5 Signs Your Contracting Business Is Leaking Profit (And Where to Find It)

You're booking more work than ever. Revenue is up 20% over last year. But somehow, there's never more money in the account. Sound familiar? You're not alone — it's one of the most common complaints from contractors doing $1M-$5M in revenue. The money is going somewhere. Here are the five most likely places.

1. You Don't Know Your Loaded Labor Rate

This is the number one profit leak in contracting. Your lead tech makes $30/hour, so you bid jobs using $30/hour. But after payroll taxes (7.65%), workers' comp (8-15% for trades), health insurance, vehicle costs, tools, and uniforms, that tech actually costs you $45-$55/hour. If you're bidding with the base rate, you're underpricing every single job by 30-40% on the labor line.

Fix: Calculate your fully loaded labor rate for each role. Use that number in every estimate. Most contractors who do this for the first time are shocked at the gap.

2. Material Costs Are Creeping Up Unnoticed

Your supplier raises copper prices 3% this quarter. Refrigerant goes up 5%. PVC fittings cost 8% more than last year. Each increase is small enough to ignore, but compounded across hundreds of jobs, they add up to thousands in lost margin. If you're using the same material estimates you set a year ago, you're bleeding money.

Fix: Review material cost actuals vs. estimates quarterly. Update your pricing templates when supplier costs change. A 5% material cost increase on a $2M business is $100K in margin — that's not a rounding error.

3. Scope Creep Has No Paper Trail

"While you're here, can you also..." is the most expensive sentence in contracting. Small add-ons that don't get documented, quoted, or billed add up fast. A 30-minute favor on a 4-hour job just cut your labor margin by 12%. Do that twice a day, five days a week, and you've given away an entire technician's worth of labor per month.

Fix: Every out-of-scope request gets a change order. No exceptions. Train your crew to say "absolutely, let me get you a price on that" instead of just doing it.

4. You're Not Tracking Callback Costs

A warranty callback looks free from the customer's perspective. From yours, it's a truck roll, 1-2 hours of tech time, possibly parts, and zero revenue. If you're not tracking callbacks per job and per technician, you can't identify the pattern — whether it's a training issue, a parts quality issue, or a specific job type that generates disproportionate callbacks.

Fix: Log every callback and tie it to the original job. Calculate the cost. Include a realistic callback allowance in your estimates based on historical data. Some contractors find that callbacks are eating 3-5% of revenue when properly tracked.

5. Overhead Is Allocated to Nobody

Your shop rent, office manager, insurance, truck payments, marketing, and software costs exist whether you run 10 jobs this week or 50. If these costs aren't allocated across jobs, your job-level margins look artificially high. You think you're making 45% gross margin on installs, but after overhead it's really 25%.

Fix: Calculate your monthly overhead and divide it by the number of jobs (or labor hours, or revenue — pick a method and be consistent). Add that number to every estimate. Now your job margins reflect reality.

Find the Leaks

The common thread: you can't fix what you can't see. Every one of these profit leaks is invisible without job-level cost tracking. Accomptant connects to your QuickBooks data and shows you estimated vs. actual costs on every job — materials, labor, overhead — so profit leaks show up in your dashboard, not just in your bank balance at tax time.