How do you Know if Your Service Calls are Profitable?

Follow this formula to see what your profit margins are on each type of service call.

If you are in the service business, your job is to take care of your customers. But you are also a business that needs to make money so it’s important to understand the different types of service calls and identify which ones are more profitable for your bottom line.

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

Formula:

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

Example:

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?

See how you can gain better visibility into your business by watching the FCS Executive Demo. Fill out the form on this page.

Photo by Petr Macháček on Unsplash