Cash Flow
Profit First
Mike Michalowicz
A simple discipline for cash flow and actually keeping profit.
Recommended for: My Estimates Are Always Off
All Challenges
Money
My Estimates Are Always Off
Compare estimates to actual results so every estimate gets more accurate.
The Challenge
Compare estimates to actual results so every estimate gets more accurate.
Why This Happens
- Incomplete scope
- Poor field information
- Missing labor
- Missing materials
- No contingency
- No historical data
- Changes in field conditions
- Failure to review completed jobs
Questions to Ask Yourself
- 1.Do you visit and measure every job?
- 2.Do you use a checklist when estimating?
- 3.Do you include contingency?
- 4.Do you compare estimate to actual?
What to Do First
1
Create an estimating checklist.
2
Review one completed job's estimate vs actual.
3
Add a contingency line.
Step-by-Step Solution
- 1
Use a scope checklist.
- 2
Gather complete field information.
- 3
Build labor and material line items.
- 4
Add contingency.
- 5
Review estimate vs actual after each job.
- 6
Adjust future estimates.
Three Levels of Solutions
Quick Win
Do this today
Compare your last estimate to what the job actually cost.
Build the System
Next 30 days
Do an Estimate vs Actual Review on every completed job.
Long-Term Transformation
Where you're headed
Estimates based on your own history that protect profit.
Lessons From the Pass It On Library
From Principles
Mistake → Lesson → Principle → System.
Framework: Mistake → Lesson → Principle → System
From Profit First
Accurate pricing protects profit.
Framework: Allocate first: Profit, Owner Pay, Taxes, Operating Expenses.
Pass It On Action
Add one missed item to your estimating checklist.
Practical Tool
Estimate vs Actual Review
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Your Action Plans
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7-Day Action Plan
- Day 1 — Identify the problem: write down exactly how “My Estimates Are Always Off” shows up in your business.
- Day 2 — Review the numbers: gather the facts, figures, and examples connected to this challenge.
- Day 3 — Find the root cause: answer “Do you visit and measure every job?”
- Day 4 — Choose one change: Create an estimating checklist.
- Day 5 — Assign responsibility: name ONE owner, a deadline, and the expected result.
- Day 6 — Implement: Review one completed job's estimate vs actual.
- Day 7 — Review what happened: what worked, what didn’t, and what you’ll do next week.
30-Day Action Plan
Week 1 — Diagnose
- Answer: Do you visit and measure every job?
- Answer: Do you use a checklist when estimating?
- Answer: Do you include contingency?
- Complete the 7-Day Action Plan.
Week 2 — Build
- Do an Estimate vs Actual Review on every completed job.
- Use a scope checklist.
- Gather complete field information.
- Build labor and material line items.
Week 3 — Implement
- Add contingency.
- Review estimate vs actual after each job.
- Adjust future estimates.
- Train the people involved and assign owners.
Week 4 — Measure & Improve
- Compare results to where you started.
- Write one lesson learned.
- Adjust the process.
- Share what you learned with someone in the fellowship.
Biblical Principles
Wisdom for the journey — encouraging stewardship, integrity, and service, never a promise of guaranteed success.
#31 · Integrity
Use honest measurements
Proverbs 11:1
#42 · Money Management
Plan before spending
Luke 14:28–30
#89 · Wisdom
Learn from correction
Proverbs 15:31–32
Related Challenges
Recommended Books
Approved Bookshelf resources related to this challenge.
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