Most Contractors Don't Know Their Actual Margin
A contractor generating $400,000 in annual revenue asked why he couldn't afford to hire a second technician. After reviewing his numbers, the answer was clear: after labor, materials, vehicle, insurance, and overhead, he was netting about 8% — $32,000 on $400,000 in revenue. Busy, but not profitable.
Understanding profit margins — and the specific levers that drive them in a field service business — is the difference between building a real business and running a treadmill.
Gross Margin vs. Net Margin
Gross profit is revenue minus direct costs (labor, materials, job-specific expenses). Gross margin = gross profit ÷ revenue × 100.
Net profit is what remains after deducting all expenses — fixed overhead, insurance, vehicle, software, marketing, owner salary. Net margin = net profit ÷ revenue × 100.
A business can have strong gross margins but poor net margins if overhead is uncontrolled. The goal is to know both numbers.
Industry Benchmarks by Trade
| Trade | Typical Gross Margin | Typical Net Margin | Key Margin Driver |
|---|---|---|---|
| Electrical | 35–55% | 10–20% | Labor efficiency, permit fees |
| Plumbing | 30–50% | 8–18% | Material markup, call-out fees |
| HVAC | 40–60% | 12–22% | Equipment margins, maintenance plans |
| Landscaping | 30–45% | 6–15% | Labor density, materials cost |
| Painting | 35–55% | 10–18% | Labor hours, material waste |
| Window Cleaning | 50–70% | 15–30% | Route density, recurring contracts |
| Pressure Washing | 50–65% | 15–25% | Route efficiency, chemical costs |
The Levers That Improve Margin
1. Raise Your Rates
The highest-leverage change for most contractors. A 10% price increase on a $400,000 revenue base with 40% gross margin adds $40,000 in revenue — most of which falls directly to net profit since costs don't scale with a price increase.
2. Reduce Material Waste and Quote More Accurately
Materials purchased for a job that aren't used or are over-quoted eat gross margin. Track material costs per job type to identify where estimates are over or under.
3. Improve Route Density and Schedule Utilization
Drive time is paid overhead that produces no revenue. Higher route density — more jobs per day in smaller geographic clusters — increases billable hours per day without adding headcount.
4. Add Recurring Revenue
Maintenance plans and recurring service agreements predictively fill your schedule, reduce customer acquisition costs, and have higher lifetime value. Services with recurring components (HVAC maintenance, lawn care, window cleaning) consistently show the highest net margins in the industry.
Track your gross and net margins monthly in Fieldbase by monitoring revenue and job costs — it gives you the data to make informed decisions about pricing and capacity.
Key Takeaways
- Know both your gross margin (after direct costs) and net margin (after all costs)
- Most field service trades target 35–55% gross margin and 10–20% net margin
- A price increase is the highest-leverage way to improve net margins
- Drive time and idle capacity are the biggest destroyers of field service margins
- Recurring service plans consistently show the highest margins in every trade