HOW MANY MONTHS OF WORK DO YOU ACTUALLY HAVE SIGNED?
Backlog coverage ratio is total signed contract value divided by average monthly revenue. A $5M subcontractor with $1.5M in signed backlog has 3.6 months of coverage. That's healthy for a fast bidding specialty sub and thin for a civil contractor with 90 day mobilization lead times. SPM tracks backlog coverage monthly in the CEO Report, because the coverage ratio is the earliest leading indicator of a future cash shortfall.
Every other warning sign in a subcontracting business tells you about last month. Backlog coverage tells you about next quarter, because it measures work that's signed but not yet built. Revenue can hold flat for two more months while the ratio slides from 3 to 1.5, and the P&L will look fine the whole way down. Overhead doesn't slide with it. That's why the number belongs on a report the owner reads every month rather than in an estimator's head, and why the trend line counts more than any single reading.
WHAT IT MEANS.
Backlog coverage ratio is total signed contract remaining value divided by average monthly revenue, which is how many months of work a subcontractor has under contract right now.
Three to six months of coverage is the healthy band for most specialty subs, and below two months is a cash risk signal rather than a slow quarter. Above six months the risk flips from too little work to more work than the crew can build on the dates already promised.
Use remaining contract value rather than total contract value, because work already billed isn't backlog. On a $1.2M contract that's 60% complete, the remaining backlog value is $480K. Counting the whole $1.2M is the most common way a thin backlog reads as a comfortable one.
WHAT THE RATIO TELLS YOU BEFORE THE BANK DOES.
Below 2 months: cash shortfall in 60 to 90 days
When backlog coverage drops below 2 months, revenue is about to drop and overhead isn't. Fixed costs like payroll, insurance, equipment, and the office continue at full rate. If new work isn't signed in the next 30 to 45 days, the business will be spending more than it's bringing in within 60 to 90 days. That signal gives the owner time to act, and without tracking it the cash shortage is the first indicator anybody sees.
Above 6 months: crew capacity risk
Heavy backlog isn't a problem until it exceeds crew capacity. A specialty sub with 7 months of backlog that can only build 5 months of work with its current crew is either going to slip schedules, hire aggressively, or damage relationships when it can't start jobs on the promised dates. Backlog coverage above 6 months triggers a crew capacity review rather than a celebration.
The trend direction counts as much as the number
A backlog coverage ratio of 3.5 months trending down for 4 consecutive months is a more urgent signal than a 2.5 month ratio that has held flat for a year. The 13-month CEO Report tracking makes that trend visible. A ratio that declines every month is the definition of a pipeline problem developing in slow motion, and it's nearly invisible without the history next to it.
WHAT IT LOOKS LIKE IN DOLLARS.
Backlog coverage ratio is total signed contract remaining value divided by average monthly revenue. A $5M subcontractor with $1.5M in signed backlog is at 3.6 months. Under 2 months is thin and comes with cash shortfall risk in 60 to 90 days, 2 to 3 months is a watch zone where bidding becomes the priority, 3 to 6 months is the standard healthy range, and above 6 months is strong with crew capacity as the thing to watch.
A verified erosion control client doing $5.2M saw their coverage ratio drop from 3.1 to 1.8 months over one quarter. Because it was on the CEO Report, the owner saw the slide in month one instead of when revenue fell. Bidding activity doubled for six weeks and the shortfall never reached the bank account.
A subcontractor operating a 12-person shop saw coverage fall below 1.5 months. Instead of guessing, the owner used the number, deferred two equipment purchases, and slowed one hire until coverage recovered to 2.5. That's roughly $120K of spending timed to the pipeline instead of timed to optimism.
With coverage visible, thin months ahead justify pursuing work at tighter margins to keep crews busy, and fat coverage justifies walking away from bad margin work. One client's win rate dropped from 41% to 28% after coverage tracking started and margin went up. The ratio told them when they could afford to be selective.
HOW THE RATIO GETS BUILT FOR YOUR TRADE.
Civil backlog is lumpy, and one $2M DOT award can change the ratio from 1.5 to 4 months overnight. The risk is in the space between awards, because bid cycles on public work are 60 to 120 days from letting to NTP, so a thin backlog today means a revenue hole one quarter out rather than next month. Civil contractors need a higher coverage floor, 3 months minimum, because the replenishment cycle is slower.
Concrete backlog gets used up fast. A $400K pour package that looked like six weeks of work compresses to three when the GC accelerates the schedule. Concrete subs consistently overestimate coverage because they divide backlog by average monthly revenue instead of scheduled burn rate. CFOS tracks both numbers, and the scheduled burn is the one that predicts the shortfall.
Electrical backlog has the longest tail, because rough-in dollars are used early while trim and closeout dollars stay in backlog for months without producing revenue at the same rate. A $1.8M electrical backlog might only support $150K per month of billing in its final phase. Phase weighted backlog coverage is the only honest read for an electrical sub.
T&M trades technically have no backlog, they have client relationships and historical billing rates. The coverage equivalent is contracted recurring scope plus a trailing 90-day T&M average. A fiber contractor with zero signed contracts but $200K per month of consistent carrier work has coverage, it's just invisible on a traditional backlog report. CFOS builds the T&M equivalent out explicitly instead of reporting a zero.
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 |
|---|---|---|
| Under $1M | $1,900 to $3,300 | $1,000 |
| $1M to $3.5M | $2,600 to $5,300 | $1,500 |
| $3.5M to $6.5M | $3,800 to $8,300 | $3,000 |
| $6.5M to $9.5M | $5,100 to $11,800 | $4,500 |
| $9.5M to $12.5M | $6,100 to $14,900 | $6,000 |
| $12.5M to $15.5M | $7,400 to $17,650 | $7,500 |
| $15.5M to $18.5M | $9,400 to $22,400 | $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.
Every job shows its margin while it is still open.
Everything in Core, plus the bookkeeping and bank reconciliations done for you, and the job costing and WIP software set up, loaded with your cost codes, and managed every month. Use your own online software, or move to ours and we cover it.
A bookkeeper we choose does the books and reconciliations. No payroll.
You approve, and the money side gets handled.
Everything in Strategic, plus a controller we choose who handles your bills and receivables for you the way an in-house controller would. They call vendors, pay the bills and keep the accounting current. We plan the cash flow first, and you approve every payment because it is your money.
A controller we choose does the payables and receivables. No payroll, no pay applications, no collections.
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