Margin / base / 3 to 6 months
Gross margin is eroding while delivery costs, especially contractors, are climbing much faster than revenue. Comparing the start and end of the period, contractor spend has outpaced revenue by a wide margin, and that holds whether revenue rose slowly, stayed flat, or fell. AIFO watches the margin trend alongside the pace of contractor spend to catch a cost base pulling away from what the work brings in. Each unit of work earns less even as more is spent to deliver it.
Below a certain gross-margin floor, the delivery model is structurally cash-negative: every new project consumes cash rather than generating it. Professional-services benchmarks from Eagle Rock CFO and SPI Research establish the range healthy firms operate in and the level at which the model stops working. A business that drops through this floor is accelerating toward trouble, because taking on more work at these economics makes the problem worse, not better.
Even when the top line holds or grows, there is somehow less cash to show for it. More work is being pushed to contractors or subcontractors to keep up with demand. Owners sense they are working harder yet no better off.
Look at margin by project or client and find where the profitable work ends and the value-destroying work begins. Re-price or walk away from the engagements that no longer clear your real cost of delivery, and check whether contractor rates have crept ahead of what the work bills for. Protect the floor deliberately, because winning more of the wrong work only speeds up the damage.
Summit Partners Group, an illustrative services firm, grew monthly revenue from about 410,000 to about 500,000 while contractor spend rose faster, from about 120,000 to about 195,000.
Revenue grew, but contractor cost grew much faster, so the margin on each new engagement kept shrinking. The trend line on gross margin is sliding steadily toward the level where a delivery model stops covering its own cost. Because more work is being staffed with increasingly expensive contractors, winning additional projects at these terms makes the cash problem worse, not better.
Summit concludes its growth is destroying margin and that it must re-price or decline work that no longer clears its true cost of delivery.
Exact thresholds, formulas, and severity bands are omitted from this public view. The full methodology, with every figure, is available in the authenticated app.
At current trajectory, gross margin reaches the [redacted]% floor in ~[redacted] months. Below this, the delivery model is cash-negative.
The exact thresholds, the formula, and your own figures are in the authenticated app. See it against a real, simulated dataset for Integra Executive Services, our public demo company, or connect your own QuickBooks Online account.