- Enter service revenue. Use the amount earned for the job or period.
- Enter direct labor hours and cost. Use actual or expected delivery hours and a burdened hourly cost.
- Add materials and outside costs. Include purchases directly tied to the service.
- Allocate overhead. Apply a consistent share of rent, software, management, and support costs.
- Review profit and profit per hour. Compare with pricing and capacity goals.
Service Profit Estimator
The Service Profit Estimator calculates profit from service revenue after direct labor, materials, and allocated overhead. It is designed for work where profitability depends on both billable revenue and the resources required to deliver the service.
Agencies, repair businesses, contractors, and professional service teams can use the result to quote work, review completed jobs, or compare service lines. The calculator shows total cost, profit, and profit per billable hour. Allocated overhead is an estimate, so the quality of the result depends on using a consistent and reasonable allocation method.
Calculator inputs
USD
hours
USD
USD
USD
Result
—
Calculated result
Total service cost—
Profit per labor hour—
Service profit margin—
Direct labor cost = Labor hours × Labor cost per hour
Service profit = Service revenue − Direct labor cost − Materials − Allocated overhead
Profit per labor hour = Service profit ÷ Labor hours
Use fully burdened labor cost when payroll taxes and benefits are attributable to service delivery.
What the result means
The main result is estimated service profit after the entered direct and allocated costs.
This model does not assign a cost to unused capacity unless that cost is included in overhead.
Given: $15,000 revenue, 180 labor hours at $32 per hour, $1,800 materials, and $2,200 overhead.
Calculation: Labor cost = 180 × $32 = $5,760. Total cost = $5,760 + $1,800 + $2,200 = $9,760. Profit = $15,000 − $9,760 = $5,240.
Result: Estimated service profit is $5,240, or $29.11 per direct labor hour.
Should the labor rate include benefits?
Yes, when you want a fully burdened delivery cost rather than base wage alone.
How should overhead be allocated?
Use a consistent driver such as labor hours, revenue, headcount, or project duration.
Can profit per hour be negative?
Yes. That indicates the entered revenue does not cover direct and allocated costs.
Should sales commissions be included?
Include them in direct costs or overhead depending on how closely they relate to the service engagement.
How is service profit different from cash flow?
Profit allocates costs to the work, while cash flow also depends on payment timing, deposits, and working capital.