Working Capital

Why growth can shrink your bank account.

Revenue up 60%. Bank balance down 30%. The P&L looks great. The checking account does not. Growth eats cash before it pays cash.

The cycle on a $20k commercial tree job

Cash goes out fast. It comes back slow.

01
Day 1: bid accepted
Order materials and consumables. $4,000 out the door before anyone climbs a tree.
02
Day 5: crew on site
Payroll runs. $3,200 out for labor on the job.
03
Day 10: job done, invoice sent
Net 30 terms. The clock starts.
04
Day 45: customer finally pays
Net 30, paid late. $20,000 in. Net cash impact: $7,200 out for 45 days, then $20,000 in.

Scale that

Five jobs running concurrently = $36,000 tied up.

Five $20,000 commercial jobs at different stages of the cycle. At any given moment, about $36,000 of cash is sitting in materials and payroll waiting to come back as receivables.

Now layer on the rest of growth: a new $4,500 a month crew member, fuel and insurance scaling with revenue, a bigger tax bill from the higher P&L. The bank balance shrinks even as the books look healthier than ever.

The math

Working capital ≈ monthly revenue × CCC days ÷ 30.

CCC is your cash conversion cycle: the average days between cash going out for a job and cash coming back in. If your CCC is 35 days and you do $80,000 a month, you need roughly $93,000 of working capital just to keep the doors open.

Double your revenue, you double the working capital need. That money comes from one of two places. Profit, which is slow. Or borrowing, which is fast and risky.

The play: deposits and progress billing shrink CCC. A 30% deposit on a $20k job is $6,000 of cash on day 1 instead of day 45. That alone funds the next job’s startup costs.

The bottom line

Growth is funded by cash, not by hope.

Track your CCC. Take deposits. Bill progress on big jobs. Otherwise the better the P&L looks, the tighter the bank account gets.