Job Costing Reality: Are You Making Money or Just Staying Busy?

A mobile marine technician completed eight jobs last week. Total revenue: $4,200. The technician feels productive and successful. Then reality hits during monthly accounting: after labor costs, parts, fuel, insurance, and overhead, net profit was $680—16% margin on work that consumed 52 hours including travel and administration.

The difference between "staying busy" and "making money" is accurate job costing. Most marine service shops track revenue religiously while remaining willfully ignorant about true job costs. This blindness keeps them trapped on the busy-but-barely-profitable treadmill.

The True Cost Components

Accurate job costing captures all cost elements, not just obvious ones: Direct labor (technician time at true hourly cost including benefits/taxes), parts and materials (actual costs paid, not retail prices), travel time and mileage (costs money even if not billed to client), consumables and supplies (shop supplies, cleaning materials, small tools), and overhead allocation (insurance, rent, admin time, marketing, licensing).

The component most often underestimated or ignored is overhead allocation. Your liability insurance, business registration fees, accounting costs, phone service, and scheduling time don't disappear just because they're not directly tied to specific jobs. Every job needs to contribute toward covering these fixed costs.

A common formula: allocate 30-40% of job revenue to overhead initially. Refine this percentage as you track actual overhead costs. A $1,000 job should allocate $300-400 to overhead, meaning direct costs (labor + parts + travel) can't exceed $600-700 to maintain healthy profitability.

The Hidden Costs of "Quick Jobs"

Small jobs often appear profitable until fully costed. A "quick 90-minute repair" for $250 seems like easy money at $167/hour. But accurate costing reveals: 90 minutes billable labor ($75 at $50/hour cost), 45 minutes travel time ($38), 30 minutes parts procurement ($25), 20 minutes estimate preparation ($17), $40 in parts, $15 in mileage, and $100 overhead allocation (40% of revenue).

Total true cost: $310 for a $250 job. You lost $60 while feeling productive. Complete ten similar jobs monthly and you've lost $600 while staying busy. This is why shops working 60-hour weeks barely break even.

Labor Cost Reality

Many marine service shops underestimate true labor costs. They think "I pay my technician $25/hour" and cost labor at that rate. True labor cost includes: base hourly wage, payroll taxes (7.65% FICA minimum), workers compensation insurance (varies by state, often 8-15% of wages), health insurance or benefits, paid time off costs, and training/downtime costs.

A technician with $25/hour base wage actually costs $32-38/hour when all factors are included. Costing jobs at base wage rather than true labor cost creates 25-50% labor cost underestimation—explaining why "profitable" jobs somehow don't generate expected business profits.

The Parts Markup Requirement

Shops buying parts at wholesale for jobs often charge at-cost or with minimal markup, thinking "I'm just passing through costs." This ignoring the real costs of parts procurement: time spent researching, ordering, and picking up parts; credit extended to clients (your cash paid for parts before client pays you); storage costs for inventory items; and risk of ordering incorrect parts (can't always return).

Industry-standard parts markup is 30-50% above wholesale cost. This isn't gouging—it's covering the real costs of parts procurement and management. A $100 wholesale part should be billed at $130-150. Shops charging at-cost for parts are subsidizing clients from their labor profits.

Travel Time Economics

Mobile marine service involves significant travel time that generates zero revenue while consuming real costs: technician time (even if not billed, it's time that could be doing billable work), vehicle fuel and maintenance, vehicle insurance and depreciation, and opportunity cost (time traveling isn't time working).

Smart costing strategies include: minimum service call fees that cover baseline travel costs, geographic clustering (batching nearby jobs to reduce per-job travel), travel time billing (client pays for travel at reduced rate), or travel radius limits (decline distant work unless premium pricing justifies travel).

Overhead Allocation Methods

Accurate job costing requires systematic overhead allocation. Simple percentage-of-revenue works for basic tracking. More sophisticated approaches include: labor-hour-based allocation (overhead divided by annual billable hours), job-count-based allocation (overhead divided by annual job count), or hybrid methods combining multiple factors.

For most marine service shops, percentage-of-revenue allocation starting at 35-40% provides reasonable accuracy without complex calculations. Annually review actual overhead costs and adjust the percentage to match reality. If total overhead is $60,000 and annual revenue is $200,000, use 30% allocation.

The Busy vs. Profitable Test

Run this diagnostic test: Calculate last month's true profitability. Take total revenue, subtract all direct costs (labor at true cost, parts at cost, travel), subtract overhead allocation, and see what remains. If net profit is under 15% of revenue, you're staying busy but barely making money.

Now analyze individual jobs from last month. How many were actually profitable when fully costed? Many shops discover 40-60% of jobs barely break even or lose money. They're staying afloat because profitable jobs subsidize unprofitable ones—but they could be far more successful focusing exclusively on truly profitable work.

Using Job Costing for Strategy

Accurate job costing drives strategic business decisions: pricing adjustments for job types with consistently low margins, minimum job sizes or service fees to ensure baseline profitability, geographic service area refinement to reduce travel costs, and strategic focus on job types with proven strong margins.

The most transformative insight: less work can generate more profit. Shops that eliminate or reprice unprofitable work often see revenue drop 10-20% while net profit increases 40-60%. They work fewer hours, experience less stress, and make more money.

Integrated Job Costing Systems

Manual job costing is tedious and typically abandoned within weeks. Modern platforms like Yachtero automatically calculate true job costs as work progresses. Time tracking captures both billable and non-billable time. Parts costs record automatically. Travel time and mileage calculate based on job locations.

When jobs complete, the system shows actual profitability immediately: total revenue, all cost components broken down, overhead allocation, and net profit (dollar amount and percentage). Over time, analytics reveal which job types, clients, and service areas consistently profit versus which ones keep you busy but broke.

This automatic costing means every strategic decision is data-driven. You're not guessing which work is profitable—you know from documented historical data. Pricing, service focus, and growth strategy become evidence-based rather than intuition-based.

The bottom line: Staying busy doesn't equal making money. Accurate job costing reveals true profitability by capturing all costs: direct labor at true hourly cost, parts with appropriate markup, travel time and expenses, and overhead allocation. Many shops discover 40-60% of work barely profits when fully costed—information that drives strategic transformation.