Locksmith profit margin: the break-even formula

What to take away

Break-even is a division problem

Two shops can charge the same price for a lockout and reach break-even a year apart. The difference is how much of each billed hour survives after the cost of delivering it.

Set up the arithmetic with your own figures.

Let F be fixed monthly cost. This includes van payment, insurance, dispatch and software. It also includes rent and your own draw. Let c be variable cost per call: fuel, parts, key blanks, and the technician's paid time on that call. Let A be average invoice. Contribution per call is A minus c.

Break-even calls per month is F divided by (A minus c). Break-even date is when cumulative contribution passes cumulative fixed cost.

The margin that matters here is contribution margin: (A minus c) divided by A, the share of each invoice left after the cost of delivering that call. Gross margin on your books may treat technician pay differently, and net margin is what is left after F as well, so say which one you mean when you compare months.

The same model works per van hour, which is how the takeaways frame it. Divide F by the hours each van is scheduled in a month to get fixed cost per van hour. Divide the month's total contribution by hours billed to get contribution per van hour. The van breaks even in the month its contribution per van hour first clears its fixed cost per van hour.

To see how the formula behaves, suppose fixed cost is twenty times the contribution of one call. The shop then needs twenty calls a month before it covers F, and every call after the twentieth adds to profit. Cut drive time so each call keeps more of its invoice, and the break-even count falls without any price change.

To find your own break-even date, list each month since opening with its calls billed and its total contribution, keep a running total, and mark the month that running total first passes the fixed cost paid to date. That month is your break-even date; a new van starts a fresh count.

That is the whole model. Everything below changes one of the three variables.

The three variables you can actually move

Average invoice. Mix drives this more than price does. A shop that runs 70% residential lockouts and 30% commercial keying has a lower average invoice than one running the reverse, even with identical rates. Commercial keying schedules, master key systems and rekeying on turnover bill in blocks.

Variable cost per call. Drive time is the largest piece and the one most shops never measure. A call forty minutes out burns paid technician time, fuel and a slot that could have taken two closer calls. Cylinder work at the bench costs almost nothing in travel; emergency automotive entry at 2 a.m. costs the most.

Drive time also has a published rate to anchor the arithmetic. The IRS standard mileage rate for business use is 72.5 cents per mile from Jan. 1 to June 30, 2026, and the 2025 rate was 70 cents per mile. Use it as the starting point for the drive-time share of c.

Fixed cost. This steps up, it does not slope. Adding a van adds payment, insurance and a second set of stock. Break-even resets the day that van keys are cut.

The bottom rows pay the bills in a bad month. The top rows build the margin. A shop with no bench work has no cushion when emergency volume drops.

Where the margin leaks

Callback work is quiet. A rekey fails because the cylinder was worn. An electric strike will not latch because the frame was never checked. A transponder key is programmed to the wrong vehicle. Each means a second visit with no second invoice.

Log callbacks by cause, not by technician. The pattern shows up within a month.

Underpriced commercial bids are the loud one. A master keying schedule quoted from a phone description, without counting doors and cylinders on site, is a bid you lose money on at installation.

Set the review

Run the numbers monthly, not quarterly. Calls offered against calls accepted tells you whether dispatch is converting. Hours billed per van tells you whether the schedule is full. Average invoice tells you whether mix is shifting.

Keep the records that support the figures. The IRS explains what a small business should retain in what kind of records to keep, and in Publication 583, Starting a Business and Keeping Records; those documents are what your contribution math rests on.

Licensing is a fixed cost too. In California, for example, a locksmith company is licensed by the Bureau of Security and Investigative Services and receives a copy of the Locksmith Act with its license, so put the license and employee registration renewals into F.

Other states that license the trade run their own registration. Texas, for example, licenses locksmith companies and individual employees through the Department of Public Safety's Private Security Bureau, and New York issues locksmith licenses through the Department of State's Division of Licensing Services. Either way, the license and its renewal date belong in F.

If you advertise a response window or a price, the claim has to hold up. The FTC's advertising guidance for small business covers what substantiation means.

Wage data for your metro, from the Bureau of Labor Statistics wage tables, is one input when you set technician pay. Payroll is usually the largest fixed line, so a small change there moves break-even more than any price change.

Two topics are worth reading next: how to price locksmith services for a fair margin, and how to hire reliable staff for a locksmith business once the schedule stops fitting one technician.

Common questions

Why is break-even different for two shops with the same prices?

Because variable cost per call differs. Drive time, callback rate and job mix all sit inside that number. Two shops can post identical rates, and one reaches break-even while the other never does.

Should I raise every price to fix margin?

No. Raising all prices by the same percentage moves the jobs you win least and the jobs you win most by the same amount. Look at contribution per van hour by job type first, then reprice the bottom rows.

What is the first number to fix if margin is thin?

Callbacks. They are pure cost with no invoice, and they are visible within a month if you log them by cause. Drive time is second, because it is the largest variable cost most shops never measure.