Why You're Broke Despite Being Booked Solid

Your schedule is packed for the next three weeks. Every truck is on the road. The phone keeps ringing. And somehow, when you check your bank account, there is barely enough to cover payroll.

This is not a marketing problem. It is not a demand problem. You have plenty of work. What you have is a profit problem, and it is hiding in plain sight.

The Real Cost of Being Busy But Broke

Cash flow problems are consistently cited as one of the most common causes of small business failure. According to the U.S. Chamber of Commerce, cash flow challenges rank among the top reasons small businesses struggle. Not lack of customers. Not bad reviews. Cash flow.

Many small businesses operate on thin net profit margins, often in the single digits. For a contractor doing $500,000 in revenue with a 7% margin, that is only $35,000 to show for a year of grinding. After one slow month or a major equipment breakdown, that cushion disappears.

Meanwhile, the owner of that business is working 60-hour weeks, missing family dinners, and wondering what they are doing wrong.

Why This Happens

The trades have a problem common to many field service industries: you are selling time, but you are not always billing for it.

You Are Calculating Labor Wrong

Most contractors price jobs like this: "That will take about four hours. My guy costs me $25 an hour. So $100 in labor plus materials, mark it up, done."

Here is what that $25 an hour actually costs you:

Hourly wage: $25.00 Employer FICA taxes (7.65%): $1.91 State unemployment taxes: Varies by state and experience rating Workers comp: Varies widely by trade, state, and loss history (can range from a few percent to well into double digits for high-risk trades) Health insurance (if offered): $3-6 per hour (example range) Paid time off (vacation, sick, holidays): $2-3 per hour (example range) Training and certifications: $1-2 per hour (example range)

Your $25 an hour employee could easily cost $35-45 an hour or more in total loaded labor cost. Many contractors discover significant underpricing when they finally calculate their true burden rate.

Overhead Is Invisible Until It Eats You

Here is what most contractors forget to factor into their pricing:

Vehicle costs: Trucks, fuel, insurance, maintenance, depreciation Shop and yard: Rent, utilities, storage Tools and equipment: Purchase, maintenance, replacement Insurance: General liability, commercial auto, umbrella Office costs: Software, phone, internet, supplies Marketing: Website, ads, wrapped trucks Admin time: Estimates, invoicing, scheduling, callbacks Licenses and permits: Annual renewals, continuing education (requirements vary by jurisdiction and trade)

When you add it up, overhead often falls in the 20-40% of revenue range for a trades business, depending on your size, market, and business model. If you are not building that into your prices, every job loses money before you finish it.

Time Leaks You Are Not Tracking

You quoted a job for four hours of labor. But here is what actually happened:

Drive time to the job: 45 minutes Waiting because customer was not ready: 20 minutes The actual work: 4 hours Drive time to the next job: 30 minutes Callback two days later for something minor: 1.5 hours including drive time

That "four-hour job" consumed seven hours of your tech's day. Did you bill for seven hours? Probably not.

And what about the no-shows? As we cover in our post on how to reduce no-shows in service businesses, every wasted trip costs you double. You lose the wasted time plus the job you could have run instead.

The Manual Fix: Get Your Numbers Right

Before you can fix this, you need to know exactly where you stand. Here is how to calculate your true costs and price for profit.

Step 1: Calculate Your True Labor Burden Rate

Pull your actual numbers from the last 12 months. For each employee:

Annual wages paid: $52,000 (example) Employer FICA taxes (7.65%): $3,978 State unemployment taxes: Varies by state Workers comp premium allocated to them: $4,160 (example, varies significantly by trade and state) Health insurance contribution: $6,000 Paid time off cost: $2,000 Training and certifications: $1,200

Total annual cost: $69,338 (example) Billable hours per year (50 weeks x 40 hours x 75% utilization): 1,500 hours

The 75% utilization accounts for non-billable time: travel between jobs, breaks, administrative tasks, training, and time between appointments. Your actual utilization will vary.

Cost per billable hour: $46.23

That $25 an hour employee? They cost you $46.23 for every billable hour when you factor in benefits, taxes, and utilization. If you have been charging $50 an hour as your customer billable labor rate, you are making $3.77 per hour gross, before overhead. That is not a business. That is a hobby.

Step 2: Calculate Your Overhead Recovery Rate

Add up all your overhead costs for the past 12 months. Everything that is not direct labor or materials on a specific job.

Example annual overhead: $156,000 Total billable labor hours across all techs: 6,000 hours Overhead cost per labor hour: $26.00

This means every billable hour needs to cover $26 in overhead before you see any profit.

Step 3: Build Your Pricing Formula

Here is a simple formula that works:

(Labor hours x Burden rate) + (Labor hours x Overhead rate) + Materials cost = Total costs Total costs ÷ (1 - Target profit margin) = Price

Note: Dividing by (1 - target margin) treats your profit as a margin on the final sale price, not a markup on cost. This is the standard approach for pricing to a target profit margin.

For a job that takes 4 hours of labor and $200 in materials, with a 20% profit margin target:

(4 x $46) + (4 x $26) + $200 = $488 in costs $488 ÷ 0.80 = $610 minimum price

Many contractors would have quoted this at $400-450. That is where the money disappears.

Step 4: Track Your Time Leaks

For one month, have your team track everything:

Drive time between jobs Wait time at jobs (customer not ready, access issues) Time spent on callbacks Time spent on estimates that did not close Admin time (paperwork, phone calls, scheduling)

It is common to find that a significant portion of paid time, sometimes 20-30% or more, is not generating revenue. Either bill for it or reduce it.

Step 5: Review Your Jobs Monthly

The SBA provides guidance on managing business finances, and regular financial reviews are a core best practice. I recommend reviewing these monthly at minimum:

Gross profit by job type: Which services actually make money? Labor efficiency: How do estimated hours compare to actual? Callback rate: Which techs or job types generate the most return visits? Collection rate: How much quoted revenue actually gets collected?

Many contractors who do this discover that a substantial portion of their job types are break-even or losing money. Stop taking those jobs. And if you need to raise prices to get back to profitability, there's a proven price increase letter template that keeps most of your customers.

A Better Way

Here is the hard truth: you cannot manually track all of this while also running jobs. The math only works if you have real data, and real data requires systems.

This is where automation starts making sense. Not as some fancy tech upgrade, but as a survival tool.

When your proposal process is fast and accurate, as we discuss in speeding up proposals for construction businesses, you stop leaving money on the table with rushed estimates. When scheduling and reminders run automatically, no-shows tend to drop. When job costing happens with timely time and materials entry and integrated accounting, you catch problems before they eat your margin.

The contractors who figure this out are not working more hours. They are working the same hours with better margins. Going from a thin margin to a healthy 15% margin can mean tens of thousands of extra dollars a year on the same revenue, with no extra jobs.

The Path Forward

Start with the manual fixes. Calculate your real burden rate. Add up your overhead. Look at the actual numbers, not what you think they are.

Then ask yourself: how much time do you spend on admin work that does not require your judgment? Chasing payments. Sending appointment reminders. Typing up estimates. Answering the same questions on the phone.

That time has a cost. And if you can automate even half of it, you get those hours back, either for more billable work or for the life outside your business you have been missing.

If you want help running these numbers or figuring out which parts of your business to automate first, let's talk. No pressure, just a conversation about where the money is actually going.