Sure, you want to be the one-stop-shop for all of your customers’ roofing needs, but if it doesn’t make you money, does it really make sense? Understanding which service calls are profitable for you and which do nothing for your bottom line can help you to position your business in a way that is much more lucrative.
Calculate Profit Margin by Service Call Type
In order to focus your efforts on the right potential customers and business model, you must know how to calculate your profit margin by service call type. To do this, you simply follow this two-step formula outlined below for each of the service call types you offer.
TYPICAL SERVICE CALL TYPES:
- General Service Call
- T&M / Leak / Emergency Call
- Routine Maintenance Call
To find your profit margin, you first determine your average income by taking the average revenue you earn minus the average expenses you incur – for each of your service call types. Then, divide your average revenue by your average income and multiply the result by 100 to get your profit margin.
- Step 1: Revenue – Expenses = Income
- Step 2: (Income / Revenue) * 100 = Profit Margin
Say you bill your customers $300 on average for a T&M call. Then, it costs you about $120 on average for time and materials. That means your average income for a T&M call is $180. Divide $180 by the average revenue of $300, multiple that by 100, and you have a 60% margin. That means you keep 60% of your total revenue, on average, for T&M calls.
Assess Your Profitability
Based on FCS’ benchmark user data, we determined that service call profitability should land somewhere between 40% – 60%. If you’re over 40% on all service call types, great! If you’re under 40%, you should strongly consider no longer offering the service or increasing its price, so you have margins that make better financial sense. What is it worth to you?