Financial Benchmarks for Restoration Contractors: How Do You Compare?
Running a successful water restoration company isn't just about doing quality work—it's about making sure the numbers work, too. Financial benchmarks give you the ability to compare your business to others in the industry and identify exactly where you're winning—or leaking cash.
Here are some of the most important financial benchmarks restoration business owners should track in 2024:
📈 Net Profit Margin: Aim for 20%+
Healthy restoration companies consistently generate 20% or more in net profit after covering all costs. That means if your business brings in $100,000 in revenue, at least $20,000 should be left over after paying your team, materials, vehicles, and overhead.
If you’re seeing margins below that, it’s time to look at:
Labor efficiency
Material waste
Overhead bloat
Unbilled work or discounts
💼 Cost of Goods Sold (COGS): 35–40% of Revenue
COGS in restoration typically includes:
Subcontractors
Materials and drying equipment
Job-related fuel and supplies
If your COGS is above 45%, your job profitability is likely suffering. If it’s too low, you might be under-investing in quality or short-staffed, leading to burnout or rework.
👷 Labor Costs: 25–30% of Revenue
For in-house W2 employees, a strong labor benchmark is around 25–30% of your top-line revenue. But to get an accurate number, you must include your true labor burden:
Employer payroll taxes
Insurance
Paid time off
Unbillable hours
Tools like our Labor Burden Calculator can help you calculate the real cost of each field employee—and prevent underpricing.
🧾 Overhead: 25–40% of Revenue
Your overhead includes rent, trucks, insurance, software, admin wages, and marketing. If your overhead is creeping over 35%, it may be time to rework your budget or renegotiate contracts.
💰 Cash on Hand: 1–3 Months of Operating Expenses
Restoration is a cash-intensive business. You’re often floating payroll while waiting weeks—or months—for insurance payouts. A strong benchmark is to keep at least one month of operating costs in reserve. Three months is ideal.
If you’re constantly covering cash flow from your own pocket, that’s a sign your AR process or pricing needs attention.
📊 Accounts Receivable Days: Under 45 Days
The industry average is between 45–60 days to collect payment from insurers and TPAs. Best-in-class companies keep AR Days under 45—some even under 30. That’s a direct driver of cash flow health.
🔢 How to Use These Benchmarks
These benchmarks aren’t just for comparison—they help you:
Identify where profits are slipping
Set pricing based on real costs
Forecast cash flow with confidence
Justify rate increases with hard data
Create a business that funds your growth goals
Want to see how your financials stack up—and what to do if you’re underperforming?
👉 Schedule a call to walk through your numbers and get a custom benchmark report: https://www.kiwicashflow.com