Mike AndesFounder, Augusta Lawn Care and Homeworks · Founder of Homeworks and Augusta Lawn Care

How Overhead Crushes Small Business's

13 Mar 2025 · 1 min

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Mike Andes explains how overhead erodes profitability in small/home-service businesses: when the owner performs the physical work (typical up to ~$200,000 annual revenue) the business can be fairly profitable; once the business hires employees and revenue rises into the $200k–$500k range, the owner becomes an overhead cost (doing estimates, calls, emails, follow-ups) and profit margins drop. High fixed overhead creates breakeven risks—any month with revenue below the breakeven level can cause losses and threaten the business.

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I see 0 to $200,000 in annual revenue as fairly profitable for most home service businesses. Why? Because the owner's actually doing the physical labor themselves. They're generating revenue. Once you get at one or two or three or four employees and you pass 200,000, between 200,000 and $500,000 in annual revenue, you don't see a lot more profit. Because now you're an overhead expense to the business. You're not generating revenue. You're doing sales estimates, you're answering the phone, you're doing emails, you're doing follow ups. You're doing. And you're not actually generating revenue. And so what happens is your profit margins drop. If your revenue ever drops below that break even point, it means that you're losing money. And if you have any month of the year where you lose money because your overhead is too high, it can be very, very risky for the business.