Editor’s note: With this article, Ian Schwandt kicks off a new JLC business series concurrent with the launch of his Substack, “Nails to Numbers.” This first installment begins with an overview of his career, which is essential to understanding his perspective as a tradesperson who acquired his business acumen by living the numbers while wearing a tool belt.
Looking back 20 years to my carpentry apprenticeship, I can easily see how the skills I learned on the jobsite and at the Southeast Wisconsin Carpentry Training Center (see “A Union Apprenticeship: Training Suited to a Sustainable Industry,” Nov/19) set me up for a great career in the building trades. What was not obvious at the time was that those instructors and mentors were planting seeds for lifelong learning.
Concrete led to framing, framing led to walls, and walls led to finishes. Each challenge built on the last: stair building, roof framing, complex remodels. Yesterday’s advanced techniques became tomorrow’s basics. It wasn’t just a linear path from apprentice to journeyman to lead; it was a mindset of constant improvement.
That mindset stuck with me and, as my career progressed, I wanted more than trade skills. I wanted to understand how the business worked.
This desire for knowledge was shaped by mentors like Jim Rhynders of Idema General Contractors, in Poughkeepsie, N.Y., and Mason Lord of Hudson Valley Preservation, in Kent, Conn. Both brought me into the inner workings of their businesses and shared openly how their wins and missteps shaped their strategies. They gave me the opportunity to work on estimates, participate in project planning, and ask questions about the financial side of the business. Still, the numbers felt abstract. I knew what a well-run job looked like in the field but not if that job was supporting the company’s financial health.
That changed in 2022, when I became the production manager at TDS Custom Construction after serving 18 months as an estimator and project developer for the company. In this new role, I worked closely with the owner, Ben Blodgett, who, like me and my past mentors, came up through the field. Ben had moved from laborer to GM before buying the company in 2021, and he had a clear vision that in my role as production manager, I should act as “the CFO of the production department.”
Being the “CFO of production” means understanding that every project has a direct line to the company’s financial health. The position is not just about estimating and job costing—it’s about forecasting, cash flow, labor capacity, and sustainable growth. The CFO mentality blends accounting discipline with forward-looking operational strategy.
In this article series, and in my Substack, “Nails to Numbers,” I draw on my journey from lead carpenter to estimator to CFO of production as I focus on the data-driven metrics that I’ve learned about from building industry mentors and finance professionals. The data-to-build metrics, like gross profit per day, volume per week, and over/underbilling and labor efficiency ratios already exist inside your company. Whether they are handwritten notes, spreadsheets, or QuickBooks files, the data is there to be leveraged.
Using this data and the accompanying metrics as forecasting tools, I can see the whole field of play and lead more effectively. My team sees why a job could be “on schedule or on budget” and still underperform. They build schedules that meet deadlines without burning out our crew. We learned how real-time job costing connects to the current month’s profit and loss. We are forecasting workload and revenue with a degree of accuracy that opens new growth opportunities.
Leveraging your own data through clear metrics and planning models, you can help your team connect the dots between their day-to-day decisions and the long-term health of the business. That shared understanding builds shared responsibility. And shared responsibility creates the accountability that leaders need when building businesses that not only survive but thrive.
This series isn’t about becoming an accountant. It’s about building your financial fluency as a builder and giving you and your team a new set of tools to lead with confidence. With that, let’s kick off with the first metric aimed at helping us accurately price jobs.
Gross Profit Per Day
One of the oldest questions in building must be, “What should I charge for my work?” Many of my colleagues focus on setting a flat gross margin percentage in hopes of delivering reliable gross profit. This technique can work well when a company performs a narrow range of project offerings, such as kitchens, baths, or decks—projects that have similar durations and cost-of-goods profiles. Design-build and custom contractors, however, perform work that is often a one of a kind. This one-off custom work can vary wildly in cost of goods, turning the flat gross margin percentage into a liability. After all, you can’t spend a percentage, so let’s talk dollars.
Talking and thinking in dollars rather than percentages brings me to an essential document: the company budget. Whether you bristle at the thought of sticking to a budget or consider it a license to spend, I believe this document is where you need to start to answer the age-old question mentioned above. A budget is a planning tool. The data it contains can tell you the kind of jobs you need and how to produce the cash flow to support your team and your future. Done right, your budget becomes the framework for your estimating process.
You might be tempted to start your budgeting exercise by throwing out a revenue goal, but let’s define gross profit first. I build our company budget starting with two things: operating expenses and net profit. Added together, they tell me how much gross profit we need to generate in a year. This gives us a clear definition for gross profit that can be expressed in dollars:
Gross Profit = Operating Expenses + Net Profit Target
I think of this as a bottom-up approach to budget building. A company’s net profit is the quintessential bottom line, while its operating expenses fall in the middle of a typical budget document and encompass company overhead costs, or the “keeping the lights on” part of running a business. Operating expenses can be further divided into overhead operating expenses and indirect expenses. Indirect expenses include production manager and administrative salaries, vehicle and tool expenses, training, and so forth. These expenses support business operations but are not easy to job-cost directly to a project. Indirect expenses are typically allocated “above the line” into COGS (cost of goods sold) through an indirect allocation shown on the budget and on future P&L statements. We can use this to further define gross profit:
Gross Profit = Overhead Operating Expenses + Net Profit Target
Determining a net profit target can feel challenging if you don’t have any historical data to review. An often-repeated industry standard is 10%, but since we can’t spend a percentage, and we are using a bottom-up budgeting approach, we need more data. Your target should reflect the return on the capital that you have invested in the business. A simplified formula for determining invested capital is
Total Equity + Total Debt + Non-Operating Cash (such as savings or retained earnings) = Invested Capital
If you are going to risk your capital and your free time to make only 5% net, why not just invest in a mutual fund and make 6%? Beyond providing a return on invested capital, your net profit target also needs to fund planned growth and the day-to-day cash flow needs of the business.
This deeper understanding of gross profit creates the foundation for understanding your budget as
Net Profit Target + Overhead Operating Expenses + Cost of Goods Sold (COGS) = Revenue
My colleague Zach Snider, principal of ALLOY Architecture + Construction, in Charlottesville, Va., refers to seeing your revenue goal through this lens as a planning tool that creates a deeper understanding of gross profit as real money that fuels the company’s operations. This bottom-up approach forces you to know your true cost of doing business instead of relying on a revenue-first, top-down model and its rule-of-thumb percentages that too often leave profit as, at best, a happy accident and, at worst, a net loss.
Armed with gross profit in dollars, you can develop a metric to serve as your north star in deciding what to charge: gross profit per day. A company that needs $1M gross profit per year to be successful needs to bring in $2,740 ($1M/365) gross profit every day to meet that goal. This can be further refined by the number of projects you can operate at one time. If your team can produce four jobs at once, then each job needs to contribute $685 in gross profit per day of project duration.
The magic in using gross profit per day as a tool is that it directs attention to how you as a manager apply your labor resources to a group of projects. A huge project that requires more labor reduces capacity, and it will need to bring in a higher gross profit per day. If a smaller job allows for extra capacity, then you can take on a smaller project at a lower gross profit per day. Whether your company self-performs carpentry labor or is project management only, your labor output is the true limiting factor in how much work you can perform each year.
Gross profit per day is grounded in the reality of remodeling work. Revenue is unpredictable. COGS will shift based on design, specs, and subcontractor mix. If a project ties up your team for six weeks, it needs to pay for that time. When I build a project budget, I start with COGS, determine the duration using the volume-per-week metric (to be discussed in my next article) and, finally, add the gross profit per day adjusted for labor capacity and the risk profile of the project.
Gross profit per day puts your labor at the center of your business model. It’s how you translate hours into dollars and avoid thinking like a salesperson who’s just selling projects like a basket of goods. Instead, you’re selling production capacity—your team’s ability to deliver value each day they’re on the clock. Gross profit per day is how you price that capacity, track it, and improve it.
