The jobs that generate the most revenue are often not the jobs that generate the most profit. The job that billed $50,000 and required six weeks of the owner’s direct involvement may have paid less per hour than the job that billed $20,000 and ran two weeks on crew.

Job profitability is the number behind the monthly picture. The five numbers tell the owner what the business’s financial position is right now. Job profitability analysis tells the owner which work is building that position and which work is eroding it.

Most contractors look at revenue by job type and conclude that the high-revenue jobs are the best jobs. The Job Profitability Analysis produces a different picture. It measures margin per job type and reveals which categories of work actually pay the business and which ones consume time without proportionate return.

Why Revenue Is the Wrong Measure

The obvious problem is that revenue and profit are different numbers. A $40,000 renovation job with $31,000 in costs produced $9,000. A $25,000 job with $16,000 in costs produced $9,000. The revenue looks different; the profit is identical.

The less visible cost is the time cost. Owner time spent on a job is a cost. It is often not included in the job cost calculation. An owner who spends forty hours on a job without accounting for that time has made a calculation error.

The deepest cost is the misallocation that follows. A contractor who believes high-revenue jobs are the most profitable pursues high-revenue jobs. They fill the schedule with work that looks successful and produces less margin than the simpler work they are too busy to take. The analysis fixes the misallocation.

The Job Profitability Analysis

The Job Profitability Analysis is three components that together reveal which work types are producing and which are consuming.

Component 1 calculates true job cost for each job type

Component 1 is the cost calculation: for each job type the business regularly performs, calculate the total cost of a representative job. This includes materials, labor, subcontractor costs, and owner hours at a realistic hourly rate.

The owner hourly rate is the variable most often omitted. A contractor who earns $80,000 per year and works 2,000 hours has an effective hourly rate of $40. If they spend 60 hours on a job, that is $2,400 in owner time that belongs in the cost calculation.

Component 2 compares profitability across job types to find the pattern

Component 2 is the comparison: apply the full cost calculation to several completed jobs of each type and compare the resulting margins. Not revenue. Not gross revenue minus materials. Margin after all costs including owner time.

The comparison across job types usually reveals two or three categories that produce strong margins and one or two that produce weak ones. The category that produces weak margins is almost always the category that also requires the most owner time.

Before: The owner estimates that all their job types pay about equally, based on how the invoices look. After: The analysis reveals that one job type is paying 22% margin and another is paying 8%. Not the same at all.

Component 3 translates the margin pattern into a work-mix decision

Component 3 is the implication: what does the margin pattern suggest about which work to pursue, which to price higher, and which to phase out?

The analysis from Component 2 connects directly to the work-selection framework in How to Decide What Kind of Work to Take. That article applies the Four-Question Work Filter; this analysis provides the margin data that fills in the first question of the filter.

How the Conductor Identifies Your Most Profitable Work Types

Which job types have actually made money this year?

The job cost and profitability records from the year’s completed jobs are in the Living Library’s Analytics Collection. The Conductor reads from those records. It identifies which job types delivered the strongest margins and which the weakest, calculated from actual costs and owner hours, not estimates.

The owner receives a ranked picture of their work: which categories to pursue more of, which to price higher, and which to reconsider. Not a general assessment of profitability. A specific breakdown of this business’s actual numbers from actual jobs.

Run the Analysis on the Last Twelve Completed Jobs

Don’t run the analysis on the last twelve months of jobs. Run it on the last twelve completed jobs. Twelve jobs across a reasonable range of types is enough to see the pattern.

For each job: actual materials cost, actual labor cost, actual subcontractor cost, actual owner hours multiplied by the hourly rate. Compare the resulting margins across job types. The pattern will be visible within ten jobs.

The Analysis Changes What Gets Scheduled Next

The contractor who discovers that one job type pays three times the margin of another is not making the same scheduling decisions as before. Every future scheduling decision is now informed by a number, not a feeling. Try Kiluma free for 14 days at kiluma.ai.