BUSY ALL YEAR. SO WHERE'S THE MONEY?
First, separate the two things it could be. If your profit and loss shows real net profit and your bank account is empty, you have a timing problem and the diagnosis is on our cash flow pages. If the profit itself is thin or missing while the schedule is full, the margin is going somewhere inside the work, and there are usually four places at once: labor burden that never reached a job, equipment charged at a rate nobody calculated, change orders performed on a verbal, and an overhead rate that hasn't been recomputed since the company was smaller. None of the four is large on its own. Together they're the difference between a good year and a year nobody can explain.
The reason this feels like a mystery is that busy and profitable feel like the same thing from inside the truck. A full schedule is evidence that the market wants what you sell and says nothing about what you keep. Revenue is a multiplier and margin is the thing being multiplied, so growth on thin margin produces a bigger form of the same problem with more risk attached.
WHAT IT MEANS.
Being busy without making money is what happens when a company sells enough work and keeps too little of each job, and it's a different condition from having no cash: a busy unprofitable contractor is losing margin inside the work, while a profitable one with an empty bank account is losing time between finishing work and collecting for it.
Construction finance rarely fails in one big way. It fails by a thousand papercuts: a cost code posting to the wrong bucket, a pay application going in three days late, an equipment rate that hasn't moved since the machine was bought, a change order performed on a verbal. Any one of those is survivable on its own, which is why each one survives. All of them together are why a company with a full schedule and good crews finishes the year with nothing to show for it.
So the work is to go around the whole ship and mend every plank, because steering harder never fixed a hull. Across our own client work the mending comes to a 7 to 9 point improvement in net profit before taxes. That's a figure from SPM's own engagements and never an industry benchmark.
FOUR COSTS, NONE OF THEM LARGE ALONE.
Labor costs the company more than the job was charged
Wages reach the job and the burden doesn't. Payroll taxes, workers' comp, general liability, holiday and every fringe come in as company-level bills, so they sit in overhead while the hours they belong to sit in job cost. Depending on the trade and the state that's eighteen to forty percent of every hour, which means a job reporting twelve percent gross margin is running at four. Nobody guessed about the money here; the company recorded every dollar. It just recorded them in two places that never meet.
The equipment rate was chosen, not calculated
Ask what the excavator costs per hour and the answer is usually a round number somebody settled on years ago, or nothing at all because the fleet lives in overhead. Both make dirt work look better than it is. An honest rate comes off replacement cost today plus maintenance, insurance and other cost across the machine's life, divided by the hours you'll get out of it. A rate built on the purchase price recovers enough to own a finished machine and leaves you borrowing to replace it, which is why a contractor can bill equipment for a decade and still finance the fleet.
Work gets performed before it gets priced
A superintendent takes a verbal, the crew builds it, and the paperwork follows weeks later or never. The cost is in the job and the revenue isn't, so a phase reports a loss that was really a billing failure, and the estimating team learns to price contingency against a problem that was administrative. The subcontract almost always already gives you the right to a written direction before you proceed. Using it costs one email and it's the cheapest margin protection on this page.
The overhead rate belongs to a smaller company
Most contractors compute an overhead rate once, usually when somebody needed it for a bid, and then bid against it for years while the office grows. Healthy is nine to thirteen percent of revenue; most subcontractors run twenty five to forty two. If your rate was set when you had four people in the office and you now have nine, every bid since has been under-recovering the difference, and the shortfall doesn't appear as a loss anywhere. It appears as a year that was busier than the last one and no better.
WHAT IT LOOKS LIKE IN DOLLARS.
Look at net profit on your last full year and your bank balance today. Real net profit with an empty account is a timing problem, and the fix is a collections cadence and a forecast. Thin or absent net profit with a full schedule is this page. Contractors often have both, and the order counts: margin first, because fixing collection on unprofitable work collects a loss faster.
Take one field employee's full annual cost to the company, including every tax, insurance and fringe, and divide by the hours he charged to jobs last year. Divide that by his base wage. That multiplier is what every hour on every job should have carried. If job cost carried the base wage alone, multiply your reported gross margin problem by it and you've found most of the missing money.
Add up every cost that isn't chargeable to a job for the trailing twelve months, and divide by revenue for the same period. Compare it to the rate in your bid template. Contractors doing this for the first time in three years usually find a difference of four to nine points, and every bid in between was priced against the old one.
Take your last three closed jobs and count the change orders signed after the work was performed. Each one is margin that was at risk and a phase that reported a loss it didn't earn. If the number is more than one or two per job, the correction is a process at dispatch, and no accounting change will reach it.
MEND EVERY PLANK, STARTING WITH THE COSTLIEST.
One fully burdened rate per labor class and one rate per machine, both posting to job cost. Your reported gross margins will fall, which is the whole point: they were never there and now the report agrees with the bank. Most contractors find their overhead rate falls at the same time, because it had been carrying production cost that belonged on jobs.
A change order number, a date and a signature before anybody builds. It's a rule about dispatch and not about paperwork, and the person who enforces it's whoever assigns the crew. This one takes no software and no accountant, and on most jobs it's worth more than either.
Not annually, and not four months after year end when the return is done. A rolling rate recomputed with each close keeps every bid priced against the company you're running today. Books closed and bank reconciliations finished by the tenth make it routine; a close that drifts into the following month leaves you bidding with a stale rate all quarter.
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, and no add-ons.
Pricing
| Last 12 months revenue | Monthly fee |
|---|---|
| Up to $1M | $1,900 to $2,900 |
| $1M to $3.5M | $2,600 to $3,900 |
| $3.5M to $6.5M | $3,800 to $5,700 |
| $6.5M to $9.5M | $5,100 to $7,100 |
| $9.5M to $12.5M | $6,100 to $8,500 |
| $12.5M to $15.5M | $7,400 to $11,000 |
| $15.5M to $18.5M | $9,400 to $13,500 |
| $18.5M+ | Quoted individually |
Range reflects the three tiers below. Which one you're in depends on how much of the work you want off your desk. No payroll. No hidden line items.
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 rather than a report.
Your bookkeeper keeps doing the books.
You stop touching the books.
Everything in Core, and we run the bookkeeping and the controllership as well. Nobody in your office is answering coding questions or chasing a reconciliation at month end.
We do the books. No payroll.
Every job shows its margin while it's still running.
Everything in Executive, plus the job costing and WIP platform set up, loaded with your cost codes, and managed for you every month. You never have to learn it.
We do the job costing.
FREQUENTLY ASKED.
