A compensation structure breaks down the same way in almost every home service business: pay a percentage of a job's total price with no link to the margin it clears, and the person doing the work will eventually out-earn the person who owns the business and absorbs its risk. That's what was happening at a waterproofing and crawl space repair company running just under $1.8 million a year. Its field crew leader took a flat 25 percent commission and made $80,000 to $100,000 doing it. The owner took home $25,000 (a figure he could recite without checking).
Anthony (not his real name) owns the company, and he'd built it over more than a decade. On paper, the business looked steady, with a 48 percent gross margin holding even in a slower year. Once he sat down with his advisor at Clear Results to build the numbers out line by line, the net profit margin came in at 1.5 percent, on a pay structure that compensated everyone in the business except him.
Most material waste on a job site comes down to a mismatch nobody talks about: the person spending the money and the person paying for it are two different people.
The incentive to be careful just isn't the same.
Economists have a term for it: the principal-agent problem. It shows up anywhere someone's careless with money that isn't really theirs to begin with.
Take a crew member who over-orders adhesive, leaves half a roll of membrane curling up in a truck bed for a week, or tosses a reusable offcut straight into the dumpster because digging it back out isn't worth the hassle.
He's usually not stealing anything, just not connecting a wasted $40 tube of sealant to his own paycheck, since nothing in his day does that for him.
Anthony's crew wasn't unusual. Almost no home service business has built that connection between what a job costs in materials and who's on the hook for it.
A commission built purely on revenue rewards closing and completing work, regardless of what's left over once the job is done. Home service businesses run into this whether the person earning the commission is a sales rep or, less commonly, the person running the crew.
At Anthony's company, the field crew leader was paid 25 percent of the total price of every job his crew completed. If a job priced at $10,000 closed, he collected $2,500 off the top. Labor for his crew came out of that $2,500; whatever was left after paying his guys, he kept. It's a workable structure on paper, since it ties his income to how much work closes, though it never ties that income to whether the work was profitable once materials, waste, and overhead came out of it.
The better these guys do, the better the crew leader does. Even if he does a great job, you don't get any more money. If he does a bad job, you don't get any more money either. All the upside in this business resides in him. He's the owner of the business.
— Stuart Trier, Clear Results
By the time Anthony and his advisor mapped it out, the crew leader was earning $80,000 to $100,000 a year. Anthony's own salary was $25,000.
The arrangement hadn't started out looking like a problem. Years earlier, when a crew left the company to move back to their home country, the crew leader absorbed a couple of their guys and kept working under the same 25 percent cut he'd always taken, paid as a single check to his own entity, which he then split among his own crew. As the business scaled and split into more crews, that flat percentage stopped tracking anything meaningful about the work being done. It just kept paying out.
Anthony had watched his own pay move in the opposite direction. He used to draw a real salary when the business was doing more volume.
My salary used to be $175,000 a year, back when we were doing $3 million.
— Anthony
That contrast makes the point directly: the business had room to pay its owner far more than $25,000. Commission, overhead, and materials were simply absorbing the difference. The business's own diagnostic playbook for this pattern, Clear Results' Revenue Lie framework, puts it plainly: a target built around top-line sales, with no required profit figure behind it, is really just a sales goal wearing the word target.
Replacing a flat percentage of revenue with an incentive tied to gross profit is the mechanism most home service contractors in this position need, regardless of the specific numbers involved. For Anthony's crew leader, the redesign had 3 parts:
The crew leader, for his part, didn't need convincing. He was turning 40, had run crews for 15 to 16 years, and his knees weren't getting any younger either. What he wanted instead was an operations role: closer tabs on materials, walkthroughs, chasing reviews, staying on top of warranty work. Running a crew every day wasn't it anymore.
None of that made the conversation automatic, though. What made it work was getting the sequencing right: define what the new role covers and what he's on the hook for, then attach the pay to it. Reverse that order and the same change reads as a demotion with a nicer title.
There's no fixed rule for how much office overhead a home service business should carry.
But once salaries and wages for administrative staff climb past the high teens as a share of revenue, that spending is usually propping up a staffing decision made for a different season than the one running now.
At Anthony's company, it was running 19 percent of operating expenses, a figure that didn't include a dollar for Anthony himself.
2 office employees answered phones, scheduled jobs, and confirmed payments. A separate operations lead split his time between putting out customer-complaint fires, ordering materials, and after-hours marketing events.
He was paid a base salary plus commission on his own sales, and his work overlapped heavily with what the restructured crew-leader role was about to cover.
Anthony's hesitation about cutting anything here was reasonable on its face: the office had been sized up during a stretch of heavy rain years earlier, when call volume spiked and the team couldn't keep up.
He'd kept that staffing level ever since, worried that trimming it would cost him during the next surge.
It's a common pattern: home service businesses staff up for one unusually busy season and never staff back down.
The math told a different story: he was paying a full-time premium, every month of the year, to insure against a handful of unusually busy weeks.
Right-sizing the office to current volume, and reviewing it against a seasonal capacity plan rather than a memory of one bad stretch, was projected to free up roughly $30,000 a year on top of the crew-leader redesign.
The mechanism isn't specific to basement and crawl space work. An HVAC lead installer paid a flat percentage of a ticket, with no adjustment for a refrigerant job that ran long or a part that got ordered twice, faces the same missing link between pay and margin.
Landscaping crews run into it differently: a foreman paid per square foot of a hardscape job has no reason to flag material overage from a bad cut plan, since his check doesn't change either way. Remodeling contractors see their own version of it when a project manager takes a flat percentage of total contract value regardless of how many change orders quietly eat the job's margin. Clear Results' Commission Trap playbook covers the underlying pattern directly: pay built on top-line revenue rewards the same behavior whether a job clears 55 percent gross profit or 35 percent.
The payroll side of Anthony's situation travels across trades too. His crew leader had operated for years as a 1099 subcontractor, cutting his own guys' checks out of a single payment from the company; as the crew split and grew, that arrangement got harder to track and, more importantly, harder to defend.
The 1099 rules for contractors get stricter the more a subcontractor's day-to-day looks like an employee's. A crew lead running the same guys under the same company truck and the same job list for years is exactly the profile the IRS and workers' compensation carriers look at first, whatever the paperwork says. Any project-based trade that scales past a handful of guys under one informal lead runs into this same transition, from framing crews to painting subcontractors to irrigation installers.
Is a 25% commission on total job price too high for a home service contractor's crew leader?
There's no single right percentage, since it depends on what the crew leader is responsible for. In HVAC, plumbing, and electrical contracting, 8 to 10 percent is closer to what's typical for a straight sales commission. A 25 percent cut of total job revenue for someone running the crew is a different animal for any home service contractor, since that cut also has to cover his own crew's labor cost, which is part of why the percentage looks larger than a typical sales commission.
Is redesigning a compensation structure like this the same as home service business coaching?
Where a typical home service coaching program hands an owner a generic commission template and a monthly check-in call, this kind of work starts from the business's own cost of goods sold, gross margin, and specific pay figures, then builds a redesign around what that particular home service contractor can afford. Clear Results built Anthony's redesign live on the call, directly from his own cost of goods sold and margin figures.
"If I move my crew leader off 1099 and onto payroll, will I lose him?" a business owner might ask.
A crew leader who's been paid this way for over a decade is unlikely to leave over a paperwork change alone, especially if his take-home stays roughly the same during the transition. Plenty of home service contractors hit this same wall as they grow past a handful of guys under one informal lead, in trades from HVAC to landscaping. The business's exposure before the change is usually what forces the timeline: a subcontractor who works exclusively for one company, drives that company's trucks, and reports to a supervisor most days functionally looks like an employee to the IRS and to a workers' compensation carrier, regardless of what the paperwork says.
What's a healthy net profit margin for a home service business this size?
For a home service contractor running under $2 million a year, 15 to 20 percent net profit is a reasonable target once true overhead is accounted for. Plenty of owners at this size are running in the low single digits without realizing how far off that is. Getting there usually means several smaller cuts working together rather than one big one. In this case, the plan split the recovery across 3 buckets: roughly 2 to 3 percent back from direct labor and materials, about 8 percent from office overhead sized for a busier season than the current one, and another 2 to 3 percent from marketing spend running high relative to lead volume.
Why does material waste show up as a cost problem instead of a labor problem?
Because nobody's tracking it at a level where it would ever show up as a labor problem. Materials usually get coded as one lump cost-of-goods line, never broken down by crew or by job. A crew that wastes twice as much adhesive as the crew next to them just disappears into that line item; the only thing that shows up is a materials percentage that's a little too high, company-wide. A weekly per-crew variance report, comparing what got pulled from the shop against what the job called for, usually surfaces the pattern inside a month or two.
What happens to a long-time crew leader's role when a business restructures pay like this?
The crew he used to run usually feels this change more than he does, a pattern that holds across home service contractors whether the trade is waterproofing, HVAC, or landscaping. When a crew leader stops taking a cut of every job and starts drawing a salary instead, the guys who worked for him need someone new signing off on their hours and their material requests, and that handoff is where transitions like this stall if nobody plans for it. Anthony kept his crew leader involved in scheduling and quality checks all through the changeover, so the shift in authority happened gradually instead of all at once, and the crew never had a week where nobody was clearly in charge.
Stuart Trier is the Founder and CEO of Clear Results. Over the past 20 years, Stuart has built, bought, and sold 11 companies across the home service, healthcare, and marketing industries. He built his first company from startup to $8M in revenue in 3 years before a successful exit, then built a chain of 28 healthcare clinics and sold the business to a publicly traded company. Following that acquisition, Stuart spent 3 years working alongside the CEO, helping lead the organization through a take-private transaction before participating in a nine-figure exit to a Fortune 10 company. Today, he's the lead investor behind an electrical services platform operating across 3 U.S. states, and has worked directly with owners through 1,800+ strategic advisory sessions.
