At $5M revenue the number of simultaneous cash gaps multiplies, overhead grows faster than the bid rate updates, and WIP becomes necessary for bonding. Here is what breaks and how to fix it.
At $2M you had one PM and a bookkeeper. At $5M you have two PMs, an estimator, a bookkeeper, and an office manager. Each hire added $60,000–$90,000 in annual fixed overhead. The overhead rate in bids has not been recalculated since the last hire. The gap between the rate in bids and actual overhead is now 6–10 points — costing $300,000–$500,000 per year in underpriced margin.
At $2M you started 3–4 jobs per year. Each required a 75-day cash gap. You funded them one at a time. At $5M you start 8–12 jobs per year, some simultaneously. Three new job starts in the same month stack three 75-day cash gaps at once. The total upfront cash required is 3–4x larger than at $2M even though revenue only doubled.
At $2M you had 6–8 active invoices per month. Your collections system — calling when you remembered — worked well enough. At $5M you have 15–25 active invoices across multiple GCs. The same informal collections system leaves $150,000–$300,000 uncollected at any given time. The AR backlog compounds faster than revenue.
Every PM, every estimator, every additional office staff member changes the overhead rate. The recalculation takes 20 minutes: pull SG&A from the last 12 months, divide by revenue. Compare to what is in bids. If the gap exceeds 2 points, update the bid model immediately. At $5M with a 7-point overhead gap, you are leaving $350,000 per year on the table — more than the cost of the PM hire that created the gap.
A 13-week cash flow forecast that includes all job starts — not just current AR and AP — shows the cumulative cash requirement of simultaneous new job mobilizations. When three jobs start in the same 30-day window, the forecast shows the stacked cash gap 8 weeks in advance. With 8 weeks, you can stagger starts by 2–3 weeks — same revenue, much smaller simultaneous cash requirement.
At $5M, AR collections need to be a scheduled weekly process — not a reaction to cash pressure. Every invoice over 30 days gets a call on Monday morning before the week starts. A collections log tracks every call, every follow-up, and every promised payment date. The AR backlog at 45+ days should never exceed 10% of monthly billings at this revenue level.
At $5M, bonding conversations become more complex — single-project limits of $2M–$3M require the surety to see WIP schedule accuracy. SPM builds ControlQore WIP reporting as part of the $5M financial system build. After 12 months of consistent monthly WIP with outcomes that match projections, the bonding capacity conversations improve meaningfully.
This contractor grew from $5M to $7M in 18 months. Three new hires added $180,000 in overhead not reflected in the bid model. AR ballooned as billing volume outpaced the informal collections system.
In month one — the backlog accumulated during the growth phase from $5M to $7M.
With overhead rate corrected, billing calendar built, and WIP live — the financial system that $7M requires, built at $5M.
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