HOW TO READ BACKLOG RISK AS A SUBCONTRACTOR: FOUR FACTORS THAT MATTER.
A $3M backlog feels like a win. Whether it's depends on four factors most contractors never measure: whether the working capital exists to fund the mobilizations, whether the backlog is dangerously concentrated in one GC relationship, whether the work was bid at margins that cover real overhead, and whether the schedule assumptions behind the revenue forecast are realistic. Miss any one of those and the backlog isn't the safety net it looks like.
Backlog is the number contractors quote at every bar and every bank meeting, and by itself it says almost nothing. Two subs with the same signed volume can be in completely opposite positions, because one can fund the mobilizations and the other can't, or one is spread across five customers and the other is riding on a single GC. Backlog health is a ratio between the dollars you're holding and the working capital and delivery capacity behind them. The four tests below turn the number into something you can act on.
WHAT IT MEANS.
Backlog risk is the chance that signed work you haven't built yet costs you money or cash instead of making it, measured across working capital, customer concentration, margin quality, and schedule dependency.
WHAT MAKES A BACKLOG DANGEROUS.
Working capital required to fund the backlog
A $3M backlog sounds like good news, and whether it's depends on whether the working capital exists to fund the mobilizations. If the backlog requires $400,000 in mobilization cash across four projects starting in the next 60 days, and available LOC plus cash is $280,000, the backlog isn't an asset. It's a liability with a start date on it.
Concentration in a single GC or project type
A $3M backlog that's 80% one GC is a concentration risk, because one slow payer or one soured relationship takes most of the year's revenue with it. Backlog needs to be tracked by GC relationship, with anything above 40% with a single customer flagged for what it is. Diversification is cheaper to build before you need it than after.
Margin quality of the backlog
A $3M backlog at 18% gross margin produces a materially different business outcome than a $3M backlog at 9% gross margin. The low margin backlog generates roughly $270,000 less in gross profit for the same volume, the same crews, and the same risk. Volume without margin is work you're doing for somebody else's benefit.
Schedule risk and milestone dependent revenue
Backlog tied to inspection milestones, permit issuance, or other trades finishing before your crew can mobilize is schedule dependent revenue. It's on the books and it's not on your calendar, because the start date belongs to somebody else. A revenue forecast built on those dates without a delay assumption behind it's a forecast of what you hope happens.
THE FIVE TESTS TO RUN.
Add up the total mobilization cash required for every project starting in the next 60 days and compare it against available LOC plus cash. If the requirement is larger than what you have, the schedule needs to change or the funding does. That comparison takes an hour and it's the most useful hour in the quarter.
Calculate what percentage of the backlog sits with your largest single customer. Above 40% is a flag and above 60% is a structural risk to the business. The point of measuring it's to start the diversification work while you still have leverage in the relationship.
Calculate the weighted average gross margin across the backlog with the correct overhead rate applied to every job. Bid margins carried at a stale overhead rate overstate what the backlog will produce. This is where you find out whether the volume you won is worth building.
Model a 4 week delay on each project that depends on a third party, then look at what that does to the revenue and cash timeline. Delays are the normal case rather than the exception on milestone dependent work. Modeling one is how you find out whether a slip is an inconvenience or a payroll problem.
The CFOS 24 month forecast overlays projected project revenue by month against overhead by month, so the months where the backlog doesn't carry the business are visible well ahead of time. Concentration risk gets reviewed in the monthly strategic meeting alongside it. That combination turns backlog from a bragging number into a planning number.
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, and no add-ons.
Pricing
| Last 12 months revenue | Monthly fee |
|---|---|
| Up to $1M | $1,900 to $2,900 |
| $1M to $3.5M | $2,600 to $3,900 |
| $3.5M to $6.5M | $3,800 to $5,700 |
| $6.5M to $9.5M | $5,100 to $7,100 |
| $9.5M to $12.5M | $6,100 to $8,500 |
| $12.5M to $15.5M | $7,400 to $11,000 |
| $15.5M to $18.5M | $9,400 to $13,500 |
| $18.5M+ | Quoted individually |
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.
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 rather than a report.
Your bookkeeper keeps doing the books.
You stop touching the books.
Everything in Core, and we run the bookkeeping and the controllership as well. Nobody in your office is answering coding questions or chasing a reconciliation at month end.
We do the books. No payroll.
Every job shows its margin while it's still running.
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 job costing.
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