May 1, 2026
Should a restoration company do reconstruction? Adding a reconstruction division captures 30-45% gross margin on work currently being referred to GCs, deepens the customer relationship through the full project lifecycle, and creates a natural upsell from every mitigation job. The decision depends on management capacity, licensing requirements, and working capital.
The honest answer is: it depends. But the factors it depends on are specific and analyzable — and most owners who ask the question haven’t run the analysis.
When you complete a mitigation job and refer reconstruction to a GC, you’re handing over 30-45% gross margin on the rebuild phase. On a $50,000 combined job where reconstruction is $30,000, that’s $9,000-$13,500 in gross profit going elsewhere. Across 50 reconstruction-eligible jobs per year, that’s $450,000-$675,000 in additional gross profit potential. Full-service capability also strengthens commercial account relationships — facility managers prefer vendors who handle complete jobs.
GC licensing is required in most states above certain dollar thresholds. Reconstruction project management is categorically different from mitigation PM — it involves subcontractor coordination, permit management, material procurement, and draw schedule management. Adding reconstruction without adding reconstruction-specific management is a recipe for quality problems and margin erosion. Working capital requirements also increase significantly.
Step 1: Obtain the required GC license. Step 2: Hire a dedicated reconstruction PM before you have jobs. Step 3: Build your subcontractor network (framing, drywall, flooring, painting, electrical, plumbing) before you need them. Step 4: Start with residential reconstruction on existing mitigation relationships. Step 5: Build reconstruction estimating capability separately. Step 6: Track reconstruction margin separately from mitigation from day one.
Reconstruction gross margins typically run 30-45%, significantly below water mitigation (60-75%) but still meaningful contribution to profitability when executed correctly.
A rough guideline: if you’re referring 30+ reconstruction jobs per year with an average value of $15,000+, the margin capture opportunity likely justifies the investment in licensing, management, and working capital.
Mike McCabe is The Profit Detective — a 36-year restoration industry veteran and Fractional Operations Manager at Floodlight Consulting Group.
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