Why is more work not bringing more profit?
The order book is growing, the team is busy and invoices are going out. But profit has barely changed. The explanation could be the price, the type of work sold, extra delivery effort or the cost of adding capacity. These need different responses.
Was it the price, the type of job or the work involved?
A lower selling price reduces contribution per order; uncharged rework raises the cost of fulfilment; lower utilisation spreads fixed labour cost across fewer productive hours. These effects should be measured separately before choosing between repricing, volume growth and hiring.
Raise prices
Higher prices may be necessary where costs have increased or the existing service is underpriced. But separate price erosion from changes in the work sold, additional uncharged service and lower utilisation. The appropriate response may differ by customer, contract or service line.
Win more orders
Additional volume improves results when its incremental contribution exceeds the extra cost and capacity it consumes. Estimate direct delivery costs, account-specific exceptions and the effect on constrained staff before assuming that higher sales will improve profit.
Hire additional staff
Recruitment may be justified by a sustained capacity constraint. First distinguish work that requires additional productive capacity from work caused by handover defects, exceptions, rework and coordination. A further management layer can increase fixed cost without relieving the underlying constraint.
Which customers and services leave money after direct costs?
Compare contribution by service, contract and customer. Then examine the operating effort behind the differences, including work that is not separately invoiced.
Why extra jobs may add little to contribution
The analysis should distinguish price, volume and mix effects from delivery efficiency and cost allocation. This makes it possible to assess whether repricing, changing the service, reducing exceptions or altering the customer mix would improve overall contribution.
Suppose five jobs each bring in £1,000 and cost £600 to deliver. Total contribution before shared overhead is £2,000. If eight similar jobs require an additional £150 of travel, rework or uncharged support each, contribution per job falls to £250. Eight jobs now contribute the same £2,000.
The figures are illustrative. The commercial question is which part of the extra work is billed, what it costs to fulfil and whether the additional volume consumes constrained capacity. This comparison is not a statement of net profit.
Compare the economics at customer level →