Run it with less chaos · Every business
How to Calculate Profit Per Service in Five Minutes
One division from last month's costs gives you a cost per minute, and that single figure tells you what each service on your menu really earns.
To calculate profit per service, take the price, subtract the supplies and card fee the service uses, then subtract the minutes it takes multiplied by your cost per minute. Your cost per minute is last month's costs other than supplies divided by the practical minutes your team had available, which research on costing puts at about 80% of scheduled time for people.
The five-minute method
| Step | What to do | Example |
|---|---|---|
| 1. Add up monthly costs | Last month's payroll with taxes, rent, utilities, software, insurance, marketing and your own pay; leave out supplies used on services | $18,000 (Assumption) |
| 2. Count practical minutes | Scheduled hours for everyone who delivers services × 80% × 60 | 2 providers × 160 hours × 80% × 60 = 15,360 minutes (Calculated) |
| 3. Find cost per minute | Step 1 ÷ Step 2 | $18,000 ÷ 15,360 = $1.17 per minute (Calculated) |
| 4. Time the service | Minutes from greeting to a ready room or chair, not the menu time | 60 minutes of service + 15 minutes of setup and turnover = 75 (Assumption) |
| 5. Subtract everything | Price − supplies − card fee − (minutes × cost per minute) | $120 − $8 − $3.27 − $87.89 = $20.84 (Calculated) |
Repeat step 4 and step 5 for your five most booked services and put the results side by side. The service with the highest price is often not the one with the highest profit per hour, because longer services use more of the minutes you are paying for whether or not anyone is booked.
| Service | Price | Supplies | Card fee | Minutes used | Cost of minutes | Profit | Profit per hour |
|---|---|---|---|---|---|---|---|
| Your service | Minutes × cost per minute | Price − the three costs | Profit ÷ minutes × 60 |
Why it works
The method is a simplified version of time-driven activity-based costing, which its authors described in Harvard Business Review as needing estimates of only two things: the cost per unit of time of supplying capacity and the time each activity takes. In their worked example, $560,000 of quarterly costs spread over 700,000 practical minutes came to 80 cents a minute, and their rule of thumb is that practical capacity runs at 80% to 85% of theoretical capacity, with about 80% for people.
General information, not legal/tax/financial advice; talk to a licensed professional about your situation.
Sources
- Kaplan, R. S. and Anderson, S. R. Time-Driven Activity-Based Costing. Harvard Business Review, November 2004; excerpted as Rethinking Activity-Based Costing, Harvard Business School Working Knowledge, 2005.
- Square. Pricing. Free plan in-person rate, accessed October 2026.
Related reading: How to Find Out Which Jobs Actually Make You Money · The Hidden Costs That Turn a Profitable Job Into a Loss · Gross Margin vs. Net Profit, Explained for Owners
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