You need to cut and do not know what is safe to cut
Cutting blind takes out the thing that was producing revenue and leaves the thing that was not.
Overhead is not one thing. Some of it protects revenue, some of it was bought early for a size you have not reached, and some of it is being carried out of habit. An owner staring at a heavy overhead line usually cannot tell which is which, so the cut lands on whatever is easiest to cancel rather than on whatever is costing the most and returning the least.
Three moves, in order
Step 03: Overhead calculation
What indirect cost really comes to at your size, and the rate your estimating template should be carrying.
Other problems step 03 solves
Other things that go wrong
What owners ask
What overhead should a construction company cut first?
Cutting blind takes out the thing that was producing revenue and leaves the thing that was not. Overhead is not one thing. Some of it protects revenue, some of it was bought early for a size you have not reached, and some of it is being carried out of habit. An owner staring at a heavy overhead line usually cannot tell which is which, so the cut lands on whatever is easiest to cancel rather than on whatever is costing the most and returning the least.
Which part of the system fixes this?
The step is number 03, overhead calculation. What indirect cost really comes to at your size, and the rate your estimating template should be carrying. It's drawn from chapter 3 of CONTROL: The Construction Financial Operating System.
Is this normal for my trade?
Across the 48 trades that publish a figure, net profit at $1M–$5M averages 7% before taxes. If you're well under that and this page describes your month, the two are usually the same story. The published average tells you where the pack sits, and your own job costing tells you where you sit, which is the number that pays payroll.
Where do I start?
Sort every overhead line into protects revenue, bought early, or carried out of habit.
Can I fix this without touching anything else?
You can try, and it doesn't hold. Step 03 depends on step 01, job cost structure and step 02, equipment cost basis. Install it ahead of those and it produces numbers nobody trusts, which is worse than the problem you started with.
Wrote CONTROL, the 8 step system these figures sit inside. More about the author.