PAVING JOBS LOOK PROFITABLE. THE CASH IS STILL IN TRANSIT.
Paving subcontractors have no cash left for reasons specific to how the work is built and billed, on jobs that are making money. The three that cost the most in this trade are below, taken from paving contractor research. Most are at 75 to 90 days from finishing work to holding the money, and 45 days is achievable.
Cash and profit are measured on different clocks. Your profit and loss records revenue when you invoice and costs when you incur them, while the bank account only knows what cleared. Labour goes out weekly and collects 45 to 90 days later, minus retention. That distance is what a growing, profitable paving company funds out of pocket, and it widens as you grow. The specific things that widen it in this trade are what the rest of this page is about.
WHERE IT LEAKS OUT.
Hot mix comes from someone else's plant on someone else's schedule. Seasonal plant shutdowns shorten the calendar. Mix that arrives too cold can't be laid, so haul time puts a radius around every job.
WHAT MOVES MARGIN IN THIS TRADE.
The Unhedged Tuesday
DOT work adjusts your pay to the liquid asphalt index automatically. Private work leaves you fully exposed on the same commodity. Index-tied escalation language in your private bids is the most valuable contract habit in the trade.
The Ticket-to-Yield Gap
You buy by the ton and sell by the square yard. Waste, over-depth and handwork are in the spread between plant tickets and placed quantity. Nobody sees the material given away until each job is reconciled.
The Ninety-Day Season
Plant schedules, temperature floors and a short calendar put the year's revenue into one window. The fleet and the overhead cost you for twelve months. You need a winter reserve to stay in business.
DAYS SALES OUTSTANDING.
Ninety days is weak, 45 is the target, 30 is strong. Nothing else moves cash faster.
| Position | Days | What it means |
|---|---|---|
| Weak | 90 days | Roughly three months of work funded out of your own pocket. |
| Target | 45 days | You can get here on the days you control. Bill on time, send complete paperwork, and follow up in week two. |
| Strong | 30 days | Takes work every month. It's the cheapest money you can get. |
Moving from 90 days to 45 frees roughly annual revenue divided by 365, times 45 days. At $4M that's about $493,000. At $8M it's about $986,000. That money costs no interest and needs no bank. So we fix billing and collections before we talk about financing.
PAVING BENCHMARKS.
Paving subcontractors at $1M to $5M net 6 percent, against the CFOS net profit target, set at your trade's net profit average at your revenue plus 3.5 points, never below 10 percent, before taxes. The working capital target is 13 percent of annual revenue, and the monthly close should finish by day 10 so the numbers can still change a decision.
FREQUENTLY ASKED.
