Industries / Home Services

    Financial leadership for home services companies

    Most contractors doing $1 million to $20 million are busy. Busy is not the same as profitable, and plenty of owners find that out the hard way.

    You can run more trucks, book more calls, and grow revenue every year while your margin quietly goes backward. It is rarely one big problem. It is pricing that never caught up with labor costs, jobs nobody costed properly after the fact, and overhead that grew right alongside the crew.

    The median HVAC contractor runs a 5.8 percent net profit margin. The top quartile averages 13.2 percent.

    Source: ACCA Financial Benchmarking Study, 2024.

    That is more than double, in the same trade, often in the same market. The gap is not volume. It is pricing discipline, service mix, overhead control, and knowing which jobs make money before you bid the next one.

    Where contractor margin actually goes

    Ask most contractors what a job costs and you get a solid estimate. Ask what it actually cost after the fact and the room goes quiet.

    That gap is where the money is.

    Labor burden is understated. The hourly wage is not the cost. Payroll taxes, workers comp, benefits, vehicle, phone, training, and unbilled drive time push true burden well above the number most estimates use. Bid at the wage rate and you lose money on every hour you sell.

    Overhead gets spread evenly when it should not be. A flat percentage applied across every job hides the truth. Some work carries more overhead than other work. Spread it evenly and your profitable jobs quietly subsidize your unprofitable ones, forever.

    Callbacks and warranty work never make it back to the job. They land in a general bucket. So a job that looked like it made 22 percent actually made 9, and nobody ever finds out.

    Service and install get blended together. They are two different businesses with different margins, different labor, and different value to a buyer. Reporting them as one number tells you nothing useful about either.

    01

    Job costing that reflects reality

    Real cost per job, with fully loaded labor burden and overhead allocated the way it is actually incurred. Service and install separated. Callbacks charged back to the job that caused them.

    02

    Pricing and labor burden

    Your true cost per billable hour, then pricing built up from it. Most contractors price off what the competition charges. That works right up until the competition is wrong.

    03

    Cash flow and working capital

    Contractors get squeezed between paying labor weekly and collecting in thirty to sixty days. Growth makes it worse, not better. We forecast the squeeze before it shows up.

    04

    Lender and bonding readiness

    Clean accrual statements, work in progress schedules, and the ratios a lender or surety actually looks at. Better presentation will not fix weak numbers, but weak presentation makes decent numbers look worse.

    05

    Valuation and exit preparation

    What the business is worth today, what is holding the number down, and what to fix first. Ideally starting two to three years before you want to sell.

    What is actually happening with private equity

    You have gotten the calls. Maybe a letter, maybe a broker, maybe a platform you had never heard of.

    Here is the structure behind it, plainly.

    Private equity buys individual contracting businesses at one multiple, combines them into a regional or national platform, and sells that platform at a higher one. The spread between what they pay you and what the combined business is worth is the return. That is the entire model.

    Two things follow from that, and both matter to you.

    Platform businesses are priced differently than add-ons. A larger business with real management depth, clean financials, and recurring service revenue can anchor a platform. A smaller owner-dependent business is an add-on. Same trade, same market, materially different multiple.

    What moves you between those two categories is mostly financial. It is not your truck count.

    Our founder, Dylan Bastian, spent four years at a boutique investment bank working sell-side transactions, on businesses from $20 million to $230 million in revenue. The pattern is consistent. Buyers pay for predictability, and they discount everything they have to take on faith.

    What buyers check first

    Recurring revenue. Service agreements under contract, and what share of total revenue they represent.

    Customer concentration. If one builder or one property manager is thirty percent of your revenue, expect a discount.

    Owner dependence. If the business stops working when you take two weeks off, you are selling a job, not a company.

    Financial clarity. Job level margin, service versus install split, clean accrual statements. If diligence has to reconstruct your numbers, the buyer assumes the worst and prices it in.

    Margin trend. Not one good year. Three years pointing the right direction.

    Notice how much of that is the same work as fixing your margin. Job costing is not only a profit exercise. It is the thing that moves you from an add-on multiple to a platform multiple. The contractors who get paid well at exit started building those numbers years before they ever took the call.

    Who this is for

    Plumbing, electrical, HVAC, roofing, and general contracting businesses doing $1 million to $20 million in revenue. Residential, commercial, or both.

    Owners who are growing and cannot tell whether the growth is making them money. Owners who have started getting acquisition calls and want to know what their business is actually worth before they answer one.

    If you are smaller than that, bookkeeping on its own is usually the right starting point, and we do that too. If you are larger, you may be ready for a full-time CFO, and we will tell you so.

    Common questions

    What does a fractional CFO do for a contracting business?
    We handle the forward-looking financial work. True job costing, pricing built up from real labor burden, cash flow forecasting through a growth stretch, the package your lender or surety wants, and the numbers behind a sale. Bookkeeping keeps the record straight and your CPA handles the return. We work out what comes next, and we can handle the bookkeeping too. Learn more about our fractional CFO work.
    We have a bookkeeper and a CPA already. Why this too?
    Good. Keep them. Bookkeeping keeps the record current and your CPA minimizes the tax bill, and you need both. Neither one is engaged to tell you that your install margin has slipped four points over eighteen months, or that your service agreements are worth more to a buyer than your truck fleet. That is a third job, and it is the one we are describing here.
    Our job costing is already in our field software. Is that enough?
    It is a good start and it is usually incomplete. Most setups use the wage rate rather than fully loaded labor burden, allocate overhead as a flat percentage, and never push callbacks back to the original job. The report looks precise and still overstates margin. We work with what your system produces and correct the assumptions underneath it.
    Private equity keeps calling. Should I take the meeting?
    Taking a call costs you nothing and teaches you something. Signing anything before you know your own number is where owners get hurt. Know what the business is worth, know what is dragging it down, and know whether you are an add-on or a platform, before you are sitting across from someone who already knows all three.
    What is my company actually worth?
    It depends on far more than revenue. Recurring service revenue, customer concentration, whether the business runs without you, margin trend, and the quality of your financial records all move the number, sometimes dramatically. Two contractors with identical revenue can be worth very different amounts. We value it properly and show you which factors are costing you.
    When should we start preparing to sell?
    Two to three years before you want to close. Most of what raises your multiple takes time to build. Service agreement growth, reducing customer concentration, building a management layer that operates without you, and three years of clean financials pointing the right way. Owners who start ninety days out get whatever the market gives them.

    Thirty minutes, no pitch. Bring your questions about the business and we will tell you honestly whether we can help. See how our engagements work.

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