Job Costing: A Contractor’s Perspective

Job costing, the single most important task in an estimating systems process, is something that is often neglected by many start-up, small, and mid-sized pavement maintenance companies. Failing to job cost effectively or failing to execute job costing at all would be similar to a pilot attempting to fly a plane through thick cloud cover without being instrument rated.

In this business contractors constantly complain about the competition: “That guy low-balls everything,” or “I just stopped bidding against that company,” or “These guys are (insert derogatory term here),” and, my personal favorite, “I don’t know how that guy makes any money!”

Well, here’s a news flash: He most likely is not making any money. Those same contractors usually have a life of less than two years. In fact, the paving and pavement maintenance industry probably has a higher turnover rate of contractors in business than most businesses have for turnover of employees.

It is the sad fact of the matter, however, that with the low barrier to entry in our trade there’s always someone who thinks a pavement maintenance business is a “get rich quick” opportunity. Usually by the two-year mark, assuming the contractor is paying taxes, his certified public accountant (CPA) sits him down and lets him know the hard truth: “You’re broke.” His employees, who probably do less work than he does, probably have made more money than the owner himself. At this point, the owner attempts to sell everything the company owns -- which is usually very little -- with an advertisement headlined “Money Maker,” “Get Rich Quick,” or “Turn Key.” The question I always ask, just for pure entertainment, is, “If you can make so much money with this equipment, why are you selling it?” I seldom get an answer.

History

Like many contractors I started my business sealcoating driveways on weekends through high school and college, and I was fortunate enough to have a mentor guiding me along the way. So when I started Brahney Industries and its Driveway Guardian subsidiary I already realized the importance of job costing. I understood that there was a target I needed to hit. When I made that transition to a “full time” entrepreneur in 2001 I had a vision for my company and, more importantly, I realized that most of my competition was not making any real money with the prices they were charging.

Because I didn’t want to compete in a market where I couldn’t make any money I did what most contractors would consider career suicide: I moved to a different part of the state into a new market and immediately priced my services at 20% - 30% higher than the competition. I did this because I knew what it cost me to complete a job and I knew that pricing at that level was the only way I could make a profit that I considered to be worth the risk of being in business. (It took time but after about two years people stopped telling me that I was 20 percent higher than the competition.)

In January 2002 I decided to shift the company’s focus to serve large national accounts, expand our services, and broaden our geographical reach from New Jersey to the entire Tri-state area from April through October, shifting the business to South Florida from November through March. In 2002 we were awarded two national accounts that had properties in both markets, and we were on our way. In January 2003, I formed Brahney Pavement Solutions as a single-source provider of complete pavement maintenance and management systems to large real estate investment trusts and national accounts, and that year we were awarded four additional national accounts.

Since then we have added an asphalt recycling division and introduced our (877) FIX-ASPHALT vanity phone number into our marketing plan to develop brand recognition. Today Brahney Pavement Solutions employs 20 People and owns over 30 different pieces of equipment to provide full-service pavement maintenance including sealcoating, crack repair, pavement marking, asphalt resurfacing, infrared repair, concrete work, and pavement management.