More jobs. More billings. More crew. More stress. The business is bigger than it has ever been and the bank account is tighter than it was at half the size. This is not bad management. It is a system problem.
Growth does not fix cash flow problems in construction — it amplifies them. Every new job is another 75–90 day cash gap funded out of pocket. Every new hire is more fixed overhead the bid rate does not reflect yet. Every new GC relationship is more AR to chase. The system that got you to $2M does not scale to $5M without being rebuilt.
At $2M you carry one or two active jobs at a time — each requiring 75–90 days of upfront cash. At $5M you carry four or five. The total cash required to fund active work is 3–4x larger even though revenue only doubled. The billing system that handled one gap does not handle five.
Every PM you hire, every truck you buy, every insurance renewal — fixed overhead goes up. The overhead rate in your bids needs to follow. Most contractors update it never. By the time you hit $5M, you are often 6–10 points below actual overhead in every bid. Every job you win is underpriced relative to what it actually costs to run the business.
At $2M you might have $40,000 in AR over 45 days. At $5M that same percentage is $100,000. If the collections system has not scaled with revenue, the backlog grows faster than the business. By the time you notice it, there is $200,000+ sitting in uncollected invoices while you wonder why a bigger business has less cash than a smaller one.
Pull last 12 months of SG&A off the P&L. Divide by revenue. That is your real overhead rate. If it is different from what is in your bids — and it almost certainly is — update the bid model today. Every job bid at the old rate after a significant hire is underpriced. The correction takes one number change in your estimating tool and applies to every future bid.
Before you sign any new subcontract, negotiate the schedule of values to front-load mobilization (5–10% of contract value), material procurement (billable at delivery), and the early phases where cash goes out fastest. This compresses the cash gap on every new job before it starts — negotiated once, permanent benefit for the life of that contract.
Every job start is an upfront cash requirement. Starting three jobs in the same week stacks three simultaneous 75-day cash gaps. A 13-week cash flow forecast that includes backlog starts lets you see this 8 weeks in advance and stagger starts by 2–3 weeks — same revenue, much smaller simultaneous cash requirement.
At $5M you are generating $400,000+ per month in billings. Even a 10% collections lag is $40,000 per month sitting uncollected. Call on every invoice over 30 days every Monday before you do anything else. This single process, done consistently, prevents the AR backlog from ever reaching crisis level.
Revenue had jumped from $5M to $7M in 18 months and cash was worse than it had ever been. Three new hires had added $180,000 in annual overhead that was not reflected in the bid model. AR had ballooned to $310,000 uncollected because the collections system had not scaled with revenue. A $750,000 loan had been taken to fund the growth gap.
AR that had accumulated during the growth phase — money that was always earned, never followed up on.
The loan that had funded the growth gap was eliminated once the billing structure caught up to the revenue level. Now on track for $12M with a financial system built to handle it.
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