THIS WEEK'S STORY
Busy, Booked—and $280,000 Short
A contractor—we’ll call him Mike—recently told me, “Samy, this may be our best year ever. We’re booked for months.”
Revenue was up. His crews were busy. The trucks barely stopped moving.
Mike expected the numbers to look great. They didn’t.
His gross margin had dropped from 24% to 20%.
“What does that mean in dollars?” he asked.
If that four-point decline continued across $7 million of annual revenue, Mike would keep roughly $280,000 less gross profit. That got his attention.
Mike had updated his copper prices. But his estimates still used old costs for labor, payroll taxes, insurance, freight, equipment, and subcontractors.
Some jobs also started months after he submitted the bid. By the time his crew arrived, the estimate belonged in a museum.
Mike isn’t alone.
Construction input costs increased 7.1% over the past year. Contractor bid prices increased only 3.5%.
Those figures don’t mean every contractor lost the same margin. But they point to a real problem: costs are rising faster than many businesses are updating their prices.
The difference doesn’t disappear. It comes out of your gross profit.
A full backlog can create a false sense of security. You can be busier than ever while working harder, taking more risk, and keeping less money.
Don’t blindly raise every price. Know the minimum gross margin each job must produce.
Compare your estimates with actual job costs. Update every cost—not just materials. Shorten how long bids remain valid. Lock in major purchases earlier. Tighten your change-order and price-escalation language.
And don’t confuse markup with margin. A 20% markup produces only a 16.7% gross margin.
Being busy feels good. Keeping the profit is what matters.
Source: Associated General Contractors of America, July 15, 2026.
