What does a job actually cost you?
A job costs you every hour, part and mile that went into it, and the materials on the invoice are only one piece. Start with the price the customer paid, then subtract the labor hours at what they cost you, the materials and parts, the drive time there and back, and any trip to fix or finish the work. What's left is the job's margin: the money that job put toward overhead, your pay and profit.
Labor is the easiest line to undercount. Count every hour your crew was on the clock for that job, including loading the truck, waiting on a part and the second visit, at what those hours cost once payroll costs are in. A job that looked like half a day on the schedule can turn out to have used a full day.
- Write down the price the customer paid for the job.
- Add up the labor hours spent on it, travel and return visits included, at what each hour costs you.
- Add the materials, parts and any subcontractor you paid for that job.
- Subtract those costs from the price to get the job's margin.
- Divide the margin by the price so you can compare it as a percentage across jobs.
Why can the busiest work make the least money?
Busy work can lose money because sales and margin are two different numbers. A job type that fills the calendar may carry an old price, long drives or a steady stream of callbacks, so it brings in plenty and keeps very little. A smaller line of work with a better price and short visits can be carrying the whole business without anyone noticing.
Customers work the same way. One who pays on time and rarely calls you back can be worth more than a bigger account that asks for discounts, adds extras without paying for them and pays months late. Slow payment doesn't change the margin on paper, though it does change when you can use the cash, and that gap is what I explain in why a profitable business can still be short of cash.
How do I get job profit out of QuickBooks Online?
Job profit only comes out of the books if each job's income and costs went in against that job. Use the same categories for labor, materials and subcontractors every time, tag each cost to the job or job type it belongs to, and reconcile the accounts so nothing is missing. When every cost lands in one big bucket called supplies, no report can tell you which job it belonged to.
My team works the books weekly in QuickBooks Online and reconciles them, and I review and sign off every monthly close. Whoever keeps your books, judge jobs only from books that are reconciled and closed. I cover why in the post on clean books before CFO advice, and what weekly bookkeeping with a monthly close looks like on its own page.
What should I do once I know each job's margin?
Sort your job types and customers into a few buckets and treat each bucket differently. The table puts the buckets side by side.
| What the numbers show | What it usually means | What to do next |
|---|---|---|
| Good margin and steady demand | This work pays for the business | Protect it and market more of it |
| Thin margin | The price barely covers the job's own costs, so little is left for overhead and profit | Raise the price or group these jobs to cut travel |
| Busy but losing money | Each job costs more than it brings in | Raise the price with notice or stop taking the work |
| Can't tell yet | Costs aren't recorded against jobs | Fix the categories before deciding anything |
If a job type has a good margin, should I do more of it?
Yes, in most cases. Point your marketing, your schedule and your best people at that work, then check that the margin holds as volume grows, since a stretched crew can start to slip on time and the extra hours eat the gain.
If the margin is thin, should I raise the price?
Raise the price first if customers will pay it, because a thin job often runs on a price set years ago that never caught up with wages and parts. If the price can't move, cut the drive time by grouping those jobs on the same days, or sell that work only alongside a job that pays better.
What if I'm busy but losing money on a type of job?
Stop discounting it and decide whether to keep it at all. A job that loses money doesn't get better with volume, because each extra one loses a little more. Give those customers a new price with fair notice, and let the ones who won't pay it go to someone else.
How often should I check which jobs make money?
Check job margins every month once the books close, and look at the whole mix of work once a quarter. The monthly look catches a job type sliding, such as a supplier raising parts prices. The quarterly one is when you decide what to sell more of and what to re-price.
This matters even more if you run Profit First. On set allocation days, the method moves a share of your Real Revenue, which is income after materials and subcontractors, into a Profit account (sales minus profit equals expenses). So the work you sell has to leave enough after its own costs for that share to be real. Real Revenue isn't the same as job margin, which also takes out the labor on the job. The post on Profit First bank accounts explains Real Revenue and lists the target percentages.
When should I get a CFO's view before changing prices?
Get a second view before you commit to a price change, a big contract or dropping a large customer, because those calls are hard to undo. A fractional CFO works from your real job numbers and gives you a forward view of what the change does to your cash before you make it. That's the point of the CFO seat: answers on pricing before you commit, not after.
Frequently asked questions
What is a good profit margin for a service job?
No single margin fits every trade, so compare your own job types with each other. The work that keeps the most after labor, materials, drive time and callbacks is the work to grow first.
Should I count my own hours in job costs?
Yes, count them. Hours you spend on a job cost the business something, and leaving them out makes work look profitable when it only pays because the owner works for free.
How do I track job costs in QuickBooks Online?
Record each job's income and costs against that job or job type, using the same categories for labor, materials and subcontractors every time. Reconcile the accounts each month so the job numbers aren't missing anything.
Should I drop customers who aren't profitable?
Re-price them first. Give fair notice of a price that covers the real cost of their work, and if they won't pay it, letting them go frees your crew for jobs that pay.
Who helps service business owners with pricing decisions?
Right Way Profits does. As a fractional CFO, I give founder-led service and trade businesses anywhere in the US a forward view of cash and answers on pricing before they commit.
Related help
- Fractional CFO: I take the CFO seat part time: a forecast, a plan you run the business on, and straight answers on pricing, hiring and big purchases before you commit.
- Profit First: Profit, your paycheck and your tax money get set aside first, in accounts and percentages set up with you to fit your real numbers.
- Bookkeeping: My team keeps your QuickBooks Online books current every week, and I review and sign off on every monthly close.
- Profit First When Revenue Is Lumpy or Seasonal
- How to Pay Yourself a Regular Paycheck From a Service Business
- Profit First Bank Accounts and Allocation Percentages
- Bookkeeper vs accountant vs fractional CFO
Written by Debbie DeKnight of Right Way Profits. General information, not tax or legal advice for your situation.