If you had double your profit margin without raising rates, what would you cut or optimize? Our payroll all-in consistently remains at around 50%, but I was hoping to hear what others are doing considering labor is our biggest expense as home service businesses!
Overhead staff - office admin, supervisor, sales rep. I would not consider cutting at all but maybe seeing what AI can take over. Also I find that software costs have increased so much over the years.
50% of your costs (labour) makes 100% of your profit. I started thinking about it that way and my mind set changed.
If you aren't raising prices, you can only cut things. Take a hard look at your expenses and see if there are things you aren't using. You might be over paying your people. Maybe you can make a performance pay system and reduce their base, but make the potential to be higher. Bottom line is if you aren't making money you need to change stuff. If you're not willing to raise your prices then that's going to be the thing you cut.
If I had to double margin without raising rates, I wouldn’t cut people I’d fix how labor is being used.
For us, the biggest shift comes from tightening efficiency. Making sure every job has the right crew size is huge because a lot of times we overstaff without realizing it. Scheduling is another big one drive time, gaps in the day, or waiting on materials can quietly eat a large chunk of payroll. The more you can have jobs fully prepped before the crew shows up, the better, because field time should be strictly execution, not figuring things out.
Strong field leadership also makes a massive difference. One solid lead running the job well will outperform adding extra guys every time. On top of that, tracking labor daily instead of after the job is finished helps catch problems early before they snowball. And rework is the silent killer every mistake essentially doubles your labor on that portion of the job.
At 50% payroll, it’s usually not a staffing issue, it’s an efficiency issue. Tighten those systems and you can realistically bring that number down without cutting your team.
