WINNING TOO MANY BIDS IS COSTING YOU MONEY.
Winning more than 35% of competitive construction bids almost always means the overhead rate in your bids is too low. Every job you win is underpriced by the difference between the rate in the bid model and your real overhead rate.
Most contractors worry about not winning enough work. Winning more than 35% of competitive bids is the opposite problem, and it costs more than losing bids does, because a lost bid costs you nothing but the time it took to price. An underpriced won job costs you the shortfall on every hour and every dollar of material for the length of the job. Then it repeats on the next one, because the rate that produced it hasn't changed. Busy and underpriced is the most expensive place a subcontractor can be.
WHAT IT MEANS.
The overhead rate is SG&A divided by revenue, the percentage every bid has to carry to cover what it costs to run the business.
The win rate is the cheapest diagnostic in the business, because you already have the data. If you're winning more than a third of the competitive work you chase, your price is consistently below the market, and the most common reason is an overhead rate that doesn't carry what your overhead really costs.
WHERE THE OVERHEAD WENT MISSING.
The overhead rate was set once and never updated
You set your overhead rate when you started bidding. Since then you hired a PM, bought equipment, added insurance, and moved into a larger shop. The overhead grew and the rate in the bid model didn't. Every bid since that last hire is underpriced by the difference, on every single job, with nothing in any report pointing at it.
Owner compensation is missing or understated
This is the most common overhead understatement we find. The owner books a nominal salary of $60,000 to $80,000 to hold down payroll taxes and takes draws when cash allows, so the overhead rate gets calculated on $70,000. The real value of the owner's role at $5M in revenue is $140,000 to $170,000, which leaves the bid model underfunded by $70,000 to $100,000 a year on every bid.
Equipment depreciation isn't in overhead
Equipment depreciates whether it's working or sitting. An excavator with $4,200 a month in ownership cost has to be covered by the overhead rate or by job level equipment cost codes. If it's booked to a balance sheet account and never hits the P&L, the overhead rate is understated by that full amount and every bid carries the error.
WHAT IT LOOKS LIKE IN DOLLARS.
At $2M in revenue, a 3 point shortfall is $60,000 a year and $300,000 over five years. At $3M it's $90,000 a year and $450,000 over five years. At $5M it's $150,000 a year and $750,000 over five years. At $8M it's $240,000 a year and $1,200,000 over five years. At $10M it's $300,000 a year and $1,500,000 over five years.
SPM finds 5 to 8 point shortfalls at engagement start on most clients whose overhead rate hasn't been recalculated in two or more years. The high win rate is the symptom that gives it away before anybody opens the P&L, which is why it's worth counting your bids before you go looking for the cause.
HOW TO CORRECT THE RATE RIGHT NOW.
Everything that's not a direct job cost belongs here: officer compensation, admin salaries, rent, insurance, the vehicle fleet, equipment depreciation, professional services, and technology. If something sits in COGS that shouldn't, like owner salary inside direct labor or a personal vehicle inside equipment, move it to SG&A for this calculation.
If you're paying yourself $70,000 and the market rate for your role at your revenue level is $150,000, add $80,000 to SG&A before calculating the rate. The overhead rate has to reflect what the business costs to run, not what you chose to pay yourself in a tight year.
That percentage is your real overhead rate. Compare it to what's sitting in your bid model right now. The overhead rate calculator will run the same math in a structured format if you want it laid out line by line.
The shortfall has been running since the last recalculation, however long ago that was. Every bid submitted at the wrong rate is a job underpriced. The correction applies to every new bid going forward, starting with the one sitting on your desk today.
Every PM, estimator, or admin hire adds $60,000 to $100,000 in SG&A. The rate needs updating at the time of hire, not eighteen months later when you notice margin compression. SPM recalculates the rate at engagement start and reviews it monthly as part of the close.
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.
| 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.
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