Booked Out but Still Broke: CPA Guide to Pricing Strategy for Contractors and Construction Firms
Samy Basta, CPA • November 19th, 2025
If you’re a contractor, construction firm owner, or real estate professional booked solid for the next two months but still can’t pay yourself a decent salary, something’s broken. And it’s not your work ethic—it’s your pricing formula. I see this every tax season when contractors, interior designers, architecture firms, and property management companies sit across from me with the same confused look: “I billed more this year than ever before. Where did all the money go?”
As a CPA specializing in B2B services for the construction and real estate industries, the answer is usually the same: You’re working harder, not smarter. You’re busy, but you’re not profitable. And there’s a massive difference.
Here’s what nobody tells you at contractor school or in your architecture degree: Being busy is not a business metric. Revenue is not a business metric. The only metric that matters is profit per hour of YOUR time. Right now, you might be making less per hour than the kid working at In-N-Out. Difference is, he gets overtime and benefits. You get stress and tax bills.
And here’s the hard truth I share as a fractional CFO for small construction firms: Your customers are getting a great deal—subsidized labor funded by your family’s financial future. Not because you’re generous, but because nobody ever taught you the real math behind contractor pricing.
Let’s change that right now.
This is the single biggest mistake that costs contractors, interior designers, and small construction firms six figures a year—and most don’t even know they’re making it.
Let’s say you spend $100 on materials and labor. You charge the customer $150. Quick math in your head: “I made $50 on $100, that’s 50% profit.”
Wrong. You made 33% profit. Here’s why this matters for construction business profitability:
Your $100 cost divided by your $150 price equals 66.7%. That’s your cost percentage. Flip it around—that’s a 33.3% margin. Not 50%.
“But Samy, I added 50% to my costs. That’s 50% markup.”
Yes. And 50% markup equals 33% margin. These are two different formulas that give you two different numbers:
Markup = (Price – Cost) ÷ Cost
Margin = (Price – Cost) ÷ Price
So when another contractor or architecture firm tells you they run 50% margins and you think your 50% markup matches that—it doesn’t. They’re marking up 100% to get 50% margins. You’re marking up 50% to get 33% margins.
That 17-point difference? On a million dollars in revenue, that’s $170,000 you’re leaving on the table. Every. Single. Year.
As a CPA who reviews contractor financials daily, let me show you what different markup percentages actually give you in margin:
25% markup = 20% margin
50% markup = 33% margin
75% markup = 43% margin
100% markup = 50% margin
Most contractors, interior designers, and small construction firms I work with think they’re running healthy margins when they’re actually operating in the danger zone. They’re using markup thinking, but comparing themselves to margin numbers.
This isn’t about being bad at math—it’s about using the wrong formula. Stop using markup as your pricing guide. Start using margin. The difference is real money in your bank account.
Let me ask you something: Have you noticed that restaurants with empty tables either raise their prices or go out of business? And restaurants that are packed solid either raise their prices or… stay packed and broke?
Which one are you?
If you’re a contractor, property management firm, or architecture firm booked out for weeks or months in advance, that’s not a sign that you’ve “made it.” As a fractional CFO who advises construction businesses, I see this as a flashing red light that you’re underpriced.
Think about it: Basic economics says high demand plus low supply equals higher prices. Except in the construction and real estate industries, where we’ve been trained to think being booked out means we’ve maxed out our earning potential.
That’s backwards.
When demand for your contracting services exceeds your capacity to deliver them, you have pricing power. You should be raising prices until you have just enough work to keep your schedule full with margin left for emergency jobs and good customers.
But most contractors and construction firms do the opposite. They stay at the same prices, work themselves to exhaustion, and wonder why they can’t get ahead.
Here’s a test for your construction business: If you raised your prices 25% tomorrow, how many of your current customers would you keep? If the answer is less than 70%, you’ve accidentally trained your market that you’re the budget option.
And budget pricing doesn’t build wealth—it builds burnout.
I’ve had contractors, interior designers, and architecture firm owners tell me, “But Samy, if I raise prices, I’ll lose customers!”
Good. You should lose some customers. The ones you want to lose are the ones who only hired you because you were cheap. Those customers:
Grind you on every line item
Pay slowly (or fight the final invoice)
Complain the most
Refer other price shoppers
Kill your profit margins
The customers you want to keep—the ones who value quality work and understand that professional contractors and construction firms aren’t cheap—those customers will stay. In fact, they might respect you more for finally charging what you’re worth.
This is where most contractors, architecture firms, and interior designers completely lose the plot on their pricing. They remember to charge for materials and direct labor, but they forget to charge for running the actual business.
As a CPA specializing in construction and real estate businesses, I see this mistake destroy profitability more than any other factor.
Pull up your calculator. Let’s count the real costs of operating your contracting or construction business:
Monthly overhead expenses most construction firms and contractors have:
Truck/vehicle payment and commercial insurance: $1,200
Tool replacement and maintenance: $200
Fuel (all those supply runs and job site travel): $400
Phone and internet for business: $100
Software subscriptions (estimating, accounting, project management): $150
Workers compensation insurance: $800
General liability insurance: $300
Office expenses and supplies: $150
Marketing and advertising: $200
Licensing and permits: $100
CPA and legal services: $200
Professional associations and continuing education: $100
That’s $3,900 per month before you’ve done any actual contracting work.
Now let’s say you work 160 billable hours per month (which is optimistic for most construction businesses—we’ll get to that). That’s $24.38 per hour just to cover overhead. Before materials. Before labor. Before profit.
But here’s what actually happens: You’re charging $65 per hour thinking you’re making $30 after paying your field labor.
Reality check from your CPA: You’re making $5.62 per hour. Maybe.
And we haven’t even talked about your unbillable time:
For contractors, construction firm owners, interior designers, and architecture firms:
6 hours this week on estimates and proposals that didn’t close
2 hours fixing that callback for free (“customer service”)
1 hour arguing with the supply house about the wrong order
3 hours doing your own bookkeeping on Saturday morning
2 hours responding to customer calls and texts
1 hour picking up materials because the delivery was wrong
2 hours on that property management issue for a real estate client
1 hour dealing with permit delays
That’s 18 hours of your week that generated zero revenue. So your 160 billable hours? More like 115-125 if we’re being honest about construction business operations.
Now your overhead cost per billable hour just jumped to $31-34. See the problem?
Most contractors and construction firms forget to charge for running the business because they were never trained to think like business owners. They were trained to think like technicians who happen to have customers.
There’s a massive difference between:
Being self-employed (you do the contracting work and collect money)
Running a construction business (you build systems that create profit even when you’re not personally on site)
The gap between those two? That’s the difference between surviving and thriving. It’s also where fractional CFO services can transform your business.
Let’s do an exercise right now. Don’t skip this—it takes two minutes and might save your contracting business.
Stop reading. Open your banking app. Look at last month.
1. Total money that came in from customers: $________
2. Total money you spent on job costs (materials + subcontractors + direct labor only): $________
3. Subtract line 2 from line 1: $________
4.Divide line 3 by line 1: ________%
That final percentage? That’s your gross margin. This is the money available to cover overhead, pay yourself, and (hopefully) make a profit.
As a CPA reviewing hundreds of contractor and construction firm financials annually, here’s how to interpret your number:
Gross Margin Benchmarks for Construction Firms and Contractors:
Under 20%: You’re literally subsidizing every job. This is not sustainable for any construction business.
20-30%: You’re slowly going broke. You might feel busy and productive, but the math is killing your business.
30-40%: You’re barely covering overhead for your contracting business. There’s nothing left for you or for reinvestment.
40-50%: Now we’re talking. This is where sustainable construction firms and contractor businesses operate.
50%+: This is where you build wealth, not just a job for yourself. This is what fractional CFO guidance can help you achieve.
“But Samy, I marked everything up 30%!”
I hear this all the time from contractors, interior designers, and architecture firms. Here’s the disconnect: 30% markup is 23% margin. That doesn’t even cover overhead for most construction businesses.
Let’s say your actual overhead (when you count everything honestly) is $8,000 per month. You do $25,000 in revenue. With 23% margin, you have $5,750 to cover overhead.
You’re $2,250 short. Every month. That’s $27,000 per year you’re subsidizing your contracting business from… where? Your savings? Your credit cards? Your spouse’s income?
The margins contractors and construction firms actually need:
35% minimum for survival (keeping the lights on, paying bills, not going backwards)
45% for a sustainable construction business (paying yourself a real salary, building some savings, managing slow periods)
50% if you want to build wealth (retirement accounts, college funds, buying equipment without financing, taking actual vacations)
What those margins require in markup:
35% margin = 54% markup
45% margin = 82% markup
50% margin = 100% markup
Yeah, those numbers probably sound crazy to most contractors and construction firm owners. I know. That’s because most of us were never taught to price for profit—we were taught to price to win the job.
But winning unprofitable construction jobs is just working for free with extra steps.
Let me tell you about a client—a construction industry professional—who transformed his business with pricing strategy and fractional CFO guidance.
The situation:
Plumbing contractor serving residential and commercial real estate clients. He has 8 trucks and $3 million in annual revenue. Working 60+ hour weeks, living paycheck to paycheck despite being constantly busy. He couldn’t understand where the construction business revenue was going.
As his CPA, we sat down with one year of financial data and a spreadsheet. What we found shocked him—and it’s a pattern I see constantly in B2B construction firms.
His average service call had 18% gross margins. Eighteen percent. His supply house was making more profit per job than his contracting business was. After overhead, he was taking home less than he paid his senior plumbers.
Here’s what we changed with fractional CFO pricing strategy:
Old contractor pricing model:
Time and materials with “whatever feels right” markup
Minimum service charge: $125
Average ticket: $480
Gross margin: 18%
Unpredictable cash flow for the construction business
New construction business pricing model:
Flat rate pricing book (no more guessing on contractor estimates)
Minimum service charge: $325
Average ticket: $740
Gross margin: 42%
Predictable, healthy cash flow
“But won’t I lose customers?”
Yes. He lost about 25% of his customer base—mostly property management firms and real estate investors who were only hiring him because he was the cheapest contractor option. The ones who questioned every line item. The ones who were slow to pay and quick to complain.
Good riddance.
The results after one year for this construction firm:
Revenue: $2.4 million (down from $3 million)
Gross profit: $820,000 (up from $540,000)
Owner compensation: $185,000 (up from $72,000)
Working hours: 4 days per week (down from 6)
Customer satisfaction: Higher (working with better clients)
Read that again: He made $280,000 more in gross profit while doing $600,000 less in revenue.
Less contracting work. More money. Same skills, different pricing.
He now drives a truck he’s proud of instead of one held together with zip ties. He takes his family on actual vacations where he doesn’t check his phone every five minutes. He’s putting money away for retirement instead of robbing next month’s construction business cash flow to make this month’s payroll.
This isn’t a unicorn story. As a CPA and fractional CFO for construction firms, I see this pattern repeat with almost every contractor who finally commits to fixing their pricing.
The math is simple:
Working harder + low margins = burnout
Working smarter + healthy margins = wealth
You can’t work your way out of a pricing problem. You can only price your way out of it.
You’ve got the information. Now here’s what contractors, construction firms, interior designers, architecture firms, and property management companies should do with it.
Step 1: Calculate your real overhead cost per hour (Do this today)
Add up every construction business expense for the last 12 months that isn’t direct job costs:
Insurance (all types)
Vehicle payments and fuel
Tools and equipment
Office and phone
Software and subscriptions (contractor-specific and accounting)
Marketing for your construction business
Professional services (CPA, legal, fractional CFO)
Licenses and permits
Everything else
Divide that number by your actual billable hours (be honest—it’s probably 1,200-1,600 per year for most contractors, not 2,000).
That’s your break-even hourly rate before materials, labor, and profit. If this number isn’t built into every single construction job, you’re working for free.
Step 2: Test your contractor pricing (Do this tomorrow)
Your next estimate—add 35% to what you would normally charge. Just test it.
If they say yes immediately without blinking? You’ve been leaving money on the table for years.
If they push back a little but still hire your construction firm? You’re getting closer to market rate.
If they say no? You just avoided a construction job that would’ve cost you money. That’s not a loss—that’s good business.
Step 3: Review your customer list (Do this this week)
Pull your customer list from the last 12 months. For each customer (whether they’re real estate investors, property management firms, or direct homeowners), ask:
Do they pay on time?
Do they respect my time and expertise as a contractor?
Do they refer other good customers?
Do they question every line item on construction estimates?
What’s my actual margin on their jobs?
Identify your bottom 10%. The ones who grind on price, pay slowly, and complain constantly.
Calculate what they’re actually costing your construction business in time, stress, and opportunity cost. Then decide if they’re worth keeping.
Sometimes the best way to increase construction firm profitability is to fire unprofitable customers.
As a CPA specializing in construction businesses, I recommend 35% minimum gross margin for survival, 45% for a sustainable business, and 50%+ for wealth building. Most contractors I work with initially operate at 20-30% margins, which barely covers overhead.
If you’re doing $500K+ in revenue but can’t understand where the money goes, a fractional CFO can provide financial strategy without the cost of a full-time CFO. For construction firms, this typically includes pricing strategy, cash flow management, and profitability analysis.
Markup is calculated on cost (profit ÷ cost), while margin is calculated on price (profit ÷ price). A 50% markup only gives you 33% margin. Most construction firms need 82-100% markup to achieve healthy 45-50% margins.
Test incrementally. Most contractors can raise prices 20-30% and retain 70-80% of their best customers. The customers you lose are typically the least profitable ones anyway. As a CPA, I help contractors identify which customers are actually profitable.
For contractors and construction businesses, I typically recommend QuickBooks Online Plus or QuickBooks Desktop Premier Contractor Edition, depending on job costing needs. Both integrate well with construction-specific estimating software and allow proper job cost tracking.
While the margin math is the same, interior designers and architecture firms often use hourly rates or project fees rather than job costing. The key is still ensuring your pricing covers overhead, labor, and profit—typically requiring 50%+ margins for professional service firms.
At minimum, annually with your CPA during tax planning. However, I recommend quarterly pricing reviews for construction firms, especially in volatile markets where material costs fluctuate significantly.
If you’re reading this and thinking “That’s me—I need help,” you’re not alone. Most contractors, construction firm owners, interior designers, and architecture professionals were never taught the business side of running a profitable construction business. You’re excellent at your trade, but nobody ever showed you the financial model that makes it profitable.
That’s where I come in.
I’m Samy Basta, CPA, and I work exclusively with small business owners in the construction and real estate industries. I specialize in helping contractors, construction firms, property management companies, interior designers, and architecture firms understand their numbers and build pricing strategies that actually work.
As your fractional CFO, I offer a free Job Pricing & Profit Review call. Here’s what we’ll do in 20 minutes:
✓ Review your current contractor pricing model and identify the gaps
✓ Calculate your real overhead cost per billable hour for your construction business
✓ Find at least $50,000 in hidden profit you’re not capturing
✓ Build a simple action plan you can implement immediately
✓ Discuss whether ongoing fractional CFO services make sense for your business
This pricing review is specifically designed for:
General contractors and specialty contractors
Small to mid-size construction firms
Interior designers serving residential and commercial clients
Architecture firms and design-build companies
Property management firms managing renovation budgets
Real estate investors running their own construction projects
No pressure. No sales pitch. Just straight CPA talk about your numbers and what they’re telling you about your construction business.
If you’re booked out but broke, or if you’re working 60 hours a week but can’t pay yourself a real salary, this call might be the most valuable 20 minutes you spend all year.
Schedule Your Free Pricing Review Call →
Or keep doing what you’re doing. Just know what it’s actually costing your contracting business.
Samy Basta brings you more than 20 years experience in tax, financial, and business consulting to his role as founder of Basta & Company. His focus is primarily strategic business planning, empowering clients to set priorities, focus energy and resources, and strengthen operations. In addition, Samy and his firm provide strategic counsel, and technical insight, on a wide range of needs, including tax saving strategies, tax return compliance, as well as choice of entity.
100 Pine Street, Suite 1250
San Francisco, CA 94111