SUBCONTRACTOR FINANCIAL QUESTIONS, ANSWERED.
The questions commercial subcontractors ask most are why they are profitable but out of cash, what net profit margin to target, what overhead really is, and when to hire a CFO. The short answers are below, each one linking to the full breakdown. Every answer is written for a commercial subcontractor doing $1M to $12M.
Subcontractors do not lack opinions about their finances. They lack straight answers grounded in how construction actually works. This page collects the questions The Construction CFO hears most from commercial subcontractors and answers each one in plain language, with the number and the link to the full explanation. It is built to be a starting point: read the short answer, then follow the link to the page that goes deep. Every answer assumes a commercial subcontractor doing $1M to $12M, the businesses The Construction CFO serves.
THE ONES WE HEAR MOST.
Why am I profitable but out of cash?
Because profit and cash are different. Retention is held, pay apps are paid 45 to 90 days out, and payroll runs weekly regardless, so the income statement shows profit while the bank account feels the gap. A 13-week cash forecast makes the squeeze visible weeks ahead. Full answer →
What net profit margin should I target?
Most commercial subcontractors run 5.5% to 8.5% net at $1M to $10M depending on trade. The CFOS target is 12% after real overhead, reached by fixing overhead allocation and billing timing, not by cutting bids. See trade benchmarks →
What is my real overhead, and why does it matter?
Most subs bid 10% overhead out of habit; the real number is often 25% to 40%. Every job bid at 10% while spending 30% loses 20% before it starts. Calculating real overhead from actual financials is the single highest-leverage fix in the business. How to price for profit →
When should I hire a CFO?
When cash is tight despite profit, when you cannot tell which jobs make money, or when bonding and lenders want financials you cannot produce. For most subcontractors that lands between $1M and $3M in revenue, well before a full-time CFO makes sense. When you can afford one →
Why don’t my jobs match my estimate?
Because estimators think in phases and bookkeepers think in line items, so the two never align and you cannot compare estimate to actual. Rebuilding cost codes to match the estimate is what makes job costing usable. Job profitability system →
What is profit fade?
Profit fade is a job’s margin eroding from the estimate to closeout, a job bid at 25% finishing at 11%. It is caused by unbilled change orders, labor overruns, and optimistic cost-to-complete, and it shows on the WIP schedule first. How to stop it →
How much working capital do I need?
Enough to carry payroll and material through the gap between performing work and collecting it, which for most subs means positive and growing working capital. Bonding capacity tracks roughly ten to twenty times this number. Working capital requirements →
How do I read a WIP schedule?
A WIP schedule shows each job’s contract value, cost incurred, percent complete, billings, and projected profit. Reading it monthly is how you catch over and underbillings and a fading margin before closeout. Read a WIP schedule →
START HERE, THEN GO DEEP.
Every answer above links to a full page that goes into the mechanism, the numbers, and the fix. Start with whichever question is costing you right now, then follow the thread.
The Construction CFO answers these questions for commercial subcontractors doing $1M to $12M every day, and installs the system that fixes them, CFOS, fully operational in 60 days.
FREQUENTLY ASKED.
