Division Profitability

Sales mix isn't profit mix.

Stage 3 · Strategy4 min readBuilds on Surviving the Off-Season Completed

A single company-wide margin tells you how the whole business did, but not which line of business earned it. Splitting sales and gross profit by division shows where the money really comes from.

Where the sales come from vs. where the profit comes from

Example: $1.32M company, one year

Revenue mix

45.5%18.2%27.3%9.1%

Gross profit mix

46.7%19.6%23.5%10.2%

Maintenance
Enhancements
Installation
Snow & Ice

Each division on its own

Division	Revenue	Margin	Gross profit	Share
MaintenanceRecurring contracts that renew. Steady, predictable cash.	$600,000	62%	$372,000	46.7%
EnhancementsExtra work sold to maintenance clients. Small jobs, strong margins.	$240,000	65%	$156,000	19.6%
InstallationBig tickets, often bid against competitors. Estimating risk is highest here.	$360,000	52%	$187,200	23.5%
Snow & IceFills the winter gap. Results swing with the weather.	$120,000	68%	$81,600	10.2%
Whole Company	$1,320,000	60.4%	$796,800	100%

Gross profit = Revenue × Margin. Share = that division's gross profit ÷ total gross profit.

What the split tells you

Sales mix ≠ profit mix

Installation brings in 27.3% of sales but only 23.5% of gross profit. Growing it without fixing its margin pulls the whole company's margin down.

Recurring revenue is gold

Nearly half of sales come from maintenance contracts that renew. Banks and buyers value predictable revenue more than one-time jobs.

The next step

Set up your books so every job, crew and cost is coded to a division. Then share overhead fairly to see net profit by division.

Try it with your own divisions

Starts with the example company's numbers

Your revenue mix vs. your profit mix

Enter a year of revenue and the gross margin for each division. Leave a division at 0 if you don't run it.

Maintenance revenue ($)

Margin (%)

Enhancements revenue ($)

Margin (%)

Installation revenue ($)

Margin (%)

Snow & Ice revenue ($)

Margin (%)

Revenue mix

Gross profit mix

Maintenance
Enhancements
Installation
Snow & Ice

Total gross profitSum of Revenue × Margin for each division

Whole-company marginTotal gross profit ÷ total revenue ()

Margin Drivers calculator · Go further

Customer lifetime value

What a maintenance customer is worth over the years, and what better retention adds.

Open the customer lifetime value

Key idea: One company-wide margin can hide a division that's losing money. Look at each line of business on its own.

Finish the lesson · Take the Module 5 quiz →