YOUR SALARY BELONGS IN OVERHEAD.
Owner compensation is overhead — not profit. It belongs in your overhead calculation alongside insurance, rent, and equipment costs. When owners take draws from profit instead, overhead looks artificially low, jobs get underbid by that gap every single time, and profit looks inflated. A $150,000 owner salary missing from overhead on a $4M company means every bid is underpriced by 3.75%. That is not a rounding error. That is the difference between a healthy business and a business slowly going broke while winning work.
This is one of the most common structural mistakes CFOS corrects in the first 30 days of every engagement. The overhead rate is wrong because the owner is not in it. The bids are wrong because the overhead rate is wrong. The fix takes one afternoon.
WHAT IT COSTS YOU TO UNDERPRICE YOUR OWN LABOR.
Most subcontractors at $3M to $8M in revenue have an owner who is doing the work of an estimator, project executive, business developer, and senior PM — and paying themselves less than they would pay someone to do any one of those jobs. When that compensation is missing from overhead, the entire financial picture distorts.
THREE THINGS BREAK WHEN YOUR SALARY IS NOT IN OVERHEAD.
Overhead is calculated as a percentage of revenue. If your salary is not in overhead, your overhead rate is understated. A company with $120,000 in overhead expenses plus a $150,000 owner salary has $270,000 in real overhead. On $3M in revenue that is 9%. If the owner's salary is excluded, overhead looks like 4% — and every bid goes out priced to recover 4% overhead when the business actually needs 9%.
On a $400,000 job, that gap is $20,000. Bid 50 jobs a year and the business is $1,000,000 short of covering its real cost structure. The P&L looks fine. The bank account does not. This is one of the most common reasons profitable subcontractors end up broke.
When the owner takes draws from profit rather than a salary through overhead, net profit is overstated by exactly the amount of those draws. A business that shows 12% net profit but whose owner is taking $160,000 per year in draws is not generating 12% net profit. It is generating something less — how much less depends on the revenue base.
This matters for three reasons. Bonding underwriters look at net profit to calculate capacity. Lenders look at it to evaluate creditworthiness. And the owner looks at it to decide whether the business is healthy. If the number is wrong, all three decisions are made on false information.
Industry benchmark data — gross margin targets, net profit ranges, overhead rates — assumes owner compensation is in overhead. When you compare your numbers to benchmarks and your owner salary is missing from overhead, your overhead looks low and your profit looks high relative to industry standards. You think you are outperforming. You are not. You are just measuring differently.
CFOS normalizes owner compensation into overhead in every engagement before any benchmarking is done. It is the only way the numbers mean anything.
FOUR STEPS TO GET OWNER COMPENSATION STRUCTURED CORRECTLY.
FLAT MONTHLY FEE. NO SURPRISES.
Two tiers based on trailing 12-month revenue. No hourly billing. No payroll. No add-ons.
| Revenue | Core Financial | Executive Financial |
|---|---|---|
| Under $1M | $1,900/mo | $2,900/mo |
| $1M–$3M | $2,600/mo | $3,600/mo |
| $4M–$6M | $3,800/mo | $5,500/mo |
| $7M–$9M | $5,100/mo | $6,900/mo |
| $10M–$12M | $6,100/mo | $8,500/mo |
| $13M+ | Quoted | Quoted |
FREQUENTLY ASKED.
