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.

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.