Warranty year eats the margin you already billed
Cash leaves in month three for the factory deposit and comes back in month twenty-six, and then you owe twelve months of maintenance on a job that's already closed.
Most trades stop spending on a job the day they leave the site. You keep spending for a year, on a car that has to keep running for the same owner holding your retention. The first money leaves at month three, the last money comes in at month twenty-six, and twelve months of service fall in between, which is a cycle almost no other subcontractor runs.
The size of it
Money committed in month three comes back in month twenty-six or later, and the job keeps consuming mechanic hours for a full year after the last invoice.
On a two-year build the deposit is your first cash movement, and it goes out before the hoistway even exists. The certificate is one of the last items before CO, so retention releases at the very back of the job, and owners often hold the last money until the warranty period is underway or finished. That warranty is a real cost center: monthly service visits, adjustments, and entrapment callbacks run by your mechanics for twelve months after the final invoice. Almost no shop codes those hours back to the job, so it looks profitable the day it closes and then gives up several points of margin over the following year with nothing on the report saying so. Then you bid the next one off numbers that were never right.
Three moves, in order
Step 01: Job cost structure
Seven cost categories and three levels of granularity, built so the estimate and the ledger use the same words.
What else costs elevator contractors money
The same mechanism in other trades
What elevator owners ask
Elevator retention not released until warranty maintenance year is over?
Cash leaves in month three for the factory deposit and comes back in month twenty-six, and then you owe twelve months of maintenance on a job that's already closed.
What does it cost?
Money committed in month three comes back in month twenty-six or later, and the job keeps consuming mechanic hours for a full year after the last invoice.
What do I do first?
Keep the job number open through the warranty year and code every callback, adjustment, and service visit to it, so you can see closeout margin and final margin side by side.
What are elevator contractors supposed to be making?
Elevator runs 27% gross margin, 18% overhead and 9% net profit before taxes at $1M–$5M. The all-trade average is 7%, so this trade is 2 points above it. The CFOS target is 12.5%.
Which part of the system fixes it?
The step is number 01, job cost structure. Seven cost categories and three levels of granularity, built so the estimate and the ledger use the same words. It comes from chapter 1 of CONTROL: The Construction Financial Operating System.
Everything on this page is something you can install yourself, andCONTROL is the order to do it in. If you would rather buy the finished result, SPM The Construction CFO does this work for elevator contractors as a service. It is a separate firm, Sulphur Prairie Management, LLC, run by the same author.
Wrote CONTROL, the 8 step system behind these figures. More about the author.