Why Labor Burden Belongs in Your Estimates

Labor Burden Belongs

Factual labor burden should be included in creating estimates because it affects how your construction business operates, how well the finances are managed, and whether it will be profitable. 

A Taco Example

I aim to get you to think about tacos whenever you estimate an upcoming project. Read on. 

If you’re a Taco Bell® aficionado, you know that while both regular and supreme tacos contain seasoned ground beef, shredded lettuce, and cheddar cheese, the supreme taco is created by adding sour cream and chopped tomatoes.

Imagine my surprise when the young boy I was treating to a lunch out ordered the taco supreme meal and quickly added, “but leave off the sour cream and tomatoes.”

I hastily stepped in to help correct the order. While enjoying our lunch, I asked him why he ordered the tacos supreme if he didn’t want sour cream and tomatoes. He told me he didn’t know the added ingredients made the difference; he thought “tacos supreme” meant they were bigger than regular ones.

It was a perfectly understandable mistake. And one he has never made again. 😉

Reversing the Taco Discrepency 

Think about this, typically, the difference in cost between a Taco Bell taco and a taco supreme is about one dollar. You know that can add up quickly, especially when you realize that Taco Bell serves over two billion customers a year. 

Of course, construction contractors don’t have a billion customers a year, yet the difference is measured not in one dollar at a time but in thousands of dollars at a time. 

Here is the point: Don’t charge for a regular taco if you’re serving a taco supreme. 

Here is the deeper point: Every time you sell a “taco,” it is, in fact, a “taco supreme” because the labor burden is there whether you charge for it or not. 

Leaving off the cost of the sour cream and tomatoes (the labor burden) can lead to underbidding, reduced profit margins, and, ultimately, financial losses. Applying the labor burden can help a construction company gain insight into its actual payroll cost.

2 Labor Burden Tools

Knowing your numbers includes knowing your labor burden. We use two tools that help track burden-related categories. They are Knowify and QuickBooks  

With the help of these two tools, our bookkeepers and staff give our clients the labor burden information they need to help protect their margins and run their construction businesses profitably. 

Protecting Project Margins

The construction industry is marked by high competition, vigorous capital requirements, and cyclical market conditions. When combined, these factors often result in lower profit margins. One way to protect profit margins is to apply labor burden when factoring costs.

So the next time you start your estimating process, remember the taco and protect your profit margins.

Ready to finally know what your labor really costs you? Let’s talk.

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• Clients and customers

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• Remain informed

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