The 10K Rule

As an owner or manager of an HVAC, plumbing, or electrical company, you’re constantly bombarded with opportunities to spend money—new software, shiny tools, marketing services, fleet upgrades, and more. Some expenses are non-negotiable, like paying your team and covering direct job costs. But when it comes to discretionary spending, the question becomes: Is this purchase truly adding value to my business?

At Contractor Excellence Consulting, we teach a simple yet powerful way to make smarter purchasing decisions: The 10K Rule.

What Is the 10K Rule?

If your company historically earns around 10% net profit, here’s the math: for every dollar you spend, you need to generate 10 times that amount in additional revenue just to maintain profitability. For example, if you’re considering a $1,000 investment in a new software tool, ask yourself: Will this realistically help me bring in $10,000 in new revenue? If not, it may not be worth the spend.

This quick test acts as a Purchasing Decision Framework—a first filter before diving deeper into Cost-Benefit Analysis, Profitability Analysis, or Total Cost of Ownership (TCO).

Why This Matters

Discretionary expenses can easily erode your margins if they don’t deliver Long-Term Value. The 10K Rule may not be the best fit for some investments—like Construction Technology, Fleet Management Strategy, or Heavy Equipment Purchase—because those items may not directly increase revenue. They can reduce costs through efficiency gains, however, and require a more detailed Value-Based Purchasing approach and sometimes a Risk Assessment in Purchasing.

But for most day-to-day decisions, the 10K Rule helps you avoid impulse buys and focus on Value-Driven Decisions that align with your Business Growth Strategy.

Other Factors to Consider

• CapEx vs. OpEx: Is this a one-time Capital Expenditure or an ongoing Operating Expense?
• Buying Equipment vs. Leasing: Which option offers better Return on Investment (ROI) and flexibility?
• Vendor Selection Criteria: Are you choosing suppliers based on price alone or on Strategic Sourcing principles?
• Software Selection Process: Does the tool integrate with your existing systems and improve efficiency?

Every purchasing decision should be evaluated through the lens of Short-Term Cost vs. Long-Term Value.

Ready to Optimize Your Spend?

At Contractor Excellence Consulting & Coaching, we specialize in Contractor Business Management and Construction Business Consulting that helps you maximize business value. If you want to learn how to apply the 10K Rule and other proven strategies to your company, schedule a free discovery call today. Let’s build a roadmap for smarter spending and sustainable growth.