Thriving Through the Seasons: Managing Cash Flow in Seasonal Industries (and Investing for Growth When the Timing Feels Wrong)

If you run a construction or professional services business, you already know the rhythm of the year isn’t smooth, it’s a wave.

You’ve got the slow season, when you’re light on work but your bank account looks great because you’re collecting receivables from the previous busy stretch. Then, just when your pipeline fills and you’re ready to ramp up again, the cash starts to dry up. You’re trying to staff up, buy materials, or fund project starts, but the cash flow from receivables is far from sufficient to feed the new project starts.

Sound familiar?

You’re not alone. Many small business owners in seasonal industries; construction, engineering, landscaping, consulting, even certain service trades, live this feast-and-famine cash cycle. The frustrating part is that even profitable businesses can feel broke half the year.

But here’s the truth: with the right structure, seasonal cash flow cycles can be managed, and even used strategically to fund growth.

Let’s unpack how.

The Seasonal Cash Flow Trap

First, let’s name what’s really happening.

Seasonal businesses don’t necessarily have a revenue problem, they have a timing problem.

Cash flow gaps often appear when:

• The business ramps up fast after a quiet period (more staff, more materials, more upfront costs).

• Customers take their time paying invoices, often 30–60 days after the work is complete.

• Deposits and progress billings don’t quite align with real cash needs.

• Owners pull excess cash during the slow season, assuming the “surplus” means the business is flush.

The result? You hit your busiest, most opportunity-rich time of year, and suddenly you’re chasing cash, not growth.

When I work with construction and professional services firms, I often find that the problem isn’t that the business is underperforming. It’s that they’ve never built a system that matches cash flow with the rhythm of their operations. However, underperforming projects will exacerbate this cash flow wave.

Map your cash flow cycle

You can’t manage what you don’t monitor.

The first move in stabilizing a seasonal business is to literally map out your cash flow cycle.

Here’s how to do it:

1. Chart your last 12–24 months of monthly inflows and outflows.

• Include everything: client receipts, payroll, subcontractors, materials, overhead, loan payments, and owner draws.

2. Overlay your work volume or billings on top of that.

• When does work actually gets done vs. when do you get paid?

3. Identify your “low point” months.

• This is your annual cash valley; when your balance dips before the busy season.

4. Identify your “peak” months.

• When your AR collections finally catch up and the bank account looks great again.

For most small construction and service firms, this pattern is relatively consistent year to year. Once you see it visually, it’s eye-opening.

That graph becomes your management tool for everything else we’ll talk about.

Smooth out the peaks and valleys

Now that you can see your cash pattern, the goal isn’t to eliminate the cycle, it’s to flatten it.

A few practical tactics go a long way:

1. Align billing and collection practices

Your cash inflow schedule should mirror your work schedule as closely as possible.

• Use deposits and progress billing to fund project start-up costs.

• Negotiate mobilization payments, or upfront deposits if there are large material purchases. The more you can front load your bid, the more likely you will remain cash neutral, or even positive from the beginning.

• Bill earlier and more frequently.
  Smaller, more regular invoices are easier for clients to pay (and harder to delay).

• For many businesses four $25,000 invoices feel easier to pay than one $100,000 invoice

• Follow up consistently.
  Implement a “collections cadence”, follow-up calls, and a designated person responsible for AR.

2. Build a seasonal working capital cushion

If you know you’ll need $200,000 in payroll and materials to ramp up next March, plan for it while you’re flush this November.

That might mean:

• Setting aside a dedicated seasonal reserve fund (a separate bank account).

• Using a line of credit as a cash bridge, then paying it off during the high-cash months; keeping in mind that this has additional costs to your business.

• Reinvesting profits strategically, not reactively.

The best-run businesses I see don’t try to guess their way through seasonal cash crunches. They budget for them.

3. Separate operating and owner cash

This one’s big.

Many small business owners see a large bank balance in the off-season and think, “Great, I can take some distributions.”

But if that cash is really next season’s fuel, pulling it now just guarantees a shortage later.

Following the steps above provides clarity on the business cash needs as well as the timing of those needs. Once you have visibility to that, you will be able to see and plan the “right” time to take distributions from the business.

Plan for growth inside the cycle

Here’s where most business owners get stuck.

They want to grow; hire a new estimator, buy equipment, add another crew, but every time they try, cash gets tight.

So they pull back, wait until “things slow down,” and then invest when they should be conserving cash.

The key to breaking this cycle is learning when to invest, and how to structure those investments so they fit your cash flow rhythm.

Let’s look at a few strategies that work.

1. Invest in growth when you’re cash-strong (but plan for it year-round)

Most owners think about growth in the middle of their busy season, when the pain points are loudest: too many projects, not enough people, systems struggling to keep up.

But that’s the worst time to make big investments; you’re already cash stretched.

Instead, use your high-cash months (after receivables have rolled in) to fund investments that make next year smoother, or as noted before, set reserves aside to cover the cost of the ramping up a larger staff before your busy season.

Examples:

• Upgrading your job costing or project management software.

• Building a cash reserve to hire earlier in the next ramp-up.

• Paying deposits on equipment before year-end while your cash position is strong.

The mindset shift is simple:

Don’t invest during the problem, invest ahead of it.

This is how mature businesses get ahead of their cash flow curve instead of chasing it.

2. Use financing strategically, not desperately

If you’ve ever maxed out your credit line just to make payroll, you know how stressful bad timing feels.

But financing isn’t the enemy. Used wisely, it’s a cash flow stabilizer.

A few options worth considering:

• Operating Line of Credit: Best for bridging short-term working capital needs between project starts and collections.

• Equipment Financing or Leasing: Smooths out the cash outlay over time rather than slashing through your working capital.

• Seasonal Terms with Suppliers: Negotiate payment windows that align with your project cash inflows. Remember that your bank is also a supplier (of financing) and a good banker will entertain this discussion with you.

• Government-backed Programs (U.S. SBA / Canada BDC): These often offer flexible, lower-interest financing for growth and expansion.

The goal is to use credit as a timing tool, not a crutch.

As your fractional CFO, I’d tell you:

If you can forecast it, you can finance it intelligently.

But if you’re guessing, you’ll end up over-leveraged or underfunded.

3. Fund growth from profitability improvements, not just revenue

Seasonal businesses often equate growth with “more work.”

But more work without more margin just amplifies the cycle; you get bigger peaks and deeper valleys.

Instead, focus on profitable growth. That means tightening up:

• Job costing: Know your margins by project, not just overall.

• Overhead recovery: Price projects to fully recover fixed costs.

• Crew efficiency: Measure productivity, not just hours worked.

• Change orders: Track and bill them promptly (huge hidden profit source).

A 2% improvement in margin will usually stabilize cash flow more than a 10% bump in revenue.

We’ve talked about mapping your cash flow cycle, flattening the peaks and valleys, and aligning your investments with the rhythm of your business.

Now let’s move from tactics to strategy: how to think like a CFO, even if you don’t have one on payroll.

Because managing seasonal cash flow isn’t about surviving the swings; it’s about using them to your advantage.

Build a rolling 12-month cash flow forecast

If you only look at your bank balance, you’re driving with your eyes glued to the dashboard.

You need to look out the windshield and that’s what a rolling forecast does.

Here’s how it works:

1. Start with your historical pattern.
   Use last year’s monthly inflows and outflows as your base. You already know which months are strong and which are tight.

2. Layer in your pipeline.
   Add confirmed projects, expected start dates, and when you realistically expect to invoice and collect.

3. Model your expenses.
   Include payroll, materials, rent, debt service, equipment leases, taxes, and owner draws. Be honest here, it’s better to see a dip on paper than feel it in real life.

4. Update it monthly.
   This isn’t a static spreadsheet; it’s a living tool. Each month, roll it forward another month so you always see 12 months ahead.

When you do this consistently, a few things start to happen:

• You see the cash dip coming six months out.

• You can plan to borrow (or save) before you hit the valley.

• You stop reacting to cash surprises.

This single practice separates businesses that scramble from those that scale.

Invest in the right season, and for the right reason

There’s a subtle difference between growth and expansion.

Growth means doing more of what works. Expansion means adding something new, a new crew, service line, or region.

Both can be healthy, but they require different cash strategies.

1. Growth investments: fund from operations

If you’re doubling down on what’s already profitable, taking on an extra crew or upgrading project management tools, fund it from retained earnings or your high-cash months.

Because you already understand the margins, you can forecast the return more reliably.

2. Expansion investments: pair with outside capital

If you’re launching something new, adding civil work to your commercial contracting business, or opening an office in another city, don’t choke your operating cash to do it.

Expansion should be financed like an asset: with its own funding source (equipment loan, investor capital, or a term loan) that matches the life of the investment.

Here’s the CFO mindset:

Fund short-term needs with short-term cash.
Fund long-term assets with long-term capital.

That simple principle will keep you from draining working capital every time opportunity knocks.

Make your slow season work for you

Most business owners dread the slow season. But here’s the truth: it’s your secret weapon, if you use it right.

The off-season gives you something you don’t have the rest of the year: time.

Use it to strengthen the business so that next year’s busy season is smoother, more profitable, and less chaotic.

Here’s how:

1. Tune up your systems

When projects slow, focus on efficiency:

• Clean up your job costing system.

• Review your estimating accuracy.

• Implement new accounting or scheduling software.

• Standardize your invoicing or project closeout process.

Those process improvements save you hours, and dollars, when the next rush hits.

2. Evaluate profitability

Go project by project. Which ones made money? Which ones didn’t?
Why?

Dig into your job margins, labor utilization, and overhead allocation. This is where your future profit lives.

3. Strengthen relationships

The off-season is when you can reconnect with clients, suppliers, and your team, without the pressure of deadlines.

Call your best customers just to check in.
Negotiate better supplier terms for next year.
Host a team debrief and ask, “What can we do better next season?”

It’s not downtime, it’s strategy time.

Think like a CFO (even if you don’t have one)

You don’t need a finance degree to manage cash flow like a pro. You just need to think in terms of timing, structure, and strategy.

Here’s what that looks like:

Strategic thinking

Present thinking (Default)

“What’s our cash position 90 days from now?”

“What’s in the bank today?”

“How do we make next season stronger?”

“How do we get through this season?”

“Can I finance this asset over 5 years?”

“Can I pay cash right now?”

“What does my breakeven look like in slow months?”

“I hope we make it through winter.”

That’s not criticism, it’s perspective.

When you start thinking like a CFO, you stop getting blindsided by your own growth.

Build a cash flow playbook

If you only remember one thing from this whole article, make it this:

Cash flow is a system, not an event.

Once you’ve mapped your cycle and built your forecast, capture your “rules” in a simple playbook.

Here’s an example outline you can adapt:

1. Cash flow principles

• Minimum reserve balance target

• Maximum owner draw policy

• Monthly cash flow forecast review date

2. Billing and collections policy

• Deposit requirement before work starts

• Progress billing schedule

• Collections cadence (when and who follows up)

3. Spending and investment rules

• Growth investments are planned 3–6 months ahead

• Expansion investments should utilize a separate funding source

• No large capital purchases without a 12-month forecast review

4. Financing guidelines

• Line of credit used for seasonal cash dips only

• Equipment financed over useful life

• Debt coverage ratio target maintained

When these rules are documented, and followed, you don’t have to re-learn the same lessons every year.

That’s how a small business runs like a big one.

Use cash surplus months intentionally

When cash starts rolling in after your busy season, it’s tempting to relax. But that’s exactly when smart owners get ahead.

Here’s a simple framework for what to do when your bank balance finally looks healthy:

1. Top up your reserve fund
   (Cover your next seasonal ramp-up before doing anything else.)

2. Pay down revolving debt
   (Clean up your line of credit or credit cards so they’re ready when you need them.)

3. Reinvest in high-return areas
   (Equipment upgrades that improve productivity, marketing that brings better leads, or systems that reduce rework.)

4. Distribute profit (if it’s truly surplus)
   (After your business is fully funded for the next season, not before.)

That’s how you turn a “good year” into a better foundation.

The big picture: control the cycle, don’t let it control you

Every business has rhythm.
Some are steady all year. Others, like construction and professional services, run in waves.

But the wave itself isn’t the problem, it’s how you ride it.

If you build systems that predict, plan, and prepare for your cycle, you’ll stop feeling like cash flow is something that happens to you.

Instead, you’ll use it as a lever for growth.

Because here’s the truth:

The businesses that thrive through every season aren’t necessarily the biggest, they’re the best at managing timing.

Bringing it all together

Let’s recap the full playbook:

1. Map your cash flow cycle. Know when you’re high and when you’re low.

2. Smooth the peaks and valleys. Align billing, collections, and reserves.

3. Plan growth investments around the cycle. Invest ahead of the crunch.

4. Use financing strategically. Match short-term and long-term uses.

5. Forecast continuously. Always look 12 months ahead.

6. Make your slow season productive. Improve, analyze, and plan.

7. Treat taxes as part of cash planning. Not an afterthought.

8. Build a playbook. Turn lessons into repeatable systems.

9. Deploy surplus intentionally. Fund the future before rewarding the present.

That’s what a CFO mindset looks like, whether you’re running a $2 million construction firm or a $20 million professional services company.

Final thoughts: you don’t need a Fortune 500 CFO

Managing cash flow in a seasonal business isn’t about financial theory, it’s about survival, control, and growth.

If you’ve ever said,

“We’re always short when we’re busiest,”
or
“I just don’t know where the money goes,”

then it’s time to take a fresh look at your cash cycle and build a system that actually fits your business.

That’s exactly what I help business owners do.

As a fractional CFO, I work with construction and professional services firms to create cash flow systems that stop the constant guessing and finally make growth sustainable.

So, if you want to stop riding the seasonal rollercoaster and start managing your business like the owner of a well-oiled machine, let’s talk.

How have you learned to ride the cash flow waves? Let us know in the comments.

The Silent Profit Killer: How Unclear Expectations and Assumptions Derail Small Businesses

Running a small business, whether in construction, engineering, consulting, or any other professional service, is like building a house. You need the right foundation, the right materials, and a team that knows exactly what they’re building. But here’s the truth: even the strongest foundation can crumble if your team isn’t on the same page.

The problem isn’t always cash flow, bad clients, or even the economy. Communication, or more specifically, unclear expectations and unchecked assumptions can be just as detrimental to success as a lack if economic resources.

It’s not glamorous, but this “silent profit killer” shows up everywhere: in contracts, in project delivery, in billing, and even in conversations between partners or leadership and staff. Left unchecked, it doesn’t just cause frustration, it costs money, time, and reputation.

Let’s break down why this happens, how to spot it, and what you can do about it before it chips away at your profits and your peace of mind.

Why Communication Breakdowns Are So Expensive

In construction and professional services, you’re selling more than just time or labor, you’re selling clarity, trust, and results. If expectations aren’t clear, here’s what can happen:

• Rework and wasted effort – The team thought you wanted X, but you really wanted Y. Now you’re paying double for the same work.

• Scope creep – Without clear boundaries, clients add “just one more thing,” and suddenly your margins vanish.

• Damaged relationships – Misunderstandings strain not only your client relationships but also internal teamwork.

• Delayed cash flow – Billing disputes often trace back to vague terms or unclear deliverables.

• Burnout – Staff get frustrated when they feel like the “goalposts” keep moving.

When you add it up, unclear expectations aren’t just an annoyance, they’re a bottom-line risk.

The Two Most Common Traps

From what I’ve seen, unclear expectations tend to fall into two main traps:

1. Lack of clarity going out (You didn’t set clear enough expectations)

This happens when you assume others know what you mean, but you haven’t spelled it out. Maybe you sent an email with a task but didn’t give a deadline. Maybe your contract left a key term vague. Maybe your proposal wasn’t crystal clear on what’s “in” vs. “out” of scope.

The danger here is that people will fill in the blanks with their own assumptions, and those assumptions almost never line up exactly with yours.

2. Misunderstanding coming in (The recipient didn’t get the message as intended)

Sometimes you do spell things out, but the other person doesn’t interpret them the way you meant. Words can be read differently, tone can be misunderstood, and even technical terms can mean different things to different people.

It’s the classic “I thought you meant…” scenario.

Here is how easily it can happen. I had been working with a new client whose CFO departed suddenly, and they found themselves within weeks of running out of cash. We were frantically working to control spending and generate a reliable positive cash flow projection for the bank. Late on a Friday afternoon I received a request from the COO that they need to secure two new vehicles urgently based on the build sheets that were attached. Due to the urgency, I quickly forwarded the build sheets to a couple of our leasing partners to see if they could provide better pricing or terms while posing some questions back to the COO about revenue streams that would be generated by the new units or availability of other units in the fleet to avoid the added cost. Following the weekend, I looked further into the request and discovered that these were not work vehicles at all and were executive perk vehicles and all the paperwork was complete with the dealership, merely requiring payment and proof of insurance to complete. Had we both taken a few extra moments to ensure we understood each other, his outgoing message and my incoming understanding, we would have saved time in completing the transaction. Plus we could have had a better conversation about appropriateness and timing of adding these vehicles to the fleet.

Why We Fall into These Traps

If we know unclear communication costs so much, why do we keep slipping into it? A few reasons come up over and over:

1. We assume others think like we do. You’ve been in the industry for 20 years, your staff or client hasn’t. What seems obvious to you may not be obvious to them.

2. We rush. Projects move fast, and it feels quicker to fire off a quick text or email instead of taking the time to clarify.

3. We avoid discomfort. Sometimes we don’t want to spell things out because it feels “awkward” or like we’re micromanaging.

4. We believe we’ve already been clear. But clarity isn’t about what you said, it’s about what the other person understood.

That last one is the kicker. Just because you explained something doesn’t mean it landed the way you intended.

Spotting the Warning Signs

So how do you know if unclear expectations are creeping into your business? Here are some telltale signs:

• Team members say things like “Oh, I thought you meant…”

• Projects regularly run over budget or schedule for reasons no one can quite pin down.

• You’re renegotiating scope or pricing mid-project more often than you’d like.

• Clients or partners frequently ask for clarification after the fact.

• Staff feel blindsided by feedback because expectations weren’t laid out up front.

If these are familiar, you’re not alone. But the good news is that they’re also solvable, without having to overhaul your entire business model.

The Financial Angle: Why CFOs Care About Communication

You might be wondering: why is a CFO writing about communication? Isn’t this more of an HR or leadership thing?

Here’s why: every misunderstanding has a cost, and that cost shows up on your financials.

• Rework = higher labor costs.

• Delays = slower cash collection.

• Client churn = lost revenue.

• Low morale = higher turnover costs.

As a fractional CFO, I’ve learned that tightening communication is one of the easiest ways to improve profitability, because you’re not working harder, you’re just wasting less.

In other words: clearer expectations are free profit.

How to Fix It: Practical Tools for Clearer Expectations

Alright, so what can you actually do about it? Let’s go practical.

1. Confirm understanding (The “playback” method)

Don’t just ask “Got it?” or “Does that make sense?” Instead, ask the other person to repeat back what they understood. Something like:

“Just so we’re on the same page, can you summarize what your next steps are?”

It may feel awkward at first, but it quickly exposes gaps before they cost you money.

2. Use checklists and templates

Airline pilots and surgeons use checklists for a reason, because even smart, capable people miss things. Standardize your contracts, proposals, and kickoff processes. Don’t reinvent the wheel each time.

3. Define “Done”

Don’t assume everyone knows what a finished product looks like. Be explicit.

• Instead of “Submit the report,” say “Submit the report with executive summary, charts, and recommendations in PDF format by Friday at 3pm.”

That level of detail prevents endless back-and-forth.

4. Write it down

Verbal instructions are the fastest way for things to get lost. Always follow up with a written version, even if it’s just a quick recap email.

5. Set boundaries upfront

Especially with clients, define scope and boundaries early. Spell out what’s included, what’s not, and how changes will be handled. This protects both your margins and your relationships. 

Real-World Scenarios Where Things Go Sideways

Let’s ground this in everyday business. Here are some situations I see all the time in construction and professional services:

• Jobsite instructions – A superintendent tells the crew to “finish up the west wall,” but half the team thinks that means prepping for drywall and the other half thinks it means painting. Result? Time wasted, materials wasted, frustration all around.

• Client deliverables – A consulting firm promises to deliver a “final report.” The client assumed that meant a polished, presentation-ready document. The firm thought it meant a draft for review. Cue an uncomfortable conversation and unpaid extra hours.

• Billing disputes – A contractor sends an invoice with “labor” as the description. The client pushes back, saying they expected itemization. The work gets done, but cash flow stalls while the invoice sits in limbo.

These aren’t rare one-off mistakes—they’re the norm when expectations aren’t nailed down.

Leadership Style and Its Role in Clarity

Here’s the part many leaders underestimate: your personal communication style sets the tone for your entire organization.

• If you’re a “big picture” talker: You might think you’ve been clear, but your team is still missing the nuts and bolts.

• If you’re detail-heavy: You risk overwhelming people, and they tune out halfway through.

• If you’re conflict-avoidant: You might avoid setting firm boundaries, which leaves expectations wide open.

• If you’re highly directive: People may be afraid to ask clarifying questions, even if they don’t fully understand.

None of these styles are “wrong,” but they all carry risks. Self-awareness is the first step toward fixing communication gaps.

The Cultural Cost of Unclear Expectations

It’s not just dollars and cents. Poor communication creates cultural cracks that widen over time.

• Frustration and finger-pointing. When mistakes happen, people blame each other instead of the process.

• Erosion of trust. Team members stop assuming the best of each other. Clients lose confidence in you.

• Turnover. Good employees won’t stick around in an environment where they constantly feel set up to fail.

• Stagnation. Instead of improving efficiency, your team spends their energy cleaning up messes.

Think of it like hidden water damage in a house. You may not see the cost immediately, but over time it rots the structure.

Building a “Clarity Culture”

So how do you flip the script and make clarity part of your business DNA? Here’s a playbook I use with clients:

1. Make clarity a core value

Talk about it openly. Tell your team: “In this company, clarity matters more than speed. We’ll take an extra five minutes to get it right.”

2. Train your team

Don’t assume everyone knows how to communicate clearly. Run short training sessions on writing better emails, giving instructions, or running client meetings.

3. Normalize questions

Encourage people to ask, “Can you clarify?” without fear of looking stupid. Reward those who double-check instead of rushing ahead.

4. Standardize workflows

Every proposal, contract, or project kickoff should follow the same checklist. No freelancing on the essentials.

5. Measure it

Track how many projects run over budget because of “miscommunication.” Treat it like any other performance metric. What gets measured gets fixed.

The CFO’s Perspective: Turning Clarity Into Profit

Let’s bring it back to the numbers. Imagine two companies, both doing $10M in annual revenue.

• Company A loses 2% of its billable hours to rework and confusion. That’s $200,000 straight off the bottom line.

• Company B invests in clearer communication, reducing rework by half. That’s $100,000 back in profit—without selling a single extra project.

The ROI on clarity is massive. And unlike chasing new clients or cutting overhead, it doesn’t require risky changes.

The Human Side: Clients and Staff Love It

Here’s the bonus: it’s not just about saving money. Clear expectations make your business easier to work with.

• Clients appreciate knowing exactly what they’re getting.

• Staff appreciate knowing exactly what’s expected of them.

• You, as the owner, enjoy less stress and fewer surprises.

In industries built on trust and relationships, that’s worth its weight in gold.

Quick Wins You Can Implement Tomorrow

If you want to start building clarity into your business without a huge overhaul, here are some small but powerful steps:

• End every meeting with a recap. “Here’s what we decided, here’s who’s responsible, here’s the timeline.”

• Add a “Scope Exclusions” section to your proposals. Spell out what you’re not doing so clients don’t assume it’s included.

• Use project kickoff checklists. Don’t leave room for guesswork on the front end.

• Have staff send recap emails after client calls. It takes five minutes and prevents days of confusion.

• Ban the word “ASAP.” Replace it with actual deadlines: “By Friday, 3pm.”

These tweaks cost almost nothing but compound over time.

Final Thought

Assumptions and vague expectations can erode the foundation of your organization. Because they are subtle, you don’t always see them, but over time they could completely change the company you intended to have.

The fix isn’t complicated. It’s about slowing down, being explicit, and building habits of clarity into your culture. Do that, and you won’t just save time and money, you’ll build a stronger, more resilient business.

What have your experiences been with assumptions or vague messaging, and what did you learn from it? What changes did you make to avoid them in the future? Leave a comment below or let me know what else you think needs to be considered.

Growing with Debt: The Pros, the Cons, and Alternatives for Small Businesses

Running a small business is a little like riding a roller coaster you designed yourself. You’re the one who decides when to climb, when to take a sharp turn, and when to hit the brakes. The problem is, most small business owners don’t have unlimited cash to keep the ride going smoothly. That’s where debt often enters the picture.

Banks, credit unions, and even private lenders are more than happy to extend financing to small construction companies, consulting firms, engineering shops, or other service-based businesses. The promise is tempting: “Borrow today, grow tomorrow.”

But as a fractional CFO who’s spent two decades in and around businesses like yours, I can tell you, debt isn’t always the rocket fuel it’s made out to be. Sometimes it’s a parachute, sometimes it’s an anchor, and sometimes it’s just plain dynamite in the wrong hands.

In this post, we’re going to dig into:

1. The upsides of using debt to grow – where it can actually help your business thrive.

2. The risks and hidden downsides – what lenders don’t emphasize in their glossy brochures.

3. More conservative approaches – ways to build and grow that don’t leave you lying awake at night wondering how you’ll cover next month’s payments.

4. How to find balance – practical steps you can take today to decide whether debt should be part of your strategy or a distraction from it.

This isn’t theory pulled from textbooks, it’s about real decisions small business owners in the US and Canada are facing every day. Let’s dive in.

The Case For Growing with Debt

1. Leverage that levels the playing field

If you’re running a $10 million construction company or a $5 million professional services firm, competing with bigger players can feel impossible. They have the equipment, the marketing, the staff, the systems, all funded by bigger balance sheets.

Debt can level the playing field by giving you access to capital that lets you:

• Buy equipment instead of renting, reducing long-term costs.

• Hire specialized staff that allow you to take on bigger projects.

• Expand into new markets or open that second office without draining your cash flow.

Think of it this way: without financing, growth often means waiting years to save up enough cash. With financing, you can close the gap much faster.

2. Smoothing out cash flow gaps

This one matters a lot in construction and professional services. You’re often stuck waiting for clients to pay 30, 60, even 90 days after you’ve already paid your people, suppliers, and subs. Debt, whether it’s a line of credit or short-term working capital loan, can act like a bridge between today’s expenses and tomorrow’s receivables.

Used responsibly, this keeps the lights on and payroll flowing without forcing you to chase clients too aggressively or discount invoices just to get paid early.

3. Taking advantage of opportunities

Sometimes opportunity knocks, but only for a few seconds. Maybe a competitor goes under and you can scoop up their client list. Maybe a supplier offers a bulk discount that saves you 20% if you buy today. Or maybe there’s a contract on the table that’s bigger than anything you’ve taken before.

Debt can make it possible to say “yes” to those opportunities instead of watching them pass by.

4. Tax advantages

In both Canada and the US, interest on business debt is usually tax-deductible. That doesn’t mean “free money,” but it does mean the real cost of debt may be lower than it looks at first glance. For example, if you’re paying 7% on a loan but your effective tax rate is 25%, the after-tax cost of that loan is closer to 5.25%.

This is not a reason to go wild with borrowing, but definitely something to factor into the calculation.

The Risks of Growing with Debt

Okay, so far debt looks pretty good. But here’s where I’m going to pump the brakes a little.

1. Fixed payments don’t care about your cash flow

In general, banks don’t care if your clients paid late. They don’t care if weather delayed your project by two months or if a global pandemic threw your industry sideways. If you owe $20,000 a month, you owe $20,000 a month, period.

For small businesses, where cash flow is already unpredictable, those fixed payments can feel like a noose tightening every time you hit a slow patch.

2. Over-leverage sneaks up on you

Leverage in this case, just means borrowing money, and usually your first loan feels manageable. The second loans? Still fine. Then suddenly you’re juggling three different payments, each with different terms and interest rates, and your debt-to-equity ratio looks more like a startup casino than a business.

This is especially dangerous in construction, where projects can balloon in cost or get delayed, leaving you carrying debt longer than you planned.

3. The emotional toll

This is something not enough people talk about. Carrying business debt isn’t just a financial issue, it’s an emotional one. I’ve seen owners lose sleep, snap at their teams, and even sabotage their own growth because they’re constantly worried about making payments.

Debt can quietly change how you make decisions. Instead of asking, “What’s best for the business long-term?” you start asking, “What keeps the bank off my back this month?” That shift can erode the very foundation of your company.

4. Interest rates and market conditions can turn fast

We’ve all watched interest rates rise over the last couple of years. If you took on variable-rate debt when rates were low, you might now be paying double what you expected. That’s not just bad luck, that’s risk you chose when you signed the papers.

And even if you have fixed-rate debt, tighter lending conditions can still hurt you. Banks pull back, lines of credit get frozen, and suddenly the safety net you thought you had isn’t there anymore.

More Conservative Approaches to Growth

If debt feels risky (and it often does), what are your alternatives? Some business owners prefer slower, steadier strategies that don’t tie them to a lender. Let’s look at a few.

1. Grow with retained earnings

The old-school approach: grow with the profits you’ve already earned. Instead of pulling out every dollar for personal use or reinvestment in unrelated areas, you deliberately keep cash in the business to fund future growth.

The upside:

• No interest payments.

• No debt obligations hanging over your head.

• You stay fully in control; no outside parties dictating your cash flow.

The downside is obvious: it takes longer. But here’s the thing, sometimes slower growth is actually safer growth. A company that grows steadily on its own cash may end up stronger in the long run than one that sprints forward on borrowed money.

2. Customer-Funded Growth

Not every business owner realizes this is an option. But your customers can sometimes be your best “bankers.”

Ways this shows up:

• Deposits or retainers before starting work.

• Progress billing that aligns cash inflows with expenses.

• Annual prepay discounts in professional services (get paid up front, deliver over time).

This approach shifts some of the financing burden off your shoulders and onto the natural flow of your contracts.

3. Joint Ventures or Partnerships

Instead of going into debt, you can share the risk (and rewards) with another business. For example, in construction, two companies might team up to bid on a bigger project than either could handle alone. In consulting, you might partner with a firm that has complementary expertise, splitting marketing and delivery costs.

This route protects your balance sheet while still allowing you to “think bigger” than your own resources.

4. Leasing Instead of Buying

Equipment-heavy businesses face a constant tug-of-war between buying outright and leasing. Buying with debt locks you into loan payments; leasing often spreads costs more flexibly and preserves capital.

While leasing isn’t free, it can be a more conservative way to scale operations without loading up the balance sheet with liabilities.

5. Build a War Chest Before Expansion

Sometimes the most disciplined move is to wait. Put growth plans on ice for six months to a year while you deliberately build a cash reserve. Then, when you move forward, whether it’s a new office, new hire, or new equipment, you’re doing it from a position of strength.

This not only avoids debt, but also gives you peace of mind knowing you have a cushion if things take longer or cost more than expected (and let’s be honest, they almost always do).

Finding the Right Balance

Here’s the truth: debt isn’t all good or all bad. It’s a tool. The real question is whether it fits your business, your appetite for risk, and your growth strategy.

Questions to Ask Yourself Before Taking On Debt

1. What’s the purpose? – Is this borrowing for growth (new opportunities, new revenue) or survival (covering payroll)? Debt for growth can make sense. Debt for survival usually just delays the inevitable.

2. What’s the ROI? – If I borrow $500,000, how much new profit will that realistically generate? How soon? What will it cost me over the same period of time?

3. Can I cover payments even if things go wrong? – Run the numbers assuming your next project gets delayed, or sales take 30% longer than expected. Can you still pay the bank?

4. What’s my exit plan? – Am I paying this down steadily, or just hoping future growth bails me out?

Balancing Debt with Equity

Equity (your own cash, retained profits, or outside investors) is slower, but safer. Debt is faster, but riskier. The healthiest businesses usually use a mix of both.

Think of it like a construction project: you wouldn’t build on just rebar or just concrete, you need both working together to create strength.

Practical Steps for Business Owners

Here are some simple, actionable steps to take before you sign any loan papers, or before you rule debt out completely.

Do a cash flow stress test

Take your current cash flow statement and model what happens if:

• Sales dip by 20% for three months.

• Customers pay 30 days later than usual.

• Costs on your next project come in 15% higher.

If debt payments still fit comfortably in that picture, you’re in safer territory. If not, proceed with caution.

Compare options beyond your bank

Banks aren’t your only choice. Credit unions, government-backed programs (like SBA loans in the US or BDC financing in Canada), and even vendor financing may give you better terms. Always compare.

Build a conservative payback plan

Even if the loan term is five years, design your business plan around paying it back in three. That gives you breathing room if things slow down, rather than living on the edge from day one.

Talk to a financial partner before signing

This doesn’t have to be a full-time CFO, you can work with a fractional CFO (like me), your accountant, or a trusted advisor. The point is: get a second set of eyes on the numbers. Too many owners take on debt based on gut instinct rather than clear analysis. The sad truth is many business owners and potential business owners needlessly feel they have to to go it alone and bear the decision making responsibility and get into trouble before they even get started.

Wrapping It Up

Debt can be a ladder, or a trap. It can help you grow faster, take on bigger opportunities, and smooth out the cash flow roller coaster. But it can also tie you to fixed payments, amplify your risks, and shift your focus from building the business to just feeding the bank.

The good news is you have choices. You can grow with retained earnings, customer deposits, partnerships, or by simply pacing yourself more deliberately. None of those strategies are as flashy as borrowing millions to scale overnight, but they often build a stronger, more resilient company.

Here’s the bottom line:

• Use debt only when the return is clear, the risks are covered, and the payoff timeline is realistic.

• Don’t let the bank’s willingness to lend define your willingness to borrow.

• Remember: the goal isn’t just growth, it’s profitable, sustainable growth.

What are your experiences with debt backed growth versus equity? Share your thoughts and experiences in the comments below.

When Your Senior Staff Walk Out the Door: How to Protect Your Business from Turnover Shocks

If you’ve ever had a key member of your team leave, whether voluntarily or not, you know it can feel like someone pulled the rug out from under your business. Maybe it was your operations manager, your lead project manager, or your CFO. Suddenly, responsibilities that once seemed invisible are glaringly obvious. Deadlines creep, client relationships wobble, and decisions slow down.

Senior staff turnover isn’t just a headache; it’s a business risk. And for small to mid-sized construction or professional services firms trying to scale, it can be downright dangerous if you don’t have a plan.

In this post, we’ll break down why turnover hits so hard, both financially and operationally, and share practical strategies to keep your business running smoothly when leadership changes.

Why Senior Staff Turnover Hurts More Than You Think

When we talk about “senior staff,” we’re not just talking about someone with a fancy title. We’re talking about people who:

• Drive major projects

• Manage key client relationships

• Own critical business processes

• Mentor and lead your team

When one of these folks leaves, the impacts ripple far beyond the empty chair.

1. Financial impact

Let’s get real: losing a senior employee costs more than just the salary you need to replace. Some of the hidden financial costs include:

• Recruiting costs: Ads, recruiters, referral bonuses, interviews. These add up fast, especially if you’re looking for highly specialized experience.

• Training & onboarding: New hires take time to get up to speed. You’re essentially paying double: the departing employee’s lost productivity and the cost of bringing someone new on board.

• Lost revenue or delayed projects: If your senior staff manages client relationships, project timelines, or sales opportunities, a departure can delay billing or even lose clients.

• Overtime or temporary staffing: To fill the gap, you might have to pay existing staff overtime or bring in temp help, which rarely fully replaces the value of your senior team member.

Industry studies suggest replacing a senior employee can cost anywhere from 50% to over 100% of their annual salary depending on their role and expertise. In smaller firms with tight margins, that’s a serious hit.

2. Non-financial costs

Money isn’t the only thing at stake. Senior staff departures can also:

• Damage team morale: People notice when leaders leave, especially unexpectedly. Teams can become anxious, disengaged, or resistant to change.

• Interrupt client relationships: Clients often develop strong personal relationships with senior staff. If those relationships are fractured, trust can erode.

• Disrupt workflow: A senior employee often holds critical process knowledge that isn’t documented. Without it, operations slow and mistakes can happen.

• Hinder strategic growth: Senior leaders are often the ones pushing the business forward. Without them, innovation, business development, or expansion initiatives may stall.

3. Impact on a scaling business

Scaling amplifies these problems. Here’s why:

• Dependence on key individuals: Smaller firms often rely heavily on a few top performers. Losing one can create a bottleneck that slows your entire operation.

• Compounded costs: In a scaling firm, projects are larger, client contracts more complex, and mistakes more expensive. Turnover can cascade into serious operational issues.

• Cultural shock: Scaling effectively usually requires standardized processes and predictable execution. When leadership changes, the cultural continuity you’ve built can be disrupted, leading to inconsistent client experiences or internal confusion.

Mitigation Strategies: How to Make Turnover Less Disruptive

So, now that we’ve laid out the problem, let’s focus on what you can do. You can’t prevent all turnover, but you can plan for it so your business doesn’t grind to a halt.

1. Document critical knowledge

This one task may be one of the most underrated and risk management tools for small businesses. As a bonus, it is low cost and relatively low effort.

Make sure:

• Processes are documented: Project workflows, reporting templates, client engagement protocols.

• Decision rationale is recorded: Why certain clients, contracts, or pricing structures exist.

• Contact lists are updated: Vendors, contractors, regulators—anything a senior staff member touches should be accessible.

Think of this as creating a “business DNA” that survives employee transitions. It doesn’t replace leadership, but it reduces downtime.

2. Build a leadership pipeline

High-performing senior staff often leave when they feel stuck, undervalued, or without growth opportunities. One of the best mitigations is to grow from within:

• Identify potential future leaders early.

• Invest in their training and development.

• Give them opportunities to lead projects, even if only partially.

This accomplishes two things: It reduces the immediate impact of a senior staff departure, and it increases retention because employees see a path forward.

3. Cross-train your team

No one should hold all the critical knowledge. Encourage overlapping responsibilities:

• Have two people familiar with key projects.

• Rotate responsibilities periodically.

• Make sure at least one other person understands client relationships, accounting procedures, or vendor contracts.

Cross-training ensures your business can keep running if a senior team member leaves unexpectedly.

4. Maintain a talent pool

Even if you’re not actively hiring, keep your options open:

• Stay in touch with former employees or contractors.

• Maintain relationships with recruiters and staffing agencies.

• Track talent that aligns with your business culture and growth needs.

Having a warm list of potential hires reduces the scramble and downtime when someone leaves.

5. Use interim support strategically

Sometimes turnover is unavoidable. When it happens, consider:

• Fractional or interim executives for short-term coverage.

• Temporary delegation of certain responsibilities across your team.

An experienced interim can stabilize operations and give you breathing room to hire thoughtfully rather than react impulsively.

Retention Tactics: Stopping Turnover Before It Happens

Mitigation is crucial, but preventing turnover in the first place is even better. A few key tactics:

1. Create clear career paths

High performers leave when they see no future. Map out growth opportunities:

• Promotions

• Project leadership roles

• Profit-sharing or bonus incentives tied to company growth

Show your senior staff that loyalty comes with tangible rewards.

2. Offer competitive compensation

For small firms, money isn’t always everything, but if your pay and benefits are lagging industry standards, departures are more likely. Think strategically:

• Salary reviews tied to performance

• Performance bonuses

• Stock options or profit sharing (especially relevant in professional services or construction firms scaling up)

3. Focus on culture

People stick around for more than paychecks:

• Encourage open communication

• Recognize achievements publicly

• Support work-life balance, even in industries that run hot and heavy projects

Culture is harder to measure but immensely impactful. If people enjoy working with you and feel valued, turnover drops.

4. Regular check-ins

Don’t wait for someone to resign before you notice trouble:

• Conduct quarterly or bi-annual performance and engagement conversations.

• Ask what’s working and what’s frustrating.

• Make adjustments to retain top talent proactively.

When Turnover Happens: Steps to Keep Your Business Afloat

Even with the best prevention strategies, turnover will happen. Here’s a practical playbook for minimizing disruption.

Step 1: Immediate knowledge capture

As soon as someone gives notice:

• Conduct a thorough handover meeting.

• Document active projects, client touchpoints, deadlines, and vendor relationships.

• Identify areas where immediate support or delegation is needed.

Step 2: Stabilize client relationships

Clients often worry more about continuity than the internal reasons for turnover:

• Introduce interim contacts proactively.

• Reassure them about your project timelines and commitments.

• Use the opportunity to strengthen other team relationships with the client.

Step 3: Reassess team roles

A departure is also an opportunity:

• Evaluate whether current roles and responsibilities still make sense.

• Consider whether internal promotions or shifts can fill gaps efficiently.

• Use cross-training as a permanent safeguard going forward.

Advanced Strategies for Small Businesses

Smaller firms often feel turnover more acutely than larger ones. When your leadership team is lean, each departure is a bigger disruption. Here’s how to plan smart.

1. Scenario planning: model the costs

Before you’re forced into a scramble, understand what a departure really costs:

• Direct costs: Recruiting, onboarding, interim support.

• Indirect costs: Lost productivity, delayed projects, client attrition.

• Opportunity costs: Missed growth initiatives or delayed bids.

For example, suppose your lead estimator earning $120,000 leaves:

1. Recruiting & onboarding: $10,000–$15,000

2. Lost productivity for three months: ~$30,000

3. Temporary contract support: $15,000

4. Potential lost project revenue: $50,000

Total estimated impact: $105,000–$110,000, not counting long-term client risk or morale impact. Knowing this helps you plan cash flow and determine whether an interim hire or internal promotion makes more sense.

2. Knowledge transfer systems

Earlier, we touched on documenting processes. Let’s take it a step further:

• Client playbooks: Record the history of key clients, including pricing, preferences, project quirks, and communication preferences.

• Project dashboards: Use software like Procore (construction) or Monday.com (professional services) to track tasks and deadlines so anyone can step in.

• Decision logs: Capture why past decisions were made. This helps avoid repeated mistakes when new leadership steps in.

These systems reduce “hero dependency”, where the business relies too heavily on one person.

3. Leveraging Technology for Continuity

Construction and professional services firms can lean on software to mitigate disruption:

• Financial systems: Keep your books, invoices, and budgets in accessible cloud platforms. If your CFO leaves, the incoming person can access financials instantly.

• Project management tools: Ensure timelines, milestones, and deliverables are tracked centrally.

• CRM systems: Client history, communications, and follow-ups should never be tied to one person’s memory.

The goal is clear: make the business resilient to departures without losing speed.

4. Cultural safeguards

When a senior staff member leaves, the culture can wobble. You can protect it:

• Shared values: Reinforce company values consistently. Your team should know “how we do things here” regardless of who’s in the senior role.

• Team-based recognition: Avoid celebrating only individuals. Reward teams for project success, collaboration, and client satisfaction.

• Open communication: Let your team know about departures early, provide context (as appropriate), and outline plans to maintain stability.

Culture isn’t a soft topic, it is what holds your teams together and drives how you do business.

5. Succession planning without a crystal ball

You don’t need a perfect prediction of who might leave. But having a succession framework is essential:

• Identify which roles are critical to operations.

• Determine the minimum coverage needed if a role is vacant.

• Identify internal candidates and develop skill roadmaps.

Even if you don’t anticipate departures, a succession plan ensures that your firm can continue growing without hitting the brakes. These succession plans also form the foundation of your teams training and development plans as well.

Real-Life lessons from small firms

Let’s look at some examples I’ve seen in construction and professional services:

1. Energy service firm: CFO termination
   I was engaged by a company that was about to terminate their CFO. The individual stored most of his work product on a personal computer and held sole access to several key financial systems. I spent several weeks working with their banks gaining access to accounts and recreating processes and templates that left the company with the former employee. Lesson learned: The company had not recognized the reliance they had placed on this one key individual and found themselves exposed when they had to part ways with the employee. Solution: The company no longer allows employees to use personal devises for work purposes and has a policy related to storing work product on the company network instead of local desktops. They also documented all processes and saved these documents for reference and training for future employees. Outcome: While this was a worst-case scenario, the company is in a better position to respond to a future departure because of this experience.

2. Electrical contractor: Senior business development manager left
   A long time employee who managed a large portion of the key customer relationships for a region chose to leave suddenly after a disagreement with senior leadership. The individual began pursuing the company’s customers and directing them to a new organization in violation of a non-solicitation clause of his employment agreement. The individual did not keep detailed records of customer contacts on the company servers; they were maintained in his personal records and personal cell phone address book. The company could not proactively contact the active customers to inform them of the transition and provide them with a new point of contact. Solution: The company implemented mandatory usage of a CRM system as well as installation of an app on employee-owned cell phones to allow the company to monitor and control company data on the employees cell phone. Outcome: The company lost several customers in the transition as they could not proactively redirect the customer contacts, however they are now better prepared for departures with a centralized CRM and more robust control of customer data.

These stories highlight the value of proactive planning. Turnover doesn’t have to be catastrophic if you’ve prepared in advance.

Financial Guardrails: Turnover-Proofing your Cash Flow

A key part of protecting your business is anticipating the financial shock. Here’s how:

1. Maintain a contingency fund

Even small firms can plan for turnover financially:

• Set aside a “key person reserve” covering 3–6 months of salary for critical roles.

• Include recruiting, onboarding, and temporary support costs.

Having cash ready reduces panic decisions, like rushing a bad hire just to fill the gap.

2. Factor turnover into growth plans

If you’re scaling:

• Budget for temporary disruptions when adding new services, geographies, or project types.

• Recognize that turnover risk increases with size and complexity; senior hires in new offices or service lines are particularly vulnerable.

3. Review compensation structures

Sometimes turnover is driven by misaligned incentives. Consider:

• Profit-sharing or milestone-based bonuses

• Retention incentives for key senior staff during critical growth periods

• Flexible benefits tailored to your workforce’s needs

Financial alignment isn’t just about pay, it’s about ensuring your people succeed when the business succeeds.

Creating a Turnover Playbook

Every business should have a documented “turnover playbook.” Here’s what it could include:

1. Immediate action checklist

• Conduct exit interview (if voluntary)

• Secure knowledge transfer

• Notify clients and internal teams

2. Interim operations plan

• Assign temporary responsibilities

• Reallocate workload to prevent burnout

• Bring in interim support if needed

3. Replacement strategy

• Decide: hire internally vs. externally

• Update recruitment plan

• Start onboarding and training process

4. Post-turnover review

• Analyze what went well and what didn’t

• Update documentation and processes

• Adjust retention strategies to prevent repeat departures

Having a formalized plan reduces chaos and helps your firm continue to scale efficiently.

Key Takeaways for Small Business Owners

Senior staff turnover is inevitable, but its impact doesn’t have to derail your business. To recap:

• Financial and operational costs are real: Prepare for both.

• Documentation and cross-training are essential: Don’t rely on one person.

• Culture matters: Protect your team from the morale impact.

• Proactive planning works: Succession plans, interim support, and retention tactics all pay off.

• Scaling businesses need extra safeguards: The bigger the firm, the bigger the risk—but also the bigger the opportunity to implement resilient processes.

Remember, every departure is also an opportunity: to improve processes, reinforce culture, and strengthen your team.

Take Control Before It’s Too Late

If turnover has ever blindsided your business, it’s time to act. Start by asking yourself:

1. Which roles are critical to my business’s operations and growth?

2. How well is knowledge documented across these roles?

3. What contingency plans do I have in place if a senior employee leaves tomorrow?

4. How could cross-training or internal development reduce my risk?

Small investments in planning now can save you tens, or even hundreds of thousands later, while keeping your clients and team happy.

If you’re unsure where to start, consider a conducting a turnover risk assessment with your senior leadership.

What impacts to your business have you encountered by employee turnover, either planned or unplanned. Leave your comments below and share your experiences.

The EBITDA Trap: Why Relying on One Number Can Steer Your Small Business Off Course

The Love Affair with EBITDA

If you hang around other business owners long enough you’ll hear “EBITDA” tossed around like it’s the ultimate scoreboard of business success.

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It’s a mouthful, but the idea is simple: strip out certain costs so you can focus on your company’s operating profitability before the “messy stuff.”

Sounds clean, right? And for certain purposes, like valuing a company for sale or comparing performance between businesses, EBITDA has its place.

The problem?
Too many small business owners run their day-to-day operations as if EBITDA is the only number that matters. And that’s like driving across the country with just your speedometer working. Sure, speed matters — but so do fuel, temperature, oil pressure, and whether you’re headed in the right direction.

The Big Problem with Using EBITDA as Your North Star

EBITDA can be dangerously deceptive for small businesses, especially in industries with uneven cash flow, high capital needs, or seasonal swings.

Here’s why:

1. It ignores cash flow realities.
   EBITDA doesn’t tell you how much cash is actually in the bank, or when it will show up. I’ve seen companies show “healthy” EBITDA while scrambling to make payroll because their receivables are 90 days overdue.

2. It hides debt problems.
   Interest is stripped out of EBITDA, which might make sense for comparing businesses with different financing structures. But if you’re staring down a big loan payment, you can’t “ignore” interest in real life.

3. It skips capital expenditure needs.
   Depreciation is added back to earnings in EBITDA, but in construction and professional services, equipment eventually needs replacing, and technology licenses come due. Those are real future cash needs.

4. It tells you nothing about growth sustainability.
   You can crank up EBITDA for a year by delaying equipment purchases, under-investing in marketing, or running your team ragged. That’s like running on fumes; it works until it doesn’t.

The “Looks Great on Paper” Story

One company that I worked with was singularly focused on EBITDA as their end goal was to sell the company they had grown.  They aggressively pursued acquisition of specialized equipment and expansion into new markets as it drove up revenue and ultimately EBITDA.

What they weren’t seeing is the ever-increasing debt service costs, nor the steadily growing DSO coming in the new markets they entered. All they were seeing was the growing EBITDA number, and the larger multiple they could achieve.

Fast forward 24 months and the credit line is maxed, and the company was making 11th hour calls to the silent partners for cash calls to cover payroll, and the bank was starting to get nervous.

The company survived, but they learned a very painful lesson:

You can’t deposit EBITDA in your bank account.

What to Use Alongside EBITDA for a Real Picture

I’m not saying ditch EBITDA completely, it’s still a useful benchmark. But you need a dashboard of numbers that tell you the full story. Think of EBITDA as one gauge on that dashboard, not the whole control panel.

Here are four complementary metrics I recommend to my clients — all straightforward to calculate, and incredibly powerful for decision-making.

1. Operating cash flow (OCF)

Why it matters:
OCF tells you how much cash your core business activities are generating after accounting for the actual timing of receipts and payments. It’s the lifeblood of your operations.

How to calculate it:
You can pull it right from your Statement of Cash Flows, it’s the first major section. Or, in simplified form:

Net Income

+ Non-Cash Expenses (Depreciation, Amortization)

+/- Changes in Working Capital (AR, AP, Inventory)

= Operating Cash Flow

Example:
If you had $500,000 in net income, plus $50,000 in depreciation, but your accounts receivable grew by $100,000 (meaning customers owe you more than before), your OCF drops to $450,000.

Why it complements EBITDA:
EBITDA ignores working capital swings, which can crush cash flow in construction and professional services. OCF keeps you honest about whether your “profit” is actually hitting your bank account.

2. Free cash flow (FCF)

Why it matters:
Free Cash Flow is what’s truly available after you’ve covered operating expenses and necessary capital expenditures. It’s what you can actually use for debt repayment, owner distributions, or reinvestment.

How to calculate it:

Operating Cash Flow

- Capital Expenditures (CapEx)

= Free Cash Flow

Example:
Using the OCF from above ($450,000), if you spend $120,000 on new equipment, your FCF is $330,000.

Why it complements EBITDA:
EBITDA adds back depreciation, which makes your results look prettier. FCF forces you to face the reality of replacing trucks, upgrading servers, or buying new tools.

3. Working capital ratio (Current Ratio)

Why it matters:
This ratio tells you if you can cover your short-term obligations (like bills, payroll, and supplier invoices) with your short-term assets (like cash, receivables, and inventory).

How to calculate it:

Current Assets ÷ Current Liabilities

Example:
If you have $600,000 in current assets and $400,000 in current liabilities:

$600,000 ÷ $400,000 = 1.5

A ratio above 1 means you have more short-term assets than liabilities. Too low, and you risk running out of cash. Too high, and you may be tying up too much in inventory or slow receivables.

Why it complements EBITDA:
EBITDA can be positive while your working capital ratio is sinking, which is a giant red flag for looming cash crunches.

3a. Quick ratio (Acid Test)

Why it matters:
If your business carries inventory that doesn’t sell quickly, or isn’t easily converted to cash, the working capital ratio can give you a false sense of security. The quick ratio strips out inventory so you see your “fast cash” position more clearly.

How to calculate it:

(Current Assets - Inventory) ÷ Current Liabilities

Example:
Using the same numbers from above, but assuming $200,000 of the $600,000 in current assets is inventory:

($600,000 - $200,000) ÷ $400,000 = 1.0

Suddenly, that healthy-looking 1.5 Working Capital Ratio drops to a more cautious 1.0 once you remove slower-moving stock.

Why it complements EBITDA:
EBITDA ignores liquidity altogether and the quick ratio tells you how well you can cover your bills if you can’t (or don’t want to) sell off inventory to do it.

4. Gross margin percentage

Why it matters:
Gross margin tells you how much of each dollar of revenue is left after covering direct costs of delivering the work (materials, subcontractors, direct labour). In construction and professional services, it’s a measure of your pricing power and job efficiency.

How to calculate it:

(Revenue - Direct Costs) ÷ Revenue × 100

Example:
If you generate $2,000,000 in revenue and have $1,400,000 in direct costs:

($2,000,000 - $1,400,000) ÷ $2,000,000 × 100 = 30%

Why it complements EBITDA:
EBITDA might hide job-level profitability problems. Gross margin reveals whether your core work is actually profitable before overhead gets involved.

Why a Metric Mix Matters

When you combine these metrics, operating cash flow, free cash flow, working capital ratio, and gross margin with EBITDA, you get a multi-angle view of your business:

• EBITDA: Are we profitable on an operational basis?

• OCF: Is profit turning into cash?

• FCF: Do we have true cash available after investments?

• Working capital ratio/quick ratio: Can we meet short-term obligations?

• Gross margin: Are our projects or services priced and executed well?

All of these are useful, but as a package they tap into the true health of your business.

Seeing Beyond EBITDA, the advanced but practical stuff

We’ve already covered the primary complementary metrics for small businesses: operating cash flow, free cash flow, working capital ratio/quick ratio, and gross margin percentage.

Now let’s add two more that I encourage almost every construction or professional services client to track. These aren’t Wall Street-level complexity; they’re straightforward, actionable, and often the early warning signs of trouble before it shows up in EBITDA.

5. Backlog-to-revenue ratio

Why it matters:
Backlog is the value of signed contracts you haven’t completed yet. Your backlog-to-revenue ratio helps you understand how much future work is lined up compared to your current annual revenue.

How to calculate it:

Backlog ÷ Annual Revenue

Example:
If you have $2,000,000 in signed backlog and your annual revenue is $4,000,000:

$2,000,000 ÷ $4,000,000 = 0.5 (or 50%)

Interpreting it:

• A low ratio might mean you’ll face a sales cliff soon if you don’t book more work.

• A very high ratio could mean your team is overloaded and might miss deadlines — risking quality and reputation.

Why it complements EBITDA:
You could have strong EBITDA today but be headed for a major revenue gap in 3–6 months. This ratio keeps your eyes on the horizon.

6. Customer collection days (days sales outstanding — DSO)

Why it matters:
DSO measures how long it takes you to get paid after sending an invoice. It’s a direct measure of how fast cash comes in, and slow collections can crush a small business even when EBITDA looks healthy.

How to calculate it:

(Accounts Receivable ÷ Total Credit Sales) × Number of Days in Period

Example:
If your average accounts receivable is $500,000, your annual credit sales are $3,000,000, and we’re looking at a 365-day year:

($500,000 ÷ $3,000,000) × 365 = 60.8 days

So it takes you about 61 days to collect on average.

Why it complements EBITDA:
EBITDA ignores the time it takes for cash to arrive. High DSO means you’re effectively financing your clients which costs you real money.

How These Metrics Work Together in Real Life

Let’s run a simple (but realistic) scenario.

Company A is a design-build construction firm with $5M in annual revenue. Their EBITDA is $750,000 (15%), which sounds solid.

But when we check the complementary metrics:

• Operating cash flow: $300,000, AR is growing faster than revenue.

• Free cash flow: $150,000, after buying a new excavator.

• Working capital ratio: 0.9, meaning they owe more short-term than they have on hand.

• Gross margin: 25%, below their target of 30%, driven by overruns on two big jobs.

• Backlog-to-revenue ratio: 0.3, they only have a few months of work booked.

• DSO: 78 days, nearly three months to get paid.

On paper (EBITDA), they’re thriving. In reality, they’re one or two bad months away from a serious cash crunch.

In this scenario none of the metrics looks too alarming, even the working capital ratio could be interpreted as a momentary blip. However, when we look at all the metrics together, it is clear that changes need to be made now, before a real problem materializes.

Why small businesses are most at risk of the EBITDA trap

Large corporations have layers of analysts and dashboards that track every possible metric. Small business owners? You’re often juggling sales calls, staffing headaches, and a truck that needs new tires, you don’t have time to swim in spreadsheets all day.

That’s why having a “north star” metric like EBITDA feels tempting. It’s one number. It’s easy to explain. It’s what banks and investors like to see.

But it’s also dangerously incomplete if you’re not looking at the bigger picture.

Building your “CFO dashboard” in under 30 minutes

Here’s the good news: You don’t need to build a massive ERP system to track these numbers. You can start simple and level up as needed.

Step 1: Open Excel, Google Sheets, or your accounting software’s reporting tool.
Step 2: Create columns for each metric: EBITDA, OCF, FCF, Working Capital Ratio, Gross Margin %, Backlog-to-Revenue Ratio, and DSO.
Step 3: Update the numbers monthly.
Step 4: Add simple green/yellow/red highlights so you can instantly see what’s on track, what needs watching, and what’s in the danger zone.

Tip: Even better, chart each metric over time. The trend is often more telling than the number itself.

The metric blind spot that hurts owners most

I’ve worked with several business owners who only realized they were in trouble when cash dried up, and by then, options are fewer and more expensive.

The truth? The warning signs usually showed up months earlier in gross margin erosion, backlog shrinkage, rising DSO, or a falling working capital ratio. Because they were fixated on EBITDA, those signs went unnoticed.

Bringing It All Together

EBITDA is a useful metric, it’s just not the whole story. When you combine it with a handful of cash flow, liquidity, and operational measures, you get:

• A clear picture of today (Are we making money? Can we pay the bills?)

• A clear picture of tomorrow (Will we have work and cash in 3–6 months?)

• The ability to take action early (Before problems become emergencies)

If you’ve been running your business off of EBITDA alone, here’s your challenge: pick two of the metrics from this article and start tracking them this month. Don’t wait until year-end.

Bottom line:
Don’t let one number decide your business’s fate. Think of EBITDA as your speedometer, important, but not enough to keep you safely on the road. Add a few more gauges, and you’ll have the confidence to drive your business farther, faster, and with fewer breakdowns.

Let me know in the comments what metrics you use to keep a pulse on your business, or share what your wake up moment was if you were using just one metric in the past that caught you off guard.

A Fractional CFO’s Playbook for Scaling Without Losing Profitability

Growth isn’t always good

Let’s set the record straight, growth can hurt your business if you don’t handle it right.

Sounds backward, doesn’t it? We’re taught to think more sales equals more profit. Bigger jobs, bigger clients, and more locations are the are signs of success, right?

Not always.

Ask a business owner who scaled too fast; one who added staff, opened a second office, bought new equipment, or landed a big contract, and they might tell you that growth nearly broke them. Why?

Because scaling a business puts massive pressure on your cash flow, operations, team, and infrastructure. You need more people or new equipment before the revenue lands. You need to float costs on longer payment cycles. You need systems that don’t break when you go from five jobs to 15.

And if your financial fundamentals aren’t strong enough? Growth becomes a liability, not an asset.

As a fractional CFO, I’ve seen this firsthand. I have worked with construction and professional services firms across the U.S. and Canada that are full of potential but were bleeding profit and cash during periods of expansion. The answer isn't not to grow, it's to grow smarter.

This playbook outlines the four strategies I use to help business owners scale with confidence, control, and yes, profitability.

Strategy 1: Know your breakeven (and track it like a hawk)

One key metric to know, that is a foundation to planning for your business is your breakeven point; the level of revenue your business must generate to cover all its costs, before you turn a profit.

Why is this so crucial during a growth phase?

Because your costs are changing constantly.

Let’s say your current breakeven is $250,000/month. Then you:

• Hire a new project manager at $90K/year

• Lease an extra truck for $1,200/month

Now your breakeven is closer to $275,000/month, and if you don’t update that target, you’ll make decisions based on faulty assumptions. You’ll think you’re making money when you’re actually treading water (or worse).

What goes into breakeven?

Fixed costs: These don’t change with job volume and include things like:

• Office rent

• Admin and salaried wages

• Insurance

• Software subscriptions

• Equipment leases

Variable costs: These go up or down with the work and include:

• Subcontractor payments

• Direct labor

• Materials

• Fuel and logistics

Breakeven revenue = fixed costs ÷ gross profit margin

Let’s walk through a simplified example:

• Fixed monthly costs: $150,000

• Gross margin: 30%

Breakeven = $150,000 ÷ 0.30 = $500,000/month

That means your business has to earn at least $500K in revenue per month just to keep the lights on.

The scaling problem

Growth often means:

• Adding overhead (staff, space, tech, equipment)

• Accepting larger jobs with longer payment terms or higher upfront costs

• Carrying higher AR balances

All of this pushes your breakeven higher. If you’re not recalculating and adjusting your pricing, cash management, or pipeline goals, you could be flying blind.

Action steps:

• Build a dynamic breakeven calculator in Excel or Google Sheets.

• Update it every time you hire, buy equipment, or change your pricing.

• Tie it into your cash flow forecasting.

Real-world case:

I worked with a new specialty contractor whose management team were energetic and whose owner was “idea” guy. They started one company based on patented equipment and process and grew steadily for 4 years. Their customers were consistently asking for an ancillary service this company had been subcontracting, and they saw an opportunity. Over the next 12 months they acquired over $2M worth of new assets with loans from the bank or capital leases. Their incumbent CFO didn’t update the breakeven calculation, nor did they model and forecast the cashflow. After 18 months they found themselves with low utilization of these new assets, a negative cash flow that was bleeding up to $60K per week and they were very nearly maxed out on their credit line. They had not paid attention to how much additional revenue they needed to cover the cost of the new equipment (loans, fuel, repairs, operators, etc.) that it nearly destroyed the solid company they had methodically built.

Strategy 2: Invest wisely in capacity

Scaling doesn’t just happen, you have to build capacity to handle the extra volume. That means more people, more tools, better systems, or additional space.

But here’s the danger: many business owners “pre-load” too much capacity too early.

The overbuilding trap

In anticipation of growth, it’s tempting to:

• Hire ahead of demand

• Buy or lease trucks or heavy equipment

• Rent larger office or shop space

• Invest in complex software you’re not ready to use

The problem? Growth is rarely smooth. Jobs get delayed. Clients vanish. Payments take longer than expected. You’re left with fixed costs and underutilized assets.

Smart capacity planning

Here’s what I recommend to clients preparing to scale:

1. Use rolling 12-month forecasts

A rolling forecast is a financial projection that updates monthly and looks 12 months ahead. It models:

• Revenue based on booked + expected jobs

• Cash inflows and outflows

• Headcount actual and projected

• Equipment needs (fuel, R&M, operators, etc.)

You’ll see when you actually need to expand capacity rather than guessing.

2. Measure utilization

Before hiring, ask: Are we maximizing the team we already have?

Track:

• Billable hours vs total hours

• Crew downtime

• Equipment idle time

• Equipment downtime and repair costs

If you’re running at 60–70% capacity, fix the underutilization first. You don’t need more, just better scheduling or smarter job selection.

3. Stage your investment

Start small. Pilot. Rent before you buy. Use temp labor or subcontractors before locking in salaries.

Growth doesn’t need to be all-or-nothing and should be thoughtfully executed. Agile businesses grow in sprints, not leaps.

Strategy 3: Track customer acquisition cost (CAC)

Let me ask you something few business owners can answer confidently:

How much does it cost you to land a new client?

If you're unsure, you're not alone. Most construction and professional service firms either don’t know or wildly underestimate their customer acquisition cost. And that’s a problem, especially during a growth phase when marketing and sales efforts ramp up.

When your business is scaling, every dollar spent chasing leads needs to be tied to actual revenue and profit. Otherwise, you risk burning cash while thinking you're building momentum.

What Is CAC?

Your CAC is the total cost of bringing in a new customer. It includes:

• Marketing spend (ads, SEO, brochures)

• Sales team salaries or commissions

• Proposal writing or quoting time

• CRM software and automation tools

• Networking, trade shows, sponsorships

• Referral fees or discounts

Here’s a basic formula:

CAC = Total Sales & Marketing Costs ÷ Number of New Clients Acquired

Let’s say you spend $50,000 on marketing and sales in a quarter and land 20 new clients:

CAC = $50,000 ÷ 20 = $2,500 per client

Why CAC Matters

If a new client generates $8,000 in gross profit, a $2,500 CAC is great. But if you’re only clearing $2,500 per client, you’re breaking even at best.

CAC becomes even more critical as you grow, because:

• Sales cycles lengthen

• Lead quality can decline if you're scaling fast

• New segments or markets often come with higher CAC

• Your sales focus may diminish and it takes longer to land each new client

Compare CAC to CLV

A healthy business keeps CAC well below Customer Lifetime Value (CLV)—the total gross profit a client delivers over their lifetime. As a rule of thumb:

• CAC should be no more than 25–30% of CLV

• If it’s higher, you’re buying business instead of earning it

Track CAC by Channel

Not all marketing is created equal. Break CAC down by source:

• Google Ads

• Organic Search

• Referrals

• Social Media

• Networking or word-of-mouth

This helps you double down on what works and cut what doesn’t.

Real-World Example:

An industrial testing contractor I worked with had been pouring money into tradeshows throughout the United States, sending teams of people to each one costing thousands per show. They were convinced that with the comparative size of the US market this was where the growth was going to come from. Once we started measuring CAC and CLV they quickly realized that the few jobs they did land in the US were generating the lowest profit, while the organically grown referral-based work they were achieving in Canada was at much higher margin at a fraction of the acquisition cost.

They trimmed the ad budget by 80%, ramped up referral incentives, and saw better ROI almost immediately.

CFO Tip:

Even if you don’t have perfect tracking, start estimating CAC monthly. Use simple spreadsheets and refine over time. What gets measured gets managed and improved.

Strategy 4: Standardize operations or you will be scaling chaos

Here’s something most growing businesses learn the hard way:

You can’t scale chaos.

If your operations are inconsistent, undocumented, or overly dependent on a handful of key people, growth will only magnify the dysfunction. Mistakes multiply. Quality slips. Team stress increases. Clients feel it.

The solution? Standardize before you scale.

What to Standardize

1. Job costing

Use consistent codes, processes, and tools to track:

• Labor hours

• Subcontractors

• Materials

• Equipment usage

Tie this directly into your accounting system. Real-time job costing helps you price better, identify margin killers, and catch overruns early.

2. Project management

Don’t reinvent the wheel for every job. Create templates and checklists for:

• Project kickoffs

• Site meetings

• Change orders

• Closeouts and post-job reviews

Use integrated tools that facilitate collaboration, visibility and communication within your project teams.

3. Billing and collections

Set clear billing milestones. Automate invoicing reminders. Standardize your follow-up process for overdue accounts.

The faster and more predictably you bill and collect, the healthier your cash flow.

4. Hiring and onboarding

Every new team member should go through the same orientation:

• Safety protocols

• Tools and login setup

• Time tracking procedures

• Core values and client expectations

This keeps quality consistent and speeds up ramp-up time.

5. SOPs (Standard Operating Procedures)

Write down or record the way things are done. It doesn’t have to be fancy, Google Docs, PDFs, or Loom videos work just fine.

Every key function should be documented:

• How to bid a job

• How to submit an invoice

• How to handle a change order

• How to manage a client handoff

Real-World Example:

I worked with a wireless telecom contractor who experienced growth of 562% growth over an 18 month period. This type of growth would have destroyed most young organizations. However, they had a standardized their operational processes that allowed them to add new crews and contractors seamlessly, obtain project progress updates in real time which was integrated with the client billing requirements. So while tremendous effort was put into requiting technicians and subcontractors, the core business functions required to keep the cash flowing and quality of execution consistent scaled almost effortlessly. This ensured that cash inflows grew with the new expenditures at consistent and even improving profit margins.

Conclusion: Build a business that scales profitably, not just bigger

Let’s zoom out for a second.

Growth feels good. It’s exciting. It’s a sign that your product or service is resonating, your brand is gaining traction, and your market sees your value.

But growth alone doesn’t mean success, especially if it comes with:

• Flat or shrinking margins

• Payroll stress

• Client churn

• Team burnout

True success is profitable, sustainable growth. It’s about building something that lasts—and pays you for the risk you’ve taken.

Here’s a quick recap of the CFO Playbook:

Strategy 1: Know your breakeven

Your costs are always changing. Make sure your pricing and sales goals keep up.

Strategy 2: Invest wisely in capacity

Don’t overbuild. Grow in phases, based on demand, not hope.

Strategy 3: Track customer acquisition cost

Know what it really costs to land a client. Focus your resources on high-ROI channels.

Strategy 4: Standardize operations

Systems beat superheroes. Build a business that runs smoothly, even when you’re not around.

When you use these strategies, you move from reactive to proactive. You stop guessing and start leading with clarity, intention, and control.

What are your “must haves” for a successful growth strategy?  What did you learn from your growing pains? Leave a comment, share your thoughts or reach out if you’d like to have a further conversation.

Is It Time to Upgrade? A Small Business Owner’s Guide to Selecting an ERP That Actually Works

You’ve probably felt it: the creeping frustration when you try to pull what feels like should be a basic report from your accounting system and it takes five different exports, three spreadsheets, and at least mild level of frustration. It could be that you have opened a new division or operating unit and you would like to see how the company is doing as a whole. Or maybe you’ve started to wonder: Is there a better way to manage all this?

If you’re running a construction or professional services firm with growing revenues, more staff, and increasingly complex operations, and you have had any of the thoughts above, chances are your current accounting or project management software is starting to show its cracks.

Many small businesses start out with QuickBooks, Xero, or Excel and these tools are great when you're small, but they start to slow you down once things get more complex. Things like job costing, subcontractor billings, retainage/holdback, multi-unit/multi-location operations and consolidations will push these basic tools beyond their effectiveness.  This is when your system starts to become a liability instead of an asset.

This is where ERP systems come into the picture.

ERP stands for Enterprise Resource Planning. While it sounds like something only giant corporations use, modern ERP systems have become more accessible for small businesses trying to grow and stay profitable. What these systems do that small accounting packages lack is integration.  They allow you to connect all aspects of your business. The most basic systems will allow you to track costs to a specific job, issue purchase orders assigned to a project which can be routed electronically for approval and then matched with an invoice emailed from your supplier. They will allow you to report on and monitor your work in progress and backlog, as well as provide you aged receivables by customer and project and they will integrate with or possibly even complete the time capture and payroll processing for your entire team. In short, they have the ability to provide all the relevant information of your company in the palm of your hand.

But choosing the right ERP? That’s a whole other challenge.

This post is here to help you figure out whether you need an ERP, how to think through your options, and what pitfalls to avoid so you don’t end up spending a fortune on a system that makes your life harder instead of easier.

Is it time to upgrade?

Let’s start with a few questions:

• Are you manually entering the same data in multiple systems (e.g., payroll, job costing, and time tracking)?

• Do you struggle to get accurate or timely financial reports?

• Are your project managers and field teams working off outdated or disconnected tools?

• Is your current system unable to track WIP, multi-phase jobs, or client billing schedules?

• Are your people wasting time doing workaround after workaround?

If you answered yes to any of those, you might be bumping up against the limits of your current system.

The right ERP can help you:

• Get real-time visibility into job profitability

• Automate repetitive admin work

• Streamline your billing and collections

• Standardize processes across departments

• Improve forecasting and cash flow visibility

• Improve the reliability, and your comfort level, in your financial reporting

But it’s not just about features. It’s about fit, and before you start demoing every ERP under the sun, it’s worth stepping back to consider what you actually need.

Scaling up from your current system

Think of your software systems like tools in a toolbox.

When you’re a small outfit, a hammer and screwdriver might be enough to get the job done. But as your projects get bigger and your team grows, you need more specialized tools to work faster, safer, and smarter.

That’s where scaling up comes in.

Most construction and professional services businesses start with tools like QuickBooks Online, spreadsheets, and job tracking apps cobbled together. That’s fine for a $1–2 million business.

But when you’re managing $5, $10, or $20+ million in annual revenue running multiple crews, consultants with multiple contracts, those tools start to fight you.

Upgrading to an ERP is about consolidating and automating the core pieces of your financial and operational workflows.

A few signs that your business might be ready to scale up:

• You need consolidated reporting across departments or business units

• Your accounting and project management systems don’t “talk” to each other

• You’re hiring financial or operations staff just to keep up with manual processes

• Your month-end close takes more than two weeks

• You’re constantly surprised by cost overruns or billing errors

Scaling up to an ERP is an investment, not just in software, but in your business’s ability to run leaner and make better decisions.

Off-the-shelf vs. customizable ERPs

One of the biggest choices you’ll face: do you go with a system that works “out of the box,” or do you need something more customizable?

There’s a spectrum. On one end, you’ve got off-the-shelf software with little flexibility but fast implementation. On the other, you’ve got fully customizable platforms that can match nearly any workflow, but often at higher cost and complexity.

Off-the-shelf ERP options

These are ready-to-use systems tailored for small-to-mid-sized businesses. They usually have industry-specific versions (e.g., for contractors or consultants) and include built-in best practices.

Examples:

• Buildertrend – Great for residential construction and remodelers

• Jobber – Popular with trade contractors (HVAC, electrical, landscaping)

• Core by BQE – Designed for architecture, engineering, and consulting firms

• Sage 100 Contractor – A more powerful solution with general construction in mind

• QuickBooks Enterprise – An intermediate step, not a true ERP, but useful for those who want job costing, inventory, and payroll in one system

These are generally easier to implement and cost less upfront. They’re ideal if:

• Your workflows aren’t too complex

• You don’t need highly customized reporting

• You want to get up and running quickly

But there’s a trade-off. If your business has unique processes, or if you’re growing fast, you may outgrow these systems in a few years.

Note: There are a lot of organizations that feel that their processes are unique, and they need to look for a customizable solution. It is a good practice to sit with your team and have an honest discussion about these processes. Are they truly unique and core to your delivery effectiveness or is this a variation of a standard process that can and should be updated. This is an important question as every modification you impose will add thousands of dollars to the total cost of the implementation.

Customizable or modular ERPs

These systems are designed to scale with you and support deeper business complexity. They can be configured to match your workflows, reporting needs, and team roles.

Examples:

• Sage Intacct – Strong in financials, great for service firms

• NetSuite – Cloud-based, highly customizable, ideal for fast-growing firms

• Acumatica – Flexible and growing in popularity among construction firms

• Vista by Viewpoint – Focused on commercial construction

• Deltek Vantagepoint – Well-suited for architecture and engineering

• Jonas Construction Software – Specifically built for construction contractors in North America, with strong service management and project costing tools

These platforms offer deeper integration, custom workflows, role-based dashboards, and advanced analytics. But they’re more complex and often require implementation support.

They’re ideal if:

• You have multiple business units or locations

• Your projects are large and detailed

• You need to meet specific regulatory or compliance standards

• You plan to scale significantly over the next 5–10 years

Adapt to the ERP or customize the ERP?

This is a major sticking point during ERP selection: Should your business adapt to the ERP, or should the ERP adapt to your business?

Here’s where a lot of ERP projects go sideways.

Many business owners want a system that perfectly fits their existing processes. While that makes sense on the surface, it often leads to expensive customizations, long timelines, and increased risk.

There’s no one-size-fits-all answer, but here’s how to think about it:

Adapting to the ERP

If you choose a system with strong, best-practice workflows, adapting your business to fit can be a smart move. You streamline your operations and align your team around proven processes.

This works well when:

• You’re willing to change how some things get done

• Your team can adapt to new systems with the right training

• You want to reduce customization costs and future headaches

• One of your top priorities is reliability and seamless integration across platforms

Customizing the ERP

If your workflows are a big part of your value proposition or you have regulatory requirements, you may need to customize.

Just be cautious: customizations add complexity and cost. They can also become a liability down the road if you switch systems or need updates.

Your best bet? Start with as little customization as possible. Use the ERP's built-in flexibility (dashboards, reports, user roles) and avoid deep changes unless absolutely necessary.

Implementation: vendor vs. independent consultant

This point could easily be a full discussion on its own, but from a very high level you typically have two choices:

The vendor’s implementation team

Most ERP vendors offer professional services or partner with third-party firms. Their people know the software inside and out, but they often take a “one-size-fits-most” approach. Hourly rates are typically higher, but as they are intimately familiar with the product and the code, they are often much quicker though you may not be able to get exactly what you want or how you want it.

Pros:

• Knows the system well

• Direct line to software support

• Generally, more efficient

Cons:

• Limited understanding of your unique business model

• May recommend additional add-ons to fill gaps

• Project can get delayed if your needs don’t fit their standard workflow

• Possibly, higher per hour cost

Independent implementation consultant

Independent consultants tend to have industry-specific knowledge (e.g., they’ve worked with a lot of contractors or service firms). They may have a lower per hour rate, but if you don’t have your needs and processes clearly mapped out from the start, the project schedule will stretch, and those costs will start to grow quickly.

Pros:

• Deep industry expertise

• Can help optimize business processes alongside implementation

• Often provide post-implementation support and training

• Possibly, lower per hour cost

Cons:

• Not as familiar with the product and code as the vendor

• Harder to evaluate quality and requires good references and reviews

• May not be as concerned for your budget as they are about providing every feature you ask for (scope creep)

Futureproofing: will it grow with you?

ERP transitions are a big investment, not just in dollars, but in time, training, and team energy.

So, the last thing you want is to repeat the process in three years because the system you picked couldn’t scale with you.

Here’s what to look for to future-proof your ERP choice:

• User scalability: Can it handle 10 users now and 50 later?

• Multi-entity or multi-location support: Even if you’re not there yet, will it support future branches or subsidiaries?

• Integrations: Does it play nicely with payroll, CRM, estimating, field tools, or time tracking apps?

• Cloud-based: On-premise software is fading. Cloud ERPs offer better security, remote access, and lower maintenance.

• Vendor longevity: Is this ERP backed by a stable, growing company? Will it still be around (and supported) in 5–10 years?

And perhaps most importantly: who will support you?

An ERP is only as good as your implementation and support partners. Make sure your internal team has a champion and that your vendor (or third-party consultant) is responsive, experienced, and aligned with your business goals.

Pro tips before you choose

1. Don’t rely on the sales demo. What you see in a polished demo may not reflect how the system works in your real-life processes, so ask to see how the ERP handles changes orders, or progress billing or periodic field reporting.

2. Map Your Processes
   Understand how work flows through your business today, quotes, change orders, approvals, billing. This will help you evaluate ERP fit.

3. Get references. Talk to other business owners who use the system, especially in your industry.

4. Define Success
   What problems are you solving? Shorter close cycles? More accurate job costing? Better forecasting? Keep your goals front and center.

5. Budget realistically. Implementation, training, and change management often take more time that initially planned. This process will cost significantly more than the software license itself.

6. Start small. If possible, roll out in phases. Core financials first, then project management, then advanced features.

7. Train your people. The best ERP in the world won’t help if your team doesn’t know how to use it.

Final thoughts

Choosing the right ERP can unlock major efficiencies, boost your profitability, and give you real control over your business. But the wrong ERP, or the right one poorly implemented, can be a costly distraction.

Take the time to map out your business needs, involve your team, and consider not just what you need today, but what you’ll need three, five, and ten years from now.

Make sure you get this right

Choosing an ERP is one of the most strategic decisions a growing construction or professional services firm will make. It affects your operations, your finances, and ultimately your ability to scale without burning out your team or your margins.

Have questions about implementing an ERP in your business?

I’d love to hear from you. Feel free to reach out or comment below to share your thoughts and experiences.

Why ‘Profit’ Doesn’t Equal ‘Cash’: A Guide for Service-Based Business Owners

If you’re like most owners of a construction or professional services business, you keep an eye on your P&L every month. You see healthy revenue. The bottom line shows profit, but sometimes you still feel the pinch. Maybe it is during a payroll week, or near month end when more vendor/subcontractor bills are due and you see yourself dipping into that credit line a little more often that you would like.

It’s one of the most common frustrations of small business owners: “We’re making money on paper, but there’s never enough cash in the bank.”

The truth is, profit doesn’t equal cash.  I’m going to let that sit with you for a moment.

Understanding the difference between profit and cash and how your business converts from the prior to the later is a critical lesson for every small business owner. Without that understanding, you could be in for a painful surprise.

Let’s unpack what’s going on behind the scenes, why it matters, and what you can do about it.

Profit vs. cash: why the confusion?

Most business owners are wired for action. You’re focused on projects, people, deadlines, and keeping clients happy. Financial metrics like “net profit” or “cash flow” get lumped together, often treated like interchangeable terms.

They’re not.

Profit is what’s left over after you subtract your expenses from your revenue. But that’s just one piece of the puzzle.

Cash is what’s actually in your bank account and available to spend. It’s what pays your bills, employees, taxes, and keeps your business running.

In other words, your P&L might say you made $400,000 in profit this year. But your bank account tells another story, one that might show a balance of just $12,000, or worse, a negative overdraft.

The gap between profit and cash is more than a number, it is a measure how efficient the cash conversion cycle is for your company (which we will talk about in a moment). For small and mid-sized firms, particularly in project-driven or service-based sectors, it can also be the difference between growth and chaos.

Let’s talk accounting: accrual vs. cash

Part of the confusion starts with how accountants and accounting systems report results.

Most businesses, including those in the construction or professional services space use accrual basis accounting, which is the most widely adopted accounting method across Canada and the United States. It’s required if you carry inventory or earn revenue before getting paid. But it also comes with a downside: it can make you feel richer than you actually are.

Here’s how it works:

• Accrual accounting records revenue when it’s earned, not when cash is received. Likewise, expenses are recorded when incurred, not when they’re actually paid.

• Cash accounting records transactions only when money changes hands.

Let’s look at an example.

Say you complete all of the work for a $250,000 consulting project in June and issue the invoice. Your P&L now shows $250,000 in revenue for June. But if the client doesn’t pay until September, that’s three months where that $250,000 is a receivable from your customer and not cash so for those three months your profit exists only on paper.

Meanwhile, you’re still paying salaries, rent, subcontractors, and taxes—all in real-time, with real dollars.

If your team grew to support that project or you ramped up marketing and bought materials, you may actually be spending more than you’re taking in. Despite your “profitable” June, your bank account could be shrinking fast.

Profitable but cash-poor: real-world scenarios

Here are some classic examples of what this might look like in your business if you are showing good profitability, but cash is still very tight:

1. The slow-paying customer trap

You may have a $500,000 renovation or design contract, but the client’s payment terms are 90 days. Even if you have been very savvy and negotiated pay when paid terms with your subcontractors, you will still be paying staff every two weeks and paying material suppliers at month end. Not to mention your regular suppliers and general overhead costs.

By the time the client pays their invoice you may have already spent $300,000 - $400,000 keeping the project moving, and you have likely been using your credit line to fund it. And if there is a holdback/retention on the job, then this only makes this scenario worse.

2. Growing to fast

Landing that new marquee project/client is exciting, but the ramp up burns through cash. You are hiring new staff, maybe investing in new equipment or tools, you are buying large quantities of materials for the project, all of which require cash today. By the time the collections start to come in you will be several months into the project/engagement, and once again, you will have been funding all of this from either your working capital or your credit line. You’re showing bigger sales and even growing profit margins, but there is a lag before the working capital will catch up.

3. Inventory and materials creep

In construction or technical services, there is sometimes the tendency to buy a little more material than you need, to ensure you don’t run out on the job. The thinking being that you will use it on the next one. Or maybe your purchaser can get a nice discount if they buy are larger quantity of commonly used material. Those costs show up as assets as they are sitting in your inventory, not expenses. So, your profit looks untouched, but your cash is tied up in stuff sitting in a warehouse or trailer.

4. Overreliance on credit

Many firms bridge cash gaps with lines of credit (LOC), that is what they are for. However, if you aren’t diligent in monitoring the use of your LOC, the mounting interest costs will quietly eat into our profits. Eventually, you realize you’re funding day-to-day operations with borrowed money, and repaying a heavily drawn LOC takes a significant bite out of your available cash.

The metric nearly as important as profit: cash conversion cycle

If profit doesn’t tell the full story, what else should you be watching?

One powerful concept every owner should understand is your cash conversion cycle (CCC).

The CCC measures how long it takes for your business to turn an investment in resources (like payroll and materials) into cash from clients.

It’s calculated by looking at three things:

1. Days sales outstanding (DSO): How long customers take to pay you.

2. Days payable outstanding (DPO): How long you take to pay your suppliers.

3. Work in progress (WIP) / inventory turnover: How long your projects or inventory tie up cash before you can invoice.

Here’s a simplified formula:

Cash conversion cycle = DSO + Days inventory – DPO

The shorter your cycle, the faster you turn sales into spendable dollars.

If your clients take 60 days to pay, but you pay vendors in 15 days, that’s a 45-day gap where you’re floating the business. Multiply that by several projects, and you’ve got a serious drain on liquidity.

By shortening your CCC—even by a few days—you can unlock tens or hundreds of thousands in working capital without needing a loan or investor.

What can you do about it?

If this all feels overwhelming, take a breath. The good news is there are practical steps you can take to improve cash flow—even if you’re stuck in long payment cycles or navigating growth.

Here’s where to start:

1. Map your cash flow

Don’t rely solely on your P&L. Use a rolling 13-week cash flow forecast to understand where money is coming from and going. This lets you anticipate crunches before they happen.

2. Revisit payment terms

Negotiate better terms with both clients and vendors. Can you shorten client payment windows, offer early pay incentives, or require deposits? Can you extend supplier payment terms without hurting relationships?

3. Invoice promptly and follow up

Sounds simple, but many businesses delay invoicing or let A/R age too long. Make billing and collections a priority. Build collection calls into your monthly routine, so they are check-ins with your customer, not calls demanding payment.

4. Track WIP and overruns closely

If you’re in project-based work, know how far along you are and what’s been invoiced vs. delivered. WIP write-offs and scope creep silently eat into both profit and cash, so stay diligent on change management.

5. Review compensation and draws

If you’re taking large owner draws based on profit, be sure they align with actual cash availability. Many businesses unintentionally strain cash flow by distributing too early or too often.

6. Look for leaks

Recurring subscriptions, idle equipment, or redundant staff roles can quietly drain thousands per month. Scrub your overhead line by line.

7. Ensure your project accounting is accurate

Running multiple projects, it can be easy to accept an “allowable” percentage of unbillable costs, or non-reimbursable costs. These accounts are often the biggest drain on your profitability if you are not monitoring then closely, and if you are not segregating these non-billable costs from your other job costs, you could be losing thousands of dollars of profit each year without knowing.

8. Watch your trailing 12-month DSO

If you are not tracking your DSO, you should be. Having a benchmark and watching how your business tracks to that benchmark month over month will allow you to spot when something changes. Once you are measuring it, you can then manage it.

A word to the wise: growth without cash is a risky game

A profitable but cash-starved business is a fragile one. You can’t invest in your team, take on new projects, or weather downturns if you’re constantly watching the bank balance.

In the U.S. and Canada, thousands of service-based companies close every year, not because they weren’t profitable, but because they ran out of cash.

Don’t let that be your story.

If you don’t’ need a full-time CFO, maybe all you need is a fresh set of eyes

If this post has you wondering where your own cash is hiding, you’re not alone. Most business owners I work with are fantastic at delivering value to their clients but run short on time or tools to connect the dots financially.

That’s where I come in.

As a Fractional CFO, I work with small and mid-sized construction and professional service firms. I help owners like you:

• Get clarity on where your money’s really going

• Forecast cash flow with confidence

• Improve billing and collection cycles

• Build strategies that support sustainable growth

No fluff. No jargon. Just real-world insights and a hands-on approach to getting your business running leaner and stronger.

5 Early Warning Signs of a Cash Flow Crunch and How to Fix Them

Cash flow is generally not the first thing on the minds of small business owners, or second or third for that matter. They are focused on providing excellent service to keep customers happy, ensuring their employees are taken care of and have the tools to succeed and they want to grow their business. Honestly, that is exactly what you should be focused on, though if you don’t add your company cash flow to that list, you may just be setting yourself up to a situation where those priorities on put on extended hold.

Cash flow issues don’t appear overnight, and they certainly don’t announce themselves with warning lights. They creep in quietly, and slowly at first, maybe over weeks or months until suddenly you find your self maxed on your credit line, you are worrying about making payroll and you have to start saying no to new projects.

Hopefully you have found this article before any of these things has happened to you and the points below provide some proactive steps, and if this sounds like your business at the moment, then please keep reading.

We have all heard the statistics about how often small businesses fail, but it doesn’t matter if you do $300,000 per year or $300,000,000 per year, if you run out of cash, you close your doors. That is the hard truth. As a fractional CFO supporting small business owners in the construction and professional services sectors, I have seen this with companies in the United States and Canada. The business looks great on the outside, but inside, you’re riding the edge of a cash flow crunch.

Let’s break down the five early warning signs of a cash flow problem and some tools to fix or prevent them.

1. You’re leaning too hard on your line of credit

In both Canada and the U.S., small businesses often use lines of credit (LOC) to cover short-term gaps. That’s smart. But when the business starts treating the LOC like working capital instead of a short term bridge, it is often a sign that they don’t have a clear picture of their cash inflows and outflows. The LOC then starts to mask the underlying issues, becoming a permanent fixture of daily operations, making it a red flag.

What this looks like:

• You are always running deep into your LOC, or even right up to the limit

• Your balance never returns to zero

• Interest charges are steadily growing month over month.

In the short term the LOC is helping smooth the valleys in cash flow, but in the long term, you are paying more for the same cash as your interest expenses continue to rise the deeper you draw into the LOC. If you're relying on borrowed money to cover routine expenses like payroll, and materials, it’s time to take a step back.

What to do:

• Build a rolling 13-week cash flow forecast

• Identify which clients or projects are delaying your cash inflow

• Which suppliers must be paid quickly and which ones are more flexible

• Use the LOC as a tool, not financing.

2. Vendor payments are getting delayed

Stretching your payables occasionally is common practice. But when it becomes a pattern, it signals a deeper problem: your business can’t meet its obligations on time.

This can cause supplier trust issues, and in industries like construction and consulting, damaged relationships can slow your project timelines or increase costs.

What this looks like:

• You’re constantly juggling which vendor to pay first

• You're on the phone negotiating extensions weekly

• Some vendors are refusing to start new work until they’re paid

• Your account is being placed on hold, or worse, switched to C.O.D.

Over time vendors will begin to tighten credit terms, increase your pricing, prioritize other customers or choose to walk away. While it may have started as a cash issue, it is now an operational problem.

What to do:

• Prioritize vendors based on their criticality and terms

• Improve your receivables process (more on that below)

• Try to take advantage of early payment discounts and volume rebate programs

• Budget weekly cash flows so you’re not caught off guard.

3. Payroll is causing anxiety

It needs to be said, payroll is sacred. Payroll stress is more than a cash flow issue, it affects the morale of your organization and your leadership. And in both Canada and the U.S., late or missed payroll can not only have legal consequences, but could cause a sudden lose of your workforce, which could spell the end for your business.

What this looks like:

• You’re moving money around to make payroll in time

• You’re floating payroll with personal funds

• You’ve skipped your own compensation.

This isn’t sustainable. If you’re regularly sweating payroll, it’s time to reassess your financial structure.

What to do:

• Establish a payroll reserve funded throughout the month

• Improve forecasting to anticipate cash gaps 2–3 pay cycles out

• Tighten up job costing to avoid underbidding work.

4. Cash reserves are depleting (or gone)

Many small business owners believe their business is fine as long as there is cash in the bank account. However, strong businesses on either sides of the border build buffers, meaning cash balances that cover 1, 2 or more months of operating expenses, remaining untouched for slow periods or emergencies. If your company used to have 1–2 months of operating expenses in reserve and now you’re down to scraping by, you’re more vulnerable than you think.

Even profitable firms in Canada and the U.S. run into cash crunches due to slow receivables, project delays, or seasonal slowdowns.

What this looks like:

• You’re down to days (not weeks) of cash on hand

• You’ve raided your savings several times this year

• You have no financial cushion for unexpected expenses.

What to do:

• Open a separate reserve account, and consider making it “deposit only”, meaning drawing on it must be very intentional

• Start small: even $5,000/month builds momentum

• Set a goal of covering at least 30–60 days of fixed costs.

Having even a modest reserve fund will create options, and options reduce stress.

5. Growth opportunities are slipping away

This one hits just as hard culturally as it does financially: a new project is awarded, but you can’t afford to staff up or pre-pay materials. You’re stuck watching opportunity pass by because you don’t have the working capital to take the risk. Making this worse is all the hard work of your team to pursue the work has gone to waste, and they fell it.

In both Canadian and U.S. markets, growth requires cash. Not just to fund operations, but to float upfront costs, bid on larger contracts, or bring in new talent.

What this looks like:

• You’ve passed on a job or client due to cash limitations

• You’re saying no when you want to say yes

• Growth feels risky—even when you’re booked solid.

What to do:

• Set project-specific cash flow forecasts before saying yes

• Negotiate better upfront billing terms (mobilization payments, deposits).

How to get Ahead of Cash Flow Problems

Here are the core strategies I’ve found effective in both Canada and the United States to reduce stress and improve cash predictability.

✅ Build a 13-week cash flow forecast

This simple tool, which can be built in a basic spreadsheet, gives you visibility into your short-term cash runway. It helps you:

• Plan for upcoming shortfalls

• Time payments with confidence

• Avoid surprises and last-minute scrambling.

You don’t need complex software. You just need consistency.

✅ Tighten up your invoicing and collections

One of the biggest cash killers in small businesses? Slow billing and slower collections.

If you’re in professional services or construction, and you are delayed in billing, and/or your clients aren’t paying on time, you’re effectively lending them money—for free.

Do this:

• Send invoices immediately after milestones or deliverables

• Automate reminders for outstanding balances, or better yet, have your finance team building relationships with your customers so collection calls are friendly check-ins

• Useful, but at a cost, offer incentives for early payment (or enforce penalties for late ones).

✅ Build (or rebuild) your cash reserve

Think of it like a contingency fund for your business, and just start where you are, adding a little each month until you have the reserve you are comfortable with.

If you’re in the U.S., aim for 1–2 months of fixed overhead in your operating reserve. If you’re in Canada, follow the same rule but consider an additional buffer for seasonality if you’re affected by winter slowdowns.

✅ Reevaluate your pricing and job costing

Are you underpricing your services? Or winning projects that lose money?

Run the numbers. In both Canada and the U.S., inflation and wage pressures have quietly eroded margins over the last few years.

If your pricing hasn’t kept up or if you’re not confident in your job costing it’s time to take a closer look. There is not more disheartening feeling than to complete an operationally successful project only to find out that you earned no meaningful profit, or worse, lost money.

Not Sure Where to Start? Let’s Talk.

As a fractional CFO serving business owners in Canada and the United States, I help companies in the construction and professional services sectors:

• Take control of their cash flow

• Improve financial clarity and confidence

• Create systems to support sustainable, profitable growth

If any of the warning signs above sound familiar, don’t wait for a full-blown crisis. A cash flow audit can give you the clarity you need to move forward. This is a practical hands-on process where we:

• Analyze your cash flow patterns: where is the money really going

• Identify bottlenecks: invoicing delays, slow paying clients, unprofitable jobs

• Forecast the next 90 days: high-level 13 week cash flow

• Create a roadmap: actionable steps to improve cash position

🧭 Book Your Free Consultation

Let’s have a 30-minute call. I’ll walk through your current situation and help you identify where the gaps are and how to close them.

👉 Schedule Your Call Here

You’ll leave with a clearer picture of your cash flow.