When Scott Peper is not being overwhelmed with the duties of parenting three daughters, he’s focused on his work as CEO of Mobilization Funding. He also wrote The Big Book of Cash Flow, which aims to help commercial subcontractors and general contractors to navigate the financial aspect of successful projects.    Cash flow in the construction world is not like it is in most other businesses. Scott’s focus is helping clients get a grip on the math of it all–capital, expenses, margins, contingencies.   He says it’s all about knowing how much money you have in your pile of cash. But some of that pile might not be just profit from a given project. Among other things, it might be…

• a line of credit
• cash you’re infusing from your own pocket
• long-term debt
• short-term debt

  Scott explains that traditional financing institutions sometimes fail to understand the dynamics that are unique to construction.    Tyler asks Scott to list cash-flow mistakes. He lists a few:  

• people living out of their checkbook rather than thinking ahead.
• not having accurate financial statements
• failure to consider forecasted expenses

  Eddie points out that “cash flow can eat you.” Plenty of businesses go bankrupt due to a lack of attention to cash flow. Scott builds on that insight and says that cash flow is also key to positioning your company for growth. Scott suggests focusing on a 13-week cash-flow forecast, and he talks us through some hypothetical scenarios.   We discuss a variety of considerations that must be made before bidding on upcoming projects.    Eddie asks how big a cash pile should be in order to keep a business in a good place. Scott talks through an example scenario of a contractor facing growth opportunities. He says that most contractors are solid on the bidding process and executing over a work schedule. What many of them don’t know is how to invest in the job at the beginning of a project vs. the point where they’re cash-flow positive.    Tyler shares that he has recently experienced a version of this disconnect when he neglected to familiarize himself with the payment terms before signing a contract with a client. Luckily he has a buffer that has been sufficient.    Scott follows up by suggesting the idea of pricing a job a few percentage points higher to take financing costs into consideration. Your bid must take cash-flow and financing costs into consideration.    We discuss the trickle-down effects of failures to consider cash flow. A sub won’t order materials when they should if they don’t have the money to pay for them. Then, if the contract considered such contingencies, extra fees may worsen the situation for that sub.  As we shift our attention to solutions, Scott lists these things:

• Have a good finance mind somewhere in your business–a readily available person with meaningful insights. 
• Have a cash-flow tool for each project, and examine reports daily to keep tabs on the small and big pictures.
• Communicate proactively with the other parties as circumstances change.

  Just getting started? Scott suggests that you learn to leverage–leverage your experience, your expertise, your credit cards, and more.    Scott’s megaphone message: Performance is the one thing that will separate you from the competition. It will bring you a variety of rewards. Make yourself so undeniably great that contractors won’t want to work with anyone other than you. Don’t sell yourself short. Do not sacrifice the price that you need in order to perform well.   Here is a link to the free resources that Scott mentioned toward...