Construction Management Running Costs
Expect initial monthly running costs for Construction Management to be around $48,067 in 2026, primarily driven by payroll and office overhead This figure includes $30,000 for initial salaries and $13,900 in fixed operating expenses like rent and software To sustain operations until breakeven in four months (April 2026), you need a minimum cash buffer of $795,000, reflecting significant upfront capital expenditure (CapEx) and working capital needs This guide details the seven core recurring expenses you must model accurately
7 Operational Expenses to Run Construction Management
| # | Operating Expense | Expense Category | Description | Min Monthly Amount | Max Monthly Amount |
|---|---|---|---|---|---|
| 1 | Payroll | Personnel | Salaries for the initial 30 FTE team (CEO, Senior PM, Admin) total $30,000 monthly, representing the single largest operational expense. | $30,000 | $30,000 |
| 2 | Office Rent | Facilities | The fixed monthly office rent expense is $8,000, requiring a long-term lease commitment independent of project volume. | $8,000 | $8,000 |
| 3 | G&A Overheads | Administrative | General and administrative fixed costs, including utilities ($1,200), insurance ($700), and supplies ($500), total $2,400 monthly. | $2,400 | $2,400 |
| 4 | Compliance | Professional Services | Essential compliance and advisory services are budgeted at a fixed $1,500 per month, covering accounting and legal needs. | $1,500 | $1,500 |
| 5 | G&A Software | Technology | General software subscriptions for G&A functions (excluding COGS-related platform fees) cost $1,000 monthly. | $1,000 | $1,000 |
| 6 | Customer Acquisition | Sales & Marketing | The annual marketing budget is $50,000, averaging $4,167 monthly, aiming for a $2,500 Customer Acquisition Cost (CAC) in 2026. | $4,167 | $4,167 |
| 7 | Variable COGS | Cost of Revenue | Costs of Goods Sold (COGS), specifically Proprietary Platform Licensing (50%) and Subcontracted Specialist Services (80%), total 130% of revenue. | $0 | $0 |
| Total | All Operating Expenses | $47,067 | $47,067 |
Construction Management Financial Model
- 5-Year Financial Projections
- 100% Editable
- Investor-Approved Valuation Models
- MAC/PC Compatible, Fully Unlocked
- No Accounting Or Financial Knowledge
What is the total monthly operating budget required to run Construction Management sustainably?
The sustainability of your Construction Management operation hinges on covering the $48,067 monthly burn rate; you must verify that projected service revenue from billable hours exceeds the sum of fixed overhead, variable costs, and payroll before scaling.
Assess the Burn Components
- Fixed overhead includes office space and the proprietary management platform subscription fees.
- Variable costs defintely scale with project activity, like necessary travel or specialized third-party consulting.
- Payroll must cover the salaries for project managers and administrative support staff required for oversight.
- If client onboarding takes 14+ days, the risk of early churn rises significantly.
Ensure Revenue Covers Costs
To sustain operations, the revenue model—based on billable hours and competitive hourly rates—must reliably surpass $48,067 monthly. Before you hit that target, review the initial capital needed, as detailed in How Much Does It Cost To Open, Start, And Launch Your Construction Management Business?
- Determine the exact number of billable hours needed monthly to achieve a 25% contribution margin.
- Project managers’ utilization rates are the primary driver of top-line revenue generation.
- Ensure your hourly rate adequately covers the fully loaded cost of the employee delivering the service.
- Watch out for scope creep, which inflates variable costs without guaranteed revenue recovery.
Which cost category represents the largest recurring expense in Construction Management?
For your Construction Management firm, monthly payroll at $30,000 is clearly the largest recurring expense when compared to fixed overhead of $13,900, meaning staffing efficiency is your primary cost control lever. You should immediately review if specialized tasks currently handled internally could be outsourced to reduce this significant burn rate, a key consideration when assessing What Is The Most Critical Measure Of Success For Your Construction Management Business?
Payroll Dominates $43.9K Costs
- Payroll ($30,000) is 68.3% of the combined $43.9K baseline costs.
- Fixed overhead is only $13,900 monthly, making personnel the clear target for optimization.
- This cost structure demands rigorous utilization tracking for all project managers.
- If utilization drops just 5%, you lose $1,500 in direct revenue potential monthly.
Staffing Efficiency Levers
- Review administrative support roles for potential savings via outsourcing contracts.
- Can specialized compliance or software management be handled by a fractional expert instead of full-time staff?
- If employee onboarding takes 14+ days, churn risk rises, wasting salary dollars on unproductive time.
- Analyze if the current team structure is defintely optimized for your current project pipeline volume.
How much working capital or cash buffer is needed before reaching the breakeven point?
You defintely need a minimum cash buffer of $795,000 to cover your initial capital expenses and operational shortfalls until the fourth month of your Construction Management business; understanding this runway requirement is key to managing early-stage risk, similar to how you track long-term owner compensation here: How Much Does The Owner Make From Construction Management Business?
Cash Buffer Target
- Minimum cash requirement is $795,000.
- Funding must be secured by February 2026.
- This covers initial CapEx (Capital Expenditures).
- It also covers operating losses until Month 4.
Runway Focus
- Secure the $795k before launch activities begin.
- If client onboarding stretches past 14 days, cash burn rises.
- This buffer buys you time to stabilize revenue.
- Don't let initial losses force premature financing decisions.
How will we cover running costs if Construction Management revenue projections fall short by 25%?
If Construction Management revenue projections fall short by 25%, your immediate action is freezing discretionary fixed costs and delaying non-essential personel additions defintely planned for 2027. This proactive cost control ensures you cover operating expenses while revenue stabilizes; Have You Considered The Best Strategies To Launch Your Construction Management Business?
Immediate Fixed Cost Reduction
- Freeze all non-essential spending immediately upon recognizing the shortfall.
- Cancel or pause the planned $600 training budget line item for Q3.
- Downgrade or suspend the $1,000 monthly G&A software subscription.
- These two cuts alone save $1,600 monthly against fixed overhead.
Managing Personnel Burn Rate
- Defer hiring any new project managers planned for 2027 commencement.
- Hiring one mid-level manager might cost $120,000 annually in salary and overhead.
- If you save $10,000 monthly by delaying one hire, that covers the revenue gap for $12,500 in lost billings (assuming 80% gross margin).
- Focus current team on high-margin existing projects only.
Construction Management Business Plan
- 30+ Business Plan Pages
- Investor/Bank Ready
- Pre-Written Business Plan
- Customizable in Minutes
- Immediate Access
Key Takeaways
- The estimated initial monthly running cost for a Construction Management firm is approximately $48,067, driven primarily by payroll and fixed overhead expenses.
- Payroll is the single largest recurring expense category, demanding $30,000 monthly for the initial three full-time equivalent employees.
- A minimum cash buffer of $795,000 is essential to cover initial capital expenditures and operating losses until the projected breakeven point in the fourth month.
- While fixed overhead totals $13,900 monthly, variable Costs of Goods Sold (COGS) are projected at 130% of revenue, requiring tight control over subcontracted services and platform licensing.
Running Cost 1 : Payroll
Payroll Dominates Burn
Your initial 30 full-time employees (FTEs), covering leadership and administration, lock in $30,000 in monthly salary expense. This cost dwarfs rent and overhead, making headcount management the primary driver of your initial cash burn rate.
Headcount Fixed Cost
This $30,000 monthly payroll covers your core 30 FTEs: the CEO, Senior Project Managers (PMs), and administrative staff. Unlike revenue-dependent costs, this is a fixed operating expense that must be covered regardless of project volume. Here’s the quick math on its weight relative to other overheads:
- Salaries: $30,000
- Office Rent: $8,000
- Total Fixed Base: $38,000
Controlling Salary Risk
Since payroll is your largest fixed cost, hiring speed must match revenue visibility, not just pipeline optimism. Rapid scaling of billable Project Managers is key, but administrative hires must wait. Remember, you also face a huge 130% variable Cost of Goods Sold (COGS) burden, so every salary dollar needs high output. Defintely watch utilization.
- Delay non-essential admin hires.
- Ensure PM utilizaton hits 85%+ quickly.
- Tie hiring bonuses to project starts.
Break-Even Threshold
Covering the $30,000 fixed payroll is your first financial hurdle before considering variable costs. If you need $50,000 in monthly revenue just to cover salaries and overhead (like $8k rent plus $2.4k utilities), you still have to absorb the 130% COGS on every dollar earned after that.
Running Cost 2 : Office Rent
Fixed Office Overhead
Your fixed monthly office rent is $8,000, a non-negotiable overhead you must cover regardless of project volume. This cost is locked in by a long-term lease, demanding consistent cash flow to service it.
Cost Inputs
This $8,000 covers the physical space for your team managing construction projects. It acts as a baseline fixed cost, separate from your variable costs like platform licensing (50% of revenue). Budgeting requires knowing the lease term length to calculate total commitment.
Managing Lease Risk
Avoid long-term commitments until revenue stabilizes. A common mistake is signing a 5-year lease before proving the $30,000 payroll is covered. Look for month-to-month options or subleasing to defintely defer the fixed risk.
Impact on Break-Even
Because rent is fixed at $8,000, it directly increases your required monthly sales volume just to cover non-salary overhead. You must ensure your billable hours generate enough margin to absorb this cost before hitting payroll targets.
Running Cost 3 : General Fixed Overheads
Baseline G&A Burn
Your baseline administrative overhead, excluding payroll and rent, is $2,400 monthly. This covers essential non-personnel operating needs like utilities, insurance, and basic supplies for the team. This is a small but critical component of your overall fixed burn rate.
Fixed Cost Inputs
These general overheads are fixed inputs needed before any project revenue lands. Utilities are the largest slice at $1,200, followed by insurance at $700, and supplies at $500. Compared to the $30,000 payroll and $8,000 rent, this $2,400 is only about 6% of your core fixed base.
- Utilities: $1,200 estimate
- Insurance coverage: $700 premium
- Supplies allocation: $500 budget
Controlling Small Overheads
Managing these small fixed costs requires diligence, not massive restructuring. For utilities, audit office energy usage monthly to spot spikes. Insurance rates depend heavily on the liability coverage needed for construction management; shop quotes annually. Supplies are controllable via bulk purchasing agreements with vendors.
- Audit energy use monthly
- Shop insurance quotes yearly
- Buy supplies in bulk
Contextualizing the Cost
While $2,400 seems minor next to $30,000 in salaries, these costs are non-negotiable fixed drains on cash flow. If you secured a smaller office space to save $2,000 on rent, you would only save 66% of this overhead bucket. Focus on negotiating the big fixed costs first, as these small ones are defintely harder to move.
Running Cost 4 : Accounting & Legal
Fixed Compliance Cost
Your budget must account for a fixed $1,500 per month dedicated to accounting and legal compliance. This covers essential advisory services needed to maintain regulatory adherence while managing complex commercial construction projects for developers. This cost is locked in, unlike your variable COGS.
Compliance Cost Inputs
This $1,500 retainer covers necessary financial reporting and legal groundwork. It’s a crucial fixed component, dwarfed only by your $30,000 monthly payroll. You need firm quotes defining the scope of work covered monthly to prevent unexpected bills. Know exactly what legal review is included.
- Monthly retainer amount: $1,500.
- Scope of legal review defined.
- Accounting compliance standards set.
Managing Advisory Fees
Since this is a fixed cost, focus on controlling scope creep, defintely not the base rate. If legal needs spike, negotiate project-based fees for new items rather than permanently raising the retainer. Initially, use tiered service levels to match advisory support to project complexity. You want high-value oversight, not excessive paperwork.
- Define legal scope strictly now.
- Use fixed-fee accounting packages.
- Review service utilization quarterly.
Fixed Overhead Baseline
This $1,500 contributes to your baseline fixed operating expenses, which total $12,900 before accounting for $30,000 in salaries. You must generate enough margin from billable hours to cover this entire fixed layer before any profit is realized. Every dollar of revenue must first service this overhead.
Running Cost 5 : G&A Software Subscriptions
Fixed G&A Software Cost
Your baseline General and Administrative (G&A) software spend, covering non-project specific tools, is fixed at $1,000 per month. This excludes any proprietary platform licensing treated as Cost of Goods Sold (COGS). Keep this number firm while scaling operations.
Software Scope and Budget Fit
This $1,000 covers essential back-office tools like HRIS (Human Resources Information System), general accounting software, and CRM (Customer Relationship Management) licenses needed for compliance and administration. The input is a fixed monthly quote for supporting about 30 FTEs. It’s a baseline fixed cost, unlike the variable platform fees tied directly to revenue.
- Covers HR, CRM, and general finance tools.
- Fixed monthly allocation of $1,000.
- Separate from project-specific COGS licensing.
Controlling Admin Spend
Avoid bundling essential G&A tools with project management software; those platform fees belong in COGS. Review licenses annually, cutting seats for non-essential staff immediately. A common mistake is paying for enterprise tiers when mid-market plans suffice for a team that size. Defintely check usage reports.
- Audit seat usage every quarter.
- Negotiate annual renewals for discounts.
- Watch out for unused licenses.
Overhead Threshold
If your G&A software spend creeps above $1,000 monthly without adding significant headcount or capability, you are overpaying for administrative overhead. This fixed cost must be absorbed quickly by project revenue before the $30,000 payroll hits.
Running Cost 6 : Customer Acquisition (CAC)
CAC Target Check
Hitting the $2,500 CAC target in 2026 requires disciplined spend against the $50,000 annual marketing budget. This budget allows for about 20 new clients per year if the target is met precisely. You must map this spend directly to high-value commercial developer acquisition.
Marketing Spend Allocation
This $50,000 annual marketing budget funds lead generation efforts to secure commercial real estate developer clients. To calculate required volume, divide the total budget by the target CAC: $50,000 / $2,500 equals 20 acquired customers annually. This is the baseline volume needed just to hit the cost metric.
- Annual budget: $50,000
- Target CAC: $2,500
- Monthly spend: ~$4,167
Improving CAC Efficiency
Since client acquisition is slow in commercial real estate, focus on referrals and high-intent channels over broad advertising. A $2,500 CAC is high for a service firm; ensure your average project size justifies this initial outlay quicklly. Avoid spending heavily before proof-of-concept is strong.
- Prioritize developer networks.
- Track time-to-close deals.
- Benchmark against industry standards.
CAC Recovery Timeline
The $2,500 CAC must be recovered within the first few projects to avoid draining working capital. Given high fixed costs like $30,000 payroll, every acquired client needs to generate revenue fast. If onboarding takes 14+ days, churn risk rises.
Running Cost 7 : Variable COGS
Cost Structure Alert
Your variable Costs of Goods Sold (COGS) currently stand at an unsustainable 130% of revenue. This is driven by 50% for proprietary platform licensing and 80% for subcontracted specialist services. Without immediate structural changes, every service dollar billed generates a 30% gross margin loss.
COGS Drivers
These costs tie directly to the billable hours you charge clients. The 80% for specialist services means you pay subcontractors nearly the full rate you charge, while the 50% platform fee compounds this loss. To model this, you need the actual contractor quotes against the hourly rate charged to the developer.
- Platform Licensing: 50% of revenue.
- Specialist Services: 80% of revenue.
- Total Variable Cost: 130% of revenue.
Fixing the Margin
Achieving profitability demands aggressively lowering the 130% burden. You can't afford to pay 80% for services if you are also paying 50% for software access on that same revenue stream. Renegotiate service agreements or shift platform costs to a fixed monthly fee structure, not a percentage of the revenue you generate.
- Cap specialist service costs below 50%.
- Convert platform fees to a fixed monthly cost.
- Ensure contract terms reflect true cost recovery.
Operational Reality
Since your variable costs exceed revenue, no amount of fixed cost management will fix this model; you’re losing money on every transaction before paying staff. If fixed overhead is roughly $47,000 monthly, you need revenue to cover that plus the 30% loss margin on every dollar earned. This is defintely not viable.
Construction Management Investment Pitch Deck
- Professional, Consistent Formatting
- 100% Editable
- Investor-Approved Valuation Models
- Ready to Impress Investors
- Instant Download
Related Blogs
- How Much Does It Cost To Open A Construction Management Firm?
- How to Launch a Construction Management Firm: 7 Essential Steps
- How to Write a Construction Management Business Plan (7 Steps)
- 7 Critical KPIs for Construction Management Success
- How Much Do Construction Management Owners Typically Make?
- 7 Strategies to Increase Construction Management Profitability
Frequently Asked Questions
Initial monthly running costs are approximately $48,067, combining $13,900 in fixed overheads and $30,000 in payroll, plus marketing expenses