Lately I have been reflecting on the epoxy projects that my team have completed in the 1st half of 2019. As every project is completed we calculate the total man hours and product used. This gives us a good indication of the actual profit of the project. We also compare these final numbers to our predictions made when we had submitted our offer.
However in every single project, there seem to be these hidden costs that creep up on you and affect your final margins. Most of these costs don’t even show up on your balance sheet.
Here are some examples of hidden costs:
- While your team was busy grinding away at that project, did you need to turn down or delay the start of another project? This cost is also known as the opportunity cost. Ask yourself what did you give up in order to complete this project. (I was once trapped on an island waiting for the weather to get better so I could return to the mainland. Meanwhile back in Athens I had a customer practically begging me to start coating a large warehouse)
- Does your customer require that all work is done late at night or on weekends? What was the additional cost of paying your workers over time and being away from your family?
- Does this project require more than the typical number of days on site? For example half-half projects are notorious for slowing the work down. Sometimes a customer may request that one week you do half the floor, the next week you move everything over to the other side, and you do the other half of the floor. This ends up doubling the number of days you will need to commit your staff to that project.
- Was the customer ready to start on the day you showed up? Or did you spend the first day trying to get proper access to power outlets, and waiting for the customer to empty the space.
- Were another 5 technical crews onsite slowing down your work? (There is nothing more frustrating than an electrician telling you start coating over there and I’ll be done in 20 minutes. 3 hours later he is still there fiddling about with some cables )
- Did you need to spend 2 hours in traffic every morning just to get to the site?
I could probably come up with another ten examples like the ones above.
In some projects these hidden costs can spiral out of control, effectively making you lose money. For example earlier this year I was running a project that required far too many visits in a crowded part of the city. I spent far too many hours in traffic, and coordination among the other technical teams on site was horrendous. What started out as an attractive, high margin opportunity, became one big messy project that was a massive suck on my resources and energy.
A crappy project can drain you psychologically and emotionally. This ends up impacting the overall health of your business. Beware of those hidden costs and remember to price them in from the project start.
What are your experiences? Any hidden costs that I have not mentioned? Leave a Comment below!