Where the Money Goes: Understanding the Profit Cone in a Restoration Business
In the restoration world, it's easy to get caught up in the hustle.
Jobs come in, trucks go out, invoices get sent. On paper, your company might be pulling in solid revenue—but somehow the bank account doesn’t reflect it. That’s because revenue isn’t profit, and what matters most is how much money makes it through every layer of the business to the bottom line.
That’s where the Profit Cone comes in—a simple but powerful way for restoration company owners to visualize how money flows through the business, and more importantly, where it leaks.
What Is the Profit Cone?
Think of your business like an upside-down cone:
At the top is total revenue—your gross billings from mitigation, contents, mold, or rebuild jobs. But that number doesn’t mean much until you track what’s subtracted layer by layer:
Revenue
Minus Cost of Goods Sold (COGS)
Minus Overhead
Minus Interest and Taxes
Equals Net Profit
With each step, the cone narrows—and if you’re not watching carefully, your profit can disappear entirely before you even notice something's wrong.
Breaking Down the Profit Cone for Restoration Contractors
1. Revenue
This is the total value of all services billed. But not all revenue is equal. Jobs vary in complexity, material requirements, and margins.
Restoration CFO Tip: Always track revenue by service line—mitigation, rebuild, contents, mold. Not every service delivers the same return, and lumping them together hides key profitability insights.
2. Cost of Goods Sold (COGS)
This includes field labor, materials, dumpsters, drying equipment, subcontractors—anything directly tied to performing the job. After subtracting COGS from revenue, you’re left with gross profit.
Bookkeeping Insight: High COGS usually signal underbid jobs, poor job costing practices, or field inefficiencies. Track labor burden carefully—it’s one of the biggest COGS variables in restoration.
3. Overhead
This is where many restoration businesses lose visibility. Office staff, marketing spend, software, insurance, and rent all get lumped into overhead. If these costs scale too fast or aren’t monitored monthly, they silently erode your margins.
Fractional CFO Perspective: Use common-size financials to track overhead as a percentage of revenue. If overhead is growing faster than revenue, your profit cone is collapsing before it reaches the bottom.
4. Interest and Taxes
Even well-run restoration companies can lose thousands to poor financing structures or lack of tax planning. Equipment loans, credit lines, and unexpected tax bills all chip away at your remaining profit.
Financial Strategy Tip: Don’t wait until tax season. Forecast your tax liability and evaluate the real cost of financing options early.
5. Net Profit
This is the narrow tip of the cone—the money you actually keep. It’s what funds growth, pays owner draws, and creates stability.
Yet for many restoration contractors, this number is an afterthought. The focus stays on sales and production, while net profit gets whatever is left—if anything.
Cash Flow Tip: Healthy restoration businesses typically aim for a net profit margin of 10–15%, depending on their service mix and stage of growth. If you’re below that, it’s time to dig into your cone.
Why Restoration Owners Should Watch the Whole Cone
Most owners can recite their sales numbers by heart. But when asked what their net profit is—or where their money goes between invoicing and the bank account—many don’t have a clear answer.
That’s a problem.
You don’t have to be an accountant to manage a restoration business well. But you do need tools that show you what’s working—and what isn’t.
The Profit Cone gives you a mental model for:
Spotting cost overruns in the field
Controlling overhead bloat
Understanding the real impact of debt and taxes
Making smart growth decisions
What to Do With This Insight
If the bottom of your cone feels too narrow, here’s where to start:
🔹 Use job costing by service type
Track COGS and gross margin by mitigation, contents, rebuild, and mold. Don’t rely on gut instinct—let the data show you what’s really profitable.
🔹 Review overhead monthly
Instead of just tracking total dollars, use percentages. If overhead was 25% of revenue last year and is 33% this year, something changed.
🔹 Implement financial reporting
Work with a restoration-savvy bookkeeper or fractional CFO who can deliver regular reports—not just to file taxes, but to drive better decisions.
🔹 Focus on what you keep
Revenue growth is good. But profit is what buys you freedom, stability, and long-term success.
Want a Clearer View of Your Profit Cone?
At Kiwi Cash Flow, we help restoration companies track their numbers the right way—from the job site to the boardroom. Our fractional CFO services and restoration-focused bookkeeping give you the tools and insights to stop the leaks and build a more profitable business.
If you're tired of guessing where your money went, it’s time to talk.