Profit Fade: Why a Job Looks Profitable Right Up Until It Isn't
· By Mike Hagberg
Profit erosion hides in plain sight on jobs that are 'making money' — how to measure profit realization against percent complete in Sage 100 Contractor and catch fade before close-out.
Profit Fade: Why a Job Looks Profitable Right Up Until It Isn't
A job that shows positive profit-to-date can still be in deep trouble. The question is never "is this job profitable so far?" — it's "how much of the estimated profit has been realized for how much of the work done?"
A real pattern from the bonding report
Consider a job with $26,688 of estimated profit that shows $7,353 profit-to-date at 28% cost burn. Sounds fine — until you compute the erosion: the job has consumed over a quarter of its budget while realizing 27% of its profit, and the margin on work performed is running 1.4%. Another job on the same report: $550,694 estimated profit, $96,029 realized at 27% burn — an 83% gap between the profit curve and the cost curve. Both jobs "made money" every month. Both were fading.
The two numbers to track
- Profit Erosion % = (Estimated Profit − Profit-to-Date as a share of work done) ÷ Estimated Profit. Over 25% deserves a meeting; over 50% is critical.
- Profit Realization vs % Complete — by the time a job has burned 50% of budget, 30–40% of the estimated profit should be realized. A flat or dipping realization curve means scope creep or cost overrun is eating the close-out margin.
Why fade hides
Early job phases bill cleanly and the costly surprises (rework, sub overruns, un-billed change-order work) land in the back half. By the time the fade is visible in gross margin, the recovery options — change orders, re-pricing, scope negotiation — have expired. The fix is mechanical: compare the profit curve against the cost curve weekly, per job, and flag divergence early enough to act.
How DataXcel watches this for you
The CEO Briefing's Project Management category scores every active job's profit realization against its cost burn each week, and the Job Profit-Fade & Trend dashboard plots the curves. Jobs already underwater, jobs over budget with shrinking margin, and jobs whose realization curve has flattened each get their own alert — ranked by dollars at risk, with the supervisor's name attached.
Profit fade is not a surprise. It is a trend you weren't plotting.