- Jobber Blueprint /
- Articles /
- Small Business Profit Margin Guide
Originally published in March 2020. Last updated on January 21, 2025.
As a small business owner, you need to set a healthy profit margin to cover your business expenses, reinvest in growth, and achieve financial stability. But many home service providers struggle to calculate, set, and stick to a number that balances pricing, costs, and growth.
Read through this guide to learn how to come up with a small business profit margin that keeps you in the black and helps you set competitive prices to keep you on the path to success.
Set a healthy small business profit margin:
What is a profit margin?
Your profit margin is the percentage of money you keep after covering costs like overhead and operating expenses. For example, if you charged $500 for a job and your costs were $400, your profit margin would be 20%.
From an accounting perspective, this financial metric is typically broken into three categories:
- Operating profit margin: The total amount you make on a job after expenses are covered but before any applicable taxes or interest charges.
- Gross profit margin: How much money you have left over after subtracting the cost of goods (COGS), which are expenses directly related to a job, like labor and materials.
- Net profit margin: Your total profit after all expenses are deducted, including COGS, overhead and operating costs, taxes, and interest.
While it’s good to be aware of the different types of profit margins, the most important for small businesses is your net profit margin. It’s the best way to track your overall profitability to ensure you’re making more money than you’re spending.
Good profit margin for small businesses
For most service businesses a healthy profit margin lands between 10-30%.
For example, here are some general profit margins for different industries:
- HVAC: 15-25%
- Plumbing: 15-25%
- Landscaping: 10-30%
- House cleaning: 20-30%
- Electrical services: 15-20%
- Lawn care: 15-30%
It’s important to keep in mind that the profit margin you set will be impacted by various factors, including:
1. Your pricing strategy
The profitability of every service is directly impacted by how you price your services.
To maximize profits, you’ll need to focus on being efficient in the field and keeping your overhead costs under control.
Your profit margin is going to be helped by selling at the right price and being efficient in the field and not having too much overhead.

2. Job costing
Knowing how profitable each job is tells you whether you’re charging enough for your services and whether you need to renegotiate or reduce material costs. It can also show you how to price new services profitably, like when you start offering bundles or tiered packages.
You start job costing and you’re going to get clarity real quick on if the juice worth the squeeze.

Use Jobber’s job costing software to track material, labor, and expenses for each job to price each job for profit so you don’t end up in the red.
3. Seasonality
If your business is seasonal, like lawn care, snow removal, or holiday light installation, your profit margin will fluctuate based on your off-season. That means you may need to adjust it to be higher during your busiest months and lower when you typically book fewer jobs.
4. Fluctuating expenses
Changing costs like when material prices increase or when you need to bring on a specialized subcontractor for a job can lower profit margins overall and for individual jobs.
5. Your industry
Some industries, like HVAC, have higher operating expenses because they require specialized labor, expensive equipment, and licenses and permits, lowering their profit margins. Other industries, like house cleaning, have less overhead and fewer regulations, allowing them to maintain a higher profit margin.
6. The services you offer
Specialized or premium services typically have a higher profit margin because they cater to a specific customer base. For example, high-end landscaping design or home automation businesses typically have higher profit margins because they provide custom solutions to client problems and use specialized tools and materials.
7. Your customers
Knowing who your target market is and how much they’re willing to pay for your services directly impacts your profit margin. If you cater to budget-friendly clients, they may expect lower prices, resulting in a lower profit margin.
8. Market conditions
Local market conditions also play a part in how much your profit margin is. For example, if you don’t have any competitors, you may be able to charge higher prices and turn a better profit. But if the market is saturated with other companies offering similar services, you may need to price lower or find a way to set yourself apart to maintain a healthy profit margin.
How to calculate profit margin
To calculate your net profit margin, follow these steps:
1. Add up your expenses
Combine your total expenses, including labor, materials, taxes, overhead, and operating costs.
2. Calculate total revenue
Revenue is the combined total of your invoices for a specific period before costs are subtracted.
To calculate total revenue, choose a timeframe (like 30, 60, or 90 days) and add up the total for all invoices issued within that time.
3. Find your net profit
Next, find your net profit by subtracting your total costs from your total revenue.
Net profit = total revenue – total expenses
This will tell you how much money you have left after all your costs are covered.
4. Calculate your profit margin
From there, calculate using this profit margin formula:
Profit margin = (net profit / total revenue) x 100
You can also use Jobber’s free profit margin calculator to do the math for you. Just enter your labor and material costs, overhead expenses, and service prices to see how profitable your current pricing strategy is.
Why profit margin matters
Having a good profit margin is essential to not only running your business but growing it. Monitoring your profit margins allows you to:
1. Track overall profitability
Your profit margin tells you how much money you are (and aren’t) making. You can use it to monitor trends like increasing material costs, rising labor expenses, and changes in demand so you can make adjustments before they impact your bottom line.
It also shows you how much room you have to grow by hiring new employees, generating leads, or building out your service list.
2. Inform pricing
Your profit margin tells you whether your prices are high enough to cover costs and put money in your pocket or if you need to increase them. It helps you strike a balance between staying competitive and generating profit.
3. Improve efficiency
When you start digging into your numbers, it helps you identify areas where you could improve efficiency by cutting costs or developing better standard operating procedures. This prevents you from wasting resources and can make it easier to reach your profit margin without increasing prices.
Pro Tip: Get instant access to your business data with Jobber Copilot. It can analyze your expenses, revenue, quotes, and invoices to help you stay on top of your profit margins.
4. Keep track of your business’s health
Understanding profit margin gives you an overview of your business’s health, but you aren’t the only one who might care about that information. Banks, lenders, and investors use this financial metric to evaluate your small business when you apply for loans or seek funding.
It also gives you insights you can use to make better decisions as a business owner when it comes to growth, planning, and making investments, like new tools or equipment.
5. Protect your business
Monitoring your profit margin ensures you always turn a profit, better preparing you for unexpected costs or seasonal fluctuations. It’s a tool you can use to track and improve cash flow, get ahead of changes in expenses, and make more strategic decisions in unforeseen situations.
Join over 200k service professionals that trust Jobber
Get Started