Who this is for: Managers
📋 Set Up Your Business Foundation — 3-Part Guide
- Part 1: Costs and Overhead
- Part 2: Labor Burden and Markup
- Part 3: Reading Your Numbers and Adjusting — You are here
You’ve entered your salary goal, costs, and labor burden. The Profit Allocation planner has done the math. This article explains what the results mean, how to read them, and what to do if the numbers don’t look right.
What the Required Gross Revenue number means #
Open the Profit Allocation planner — tap YOUR PRICERIGHT FORMULA on the home screen, then tap Find Out My Number. If your inputs from Parts 1 and 2 are already saved, scroll past the input cards to the Required Gross Revenue section.
The two numbers here — Monthly and Annual — are the gross revenue your business needs to generate for everything to be covered: your overhead, your Tax Reserve, your Upgrade & Replacement Fund, your Business Savings, and your take-home salary. This is not your profit target. This is your floor. Every dollar below this number means something in your formula isn’t funded.
The Monthly Breakdown — reading your five buckets #
Below the gross revenue target, the Monthly Breakdown shows what each dollar of gross is allocated to once you hit your target. Read these from top to bottom:
- Operating Costs — your monthly overhead cap. If your actual bills exceed this number, your operating percentage needs to increase or your costs need to come down.
- Upgrade & Replacement — the monthly amount going toward capital expenses. If you’ve been skipping this, you’ve been borrowing from future-you every time something breaks.
- Business Savings — your monthly emergency fund contribution. The goal is three to six months of operating costs in reserve.
- Tax Reserve — the amount to set aside every month, calculated from your tax settings. Keep this in a separate account and don’t touch it until your quarterly payment is due.
- Debt Service — your fixed monthly loan and financing payments. If you entered these in Part 1, they appear here as a separate line outside the percentage buckets.
- Your Take-Home Salary — what’s left after every obligation above is funded. In The PriceRight Formula, this is what you designed the whole thing around.
The Current / Target / Gap row #
If you entered your Current Average Monthly Gross in Part 1, a three-column row appears below the hero numbers: Current, Target, and either Gap or Ahead.
This is the most useful number on the screen. It tells you exactly how far your current revenue is from where it needs to be — or by how much you’re already exceeding your floor. If the Gap column is showing in red, that’s not a crisis. It’s a number. And a number is actionable in a way that a feeling of “I don’t think I’m making enough” never is.
The health indicator #
At the bottom of the results card, a green or amber indicator tells you whether your allocation is healthy. Green means your take-home salary is at least 10% of gross — the minimum threshold for a sustainable business. Amber means your current allocation percentages are leaving too little for your salary. If you see amber, the fix is usually to lower your Operating Costs percentage, reduce your Upgrade or Savings allocation, or revisit your cost inputs from Part 1.
The Sales Target card #
Below the results, the Sales Target card shows how many jobs or sales you need per month and per week to hit your gross revenue target — based on the average sale amount you entered. This is the number most contractors have never calculated. If the weekly number looks unrealistic, that’s useful information. It usually means either your average job price needs to go up, your costs need to come down, or both.
Adjusting toward a healthy number #
If something looks off — your required gross is higher than expected, your salary percentage is too thin, or your gap is larger than you thought — here’s how to adjust:
- Required gross is too high: review your Operating Costs percentage. The benchmark is 30%. If your allocation is above that, look at which overhead items are pushing it up and whether any can be reduced.
- Salary percentage looks thin: try lowering Upgrade & Replacement or Business Savings by a point or two. Both are important — but it’s better to fund them at a lower rate than to leave your salary underfunded.
- Gap is larger than expected: this usually means your current pricing is below your real floor. Use the Sales Target card to calculate the average job price increase that would close the gap.
- Numbers feel right but salary still looks low: tap Interpret My Numbers at the bottom of the results. The AI advisor reads your full allocation and explains what the numbers mean in plain language, including specific suggestions for your situation.
💡 Tip: Use the Reset button in the top-left corner of the Profit Allocation screen to clear all inputs and start fresh if your numbers got messy during setup. Your services and products are not affected — only the planner inputs reset.
The two-number approach: current reality and achievable ideal #
There are two useful ways to use the planner. The first is to enter your real current numbers — what you actually earn and spend today. The second is to enter your target numbers — what you want to earn and are working toward. Running both gives you a current state and a target state side by side.
Start with current reality. That’s the honest baseline. Then set your goal. The gap between them is your roadmap.
🚀 Smart Business Tip
Come back to the Profit Allocation planner every quarter — not to redo it from scratch, but to update two or three numbers that have changed. Your insurance renewed and went up. You paid off a piece of equipment. You started paying yourself more. Each of those changes shifts your required gross. Contractors who review their allocation quarterly end up with pricing that tracks their real business trajectory — not the business they had when they first set it up.
✅ You’ve completed the full Business Foundation setup.
Your overhead is entered, your labor burden is set, your margin target is defined, and you know your revenue floor. Every estimate you build from this point forward is priced against your real business — not a guess.
Ready to build your first estimate? Start a New Estimate: Vertical, Scope, and Line Items →
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