Job Costing: Did We Make Money on This Job?

Why this matters

Your P&L tells you if the shop made money this month. It cannot tell you which jobs made money and which quietly lost it. Job costing answers that, one ticket at a time, and it is how you find the work that looks busy but bleeds. Two jobs can bill the same and earn wildly differently. Until you cost jobs, you are pricing in the dark.

Step 1: Capture the revenue for the job

Start with the full amount billed on that single job: labor, materials marked up, equipment installed, trip or diagnostic fees, any add-ons. Use the actual invoiced amount, not the estimate. If a change order added scope, include it. This is the top line for this one ticket.

Step 2: Add up the true labor cost (not the hourly wage)

This is the step shops get wrong. The cost of a technician on a job is not their hourly wage. It is their fully burdened labor rate - wage plus the payroll taxes, workers' compensation, insurance, benefits, and paid non-productive time the shop carries for every working hour. Burden typically adds a meaningful fraction on top of base wage, often pushing real cost well above the number on the pay stub. See related: Labor Burden.

To cost the job: take each person's burdened hourly cost, multiply by the hours they actually spent on this job (including drive time and the time the truck sat), and sum across everyone who touched it. Track hours per job from day one - without that, job costing is guesswork.

Step 3: Add the direct materials and equipment

Add what the parts and equipment actually cost you, not what you billed for them. Pull from supplier invoices or your parts catalog cost field. Include consumables you burned on the job. The markup you charged is revenue (Step 1); the cost you paid is the number here.

Step 4: Add the other direct costs

Costs that exist only because you did this job belong here too:

• Subcontractor charges for this job.
• Fuel and vehicle cost for the trip, if you allocate it per job.
• Permit and inspection fees you paid out.
• Equipment rental specific to the job.
• Disposal or dump fees.

If a cost would not exist had you declined the job, it is a direct cost. If it exists whether or not the phone rings (office rent, software, advertising), it is not - that is overhead, handled in Step 6.

Step 5: Calculate gross profit and gross margin for the job

Now do the math:

• Job gross profit = revenue (Step 1) minus all direct costs (Steps 2 through 4).
• Job gross margin = job gross profit divided by revenue, as a percent.

Margin is the number to compare across jobs because it is fair regardless of ticket size. A small repair and a large install can both be judged on whether they cleared your target margin. Set a target (most service shops want job gross margin comfortably above half) and flag every job that came in under it.

Step 6: Sanity-check against overhead

Gross profit is not your take-home on the job. The shop still has to cover overhead out of the gross profit every job produces. A quick way to keep this honest: know what share of revenue your overhead eats company-wide, and make sure each job's gross margin clears that share with room left over. A job whose gross margin only equals your overhead percentage broke even - it paid to exist and earned the owner nothing.

Step 7: Read the result and act

• Strong margin: repeatable. Note what made it work - good estimate, tight hours, fair pricing - and do more of that work.
• Thin margin: find the leak. Was it labor (hours blew past the estimate)? Materials (priced the parts wrong)? Scope creep with no change order? Each points to a different fix.
• Negative: you paid to do the job. One-offs happen, but a pattern of losing jobs in one category - one trade, one customer type, one service - means reprice or stop selling it.

Step 8: Roll it up to find patterns

One job is a data point. The power is in the pattern. Group costed jobs by service type, by customer, by crew, by lead source. You will usually find a few categories carrying the shop and a few dragging it. Reprice the laggards, lean into the winners, and your average margin climbs without selling a single extra job.

References

• U.S. Small Business Administration (SBA), job costing and pricing for service businesses
• IRS, cost of goods sold and direct cost basics (Schedule C concepts)
• See related: Labor Burden, Gross Margin vs Net Margin, Reading Your Profit and Loss Statement