The formula is straightforward. Take your contract revenue, subtract all direct costs, and divide the result by revenue. Your direct costs for a residential cleaning contract are labor, supplies, travel and tolls, and equipment. Multiply by 100 and you have your gross margin percentage.

For example, say you charge $300 for a cleaning job. Your cleaner costs you $140 in wages and payroll taxes, supplies run $25, travel and tolls cost $20, and equipment wear comes to $10. That’s $195 in direct costs, leaving $105 gross profit. Divide $105 by $300 and your gross margin is 35%.

Most NYC residential cleaning businesses should be targeting somewhere between 30% and 40% gross margin. Below 30% and you probably can’t cover your overhead like insurance, marketing, phone bills, and your own salary. Above 40% is strong, but if you’re consistently above that range you might be underinvesting in your crew or underpaying relative to the NYC labor market, which leads to turnover.

Getting each cost component right matters. Labor is the biggest line item and the easiest to miscalculate. Don’t just count the hourly wage. Include your share of payroll taxes, workers’ comp, and any paid time off. For a cleaner making $20/hour in New York, the true loaded cost is closer to $24 or $25 once you factor in employer obligations.

Supplies are small per job but add up fast across dozens of weekly contracts. Track what you spend on cleaning products, trash bags, gloves, and anything consumable per visit. Even a rough per-job average is better than ignoring it.

Travel and tolls deserve serious attention if you operate across the boroughs. Congestion pricing in Manhattan is now a real direct cost for any crew that crosses below 60th Street. Bridge and tunnel tolls, gas, and parking all eat into margin. If you’re sending a crew from the Bronx into Manhattan, those costs can turn a profitable-looking contract into a break-even one. Track mileage and tolls per job or at least per route so you know the actual cost of serving each area.

Equipment is usually the smallest direct cost, but don’t ignore it. Vacuums, mops, and carpet cleaners wear out. Spread the replacement cost across the jobs where they’re used so your margin calculation reflects reality.

The most common mistake is calculating margin using only labor and calling it done. When you skip supplies, travel, and equipment, your margin looks 5 to 10 points higher than it actually is. That’s a dangerous gap because you’ll think you’re profitable on contracts where you’re barely breaking even.

Run this calculation per contract, not just as a company-wide average. Some contracts are winners and some are losers, and you can’t tell the difference without job-level numbers. A contract in Riverdale with no tolls and a short drive is a completely different proposition than one in Midtown requiring congestion pricing and paid parking.

If tracking direct costs per job feels like too much work on top of running your business, that’s where small business bookkeeping in the Bronx makes a real difference. A bookkeeper who understands cleaning service accounting can set up your QuickBooks so every expense gets coded to the right job, and your gross margin reports are waiting for you at the end of each month instead of living in a spreadsheet you never update.