Done-for-you certified payroll for small public-works subcontractors. The client forwards one payroll file each week; we return a filed, compliant federal report. This document presents the complete case: market, competition, economics, technology, risk, and the two-week test that decides it.
ASSESSMENT VERDICT: GO — WITH CONDITIONS
The completed seven-chapter assessment (market model, competitor profiles, technology plan, legal review, 60-month three-scenario financial model, strategic analysis) returns a GO. The conditions are the pre-committed 14-day validation gates in Item 15, plus one week-one architecture decision (SSN truncation — Item 10). Funding path: bootstrap, decisively. Base-case model: $312–337K ARR at month 12 (87–94 accounts); the worst corner of the sensitivity grid still reaches $382K ARR by month 24.
Every contractor on a government-funded construction project must file a certified payroll report — federal form WH-347 — every week, signed by an officer under penalty of perjury. A missing or incorrect report triggers a routine, codified consequence: the general contractor withholds the subcontractor's next progress payment. The firms carrying this burden are small trade crews with no office staff. The list of who acquires this problem is published weekly in public award data. The delivery work is largely automatable — and the compliance engine is already built and tested. No competitor in any category sells to these firms by telephone.
The Davis-Bacon Act requires workers on federally funded construction to be paid the local “prevailing wage” for their trade — rates set in a dense contract document called a wage determination. Form WH-347 is the weekly proof. It demands per-worker classifications, daily hours, base rates, fringe-benefit math, and overtime computed under rules that change at the overtime boundary (1.5× on base, 1× on fringe). Page two is a Statement of Compliance signed under penalty of perjury.
At a typical 3–15 employee subcontractor, this work is done by the owner or a family member, at night, without training. Standard payroll software does not produce it correctly. Errors mean withheld payments, back-wage assessments, and — for willful cases — debarment from public work.
The public record shows three distinct responses, and each one is a buying signal: experienced contractors price the paperwork in as a permanent cost; first-time bidders and their bookkeepers are visibly anxious about getting it wrong; and a measurable share refuses to bid public work at all rather than face it.
“You'll be out of pocket for about 90 days… man, when people talk about ‘red tape' they mean it. Plan for the worst… sure fire way to go under quick and painful!”
“Prevailing wage in California is a non-starter for me… guys usually eventually get caught and get their license yanked and jail time… I never ONCE bothered bidding on that stuff.”
“And heaven forbid we forget to request one — the union can rain down hell on us.”
“Their raise will instead be spent on administration — to pay the accountant to certify payroll.”
“I tried reaching out to customer support and they spent the entire chat trying to sell me Enterprise, and when I declined they hung up on me. I really need this issue resolved.”
“It's almost impossible to get certified payroll right.”
All quotes verbatim from public sources, collected July 2026; links retained for verification. Full evidence corpus on file.
Before any sales activity, the compliance engine was red-team tested under a no-look-ahead protocol: one team generated three realistic weekly payrolls — one flawless, two with violations buried in ordinary-looking numbers — and sealed the answer key. A second, independent team built the validation engine from the rules alone, firewalled from the test data.
| Submission | Planted condition | Engine verdict | Outcome |
|---|---|---|---|
| Payroll A | Overtime paid at straight time; fringe underpaid $0.85/hr on a second worker | REJECTED | Both violations identified, to the penny, with the exact statutory rates cited |
| Payroll B | Net-pay transposition error (+$54.00); one worker misclassified at a consistent lower scale | REJECTED | Arithmetic error caught exactly. Paper-consistent misclassification is undetectable on any form — the industry-wide gap our paid onboarding audit exists to close |
| Payroll C | Clean — including a legitimate 45-hour overtime week priced correctly | ACCEPTED | Zero findings. No false positives; correct overtime passed untouched |
The engine implements 22 rule codes: rate floors, fringe arithmetic across the overtime boundary, apprentice-ratio enforcement, penny-exact cross-footing, and compliance-statement consistency. The checking layer of this business is not a plan. It exists.
| Competitor | Ownership / backing | Pricing model | Weakness against us | Threat |
|---|---|---|---|---|
| Owner's family / informal | — | Unpaid labor | Fear, errors, no guarantee; signs perjury page unadvised | Primary rival |
| Local bookkeepers | Sole proprietors | $40–100/hr | No rate-sourcing expertise; no rejection-fixing; cannot scale or sell | Moderate |
| Points North (Managed Services) | Private, est. ~1994 | $375/mo + $7.50/rpt + $4,995–6,995 setup | Setup fee structurally excludes small subs; channel-led, no outbound | Moderate |
| Payroll4Construction | Foundation Software (PE) | ~$700–2,500/mo bundle | Requires full payroll switch; targets 10–100+ employee firms | Low |
| Miter / Lumber / Trayd | VC ($38M / $15.5M / $10M) | Per-employee platform | Sales-led platform switches; case studies at 25–300 employees; moving up-market | Low, watch Lumber |
| DIY software (CertifiedPayrollPro et al.) | Independent | $49–99/mo + per report | Generates the form; leaves classification, rates, and rejections to the owner | Low |
| LCPtracker / eMars / Elation | Agency-procured | Agency pays | Portals create sub-side work; they are a lead list, not a rival | Ally-shaped |
The finding that frames the whole landscape: across every category — software, services, platforms, consultancies — customer acquisition is 100% inbound: SEO, marketplace listings, agency mandates, webinars. Not one competitor telephones small subcontractors. Nobody anywhere runs award-triggered outbound. The sales motion this team was built around is uncontested.
| Metric | Value | Basis |
|---|---|---|
| Average revenue | $249 / mo / project | Band $199–349; ~20% of accounts run 2+ simultaneous projects |
| Onboarding audit | $399 avg | ~70% attach on new accounts; also a quality gate |
| Account life | ~12.5 months | 8%/mo project-based churn — jobs end; dissatisfaction churn is structurally rare mid-project |
| Lifetime value (gross) | ~$3,390 | 12.5 × $249 + 0.7 × $399 |
| CAC — cash | < $50 | Public data, dialer, phone; no paid media |
| CAC — fully loaded | $150–200 | ~3–4 closer hours per closed account at imputed market rate |
| LTV : CAC | ~17 : 1 founder-sold | Conservative floor ≥ 3.5:1 even at hired-closer cost ($306–446 loaded, net of audit revenue); CAC payback under 2 months on either basis |
| Break-even | ~4 accounts | Fixed cash costs ≈ $800–1,000/mo pre-hire |
| Stage | Assumption | Note |
|---|---|---|
| List source | Weekly, free | USAspending subawards + state DOT lettings + state registries, filtered to awards in the last 60 days |
| Dial volume | 60 / day | One full-time closer |
| Concierge phase yield | 100 dials → 3–5 paid | The validation gate; delivery by hand before productization |
| Steady-state adds | ~12 accounts / mo | Sustainable for one closer; replaces ~8%/mo project churn with growth |
| Second channel (mo. 4–6) | 1 GC = a sub roster | Primes are legally responsible for sub compliance and are sold only tracking portals today; unclaimed channel, piloted not presumed |
| Risk | Rating | Mitigation |
|---|---|---|
| Preparation error freezes a client's payment | Medium / High | Human sign-off on every filing until measured error rates justify spot-checking; E&O insurance (~$2K/yr); engagement letter caps liability and reps client-data accuracy |
| Perjury exposure on certifications | Low | The client's officer signs the Statement of Compliance — always. We prepare; they certify. Tax-preparer posture, stated in every engagement letter |
| State payroll-service registration requirements | Low / Medium | Survey launch states in week one; register where required; modest cost and time |
| PII breach (SSNs, wages) | Medium / High | Encryption, access controls, retention policy from day one; cyber rider (~$1K/yr); week-one architecture decision: store truncated SSNs only (the form requires last four digits) — cannot be retrofitted later |
| E&O coverage gaps | Low / High | Policies commonly exclude government fines and penalties — carrier must confirm in writing that client back-wage damages caused by our error are covered, before binding, not at claim time |
| Client instructs us to file a report the engine flags as false | Low / Severe | The one path from insurance claim to criminal complicity. Refusal-and-termination clause in every engagement letter, enforced without exception, including against the largest account |
| Marketing overstatement (deadline-based scripts) | Low | Scripts state only verifiable facts about the prospect's own contract; honesty is also the sales strategy |
| Davis-Bacon weakened by legislation or rulemaking | Low / Severe | Monitored quarterly; ~half the states run independent prevailing-wage regimes — federal repeal does not zero the market. Form and rule changes historically increase demand for help |
Month-one legal spend: engagement-letter template drafted by counsel, entity formation, E&O and cyber binding — under $7K total, inside the existing budget. One forward item: if the general-contractor channel accelerates, enterprise paperwork (SOC 2, ~$15–25K) arrives with it — budgeted against that channel's revenue, not the launch.
| Parameter | Bootstrap ($25K) | Angel ($250K) | Venture ($1.5M) |
|---|---|---|---|
| Founder compensation, yr 1 | Draws after reserve (~mo. 4+) | ~$70K salaries | ~$130K salaries |
| First reviewer hire | Month 8 | Month 4 | Month 2 (two by mo. 12) |
| Second closer | Months 9–12, from cash flow | Month 6 | Month 4 |
| Ownership retained | 100% | ~80–85% | ~60–70% |
| Structural fit | Natural | Optional | Mismatched |
The funding recommendation writes itself: a business with ~90% cash margins, sub-$50 cash CAC, and break-even at four customers does not need outside capital — it needs execution. Outside money buys speed at the cost of ownership and adds growth pressure that a relationship-driven compliance service converts poorly. Bootstrap is the plan; the other columns exist to show the choice was examined, not overlooked.
Conservative case, stated plainly: if automation stalls at early review times, month-12 lands at $12–15K MRR — a 45–55% fully-loaded-margin services firm that still pays both founders and still grows. The plan's failure mode is a smaller good business, not a zero.
| Force | Rating | Evidence |
|---|---|---|
| Threat of new entrants | Moderate | Software is cheap to build — but the moat is the sales motion, the parsed-format library, and the client relationships, none of which ship with code |
| Buyer power | Low | Fragmented 3–15 employee buyers; compelled purchase; switching mid-project means missing a federal filing |
| Supplier power | Low | Inputs are public data and commodity cloud/AI services, multi-sourced by design |
| Substitutes | Moderate | The spouse and the bookkeeper — displaced on quality and guarantee at equal price, not on cost |
| Rivalry | Low | One national done-for-you incumbent, priced out of the segment by its own setup fee; platforms aimed up-market |
| # | Risk | Early-warning indicator | Pre-committed response |
|---|---|---|---|
| 1 | The phone doesn't convert — subs don't buy at $199–249 despite the pain | Validation test: < 2 paid pilots per 100 dials | Stop. The kill trigger is written before the first dial; no rationalizing past it |
| 2 | Hidden incumbent — GCs or payroll bureaus already bundle this for < $150/mo somewhere we haven't looked | Asked on every validation call: “who does your certified payroll today?” | The test doubles as a competitive census; if found, reposition or stop before productizing |
| 3 | Automation stalls — review time stuck near 45 minutes | Minutes-per-filing KPI, tracked from filing #1 | Accept the services-business case ($12–15K MRR), hire reviewers earlier, price the audit higher |
| 4 | A filing error freezes a client's payment and poisons referrals | Any rejected filing we prepared | Human sign-off on 100% of filings until error rates are measured; E&O; make-whole policy — one client's trust is worth more than one month's margin |
| 5 | Prospect base is dirty — most subs are underpaying the determination and cannot be served | Validation calls log pay rates vs. determination | > 50% underpaying converts the model to audit-led consulting — smaller, different, decided consciously |
| 6 | Key-person loss — the closer is the entire revenue engine | — | Scripts, call recordings, and playbooks documented from week one; second closer hired at first sustainable moment |
| 7 | Political — Davis-Bacon weakened, or infrastructure reauthorization fails (authorization lapses Sept 30, 2026) | Quarterly regulatory watch; reauthorization vote tracked | Model survives a 40% federal-spend cut; state prevailing-wage regimes (~half the states) hedge; pivot weight toward state-funded work |
This assessment does not ask for belief. It asks for two weeks of execution against pre-committed pass/fail gates, at a cost of roughly $800.
| Gate | Threshold | Verdict |
|---|---|---|
| Paying pilots by day 14 | ≥ 5 at $199–249/mo | PROCEED |
| Paying pilots by day 14 | < 2 | STOP |
| Prospects already underpaying | > 50% | RE-EVALUATE |
| Unseen incumbent bundling < $150/mo | Any evidence | RE-EVALUATE |
The worst case costs $800 and two weeks. The base case is a $300K-per-year business with ~90% cash margins, a publicly published customer list, a tested delivery engine, and no competitor on the telephone. The decision being requested is not “commit to the company.” It is “run the test.”