You don’t need a finance degree to run a healthy government contracting business. You need three numbers, and the habit of checking them.
Key takeaways
- Your indirect rate is the multiplier that turns direct labor into the true cost of the work. Without it, you are bidding blind.
- Your cash runway is how many months you could operate if the money stopped coming in: the number that matters most under NET 60 terms.
- Your contract margin has to be measured per contract, not blended, or your best and worst work stays invisible.
- Together the three act as a dashboard: costs, profit, and staying power.
1. Your Indirect Rate
Your indirect rate is the multiplier that turns direct labor into the true cost of doing work. It captures fringe, overhead, and G&A, the costs that don’t belong to any single contract but have to be covered by all of them. If you don’t know your indirect rate, you don’t know what a contract actually costs, which means you’re bidding blind.
2. Your Cash Runway
Cash runway is how many months you could operate if the money stopped coming in tomorrow. In a world of NET 60 payments and upfront payroll, runway is survival. A contractor with three months of runway sleeps at night; one with three days makes desperate decisions. Know the number, and grow it deliberately.
3. Your Contract Margin
Contract margin is what’s left after direct and allocated indirect costs come out of contract revenue, measured per contract, not blended across the whole business. It’s the number that tells you which work to chase and which to walk away from. Two contractors with identical revenue can have wildly different margins, and margin is what actually pays you.
Put them together and you have a dashboard: the indirect rate tells you your costs, contract margin tells you your profit, and cash runway tells you your staying power.
Know your numbers cold
Start with the free cash flow training, then book a GovCon financial readiness call.
