You’re winning bids. Your crew is booked out for weeks. The phone keeps ringing. And yet you check your bank account and think, “Where did all the money go?”

Here’s the truth nobody tells construction owners: your overhead is not “business expenses.” It’s a silent leak. And right now, you’re trying to fill a bucket full of holes. You can bid more, work harder, land bigger projects, and still feel broke. Because the leak isn’t your crew. The leak is the stuff you pay for even when nobody is swinging a hammer.

Markup vs Margin – The Simple Version

Before we talk about overhead, let’s clear up something that trips up almost every contractor I work with. The difference between markup and margin. These two words get swapped around all the time, and mixing them up can cost you thousands on every single job.

Markup is how much you add on top of your costs. If a job costs you $100,000 and you charge $120,000, that’s a 20% markup. Simple. You took your cost, added 20%, and that’s your price.

Margin is how much of the final price you actually keep. On that same $120,000 job, you kept $20,000. But $20,000 out of $120,000 is only about 16.7%. That’s your margin.

See the problem? You thought you were making 20%. You’re actually keeping 16.7%. And if your overhead needs you to keep 20% of every dollar just to break even, you’re underwater on every job and don’t even know it.

This is the first hole in the bucket. A lot of contractors price jobs using markup math but run their business assuming margin math. Those two numbers are never the same. And the gap between them is where cash quietly disappears.

Why Your ‘Busy’ Schedule Is a Red Flag

Let me tell you about a call I had last week. I’m not going to name the client, but this is exactly what happened.

One of my construction clients—good company, solid owner, busy team—calls me up and says, “Bro, we’re slammed. We’re booking jobs. Why is my bank account always stressed?”

He wasn’t losing work. He was winning work. And that’s what made it so confusing.

So I asked him one question: “If you did zero jobs next month, what bills would still hit you?”

He starts listing them out. Office payroll. Truck payments. Insurance. Yard lease. Software subscriptions. Phones. Rent. Shop utilities. We added it all up. His overhead was running about $55,000 a month. He looked at me like I just told him his kid was driving the company truck.

He didn’t think it was that high. Because it didn’t happen overnight. It crept up. One new truck payment. One extra office person. A couple new software tools. A nicer office because “we deserve it.” Each one felt small. But together? It was a flood.

Then I asked him a second question: “On average, after job costs, what do you keep from each dollar before overhead?” He said about 20%. That’s normal for construction.

And here’s where his face changed.

I said, “If you keep 20 cents on every dollar, you need $5 of revenue to produce $1 of gross profit. So your overhead isn’t just $55,000. Your overhead is a sales target. You need $275,000 a month in revenue just to break even.”

He went quiet. Because he realized the line had moved up. Nobody told him. He was playing the same game, but the rules changed. That’s why being busy felt like running in place.

The Overhead You’re Forgetting to Build Into Your Price

Your business only has two kinds of costs. Job costs and overhead.

Job costs are what you spend to do the work. Labor on site, materials, subcontractors. These go up and down based on how much work you have.

Overhead is everything you pay even if you do zero jobs this month. It’s your monthly “I exist” bill. And it grows like weeds—quiet, slow, and hard to notice until it’s choking your cash flow.

Here’s what most contractors miss when they’re pricing jobs. They account for labor, materials, and subs. They add their markup. And they think they’re covered. But they forget to build in enough to cover overhead. So every job looks profitable on paper, but the business still feels broke at the end of the month.

The overhead items that sneak up on construction companies the most are vehicle payments that stack up as you grow, software subscriptions that multiply quietly, a second or third admin hire that felt necessary at the time, storage units and yard costs that just “exist,” and insurance premiums that went up at renewal and nobody noticed.

None of these are bad expenses on their own. But when you add them all up and nobody is tracking the total, your break-even revenue keeps climbing—and you keep wondering why you feel broke.

A Quick Gross Margin Check for Contractors

You don’t need a fancy dashboard to figure out if overhead is eating your profit. You need two numbers and some kid math.

Number 1: Your monthly overhead. Add up every bill that hits you whether or not you’re doing jobs. Office payroll, rent, trucks, insurance, software, phones, yard, shop. Don’t make it perfect. Make it honest.

Number 2: Your gross margin percentage. This is how much you keep from each revenue dollar after job costs. If you bill $500,000 in a month and your job costs are $400,000, you kept $100,000. That’s a 20% gross margin.

Now here’s the formula. Break-even revenue = monthly overhead ÷ gross margin percentage.

If your overhead is $55,000 and your gross margin is 20%, your break-even is $55,000 ÷ 0.20 = $275,000 per month. That’s the revenue where you stop bleeding and start breathing. Anything below that and you’re losing money—no matter how many jobs you’re running.

Track this number every month. If it goes up, ask why. If you can’t explain why in one sentence, overhead creep is winning.

And track your overhead ratio. That’s overhead compared to revenue. If revenue stays flat and overhead goes up, you’re squeezing yourself. You don’t need a CFO dashboard for this. You need a warning light.

How a Pricing Review Can Add Six Figures Without More Jobs

Here’s the part that made my client’s call a real turning point. We didn’t talk about getting more jobs. We talked about patching the leaks.

We built a simple one-page overhead list. Big items only. Then we sorted everything into three buckets: must-have, nice-to-have, and waste. Must-have is stuff you genuinely need to operate. Nice-to-have is helpful but survivable without it. Waste is stuff you don’t use, don’t notice, or can’t explain.

Here’s what we found. Two software tools doing the same job. A subscription nobody remembered signing up for. Tool purchases with no rules or limits. A vehicle cost that didn’t match actual usage.

We cut the waste. We renegotiated what we could. And the funniest part? None of those cuts hurt the business. The crews still worked. The jobs still moved. The company didn’t fall apart. But the cash stopped getting drained every month.

By the end of the call, we had a target: drop overhead by about $8,000 to $12,000 per month over the next 30 to 60 days. That’s $96,000 to $144,000 a year. Without winning a single new job.

Let me say that again. Every dollar you cut from overhead is like removing a hole from the bucket. It’s clean. It’s immediate. And it lowers your break-even revenue, which means you need less sales just to breathe.

And then we added one simple rule going forward: any new overhead expense needs a “pay for itself” plan. Before you add a cost, it has to do one of three things—bring in more money, save real time, or replace another cost. If it can’t do one of those three, it’s not growth. It’s a leak wearing a nice outfit.

Quick FAQs about Construction Overhead

What’s a healthy gross margin for a construction company?

It depends on the trade, but most general contractors I work with in the $1M–$10M range aim for 20–30% gross margin. Specialty trades can be higher. The key isn’t hitting a perfect number. It’s knowing your number and making sure it covers your overhead.

How often should I review my overhead?

Monthly. At minimum, once a quarter. Overhead creep happens because people set it and forget it. A 10-minute monthly check prevents six-figure surprises at year-end.

Can I really save six figures just by cutting overhead?

Absolutely. In my experience as a CPA working with construction companies, cutting $8,000–$12,000 a month in waste is common. That’s $96,000–$144,000 a year. And unlike chasing new revenue, those savings hit your bottom line immediately.

Busy but Broke? Let’s Find the Leak.

If you’re a contractor doing $1M–$10M and your bank account doesn’t match your workload, your overhead is the first place to look.

Book a free Job Pricing & Profit Review call with me.

We’ll calculate your real break-even revenue, identify the leaks in your overhead, and build a plan to keep more of every dollar you earn without chasing more jobs.