Sakhile Construction Business Plan — Unit Economics of a Contract
The economics of a single building contract: gross margin, preliminaries, site overhead and what actually falls to the bottom line.
Unit Economics of a Contract
Jump to section
- Overview & contents
- i. Important Notice
- 1. Executive Summary
- 2. The CIDB Grading Ladder
- 3. The Market in 2026
- 4. Strategy: Private Work First
- 5. SWOT and Competitive Position
- 6. The Working Capital Problem
- 7. Retention and Guarantees
- 8. Unit Economics of a Contract
- 9. The Five-Year Roadmap and Gates
- 10. Funding
- 11. Estimating and Contract Control
- 12. People and Plant
- 13. Compliance and Registrations
- 14. Financial Projections
- 15. Break-Even
- 16. Sensitivity and Scenarios
- 17. Risk Management
- 18. Implementation Timeline
- 19. Returns
- 20. Key Performance Indicators
- 21. Key Assumptions
- 22. Conclusion
- A. Appendix A: Consolidated Financial Summary
- B. Appendix B: Capital Schedules
- C. Appendix C: Funding and Debt Schedules
- D. Appendix D: Risk Register
- E. Appendix E: Glossary
|
Per contract, Year 5 basis |
R |
% of contract value |
|---|---|---|
|
Contract value |
2 888 889 |
100.0% |
|
Materials |
(1 080 389) |
37.4% |
|
Site labour |
(634 167) |
22.0% |
|
Subcontractors |
(446 222) |
15.4% |
|
Plant hire and site establishment |
(187 889) |
6.5% |
|
Gross margin |
540 222 |
18.7% |
|
Overhead recovery |
(344 722) |
11.9% |
|
Contribution |
195 500 |
6.8% |
|
Retention withheld on this contract |
288 889 |
10.0% |
8.1 What the numbers mean at bid stage
|
Question at bid stage |
The number |
Consequence |
|---|---|---|
|
Can the business fund this contract? |
Materials and labour for roughly 60 days, plus 10% retention for up to two years |
A R2.9m contract needs roughly R500 000 of funding before the first certificate is paid |
|
Does the rate recover the payment cycle? |
R34 000 of financing on a public contract at 68 days |
If it is not in the preliminaries it comes out of the R195 500 contribution |
|
Does this contract move the grade? |
Only if it is the largest completed in the class and registered on the Register of Projects |
A contract at the top of the band is worth more than two at the middle |
|
What is the downside if the estimate is wrong? |
Three points of margin on this contract is R86 667 |
Nearly half the contribution, on a single estimating error |
|
Is the guarantee capacity available? |
5% to 10% of contract value committed for the duration |
Committed capacity cannot be used for the next bid |
The last two rows are the ones most often skipped. An estimating error of three percentage points on a single contract removes nearly half its contribution, and at eighteen contracts a year a systematic three-point error removes R1.56 million — considerably more than the Year 5 EBITDA of the entire business at plan margin less that error. Estimating discipline is not a back-office function in this sector; it is the business.