Beat the company's own 12% ceiling with room to spare.
Same weekly production, far less overtime
What one overloaded job did to the real cost of a field hour
Most contractors price a job based on the wage they pay a crew, not the actual cost of putting that crew on a truck for an hour. That difference is where profit disappears. One foundation repair company learned the hard way when direct labor costs rose to 18% of revenue.
Miles (not his real name) worked with Clear Results to build a weekly labor burden scorecard, cutting direct labor to 11.6% of revenue and crew workweeks from 55 to 42–44 hours, without losing any of the $25,000 a week that his crews already produced.
Sales reps were quoting jobs based on "best-case scenario" labor assumptions, not on what it cost to run a job. Miles could see gross revenue climb every quarter. What he couldn't see was whether any individual job or any individual crew-hour was profitable once real costs were accounted for.
The math, once someone worked through it, was ugly. Dividing a full quarter's company expenses across the hours three crews worked put fixed overhead at roughly $280 an hour, per crew, before a single wage was paid. Against a bill rate in the low $300s, that left barely $11 an hour of margin. Sound sustainable? It wasn't. The company had no way of knowing in real time; the damage only became apparent once the quarter had closed.
Most contractors think their labor cost is the wage on the paycheck, though it rarely is. A true labor burden rate loads that wage with payroll tax, insurance, and benefits, then adds the overhead every field hour has to cover: fleet, tools, admin, everything that isn't the job in front of the crew.
Miles paid his crews roughly $32 an hour. Load that with a realistic 1.18 burden multiplier, and having someone in the field costs about $37 an hour, before overhead is even counted. Add in what it takes to cover the rest of the business, and the real breakeven cost of a field hour can run several times the wage on the paycheck. Price or staff against the wage alone, and the difference comes straight out of the margin.
The clearest example of the difference between wage and real cost showed up when one crew spent seven to eight weeks on a single custom excavation project. Even Miles wasn't sure, right away, how much the job had really cost him.
"I don't know if I lost money, but I definitely didn't make money like I could have if the crew had been on other jobs for eight weeks." — Miles
With that crew tied up on one unbillable stretch, the company's pool of billable hours shrank, and the fixed overhead that pool has to cover didn't. Stuart modeled it directly: divide June's $207,000 in fixed expenses by the 1,912 hours the team billed that month, and the breakeven overhead burden alone comes out to $108 an hour. Add the loaded labor cost on top, and the real breakeven (before any profit) lands around $146 an hour. To make money instead of just cover costs, the company needed to be billing closer to $189.
Squeezed by the resulting cash crunch, Miles put $50,000 of his own owner's profit back into the business just to make payroll. That's not a rounding error. It's a business owner personally absorbing the true cost of an uncosted job.
Fixing this took two changes running at the same time, not one silver bullet.
Did the crews resist tighter hour caps? Some did, and it took real management, not just a new spreadsheet, to hold the line. But the numbers gave Miles something he'd never had before: a weekly answer to whether the business was making money, instead of a quarterly guess.
By the following November, the shift had fully compounded. Direct labor percentage, which had been running as high as 18% earlier in the year, landed at 11.6%, beating the company's own 12% ceiling.
"I dropped my labor percentage by 4%. It went from 15.8% to 11.6%, last I looked." — Miles
The bigger surprise was what happened to the schedule: the same $25,000 a week in production that used to require 55-hour weeks and roughly 15 hours of overtime was now coming from crews working 42 to 44 hours instead. Same revenue, fewer hours, and far less overtime eating into every job's margin.
The difference between wage and real cost doesn't stop at foundation work. Take a remodeling contractor who bids a bathroom retrofit off a flat $40-an-hour carpenter rate: the math looks fine until a job slips from an estimated 40 hours to 60 (which happens more often than anyone likes to admit), the crew runs into overtime, and the invoice never moves to cover it. The owner was left wondering why a $25,000 project somehow didn't make payroll. The answer is the same one Miles used: load the real wage, set an hourly cap per job phase, and track the burden weekly instead of discovering it at quarter's end.
A transactional trade like HVAC service runs into it differently but just as expensively. A technician billing at a flat rate looks profitable on paper against a $30-an-hour wage, until "windshield time" between calls and an unbilled warranty callback eat into the hours that are supposed to be covering overhead. Track billable hours against total clocked hours, and the real breakeven per truck often runs two to three times the technician's wage: the same math, a different trade.
1. How to Calculate a Real Labor Burden Rate Instead of Just a Wage
Start with the wage, then load it with payroll tax, workers' comp, and benefits: most home service trades land somewhere between 1.15 and 1.25. A $32-an-hour wage loaded at 1.18, for instance, comes out to closer to $37 an hour before a truck even leaves the yard (and that's before overhead is added). Add a share of fixed overhead per billable hour on top of that, and the wage on the paycheck usually understates the real cost by a wide margin.
2. How to Stop Overtime From Eating Into Contractor Margins
Track weekly hours against production, not just against the schedule. A crew that's chronically running 15-plus hours of overtime a week is usually a scheduling issue, not a staffing shortage. Hard hour caps per job, afternoon truck prep instead of morning prep, and a weekly labor-percentage scorecard can cut overtime sharply without cutting the revenue those hours produce.
3. Is Job Costing the Same as Home Service Coaching?
No. Most home service coaching programs hand owners a framework and a monthly check-in, then leave the implementation to the owner. Clear Results installs the tracking system itself (the weekly scorecard, the burden-rate math, the pricing adjustment) and works inside the business until it runs on its own, rather than handing over a playbook and stepping back.
4. How to Bid Custom or Non-Standard Jobs Without Losing Money
Custom and one-off jobs are where uncosted labor does the most damage, because there's no repeatable estimate to check against. Set an hour cap before the job starts, track hours against it daily rather than at completion, and treat any job that blows past its cap as a signal to re-price the next one like it, not just absorb the loss quietly.
5. At What Revenue Should a Contractor Install a Formal Job Costing System?
There's no hard cutoff, but the need shows up earlier than most owners expect, often as soon as a business runs more than one crew at once. Once an owner can no longer personally track every job's hours against its estimate in their head, informal tracking stops working, and a formal weekly system becomes the difference between growth and margin erosion.
6. How to Get Crew Buy-In When Shifting From Daily to Hourly Scheduling
Expect some resistance, and don't be surprised if it's louder than you'd guess. To a crew, tighter hour caps can feel like a threat to their take-home pay, not just a scheduling tweak. The answer isn't to force it top-down; it's to pair the new caps with a clear pay structure (so people know exactly how it affects them) and let productive crews earn time back, not just work harder for the same money.
7. What's a Realistic Direct Labor Percentage Target for a Contracting Business?
It varies by trade (a lot more than most owners expect), but many home service businesses aim for direct labor between 10% and 16%, with the lower end reserved for higher-margin specialty work. The exact target matters less than tracking it every week, without fail. A business that doesn't know its real percentage can't tell whether 18% is a crisis or just normal for its own trade.
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.
