MASTER ESTIMATING SERVICE
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Exclusively Electrical

Master Systems was developed in 1963 with one simple purpose, to provide a better way to run an electrical contracting business.

Master Systems is an electrical contracting business system designed to develop more profit for the electrical contractor. The system components solve many problems that have plagued the electrical contracting industry for years.

Master Systems is based on a simple concept:

The purpose of a business is to earn a profit for the owners of the business.

Since the purpose of the system is to generate more profit, then understanding the system begins with understanding profit.

Profit is the difference between income and costs - all income and all costs. For this reason, and because of tax requirements, the period of time over which profit is calculated is the business year.

Since profit is the difference between income and costs, it is obvious that there must be income before there can be profit. Income, in an electrical contracting company, is on a per job basis. The yearly income is the sum total of jobs completed in the business year.

For an individual job, the total of direct job costs, overhead, and profit become the selling or bid price. The amount of the bid becomes income if the bid is successful. Estimated profit becomes actual profit if the actual costs do not exceed the estimated costs.

Profit then is the result of obtaining enough work to meet the company’s volume requirements and then doing that work within estimated costs. That seems simple enough. It isn’t. In fact it is very complex and difficult. So difficult that industry reports year after year have shown:

Volume up, Overhead up, Profit down.

Obviously, in electrical contracting profit does not increase simply because volume increases.

Other industry reports show the average profit margin in all levels of electrical contracting is less than 3%. Expressed another way, actual profit is less than 3%. But the average estimated profit is 8%! And what happened to the 5% difference? It paid for cost over-runs.

The primary reason for lower profit:

Is the failure of contractors to make actual costs meet estimated costs.

If contractors had made actual costs meet estimated costs, the average profit for the industry would be 8% and not 3%. Eliminate the causes of cost over-runs and estimated profit becomes actual profit.

Two misconceptions that have had a very powerful effect on how contractors have attempted to solve the problem of cost over-runs are:

• If material costs ran over the estimator is to blame.
• If labor costs ran over the field is to blame.

The truth arrived at through many years of research, has proved that the major causes of cost over-runs are:

• Poor Estimates.
• Lack of Material.
• Inadequate Tools.
• Ineffective Supervision.

The conclusion to increasing profit was simply:

• Better Estimating.
• Better Job Management.
• Better Cost Monitoring.
• Better Management.

As it turned out, there was considerably more to it than that. But, there was another major cost that receives very little attention. The name of that cost was overhead. And it has more effect on profit than most contractors realize.

Material and labor costs are estimated costs. If actual material or labor costs exceed estimated material and labor costs, profit will shrink. Contractors do not realize that the same facts apply to overhead.

• The money to pay for material is estimated.
• The money to pay for labor is estimated.
• The money to pay for overhead is estimated as a percentage of estimated direct job costs. If direct job costs were short, then so was overhead.

From these statements the following is true:

• If the actual cost paid for material was more than the estimated costs, the difference was paid out of profit.
• If the actual cost paid for labor was more than the estimated costs, the difference was paid out of profit.
• If the actual cost paid for overhead in one year, was more than the total dollars in the estimates for overhead, the difference was paid out of profit.

Earning the estimated profit is the result of:

1. Obtaining a certain amount of work at a potentially profitable price.
   (Accurate Estimating).
   
   
2. Doing everything necessary to make actual costs meet or beat estimated costs.
   (Effective Job Management).
   
   
3. Knowing very early in any job how actual costs are comparing to estimated costs.
   (Reliable Cost Monitoring).
   
   
4. Accomplishing the three at minimum overhead cost.
   (A business system based on a thorough knowledge of electrical contracting).

Now, let’s define the following:

1. What is an accurate estimate?
   An accurate estimate is an estimate that includes enough money to pay for all reasonable costs for work required by the contract, and a portion of overhead, plus a profit.
   
   
2. What is effective job management?
   Effective job management is office and field management people who can convert the estimated bill of material, to a bill of material purchase, tool the job to install that bill of material, inform the field on how the bill of material is to be installed, and control all the paper work.
   
   
3. What is reliable cost monitoring?
   Reliable cost monitoring is cost monitoring capable of comparing actual costs of work done to date, to estimated costs of work done to date.  It must be able to accurately document actual costs of work done to date, without the field reporting on installed quantities.
   
   
4. What is an electrical contracting business system?
   An electrical contracting business system is a proven method of operating a contracting company that meets both general business needs and the specialized needs of an electrical contracting company. A business system designed to decrease time to do overhead functions and to eliminate the duplication of work.
   

This led to the development of Master Systems, a business system that has proven to be the best for the electrical contractor who wants success and longevity.

Master Systems is an interlocking electrical contracting business system consisting of:

• Master Systems Management.
• Master Systems Estimating.
• Master Systems Production Management.
  • Office Operations.
  • Field Operations.
• Master Systems Cost Monitoring (Profit Protection).
• Master Systems Money Control.

This list is the order in which work is done in the business. It is the order in which systems should be studied and the order in which they should be applied.

Master Systems Management, explains and justifies all systems and establishes management control of the business. It also defines duties for which management alone is responsible.

Master Systems Estimating, Job Management, and Profit Protection, are grouped under operations. The purpose of estimating is to prevent losses caused by inadequate estimates. The purpose of job management is to prevent losses caused by labor not having what is needed to install work productively. The purpose of profit protection is to chart the efficiency of the company as a whole and to limit losses due to the failure of labor to perform as it should, once properly supplied. All three have a direct bearing on earning profit.

Master Systems Money Control is basically accounting functions. The purpose of money control is to meet financial and tax requirements at the lowest overhead costs.

Each System is based on the following logic:

• Over-runs are caused by mistakes.
• Mistakes reduce profit.
• How much a mistake will take from profit depends on the nature of the mistake and when it is detected.
• There is a critical point in every function. Mistakes caught before this point is reached will have a minimum cost to correct.
• Mistakes caught after this point has been passed will have a much higher cost to correct, and the cost to correct will increase until the maximum has been reached.

Master Systems prevents mistakes/losses when applied properly. Master Systems limits losses and detects mistakes when applied properly.

Mistake detection and the critical point are critical to profit. Most employees are trying to do their jobs properly. Most mistakes are made by people who know better, who do not normally make that mistake, and who are honestly surprised that they did what they did, or failed to do what they failed to do. That is why the critical point is so important.

More detailed information can be found on our home page menu selections.

Master Systems is known as the pioneer in sound business systems for electrical contractors. We still carry on this tradition today and continue to teach these methods to electrical contractors. In most cases we will not tell the contractor what he wants to hear, but will show the contractor how to make money in electrical contracting. In fact we are more hard nosed today, because we want electrical contractors to use Master Systems exactly the way the systems are intended, with profit being the only judge.

Master Systems, with our one-on-one training workshops, combined with the individual contractor's experience, have increased profit for every single company that has applied them. And they will for you.

Master Systems are not designed for the electrical contractors who just want to bid more jobs and obtain work by whatever means. The old saying, bid more jobs and you get more jobs, may work in certain scenarios, but there really are no guarantees. The only thing the contractor can guarantee on, is now his company has turned into an estimating mill, overhead cost is going up, maybe obtain a bunch of work with minimum margins, and have a company that is more out of control.

Most estimators think the purpose of the estimate is to get a job. They also think that estimating is a race and the estimator who produces the fastest estimate with whatever means wins the race. That may be true from strictly an estimating viewpoint. But from a profit viewpoint it is definitely not true.

Our research studies have shown, that an electrical contractor in his hunger for making a big showing on volume, does not get his share of the profits, and he ruins a lot of good business for good contractors.

We continue our research today. We have found that most electrical contractors do not have the proper controls in place and estimators have too much flexibility. In general the business is running the contractor, not the contractor running the business. The truth really is that most contractors do not want to do what is required and look to others to handle it.

Today, there are many business operations and software packages that are developed from general business practices, personal opinions, information from contractors and estimators, solely for convenience and speed. The problems of an individual company cannot be solved by a committee. The modern electrical contractor needs proven tools applied to their specific situation.

The proof is in the industry reports, that post average profit 3%. They have also reported the electrical industry plagued with high overhead and lack of production. If contractors had all the answers, the average profit would be a lot more than 3%.

Most contractors think that software is the answer. They are only partially right. We are in the software business and will not sell software to a contractor who does not understand how a profitable electrical contracting company is supposed to work. So training in Business Management and Estimating (specifically take-off) comes first, not software. The contractor must organize, direct, and control the business.

Our training workshops are unique, just straight forward instruction, presented in an easy to understand form with one simple purpose, to provide a better way to run an electrical contracting business.

The format for all workshops are based on the following:

• We show you what has to be done.
• We explain and justify in detail why it has to be done.
• We show you how to do it.
• We show you how to cross-check to prove you did it right.
• Plenty of opportunity to ask questions.

Where do you start? Even though you agree Master Systems make sense, can you make improvements without seriously impairing your business? Will the cure kill? Is there an orderly way to effect improvements?

There is a proper and orderly way to improve your business without disruption in the profit flow and it is taken one step at a time.

Priority #1

Are you convinced that these systems make sense? Are you willing to set the pace? Unless the benefits of this business system are attractive to you, they aren't going to happen. So start with yourself. Are you determined to make things happen?

Electrical Contractors fall into one of two categories.

• The ones that make excuses for what does not go right. And they keep on struggling day to day.
• The ones that try to list the reasons for what does not go right. These contractors try to find solutions and want corrections made. They know that problems must be eliminated.

Will Master Systems work for you? You may be interested in Master Systems Management or Estimating Workshop? Or Consulting?

Call us at 1-540-925-2413, and let’s talk. Time spent with us, will be worth it to you for the years to come.

Your guarantee with us is simple.

• The electrical contractor who follows Master Systems will generate more profit than ever before. We guarantee it or we will refund every penny of the fee, no questions asked.
• You either agree our Training Workshops or Consulting Service was worth the time and money or we will refund every penny of the fee, no questions asked.

Please do not hesitate to call 1-540-925-2413, for additional information or if you have any questions.

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Louis J. Pokrywka, Owner
Master Estimating Service

Master Estimating Service, Expanding Your Possibilities....

Copyright ©1990-2024 Master Estimating Service - All Rights Reserved

Information contained in this website has been taken directly from our encyclopedia,
The Business of Electrical Contracting
Master Systems 1963-1990, 1990-2007, 2007-2024.