Restoration and Renovation Running Costs: $25k Monthly Fixed

Restoration and Renovation Running Costs

Running a Restoration and Renovation business requires tight control over variable costs, which make up a significant portion of project expenses In 2026, expect total monthly running costs to range widely based on project volume, but fixed overhead (rent, salaries, admin) starts around $25,300 The largest recurring expense is payroll, projected at $18,333 per month for the initial team Your cost of goods sold (COGS), including direct materials (140% of revenue) and subcontractor labor (90% of revenue), is the primary variable lever The model shows you hit break-even quickly, within 4 months (April 2026), indicating strong unit economics if sales targets are met This guide details the seven critical monthly expenses you must track

7 Operational Expenses to Run Restoration and Renovation

#	Operating Expense	Expense Category	Description	Min Monthly Amount	Max Monthly Amount
1	Wages/Salaries	Fixed Labor	Initial 2026 payroll averages $18,333/month, covering the Founder ($120k) and a Skilled Technician ($75k), plus a part-time Junior Tech starting mid-year, defintely.	$18,333	$18,333
2	Building Supplies COGS	Variable COGS	Direct Materials (building supplies, devices) are a major variable cost, projected at 140% of total project revenue in 2026, decreasing to 100% by 2030.	$0	$0
3	Variable Labor Costs	Variable Labor	Subcontractor Labor is budgeted at 90% of revenue in 2026, a critical variable expense that must be tracked per project to maintain gross margins.	$0	$0
4	Office Rent	Fixed Overhead	Office/Showroom Rent is a fixed monthly cost of $3,500, essential for establishing a professional base of operations.	$3,500	$3,500
5	Customer Acquisition	Sales & Marketing	The annual Marketing Budget starts at $25,000 in 2026, translating to a monthly average of $2,083, with a target Customer Acquisition Cost (CAC) of $500.	$2,083	$2,083
6	Vehicle Maintenance	Fixed Overhead	Vehicle Maintenance and Fuel costs are fixed at $1,200 monthly, necessary for managing site visits and material transport for the two initial work vans.	$1,200	$1,200
7	Software/Admin	Fixed Overhead	Monthly fixed software and administrative costs (CRM, Accounting, Legal) total $1,000 ($400 for software + $600 for A&L), ensuring compliance and project management efficiency.	$1,000	$1,000
	Total	All Operating Expenses		$26,116	$26,116

What is the total monthly operating budget required to sustain Restoration and Renovation operations?

The minimum monthly operating budget required to sustain Restoration and Renovation operations, before accounting for project-specific variable costs, is approximately $25,333. This figure is derived by combining the mandatory fixed overhead with the average monthly payroll expense.

Minimum Sustainment Budget

Fixed overhead sits at $7,000 monthly minimum.
Average payroll demands $18,333 per month.
Total baseline operational burn rate is $25,333.
This covers overhead needed to keep the doors open.

Budget Context and Exclusions

Understanding this baseline is crucial for setting revenue targets, and you can see what owners in this space typically make by reviewing data on How Much Does The Owner Of Restoration And Renovation Business Typically Make?. This $25,333 covers the non-negotiable costs to operate the business structure, but it excludes the fluctuating expenses tied directly to job execution.

Excludes material purchasing for specific jobs.
Excludes subcontractor fees tied to project scope.
Excludes equipment rentals specific to active projects.
Focus on project margin to cover these costs defintely.

Which cost categories represent the largest recurring monthly expenses?

For your Restoration and Renovation business, payroll and materials will defintely be your biggest monthly headaches; you should check out Is Restoration And Renovation Profitable In The Current Market? to see how these costs impact your overall margin structure.

Labor Baseline

Payroll sets your minimum monthly operating cost floor.
The baseline staffing expense is $18,333 per month.
This is the cost before any billable hours are logged.
Manage scope creep to keep labor utilization high.

Material Overspend

Direct materials represent 140% of revenue.
This means materials cost 40% more than you collect per project.
This cost structure immediately guarantees negative gross profit.
You must tighten procurement or raise project pricing fast.

How much working capital cash buffer is needed to cover costs during the initial ramp-up?

You need a minimum working capital buffer of $810,000 to sustain operations until the Restoration and Renovation business hits break-even, projected for April 2026. Before diving into operational costs, it’s smart to benchmark what the owner might typically earn in this field, which you can review at How Much Does The Owner Of Restoration And Renovation Business Typically Make?. Honestly, this buffer covers payroll, materials float, and overhead; shure, this is the minimum runway needed.

Minimum Cash Requirement

Total required runway cash is $810,000.
This covers cumulative negative cash flow until April 2026.
Ensure liquidity covers all fixed overhead costs monthly.
Watch material cost volatility closely during the ramp.

Liquidity Levers

Tighten project invoicing schedules immediately.
Reduce Customer Acquisition Cost (CAC) below target.
Secure favorable payment terms with key suppliers.
Prioritize high-margin renovation services first.

How will Restoration and Renovation cover fixed costs if project revenue is lower than forecasted?

When project revenue for your Restoration and Renovation business underperforms projections, you must immediately activate contingency spending controls to cover fixed costs; this is crucial for survival, and you should review Have You Considered The Best Strategies To Effectively Launch Restoration And Renovation Business? before revenue dips defintely. If you're worried about covering overhead, you need clear levers ready to pull.

Immediate Cash Preservation Levers

Marketing spend has a $25,000 annual baseline.
Cutting this spend directly reduces your monthly burn rate.
Pause acquisition channels with high Customer Acquisition Cost (CAC).
This control is faster to implement than project cost renegotiation.

Controlling Future Headcount Costs

Delay the planned Junior Technician hire (0.5 FTE).
This specific role is slated to start in July 2026.
Delaying defers associated payroll and benefits expenses.
Only onboard staff when project backlog guarantees utilization above 85%.

Key Takeaways

The baseline fixed monthly operating cost for the Restoration and Renovation business, including initial payroll, is projected to start around $25,300.
Direct materials (140% of revenue) and subcontractor labor (90% of revenue) combine to create a substantial 230% Cost of Goods Sold, demanding rigorous project margin management.
Assuming sales targets are consistently met, the business is projected to achieve its break-even point within the first four months of operation in 2026.
A significant working capital buffer of at least $810,000 is required to cover initial capital expenditures and operating losses until the projected profitability date.

Running Cost 1 : Wages and Salaries

Initial Payroll Burden

Your initial 2026 payroll averages $18,333 per month, which covers the core team needed to execute projects. This figure includes the Founder's $120k salary and the Skilled Technician's $75k pay, plus a Junior Technician starting later in the year.

Payroll Inputs

This monthly payroll expense sets your baseline operating cost before revenue hits. The Founder salary is $10,000/month ($120k/12), and the Skilled Technician costs $6,250/month ($75k/12). The remaining $2,083 accounts for the Junior Technician starting mid-year, defintely lowering the initial average.

Annual salary for key roles
Start date for junior staff
Employer taxes/benefits load

Managing Labor Spend

Fixed salaries are sticky; manage them by tightly linking the Junior Technician's start date to secured project volume. Relying too heavily on fixed staff before project flow is stable increases burn rate quickly. You need to ensure the $18.3k payroll is covered by high-margin work.

Delay non-essential hires
Tie raises to utilization
Use subcontractors first

Payroll Risk

Be careful mixing high fixed salaries with 90% variable labor costs from subcontractors. If your fixed team isn't efficiently managing those subs and projects, your total labor expense balloons fast. Underutilization of the $120k Founder role is the biggest threat to early profitability.

Running Cost 2 : Building Supplies COGS

Material Cost Crisis

Direct Materials cost is your biggest variable threat right now, hitting 140% of project revenue in 2026. This means you are losing 40 cents on every dollar of sales just buying supplies. You must drive this cost down to 100% by 2030 to break even on materials alone.

Tracking Material Spend

Building Supplies COGS covers every physical item—lumber, fixtures, devices—needed for the job. To track the 140% figure, you need accurate total project revenue for 2026 and the exact spend on materials. This cost must be tracked project-by-project.

Inputs needed: Total project revenue.
Key metric: Material spend vs. revenue.
Goal: Reduce 140% ratio fast.

Controlling Material Costs

Managing 140% materials requires strict purchasing discipline to hit the 100% target by 2030. Since you rely on subcontractors (90% of revenue), ensure they don't inflate material markups. Lock in prices early.

Negotiate volume discounts now.
Standardize device SKUs across projects.
Audit subcontractor material invoicing closely.

Cash Flow Reality

A 140% material cost means you are funding your material purchases using debt or owner capital, not project revenue. If Subcontractor Labor is already 90%, your gross margin is negative until you fix material procurement defintely.

Running Cost 3 : Variable Labor Costs

Control Subcontractor Spend

Subcontractor costs are your biggest margin threat in 2026, pegged at 90% of revenue. Since this labor scales directly with projects, you must assign these costs precisely to each job. Failing to control this 90% spend means your gross margin disappears fast.

Estimating Variable Labor

Subcontractor Labor represents external trade partners handling specialized work, distinct from your salaried team ($18,333/month payroll). This 90% variable cost is tied directly to project scope and pricing. You need actual quotes or standardized hourly rates per trade to accurately budget this expense against projected revenue for every renovation.

Track actual vs. budget per trade
Use standardized rate sheets
Factor in liability coverage

Managing Labor Overruns

Managing 90% labor means avoiding scope creep, which inflates subcontractor hours instantly. Since Building Supplies are already high at 140% of revenue, any labor overrun destroys profitability. Standardize subcontractor agreements now. If onboarding takes 14+ days, churn risk rises.

Negotiate fixed-price contracts
Incentivize on-time completion
Review all change orders

Margin Protection Tactic

Track subcontractor utilization against the 90% target weekly. If one project runs at 105% of budgeted labor, you must immediately pull back on scope or increase pricing on the next contract to offset the deficit. This defintely impacts cash flow planning.

Running Cost 4 : Fixed Facilities Rent

Rent Baseline

Your required showroom rent is a fixed $3,500 monthly commitment needed for client meetings and admin. This cost sits outside your variable project expenses, demanding consistent revenue coverage.

Cost Inputs

This $3,500 covers your showroom lease, vital for client consultations on renovation projects. You need the lease terms to fix this number for the initial budget period. It’s a baseline operating cost that must be covered monthly, regardless of project starts.

Lease agreement quotes needed
Fixed monthly charge
Essential for professional image

Managing Overhead

Don't overcommit to prime retail space early on; that's a defintely common founder trap. Seek smaller, flexible leases or shared administrative hubs first. If you can negotiate three months free rent, that saves $10,500 in initial cash burn.

Avoid long-term commitments
Negotiate tenant improvement funds
Benchmark against similar service firms

Fixed Burn Rate

Here’s the quick math: Rent ($3.5k) plus vehicle costs ($1.2k) and software ($1k) sets your non-payroll fixed burn at $5,700 monthly. Every project must generate gross profit to clear this hurdle before wages are paid.

Running Cost 5 : Customer Acquisition Costs

Budget & Target CAC

Your 2026 marketing spend is set at $25,000 annually, meaning you must acquire a new customer for $500 or less. That monthly average of $2,083 needs to drive enough qualified leads to cover high variable costs like supplies and labor.

CAC Inputs

This $25,000 budget covers all Customer Acquisition Costs (CAC) for 2026. To hit the $500 target, you need to secure 50 new projects that year (25,000 / 500). This spend supports initial outreach, digital ads, and offline materials necessary to engage homeowners needing major renovations.

Annual budget set at $25,000.
Target CAC is $500 per client.
Monthly spend averages $2,083.

CAC Optimization

Since Building Supplies COGS is 140% and Subcontractor Labor is 90% of revenue, your gross margin is tight. Focus acquisition efforts on high-ticket, complex jobs where the $500 CAC is absorbed over a larger project value. Avoid spending on small repair leads; defintely track lead source ROI.

Cost Context

Your $2,083 monthly marketing spend is less than your $3,500 rent or your $18,333 average payroll. Marketing is currently a relatively small fixed cost, but it must generate enough high-value projects to cover the substantial variable costs that follow acquisition.

Running Cost 6 : Transportation Maintenance

Fixed Van Costs

Your essential transportation budget is fixed at $1,200 monthly for the initial two work vans. This covers necessary fuel and maintenance required to manage site visits and material transport for your renovation projects. This cost hits regardless of project volume.

Cost Coverage Inputs

This $1,200 is a fixed operating expense covering routine maintenance and fuel for the two vans needed to support field operations. You must budget this amount monthly starting in 2026, as it is not tied to project revenue like COGS. It’s the cost of mobility.

Covers two vehicles.
Includes fuel and upkeep.
Fixed monthly overhead.

Controlling Fuel Spend

Since the maintenance portion is fixed, focus on variable fuel costs. Optimize technician routes to minimize non-billable driving between job sites or supply runs. You should defintely track miles driven versus revenue generated per van weekly to spot inefficiencies quickly.

Map routes aggressively.
Monitor idle time daily.
Bundle material pickups.

Scaling Transportation

If you add a third van, assume this fixed cost scales by $600 per unit for accurate forecasting, covering the added fuel and upkeep. This $1,200 baseline is critical for calculating your true monthly burn rate before revenue starts flowing.

Running Cost 7 : Essential Software Subscriptions

Fixed Software Overhead

Your baseline operational overhead includes $1,000 monthly for essential subscriptions. This covers CRM, accounting, and legal tools needed to run your renovation projects smoothly and stay compliant. That’s your cost of doing business before you even buy the first nail.

Cost Inputs Required

These fixed costs support project tracking and regulatory adherence. The $1,000 total breaks down into $400 for software platforms and $600 for administrative and legal services. You need quotes for your specific CRM and accounting packages to lock this in. This is a non-negotiable baseline cost.

Software Platforms: $400/month
Admin & Legal Services: $600/month
Total Fixed Overhead: $1,000

Managing Subscription Spend

Managing this $1,000 means choosing the right tools upfront. Don't overbuy features you won't use in 2026. Review contracts annually to catch auto-renewals on expensive, unused features. If you scale slowly, look for startup tiers instead of enterprise plans.

Audit features used quarterly.
Negotiate annual vs. monthly rates.
Avoid premium tiers initially.

Compliance Cost Reality

Compliance software, especially for lien waivers and contractor licensing in construction, is often cheaper than the fines incurred by missing deadlines. Budgeting $600 for A&L is defintely lean but necessary for a service business this size.