A FULL BACKLOG CAN KILL YOUR COMPANY.
Backlog isn't cash. It's a promise of future cash, and it requires you to spend money you may not have before any of it comes in. A dangerous backlog is one that requires more working capital to execute than the business has available. When subcontractors bid and win without modeling the working capital requirement of each job, they sign contracts that speed up financial collapse instead of preventing it.
The trap is that winning work is the one thing everybody in the company celebrates. Nobody throws a party for a bid you passed on because the mobilization was too heavy for the bank account. So the sales side keeps producing and the finance side keeps absorbing, until the month those two can't both be true. What makes this one cruel is that the jobs are usually good jobs at fair prices. The company isn't failing at construction. It's failing at funding construction, which is a different problem with a different fix.
WHAT IT MEANS.
A dangerous backlog is one that requires more working capital to execute than the business has available, including undrawn credit.
Every construction job requires working capital to execute. Mobilization costs money before the first billing event, crews need payroll before the GC pays the invoice, and materials get purchased before anybody bills for them. One client reached $5M in backlog by year two and was waking up at 3am terrified of losing the house, because they had taken on more work than their working capital could fund.
The damage reaches the field before it reaches the P&L. AP that runs 60 to 90 days past due triggers supplier credit holds. A concrete sub who can't get material on account can't pour, and a civil contractor who loses equipment rental credit loses the machine. The execution problem everybody is arguing about in the trailer is a symptom of the backlog and capital mismatch in the office.
Undercapitalized growth also builds a ceiling. The company gets to $4M, then $5M, then $6M, and hits a wall where every new job produces more financial stress instead of more margin. The owner works harder, takes on more risk, and makes less money than he did at $3M. That's not a sales problem and it's not a field problem. It's a backlog quality problem.
HOW TO KNOW IF YOUR BACKLOG IS DANGEROUS.
Your backlog grows faster than your bank balance
If backlog is increasing while cash is flat or declining, you're funding growth out of your existing working capital. Every new job signed without a matching increase in collected receivables or available credit draws the cushion down. A contractor who signs $3M in new work in Q1 while collecting $1.5M in Q1 receivables is net negative on working capital before a single crew mobilizes on the new jobs.
Cash negative jobs hiding in the portfolio
A cash negative job isn't necessarily a money losing job. It's a job whose pay structure demands more cash outflow in the near term than it returns. A long duration job with 90 day public pay cycles and a large mobilization cost can be perfectly profitable at closeout and consistently cash negative for the first four months. A combined revenue forecast buries that timing, which is why each job has to be modeled on its own.
The line of credit funds operations instead of opportunity
A line of credit is for growth: equipment, strategic hiring, and bid bonds on large projects. When it gets drawn every month to cover payroll and AP timing, it's functioning as a working capital substitute for an undercapitalized business. Once the LOC is fully drawn there's no buffer left for anything unexpected, and one delayed GC payment, one retainage hold, or one project dispute can start a cascade.
WHAT IT LOOKS LIKE IN DOLLARS.
Say a job requires $180,000 in working capital to fund its first 60 days and you've $120,000 available. You'll run out of money executing a job you legitimately won at a profitable price. The bid was fine, the margin was fine, and the outcome is still a crisis, because nobody checked the funding requirement before signing.
A contractor going from $2M to $5M in a single year doesn't just need more field capacity. They need roughly 2.5x more working capital than they used the year before. That's why the most dangerous year in a subcontractor's history is usually its best sales year, and why the crunch reaches the bank account about four months after the celebration.
The requirement per dollar of backlog varies by trade and by pay structure. Civil contractors typically need $0.12 to $0.18 in working capital per $1.00 of backlog. Electrical contractors with large material buyout requirements can run $0.20 to $0.28. Knowing your own ratio turns a backlog number into a funding number, which is the only form of it you can plan against.
When the LOC is maxed and payroll is due, an MCA starts to look like the answer. It's not. An MCA at 40 to 60% annualized cost on $150K compounds the working capital problem instead of relieving it. SPM has worked with contractors holding four simultaneous MCAs, each one making the next payroll cycle harder to fund than the last.
BACKLOG AS A FINANCIAL DECISION, NOT A SALES METRIC.
Every bid gets evaluated for its working capital requirement before it goes out, not just for GP margin. A 22% GP job that requires $250,000 of upfront working capital is a completely different decision than a 22% GP job that front loads billing. Mobilization cost, pay cycle timing, material buyout schedule, and LOC headroom all get reviewed before the contract is signed.
If a project requires more working capital than is available including undrawn LOC, the bid gets passed or the contract terms get negotiated before signing. That is a filter, and it decides before the argument starts. The 13 week and 24 month forecast is updated with every new contract signed, so the cash impact of adding backlog is visible before it reaches the account.
Once a month the whole portfolio gets sorted: which jobs are cash positive in the next 90 days, which are cash negative, and what the net position is against available credit. Retainage release dates go into the same view, because $400K releasing over the next 6 months is part of the working capital picture. Billing velocity gets pushed at the same time, since collected receivables fund new mobilizations more cleanly than LOC draws do.
THE OUTPUTS, NAMED.
FLAT MONTHLY FEE. NO SURPRISES.
Three tiers, priced by your trailing twelve month revenue. Which one you're in depends on how much of the work you want off your desk. No hourly billing. No payroll. The one-time onboarding fee is right here in the table.
| Last 12 months revenue | Monthly fee | One-time onboarding |
|---|---|---|
| Up to $1M | $1,900 to $2,900 | $1,000 |
| $1M to $3.5M | $2,600 to $3,900 | $1,500 |
| $3.5M to $6.5M | $3,800 to $5,700 | $3,000 |
| $6.5M to $9.5M | $5,100 to $7,100 | $4,500 |
| $9.5M to $12.5M | $6,100 to $8,500 | $6,000 |
| $12.5M to $15.5M | $7,400 to $11,000 | $7,500 |
| $15.5M to $18.5M | $9,400 to $13,500 | $9,000 |
| $18.5M+ | Quoted individually | Quoted individually |
The onboarding fee covers migrating your books back to the start of your last taxable year and getting you fully operational in 60 days. It's billed once, with your first invoice. It's the same for all three tiers. Your first month is prorated, and your monthly engagement starts on the first of the first full month.
Range reflects the three tiers below. Which one you're in depends on how much of the work you want off your desk. No payroll. No hidden line items. The onboarding fee is right here in the table.
You stop guessing.
You get the CFO work. Job costing built against the way you estimate, a 13 week cash forecast, monthly WIP, and a meeting every month that ends in decisions and never in a report.
Your bookkeeper still does the books.
You stop touching the books.
Everything in Core, and we do the bookkeeping and the controllership as well. Your office stops answering coding questions and stops fixing a reconciliation that will not balance on the last day of the month.
We do the books. No payroll.
Every job shows its margin while it is still open.
Everything in Executive, plus the job costing and WIP platform set up, loaded with your cost codes, and managed for you every month. You never have to learn it.
We do the books, the job costing, and the software. No payroll.
FREQUENTLY ASKED.
