CONSTRUCTION OWNER SALARY: OVERHEAD OR PROFIT?
Owner salary belongs in overhead at a defined market rate. It doesn't belong in profit, and it isn't a draw taken whenever cash allows. A defined owner salary run through payroll as an overhead line is one of the most important financial decisions a construction company owner can make, because it makes the overhead rate accurate, the net profit real, and the business financeable and sellable.
Most construction owners pay themselves whatever is left after everything else is paid. Some months that's a lot and some months it's nothing. That is a draw, and a draw is a profit distribution rather than a cost of running the company. Treating your pay that way makes overhead look lower than it is, profit look higher than it is, and the business look more valuable than it's to anybody who can read a set of financials. The correction costs nothing and takes one payroll cycle to put in place.
WHAT IT MEANS.
Owner salary is a market rate wage for the job the owner does, run through payroll and carried in overhead, which makes it a cost of running the business rather than a share of the profit.
WHAT AN UNDEFINED SALARY DOES TO THE NUMBERS.
Missing owner salary understates overhead
If your overhead rate is 10% and it doesn't include owner salary, add $150,000 of salary into your fixed costs. On $4M of revenue that takes overhead from $400,000 to $550,000, which is a real overhead rate of 13.75% rather than 10%. Every bid you priced at 10% overhead was underpriced by 3.75 points. On a $600K project that's $22,500 of unrecovered overhead built right into the contract price.
Draws taken out of profit aren't profit
If you take $180,000 a year in draws and show 12% net profit on $4M of revenue, that 12% isn't real. Add the $180,000 salary into overhead where it belongs and the real net profit is roughly 7.5%. Nothing about the business changed when you did that. The only thing that changed is that the number now tells you the truth.
A buyer pays for documented, normalized profit
When you sell the business, a buyer adjusts EBITDA for owner compensation. If your books show you paid yourself $60,000 in salary but the role takes $160,000 to replace, the buyer adds back $100,000 of expense. That reduces your EBITDA and your valuation with it, and it happens during diligence when you have the least room to argue.
WHAT IT LOOKS LIKE IN DOLLARS.
Market rate for an owner operator running a $3M to $8M commercial subcontracting company, covering estimating, business development, key GC relationships, and oversight of field operations, is $120,000 to $180,000 per year. That's the number to price into overhead. Pay yourself what you would pay somebody else to do your job.
THREE STEPS TO A REAL OWNER SALARY.
Pick a market rate number for your role and your revenue size. For most $2M to $8M owner operators that's $120K to $180K. Set it once and commit to it, because a salary that moves with cash is a draw wearing a different label.
The salary runs through your payroll system as a W-2 employee salary, not as an owner draw or a distribution. That's what makes it a documented cost of the business. It's also what a bank, a surety, and a buyer look for when they test whether the profit is real.
Include the full salary plus employer payroll taxes and any benefits the company pays on your behalf in the overhead calculator. That's the number your bids have to recover against. Leave it out and every bid you send is short by the amount you didn't count.
Once overhead is fully covered and the business has hit its target net profit, additional compensation comes as distributions or draws out of S-Corp or LLC profit. The structure is a consistent salary in overhead every month plus variable distributions when profit justifies them. That order is what keeps the overhead rate honest.
FLAT MONTHLY FEE. NO SURPRISES.
Three tiers, priced by your trailing twelve month revenue. Which one you're in depends on how much of the work you want off your desk. No hourly billing, no payroll, and no add-ons.
| Last 12 months revenue | Monthly fee |
|---|---|
| Up to $1M | $1,900 to $2,900 |
| $1M to $3.5M | $2,600 to $3,900 |
| $3.5M to $6.5M | $3,800 to $5,700 |
| $6.5M to $9.5M | $5,100 to $7,100 |
| $9.5M to $12.5M | $6,100 to $8,500 |
| $12.5M to $15.5M | $7,400 to $11,000 |
| $15.5M to $18.5M | $9,400 to $13,500 |
| $18.5M+ | Quoted individually |
Range reflects the three tiers below. Which one you're in depends on how much of the work you want off your desk. No payroll. No hidden line items.
You stop guessing.
You get the CFO work. Job costing built against the way you estimate, a 13 week cash forecast, monthly WIP, and a meeting every month that ends in decisions rather than a report.
Your bookkeeper keeps doing the books.
You stop touching the books.
Everything in Core, and we run the bookkeeping and the controllership as well. Nobody in your office is answering coding questions or chasing a reconciliation at month end.
We do the books. No payroll.
Every job shows its margin while it's still running.
Everything in Executive, plus the job costing and WIP platform set up, loaded with your cost codes, and managed for you every month. You never have to learn it.
We do the job costing.
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