The 3 things that need your attention now
Surfaced first because they’re the most urgent — the truth the surface numbers were hiding.
The business leans heavily on borrowed money
- What we saw
- Debt-to-equity is 16.0×.
- What it means
- Lenders, not the owner, are funding the business. That magnifies both upside and risk — and it shifts control toward the people you owe.
- What to do
- Retain earnings rather than drawing them, and avoid new debt until the ratio normalizes.
Reported profit isn't converting to cash
- What we saw
- Operating cash flow was only -49% of reported net income over the window — the other 149% is accruals (profit booked ahead of the cash).
- What it means
- The profit on your P&L is largely on paper — accruals that haven't turned into cash and, if they don't, will reverse. This is the exact gap that lets an outside expert call a business 'healthy' while the owner never feels like the money is there.
- What to do
- Reconcile net income to operating cash line by line. The usual culprits: receivables you've booked but not collected, and revenue recognized ahead of the work — see the over-billing check below.
Revenue is rising while cash is falling
- What we saw
- Revenue grew +75% but your cash balance dropped -77% over the same window.
- What it means
- This is the single most dangerous pattern an owner can normalize: every metric a lender or accountant praises is going up, while the one number that keeps the doors open is quietly going down. It is almost always the first visible sign of a cracked foundation.
- What to do
- Treat this as urgent, not as a growth cost to 'grow through.' Trace where the cash is going: receivables, inventory/materials build-up, debt service, or owner draws. Pillars 3 and 5 break this down.
Your 30 days, in order
Your reddest pillar is where the dollars are leaking fastest — start there. Week 1: moves 1–2 of your first sheet. Week 2: move 3, plus move 1 of your second. Weeks 3–4: the rest, at the pace the first ones proved. Day 30: re-scan — the metrics on each sheet tell you, without anyone’s opinion, whether it moved.
Fix-Sheet: Debt Burden
What this means Monday morning: Debt hides best inside growth — revenue climbs, the line of credit climbs quietly with it, and one slow quarter turns “leverage” into “the lender's business, not yours.”
The first three moves
- BookkeeperOne page, every obligation: lender, balance, rate, monthly payment, personal guarantee yes/no. Most owners have never seen this on one page. It changes the conversation.
- YouCompare monthly earnings to total monthly debt service. If earnings don't clear debt service with room to spare, the business is working for the lenders first — decide with your CPA which debt gets attacked first (highest rate or ugliest guarantee).
- YouFreeze the line of credit as a growth tool — in writing, to yourself: the LOC bridges receivables, it doesn't fund expansion. If the balance hasn't touched zero in a year, treat it as the term loan it's become and talk to your lender about terming it out.
Done in 30 days looks like
The one-page debt map exists, you know your coverage ratio cold, and the LOC has a job description it's actually doing.
The metric that has to move
Debt service coverage (earnings ÷ debt payments) upward; LOC balance trend downward.
Work these moves with your own bookkeeper and CPA — this is educational information from a contractor who lived this read, not advice for your specific situation.
Fix-Sheet: Cash Generation vs. Reported Profit
What this means Monday morning: The profit your P&L reports is partly paper — living in receivables you haven't collected and billings ahead of work you haven't finished. Companies don't die of low profit; they die of cash that never arrived. This gap is where that starts.
The first three moves
- YouPut two numbers side by side for last month: net income, and the actual change in your bank balance. If they disagree by more than a little, that difference is the gap this pillar measures — now it has your attention.
- BookkeeperReconcile net income to cash, line by line: where did the profit go? The usual suspects are receivables growth and unearned/deferred revenue. Name the dollars in each bucket.
- YouTake the two biggest buckets to your bookkeeper or CPA and set one written rule for each — e.g., “no new work for anyone 45+ days past due” — and put it in writing to your team.
Done in 30 days looks like
You can say, without looking it up, how much of last month's profit became cash — and there's one written rule attacking the biggest leak.
The metric that has to move
Operating cash flow ÷ net income, trending toward 1.0 — re-scan next month with both months in; the trend read does this for you.
Work these moves with your own bookkeeper and CPA — this is educational information from a contractor who lived this read, not advice for your specific situation.
Fix-Sheet: Cash Conversion Cycle
What this means Monday morning: You're the bank — fronting labor and materials, waiting on draws, retainage, and slow payers while your own bills arrive on schedule. Growth makes this worse, not better: more work means more cash stuck.
The first three moves
- BookkeeperPrint the A/R aging today. Circle everything over 45 days. That circled number is the loan you've made your customers, interest-free.
- YouCall the single biggest circled account personally — today, not Friday. One call from the owner collects what three statements won't.
- You + BookkeeperSet the billing rhythm in writing: invoices go out the day the milestone hits (not month-end), and a past-due touch happens every week on the same day, every time — no exceptions and no mercy-drift.
Done in 30 days looks like
The over-45 circle is visibly smaller, invoices leave the building the day they're earned, and collections happen on a weekly drumbeat instead of when the account gets scary.
The metric that has to move
Days sales outstanding (DSO) — re-scan monthly and watch the receivables-aging trend line.
Work these moves with your own bookkeeper and CPA — this is educational information from a contractor who lived this read, not advice for your specific situation.
Fix-Sheet: Burn Rate & Runway
What this means Monday morning: Runway is the honest count of how many months the business survives if revenue stumbled — and businesses that don't know their number make brave decisions with borrowed time.
The first three moves
- BookkeeperCompute last month's true all-in spend: overhead + payroll + debt payments + the owner draw. One number. Write it where you'll see it.
- YouDivide cash on hand by that number — that's your runway in months. Decide, in writing, the floor you will not go below (many owners pick 3 months) and what triggers when you hit it.
- YouKill or pause the two most defensible-sounding discretionary spends. Not the biggest — the two easiest to rationalize. Revisit in 90 days from strength instead of from panic.
Done in 30 days looks like
You and your bookkeeper both know the runway number, it has a written floor with a trigger, and next month's burn is lower than this month's.
The metric that has to move
Months of runway (cash ÷ monthly burn), re-checked on every scan.
Work these moves with your own bookkeeper and CPA — this is educational information from a contractor who lived this read, not advice for your specific situation.
Your business on three legs
Every business stands on three: Sales gets the work, Operations does the work, Finance gets paid and keeps score. Management is the seat that holds them together — here’s how each leg is bearing weight.
Sales
Whether you win the right work — and have enough of it sold ahead to keep the crew busy.
Operations
Can you see your true cost per job, and do your systems actually get enforced?
Finance
Does reported profit turn into real cash — and is growth funded by the work or by debt?
The seven-pillar scorecard
6 of seven pillars run automatically from your financials. Any still locked need data your books don't carry — job costs, an ops snapshot, or your bid log.
Cash Generation vs Reported Profit
Reported profit is not real cash. This is the blind spot that sinks businesses.
Job-Level Cost Visibility
You can see what each job costs and makes — real cost control.
Cash Conversion Cycle
Cash is trapped too long, forcing the business to fund the gap with credit.
Burn Rate & Unit Economics
The business is burning cash and growth is funded by debt, not operations.
Debt & Liability Burden
Debt service is crowding out the business; refinancing pressure is building.
Operational Discipline & System Compliance
Spending and execution hold to a system that's actually enforced.
Sales Pipeline & Conversion
Are you winning the right work — and is enough sold ahead?
Pillar by pillar
Cash Generation vs Reported Profit
Revenue looks great — but where's the money?
Reported profit is not real cash. This is the blind spot that sinks businesses.
Worse than break-even: the books showed a profit while operating cash flow was negative over the last 3 periods — cash left the business even as the P&L gained.
Revenue is up +75% while cash is down -77% over the same span. Growth is consuming cash, not producing it.
About 31% of your recent revenue is money billed or collected ahead of work actually earned ($580,000 unearned). That inflates today's profit by borrowing from tomorrow.
Reported profit isn't converting to cash
- What we saw
- Operating cash flow was only -49% of reported net income over the window — the other 149% is accruals (profit booked ahead of the cash).
- What it means
- The profit on your P&L is largely on paper — accruals that haven't turned into cash and, if they don't, will reverse. This is the exact gap that lets an outside expert call a business 'healthy' while the owner never feels like the money is there.
- What to do
- Reconcile net income to operating cash line by line. The usual culprits: receivables you've booked but not collected, and revenue recognized ahead of the work — see the over-billing check below.
Revenue is rising while cash is falling
- What we saw
- Revenue grew +75% but your cash balance dropped -77% over the same window.
- What it means
- This is the single most dangerous pattern an owner can normalize: every metric a lender or accountant praises is going up, while the one number that keeps the doors open is quietly going down. It is almost always the first visible sign of a cracked foundation.
- What to do
- Treat this as urgent, not as a growth cost to 'grow through.' Trace where the cash is going: receivables, inventory/materials build-up, debt service, or owner draws. Pillars 3 and 5 break this down.
Profit is inflated by billing ahead of the work
- What we saw
- $580,000 of revenue is recognized ahead of being earned — 31% of recent revenue.
- What it means
- This was a major distortion in the founder's own collapse: over-billed work shows up as profit now, but it's a liability you still owe in labor and materials. The P&L looks strong precisely because the obligation is hidden.
- What to do
- Move to earned-revenue (percentage-of-completion) recognition and watch billings-in-excess-of-costs as its own line. In the mid tier we reconcile this against the WIP schedule job by job.
Job-Level Cost Visibility
Do you actually know your true cost per job?
You can see what each job costs and makes — real cost control.
Your gross margin is about 30% — a believable range for the trade, so your direct job costs appear to be landing in COGS.
Cash Conversion Cycle
How long is your money trapped between the work and the payment?
Cash is trapped too long, forcing the business to fund the gap with credit.
It takes about 64 days to collect money you've already earned. That's cash sitting in someone else's account instead of yours.
You take about 21 days to pay your suppliers.
Materials sit about 28 days before being used.
Your cash is locked up for about 71 days between paying for work and getting paid for it — that whole window has to be funded somehow, usually by debt.
Receivables have aged for 5 periods in a row — the money you're owed is taking longer to reach you each period.
Money you've earned is slow to arrive
- What we saw
- Days Sales Outstanding is ~64 days.
- What it means
- Work is done, the invoice is booked as revenue, but the cash hasn't landed. Long DSO is how a 'profitable' company runs out of money.
- What to do
- Tighten billing timing and collections cadence: invoice on milestones, not at the end; chase 30-day balances weekly; consider deposits or progress billing.
Your cash is trapped too long in the cycle
- What we saw
- Cash Conversion Cycle is ~71 days.
- What it means
- Every day in this cycle is a day you're financing the business out of pocket or on credit. A long, lengthening cycle is what forces owners onto the line of credit just to make payroll.
- What to do
- Attack the biggest lever first — usually collections (DSO). Negotiate longer supplier terms (DPO) and reduce idle materials (DIO) where you can.
Receivables are aging, period after period
- What we saw
- Effective collection days rose for 5 consecutive periods.
- What it means
- A steady drift, not a spike — the kind of slow bleed that doesn't trip any alarm until the cash isn't there. Your AR is aging faster each period.
- What to do
- Pull the AR aging detail now and segment by customer. A few slow payers usually drive most of the drift; put them on stricter terms.
Debt & Liability Burden
Can the business service its debt without refinancing or cutting payroll?
Debt service is crowding out the business; refinancing pressure is building.
Your earnings cover only 0.93× your debt payments — under 1.0×, meaning operations don't even cover the debt. The cushion is thin.
Total debt is 4.4× your annual earnings. It would take years of everything you make just to clear it.
For every $1 of equity you carry 16.0 of debt — the business is financed far more by lenders than by you.
Operations don't cover your debt
- What we saw
- Debt Service Coverage Ratio is 0.93×.
- What it means
- Below 1.0× means the business doesn't generate enough to make its debt payments from operations — the gap is being filled by new borrowing, refinancing, or cutting something that matters, like payroll.
- What to do
- Build a debt maturity calendar (what's due, when) and stress-test it against a slow quarter. If you're refinancing to make payments, name that out loud — it's the warning sign, not the solution.
The business is carrying too much debt for what it earns
- What we saw
- Leverage is 4.4× EBITDA.
- What it means
- High leverage turns a normal slow stretch into an existential one. There's no slack — the debt assumes everything keeps going right.
- What to do
- Stop adding debt to fund growth until coverage improves. Map which balances are revolving vs. term, and prioritize paying down the most expensive, callable ones.
The business leans heavily on borrowed money
- What we saw
- Debt-to-equity is 16.0×.
- What it means
- Lenders, not the owner, are funding the business. That magnifies both upside and risk — and it shifts control toward the people you owe.
- What to do
- Retain earnings rather than drawing them, and avoid new debt until the ratio normalizes.
Burn Rate & Unit Economics
Is growth funded by operations — or by new debt?
The business is burning cash and growth is funded by debt, not operations.
At your current burn of $31,775/mo against $70,000 in the bank, you have about 2.2 months before the cash runs out — the clock no profit margin shows you.
Operations actually drained cash this window while your growth pulled $1,040,000 into receivables and materials — the build and the drain were covered by $1,800,000 of new borrowing. Your growth is funded by the bank, not the work.
Over this window each new dollar of revenue produced -20% of operating cash — growth is consuming cash, not making it.
You're burning cash — the runway is short
- What we saw
- Operating cash burn is about $31,775/mo against $70,000 on hand — roughly 2.2 months of runway.
- What it means
- Runway is the one number that doesn't care how good the P&L looks. When operations burn cash, every month spends down a finite balance — and if each new dollar of revenue makes cash worse instead of better, growing the business only shortens the clock.
- What to do
- Build a 13-week cash forecast now and treat runway as the number that governs every other decision. Find the burn's source — receivables, materials build-up, debt service, owner draws — and stop the largest leak first.
Your growth is funded by debt, not the business
- What we saw
- Operations consumed cash while growth pulled $1,040,000 into working capital; about $1,800,000 of new debt covered it.
- What it means
- When growth pulls more cash than operations generate, the gap has to come from somewhere — new debt or the reserves you've built. Either way, every new job makes the business more fragile, not stronger; it feels like momentum right up until the cash or the credit runs out.
- What to do
- Tie each new dollar of revenue to the cash it actually frees. Slow the growth you can't self-fund, and shorten the gap between doing the work and collecting for it before it drains more.
Operational Discipline & System Compliance
Do your systems get enforced — or just exist?
Spending and execution hold to a system that's actually enforced.
Your overhead holds steady at about 17% of revenue month to month — a sign spending runs on a budget you actually enforce.
Overhead is holding its share of revenue (about 17%) — it isn't outrunning the work.
You’re looking at the $750 Readout — on sample numbers.
Every dollar figure, ranked flag, and plain-English read above is what the Real-Books Readout delivers on your actual QuickBooks. Start where it costs nothing: the free scanon your own numbers shows you where the cracks are — the Readout puts dollars on them. And when you’re ready to fix what it finds, the Profit-Leak Session ($2,500) dollarizes every leak live with your team; your $750 credits toward it.
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