How To Calculate Profit Margins That Generate Success

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9 Profit-Boosting Tactics That Will Transform Your Service Business

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I’m excited to share insights from a recent episode of the Profitable Home Services Podcast where I had the pleasure of hosting Jeremy Lowe from Profit Rhino and Service Fusion. With over 40 years of experience in the industry, Jeremy has a wealth of knowledge to share. We explored the vital role of financial education for business owners. A surprising number of students struggle to calculate profit margins correctly, emphasizing the need for entrepreneurs to take control of their finances

In this episode, we discussed:

  • Jeremy’s love for photography and the importance of paying attention to opportunities
  • Discussion on flat rate pricing and its benefits
  • Importance of understanding the financial side of running a home service trade business
  • Misconception that sales are the lifeblood of a business, emphasizing profit and cash flow as key drivers of success
  • Fear and discomfort business owners have when it comes to understanding their numbers
  • Importance of education and training for contractors in the home service industry
  • Aim for higher net profits and working on the business rather than being constantly busy
  • Importance of working with customers who appreciate and value your services
  • Unique profit leaks in home service businesses and finding innovative solutions to maximize profitability

The key moments in this episode are:

  • [00:06:29] – The importance of flat rate pricing
  • [00:10:35] – The hidden profit leak in the service department  
  • [00:11:02] – Understanding how to make a profit in the service department 
  • [00:11:38] – Understanding the inefficiency in service departments 
  • [00:13:29] – The importance of knowing and understanding your numbers 
  • [00:15:45] – The significance of cash flow and profit in a business
  • [00:23:05] – The importance of education and mentorship 
  • [00:23:40] – The correlation between net profit and business efficiency 
  • [00:24:12] – The potential for high net profit in the service industry
  • [00:34:48] – The importance of customer appreciation  
  • [00:35:24] – Providing exceptional service to justify higher rates  
  • [00:36:58] – Going the extra mile to create customer loyalty 

“We just have to deliver a knock your socks off service mentality, create what Ken Blanchard called raving fans, and if we do that people are more than happy to pay us.” Jeremy Lowe

A Journey of Success and Passion

Jeremy’s journey is nothing short of inspiring. Starting as an HVAC technician, he climbed the ladder to manage a contracting firm worth $14 million. Today, he uses his expertise to educate contractors, write articles, and speak at trade shows about business improvement. His Pricing for Profit Bootcamp is a must-attend for anyone seeking a deep understanding of profit in the service industry.

Beyond his professional life, Jeremy is a passionate photographer and a mental health advocate, volunteering to help those suffering from mental health issues and trauma from suicide. His love for photography and attention to opportunities, both in nature and business, is a testament to his multifaceted personality.

The Power of Flat Rate Pricing

Jeremy’s expertise in flat rate pricing models is unparalleled. He got involved with Kelly and Roach 23 years ago and has been a strong advocate for the benefits of using a flat rate book. This book, continuously updated with feedback, is a valuable tool for understanding the financial side of running a home service trade business.

Jeremy emphasizes that labor is the primary cost of overhead and often drives inefficiency in service departments. By correctly assigning overhead costs to the department that generated it, businesses can uncover the true profitability of their service department. He shares his experience of turning around a company by addressing inefficiencies and incorrect service labor rates.

Profit and Cash Flow: The Lifeblood of Business

Contrary to common belief, Jeremy stresses that sales are not the lifeblood of a business. Instead, profit and cash flow are the key drivers of success. He shares an example of a company that had cash in the bank but lacked true profit, which put them in serious trouble when faced with a cash flow hiccup.

Jeremy and I also discussed the fear and discomfort many business owners have when it comes to understanding their numbers. He conducts a test in his classes, revealing that a significant number of students struggle with calculating profit margins correctly. This highlights the importance of financial education and the need for business owners to take control of their finances.

The Importance of Education and Training

Jeremy emphasizes the need for contractors to invest time in education, whether it’s through classes, training programs, or mentorship opportunities like the Service Corps of Retired Executives. Continuous learning and skill refinement can take businesses to the next level and achieve higher profits.

We both admire home service businesses that have a net profit of 10 to 15%, as it shows they have absorbed the lessons and implemented efficient systems. Jeremy adds that 80% of the profit in the industry is made by less than 20% of the contractors, highlighting the potential for profitability in the service sector.

Delivering Exceptional Service

It’s important to work with customers who appreciate and value your services. For example, Jeremy will be speaking at a conference about why contractors often struggle to raise their rates. We agreed that delivering exceptional service and creating “raving fans” who are willing to pay a premium for your services is key.

Jeremy observed that the top 20% of service businesses are willing to go the extra mile, and this is reflected in their pricing. By exceeding customer expectations, the focus shifts away from price and towards the value provided.

Addressing Profit Leaks

Jeremy pointed out that service departments often overlook the expenses associated with weekly meetings and picking up parts, which can significantly impact profitability. Find innovative solutions to minimize time spent on non-profitable activities and maximize time spent with customers.

About Jeremy Lowe

With more than 40 years of HVAC experience under his belt, Jeremy Lowe speaks to thousands of business owners and managers about building profit in service departments. He started in the field as a HVAC technician and worked his way up to managing a contracting firm worth $14 million. He uses that storied background to teach contractors, publish articles and speak at trade shows about how to improve their businesses, but his Pricing for Profit boot camp is the best way to really understand what he offers and why it is important to grasp what profit really means. More than 1,000 contractors have taken this two-day immersive course and came out of this boot camp with a firm understanding of their business.

Though he still speaks nationally, Jeremy also serves as the Sr. Director of Content and Training at Service Fusion. He manages and creates training materials for both employees and customers while still overseeing the Callahan Roach flat rate pricing database. With his experience with the industry leader in flat rate pricing models, he is an expert in both Callahan Roach’s robust flat rate catalog and how to create the best flat rate services for contractors. When not working, Jeremy relaxes by fishing on his boat and/or traveling with his camera.

Photography has been passion since he was eight, so he is rarely without a camera (or two). He also loves sampling the flavors of all the cities he travels to while meeting new people. And since mental health is incredibly important to him, Jeremy also volunteers to help those who suffer from mental health issues and trauma from suicide.


Connect with Jeremy Lowe


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