GOOD BACKLOG VS DANGEROUS BACKLOG.
A good backlog is signed work that your available working capital can fund through mobilization and the first billing cycle. A dangerous backlog is signed work that exceeds your working capital — which means mobilizing creates a cash deficit that compounds each week until the first pay app comes in. The dollar amount of your backlog tells you almost nothing. The cash requirement of your backlog tells you everything.
Most subcontractors measure backlog in contract dollars. The number that actually matters is the cash requirement — how much working capital do you need to mobilize each project and fund it through its first payment cycle. A $3M backlog that requires $400K in mobilization capital on a company with $180K in available LOC is not a $3M opportunity. It's a $220K cash crisis waiting to happen. This page shows you how to calculate that number before you sign anything.
WHAT MAKES A BACKLOG GOOD VS DANGEROUS.
Work Your Working Capital Can Actually Fund
Good backlog has four characteristics: the margin is at or above your trade benchmark, the GC or owner has a history of paying on contract terms, the mobilization cash requirement fits within your available LOC and operating cash, and the payment cycle is short enough that collections replenish capital before the next mobilization event. A $1.2M private commercial project with a GC who pays net 30, a mobilization requirement of $90K, and an available LOC of $300K is good backlog. You can fund it, you'll get paid on time, and the next project doesn't have to wait.
Work That Looks Good on Paper and Creates a Cash Crisis
Dangerous backlog looks the same as good backlog on a revenue forecast. The difference is in the cash requirement vs available capital. A $1.8M public infrastructure project with a 90-day pay cycle, a $220K mobilization requirement, and a GC who runs pay apps through a government approval process is dangerous backlog if you only have $150K in available capital. You'll mobilize, the crew will run for 6 weeks, and the first check won't arrive until week 13. Every week between mobilization and first payment, you're funding the project out of capital you may not have.
The GHC example: A $7.1M civil contractor we worked with signed $5M in work in year two — growing hard and fast. Within 8 months, two lines of credit were maxed, an SBA loan was drawn, and a personal LOC secured against the house was tapped. The work was profitable. The backlog was real. But the mobilization cash requirement of three simultaneous project starts exceeded available capital by $400K. The backlog was dangerous, and nobody ran the math before signing.
HOW TO CALCULATE YOUR BACKLOG CASH REQUIREMENT.
For every project in your signed backlog, calculate the cash requirement before first payment:
Step 1: Estimate mobilization cost — labor, material purchases, equipment deployment, first 2–3 weeks of overhead allocation.
Step 2: Identify first billing event — when can you submit the first pay app and what is the dollar amount?
Step 3: Add the GC's payment cycle to the billing date — that's when cash actually arrives.
Step 4: Sum total costs from mobilization to first payment — that's your cash requirement for this project.
Step 5: Compare to available capital (cash + available LOC). If requirement exceeds available capital, the project is dangerous backlog until capital is raised or start date is deferred.
BEYOND CASH — WHAT ELSE MAKES BACKLOG GOOD OR DANGEROUS.
FREQUENTLY ASKED.
