Growth is eating your cash faster than it pays you
The best year you ever had on the income statement was the year you almost didn't make payroll.
Growth consumes cash. Every new job funds labor and material before it funds you, so a fast-growing sub is a lender to its customers. Without a forecast, growth feels like success right up until the week it doesn't.
Three moves, in order
Step 07: Monthly cadence
Weekly bookkeeping, cost to complete, and one CEO report, on the same days every month.
Other problems step 07 solves
Other things that go wrong
What owners ask
Construction company growing but running out of cash?
The best year you ever had on the income statement was the year you almost didn't make payroll. Growth consumes cash. Every new job funds labor and material before it funds you, so a fast-growing sub is a lender to its customers. Without a forecast, growth feels like success right up until the week it doesn't.
Which part of the system fixes this?
The step is number 07, monthly cadence. Weekly bookkeeping, cost to complete, and one CEO report, on the same days every month. It's drawn from chapter 7 of CONTROL: The Construction Financial Operating System.
Is this normal for my trade?
Across the 48 trades that publish a figure, net profit at $1M–$5M averages 7% before taxes. If you're well under that and this page describes your month, the two are usually the same story. The published average tells you where the pack is, and your own job costing tells you where you are, which is the number that pays payroll.
Where do I start?
Forecast cash 13 weeks out, updated weekly, before you take the next job.
Can I fix this without touching anything else?
You can try, and it doesn't hold. Step 07 depends on step 03, overhead calculation and step 04, estimating system and step 05, software and bookkeeping alignment and step 06, project management. Install it ahead of those and it produces numbers the field won't trust, which is worse than the problem you started with.
Wrote CONTROL, the 8 step system behind these figures. More about the author.