What net profit should a home service company make?

The short answer

There is no single correct net profit percentage for a home service company. The right number depends on your trade, your mix of service and install work, whether you own your building, and how much you are reinvesting. What you can do is measure profit the same way every month, compare it with honest benchmarks and know which lever to pull when it falls.

Start with the uncomfortable baseline. In the Federal Reserve Banks' 2025 Small Business Credit Survey, 47% of small employer firms said they were operating at a profit at the end of 2024, 19% were at break-even and 34% were operating at a loss^[1]. Being profitable at all puts a company in the better half.

Define net profit so it means something

Net profit is revenue minus every cost: direct job costs, overhead, interest, depreciation and taxes. Most owners look at net profit before income taxes, because pass-through entities pay tax on the owner's personal return. That is fine if you say so every time you quote the number.

The bigger distortion is owner pay. An owner who runs dispatch, sells replacements and does the books, but takes only distributions, shows a high profit that is really an unpaid salary. An owner who pays family members who do little work shows a low profit that is really a distribution. Before comparing yourself with anyone, adjust for both:

• Replace what the owner is paid with what you would pay a hired general manager to do the same job in your market, including benefits, which made up 30.0% of private employer compensation costs in June 2026^[3].
• Remove wages paid to people who do not work in the business, and add a market wage for family members who work unpaid.
• Move personal expenses run through the company, such as a family vehicle, out of overhead.
• Note one-off items separately: a lawsuit settlement, a large insurance payout, a one-time software migration.

What published benchmarks show

Online articles often quote double-digit net margins for the trades. Treat those with care unless the source shows its sample and definitions. Free, well-documented data points to lower numbers for large companies. In NYU Stern's January 2026 data set, aggregate net margins were 5.94% for US engineering and construction companies, 7.03% for business and consumer services, 7.42% for building materials and 9.74% for the whole market^[2].

Small, well-run service companies can beat those figures because they avoid corporate overhead and earn premium prices for fast local service. Many do not. Paid trade-association surveys and peer groups give the closest comparison, and our guide to benchmarking through peer groups explains how to use them. Whatever source you use, compare only after adjusting owner pay as above.

Survival is the other benchmark. Of US private establishments opened in March 2015, only 34.6% were still operating ten years later^[4]. Consistent profit, even a modest one, is what pays for the slow seasons, the bad debt and the truck that breaks in July.

Example: walking a P&L from gross to net

Example (fictional): a residential cleaning company with 14 cleaners has annual revenue of $1,400,000. Direct costs (cleaner wages with burden, supplies, travel between homes) are $840,000, leaving gross profit of $560,000, a 40% gross margin.

Example overhead: office manager and scheduler $110,000; owner at a market general manager wage $95,000; rent and utilities $36,000; software and phones $24,000; marketing $70,000; insurance $38,000; vehicles not assigned to cleaning $18,000; accounting, bank and card fees $41,000. Total overhead is $432,000. Interest and depreciation add $22,000.

Example result: net profit before income tax is $560,000 − $432,000 − $22,000 = $106,000, or 7.6% of revenue. Before the owner salary adjustment, when the owner took no wage, the same company appeared to earn $201,000, or 14.4%. Same business, very different story.

The five levers

When small firms faced financial strain in 2025, 48% raised prices and 47% reduced costs^[1]. Both work, but in the trades labor productivity usually has the biggest effect because labor is the largest cost. Our guides to job costing and the true cost of labor show how to see it clearly, and gross margin targets by trade covers the price and materials side.

How to tell which lever to pull

Look at three ratios together each month: gross margin, overhead as a share of revenue and revenue per field FTE. The pattern tells you where the problem sits.

• Gross margin down, overhead steady: a pricing, materials or labor-hours problem in the field. Check job costs on your largest jobs.
• Gross margin steady, overhead share up: revenue fell or overhead grew. Look at booked jobs and at recent hires or subscriptions.
• Both steady, revenue per tech down: the schedule has gaps. Check missed calls, cancellations and drive time. See revenue per technician.
• Everything steady, cash tight: profit is fine but money is stuck in receivables or inventory. Profit and cash are different problems.

Software is a common quiet drain. Subscriptions accumulate as each manager adds a tool, and few companies cancel the old one. A yearly software subscription audit often recovers money with no effect on customers.

How the trade changes the math

Net profit targets should reflect how your trade earns money. Three differences matter most.

• Ticket size and frequency. Pest control, lawn care and cleaning collect many small recurring payments. Profit depends on route density and retention, and a lost customer costs a year of visits, not one job. HVAC, roofing and garage doors earn more per job but less often, so a weak sales month shows up in profit immediately.
• Materials share. Trades that resell a lot of equipment or material, such as roofing and HVAC replacement, need a larger revenue base to produce the same profit dollars, because more of every invoice passes straight through to suppliers.
• Seasonality. Landscaping and roofing carry fixed costs through slow winter months with little revenue. Their annual profit is earned in a short peak, so a single wet spring or a late cooling season can move the full-year result more than any cost cut.

Because of these differences, compare yourself with companies in the same trade and with a similar service-to-install mix. A pest control operator with mostly recurring residential accounts and a roofer doing insurance replacements may both be well run and still report very different net margins. The question is not whether your number matches someone else's, but whether it is stable, improving and enough to fund the next truck, the next hire and a cash reserve for the slow months.

When a low profit is acceptable

A year of thin profit can be a deliberate choice: hiring and training two apprentices ahead of demand, opening a new territory or buying a second shop. The test is whether you planned it, put a number on it and can say when it pays back. A low profit that nobody can explain is not an investment; it is a warning.

Write your target down as a range, not a single figure, and review it each quarter. Tie the owner's own bonus or distribution to hitting it, so the incentive to measure honestly is built in.

A monthly profit routine

1. Close the books within ten working days of month end, with all supplier bills entered.
2. Produce the P&L by service line, with the owner salary adjusted to market.
3. Compare each line with the same month last year, not just with the month before.
4. Pick the one lever that explains most of any shortfall and assign a person to it.
5. Check the result the following month before adding a second initiative.

Over a year, this routine matters more than the target percentage. Owners who look at a closed, consistent P&L every month spot a margin leak within weeks; owners who look once a year find it at tax time, when the money is long gone.