NO NEW JOBS, NO NEW REVENUE. $203,000 IN THE BANK IN 7 DAYS.
Crews were busy, the backlog was healthy, and the P&L looked fine. The bank account never seemed to reflect any of it.
A $4.9M concrete subcontractor collected $203,000 within 7 days of engagement without selling a single new job, because that money was sitting in overdue receivables nobody was chasing. Some of the invoices were 90, 120, and even 150 days old, and several had already been approved and were waiting on a phone call while the owner assumed his GCs were simply slow. Collections was only the first finding. He had been pricing work off an overhead rate of about 5 percent when his real overhead was 12 percent, which on a $4.9M revenue base is the difference between covering $245,000 a year and covering closer to $588,000. He had been underpricing every job for years and volume was papering over it. With the overhead corrected and the estimating model rebuilt on the real number, he won fewer bids and made more money on the ones he won, finishing the following year with $1.3M less revenue and more net profit in dollars.
The part worth repeating is where the money was. It wasn't on the jobs and it wasn't in the field. It was in a back office that had no collections cadence and an overhead rate nobody had checked in years.
This post is the first week and the following year as the owner experienced them. Read The Concrete Contractor Margin Recovery Case Study for the complete treatment, worked figures included.
THE NUMBERS LOOKED FINE AND THE BANK ACCOUNT DIDN'T.
The owner of a $4.9M concrete subcontracting company called us because he was frustrated. Business was good, crews were busy, the backlog was healthy, and the P&L looked fine. But the bank account never seemed to reflect it, and he couldn't figure out where the money was going. We figured it out in about a week.
He had $203,000 sitting in overdue accounts receivable that nobody was actively collecting. Not stolen, not lost, just sitting in invoices that had been submitted and then forgotten, some of them 90, 120, even 150 days old. He had assumed his GCs were slow payers and had stopped following up. In reality, several of those invoices had been approved and were just waiting on a phone call.
Within 7 days of engagement, we collected $203,000. No new jobs, no new revenue, money that was already his and already earned and just not in his account. That's where most concrete subs are bleeding, not on the jobs, but in the back office.
THE OVERHEAD PROBLEM NOBODY WAS WATCHING.
Collections was only part of it. The bigger issue was that his overhead had been miscategorized for years. He believed his overhead rate was around 5% of revenue, that's what he'd been using to price jobs, and that's what his estimates were built on. The actual number was 12%.
That 7 point difference doesn't sound catastrophic until you run it through a $4.9M revenue base. At 5% overhead, he thought he needed to cover about $245,000 in overhead annually. His actual overhead was closer to $588,000. He had been underpricing every single job for years, and making it work only because his volume was high enough to paper over the shortfall.
When we corrected the overhead allocation and rebuilt his estimating model around the real number, two things happened. First, his bids got more accurate. Second, he started winning fewer jobs, and making more money on the ones he won.
He thought he had to cover $245,000 a year. The number was closer to $588,000.
MORE PROFIT ON LESS REVENUE.
In the year after we fixed his financial system, he did $1.3M less in revenue and made more net profit in actual dollars. That's not a typo. Less work, more money.
Here's why it happens. When your overhead rate is wrong, you're effectively subsidizing your GC's project with your own margin. You win the bid on price. You stay busy. You look successful. But at the end of the year, there's nothing left.
When the overhead is correct and the pricing reflects it, you lose some bids. The ones you lose were the ones that were going to cost you money anyway, and the ones you win produce margin. His crew was the same, his equipment was the same, and his GC relationships were the same. The only thing that changed was that he finally knew what his jobs had to make to keep the business healthy.
WHAT MOST CONCRETE SUBS MISS: THE AR AGING REPORT.
Every concrete subcontractor has accounts receivable. Most of them look at the total number and feel okay if it's not growing too fast. Almost none of them are actively managing aging, which means breaking AR down by how old each invoice is and following up systematically on anything past 45 days.
A basic AR aging process looks like this. Every Friday, pull a report that shows every open invoice sorted by age: current, 30 days, 60 days, 90 days, 90 plus. Anything past 45 days gets a call or an email that week. Not a passive reminder, an actual follow up that asks when the check is cutting.
That process alone, consistently applied, is worth tens of thousands of dollars a year for most concrete subs doing $3M or more. It takes one hour a week and it's the cheapest money in the business.
DECEMBER LOOKED DIFFERENT THAT YEAR.
At the end of the year, the concrete sub paid out $130,000 in profit sharing to his crew. He had never been able to do that before. He genuinely didn't know the business could support it.
The money was there in prior years, it just wasn't visible. Same business, same crews, same GCs, better system.
THE SHORT LIST.
FREQUENTLY ASKED.
