Modular Construction Running Costs: $104k/Month Fixed Overhead

Modular Construction Running Costs

Expect fixed monthly running costs (salaries and overhead) around $104,700 in 2026, before factoring in the massive variable costs of production This figure covers core staff, factory leases, and corporate overhead Modular Construction is capital-intensive, meaning your true monthly cash burn depends heavily on production volume For instance, the total projected revenue for 2026 is $164 million, but raw materials and direct labor alone represent significant unit costs—up to $18,750 for a Two Bed Home This guide breaks down the seven crucial recurring operational expenses you must model precisely to maintain positive working capital and achieve the projected $117 million EBITDA in the first year

7 Operational Expenses to Run Modular Construction

#	Operating Expense	Expense Category	Description	Min Monthly Amount	Max Monthly Amount
1	Factory Lease	Fixed Overhead	The $25,000 monthly factory lease is the largest single fixed overhead cost, requiring long-term commitment and careful capacity planning.	$25,000	$25,000
2	Corporate Wages	Fixed Overhead	Staff salaries total $60,208 monthly in 2026, covering seven key roles from CEO to Admin Assistant, which is a defintely fixed cost.	$60,208	$60,208
3	Raw Materials	Variable (Unit Cost)	Raw materials are the largest unit-variable cost, ranging from $3,500 (Retail Kiosk) to $12,500 (Two Bed Home) per unit.	$3,500	$12,500
4	Direct Labor	Variable (Unit Cost)	Direct factory labor costs vary from $1,750 to $6,250 per unit, directly scaling with production volume and complexity.	$1,750	$6,250
5	Factory Utilities & Maintenance	Variable (% of Sales)	These costs are variable based on revenue, totaling 18% of sales (10% Utilities, 08% Maintenance), impacting gross margin directly.	$0	$0
6	Corporate G&A Overhead	Fixed Overhead	Fixed corporate overhead, including rent, insurance, and software, totals $17,500 monthly, supporting non-production functions.	$17,500	$17,500
7	Sales & Installation Support	Variable (% of Sales)	Variable selling expenses, including Sales Commissions (40%) and Installation Support (20%), total 60% of revenue in 2026.	$0	$0
	Total	All Operating Expenses		$107,958	$121,458

What is the minimum cash buffer required to cover running costs before positive cash flow?

The minimum cash requirement for the Modular Construction business idea is set at $113 million by January 2026, which dictates the necessary operational runway before achieving positive cash flow; understanding this scale is key, especially if you are exploring How Can You Effectively Launch Modular Construction Business?. This substantial buffer is necessary because scaling factory production and securing supply chains demands significant upfront capital outlay before unit sales stabilize.

Cash Buffer Analysis

The target cash requirement is $113,000,000 set for January 2026.
This amount must cover all fixed operating expenses (OpEx), defintely.
If monthly fixed costs run at $15M, this provides about 7.5 months of runway.
If onboarding suppliers takes 14+ days longer than planned, runway burn accelerates.

Actionable Cost Reduction

Accelerate module throughput rates in the factory.
Negotiate longer payment terms with key material vendors.
Minimize factory overhead before sales commitments are firm.
Secure deposits covering 30% of unit cost upfront.

What are the largest recurring cost categories that drive monthly cash burn?

For the Modular Construction business, monthly cash burn is dominated by fixed corporate wages and overhead, which total over $104,000 before you even factor in unit production costs. Understanding this fixed base is crucial for managing runway, much like assessing profitability in other asset-heavy models, for instance, when looking at How Much Does The Owner Of Modular Construction Business Typically Make? You’re defintely looking at a high fixed cost structure here.

Fixed Monthly Drain

Corporate wages represent the largest recurring drain at $60,208 monthly.
Fixed overhead costs, like facility leases, add another $44,500 to the base burn.
Total fixed operating expenses before any production starts are $104,708.
This fixed base must be covered by gross profit before you see net income.

Variable Costs vs. Fixed Base

Variable COGS per completed unit starts high, exceeding $18,750.
Fixed costs hit hard every month, unlike COGS which scales with unit sales volume.
If you sell zero units, your cash burn is the full $104,708.
To cover fixed costs alone, you need gross profit from roughly 6 units sold (104,708 / 18,750).

How long is the working capital cycle from material purchase to customer payment?

Achieving a 1-month working capital cycle for Modular Construction, encompassing material purchase to customer payment, is extremely tough because typical developer payments lag significantly behind factory production timelines; reviewing these assumptions is critical, which is why you need to understand What Are The Key Steps To Develop A Comprehensive Business Plan For Launching Modular Construction?

Breakeven Timeline Reality Check

The 1-month breakeven date assumes you collect cash almost immediately after incurring costs.
If module fabrication takes 45 days, and developer payment terms are Net 30, the cycle is already 75 days minimum.
Developer contracts often include significant retainage held until final inspection, pushing DSO much higher.
This aggressive timeline is defintely not aligned with standard commercial construction finance.

Shortening the Cash Conversion Cycle

Require 30 percent upfront deposits tied directly to ordering long-lead materials.
Structure progress payments based on factory milestones, not site completion.
Negotiate shorter payment terms with key suppliers, perhaps Net 15 instead of Net 30.
Focus on selling units with the shortest factory build times first to cycle cash faster.

If initial sales targets are missed, how will fixed costs of $104,700 per month be covered?

If initial sales targets for the Modular Construction operation fall short, you must immediately triage the $104,700 monthly fixed overhead by cutting discretionary items first, defintely, otherwise, you risk burning through runway fast. Understanding performance drivers is key, which is why you need to monitor metrics like cycle time, as discussed in What Is The Most Critical Metric To Measure The Success Of Modular Construction?

Triage: Immediate Spending Cuts

Pause the $5,000 Marketing Campaigns spend instantly.
Defer non-essential $4,000 R&D projects until cash flow stabilizes.
These two items save $9,000 monthly right away.
These are variable fixed costs you control today.

Fixed Commitments & Cash Buffer

The $25,000 Factory Lease is a non-negotiable anchor cost.
Salaries and utilities make up the remaining $70,700 burn rate.
You need $104,700 in cash reserves to cover a full month gap.
If you miss targets for two months, you need $209,400 ready to deploy.

Key Takeaways

The baseline fixed monthly running cost for modular construction operations in 2026 is projected to be approximately $104,700, covering core staff salaries and factory overhead before production volume is factored in.
The largest drain on monthly cash flow comes from variable Cost of Goods Sold (COGS), where unit costs for materials and direct labor can exceed $18,750 for a standard two-bedroom home.
Launching the business requires a significant minimum cash buffer of $113 million in January 2026 to cover initial capital needs and early operating expenses before positive cash flow is achieved.
Despite high overhead, the model forecasts strong operating leverage, projecting an ambitious $117 million EBITDA within the first year of scaling production.

Running Cost 1 : Factory Lease

Lease: The Fixed Anchor

The factory lease is your single largest fixed cost hurdle right now. At $25,000 monthly, this commitment locks in substantial overhead before you ship your first modular unit. You need a solid production plan to absorb this cost quickly.

Cost Inputs

This $25,000 covers the physical space for manufacturing your modular units. It’s a fixed cost, meaning it doesn't change if you build one home or ten. To cover it, you must look at your total fixed overhead, which includes $60,208 in wages and $17,500 in G&A. This is a defintely large commitment.

Cost: $25,000 per month
Type: Fixed Overhead
Impacts: Capacity planning

Managing Utilization

You can't easily reduce a lease once signed, but you must optimize utilization. If your capacity plan assumes 10 units/month but you only ship 5, you are losing $2,500 per unit just covering the lease overhead. Avoid signing for space you won't use within 12 months.

Match lease term to sales forecast
Avoid excess square footage
Factor lease into unit COGS

Break-Even Pressure

Capacity planning is critical here. If your break-even volume requires producing 8 units monthly just to cover the lease, but sales cycles stretch past 90 days, you face a serious cash crunch. Plan your lease start date carefully against your first revenue inflow.

Running Cost 2 : Corporate Wages

2026 Payroll Load

Your 2026 projected corporate payroll runs $60,208 per month. This fixed cost covers seven essential roles, from the CEO down to the Admin Assistant, and must be covered regardless of how many modular units you sell. This is a core component of your fixed overhead, seperate from direct factory labor.

Fixed Headcount Cost

This $60,208 estimate covers seven roles, including the CEO and Admin Assistant, budgeted for 2026 operations. You need firm salary quotes for each position to validate this total. This expense sits alongside your $25,000 factory lease as necessary fixed overhead to keep the lights on.

Input: 7 salaried employees
Year: 2026 projection
Type: Fixed monthly cost

Controlling Overhead

Don't staff management based on projected unit sales; hire based on current capacity needs. Overpaying for a full executive team before you hit volume means this $60k burns cash quickly. Defer non-essential roles until direct labor justifies the factory output.

Avoid hiring ahead of production
Tie admin growth to volume
Review compensation annually

Fixed vs. Direct Labor

This $60,208 corporate wage is fixed overhead, unlike your direct factory labor, which scales per unit built. If you sell zero homes, this payroll still hits. You need enough gross margin from variable costs (materials, installation fees) to cover this before profit starts.

Running Cost 3 : Raw Materials

Material Cost Range

Raw material procurement is your biggest unit cost driver, directly impacting profitability for every structure built. These costs fluctuate significantly based on the product mix, spanning from a low of $3,500 for a Retail Kiosk up to $12,500 for a Two Bed Home module. That’s a huge spread.

Estimating Material Spend

This cost covers all primary inputs needed for manufacturing the module shell and interior components before assembly. You estimate this by taking the bill of materials (BOM) for each specific product line, like the Two Bed Home, and multiplying it by current supplier quotes. This cost is variable and scales directly with production volume.

Units produced × BOM cost
Supplier quote accuracy matters
Product complexity drives cost

Controlling Material Costs

Managing material spend requires locking in prices early, especially for high-cost items like structural lumber or specialized cladding. Since this cost ($3,500 to $12,500) dwarfs Direct Labor ($1,750 to $6,250), procurement efficiency is defintely critical. Avoid cost creep by standardizing component sizes across product lines where possible.

Lock in material pricing early
Standardize components across models
Negotiate volume discounts

Material vs. Labor Cost

Raw material expense is the primary lever you pull against your Direct Labor cost when analyzing gross margin per unit. If you shift sales mix toward smaller units, like the Kiosk, your unit material cost drops significantly, improving contribution margin faster than cutting labor alone.

Running Cost 4 : Direct Labor

Labor Cost Range

Direct factory labor costs are a primary variable expense, fluctuating between $1,750 and $6,250 per modular unit produced. This cost ties directly to the complexity of the specific module, demanding careful unit costing based on assembly hours required for each design.

Cost Inputs Needed

This cost covers the wages for the team assembling the modules inside the climate-controlled factory. To budget accurately, you must map labor hours against the complexity of each product line. For example, a Two Bed Home requires far more assembly time than a simple Retail Kiosk.

Map labor hours to module complexity
Track actual time vs. standard estimates
Include all assembly personnel wages

Managing Labor Spend

Since labor scales directly with output, efficiency gains drive margin improvement. Standardizing assembly processes across the catalog reduces variability and training time. Avoid scope creep on initial module designs; complexity defintely kills factory throughput and drives costs toward the upper range.

Standardize assembly sequences
Cross-train factory floor staff
Benchmark against industry benchmarks

Scaling Impact

Because direct labor scales unit-by-unit, high-volume production allows absorption of fixed overhead faster, but only if factory efficiency remains tight. If complexity pushes the average cost near the $6,250 ceiling, your gross margin gets squeezed despite high sales volume.

Running Cost 5 : Factory Utilities & Maintenance

Variable Factory Cost

Factory Utilities and Maintenance are not fixed overhead; they scale directly with your sales volume. Expect these combined costs to consume 18% of total revenue. Utilities account for 10% of sales, while Maintenance makes up the remaining 8%, hitting your gross margin dollar-for-dollar.

Cost Inputs

This 18% covers the operational energy needed to run the factory floor and routine upkeep on machinery. To budget accurately, you need your projected Total Sales Revenue, not just unit counts. If your average unit sale is $150,000, then $27,000 of that immediately covers these variable factory costs.

Utilities (10% of sales)
Maintenance (8% of sales)

Margin Levers

Since these are variable, efficiency drives margin. Focus on optimizing utility consumption per module manufactured. Maintenance needs proactive scheduling, not reactive fixes, to avoid costly downtime. Don't let poor preventative maintenance push utility costs higher due to inefficient machine operation. That’s a defintely hidden margin killer.

Benchmark energy use per square foot.
Negotiate utility rates annually.
Implement predictive maintenance schedules.

Gross Margin Focus

Remember, this 18% is deducted before calculating your gross profit, unlike fixed overhead like the $25,000 factory lease. If your direct labor and materials are controlled, managing this 18% variable bucket is the fastest way to improve the profitability of every single unit you ship.

Running Cost 6 : Corporate G&A Overhead

Overhead Baseline

Corporate G&A overhead is a fixed drain of $17,500 per month. It's the cost of running the headquarters, covering rent, insurance, and software supporting non-production functions. This number sets your absolute minimum monthly burn rate before factoring in the $60,208 in corporate wages.

G&A Inputs

This $17,500 bucket covers essential administrative infrastructure, separate from the $25,000 factory lease. You need current quotes for business insurance and annual contracts for key software like accounting packages. This cost is unavoidable monthly, setting the floor for your operating expenses.

Cost Control

Manage this overhead by scrutinizing software licenses; many startups overpay for unused seats. Avoid signing long-term, expensive office leases early on if possible. Keep insurance policies bundled where possible for better rates, defintely review these annually.

Breakeven Anchor

Since corporate overhead is fixed, profitability hinges on scaling revenue fast enough to cover this $17.5k floor plus the $60,208 in corporate wages. Slow sales mean this fixed cost eats cash quickly.

Running Cost 7 : Sales & Installation Support

Variable Cost Shock

Sales and installation costs eat up 60% of revenue in 2026, driven by 40% commission and 20% installation support. This leaves only 40% of revenue to cover all materials, labor, and overhead, demanding extreme pricing power.

Cost Calculation Inputs

These variable selling expenses are calculated directly on top-line revenue, not unit volume. Sales commissions hit at 40%, while installation support costs 20%. You need clear definitions for what triggers commission payouts versus installation milestones.

Commission: Tied to final sale price.
Support: Covers site readiness and module placement.
Total direct cost: 60% of sales.

Managing High Sales Load

Reducing this 60% burden requires changing the sales structure or scope. Target the 20% installation support cost first; perhaps developers handle site prep, cutting your variable load to 40%. If you raise unit prices, these percentages still consume cash flow.

Negotiate installation scope with buyers.
Tie commission to gross profit, not revenue.
Ensure high Average Order Value (AOV).

Margin Checkpoint

Because 60% of revenue is gone before fixed costs, your unit economics must be flawless. If the average unit sale price doesn't significantly exceed raw materials (up to $12,500) plus direct labor, you’ll defintely struggle to cover the $25k factory lease and $17.5k G&A.