Running a construction company without benchmarking is like playing a game without knowing the score.
You may have some idea of how you’re doing—maybe the bank account isn’t empty, and jobs are still coming in—but without comparison to industry standards, it’s hard to know if you’re on track or just getting by.
In this post, we’ll break down what benchmarking is, how it applies to contractors, and how to use it to improve the financial strength of your business.
What Is Benchmarking?
Benchmarking means comparing your company’s key financial metrics to industry averages or performance standards.
For construction companies, this means analyzing your performance in areas like:
- Liquidity (e.g., Current Ratio)
- Profitability (e.g., Gross Profit and Net Income %)
- Efficiency (e.g., Overhead as % of Revenue)
- Leverage (e.g., Debt-to-Equity)
- Work-in-Progress trends (e.g., Under/Over Billings)
Benchmarking gives context to your numbers. Without it, you’re just guessing what “good” looks like.
Why Benchmarking Matters in Construction
Construction is a competitive, cash-intensive industry. And most owners are so busy running jobs and managing people that they don’t stop to measure their financial performance.
Benchmarking solves that.
It helps you:
- Identify hidden weaknesses (e.g., low margins, high debt)
- Prove your strength to bankers and bonding agents
- Prioritize improvements that will move the needle
- Track your company’s growth over time
- Set realistic goals based on where you stand now
How to Benchmark Your Financials
To start benchmarking, you need a few reliable reports:
- Balance Sheet
- Income Statement (Profit & Loss)
- WIP Schedule
From there, you can calculate ratios like:
- Current Ratio = Current Assets / Current Liabilities
- Gross Profit % = (Revenue – Job Costs) / Revenue
- Net Income % = Net Income / Revenue
- Debt-to-Equity = Total Liabilities / Owner’s Equity
- Overhead % = Overhead / Revenue
Once calculated, compare your results to contractors in similar trades, regions, and revenue sizes.
Where Do You Get Benchmark Data?
At Atlas CFO, we’ve spent decades working with construction companies. We’ve built a benchmark database specifically for contractors—sorted by revenue size, trade type, and performance.
We also built those benchmarks right into our Atlas Growth Model™ so our clients can compare their numbers to industry standards in real time.
Other resources include:
- CFMA Financial Benchmarker
- Trade association reports
- Bonding company reports
- Accounting firm publications (specific to construction)
Common Benchmarking Mistakes to Avoid
- Comparing against all industries: Construction is unique. Use industry-specific benchmarks.
- Using unreconciled data: If your Balance Sheet is off, the ratios will be too.
- Comparing without context: Don’t just chase “higher” or “lower”—understand why the number is what it is.
- Forgetting the goal: Benchmarking isn’t about perfection—it’s about progress.
What Should You Do With the Results?
Once you’ve compared your financials to benchmarks, use the insights to:
- Improve cash flow (e.g., raise Current Ratio by reducing AP)
- Increase profitability (e.g., monitor job costs more closely)
- Manage debt (e.g., reduce Debt-to-Equity over time)
- Optimize overhead (e.g., assess staffing or rent expenses)
- Strengthen your balance sheet (e.g., retain more earnings)
You don’t have to fix everything at once—just take the next best step.
Bonus: Share Benchmarks with Your Team
You’d be surprised how motivating it is for your project managers and field leaders to see where the company stands.
Set a simple benchmark target (e.g., “Let’s move our Net Income % from 5% to 7% this year”) and talk about how each department contributes.
Benchmarking isn’t just a finance tool—it’s a leadership tool.
Final Thoughts
Benchmarking turns your financials into a scoreboard—so you can lead your company with clarity, not just gut instinct.
You can’t control the market. But you can control your numbers. And benchmarking helps you make better decisions, faster.