IS SERVICE WORK SUBSIDIZING YOUR PROJECTS?
You can't answer this from one combined P&L. It reports one gross profit for two businesses that earn it in very different ways. You need three things separated by division: revenue, direct cost and a defensible split of the overhead both divisions use. Then each side reports its own profit. In most mixed shops one side is covering the other. Service usually has predictable weekly cash and projects have large ups and downs. So service earnings pay for project overruns, and nobody decided that was the plan.
Both sides look fine inside one set of books, so this question stays open for years. Total revenue grew, total gross profit held, and nobody can trace the change in the bank balance to a division. The two businesses work nothing alike. Service bills small tickets fast and collects in days. Projects bill monthly, hold retainage and collect in months. Average them and the number describes neither one. Then you use that average to decide what to bid, what to staff, what to charge and which side gets the next hire.
WHAT IT MEANS.
Divisional profitability is the profit each side of a mixed business earns on its own. Each side gets its own revenue, its own direct cost and its share of the overhead both sides use.
Service margins vary too much by region for us to publish a benchmark you should price against. Labor rates, drive time, competitive density and what a market will pay for a recurring agreement vary more between two metros than between two trades. So this page has no target service margin. A number that was never true where you operate is worse than no number. We build your service figures from your own books.
The word to remember is defensible. Any split of shared overhead is a decision, so it will never be perfect. The test is whether you would still defend the method if the answer came back against the division you were hoping would win. Choose the driver before you look at the result. Write down why you chose it. Use the same driver every month.
ONE SET OF BOOKS, TWO DIFFERENT BUSINESSES.
One combined P&L reports one number for two businesses
A single P&L gives you one revenue line, one cost of revenue line and one gross profit for a company with two different businesses in it. Service earns on tickets, travel time, technician utilization and renewals of recurring agreements. Projects earn on estimates, production rates, change orders and retainage released at the end. The combined gross profit is an average of the two. An average can't tell you which side produced it or whether one side is covering for the other.
The same people do both, so the labor cost has no home
Most mixed contractors don't have a service crew and a project crew. They have technicians who handle calls until a project needs bodies, and then those technicians go to the project. The project takes labor the service division was going to bill. Service revenue drops for the month. The project looks better than it earned, because it got help it never paid for. Unless time is coded by division every day, nobody sees that transfer in either direction, and the two divisions blame each other for a number neither one controls.
Shared overhead gets charged to whichever side is easier
The trucks, the shop, the dispatcher, the software, the insurance and the owner's own time all serve both divisions. In most books they're in one overhead pool charged against total revenue. That charges each division by its size. It should charge each division by what it uses. A service division typically uses more dispatch, more vehicle miles and far more small billing transactions per dollar of revenue than a project division does. So a revenue based split understates what service costs to operate and overstates what it earns. That's why plenty of owners are certain service is their best margin before anybody has tested it.
WHAT IT LOOKS LIKE IN DOLLARS.
Take a shop with $1M of project revenue at 14 percent gross profit and $400K of service revenue at 35 percent, purely as math. Combined gross profit is $280K on $1.4M of revenue, which reports as 20 percent. Nothing on that P&L says the project side is at 14. Nothing says service is the reason the company is still solvent. These figures only illustrate the math. Don't use them as a benchmark for your market.
A technician billing 6 of 8 hours is at 75 percent utilization. That's only the math, and we don't offer it as a target. Move that technician to a project for four weeks. The service division loses 120 billable hours it could have sold, and the project gets 160 hours of labor at cost. Service looks worse that month and the project looks better. Neither figure describes what happened unless the hours were coded by division as they were worked.
Say shared overhead is $600K, project revenue is $3M and service revenue is $1M. Split it by revenue and service takes $150K. Split it by field headcount, with 6 of 20 field people on service, and service takes $180K. Same overhead, same month, and a $30K difference in which division reports a profit. The math shows the driver decides the answer. We don't recommend either driver here.
TWO PROFIT AND LOSS STATEMENTS OUT OF ONE SET OF BOOKS.
You don't need separate books or a separate entity to answer this, and setting one up usually makes it harder. You need a division tag on every transaction when it's entered, the same accounts for both sides, and a third tag for items that serve the whole company. Two P&Ls built that way still add up to the company P&L your tax return uses. That tie is what keeps the two P&Ls honest.
The largest error in a mixed book is labor charged to the division a person usually works for. Charge it to the division they worked for on Tuesday. Fix it at the timecard, before month end. Nobody can rebuild a month of crew movement from memory in the first week of the next month. When a technician spends three days on a project, those hours belong to the project, and the service division stops covering a cost it never got the revenue for.
Each cost pool splits on its own basis, and an allocation that uses one basis for everything is indefensible. Vehicles split on miles or on assigned units. Dispatch and small transaction billing split on ticket or work order count. Shop and yard split on square footage used. General administration splits on direct labor dollars. Choose the driver for each pool once, document it, and leave it alone for a full year so a month to month change means something. If you change a driver mid year you get two answers and trust neither.
A mixed contractor who learns that service funds the projects has to stop bidding project work at a price that only works because service covers the difference. Nobody chose that as a strategy. The project side gets priced to cover its own overhead share, or it gets smaller. That usually means declining one type of work. It could be the low bid competitive jobs, the general contractor whose pay cycle your service collections finance, or the project size that uses technicians for months. An owner can only decline work with confidence when the two P&Ls are in front of them.
Some mixed businesses shouldn't stay mixed at their current proportions. If the project division can't cover its own direct cost plus a defensible share of overhead in a normal year, it's a hobby funded by the service agreements. The choice is to reprice it, reduce it or exit it. The same goes for a service division that uses dispatch, vehicles and administrative time out of proportion to what it bills. Shrinking the losing side is usually more profitable than growing the winning side, because it frees the technicians, the trucks and the owner's attention all at once.
THE OUTPUTS, NAMED.
FLAT MONTHLY FEE. NO SURPRISES.
Three tiers, priced by your trailing twelve month revenue. Which one you're in depends on how much of the work you want off your desk. We don't bill by the hour, and we don't do payroll. The one-time onboarding fee is in the table.
Built for subs doing $1M to $12M. Above $12.5M we quote.
| Last 12 months revenue | Core | Strategic | Platinum | One-time onboarding |
|---|---|---|---|---|
| Under $1M | $1,900 | $3,100 | $3,300 | $2,500 |
| $1M to $3.5M | $2,600 | $4,100 | $5,300 | $4,500 |
| $3.5M to $6.5M | $3,800 | $5,900 | $8,300 | $6,000 |
| $6.5M to $9.5M | $5,100 | $7,600 | $11,800 | $7,500 |
| $9.5M to $12.5M | $6,100 | $8,900 | $14,900 | $9,000 |
| Above $12.5M | Quoted | Quoted | Quoted | Quoted |
The onboarding fee covers migrating your books back to the start of your last taxable year and getting you fully operational in 60 days. It's billed once, with your first invoice. It's the same for all three tiers, and it moves with your revenue band. Your first month is prorated, and your monthly engagement starts on the first of the first full month.
Just want the setup? Onboarding only is the same onboarding work with no monthly service after it, one time, at the onboarding fee plus $2,000. Start a monthly engagement later and $2,000 counts toward it. It starts at $4,500, and the price for every band is on the pricing page.
The three tier columns are the whole price. Which one fits depends on how much of the work you want off your desk. No payroll. No hidden line items. The onboarding fee is right here in the table.
- Online software only: QuickBooks, Sage, Viewpoint and similar. No VPN or hosted desktop.
- Not in any tier: payroll, pay applications, collections on receivables.
- Pricing valid through 2027.
CFO work. Your own bookkeeper keeps doing the books.
We build your plan every month. Your team does the work.
You get the CFO work: job costing built to match the way you estimate, a 13 week cash forecast, WIP every month, and a monthly meeting that ends with decisions.
Your bookkeeper still does the books.
Core, plus bookkeeping and bank reconciliations, plus job costing and WIP software set up and managed for you. Use your own online accounting software or we supply it, one price.
We build the plan, track it and adjust it every month.
We only work with trade subcontractors. We know what to look for, and we fix problems while they're still small. Everything in Core, plus the bookkeeping and bank reconciliations done for you, and the job costing and WIP software set up, loaded with your cost codes, and managed every month. Use your own online software, or move to ours and we pay for it.
Our team does the bookkeeping and the reconciliations. We don't do payroll.
Strategic, plus a controller who handles payables and receivables the way an in-house controller would. You approve every payment.
We manage the money side for you, every week.
Everything in Strategic, plus our team does the controller work. We handle your bills and receivables the way an in-house controller would: we call vendors, pay the bills and keep the accounting current. We plan the cash flow first, and you approve every payment because it is your money.
Our team does the payables and receivables. We don't do payroll, pay applications or collections.
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