P&L Segmentation: Profit Over Revenue

Revenue is vanity. Profit is sanity. We see it all the time: A company hits $3 Million in revenue, the owner is working 80 hours a week, and at the end of the year, there is $50k left in the bank.

The problem is usually a hidden "Loser Division." Maybe your Firewood delivery service is actually losing money once you factor in labor and fuel. Maybe your Stump Grinding crew is running at 5% margin while your Removal crew is at 25%. You won't know until you separate them.

Divisional Accounting

In QuickBooks (or Xero), you need to tag every invoice and every expense with a "Class."

• Class A: Residential Removals
• Class B: Plant Health Care (PHC)
• Class C: Land Clearing

At the end of the month, run a P&L by Class. You might be shocked to find that PHC accounts for only 10% of your revenue but 40% of your profit.

Job Costing

Go deeper. You should know the profit on every single crew, every single day.

"Crew A did $2,500 in work today. Their labor cost was $1200. Their fuel/equipment allocation was $700. Gross Profit: $600 (24%)."

If Crew B consistently runs at 10% Gross Profit, you have a training issue or a leadership issue.

Frequently Asked Questions

Is PHC profitable?

Usually, yes. Plant Health Care (fertilization, injections) has extremely high margins because it requires little equipment and low labor compared to removals.

What is a healthy profit margin?

For a mature tree service, you should aim for 15-20% Net Profit (after paying yourself a salary). If you are under 10%, you are in the danger zone.

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