Tree service
Tree Service Net Profit Calculator
Works net profit, which is what is left after the overhead the trade cannot avoid.
Result
Net profit here is before tax and before any owner's draw that is not already inside overhead. If you pay yourself out of what is left, this figure is your wage rather than the company's profit.
Get a Free Business AuditHow the calculation works
Gross profit less overhead gives net profit and net margin. In tree care that step is a large one, because the overhead includes equipment finance, insurance at some of the highest rates in any trade, yard space and the management that keeps crews scheduled and compliant. A healthy gross margin can produce a thin net margin here in a way it would not in a light trade.
What moves the number
- Overhead total, dominated by fleet, insurance and yard.
- Revenue level, since overhead is largely fixed.
- Working days achieved against the year.
- Owner compensation, and whether it sits above or below the line.
Where this one goes wrong
A strong gross margin with a weak net margin means the overhead is too large for the revenue, and in this trade that usually means equipment. A business with more machines than its volume supports carries payments, insurance, maintenance and yard space on all of them, and the symptom is exactly this gap. The question is whether to grow revenue into the capacity or reduce the capacity, and the second is harder because equipment is illiquid. Be clear about owner compensation too, since a net profit figure that does not pay the owner a market wage is overstating what the business earns.
Before you quote
- Compare gross and net margin to find whether overhead is the problem.
- Check equipment capacity against actual volume.
- State whether owner compensation is above or below the line.
Questions
About this calculator
Why is my gross margin good but net margin thin?
Because the overhead is too large for the revenue, and in tree care that usually means equipment. More machines than the volume supports means paying finance, insurance, maintenance and yard space on all of them. The gap between gross and net is where that shows.
Is it better to grow into capacity or shed it?
Growing is usually preferred and shedding is sometimes necessary, and the difficulty is that equipment is illiquid: a chipper sold under pressure does not return its value. That is the argument for buying capacity against demonstrated demand rather than anticipated demand.
Should owner pay come out before net profit?
It should at least be stated, because a net profit figure that does not pay the owner a market wage for the work they do is overstating what the business earns. Many small tree services show profit that is really unpaid owner labour.
The formula
net profit = revenue - direct costs - overhead
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How to use this calculator
- Revenue ($). Enter your own figure; the page starts at $37,000.
- Direct labour ($). Enter your own figure; the page starts at $16,000.
- Materials and equipment ($). Enter your own figure; the page starts at $11,000.
- Other direct costs ($). Enter your own figure; the page starts at $2,200.
- Overhead ($). Enter your own figure; the page starts at $11,500.
The result updates as you type, so you can try a figure, see what it does to net profit, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Revenue | $37,000 |
| Direct labour | $16,000 |
| Materials and equipment | $11,000 |
| Other direct costs | $2,200 |
| Overhead | $11,500 |
What comes out
| Result | Value |
|---|---|
| Net profit main result | -$3,700 |
| Net margin | -10.0% |
| Total direct cost | $29,200 |
| Profit per working day | -$168.18 |
That is -$3,700 at a -10.0% margin, about -$168.18 for every working day.
How sensitive the answer is
Holding everything else steady and changing only revenue, this is what happens to net profit. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Revenue ($) | Net profit |
|---|---|
| $18,500 | -$22,200 |
| $27,750 | -$12,950 |
| $37,000 example above | -$3,700 |
| $55,500 | $14,800 |
| $74,000 | $33,300 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Revenue ($)
- A money amount, starting at $37,000.
- Direct labour ($)
- A money amount, starting at $16,000.
- Materials and equipment ($)
- A money amount, starting at $11,000.
- Other direct costs ($)
- A money amount, starting at $2,200.
- Overhead ($)
- A money amount, starting at $11,500.
What the results tell you
| Result | What it is |
|---|---|
| Net profit | The headline result. A money figure. |
| Net margin | A percentage. |
| Total direct cost | A money figure. |
| Profit per working day | A money figure. |
Estimating is the easy part
The jobs you never hear about cost more than the ones you mis-measure. BDEVY builds the marketing, systems and automation that bring them in.