Ask a contractor how much cash is in the business and you get a dollar figure. It is the wrong unit, and it is why so many owners with healthy-looking balances end up in trouble.
The short answer: measure cash in weeks of payroll plus fixed costs, not in dollars. Divide your bank balance by one week of running the business. Under six weeks is tight. Under three and you start making decisions out of fear. Most trades businesses should be aiming for eight to twelve.
$180,000 in the bank sounds like a lot. For a company with a weekly burn of $60,000, it is three weeks, and three weeks is not a lot at all.
The calculation
Two numbers, both of which you can get this afternoon.
Your weekly burn. One week of payroll, fully burdened — wages plus taxes, workers' comp, benefits — plus one week's share of everything fixed: rent, insurance, vehicle payments, software, loans, your own draw.
Do not include job materials or subs. Those are variable and mostly funded by the job. What you want is the cost of simply existing for a week with no new revenue.
Your available cash. Bank balance plus anything you could genuinely draw on immediately. Be honest about the credit line — if it is already half used, only the unused half counts.
Weeks of runway = available cash ÷ weekly burn
That single number tells you more about the health of the business than revenue does.
What the thresholds actually mean
These are not arbitrary. Each corresponds to a change in how you behave.
| Runway | What it means in practice |
|---|---|
| 12+ weeks | You can price properly and walk away from bad work |
| 8–12 weeks | Comfortable. The target for most trades businesses. |
| 6–8 weeks | Workable, but one bad receivable hurts |
| 3–6 weeks | Tight. You start chasing volume over margin. |
| Under 3 weeks | Decisions get made out of fear |
That last row is the one worth understanding properly, because it is not really about money. It is about judgment.
Under three weeks of runway, a contractor takes the job at 11% because 11% is cash on Friday. Skips the deposit because the customer pushed back and the work is needed now. Discounts to close today rather than holding the price for a week. Puts off the truck repair. Delays paying a supplier and loses the early-payment discount.
Every one of those decisions is rational in the moment and expensive over a year. Thin cash does not just cost you interest. It costs you margin, because it removes your ability to say no — and pricing power is almost entirely made of the ability to say no.
Why trades businesses run thin
This is structural, not a character flaw.
You fund the job before you get paid. Materials on day one, payroll every week, invoice at completion, paid thirty to sixty days later. On a ninety-day job you are financing the customer for months.
Growth consumes cash. A bigger job means more materials and more payroll up front. Two big jobs at once means double. This is why the busiest year is often the tightest — covered at length in the piece on the cash trap of growth.
Receivables drift. The invoice goes out on the 30th and the customer pays on the 75th, and there is often nothing you can do about it once the work is done.
Seasonality. In Calgary, and anywhere with a real winter, revenue arrives in a compressed season while overhead runs all twelve months.
The number most people get wrong
When owners do calculate runway, the most common error is counting money that is not theirs.
Deposits and progress payments on work not yet done are not your cash. If you have been paid $80,000 for a job you have not started, that money is spoken for. Spending it means the next job funds the last one, which works right up until it stops.
Two ways to handle it. The clean way is a separate account for customer deposits. The practical way is to subtract un-earned deposits from the balance before dividing.
Taxes are not your cash either. GST collected and payroll remittances are held on someone else's behalf. Subtract them.
Run those two adjustments and runway often drops by a third.
Rebuilding it when it is thin
If you have just done the arithmetic and it came out at four weeks, the fix is not one thing. It is several small ones, in order of speed.
Fastest: collect what you are owed. Receivables over thirty days are cash you already earned. Most contractors have more sitting there than they think, and most of it is unpaid because nobody has asked twice. A single afternoon of phone calls frequently outperforms a month of new sales.
Next: take deposits, and make them real. A deposit that covers materials means the job does not consume your cash to start. If you are not taking one, that is a policy decision you can change this week.
Next: bill progressively. Waiting until completion to invoice a six-week job means financing it for six weeks plus payment terms. Milestone billing turns one long float into several short ones.
Then: fix the pricing. Slower, and the real fix. If margin is thin, no amount of cash management saves you — you are just running out of money more slowly.
Last: the credit line. Useful as insurance, dangerous as a solution. A line covering four weeks of burn is a genuine safety net. A line permanently drawn is a signal the business is underpriced.
What good looks like
A trades business with eight to twelve weeks of real runway behaves differently, and everybody in it can feel the difference.
You can turn down work that does not pay. You can hold a price when a customer pushes. You can replace a failed truck without an emergency. You can wait an extra two weeks for the right hire instead of taking whoever is available. You can absorb one customer paying sixty days late without it becoming a crisis.
None of that shows up as a line on the P&L. All of it shows up in margin over twelve months, because it is the accumulated effect of hundreds of decisions made from a position of not needing the money today.
Check it weekly, in weeks
Put this at the top of your Monday routine — it is number one on the sheet for a reason.
Not the balance. The balance moves for reasons that do not matter and it invites you to feel fine because the figure looks big. Weeks of runway moves for reasons that do matter, and it is directly comparable month to month regardless of how the business grows.
One number, ten seconds, every Monday. It is the earliest warning you get, and it arrives weeks before anything shows up on a financial statement.
The money in the account that is not yours
Before the runway number means anything, subtract the cash you are holding on somebody else's behalf.
Most trades businesses run one operating account, and the balance in it is a blend of several different things:
- Customer deposits for work not yet started
- Sales tax collected and not yet remitted
- Payroll source deductions withheld and not yet paid
- Holdback owed to subs once their lien periods expire
None of that is working capital. All of it leaves on a date somebody else picked.
A $95,000 balance that includes $30,000 of deposits, $14,000 of sales tax and $9,000 of source deductions is really $42,000 — under four weeks of runway for a business with $11,000 of weekly fixed costs, not the eight-plus weeks the bank balance suggests.
This is the single most common reason a contractor gets surprised by a cash problem. They were watching a real number that was measuring the wrong thing.
The fix takes an hour.
Keep a second account and move the obligations into it. Every time sales tax is collected or source deductions are withheld, transfer the amount across. The operating balance then means what you think it means, and remittance dates stop being events.
Treat deposits as restricted. A deposit funds that job's materials. Spending it on last month's payroll is borrowing from a customer, and that works exactly until the job needs its materials ordered.
Run the runway calculation on the adjusted figure. Bank balance, minus deposits held, minus tax and remittances owed, minus imminent holdback. That number is what the business actually has.
It is usually a good deal smaller than the one people quote — and being surprised by it now, on a Monday morning, is enormously better than being surprised by it on a Thursday with payroll due Friday.
The 10 Numbers I Check Every Monday
One page. Ten minutes, every Monday. Every number has a line next to it that tells you when to act.
Get the sheet — freeCommon questions
Does my credit line count as cash?
Only the unused portion, and only if the facility is genuinely available. A line that is already half drawn gives you half its face value in runway. Treat a credit line as insurance against a bad month rather than as working capital, because a permanently drawn line is a signal that the business is underpriced rather than underfunded.
Should customer deposits count toward my cash position?
No. Money paid for work you have not performed is spoken for. If you count it as available cash you end up funding each job with the next job's deposit, which works until one customer pays late. Either hold deposits in a separate account or subtract un-earned deposits before calculating runway.
What if I am seasonal and cash is always thin in winter?
Then your target runway needs to cover the trough, not the average. Work out your weekly burn in the slow months and hold enough to cover the gap plus a margin. Seasonal businesses need more runway than year-round ones, not less, and the time to build it is during the busy season.