How Contractors Go Broke: The Cash Flow Trap

If I'm making money and growing, how in the world can

that actually make me more likely to run out of cash? We've talked about this way.

When you're growing, it's sucking cash out.

It is because when you're growing, you know there's cash needs.

People are frantic.

They're running around.

The job's got to get started.

You're getting pressures from everyone.

You want to get things going so you can relax a little bit.

You want to get it started.

I think the whole idea of this podcast to let people think about cash a little bit differently.

What is cash? What do you need it for? That seems self-evident, doesn't it? But cash can mean so many things to a contractor and helping them.

It's the most fundamentally powerful tool you can have.

You might say, oh, it's okay.

If I have good credit, I don't need good cash.

Well, maybe, but if you have good credit, you're in a backwards position.

In some way, you're either paying a higher bond rate or you're paying interest on money that you're financing on this job.

So I was hoping we could kind of talk about that.

Why does that happen? What are some common mistakes that contractors make? And how do you determine exactly what your cash costs are going to be before you even start a project? It's very freeing.

Yeah,

I know we talk about cash and cash flow all the time, but For a lot of contractors, whether it's trying to get bonded and get set up where they can run it, but they may see down the road it's profitable, it's cash coming in the door.

But to be able to get to that cash, you've got to be able to fund it and float it.

And so I think that's where you want to go with this today.

People underestimate how much it's actually costing them

to actually float that job.