Picture a good-sized mechanical or electrical shop — call it $8 million in revenue, fifteen years in business, trucks in the lot, a real backlog, a name people in town recognize. By every outward measure, it's a success. Ask the owner one simple question — "What's your gross margin on the Johnson job?" — and the honest answer is often, "I'm not sure."
Not because anything's wrong. The job is going fine. There's money in the account. The crews are busy. But the actual number — the one that says whether that job is making money or slowly losing it — isn't at anyone's fingertips. The office is usually run by a family member doing their level best with tools that made sense when the company was half this size; they were simply never set up to answer a question like that.
That's the pattern worth naming: most contractors between $5 and $15 million aren't in trouble because the work is bad. They're in trouble because the numbers are hard to see. The jobs are good. The information just isn't there at the moment a decision needs it.
So here's the fix. These are the ten numbers a contractor CEO should be able to speak to without digging — not to pass a banker's quiz, but because a business this size runs better when the person at the top can see it clearly. Every one of them is knowable. Most of them, your current books probably can't tell you yet — and that's the first thing worth solving.
1. Your Backlog — and the Margin Baked Into It
Revenue tells you what you already did. Backlog tells you what's coming. If you only track one of those, you're driving by looking in the rearview mirror.
Backlog is the dollar value of signed, contracted work you haven't built yet. For an MEP contractor, it's the single best leading indicator you have. A shrinking backlog is a warning six months before it ever shows up in your revenue. A growing one tells you it's time to hire, or to raise prices because you're getting full.
But raw backlog isn't enough. You need to know the margin baked into it. Twelve million in backlog at a bid margin of 8% is a very different company than $12 million at 22%. I've watched contractors celebrate a fat backlog that was quietly going to lose them money on every job, because they bid it hungry in a slow stretch and never went back and looked.
What this means for you: Know your backlog in dollars and know the weighted margin inside it. If you can't produce that number this week, that's not a small gap — that's the gap.
2. Your WIP Schedule — and Whether You Actually Believe It
If there's one document that separates contractors who make it from contractors who don't, it's the Work-in-Progress schedule. And in shops your size, it's either missing, out of date, or quietly wrong.
Your WIP schedule takes every open job and answers: how much have I spent, how much have I billed, how far along am I really, and what does that mean for the profit I'm allowed to recognize. It's how percentage-of-completion accounting works, and it's the only way to know whether the profit on your P&L is real or borrowed from the future.
Here's why it matters more than almost anything else: your P&L can look great while your WIP schedule is screaming. If your estimated costs to complete are too low — because the field isn't telling the office the truth, or the office isn't asking — every job looks more profitable than it is, right up until the day it doesn't.
What this means for you: You should get a WIP schedule every single month, and you should be skeptical of it. The number that should keep you up at night isn't cost — it's estimated cost to complete. That's the one people fudge, usually without meaning to.
3. Gross Margin by Job — Not Just Company-Wide
The company-wide margin on your income statement is an average, and averages lie. A 20% blended margin can be one great job at 35% carrying two dogs at 8%. If all you see is the blend, you'll keep bidding the dogs, because you never learned they were dogs.
This is job costing, and it's the discipline most $5–15M contractors are missing. Every job needs its own little P&L: what did we bid, what did labor actually cost, what did material and equipment cost, and where did we land versus the estimate. Do that consistently and patterns jump out. This foreman runs tight. That type of work always bleeds. This GC is worth firing.
What this means for you: You should be able to rank your last twenty jobs by actual gross margin. When you can, you'll stop competing for the work that's been costing you money and start chasing the work that actually pays.
4. The Gap Between Profit and Cash
This is the one that kills good companies. You can be profitable on paper and go broke in the bank, and in construction it happens all the time — because the timing of when you spend and when you get paid is brutal.
You pay your crew every week. You pay your suppliers in 30 days. But you bill the owner monthly, get paid in 45 or 60, and they hold back 10% retention until the job is closed out — sometimes a year later. So you are constantly funding the gap between doing the work and getting paid for it. Grow too fast and that gap gets wider, not narrower. That's the cruel joke of construction: your best year of growth can be the year you run out of cash.
What this means for you: Profit and cash are two different questions, and you need to be asking both. "Did we make money?" and "Do we have money?" have different answers, and only one of them makes payroll on Friday.
5. Your Break-Even — What You Have to Bill Just to Keep the Lights On
Every month, before you make a dime of profit, you have to cover overhead: the office salaries, the rent, the trucks, the insurance, the software, your own paycheck. That's your fixed nut. Break-even is the amount of gross profit you have to generate to cover it.
Here's how to think about it. If your fixed overhead is $150,000 a month and your average gross margin is 20%, you have to bill $750,000 a month just to break even ($150,000 ÷ 0.20). Every dollar above that, at 20%, drops twenty cents to the bottom line. Every dollar below it, you're losing money — no matter how busy the crews look.
What this means for you: Know your monthly overhead and your break-even revenue as two numbers you can recite. When someone pushes you to add an office hire or a new truck, you'll know exactly how much more you have to sell to pay for it.
6. Labor as a Percent of Revenue — Your Biggest Lever
In an MEP shop, labor is where jobs are won and lost. Material prices are more or less what they are. But labor productivity — how efficiently your crews turn hours into installed work — is the number that swings your margin more than anything else you control.
Track labor cost as a percentage of revenue, and track it by job against what you bid. When a job's labor runs 10 points over estimate, that's not bad luck. That's a bid problem, a supervision problem, or a scope-creep problem, and each one has a different fix. But you can't fix what you're not measuring, and "the guys worked hard" is not a measurement.
What this means for you: A few points of labor efficiency is often the difference between a 4% net year and an 8% net year. On $10 million, that's $400,000. That's the lever. Pull it on purpose.
7. Working Capital — Whether You Can Fund the Next Job
Working capital is your current assets minus your current liabilities — the dollar cushion you have to operate day to day. In construction it's not a nice-to-have. It's the thing that determines how big a job you can take without choking.
Every job you win consumes working capital before it produces any. You buy material, you pay labor, you carry the receivable and the retention — all before the money comes back. Take on a job that's too big for your working capital and you can win the bid and still not be able to fund the work. I've seen contractors land the biggest project of their lives and nearly die from it.
What this means for you: Know your working capital in dollars, not just as a ratio. It's also the first thing your bonding company and your banker look at, because it's what tells them how much company you can actually handle. (I go deep on the lender's view in What Your Banker Sees When You Walk In the Door.)
8. A 13-Week Cash Flow Forecast
Your bank balance today tells you where you are. It tells you nothing about where you'll be in six weeks — which is exactly when the big material buy, the tax payment, and the slow-paying GC all land in the same week.
A rolling 13-week cash forecast is the single most useful tool I bring into a contractor that doesn't have one. It's not complicated: cash you expect in, week by week, from your actual billing and collection timing, minus cash you know is going out — payroll, payables, debt, taxes. Do that and the crunch shows up as a line on a page five weeks early, while you still have options, instead of as a phone call from your controller on a Thursday.
What this means for you: A quarter of foresight is worth more than any amount of hindsight. If you're managing cash by refreshing your online banking, you're managing it too late.
9. Accounts Receivable and Retention Aging
Every dollar sitting in receivables is a dollar of work you already did, already paid for, and haven't been paid back for. In a lot of contractors your size, there's more money trapped in aged AR and forgotten retention than the owner realizes — and some of it is quietly turning into money they'll never collect.
Pull an AR aging and actually read it. Anything past 60 days needs a reason. Anything past 90 needs a phone call today. And retention — that 5-10% held back on every job — has a way of getting closed out and never billed, because it's the last step on a job everyone's mentally already finished. That's your profit, sitting on someone else's balance sheet because nobody sent the invoice.
What this means for you: Collections is not the bookkeeper's problem to handle quietly. It's a leadership function. The money's already yours — go get it. Make someone own the aging report and work it every week.
10. Debt Service Coverage — What Your Banker and Bonding Company See
Sooner or later you'll want money — a line of credit for the growth crunch, an equipment loan, a bigger bonding line for a bigger job. When that day comes, the decision is largely already made by a number you should have been watching all along: your debt service coverage ratio.
DSCR is your operating cash flow divided by your total debt payments. Below 1.0, you don't generate enough to cover the debt you already have — that's a no. Most lenders want to see 1.25 or better before they get comfortable. Same math your bonding company runs, plus a hard look at working capital and your job history. The point is this: your financials are a loan application you're filling out every year, whether you plan to borrow or not. The contractor who gets the best terms isn't the one with the best pitch — it's the one whose numbers have been telling a good story for three years before he ever asked.
What this means for you: Know your DSCR before you need it. If it's soft, you want to know now, while you have time to fix it — not across the desk from a banker who already knows.
The Real Point
None of these ten numbers require an MBA. They require a decision — the decision to run your company on information instead of instinct.
Here's what I want you to hear, because I mean it as encouragement and not a scolding: if you read that list and felt your stomach drop a few times, you're not behind. You're normal. Almost every contractor who builds a real business between $5 and $15 million gets there on grit, relationships, and knowing the work cold — not on financial systems. The systems are supposed to come next. The problem is nobody tells you that, and the family member keeping your books can't build them for you, no matter how hard she's trying.
That's the moment you're in. You didn't do anything wrong. You outgrew your setup, which is what success looks like right before it gets dangerous. The good news is that every one of these numbers is knowable, and the shop that starts knowing them is a fundamentally different, safer, more valuable company within a year.
You built something real. Now go find out what it's actually telling you.
Joshua R. Bohlke spent over a decade as a commercial banker before serving as CFO and financial advisor to construction and specialty-trade businesses. He works with mechanical, electrical, and plumbing contractors who've outgrown their books and are ready to run the company on real numbers. The Bankability Report on this site runs your financials through the same framework a lender uses — and tells you where you stand.
Prefer to listen? I recently sat down for a podcast conversation covering a lot of this ground — watch it on YouTube.
jrbohlke.com • The Analysis