FICTIONAL EXAMPLE · ALL COMPANY DETAILS, FIGURES, AND FINDINGS ARE INVENTED FOR DEMONSTRATION. NOT CLIENT RESULTS OR INDUSTRY BENCHMARKS.
BUSINESS PROFITABILITY REVIEW / SAMPLE
Busy doesn’t always
mean more profitable.
Illustrative residential cleaning company
Example Cleaning Co.
Review period: year ended December 31, 2025, compared with 2024. Prepared as a demonstration of the engagement’s structure and analytical approach.
01 / EXECUTIVE SUMMARY
Sales grew. Profit slipped.
Revenue increased by $120,000, but operating profit declined by $5,000. Direct labor grew faster than sales. Recurring cleaning produced the strongest contribution margin; deep-cleaning work warrants a pricing and estimating review.
Recommended priority
Test deep-clean pricing and estimating first, validate paid-hour utilization on recurring routes, and then remove avoidable overhead. Do not make broad price changes or staffing reductions from these illustrative totals alone.
02 / FINANCIAL PICTURE
What changed in the business?
| Measure | 2024 | 2025 | Change |
|---|---|---|---|
| Revenue | $1,080,000 | $1,200,000 | +$120,000 |
| Direct labor, including payroll burden | $594,000 | $690,000 | +$96,000 |
| Supplies and other variable job costs | $81,000 | $90,000 | +$9,000 |
| Contribution profit | $405,000 | $420,000 | +$15,000 |
| Operating overhead | $310,000 | $330,000 | +$20,000 |
| Operating profit | $95,000 | $90,000 | −$5,000 |
Contribution profit = revenue less direct labor and variable job costs. Operating profit is before interest and income taxes; overhead includes depreciation and a hypothetical $100,000 owner-management salary in both years. Owner distributions are separate.
The bridge from $95,000 to $90,000
$95,000 + $120,000 − $96,000 − $9,000 − $20,000 = $90,000. The additional sales generated $15,000 of contribution, which was more than offset by $20,000 of additional overhead.
Direct labor rose from 55.0% to 57.5% of revenue. This flags a question; it does not establish the cause. Wage changes, service mix, overtime, travel, rework, and job-estimating errors would need separate investigation.
03 / SERVICE ECONOMICS
Not every dollar of sales
contributes equally.
| Service | Revenue | Labor | Other variable costs | Contribution | Margin |
|---|---|---|---|---|---|
| Recurring cleaning | $720,000 | $396,000 | $43,200 | $280,800 | 39.0% |
| Deep cleaning | $300,000 | $186,000 | $30,000 | $84,000 | 28.0% |
| Move-in / move-out | $180,000 | $108,000 | $16,800 | $55,200 | 30.7% |
| Total | $1,200,000 | $690,000 | $90,000 | $420,000 | 35.0% |
Illustrative revenue and labor are assigned by job code. Other variable costs are assumed to be assigned consistently by service. Shared overhead is not allocated, so these are not service-level net profit figures. Actual work would reconcile these reports to the financial statements and flag estimates.
What the figures suggest
Deep cleaning uses $0.62 of direct labor per revenue dollar, compared with $0.55 for recurring work. Review actual versus estimated hours, discounts, and job scope before changing prices.
What they do not tell us
A lower-margin service may still cover shared costs or lead to recurring clients. We cannot recommend dropping it without considering capacity, acquisition value, and avoidable costs.
04 / DECISION SCENARIOS
Three changes to investigate.
These are hypothetical annual run-rate effects, not forecasts or promises. They assume a full year at the stated conditions and exclude implementation costs and taxes.
A / PRICING
Test a 5% increase on deep-clean pricing.
At unchanged job volume and costs: $300,000 × 5% = $15,000 additional annual operating profit.
Sensitivity: if job volume falls 4%, revenue becomes $300,000 × 1.05 × 0.96 = $302,400. If all $216,000 of direct costs also fall proportionally, contribution becomes $95,040: an $11,040 improvement. If those costs do not decline, improvement is only $2,400. Track accepted quotes, job hours, and contribution per job.
B / LABOR UTILIZATION
Reduce paid hours per recurring route without reducing quality.
Assume $396,000 represents 18,000 paid hours at a $22 loaded hourly cost. A 3% reduction is 540 hours × $22 = $11,880 annual cost reduction, only if those paid hours can actually be eliminated while maintaining revenue and service quality.
If staff hours stay unchanged, the benefit is available capacity, not immediate profit. Any additional sales using that capacity require a separate scenario; they are not added here.
C / OVERHEAD
Remove $500 a month of confirmed avoidable expenses.
Illustrative target: unused software, redundant services, or unnecessary subscriptions. $500 × 12 = $6,000 annual cost reduction, after verifying cancellation terms and operational needs.
Combined illustration—not a forecast
With unchanged volume, fully cash-reducible labor, no overlap, and zero implementation costs: $15,000 + $11,880 + $6,000 = $32,880 of additional annual operating profit. Revenue would be $1,215,000 and operating profit $122,880, a 10.1% margin. Timing, customer response, and actual labor flexibility could materially reduce this result.
05 / PROFIT IS NOT CASH
Why the bank balance can fall
in a profitable year.
This historical illustration explains cash movement. A forward-looking cash forecast would be a separately scoped engagement.
| Operating profit | $90,000 |
|---|---|
| Add back noncash depreciation | +$12,000 |
| Increase in accounts receivable | −$25,000 |
| Increase in supplies inventory / prepayments | −$8,000 |
| Increase in operating payables | +$6,000 |
| Operating cash generated | $75,000 |
| Equipment purchases | −$20,000 |
| Debt principal repayments | −$18,000 |
| Owner distributions, separate from salary | −$45,000 |
| Net change in cash | −$8,000 |
Assumes no other cash movements, interest, entity-level income taxes, borrowing, or capital contributions. Beginning cash of $38,000 becomes ending cash of $30,000. These are invented, simplified inputs, not actual financial statements.
06 / THE 90-DAY PLAN
Turn the findings into decisions.
| When | Action | Owner | Measure / decision |
|---|---|---|---|
| Days 1–15 | Reconcile job revenue and labor to the accounts. Review 20 recent deep cleans for estimated versus actual hours. | Owner + bookkeeper | Document unexplained differences; establish contribution per job and estimate accuracy. |
| Days 16–30 | Pilot revised pricing on comparable new deep-clean quotes. | Owner / sales lead | Compare conversion, contribution per job, and customer objections. Continue, adjust, or stop based on the combined economics. |
| Days 16–45 | Review recurring-route travel, idle time, and rework; pilot a schedule change. | Operations lead | Paid hours per completed clean, overtime, complaints, and rework. Confirm whether saved hours reduce payroll or create capacity. |
| Days 1–30 | Review recurring overhead commitments and cancel only unnecessary items. | Owner | Verify actual monthly savings and one-time cancellation costs. |
| Days 31–60 | Review open invoices and collections practices. | Owner + bookkeeper | Overdue receivables and cash collected. Decide whether a rolling cash forecast is needed. |
| Days 61–90 | Assess implemented changes and revise the operating plan. | Owner | Actual margins and cash versus baseline, with changes in volume and mix explained. |
The review includes the action plan and a 30-day follow-up. Ongoing execution, weekly monitoring, and additional analysis are not included unless separately agreed.
07 / HOW A REAL ENGAGEMENT DIFFERS
Your records. Your decisions.
A real review starts by agreeing on the question and checking the available records. Each finding would reference supporting reports, reconcile to the accounts, and distinguish observed facts from estimates. We would discuss implementation costs and constraints with the owner before estimating benefits.
No real company records were used here. This sample is not an audit, tax opinion, valuation, or statement of achieved results.
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