BTHE BARATELLI INSTITUTE · Mentoring at Scale
FOR CONTRACTORS PREPARING A SURETY RENEWAL, A SALE, OR A CREDIT FACILITY

The view of your business your surety, acquirer, and lender want to see — that your accounting system doesn't produce.

Your Sage / Foundation / Procore system already produces a WIP report at month-end. This isn't that. This is the strategic translation of your WIP into the four numbers a surety underwriter, a buyer's QofE team, or a credit officer actually evaluates: bonding capacity (single-job + aggregate), profit-fade exposure, change-order discipline, and win-rate diagnostics. The discipline you should run before any of those three conversations.

10x / 20x
Surety single-job + aggregate
Fade
Profit-fade flag for buyers
8-12%
Top-quartile CO ratio
QofE
Buyer-readiness lens
YOUR FIRM
1
Company profile
2
Active projects
3
Cost & overhead
4
Bonding & growth
5
Strategic scorecard
STAGE 1 OF 5

Tell me about your firm

Defaults model a $14M revenue commercial GC with 18 active jobs preparing for surety renewal. If you're heading into a sale instead, the same inputs produce the buyer-readiness lens at the end.

Total revenue recognized this year (percentage-of-completion). Excludes change orders pending approval.
$
Open jobs at fiscal year-end (or current). Top-of-list 8-12 below; if you have more, summary stats still apply.
Jobs you submit bids on per year (won + lost). Drives win-rate calc.
STAGE 2 OF 5

Active projects (top 8-12)

Enter your largest active projects with contract value, costs to date, estimated total cost (ETC), and billings to date. The tool computes percent complete, earned revenue, and over/under billing — the standard WIP report every surety, banker, and CFO requires monthly.

The over/under billing math. Earned revenue = Contract value × (Costs to date ÷ Estimated total cost). Compare to billings to date. Underbilled means you've performed work you haven't billed for — cash-flow risk. Overbilled means you've billed ahead of work performed — the opposite, but means future months will have revenue without billings (also a cash-flow concern, plus often a sign of front-loaded SOV games). Both extremes flag risk; healthy contractors run within ±5% of contract value.
STAGE 3 OF 5

Cost structure & overhead

Job costs (direct + sub) plus indirect overhead. Most contractors under-allocate overhead to projects, which makes margin look better than reality.

Office staff (PMs, estimators, admin), facility, insurance (general liability + workers comp), vehicles, technology, professional fees. Excludes field labor (direct cost) and equipment used on jobs (allocated to jobs).
$
Approved change orders for the year. Top-quartile contractors run 8-12% of contract value in COs. Below 5% means you're either taking the hit on scope creep or under-charging for it.
$
Top-quartile contractors run 30-40% margin on COs (vs. 15-25% on base contract). COs are negotiated bilaterally — pricing power is on your side. Below 25% means you're pricing them like base contract.
%
Contracts signed but where work hasn't begun. Top-quartile contractors carry 0.8-1.2x annual revenue in backlog. Below 0.5x means thin pipeline; above 1.5x means execution risk.
$
Top-quartile commercial GCs win 25-35% of bids. Subcontractors typically 30-45%. Sub-20% means you're chasing too many jobs you can't win; over-50% may mean you're under-pricing.
%
Standard 5-10% withheld until project completion. On a $14M revenue contractor with 6-12 month avg job duration, retention typically traps ~$700K-$1.4M of cash.
%
STAGE 4 OF 5

Bonding capacity & growth runway

For commercial GCs and many subs, bonding is the binding constraint on growth — not capital, not estimating, not labor. The surety underwrites you on working capital and net worth. Get the math right and you scale; get it wrong and you can't bid the next job.

From your balance sheet. Sureties typically apply ~10x multiplier to working capital for single-job bonding limit; 20x for aggregate program.
$
From your balance sheet. Sureties apply similar multipliers (10x single / 20x aggregate). The lower of WC-based or NW-based limit binds.
$
10x is standard for established contractors with clean loss history. New / shaky contractors run 5-7x. Specialty programs may go to 12-15x.
Cap on total bonded backlog. 20x WC is industry standard; clean contractors with strong relationships sometimes negotiate to 25-30x.
Why bonding capacity is the binding growth constraint. Most commercial GCs are bonding-limited. To grow revenue 30%, you need 30% more bonded backlog — which usually means 30% more working capital and net worth. The math is brutal: you can't retain enough earnings to grow that fast unless margins are top-quartile. The lever is improving the inputs sureties care about: clean WIP, no-loss history, strong balance sheet, conservative loan covenants.
STAGE 5 OF 5 · WIP SCORECARD

Strategic scorecard

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—
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Work-in-progress report

The standard contractor WIP. Earned revenue = contract × (cost to date ÷ ETC). Underbilled = you've performed more than you've invoiced (cash-flow drag). Overbilled = you've invoiced ahead of performance.

Bonding capacity utilization

Operating health metrics

Recommendations

PAIRS WITH
CFO & Controller's Guide · Liquidity Event Playbook
The CFO Guide chapter on construction-industry accounting covers ASC 606 percentage-of-completion mechanics, the bonding-and-banking relationship playbook, equipment-leasing-vs-owning analysis, and the M&A landscape for trades businesses (where private equity has been rolling up HVAC, electrical, and plumbing at 8-14× EBITDA premiums). Subscribe to the library →
CFO & CONTROLLER'S GUIDE

The full contractor financial playbook — by email.

ASC 606 percentage-of-completion mechanics, the WIP-report monthly close discipline, surety-relationship management, equipment-leasing vs. owning math, the change-order pricing playbook, and the path to a sale (PE roll-up landscape).

We use your email only to send what you requested and occasional Institute updates — never sold, unsubscribe anytime. See our Privacy Policy.

Benchmarks shown reflect typical commercial-and-residential contractor industry data (CFMA Annual Financial Survey, Construction Financial Management Association, AGC of America benchmarks, ENR Top contractor reports). Your peer-specific targets vary by region, contract mix, and surety relationship. The bonding-capacity calculation uses standard surety multipliers (10x single / 20x aggregate); your specific surety may apply different multipliers based on history, loss experience, and capacity needs. This is not financial, accounting, or surety advice. Engage your CPA, surety, and banker before relying on this output.
WANT THE METHODOLOGY BEHIND THIS TOOL?
This calculator is one chapter of CFO & Controller's Reference Guide.
The tool gives you the answer. The guide gives you the argument — the case law, the worked examples, the negotiation playbook, the cross-check tables, the exception cases. Read the chapter and you can defend your number to a board, a buyer, an examiner, or a counterparty.
The methodology behind this calculator is in Ch 24 Inventory Operations of the reference guide.
See the Guide → Browse all 22 guides
PROFESSIONAL DISCLAIMER · PLEASE READ

Educational and informational purposes only. This calculator and any output it produces are intended solely for general educational and decision-support purposes. They do not constitute investment, tax, legal, accounting, appraisal, lending, insurance, or any other professional advice, and they do not create a fiduciary, attorney-client, accountant-client, or advisor-client relationship of any kind.

Estimates based on your inputs. All results are estimates derived from the data and assumptions you provide. Tax law, accounting standards, regulations, market conditions, and the specific facts of your situation can materially change the answer. The Baratelli Institute, its affiliates, and any co-branding professional make no warranty of accuracy, completeness, currency, or fitness for any particular purpose, and disclaim all liability for decisions made in reliance on the output.

Consult your own qualified professionals. Before acting on anything calculated here, consult your own attorney, CPA, financial advisor, appraiser, lender, or other qualified professional licensed in your jurisdiction who has reviewed your specific facts and applicable current law. The Baratelli Institute is a publisher of practitioner reference material. It is not a registered investment adviser, broker-dealer, law firm, accounting firm, appraisal firm, or lender.

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