Service-Based Business Owners Must Include Labor Hours in their Cost of Goods Sold in order to get a true cost basis and calculate a true gross margin on their services. Especially when labor is part of the actual service.
Most importantly, solo business owners need to include labor hours too! They need to assign a typical hourly wage as if they have hired someone other than themselves to do the job. This is the only way to get a true COGS for services.
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