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Key Takeaways
- The baseline fixed monthly overhead for launching a four-person handyman team in 2026 is projected to start at approximately $25,700, heavily weighted by payroll expenses.
- Variable expenses, including direct labor and materials, are projected to consume an unsustainable 270% of generated revenue, demanding immediate cost control measures.
- Due to the high initial burn rate, the financial model forecasts a lengthy 32-month period required to reach the operational break-even point.
- To survive the initial growth phase and cover cumulative losses, a minimum working capital reserve of $145,000 must be secured by early 2029.
Running Cost 1 : Fixed Payroll and Wages
Payroll Baseline
Your initial fixed payroll commitment is $20,833 monthly. This covers the core operational team: the CEO, one Lead Technician, and two Technicians. Honestly, this number represents your baseline burn rate before any variable job costs hit. That’s a big anchor.
Team Structure Cost
This $20,833 covers 4 FTEs (Full-Time Equivalents), making it the single largest fixed outlay. It includes salaries for management (CEO) and the essential service delivery staff. This cost is non-negotiable for service delivery, unlike the 120% variable labor cost tied to billable hours.
- CEO Salary Allocation
- Lead Technician Salary
- Two Technician Salaries
Managing Fixed Headcount
You can’t easily cut this cost short-term without stopping service. The focus must be on utilization—ensuring the 4 FTEs stay busy enough to cover their fixed cost plus overhead. Avoid hiring the fifth person until metrics prove the current team is saturated.
- Tie technician wages to performance metrics.
- Delay hiring until utilization hits defintely 85%.
- Ensure CEO role drives revenue quickly.
Burn Rate Anchor
Since this is your largest fixed cost, every day without revenue means $694.43 ($20,833 divided by 30 days) of payroll burns cash. If onboarding takes 14+ days, churn risk rises because paying staff who aren't billable eats margin fast.
Running Cost 2 : Direct Technician Labor
Labor Cost Crisis
Direct Technician Labor is a 120% variable cost, meaning technician wages for billable work exceed total revenue generated from those jobs. This structure immediately destroys gross margin unless pricing or efficiency drastically changes. You must control billable hours relative to job revenue to survive.
Cost Breakdown
This 120% figure represents the total technician wages paid for time spent actively working on customer jobs. To model this accurately, you need the average technician hourly rate multiplied by the total billable hours logged monthly. This cost sits right below revenue on the P&L, defining your contribution margin before fixed overhead.
- Hourly wage rate input.
- Total billable hours input.
- Impacts gross profit directly.
Margin Control
A 120% labor cost is unsustainable; focus on driving utilization and increasing Average Order Value (AOV). If technicians spend too much time on non-billable tasks or drive inefficient routes, margin disappears fast. Benchmark against industry standards, aiming for labor costs closer to 40% to 50% of job revenue.
- Boost technician utilization rate.
- Reduce non-billable administrative time.
- Increase job pricing immediately.
Margin Reality Check
When labor hits 120%, the business is losing money on every service call before accounting for materials (another 70% of revenue) or fixed costs like the $20,833 payroll. This model requires immediate, aggressive repricing or significant productivity gains to cover the 190% in variable costs alone. That's a tough spot to defintely start from.
Running Cost 3 : Office Space and Utilities
Fixed Space Cost
Your fixed office and utility overhead sits at $2,800 monthly. This cost supports essential administrative work and storing your service equipment. Since this is a fixed cost, managing technician utilization is key to absorbing it effeciently. It's a necessary baseline expense for operational stability.
What This Covers
This $2,800 covers rent for a necessary base of operations and utilities like electricity for the office. For a handyman service, this space must accommodate administrative staff and secure storage for tools and perhaps small inventory before dispatch. You need quotes for commercial space and utility estimates to lock this number in.
- Estimate based on one small office.
- Includes power for dispatch systems.
- Storage must fit basic service gear.
Managing Overhead
Reducing this fixed cost requires tough choices, like finding smaller spaces or moving administration remote. If you delay securing space, administrative functions suffer, slowing technician dispatch. Avoid signing long leases initially; look for month-to-month terms until technician volume justifies a larger footprint.
- Seek shared office space initially.
- Verify utility estimates are conservative.
- Keep admin staff lean.
Fixed Cost Stacking
This $2,800 adds directly to your largest fixed cost, the $20,833 payroll. Together, these base costs dictate how many billable hours you need just to cover overhead before paying for insurance or materials. Every day without revenue means you burn through this fixed base.
Running Cost 4 : Liability and Workers Comp Insurance
Mandatory Insurance Budget
You must budget $800 monthly for General Liability and Workers Compensation insurance. This coverage is mandatory protection for any service business sending technicians into customer homes to perform repairs or maintenance. Ignoring this cost exposes the entire operation to catastrophic financial risk from accidents or property damage claims.
Cost Coverage Inputs
This $800 monthly premium covers two main risks: General Liability protects against third-party property damage, and Workers Compensation covers employee injuries on the job. For a handyman service, these are essential inputs before the first job invoice is sent. It sits as a fixed monthly overhead, independent of sales volume.
- General Liability covers property damage claims.
- Workers Comp covers technician injuries.
- Fixed cost: $800 per month.
Optimizing Premiums
You can’t skip this, but you can optimize the premium. Premiums depend heavily on the classification codes (risk level) assigned to your technicians' work and your claims history. Ensure your insurance broker uses accurate codes for handyman work, not higher-risk construction codes. It's defintely worth reviewing these classifications yearly.
- Get multiple competitive quotes annually.
- Maintain a strong safety program.
- Audit technician classifications carefully.
Risk Mitigation
If a technician causes $50,000 in damage while fixing a leaky pipe, liability insurance handles the loss, not your cash reserves. Without coverage, that single incident could wipe out your operating capital before you even reach break-even. This is foundational protection for field service work.
Running Cost 5 : Customer Acquisition Costs (CAC)
High Initial Acquisition Cost
Your initial marketing plan ties $15,000 annually to acquiring customers at a steep $150 cost per head. This budget represents 50% of your first year's projected revenue, which is a very aggressive initial marketing allocation that needs immediate focus.
CAC Budget Breakdown
This $150 Customer Acquisition Cost (CAC) covers all spend to land one new homeowner needing service, from digital ads to local flyers. To spend the full $15,000 budget, you need to acquire exactly 100 new customers this year. That means you are targeting about 8.3 new clients every month.
- Budget is $15,000 yearly.
- Target 100 new clients.
- Acquisition rate is 8.3 monthly.
Driving CAC Down
A 50% marketing spend relative to revenue is unsustainable long term; you need to drive CAC down fast, maybe below $75. Focus on maximizing the lifetime value (LTV) of those first 100 customers through excellent service and subscription uptake. If you can get existing clients to refer new ones, that word-of-mouth acquisition cost is near zero.
- Boost LTV immediately.
- Prioritize retention over volume.
- Aim for organic growth channels.
Revenue Check
If this $15,000 marketing spend is 50% of your total revenue goal, your total required revenue is only $30,000 for the year. That implies very few jobs or very low subscription uptake. You must validate the revenue assumption quickly or drastically cut this marketing spend, defintely.
Running Cost 6 : Materials and Supplies
Materials Cost Hit
Materials and supplies will consume about 70% of your revenue right off the top. This is a pure variable expense tied directly to the volume and complexity of the jobs you complete. You must build pricing models assuming this high cost is locked in before you even send a technician out the door.
Estimating Material Spend
This cost covers all physical items used: lumber, fasteners, paint, or replacement fixtures. To estimate this accurately, track the average material cost per job code, not just per hour. If your average job mix skews toward complex plumbing fixes over simple drywall patches, your materials percentage will definitely trend higher than 70%.
- Track parts used per service type.
- Weight estimates by job complexity.
- Verify supplier costs monthly.
Controlling Supply Costs
You control this cost by standardizing parts and negotiating hard. Stop technicians from buying retail at local stores unless it's an emergency. Centralize purchasing to gain leverage, aiming for 5% savings on high-volume items like standard plumbing fittings or fasteners. If you don't manage inventory, this 70% figure balloons fast.
- Negotiate volume pricing immediately.
- Limit technician purchasing autonomy.
- Track inventory shrinkage closely.
The Margin Reality Check
When setting your per-project fee, remember that materials (70% of revenue) and direct technician labor (120% of billable wages) are your two biggest variable outflows. If your markup on materials is too thin, you won't cover the $20,833 fixed payroll, regardless of how busy you are.
Running Cost 7 : Vehicle Fuel and Maintenance
Vehicle Cost Allocation
You must budget exactly 30% of revenue for vehicle fuel and maintenance costs right now. This allocation is non-negotiable because it needs to cover operational burn and save up for the three van capital expenditures planned for 2026. Ignoring this ratio means you'll fund depreciation out of operating cash flow later, which is defintely a mistake.
Fuel and CapEx Planning
This 30% bucket covers routine oil changes, tire replacements, and daily fuel burn across your working fleet. To model this accurately, you need projected technician mileage and current national average fuel prices. The real pressure comes from planning for three new vans in 2026; set aside capital monthly to avoid financing that purchase at high rates.
- Estimate fuel based on miles per job.
- Factor in expected annual maintenance schedule.
- Ensure savings fund covers $X00,000+ for 2026.
Cost Control Tactics
Controlling vehicle costs means standardizing your fleet early, perhaps choosing one fuel-efficient model. Since Direct Technician Labor is already 120% variable cost, efficiency here saves double. Negotiate bulk fuel contracts or use fleet cards to track usage precisely. If you can keep actual spend below 25%, that extra 5% buffers the high $150 Customer Acquisition Cost (CAC).
- Mandate preventative maintenance checks.
- Use GPS to monitor excessive idling time.
- Avoid premium fuel unless required by specs.
Uptime is Revenue
Vehicle uptime directly impacts service delivery, which supports your subscription revenue promise. If a van is down for repairs, you lose billable hours and risk breaching service level agreements (SLAs) with your subscription customers. Track Mean Time Between Failures (MTBF) for your current fleet to forecast 2026 replacement needs better.
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Frequently Asked Questions
Fixed running costs start around $25,700 per month in Year 1, mostly driven by payroll Variable costs add another 270% of revenue You definetly need a strong operational plan to cover these costs until the 32-month break-even point