How a $6.7M Civil Subcontractor Paid Off $348,000 in Credit Line Debt in 60 Days

A $6.7M civil subcontractor had been carrying a $348,000 balance on his line of credit for so long it had started to feel permanent. It wasn’t a crisis — the line was there, the bank wasn’t calling, the business was operating. But the balance never moved. Every time it started to come down, something else came up — a big material purchase, a slow payment month, payroll on a week when collections were behind — and it went right back up.

He had mentally accepted the line of credit as a structural part of the business. Something you manage, not something you pay off.

Within 60 days of engagement, the line of credit was at zero.

The money to pay it off was already in the business. It just wasn’t visible.

30% Overhead on a Civil Subcontracting Company

The first thing we looked at was overhead. His was running at 30% of revenue. For a civil sub at his revenue level, the target range is closer to 15% to 20%. At 30%, he needed every job to produce a 30-cent-on-the-dollar contribution just to cover overhead before a dollar of profit was possible. Most of his jobs were producing 28% to 32% gross margin — which meant overhead was consuming essentially everything.

The 30% wasn’t because he was wasteful. It was because costs that should have been allocated directly to jobs were sitting in overhead instead. Equipment costs in particular were being treated as overhead line items rather than direct job costs. When we moved them to the job level and allocated them against actual equipment hours per project, overhead dropped immediately.

Overhead came down from 30% to 17%. That 13-point improvement on $6.7M in revenue is $871,000 in costs that moved from overhead to correctly allocated job costs — jobs where those costs were now visible, trackable, and priceable.

The $309,000 Bank Balance at Day 30

At the 30-day mark, the business had $309,000 in the bank.

That’s not a dramatic intervention number. It’s what happens when a $6.7M civil subcontracting company has its financial system aligned correctly — when costs go to the right places, billing goes out on time, collections are followed up systematically, and the owner can see his cash position with enough lead time to make decisions instead of react to surprises.

The line of credit got paid off at day 60 because the cash was there. It had always been capable of being there. The system just hadn’t been producing that visibility before.

What Most Civil Subs Miss: Equipment Cost Allocation

The single biggest overhead distortion in most civil subcontracting companies is equipment.

Most civil subs run equipment costs through overhead because it’s easier. The excavator payment goes to equipment expense. Fuel goes to fuel expense. Maintenance goes to repairs. None of it gets tied to specific jobs.

The problem is that different jobs use different equipment at different intensities. When equipment costs sit in overhead and get spread across all revenue equally, you’re overcharging your light-equipment jobs and undercharging your heavy-equipment jobs. Your bids on heavy equipment work consistently win — because they’re underpriced. Your bids on light work lose — because they’re overpriced.

Building an equipment cost allocation system — even a simple one based on hours logged per machine per job — fixes this permanently.

$65,000 in Christmas Bonuses

At the end of the year, the civil sub paid out $65,000 in Christmas bonuses to his crew.

He had wanted to do this for years. The business had been capable of supporting it for years. It just hadn’t been visible until the financial system was built to show it.

The line of credit is gone. The overhead is right. The crew got taken care of. That’s what a properly structured civil subcontracting business looks like when the numbers are finally working the way they’re supposed to.

If you’re running a civil subcontracting company and your line of credit balance hasn’t moved in a year, the money to pay it off is probably already in the business. Schedule a free call at constructioncfo.net to look at your numbers together.