You know that feeling, right? You just wrapped up a huge heat pump install in Nanaimo. The client’s ecstatic, the final payment is in your account, and for a moment, it feels like a massive win.
But then reality hits. A week goes by, you’ve paid your supplier, your helper, and filled the truck for that trip to Comox. You glance at your bank balance and that big win feels… well, a whole lot smaller. Where did all the profit actually go?
It’s a story we hear constantly from HVAC techs and other tradespeople all over Vancouver Island. You’re a master of your craft, but when it comes to the numbers, are you just winging it? That guesswork is probably costing you a fortune.
The fix? It’s called job costing. And trust us, it’s not nearly as intimidating as it sounds.
So, What Exactly Is Job Costing?
Think about it this way: job costing is like creating a detailed recipe for every single project you do. Instead of just tossing ingredients in a bowl and hoping it tastes good, you’re measuring everything. Perfectly. It’s the simple process of tracking every single cost tied to a specific job so you can figure out how much money you actually made.
It’s the difference between thinking you turned a profit and knowing you did.
Knowing your numbers is a superpower. It lets you build quotes with unshakable confidence, pinpoints which jobs are your real money-makers, and helps you spot problems before they completely drain your bank account. It’s about building a business that lasts, not just jumping from one job to the next and hoping for the best.
The Three Key Ingredients of Any Job Cost
When you really boil it down, every project has three main cost buckets. It doesn’t matter if it’s a quick furnace service in Duncan or a massive system install up in Campbell River—it always comes down to these three things.
1. Direct Labour
This one seems obvious, but it’s so much more than just your hourly rate. Your true labour cost has to include:
- Wages: What you pay yourself or your techs per hour. Easy enough.
- Payroll Burdens: Here’s the kicker that so many people miss. This covers your contributions to CPP and EI, your WorkSafeBC (WCB) premiums, vacation pay, and any other benefits. These aren’t small change; they can add a huge percentage right on top of the base wage.
If you forget to account for these burdens, you’re under-pricing your work on every single quote. Period.
2. Direct Materials
This is usually the most straightforward piece of the puzzle. It’s all the physical stuff you install on the job. The big-ticket items are no-brainers:
- The furnace or heat pump itself
- Ducting
- Thermostats
But what about the little things? Don’t forget the screws, the sealant, the wiring, and the fittings. These tiny items, often called consumables, add up shockingly fast. A proper job costing system makes sure you track every last one.
3. Overhead (The Sneaky Profit Killer)
Overhead costs are all those expenses you have to pay just to keep your business running—the costs that aren’t tied to any one job. It’s what you pay to keep the doors open, even on a slow week.
We’re talking about things like:
- Vehicle Costs: Your truck payments, insurance, gas, and all that maintenance.
- Shop or Office Rent
- Insurance and Licenses
- Phone and Internet Bills
- Accounting and Software Subscriptions (like Xero or QBO)
- Tools and Equipment
So how do you possibly account for this on a single quote? You calculate an overhead recovery rate. You figure out your total monthly overhead costs and then bake a small piece of that into every billable hour you work. This ensures every job you take on pays its fair share for keeping the lights on.
Putting It All Together: From Cost to Quote
Once you know your three key ingredients, building a profitable quote is no longer a guessing game. It’s just simple math.
Direct Labour + Direct Materials + Overhead = Total Job Cost
That number right there is your breakeven point. It’s the absolute minimum you need to charge to not lose money. But you’re not in business to break even, are you? To actually make a profit, you have to add your markup.
Total Job Cost + Profit Margin = Your Final Quote
And just like that, you’re not guessing anymore. You’re quoting with the rock-solid confidence that every single cost is covered and that you’re guaranteed to make a healthy profit. You can see with total clarity how a change in material costs or an extra hour of labour will affect your bottom line.
Getting these numbers dialled in can feel like a lot, especially when you’re busy with the actual work. Every business on the Island is different, from a one-person show in Port Alberni to a growing team in Victoria. For advice that’s tailored to your specific business—from setting up your books to finally understanding your tax obligations—talking to a pro can change everything. We can help you get a handle on the numbers, so why not get in touch with an accountant today and start building a more profitable business?