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

The Key Labor Percentage Number

18 Feb 2026 · 1 min

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In this brief video, the speaker presents a simple rule of thumb for evaluating the profitability of home service businesses based on the proportion of revenue allocated to labor costs. He states that when labor expenses exceed roughly 50% of revenue, achieving profit becomes very difficult, whereas keeping labor costs below about 30% of revenue typically yields sustainable profit margins of 20% or more. The 20% gap between these thresholds mirrors the typical profit range observed in the industry, making the labor‑percentage metric a quick diagnostic for business health.

Chapters

There is one quick and dirty number I see that differentiates profitable versus unprofitable home service businesses, and that is what percentage of revenue is spent on labor. Now, a very, very rough rule of thumb, but if over 50% of your revenue is spent on wages, it's very difficult to make profit if under 30% of your revenue is spent on wages almost every single time. In home services I have seen this. It's a very profitable business. And it's no surprise. The difference between 30% and 50% is about 20%. And that's usually what people's profits are. And so over 50% bad, usually not making any profit. Under 30%, usually profitable, very sustainable margins over 20% profit.