DEBT-TO-EQUITY RATIO.
Sureties and bankers use it to read leverage risk, because a highly leveraged construction business has less cushion to absorb a loss and fewer options when cash gets tight. A ratio below 2.0 is generally healthy for most subcontractors. Above 3.0 starts to concern sureties, and above 4.0 typically creates credit and bonding constraints. Most subcontractors haven't calculated theirs since their CPA mentioned it at year end.
The ratio moves for two reasons and only one of them is borrowing. Equity is in the denominator, so every dollar distributed to owners pushes the ratio up even when the debt hasn't moved at all. A sub who takes a large fourth-quarter draw right before year-end statements go to the bank has thinned the equity base at the worst possible time. Nothing about the business changed that week. The number a lender reads changed a lot, and nobody in the office saw it happen.
Want Josh to check your own numbers? Financial Health Snapshot, $1,500 one time. Your last 12 months read against your trade's benchmarks, with a 60 minute readout.
WHAT IT MEANS.
The debt-to-equity ratio is total liabilities divided by total equity, which is the measure of how much of the business is financed with borrowed money versus owner money.
The two kinds of debt on a subcontractor's balance sheet don't affect the ratio the same way. Equipment debt comes with an equipment asset opposite it, so the net effect on equity is limited to the difference between the loan balance and the book value. A line of credit draw adds a liability with nothing opposite it, which is why a maxed line moves this ratio faster than a new machine does.
WHY THE RATIO GETS AWAY FROM YOU.
Equipment financing is causing your leverage to be too high
Equipment-intensive trades, civil, excavation, and concrete, often hold real equipment debt. When that debt is high relative to equity, the ratio rises and sureties start asking whether the business can absorb a loss. The equipment may be generating good revenue, but the leverage it creates changes how banks and sureties read your financial risk, and that reading is what caps the program.
Your equity is low because profit is being distributed
Every dollar distributed to owners reduces equity and every dollar retained builds it. Subcontractors who distribute most of the profit each year keep the equity base thin, which holds debt-to-equity high even when the debt itself is unremarkable. Thin equity against ordinary debt reads as fragility to everybody who reviews the balance sheet, and it's the most common reason a profitable sub looks overleveraged.
You don't know what your debt-to-equity ratio is
Total liabilities divided by total equity is a one-line calculation, and most subcontractors haven't calculated it since their CPA mentioned it at year end. By the time a bank or a surety flags a high ratio, the decision that created it was made months earlier. Monthly tracking catches the change while there's still something you can do about it.
WHAT IT LOOKS LIKE IN DOLLARS.
Those are the three thresholds worth knowing. Below 2.0 is generally healthy for most subcontractors. Above 3.0 starts to concern sureties, and above 4.0 typically creates credit and bonding constraints, which is the point where the ratio stops being a metric and starts being a limit on the work you're allowed to take.
TWO LEVERS, ONE REPORTED NUMBER.
Total debt is all liabilities, current and long-term together. Total equity is total assets minus total liabilities, which also reads as retained earnings plus paid-in capital on the balance sheet. Divide total debt by total equity and you have it. Below 2.0 is generally healthy for most subcontractors, above 3.0 starts to concern sureties, and above 4.0 typically creates credit and bonding constraints.
The most reliable way to improve debt-to-equity is retained earnings, which means keeping profit in the business rather than distributing it. SPM models the distribution against retention decision each year: how much can come out while still holding the debt-to-equity and current ratio targets the bonding program and the credit facility require. That is a calculation, and it belongs in front of the year-end draw conversation rather than behind it.
SPM calculates and reports debt-to-equity every month for every client, alongside the current ratio and working capital, as part of the regular financial ratio reporting. When any ratio gets close to a threshold that counts for banking or bonding, it comes up in the monthly CFO meeting with a specific recommendation attached. The whole point is to read it as a warning rather than meet it as a constraint.
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. The one-time onboarding fee is right here in the table.
Built for subs doing $1M to $12M. Above $12.5M we quote.
| Last 12 months revenue | Core | Strategic | Platinum | One-time onboarding |
|---|---|---|---|---|
| Under $1M | $1,900 | $3,100 | $3,300 | $2,500 |
| $1M to $3.5M | $2,600 | $4,100 | $5,300 | $4,500 |
| $3.5M to $6.5M | $3,800 | $5,900 | $8,300 | $6,000 |
| $6.5M to $9.5M | $5,100 | $7,600 | $11,800 | $7,500 |
| $9.5M to $12.5M | $6,100 | $8,900 | $14,900 | $9,000 |
| Above $12.5M | Quoted | Quoted | Quoted | Quoted |
The onboarding fee covers migrating your books back to the start of your last taxable year and getting you fully operational in 60 days. It's billed once, with your first invoice. It's the same for all three tiers, and it moves with your revenue band. Your first month is prorated, and your monthly engagement starts on the first of the first full month.
Just want the setup? Onboarding only is the same onboarding work with no monthly service after it, one time, at the onboarding fee plus $2,000. Start a monthly engagement later and $2,000 counts toward it. It starts at $4,500, and the price for every band is on the pricing page.
The three tier columns are the whole price. Which one fits depends on how much of the work you want off your desk. No payroll. No hidden line items. The onboarding fee is right here in the table.
- Online software only: QuickBooks, Sage, Viewpoint and similar. No VPN or hosted desktop.
- Not in any tier: payroll, pay applications, collections on receivables.
- Pricing valid through 2027.
CFO work. Your own bookkeeper keeps doing the books.
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 and never in a report.
Your bookkeeper still does the books.
Core, plus bookkeeping and bank reconciliations, plus job costing and WIP software set up and managed for you. Use your own online accounting software or we supply it, one price.
Every job shows its margin while it is still open.
Everything in Core, plus the bookkeeping and bank reconciliations done for you, and the job costing and WIP software set up, loaded with your cost codes, and managed every month. Use your own online software, or move to ours and we cover it.
A bookkeeper we choose does the books and reconciliations. No payroll.
Strategic, plus a controller who handles payables and receivables the way an in-house controller would. You approve every payment.
You approve, and the money side gets handled.
Everything in Strategic, plus a controller we choose who handles your bills and receivables for you the way an in-house controller would. They call vendors, pay the bills and keep the accounting current. We plan the cash flow first, and you approve every payment because it is your money.
A controller we choose does the payables and receivables. No payroll, no pay applications, no collections.
FREQUENTLY ASKED.
