Mike Andes says home service businesses can hit 40% profit margins by raising labor rates about 20% and rewarding crews for finishing jobs on time. If labor costs exceed 60% of revenue, profitability is nearly impossible.
having some sort of metric of efficiency and incentive for your crew to hit budgeted hours, or even if it's a subcontractor, it's like, hey, this is the percentage of the job you're getting right now. We're paying so much to subcontractors and so much to labor, we will never make this business profitable. I really want you to increase these prices by 20% plus, and then I want you to have some incentive around efficiency. And if you do both of those things, then and only then will you get that 40% range that I like to see when it comes to direct labor and subcontractors. If you start getting 50, 60, and you're over 60% right now, Nick, I, I never see a home service business make any money. So we've got to make sure that we are incentivized to make sure the jobs are done efficiently.
