IS SERVICE WORK SUBSIDIZING YOUR PROJECTS?
You can't answer this from one combined P&L, because one combined P&L reports one gross profit for two businesses that earn it in completely different ways. Answering it takes three separations: revenue by division, direct cost by division, and a defensible split of the overhead both divisions use. Once those three exist, each side reports its own profit, and in most mixed shops one side turns out to be carrying the other. Service is usually the side with predictable weekly cash, projects are the side with the large swings, so service earnings end up absorbing project overruns without anyone deciding that's the plan.
The reason this question stays open for years is that both sides look fine inside one set of books. Total revenue grew, total gross profit held, and the bank balance moved for reasons nobody can trace back to a division. Meanwhile the two businesses behave nothing alike. Service bills small tickets fast and collects in days. Projects bill monthly, hold retainage, and collect in months. Averaging them produces a number that describes neither one, and every decision made off that average is made blind: what to bid, what to staff, what to charge, and which of the two deserves the next hire.
WHAT IT MEANS.
Divisional profitability is the profit each side of a mixed business earns on its own, after its own revenue, its own direct cost, and its share of the overhead both sides consume.
Service business margins move too much by region for us to publish a benchmark anybody 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 they do between two trades. So you won't find a target service margin on this page to measure yourself against, because a number that was never true where you operate is worse than no number at all. We build your service figures out of your own book instead, which is the only place a number that's true about your business lives.
The word doing the work in all of this is defensible. Any split of shared overhead is a decision rather than a fact, so the test isn't whether the split is perfect. The test is whether you would still stand behind 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, and use the same driver every month. A method chosen after you've seen the answer isn't a method.
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 running two different economic engines. Service earns on tickets, travel time, technician utilization, and renewal 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, and 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 run calls until a project needs bodies, and then those technicians go to the project. When that happens the project absorbs labor the service division was going to bill, service revenue drops for the month, and the project looks better than it earned because it got help it never paid for. Unless time is coded by division at the day level, that transfer is invisible in both directions, 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 sit in one overhead pool absorbed against total revenue, which charges each division in proportion to its size rather than in proportion to what it consumes. A service division typically consumes 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 run and overstates what it earns. That's the direction of the error, and it'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 arithmetic. 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 running at 14, and nothing says service is the reason the company is still solvent. Those figures are an illustration of the math and not a benchmark for your market.
A technician billing 6 of 8 hours is at 75 percent utilization, which is arithmetic rather than a target. Move that technician to a project for four weeks and the service division loses 120 billable hours it had the capacity to sell, while the project picks up 160 hours of labor at cost. Service looks worse that month, the project looks better, and 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 by revenue and service carries $150K of it. Split by field headcount instead, with 6 of 20 field people on service, and service carries $180K. Same overhead, same month, and a $30K difference in which division reports a profit. That's arithmetic to show the driver decides the answer, not a recommendation of either driver.
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 at the point of entry, the same account structure serving both sides, and a third tag for items that genuinely serve the whole company. Two P&Ls built that way still add back up to the company P&L your tax return uses, which is the property that keeps the exercise honest.
The single largest error in a mixed book is labor charged to the division a person usually works for rather than the division they worked for on Tuesday. Fix that at the timecard, not at month end, because nobody can reconstruct a month of crew movement from memory in the first week of the following month. When a technician spends three days on a project, those hours belong to the project and the service division stops carrying a cost it never received the revenue for.
Not everything splits on the same basis, and pretending it does is what makes an allocation 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, and general administration splits on direct labor dollars. Choose the driver for each pool once, document it, and then leave it alone for a full year so month to month movement means something real. Changing a driver mid year is the fastest way to produce 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 survives because service is covering the difference in the background, and nobody chose that as a strategy. The project side either gets priced to carry its own overhead share and stand on its own, or it gets smaller. That usually means declining a specific type of work: the low bid competitive jobs, the general contractor whose pay cycle finances itself out of your service collections, or the project size that consumes technicians for months. Declining work is a decision an owner can only make with confidence when the two P&Ls are in front of them.
Not every mixed business should stay mixed at its current proportions. If the project division can't cover its own direct cost plus a defensible share of overhead in a normal year, then the project division is a hobby funded by the service agreements, and the choice is to reprice it, reduce it, or exit it. The same logic runs in the other direction when a service division consumes 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 releases 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. No hourly billing, no payroll, and no add-ons.
Pricing
| Last 12 months revenue | Monthly fee |
|---|---|
| Up to $1M | $1,900 to $2,900 |
| $1M to $3.5M | $2,600 to $3,900 |
| $3.5M to $6.5M | $3,800 to $5,700 |
| $6.5M to $9.5M | $5,100 to $7,100 |
| $9.5M to $12.5M | $6,100 to $8,500 |
| $12.5M to $15.5M | $7,400 to $11,000 |
| $15.5M to $18.5M | $9,400 to $13,500 |
| $18.5M+ | Quoted individually |
Range reflects the three tiers below. Which one you're in depends on how much of the work you want off your desk. No payroll. No hidden line items.
You stop guessing.
You get the CFO work. Job costing built against the way you estimate, a 13 week cash forecast, monthly WIP, and a meeting every month that ends in decisions rather than a report.
Your bookkeeper keeps doing the books.
You stop touching the books.
Everything in Core, and we run the bookkeeping and the controllership as well. Nobody in your office is answering coding questions or chasing a reconciliation at month end.
We do the books. No payroll.
Every job shows its margin while it's still running.
Everything in Executive, plus the job costing and WIP platform set up, loaded with your cost codes, and managed for you every month. You never have to learn it.
We do the job costing.
FREQUENTLY ASKED.
