Growth does not create margin, it multiplies the margin you already had. If profit stayed flat while volume rose, the money per job got smaller by about as much as the number of jobs got bigger. Convert everything to per job and compare the same months in both years. The cause will be one of four, and the first to rule out is job mix.
Written by JD Davenport, who still sells for a living. Updated 4 November 2026.
You sold meaningfully more work than last year. You worked harder than last year. Gross profit dollars came out roughly where they were.
Re-denominate. Total revenue against total profit tells you almost nothing, because both moved. Convert everything to per job, then compare the same window in both years.
Revenue per job. Cost per job, split into material, labor and everything else. Gross profit per job, before and after commission. Same months, same basis, both years, stated out loud, because most arguments about a number of this kind turn out to be arguments about the denominator.
Now the question has an answer, and it will be one of four.
You sold more of a cheaper kind of work, or more of a kind that carries a thinner margin. Nothing went wrong. The average moved because the population changed.
Check it by grouping jobs by size band and comparing margin within each band. If margin held inside every band and only the overall average fell, it is mix, and it is a sales strategy question rather than an operations problem.
Margin fell roughly evenly across every job and every size. That is pricing. Costs moved and the price did not follow, or discounting spread quietly.
This one is the most comfortable to find, because it is fixable at the top of the funnel with a rate change and it does not require anybody else to change how they work.
Margin held on most jobs and collapsed on a few. This is the most common answer and the least visible, because the average makes it look like a general decline when it is actually a small number of jobs carrying most of the shortfall.
Test it by concentration rather than by average. Rank jobs by how far they fell short of their sold margin and see how much of the total shortfall the worst five, ten and twenty carry. If a handful carry most of it, you have an execution problem with a tail, and raising prices across the board will not touch it.
Worth knowing: those jobs are very often sold correctly. Priced at or above the floor, and expensive to build. The overrun happened after the signature, where the pricing rule cannot reach.
More volume needed more crews, more supervision, more vehicles or more subcontractors at rates you would not have accepted last year. The per-job margin fell because the marginal job was genuinely more expensive to deliver than the average job was.
This is real and it is not failure, but it has to be named, because it is the only one of the four where the honest answer might be to grow more slowly.
Because the four fixes have nothing to do with each other and three of them are wasted on the wrong diagnosis. Mix is a sales decision. Pricing is a rate change. Execution with a tail belongs to production and to the gates around the work. The cost of growth is a capacity question.
The instinct is usually to change the commission plan, because pay is the lever an owner controls directly. That is almost never the answer. If the money is escaping between the estimate and the invoice, no percentage split fixes it. It only moves who absorbs it, and it makes the people who absorb it angry about something that was never theirs.
Diagnose first. The commission plan is downstream of job cost accuracy, and job cost accuracy is downstream of being able to state, per job, what the work actually cost.
Stating it per job is The Job Cost Standard. If the shortfall turns out to be concentrated, the gates that catch it are The Production Standard. If you are about to change how people are paid, read revenue versus profit first. More answers on the questions page.