Job Costing

Job costing is the practice of tracking the real labor, materials, and overhead costs spent on a specific job — and comparing those actual costs against what you charged the customer. The output is your true gross margin per job, which often differs sharply from what you assumed when you quoted.

For service businesses, job costing is the discipline that separates “I think we’re profitable” from “I know which jobs make money and which ones don’t.”

What to Track Per Job

The five inputs:

1. Quoted price — what the customer agreed to pay.
2. Final invoice price — what was actually billed (may include change orders, upsells, or discounts).
3. Materials cost — what you actually paid for parts and supplies, including waste.
4. Labor cost — billable hours × loaded labor rate (wage + payroll taxes + benefits + workers’ comp). Don’t forget the unbillable hours on quoting, driving, and admin.
5. Allocated overhead — vehicle, insurance, software, marketing, divided proportionally to the job.

What Job Costing Reveals

Most service businesses are surprised by what job costing actually shows:

• The job you thought was the most profitable often isn’t. Big-ticket jobs frequently have lower margins than small repairs because materials cost is a higher percentage.
• Jobs that ran long erode margin disproportionately. A 6-hour job quoted as 4 hours doesn’t lose 50% of margin — it often loses 100% or more.
• Materials waste is bigger than estimated. Most contractors estimate 5–10% waste. Real number is often 15–25%.
• Travel time is a hidden cost. Especially for low-density routes (see route density).

Service Business Benchmarks

Healthy gross margin per job by industry:

• Plumbing repair: 50–70%
• HVAC service: 50–70%
• HVAC install: 25–45%
• Cleaning: 60–80% (labor-heavy)
• Roofing replacement: 25–40%
• Pest control: 50–70%
• Handyman: 50–70% (materials-light)
• Garage door: 45–65%

If your job costing shows you’re below these ranges, the job is either underpriced, taking longer than estimated, or losing materials to waste/theft.

How to Implement It Without a CFO

You don’t need fancy software. The basic approach:

1. Use your invoicing tool to capture price and revenue per job.
2. Track tech hours per job in your scheduling tool. Most field service apps including Kairvio capture this automatically.
3. Estimate materials at the time of job completion (or pull from inventory if you track it).
4. Allocate a flat overhead percentage (typically 15–25% of revenue) per job.
5. Calculate gross margin = (revenue - materials - labor - overhead) ÷ revenue.

Run this for a month. Then sort jobs by margin. Look at the bottom 10% — those are the jobs costing you money. Either re-price them, decline them, or fix the operational issue causing the loss.

Related

• Profit Margin Calculator
• Service Pricing Calculator
• Route Density