Part 6: Estimating, Pricing, and Managing Work
In the previous part of this book we explored how businesses understand and manage their finances. The income statement, balance sheet, and cash flow projection all help entrepreneurs understand the overall financial health of their business.
But in trades-based businesses, financial success is built one job at a time.
Every project begins with an estimate. That estimate becomes a proposal. Once the proposal is accepted, the work must be completed, tracked, and invoiced. If the estimate is inaccurate the job may lose money. If the work is not tracked, overruns go unnoticed. If invoices are delayed, cash flow suffers. Successful trades entrepreneurs develop systems that allow them to price work properly, manage projects effectively, and ensure they are paid for the work they complete.
This part of the book focuses on the tools and processes used to manage individual jobs. You will learn how to estimate the cost of a project, understand different pricing models used in the trades, calculate labour rates, overhead, and profit, prepare professional proposals for clients, track labour, materials, and project costs, manage project tasks and timelines, invoice clients, manage payments, and maintain financial records through bookkeeping and accounting.
One of the most important lessons for new entrepreneurs is that estimating and job tracking are closely connected. A good estimate helps ensure a job will be profitable. Tracking the job while it is in progress helps ensure the estimate stays accurate. And keeping records of completed jobs helps entrepreneurs improve their estimates over time. This process forms a continuous cycle. You estimate the job, complete the work, compare the results to the estimate, and use what you learned to improve the next one. Over time that cycle builds experience, refines pricing, and produces more profitable businesses.
The chapters that follow will walk through each step of this process, starting with one of the most important skills for any trades entrepreneur: estimating the true cost of a job.
