You priced jobs at $2M with 12% overhead built in. Now you're at $5M and overhead is 18% — because you added a project manager, a second truck, a bigger office, and upgraded software. But you're still pricing jobs at 12% overhead. Every job ships with a built-in loss that doesn't show until the year closes.
You don't know a job is losing money until it's done. Labor went 15% over on phase two. A material call-out came in late. A sub ran a change order you hadn't priced. By the time the job closes, there's nothing left to do but absorb it. The next job prices the same way and bleeds the same amount.
Here's what typically happens between $2M and $5M in a growing subcontracting business:
None of those are bad decisions. But together they can add $150–$250K in annual overhead without anyone formally recalculating what that means for job pricing. The jobs go out the door at last year's overhead assumption. The margin shrinks by 3–5 points. At $5M revenue, that's $150K–$250K of profit you priced away before the first nail went in.
The fix: Recalculate your overhead rate every quarter at current cost levels. Price future work to recover the actual overhead burden — not last year's. This one adjustment, done correctly, is often the entire answer.
Most subcontractors in the $2M–$8M range track job cost in one of two ways: they don't, or they do it manually in a spreadsheet after the job closes. Neither works.
The monthly rhythm that actually fixes this looks like this:
Every month, each job gets a cost-to-complete update: budgeted cost vs. actual cost to date vs. estimated cost at completion. If a job is running 8% over budget at 40% completion, you know now — not when the last invoice comes in.
Labor is the most common bleed point. Rough-in ran 120 hours. You estimated 90. That 30-hour overrun, multiplied across three jobs, is $15K–$25K in margin that didn't exist when you priced the work. Catching it by phase means you can adjust field supervision, renegotiate scope, or at minimum price the next job accurately.
Verbal approvals expire. GCs forget. If your crew did the work and you logged the change order at closeout, you have a negotiation problem — not a documentation problem. Change orders need to be in writing within 48–72 hours of direction. That's a discipline issue, and it's fixable with the right system.
Most contractors start seeing the impact in 60–90 days. Not because we're magic, but because the data was always there — it just wasn't organized in a way anyone could act on it.
The two most common causes are overhead rate creep and invisible job cost bleed. As revenue grows, overhead often grows faster — or you're still pricing at an old overhead rate that no longer reflects your actual costs. At the same time, without monthly job cost tracking, overruns accumulate job by job without anyone catching them until the year-end P&L lands.
Overhead rate creep is when your SG&A expenses grow proportionally faster than revenue as the business scales — but your job pricing doesn't adjust to match. A contractor at $2M might run 12% overhead. At $5M they might actually be running 16–18% overhead after adding staff, equipment, and insurance. If jobs are still priced at 12%, every job ships with a 4–6 point margin deficit baked in before a single crew member shows up.
Fix the job costing first. You cannot manage what you cannot see. Every active job needs a cost-to-complete updated monthly against its estimate. Then recalculate your overhead rate at current revenue and cost levels and reprice future work to recover it. Most contractors find the answer is not complicated — it just requires looking at the right numbers at the right time. Schedule a call if you want SPM to walk through the numbers with you.
Job cost visibility means knowing — while a job is still running — how much has been spent versus how much was estimated, and what it will cost to finish. Without it, you find out a job lost money after it's done. With it, you catch overruns in time to adjust: negotiate a change order, pull labor, find a cheaper material source, or at minimum protect the next job's pricing.
A bookkeeper records what happened. We tell you what it means and what to do about it. We align job costing to your estimates, track WIP monthly, and hold strategic accountability meetings so problems get fixed — not just documented.
That's not bad luck. It's a fixable system problem. Let's figure out which one you have.
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