Run it with less chaos · Every business
How to Find Out Which Jobs Actually Make You Money
Two jobs can bring in similar margins on paper and very different money per hour, and the research on costing shows that a small share of a company's customers usually carries all of its profit.
At a glance
- Job profitability is what a job leaves behind after its materials, its fees and every hour it used are paid for, with each hour priced at what it costs the business to keep its doors open and its people on the clock.
- In the Federal Reserve's 2024 Small Business Credit Survey of 7,653 employer firms, only 46% reported operating at a profit, so a full calendar is no guarantee that the work on it pays.
- Research on activity-based costing found that in a typical company, 15% to 20% of customers generate 100% or more of the profits, while the rest break even or lose money.
- In an illustrative service business, three common job types earn between $58.54 and minus $15.27 per hour of capacity, a spread the invoice totals never show.
- Pricing your hours once, then ranking your job types by profit per hour, tells you which work to grow, which to reprice and which to stop taking.
Part 1 | The invoice total hides the hours each job uses
Most owners judge a job by its ticket, and the habit makes sense, because the ticket is the number the customer sees, the bank deposit records and the end-of-month report adds up. The trouble is that two tickets of similar size can use very different amounts of the business's time, once the drive, the setup, the return trip, the phone calls and the paperwork are counted, and time is the one resource a service business sells that cannot be restocked.
The pattern is old and well documented. When researchers at Harvard Business School began costing work by the activities it consumed, rather than by spreading overhead evenly across sales, they kept finding the same shape. In one insurance company's data, the most profitable 40% of customers generated 130% of annual profits, the middle 55% broke even and the least profitable 5% produced losses equal to 30% of annual profits; across companies, the same research found that 15% to 20% of customers typically generate 100% or more of the profits.
| Customers, ranked by profitability | Share of annual profits |
|---|---|
| Most profitable 40% | 130% |
| Middle 55% | About 0% (break even) |
| Least profitable 5% | Minus 30% |
The same logic applies to job types in a small service business. The owner's first instinct is often We just need more jobs, when the more useful question is which kinds of jobs, because adding more of the work that loses money makes the calendar fuller and the year worse.
Part 2 | Put a price on every hour the business has
The method that made those findings practical, time-driven activity-based costing, needs only two numbers: what it costs per hour to supply the business's capacity and how long each kind of job takes. Its authors, writing in Harvard Business Review, recommend measuring capacity as practical capacity rather than every scheduled hour, and they suggest about 80% for people, since breaks, training, travel between tasks and ordinary interruptions take the rest.
For an owner, that becomes cost per hour of capacity = monthly costs other than materials ÷ practical hours per month. Monthly costs here mean payroll with taxes and benefits, rent, vehicles, insurance, software, phones and the owner's own pay, the things the business spends whether or not a particular job happens. Practical hours are the hours your people are scheduled to work, multiplied by 80%, which is the research benchmark; your own number may be lower if drive time is heavy.
Then, for each job type, job profit = price − materials − (hours used × cost per hour of capacity). Hours used means everything the job consumed from the moment it was booked: the drive, the work, the cleanup, the follow-up call and any return visit.
Part 3 | Rank job types by profit per hour, then decide
Once each job type has a profit figure, divide it by the hours the job used, because profit per hour is the measure that tells you what a day filled with that work would earn. The table below shows how much the picture can change in one illustrative home service business.
| Monthly costs other than materials (Assumption) | $40,000 |
|---|---|
| Technicians × scheduled hours per month (Assumption) | 4 × 160 = 640 hours |
| Practical capacity (Cited benchmark (Kaplan and Anderson)) | 80% = 512 hours |
| Cost per hour of capacity (Calculated ($40,000 ÷ 512)) | $78.13 |
| Job type | Price | Materials | Hours used | Job profit | Margin | Profit per hour |
|---|---|---|---|---|---|---|
| Maintenance visit | $189 | $15 | 1.5 | $56.81 | 30.1% | $37.88 |
| Standard repair | $1,200 | $380 | 6 | $351.25 | 29.3% | $58.54 |
| "Quick" install with a return trip | $650 | $210 | 7 | −$106.88 | −16.4% | −$15.27 |
The maintenance visit and the repair carry nearly the same margin, yet an hour of repairs earns about 55% more than an hour of maintenance visits, and the install, which looked like a decent $650 ticket, cost more to deliver than it brought in once the return trip and the extra hours were counted. Each result points to a different decision. A job type with a low profit per hour might need a higher price or a minimum charge, one that keeps losing money might need a different process, such as a better site check before quoting, and one that does well is a candidate for more marketing.
How you compare
- Profitability across small firms: 46% of employer firms in the Federal Reserve's 2024 survey reported operating at a profit, 19% at break even and 35% at a loss, so a business that knows its profit by job type is already working with better information than many of its peers.
- Margins in the trades: remodelers in the National Association of Home Builders' latest cost study averaged a 29.9% gross margin and a 6.3% net margin in 2024, which means a few job types with negative profit per hour can absorb most of a year's profit.
- Capacity: if your practical hours are well under 80% of scheduled hours, drive time and gaps in the schedule are part of every job's cost, and tighter routing or booking is worth as much as a price change.
- Your own baseline: the most useful comparison is your top five job types against each other, recalculated each quarter.
Questions to ask this week
What are our five most common job types? Pull them from the last three months of invoices, by count rather than by dollars.
How long does each one really take? Count from booking to final follow-up, including drive time and return trips, for at least ten jobs of each type.
What does an hour of our capacity cost? Add last month's costs other than materials and divide by 80% of scheduled hours.
Which job type earns the least per hour? Decide whether it needs a new price, a minimum charge, a better process or a polite referral to someone else.
The next step is to work out your cost per hour of capacity from last month's numbers, then time ten jobs of your most common type against it.
About this research: This article draws on Harvard Business School research on customer profitability and on time-driven activity-based costing, the Federal Reserve Banks' Small Business Credit Survey and the National Association of Home Builders' Remodelers' Cost of Doing Business Study. The time-driven costing figures were confirmed from the authors' own excerpt published by Harvard Business School. The worked example is illustrative. General information, not legal/tax/financial advice; talk to a licensed professional about your situation.
Sources
- Kaplan, R. S. A Balanced Scorecard Approach to Measure Customer Profitability. Harvard Business School Working Knowledge, 2005 (from Balanced Scorecard Report).
- 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.
- Federal Reserve Banks. 2025 Report on Employer Firms: Findings from the 2024 Small Business Credit Survey. 2025. 7,653 employer firms.
- National Association of Home Builders. Remodelers Saw Profit Margin Gains in 2024. Eye on Housing, April 2026; from the 2026 Remodelers' Cost of Doing Business Study.
Related reading: Job Costing for Contractors Who Hate Spreadsheets · How to Calculate Profit Per Service in Five Minutes · The Hidden Costs That Turn a Profitable Job Into a Loss · What a Discount Really Costs You, Shown in Margin Math
Work with osNOVA on knowing which jobs pay
We help owner-run service businesses work out what an hour of their time really costs, rank their services by the money each one earns, and set prices, minimums and booking habits that fill the calendar with the work that pays, starting from what you want more of, whether that is steadier cash, fuller weeks or more of your best jobs.
Email hello@osnovaops.com about your business
Or leave your email and we will reach out
Tell us what kind of business you run and what you want more of.
Not ready to talk? osNOVA runs free live events for owners.