How to Calculate Job Profitability

Why This Matters

Service businesses routinely have one or two job categories that lose money on every ticket, and the owner has no idea. A common example is sub $200 dispatch fees on emergency calls where the tech drives 45 minutes, diagnoses for 20 minutes, the customer declines repair, and the shop pockets $189 minus $92 of labor, $15 of truck cost, and $24 of overhead allocation, netting $58 before warranty reserve. On 10 such calls a week, that is $580 of gross profit to cover a lot of downstream risk. Compare to a $1,200 ducted repair with 58 percent margin that nets $696 in a single call, and the difference is obvious. Shops that measure job profitability shift their marketing, pricing, and dispatching toward high margin work and away from low margin work over a 6 month cycle, lifting net profit by 8 to 14 points. On a $1.2M shop, that is $96,000 to $168,000 in new net profit without adding a single new customer. This is the most underused lever in the trade.

The Steps

1. 1

   Step 1: Build the cost side of the formula

   Every job has 6 cost buckets: direct labor, direct parts, truck cost, overhead allocation, warranty reserve, and payment processing. Direct labor is loaded hourly rate times hours on the job. Parts is your wholesale cost on any materials used. Truck cost is roughly $15 per billable hour for fuel, insurance, and depreciation on a stocked work truck. Overhead allocation is your non COGS expenses divided by your total billable hours, which typically lands around $40 to $60 per billable hour for a small shop. Warranty reserve is 3 to 5 percent of the invoice total. Payment processing is 2.9 percent if the customer paid by card. Add all six buckets to get total cost per job.

   Pro tip: Never skip truck cost and overhead. Those two alone account for 40 percent of total job cost.

2. 2

   Step 2: Tag every invoice with a job category

   Create 8 to 12 job category tags in Kaldr Tech: Diagnostic, Capacitor Repair, Water Heater Install, Drain Cleaning, Duct Work, and so on. Tag every invoice as it is closed. This tagging takes 5 seconds per invoice but it unlocks everything downstream. Without tags, you cannot slice profitability by category. With tags, you can pull a report in 10 seconds showing average margin by category, and the report will reveal which types of work actually make money. Most shops discover 2 or 3 categories that look busy but lose money, which is the insight that drives real strategic change.

   Pro tip: Make category tagging a required field on invoice close. Optional fields get skipped.

3. 3

   Step 3: Run the first report on your last 90 days

   Open Kaldr Tech, go to Reports, and run Job Profitability by Category for the last 90 days. The report shows revenue, total cost, gross margin percentage, and net profit for each category. Print it out. Look at the bottom of the list. Every shop has one or two categories with gross margin under 35 percent, which after overhead allocation means those categories are losing money. Common examples are same day emergency diagnostic only calls, warranty callbacks on older jobs, and certain commercial small tickets. The first time you see this report you will probably be shocked. That shock is the starting point for every profitable decision you will make for the next 2 years.

   Pro tip: Sort by margin ascending so the losing categories jump to the top of the page.

4. 4

   Step 4: Calculate margin by individual tech

   Run the same report but slice by tech instead of category. You will find one or two techs who consistently deliver higher margin than the rest. Look at what they are doing differently. Usually it is a combination of better upselling, faster diagnosis, fewer callbacks, and more confident price delivery. Share what works with the rest of the team in morning huddles. Conversely, any tech delivering consistently low margin needs coaching. Do not fire low margin techs immediately. Coach first, train second, review after 60 days. Most margin gaps close with focused coaching because the tech is usually just missing one or two habits.

   Pro tip: Never share tech by tech margin numbers in public. Coach privately.

5. 5

   Step 5: Identify customer segments that lose money

   Slice profitability by customer type or ZIP code. You will almost certainly find that one neighborhood or customer segment has higher drive times, lower close rates, or worse average tickets. It might be a cluster of older homes with budget constraints, or a high crime area where techs rush through diagnostics, or a commercial account that squeezes margin on every job. Once you see the data, you can make a decision: raise prices for that segment, stop marketing there, or find a way to make those calls more efficient. Any of those moves is better than continuing to lose money unknowingly.

   Pro tip: Never apologize to your team for stopping unprofitable marketing. They will thank you.

6. 6

   Step 6: Set a monthly profit review cadence

   Block 30 minutes on the first Monday of every month to review the job profitability report. Look at trends versus the previous month. Celebrate categories where margin improved and dig into categories where margin slipped. Make one or two specific changes each month based on what you see: a price increase on a low margin category, a tech coaching session, a marketing budget reallocation. Over 12 months these small monthly changes compound into 8 to 14 points of net profit improvement, which on a $1.2M shop is between $96,000 and $168,000 in new annual profit. Consistency beats intensity.

   Pro tip: Keep a running doc of monthly changes so you can see your decision trail in 12 months.