Robert Morris Associates had a report that broke down all sorts of comparable data by company size. The information is 13 years old, but there may be current data for anyone who wants to search for it on the Web.
Bottom line according to this report: The smaller you are, the higher the gross profit percent, but there seems to be a sweet spot in the $10 million to $50 million contractor size. I’d have to guess its peak is in the under-$25 million size, if you could break it down further where there is a balance of size and income that is just about right. Just looking at the return on equity, it makes the case.
I worked for years at a large mechanical doing $70 million that got gobbled up by a utility and ejected its upper management. I can tell you it was a struggle to reach a 5 percent net before taxes and distributions.
Now, having my company at $15 million, we are at a great spot financially in every sense. I can’t see pushing it any larger than $25 million to keep the headaches to a minimum and the returns to a maximum. The money just is not worth the risk/pressure.
James C. Mooney, P.E.
enginuity LLC
Mechanicsburg, Pa.