The Big Job Trap: Why Large Contracts Kill Small Shops

The call every small-shop owner waits for goes something like this: GC you've done two small jobs with, decent payer, calls and says he's got a $280,000 mechanical contract on a 24-unit residential build. Yours if you want it. You'd be his primary sub. He says your name came up with the developer.

You hang up and do the math in your head. That's twice your best year.

You call him back and say yes.

That's the trap. Not the job. The yes.

The Number That Actually Matters Isn't the Contract Value

Right up until October 2008 I measured my shop in trucks. Six trucks and twelve guys meant I'd made it. That was the number I cared about. Not cash on hand. Not days of float. Trucks.

The big job is the same illusion in a different shape. A $280,000 contract is a number on paper. It tells you nothing about whether your shop can survive the gap between when you start spending and when money comes back in.

One question. Write it down before you pick up the phone: can you pay your guys, your truck notes, and your rent for 90 days with zero new deposits hitting the account?

Not "probably." Pull the actual number. If the answer is no, the job is already bigger than you are — regardless of what the contract says.

I learned that watching my receivables stretch from 45 days to 110 days in the fall of 2008. Two builder accounts gone in the same week. Four men I'd hired personally, laid off. I had trucks. I did not have 90 days of cash. When the float ran out, it ran out fast.

How a Big Job Eats a Small Shop

In 2011 I was owed $61,000 by a builder named Whitman out of Marlborough. Not one big job — four smaller ones, accumulated. Net-30 in the contract, 75 days in reality, and every Friday when I called it was "next Friday, we're just waiting on the closing for Phase Two, you know how it goes."

I kept working.

He paid me 38 cents on the dollar in the bankruptcy.

Whitman wasn't technically a big-job trap. It was a receivables trap. But the cash-flow mechanics are the same. A slow-pay GC on four small jobs and a slow-pay GC on one big job will kill your shop the same way: you keep spending on labor and materials while the money owed to you sits on someone else's balance sheet. Job size changes. The math doesn't.

What the big job adds is scale and speed. If you're carrying $90,000 in materials where the first draw is 30 days out and net-30 from draw approval, you've got potentially 60 days before you see a dollar — and that's if the draw clears on time. It clears when the GC's inspection passes. When the developer approves the draw request. When the title company processes the funding. All of which takes longer than the contract says it will.

A $40,000-a-year shop can survive a client who's slow on a $12,000 job. That same shop cannot survive being the primary materials financier on a $280,000 build.

What the GC's Payment Schedule Is Actually Telling You

Here's the part that should make you angry.

When a GC hands you a contract with 60-plus-day payment terms on a job that requires you to carry materials yourself, he is not offering you a job. He is offering you a loan at zero percent interest. You didn't agree to make it. He's betting you won't notice.

When a GC asks you to carry materials and wait 60 days to get paid, he isn't offering you work. He's offering you a loan you didn't agree to make.

"Pay-when-paid" clauses and retainage aren't administrative details. They push the carrying costs of a project onto the subs — the ones who need the work enough to sign without pushing back. The contract says 30. Reality is 90. The sub absorbs the spread on a line of credit he's paying interest on, for a job he priced without factoring in the financing cost.

Go back to Whitman. He paid me 38 cents on the dollar. He paid his framer more than that. Why? The framer threatened to walk. He'd done it before on another job and Whitman knew it. I kept showing up. I kept calling on Fridays. I was polite and professional and I ate the loss.

A shop that finances materials, stays on schedule, and never walks has told the GC he doesn't need to pay on time. He'll pay whoever is loud enough to cost him more than you do. The moment you started work without a signed deposit check in your hand, you already had your answer.

The Float Math Nobody Does Before They Sign

Let me run the number on a $280,000 job.

Say it's a 24-unit residential build. Your scope is plumbing rough, trim, and mechanical. Materials are $90,000 — pipe, valves, fixtures, equipment. Supplier gives you net-30. Contract has a first draw at 30 days, net-30 from draw approval.

Best case: you buy materials on day one, first draw clears on day 60. You've been carrying $90,000 on your supplier account for 60 days, plus payroll for the crew you put on this. Four guys at $28 an hour, 40 hours a week, eight weeks — call it $36,000 in labor before you see a dollar. Total cash out before first draw: $126,000, and that's the clean scenario.

If your shop has $40,000 in the bank, you're not doubling your revenue. You're tripling your exposure.

That $40,000 doesn't cover the materials. It doesn't cover six weeks of payroll. It doesn't cover your existing overhead — truck notes, insurance, shop rent. You're going to a line of credit. The line of credit charges you real money on work you've already priced.

If you can't cover 90 days of operations without touching the new job's materials money, you haven't taken on a job. You've taken on a second mortgage on your business.

That math takes 20 minutes to run. Almost nobody runs it before they sign.

The Terms Are the Job

GCs who pay 60-plus days are using your labor as a free credit line. The contract says 30. Hold them to 30. If they won't move, stop working for them. I fired Whitman after the bankruptcy — too late, but I made a rule out of it. Slept better.

On a job this size, before you sign anything, you need three things in the contract:

Mobilization deposit. Minimum 10 to 15 percent up front, before you order a fitting. On $280,000 that's $28,000 to $42,000. Any GC who's worked with subs before knows this is standard. If he acts like it isn't, he's been getting free financing from people who didn't ask. He doesn't want to stop.

Draw schedule tied to milestones, not calendar. "Net-30 from invoice" sounds fine until you understand the GC controls when the invoice is approved. Tie draws to rough-in complete, inspection sign-off, trim-out complete, final inspection. Payment follows your progress, not his cash position.

Retainage capped and tied to your scope. No retainage is best. If the GC insists, cap it at 5 percent with a hard release date tied to your scope's substantial completion. Not the project's. Not "60 days after certificate of occupancy." Your scope. Your release date.

If he won't move on any of these, the job is priced for a shop with a credit line the size of your annual revenue. That's not you. Walk.

The job you walk from because the terms are wrong is not the job that kills your shop. The one you take with a bad payment schedule and a big number on the contract — that one has a real shot at it.

What You Do Before You Call Him Back

You've got the weekend. Here's what happens before you pick up the phone Monday.

Run the 90-day math on paper. Pull your actual bank balance. Write down monthly truck notes, payroll, rent, insurance, supplier minimums. Multiply by three. Does your balance cover that without touching the new job's material money? If not, the answer to this job is no, or the terms need to change before yes means anything.

Call your supplier before you call the GC. Get real numbers on material lead times. Ask specifically: what are my terms on an order this size, and does any of this go COD? A supplier who doesn't know you at that order volume may tighten terms. You need to know before you commit. Shops die because they priced the materials and forgot they'd be buying them 60 days before the first draw clears.

Write down your floor before you get on the phone. Deposit amount. Draw schedule. Retainage position. Know your number, because the GC is going to push back and if you don't have a floor you'll negotiate yourself into a bad deal and feel like you held your ground.

If it's not in the contract, it doesn't exist. No verbal draw schedule. No handshake on the deposit. A GC who resists putting payment terms in writing is telling you exactly what he plans to do with them.

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FAQ

My GC says this job will "put us on the map" — isn't that worth some risk?

"Put us on the map" is what someone says to get you to absorb costs they should be absorbing. The question is whether your shop survives if the draw schedule slips six weeks, which it will. Take the risk if the terms make it survivable. Not because of a phrase.

How do I calculate how much cash I actually need before I commit?

Add your material costs for the full job. Add estimated labor through the first draw. Add normal overhead for that same stretch — truck notes, insurance, rent, everything you pay whether you're working or not. That total is what you're out before the first dollar comes in. Compare it to your actual bank balance. If there's a gap, that gap is either a line of credit you're paying interest on or a problem.

What's a reasonable mobilization deposit, and how do I bring it up without losing the bid?

Ten to fifteen percent is standard. You bring it up matter-of-factly: "Our terms on a job this size include a mobilization deposit before material orders go in, with draws tied to milestone completions." Say it like it's already true, because it should be. GCs who work with professional subs expect it. The ones who balk have been getting free financing from people who didn't ask.

Is a line of credit the answer here?

It buys you time, and time costs money. If your job margin is 18 percent and you're carrying materials on a line at 9 percent for 60 days, your effective margin just changed — run the actual number. A line doesn't fix a bad payment schedule. It means you're paying to wait instead of waiting for free. Negotiate the terms first. Use the line for timing gaps, not structural ones.

What if I pass and a competitor takes it and grows past me?

You don't know his cash position. You know yours. He might land the job and spend two years recovering from a GC who pays at 90 days and a $90,000 material hit he didn't plan for. A shop that's still standing in three years has more options than one that landed a career-maker and didn't survive it. I've watched good operators lose everything on a job that looked like the big break. I ain't once watched a shop die because it passed on work with bad terms.

How do I know when my shop is actually ready for a job this size?

When you have 90 days of operating expenses in the bank without touching the job's materials budget. When your supplier will give you real terms on a large order. When you have a foreman who can run the crew without you on-site every day. Those three things. The crew size is secondary — it's a cash question. I've seen a three-truck shop handle a job like this cleanly because they negotiated a real deposit and had their float covered. I've seen bigger shops wreck themselves on the same size job because they had neither.