Profitability Analysis Breakdown
- Service Price is the price that is collected from the client for the service performed. This is the actual money collected net of any discounts, promotions, price reductions, or bundled specials.
- Direct Expenses are any costs that are directly related to performing the service. These costs exist only because the service is being offered on your menu. Below are examples, evaluate all expenses needed to perform the service and include in this category.
-Wellness Provider Labor Expense is the expense paid directly to the wellness provider performing the service.
-Product Supplies Expense includes all costs for products that are directly used to perform the service.
-Room Set-up Expenses are costs for room set-ups including linens and ancillary supplies needed within the treatment room.
- Service Margin is the difference between Service Price and Total Direct Expenses.
-Service Margin = Total Revenue - Total Direct Expenses
Service Margin or Gross Margin
- Service Margin is considered the Gross Margin which is the service revenue that a business retains after incurring the direct expenses associated with performing the service.
- Service Margin is important because it shows whether your service sales are sufficient to cover your operating expenses and ultimately that the business profitable.