What I Learned Reviewing 1,000+ Contractor P&Ls

The Numbers Nobody Publishes

Before I started Level, I spent over a year at BuildOps as Director of Growth Product, building AI-powered accounting and ERP products for commercial contractors. Before that, I was in private equity at Vector Capital, evaluating contractor financials for potential acquisitions. And at Overline, my team has analyzed over $1 billion in real estate assets for tax and insurance optimization.

Across all of that — reviewing the books of well over 1,000 contractors across HVAC, plumbing, electrical, mechanical, and refrigeration — I started seeing the same patterns. The same metrics that separated the contractors who build wealth from the ones who work 80-hour weeks and barely break even.

Most of what gets published about contractor benchmarks is either survey-based (self-reported, unreliable) or generic ("aim for 35-50% gross margins"). Here's what I actually saw in real P&Ls.

Profit Margins: The Conventional Wisdom Is Wrong

Every blog on the internet says contractor gross margins should be 35-50%. That's directionally correct but hides the real story.

What I actually observed across hundreds of contractors:

The key insight: the median is higher than most people think — closer to 40-45%, not 35%. The commonly cited 18-22% for service agreement margins is particularly misleading. That number comes from studies that include contractors who are literally losing money on every maintenance contract and don't know it.

I've seen one contractor losing $3.8 million per year on service agreements. Negative 23% margins. They had no idea until we ran the numbers. On the other end, I've seen operators running 85%+ SA margins with tight scheduling and strong pull-through revenue.

The Phantom Margin Problem

Here's something that should worry every contractor: the vast majority of jobs in any contractor's system show inflated margins — because cost isn't tracked properly. Among the jobs where contractors actually tracked both revenue and costs, margins centered around 20-50%. The rest? 80%+ margins that look great on paper but are meaningless because nobody tagged the labor, materials, or subcontractor costs to the job.

If your average job margin looks too good to be true, it probably is. Read our guide on setting up job costing in QuickBooks before you trust those numbers.

The Collection Rate Gap

This is the metric that matters most. And it's the one most contractors don't track.

Collection rate = total cash collected / total revenue billed. It sounds simple. It's devastating when you see the variance.

The single most shocking thing I saw: one commercial contractor had billed $139 million and only collected $94 million. That's $45 million in outstanding receivables. At the industry-achievable 96% collection rate, they'd recover over $30 million. That's not a sales problem or a marketing problem. It's a cash flow management problem that a bookkeeper isn't equipped to solve.

Slow payments cost the U.S. construction industry an estimated $280 billion per year. 82% of contractors wait over 30 days for payment. Only 5% of subcontractors get paid on time. If you're not actively managing your collection process, you're leaving real money — money you already earned — in someone else's account.

Retainage is a big part of this problem, but it's not the only part. Slow invoicing and weak AR follow-up compound the damage.

Billing Speed: The Metric Nobody Tracks

Here's one that genuinely surprised me. Most contractors don't measure how many days pass between completing a job and sending the first invoice.

What I found:

• The best contractors invoice before the job is complete. They progress-bill on percentage of completion, so cash is flowing in while work is still happening. Negative billing days.
• The median contractor invoices about 1 day after completion. Fast, but not progress-billing.
• The bottom quartile invoices 5-10+ days after completion. Every day you wait is a day your cash is stuck.

One contractor I worked with — Bay City, a boiler company — was the model: progress billing (invoicing during the job) AND fast closeout (14 days). Their cash position reflected it.

Compare that to contractors billing 10+ days after completion with 60-day payment terms and 10% retainage. You're looking at 70+ days from work completion to cash in hand, minus the retainage that might take another 90 days. That's real money sitting idle for half a year.

The fix is simple: invoice the same day the job closes. If you're on commercial projects, progress-bill monthly. If your field service software supports it, automate the invoice trigger on job completion.

Labor vs. Materials: Where the Profit Actually Lives

Across hundreds of thousands of quote line items I reviewed, the margin split was consistent:

• Labor: ~47% margin — this is where contractors make money
• Materials/parts: ~30% margin — standard markup, lower margin
• Equipment: ~25% margin — lower margin, higher ticket
• Subcontractor: ~24% margin — thinnest margin of all

The implication: contractors who shift their revenue mix toward labor-heavy work (service, maintenance, T&M) generate structurally higher margins than those heavy on equipment sales or subcontractor pass-through.

This doesn't mean avoid equipment or subcontractor work. It means price it differently. And it means your service division is probably subsidizing your install division — which is worth knowing before you chase that next big project.

Quote Conversion: 73% Is the Number to Beat

Most contractors don't track their quote-to-job conversion rate. The ones who do show massive variance.

From what I've seen across hundreds of thousands of quotes:

• Top performers: 90%+ conversion (Carson Electric hit 98.7% — nearly every quote turned into a job)
• Median: ~73%
• Bottom quartile: Below 60%

The gap between 60% and 90% conversion at the same volume is enormous. If you're quoting $5M/year and converting 60%, you're winning $3M in work. At 90%, that's $4.5M — a $1.5M revenue swing with zero additional marketing spend.

The counterintuitive insight: a very high close rate might mean you're underpricing. If you're closing 95%+ and your margins are thin, test raising prices. You might close 80% at higher margins and make more money on less work.

The Service Agreement Upsell Gap

This is the most overlooked revenue lever I've seen.

Pull-through revenue = additional work (repairs, replacements, upgrades) generated during routine maintenance visits. It's the upsell on the service agreement.

One company I worked with generated 72% of their SA revenue from pull-through — techs were trained to identify and recommend work during every visit. Another generated 2%. Same industry. Same customer base. Completely different financial outcome.

If your techs are doing maintenance visits and not generating pull-through revenue, you're leaving a massive amount on the table. This is a training and incentive problem, not a market problem.

What Separates the Top 10% from Everyone Else

After reviewing all these P&Ls, the pattern is clear. The top-performing contractors don't do one thing right — they do five things right simultaneously:

1. They track job-level profitability religiously. Every transaction tagged to a job. Every hour logged. No exceptions. (Here's how to set it up)

2. They collect 96%+ of what they bill. Tight AR processes, fast invoicing, active retainage tracking, and they know their state's prompt payment laws.

3. They invoice fast. Same-day or progress billing. They don't let completed work sit uninvoiced.

4. They price for labor, not just materials. They understand that a $90/hr blended bill rate with 48% labor margin is where the profit lives.

5. They turn maintenance into revenue. Pull-through rates of 50%+ from service agreement visits.

The contractors who do all five? They build real wealth. The ones who do one or two? They survive. The ones who do none? They're part of the 46% that fail within five years.

When These Metrics Don't Apply

A few honest caveats:

Residential-only contractors operate differently from commercial. Payment cycles are faster (no retainage, usually), job sizes are smaller, and the collection problem looks different. These benchmarks skew commercial.

Under $3M in revenue, the overhead math changes. A solo operator or 3-person crew doesn't need formal overhead allocation or monthly financial review. The complexity that justifies a fractional CFO over a bookkeeper kicks in around $3-5M.

Regional variation matters. Bill rates in Illinois ($125-130/hr average) look very different from rates in the Southeast ($80-90/hr). The margins may be similar, but the absolute dollars aren't. Always benchmark against your market, not national averages.

New companies without 12+ months of data won't have meaningful benchmarks yet. Focus on building clean financial infrastructure first, then benchmark once you have enough data to be useful.

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The Bottom Line

Most contractors don't lack revenue. They lack visibility into where the money goes after it comes in. The difference between a contractor who builds wealth and one who's perpetually stressed about payroll isn't talent or work ethic — it's financial infrastructure.

If any of these benchmarks made you uncomfortable — if your collection rate is below 85%, if you don't know your billing speed, if your margins look suspiciously high because costs aren't tracked — that's the signal. The data is in your system. You just need someone to structure it.

Q: Can Level help me benchmark my business against these numbers? A: Yes. We connect to your QuickBooks and field service software (BuildOps, ServiceTitan, Jobber, Housecall Pro) and run a full profitability audit — job margins, collection rate, billing speed, overhead allocation. The first audit is free. We'll show you exactly where you stand before you pay anything.

Q: Where does this data come from? A: My direct experience reviewing contractor financials — first in private equity at Vector Capital, then building AI accounting products at BuildOps (working with 1,000+ contractors across HVAC, plumbing, electrical, and mechanical trades), and now at Level and Overline. The benchmarks are based on patterns observed across hundreds of real P&Ls, not surveys or self-reported data.

Q: How do I know if I need a CFO or just a better bookkeeper? A: If you're over $3M in revenue, your cash flow surprises you, or you can't answer "which jobs make money?" with specific data — you've outgrown your bookkeeper. Read our full breakdown: When Does a Contractor Need a CFO vs. a Bookkeeper?