Which of your services actually makes money? A 30-minute check

The service that makes you the most money is usually not the one with the highest revenue; it is the one with the highest gross profit per hour of your team's time. You can find it in about 30 minutes with last year's invoices, a rough count of hours and your main direct costs. If you have ever asked which services are most profitable for your small business, this check gives you a working answer without hiring anyone.

Here is the method, step by step, with a worked example.

What do you need before you start?

Gather three things. Rough figures are fine; this is a first pass, not an audit.

• Revenue by service for the last 12 months, before HST. Your invoices or bookkeeping software should have it.
• Direct costs by service. Materials, subcontractors, supplies, anything that only exists because you did that work.
• Hours by service. Labour hours your team spent delivering it. Estimate if you have to, but be honest; most people underestimate.

If you cannot split costs or hours by service at all, that is a finding in itself. Start tracking it now and rerun this check in three months.

Step 1 (5 minutes): list your services

Write down each distinct service you sell. Keep it to the ones that matter; lump the rarely used ones into "other".

Five to eight lines is typical for a small service business.

Step 2 (10 minutes): fill in the numbers

For each service, write revenue, direct costs and hours. Then calculate:

• Gross profit = revenue minus direct costs
• Gross margin = gross profit ÷ revenue
• Gross profit per hour = gross profit ÷ hours

The last one is the number that usually changes minds.

Step 3 (10 minutes): compare

Here is a worked example for an imaginary home-services company. The figures are invented to show the method.

Service	Revenue	Direct costs	Hours	Gross profit	GP per hour
Full renovations	$180,000	$126,000	1,500	$54,000	$36
Repairs and call-outs	$60,000	$15,000	600	$45,000	$75
Seasonal maintenance	$40,000	$12,000	500	$28,000	$56

Renovations bring in three times the revenue of repairs. But per hour of labour, repairs earn roughly double. If this company is fully booked, every renovation hour displaces work that would have earned more.

That does not mean "stop doing renovations". It might mean renovations are priced too low, or carry too many unbilled extras, or that repair work deserves more of the marketing budget.

Step 4 (5 minutes): write down three decisions

Turn the table into actions. For example:

1. What to market more. The highest gross profit per hour, assuming you have capacity.
2. What to reprice. Services with low margin that you still want to offer.
3. What to stop or refer out. Work that is low margin, low per hour and not a doorway to better jobs.

Write these down. A check that does not change a decision was just arithmetic.

What can make the numbers misleading?

A few traps to watch for:

• Loss leaders. A low-margin service might be how customers find you for the profitable one. Check whether it actually leads to repeat or bigger work.
• Uneven seasons. A service that only runs four months a year can look poor annually and strong per hour.
• Owner time. If your own hours are not counted, owner-heavy services look more profitable than they are.
• One huge job. A single large job can skew a service's whole year. Look at the typical job too.
• HST in revenue. Use amounts before HST. HST collected belongs to the CRA.

Most of these come down to tracking costs and hours per job consistently. We cover that in job costing: are your jobs actually profitable?.

How does this connect to marketing?

Directly. If you know repairs earn $75 per hour of gross profit and renovations earn $36, you know which enquiry is worth paying more to get.

That changes how you write your website, which service you put in your ads and what you say yes to on the phone. We explain that approach in start your marketing with your books, not your logo.

How often should you run this check?

Once a year at minimum, ideally each quarter. Prices, wages and material costs move, and a service that earned well two years ago may not now.

If you have a system that tracks costs against jobs as they happen, the quarterly check becomes a five-minute report rather than a spreadsheet exercise.

Where Papaya fits

Papaya Creative Studio's team brings real finance and business-process experience, so we read the numbers first and then market what actually makes money. Read more about the team on our about page, see our published prices on pricing, or send us your questions.

Common questions

How do I find out which of my services is most profitable?

List each service with its revenue, direct costs and labour hours, then calculate gross profit per hour. The service with the highest gross profit per hour usually makes the most money for the time invested.

What is gross profit per hour?

It is the revenue from a service minus its direct costs, divided by the labour hours spent delivering it. It shows how much each hour of your team's time earns before overhead.

Should I stop offering my least profitable service?

Not automatically. Check whether it brings in customers for more profitable work, whether it can be repriced, and whether it fills quiet seasons before dropping it.