The Only Two Ways to Increase Gross Margins (Service Businesses Ignore Them)
If you're running a construction or service-based business, chances are you're working hard, staying busy, and still asking yourself: "Where's all the money going?" You're not alone. One of my clients who hit $700k revenue for 2024 constantly says to me "Ben, I know we are making great money, but it always feels like more money is going out then coming in".
Many business owners I speak with feel like they're grinding non-stop, but their profit margins don’t reflect the effort. They’ll blame the market, competition, material costs — and sure, those all play a role. But here’s the hard truth:
There are only two ways to increase your gross margins:
Increase your prices
Decrease your cost of goods sold (COGS)
That's it. Everything else is noise.
1. Increase Your Prices (Without Losing Customers)
Raising prices doesn’t mean gouging your clients. It means charging what your work is worth. For a lot of businesses, it means finally catching up to inflation, rising labor costs, and materials.
Here’s what’s wild: Most of your competitors are undercharging, not overcharging. So if you’re good at what you do, reliable, and show up when you say you will — people will pay more.
Try this:
Run a quick audit: look at your last 10 jobs. Did you quote them based on time, materials, and profit — or just what you “thought the customer would pay”?
Add 10–15% to your next quote. Track what happens.
If you lose every single job, maybe you went too far. But if even 7/10 say yes — congrats. You just increased your margins without lifting a finger.
BONUS: If you are not already -- please charge more during your busy times. If you don't….you're losing money. You can be 100% honest with your customers and say something like; "Honestly right now, our crew are working on 2-3 different job sites and this is the busy season so I will have to see what I can do and our price will be "insert price". If you don’t like saying your price over the phone or in person that’s okay, you can mention to them that your price will be higher due to how busy you are. Then you can simply send a quote that includes your increased price.. You will be surprised at how many people agree.
2. Decrease Your COGS (Without Sacrificing Quality)
Cost of Goods Sold (COGS) are everything it costs to deliver your service — labor, materials, rentals, etc. If you’re not actively reviewing these, there’s probably profit leaking every week.
What to look at:
Are you overbuying materials? Buying in bulk without tracking can eat cash.
Are you charging for all materials? Many businesses eat minor supply costs and never pass them on.
Is your team wasting time? Onsite inefficiency = higher labor costs.
Small fix, big win: One client we worked with saved $35k in fuel costs year over year simply by tracking his employees company trucks. That is an additional $35k profit in one year with very little work done.
Why This Matters Now
Gross margins are the oxygen of your business. The higher they are, the more you can:
Pay yourself properly
Hire help without stress
Survive slow months
Reinvest into growth
If your business is doing $500K or more, a 5–10% margin boost could easily be worth $25–50K+ annually. That’s a truck. A hire. Or 6 months of breathing room.
Most businesses ignore this because they’re too caught up in the day-to-day. Don’t be like most businesses.
