FROM LOSING 1%
TO $737K NET PROFIT.
A $6.7M commercial civil contractor was doing the work and winning bids. On the surface the business looked fine. Overhead was eating them alive at 30 percent against a 29 percent gross profit margin. Every project he bid was losing 1 percent right off the rip. He had no idea. He had tried two CFOs before. Both were bank recommended general CFOs with no construction experience. Both failed. We sat down and calculated real overhead. 30 percent. Not the 10 percent he thought he was bidding. They cut the software they did not need. They deferred equipment. They stopped buying things just for tax write-offs. Real overhead dropped to 18 percent. They rebuilt their bids using the real number. They went from losing $67,000 a year to making $737,000 a year. Same revenue. Same crews. Same trucks.
This is what happens when a civil contractor stops accepting the lie that this is just how the industry works. They saw their real overhead and made a choice. They stopped being a victim to how things had always been done.
This $6.7M commercial civil contractor was the kind of business that looks healthy from the outside. Crews were running. Work was getting won. Bids were getting approved. The bookkeeping was clean enough to file taxes. Revenue held at $6.7M.
Underneath, the math did not work. Overhead was running at 30 percent. Gross profit margin was 29 percent. That meant every single project he bid was losing 1 percent right off the rip. One project would happen to outperform the budget. As a business in aggregate, that hid the problem in the bidding.
He had already tried two CFOs before us. Both were bank recommended general CFOs with no construction experience. The bank required a CFO because the numbers did not make sense. The CFOs did not know how to pick apart job costing or estimating. Nothing was working. That is when he called.
Overhead Was 30 Percent, Not 10
He thought he was bidding 10 percent overhead and 5 percent profit. That is what every contractor he knew bid. We sat down and calculated real overhead. 30 percent. Not 10. Every project losing 15 percent against what he was really pricing in.
Padding Everywhere With No Job Costing
He had padding throughout his estimates that he did not understand because he had no job costing to track it. The "10 percent overhead" was a number from the industry. Not a number from his own books.
Buying Everything for Tax Write-Offs
His previous CFO and CPA had told him to keep buying. Equipment, software, vehicles. Nobody asked the real question: do we truly need this? The advice was financial. It ignored the operational reality.
Every Project Bidding at Negative 1 Percent
10 percent OH plus 5 percent profit was the bid. 30 percent OH plus 29 percent GP was the reality. He was bidding at negative 1 percent and did not know it. The business was paying $67,000 a year just to be in business.
- Real overhead calculation: calculated every weekly and monthly expense. Divided by annual revenue. The real number was 30 percent. CONTROL Chapter 3.
- Overhead reduction: cut the software he did not need. Deferred equipment purchases. Stopped buying for tax write-offs. Real overhead dropped from 30 percent to 18 percent.
- Bid rebuild: every estimate moved from 10 percent OH plus 5 percent profit to 18 percent real OH plus 11 percent target net profit. Same gross margin target. Honest numbers.
- Monthly cadence: tracked overhead month over month on a rolling 12-month average. Saw the trend. Adjusted estimates as it moved. CONTROL Chapter 7.
The math. At negative 1 percent on $6.7M revenue, the business was paying $67,000 a year just to be in business. At positive 11 percent, the business is making $737,000 a year. An $804,000 swing on the same revenue base.
The bidding change. Same gross profit margin target. Honest overhead number. The bids look different to him now. They do not look different to the GCs. Most are still winning at competitive pricing because the padding was wasteful, not necessary.
The discipline. Overhead is managed monthly now instead of bled monthly. Software gets reviewed. Equipment purchases get justified by job, not by tax season. The business is producing margin because nothing is wasteful anymore.
WANT IT INSTALLED FOR YOU?
CONTROL teaches you how to build the system yourself. The Construction CFO, a service of Sulphur Prairie Management, builds and runs it for you. Same system. Same outcomes. From $1,900 per month. 60-day onboarding.
A $6.7M commercial civil contractor with overhead running at 30 percent against a 29 percent gross profit margin. That meant every project he bid was losing 1 percent right off the rip. He had no idea. The bookkeeping showed overhead was somewhere around 10 percent. The reality was 30. He had tried two CFOs before. Both were bank recommended general CFOs with no construction experience. Their bank required a CFO because the numbers did not make sense. Nothing was working.
Three categories of cuts. They cut software they did not need. They deferred equipment purchases. They stopped buying things just for tax write-offs. Their previous CFOs and CPA had told them to keep buying. Nobody asked the real question: do we truly need this? Once those cuts hit, real overhead dropped from 30 percent to 18 percent. Then they rebuilt their bids using the real number.
Math. At negative 1 percent on $6.7M revenue, they were paying $67,000 a year just to be in business. At positive 11 percent, they were making $737,000 a year. Same revenue. Same crews. Same trucks. The only thing that changed was they stopped bidding 10 percent overhead when real overhead was 30. They put the real number in. They started managing overhead tightly. They kept more because nothing was wasteful anymore.
Almost always because they are bidding overhead at 10 percent while real overhead is 25 to 38 percent. Every project loses the difference. The owner cannot see it because the books are too generic. The LOC fills the shortfall that the bids should have closed. Once it is maxed, the business is locked out of growth. The fix is not more revenue. The fix is knowing the real overhead number.
Two before this one. Both were bank-recommended generalists with no construction background. The bank required a CFO because the numbers did not make sense. The CFOs did not know how to pick apart job costing or estimating. They could file taxes and close books. They could not run a construction business. The third time was different because the CFO understood construction.
