How to calculate profit on a landscaping or service job

Start with three separate numbers

Revenue

The amount for the job’s work, including approved additions and subtracting discounts or credits. Keep customer sales tax collected for remittance separate from service revenue.

Remainder after direct job costs

Revenue minus the costs assigned directly to delivering that job. This amount still has to help cover shared expenses.

Estimated job profit after allocated overhead

The remainder minus the job’s assigned share of shared expenses. This is a management estimate, before any costs or taxes not included in the model.

You may hear the second number called a job’s “contribution.” Be precise: formal contribution margin subtracts variable costs, as the SBA’s break-even guide explains. Direct and variable are not identical categories. A dedicated salaried employee, for example, can be a direct job cost without that salary changing with every extra job.

Count the work it actually takes to deliver

Intuit’s job-costing guide distinguishes costs traceable to a job from shared overhead. Start with these inputs:

• Labor: each person’s hours multiplied by their cost rate. Count job-related loading, travel, setup, cleanup, and return visits consistently—not only time holding a tool.
• Materials: what was used, including delivery and waste where applicable. Do not assign an entire bulk purchase to one job if part remains for others.
• Other direct costs: job-specific rental, disposal, subcontractors, travel costs, and payment fees. Use actual charges or documented estimates.

A wage is not the complete employment cost. Intuit’s labor-cost documentation includes items such as employer taxes and workers’ compensation in cost rates. Use your actual payroll and benefit costs; do not copy a universal percentage. Keep estimated hourly costs distinct from finalized payroll amounts.

If you work in the field yourself, include a realistic value for those hours in the pricing model. Label it as an owner-labor planning allowance if it is not a recorded payroll expense. That avoids treating your labor as free without pretending the allowance is a tax deduction.

A worked example: a $1,500 cleanup and mulch job

Every number below is hypothetical—not Pebble Creek pricing, local wage data, a recommended margin, or a customer result. The example leaves sales tax out of the arithmetic, not out of your compliance obligations.

Assume two people each spend eight hours on the job’s preparation, travel, work, and cleanup: 16 person-hours. Their assumed loaded labor cost is $30 per person-hour, including employment-related costs but excluding the shared overhead below.

The $20 fee is only a worksheet assumption, not a payment-provider rate. Replace every allowance with your own information before using this model to quote work.

Where does that $200 overhead allowance come from?

One allocation method uses productive person-hours. Suppose your annual shared-expense budget is $30,000 and you realistically expect 2,400 job person-hours. The allocation rate is $30,000 ÷ 2,400 = $12.50 per hour. Sixteen hours receive $200.

The budget might include office work, software, general insurance, and other costs not already assigned to jobs. Intuit describes activity-based overhead allocation, including labor-hour methods. Choose a basis that reflects your operation; an equipment-heavy business may need a different approach.

MU Extension’s break-even publication explains why fixed costs must be covered and why lower-than-expected volume changes the cost per unit. Its examples concern value-added agricultural products; the relevant lesson for a service company is to use realistic volume and avoid counting the same expense twice.

Do not put equipment ownership or office costs into both the hourly rate and the overhead budget. Review the allocation against actual company expenses and productive hours. A tidy job worksheet does not guarantee the entire year’s overhead has been recovered.

A 20% margin is not a 20% markup

University of Maine Extension’s pricing guide distinguishes dividing the surplus by selling price from dividing it by cost. In this example, use the same $1,200 modeled cost base for both calculations:

• Margin: $300 ÷ $1,500 selling price = 20%.
• Markup: $300 ÷ $1,200 modeled cost = 25%.
• Price for a 20% target margin: $1,200 ÷ (1 − 0.20) = $1,500.

Adding 20% to $1,200 gives $1,440, leaving $240—a 16.7% margin, not 20%. This assumes the modeled cost stays unchanged; if fees vary with price, include that effect. A target percentage is a planning choice, not a guarantee that customers will accept the price.

After the job, replace the plan with actual information

Now suppose the job takes 20 person-hours instead of 16, and materials cost $390 instead of $360. Everything else stays the same:

• Direct costs become $600 labor + $390 materials + $60 disposal + $80 rental + $20 fee = $1,150.
• The direct-cost remainder falls to $350.
• Allocated overhead becomes 20 × $12.50 = $250.
• Estimated profit after that allocation falls to $100, or about 6.7% of the $1,500 revenue.

The $200 reduction comes from $120 more labor, $30 more materials, and $50 more allocated overhead. That extra allocation is not necessarily an extra $50 cash expense caused by this job; it reflects more use of the capacity that supports the business.

Ask what changed: difficult access, an extra supply trip, underestimated preparation, rework, or added scope? Record the reason while it is fresh. Use it to improve the next estimate—not automatically to send an unapproved extra charge.

Also track collection separately. Missouri State University’s efactory distinguishes net income, cash flow, and cash on hand. A modeled profitable job can still have an unpaid invoice. Our estimate-versus-invoice guide explains that payment trail.

A reusable job-review worksheet

Start with a few completed jobs of different types. A missing receipt is “not yet known,” not $0. Mark an incomplete result provisional and reconcile the records with your bookkeeper before treating it as final.

The Pebble Creek approach: put the context beside the number

We built our own operating system around the work of Pebble Creek’s lawn and property-care business. An approved price is more useful when you can connect it to the job, time, materials, and changes that explain the outcome.

A spreadsheet may be enough at first. When gathering those inputs becomes the hard part, a custom business operating system can be scoped to connect the workflow and make missing information visible. It should support your accounting process, not claim profit from incomplete data or replace professional judgment.