In the construction industry, numbers don’t just live on the balance sheet — they live on the job site, in your equipment yard, and in every estimate you submit. For construction companies in areas where labor and weather can make or break a project, tracking the right Key Performance Indicators (KPIs) is essential.

At KT, we work closely with construction clients to identify the metrics that matter most. While every business is different, three KPIs consistently offer the clearest insights into the financial health and operational performance of the construction industry:

Gross Profit Margin & Overhead

Margin analysis is your first and best indicator of profitability. Gross profit margin measures how much revenue remains after covering the direct and indirect costs of construction, including materials, labor, subcontractors, insurance, depreciation, repairs, and more. However, many construction companies overlook how this margin must also support general and administrative costs like office supplies, professional fees, office staff, and other administrative expenses.

Margins vary by project type, with an industry average of 10–20% — excluding general and administrative costs. It’s important to consider typical overhead and operational costs when bidding contracts to ensure your margins are sufficient to support business operations. If you’re consistently seeing thin margins, it may indicate underbidding, poor cost control, or rising overhead that isn’t being accounted for in your estimates. Tracking this KPI in tandem with your overhead ratio can provide a clearer picture of long-term financial sustainability.

Cash Flow from Operations

Even profitable contractors can run into trouble if cash isn’t flowing — due to cost overruns, aging receivables, or other factors. This KPI looks at the net cash generated by your core business activities. Cash flow is often a more urgent concern than profitability, as steady inflows are critical for keeping construction projects moving.

Regularly monitoring your statement of cash flows and accounts receivable aging helps to ensure sufficient working capital is available. Cash flow issues, or an overreliance on financing, can lead to project delays, missed deadlines if materials are not purchased timely, and even liquidated damages — putting future cash flow at greater risk. Additionally, a shortage of cash will lead to increased borrowings on your line of credit, and the interest rates are not cheap, currently.

Monitoring Project Progress, Deadlines & Budgets

In our region, weather can be unpredictable and often shorten construction seasons — meaning delays can quickly erode profit margins. This operational KPI helps measure your team’s ability to execute projects effectively and on time.

Creating a roadmap with internal deadlines and consistently tracking planned vs. actual completion dates by stage — and budgeted vs. actual costs — is essential for avoiding unexpected issues and is a key to proactive management and future bidding. Monitoring contract progress, including documenting challenges not accounted for in original estimates, allows for early conversations with clients about potential change orders. A high variance from budget may point to scheduling issues, subcontractor delays, or job site inefficiencies.

Final Thoughts

Focusing on just a few meaningful KPIs — like gross profit margin and overhead, cash flow, and project monitoring — can offer powerful clarity without overwhelming your team. These metrics form the foundation for better bidding, smarter resource allocation, and ultimately, a more resilient and profitable business.

At KT, we help construction clients not only measure these KPIs but also act on them — through better forecasting, internal controls, and strategic planning. We’re here to help build financial tools that work for your construction operation. If you’re not regularly reviewing these KPIs, now is the time to start. Contact the KT Construction team to get started today!