Josh Luebker
Fractional CFO · The Construction CFO
Former commercial construction PM and master electrician. 150+ projects, $300M+ total value. Fractional CFO for commercial subcontractors $1M-$12M. About Josh | LinkedIn
Most subcontractors have no way to know whether their gross margin is normal, their overhead rate is competitive, or their net profit is where it should be. These benchmarks give you a number to compare against -- by trade, at your revenue band. Being below benchmark is a flag. Being above is worth protecting.
Gross margin is revenue minus direct job costs. These are the $1M-$5M benchmarks. Gross margin improves as revenue scales because overhead spreads across more work. Below benchmark almost always means labor overruns, material pricing issues, or SOV structure problems.
Overhead rate is the percentage of revenue going to indirect costs. Below benchmark usually means overhead is being undercounted in bids. Above benchmark means cost structure needs review. Both are problems that compound silently.
Net profit is what remains after direct costs and overhead. For most commercial subs at $1M-$5M, 5-8% is the healthy range. Below 4% is a warning. Negative net margin means equity is shrinking even while the business appears to operate normally.
Your bids don't cover the real cost of running the business. Every completed job bleeds cash. The P&L shows profitable. The bank disagrees. This is the most common cause of being below net profit benchmark while gross margin looks fine.
Without job cost tracking, profitable jobs subsidize losing ones. Your blended margin looks acceptable. The individual job picture is different. You find out at closeout, not week four.
You are doing work before billing for it, or billing conservatively. SOV front-loading, aggressive pay app timing, and retainage negotiation all directly affect your realized margin on every single job.
It depends on trade. Electrical contractors should be at 25-27% at $1M-$5M. Civil and concrete run 21-23%. Grading, sitework, and framing run 18-20%. More than 3 points below your trade benchmark means something in job costing, overhead rate, or billing structure needs attention.
Most commercial subs in the $1M-$12M range run 13-17% depending on trade. Civil and concrete run 14%. Electrical and demolition run 16%. Below 12% usually means overhead is being undercounted. Above 18% means cost structure needs review.
For commercial subcontractors at $1M-$12M, 5-8% is the realistic healthy range. Top performers in waterproofing, SWPPP, and electrical can push 10-12%. Below 4% is a warning. Negative net margin means equity is shrinking faster than you realize.
Schedule a free call. We will tell you where your numbers sit against benchmark and what is driving the gap.
Schedule a Free Call →See Pricing