How To Increase Profitability
Most home service business owners asking how to increase profitability start by looking at revenue instead of the numbers that actually decide it. One of my coaching clients found that out the hard way. He landed the biggest job of his career and was sure it would be his best month yet. When we ran the job costing on it afterward, that job had actually lost him money.
In this episode, I walk through ten questions I hear all the time from home service business owners, the ones most people are too uncomfortable or embarrassed to ask out loud. Each one points to a real profit leak hiding in the business, from revenue vs profit to what your team really costs you. Keep reading, and you will find the exact questions, plus what to do once you know the answer.
What You’ll Learn
- Why chasing revenue can hide the real problem in your numbers
- How to price a job so it actually covers what it costs
- What your team actually costs you once every number is counted
- How to know if your crew is really as busy as it looks
- Where your bank balance and your real profit start to disagree
- Most owners do not spot their profit leaks until it costs them
- Learning how to increase profitability does not require new customers
- Find out if your business can survive a month without you
Key Moments…
- [6:45] How To Increase Profitability Starts With Revenue Vs Profit
- [11:29] Pricing And Whether You Charge Enough
- [17:45] The Jobs That Are Secretly Losing Money
- [20:20] What Your Team Really Costs You
- [23:00] Busy Crews And Hidden Productivity Leaks
- [28:16] Why Cash And Profit Do Not Match
- [33:10] Overhead Creep And Your Break-Even Point
- [35:38] Customer Follow-Up And Repeat Business
- [41:31] Could Your Business Survive Without You
Question 1: Why Doesn’t It Feel Like I Am Making Any Money?
Learning how to increase profitability usually starts with one shift. Stop chasing revenue and start chasing profit. This is the classic revenue vs profit problem. Revenue is the top-line number, the one you set goals around. Profit is what you actually get to keep once every expense is paid. Most home service businesses doing millions in revenue are still only running a 3 to 5 percent net profit. I want to see 15 to 20 percent, and that gap is exactly why some companies end up growing broke.
Question 2: How Do I Know If I Am Actually Charging Enough?
This is one of the most common fears I hear, and it almost always comes down to how pricing was built in the first place. Learning how to price a job starts with knowing your true costs, not just matching what a competitor charges or bumping last year’s number by a flat percentage. One of my newer coaching clients found this out the hard way. He landed the biggest job of his career, bid to take six weeks, and it stretched to ten. When we finally ran the numbers on materials, labor, and his own time, he had actually lost money on it. Your price has to cover labor, materials, overhead, and still leave you a profit, not just feel exciting when the deal closes.
Question 3: What If Some Of My Jobs Are Actually Losing Me Money?
Being busy does not automatically mean you are profitable. It just means you are busy. The only way to know the difference is job-costing each type of service you offer separately, rather than looking at your business as one big average. Some types of jobs run a healthy margin while others barely break even or lose money outright. A business can look profitable overall while one specific service is quietly dragging the average down.
Question 4: What Do My Team Members Really Cost Me
An owner will often tell me a technician makes 35 dollars an hour, and that is the number that gets built into every bid. But that hourly wage is not the real cost of that employee. What actually gets added on top of the hourly wage:
- Payroll taxes and workers’ compensation insurance
- Benefits like health insurance or retirement contributions
- Unbillable time, including drive time and meetings
- Sick time, vacation time, and holidays
Once you add in these payroll taxes, benefits, and unbillable time, you get what is called the fully burdened labor rate, and that same technician is often closer to 50 or 55 dollars an hour. Pricing off the lower number quietly eats your margin on every job.
Question 5: Why Are My Busy Crews Not Producing More?
Busy and productive are not the same thing, and I have seen this play out firsthand. Earlier this year I watched a crew building a garage for us. Three or four guys sat around for two hours waiting on a tool that had been left at a previous job site, and the owner paid full payroll for every one of them the entire time. That likely cost him several hundred to a couple thousand dollars, and the crew spent the rest of the day rushing to catch back up.
Question 6: My P&L Says I Made Money, So Where Is The Cash?
Your P&L and your bank account are not the same thing, even though it feels like they should be. Your report can say you made 200,000 dollars in net profit while your bank account only shows 80,000. Loan payments, equipment purchases, owner draws, and customers who pay 30 or 60 days late all pull cash out of your business without ever showing up as an expense on that report. Understanding both your profit and your cash flow separately is what keeps this gap from catching you off guard.
Question 7: What Does It Really Cost To Keep My Doors Open?
Most owners cannot answer this one on the spot, and that is exactly the problem. As a business grows, overhead tends to creep upward quietly: a bigger office here, another truck there, a new software subscription added without much thought. That creep means you are losing profit every single month without ever seeing it as a single line item. Knowing your monthly overhead, sometimes called your monthly nut, tells you the real number you have to hit before you make a single dollar of profit.
Question 8: Am I Getting A Return On My Marketing Spend?
If you are spending real money to generate leads, you should be able to trace which of those paid-for leads actually turn into paying jobs. This is exactly the kind of number we dig into during profit coaching, connecting marketing spend back to what it actually produces. If you cannot say which channels are working, that is worth digging into.
Question 9: Why Do We Stop Talking To Customers After The Job Is Done?
You already paid to get every customer on your list, which means there is likely gold sitting in it that you are not using. I once had a plumber do great work in my home, but he never followed up. Years later, when I needed a plumber again, I could not even remember his name, so I hired someone else. One HVAC company I worked with took the opposite approach. They visited top customers once a year to swap batteries in smoke detectors for free, and it consistently led to more paid work every time.
A few simple ways to stay in front of customers who already trust you:
- A seasonal reminder by text, email, or mail
- A quick offer of an additional service they may not know you provide
- A yearly check-in, even if it is not a sales pitch
- An ask for a referral once trust is already built
Question 10: Could My Business Survive Without Me?
This is the question nobody wants to sit with, but it might be the most important one on this list. If you disappeared for a month, would your team know what to do? A friend of mine, another accountant, passed away unexpectedly. His office fell into chaos, and within about 60 days, his thriving practice was gone because nobody on his team was equipped to keep it running. Owner dependency is one of the most expensive profit leaks I see, and if everyone in your business depends on you, you have not built a business. You have built a job with extra steps.
Which Question Made You The Most Uncomfortable
These ten questions are not meant to feel like ten new items on your to-do list. Read back through them and notice which one made you the most uncomfortable, since that discomfort is usually pointing at exactly where your money is leaking out. If you are serious about how to increase profitability, pick that one question and start there instead of trying to tackle all ten at once. Look at your numbers, get help if you need it, and find out whether that unanswered question has been costing you more than you realized.
Diane’s Resources:
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