Gross margin is the percentage of revenue remaining after subtracting the direct costs of delivering a service (labor, materials, chemicals, and equipment). It does not include overhead. Gross margin indicates how efficiently a business delivers its services. Field service businesses should target gross margins of 50-65% to leave enough room to cover overhead and generate profit.
A pressure washing job generates $500 in revenue. Direct costs include $100 in labor, $30 in chemicals, and $20 in fuel. Gross profit is $500 - $150 = $350, and gross margin is $350 / $500 = 70%.
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