When contractors talk about cash, they tend to lump it all together. But in reality, there are three types of cash every construction business needs to survive — and thrive:

1. Operating Cash – This is the cash you need to cover your day-to-day: payroll, materials, subs, overhead. It’s your working fuel.
2. Reserve Cash – This is your safety net. It covers slow months, surprises, or emergency expenses. Think of it as your business’s shock absorber.
3. Growth Cash – This is the money you set aside to invest in your future: new hires, equipment upgrades, marketing, expansion.

If you don’t intentionally separate these types of cash — or at least track them mentally — you’ll end up reacting emotionally instead of strategically.

What most contractors do is spend every dollar that comes in, hoping the next job will refill the tank. But that’s survival mode, not growth mode.

A specialty contractor I worked with had solid revenue and what looked like decent margins. But whenever he tried to scale — hire more crews or take on bigger jobs — things fell apart. He was draining his operating cash to cover “growth” projects, and had no reserves when a GC delayed payment. After one painful layoff and missed payroll, we set up separate allocations for each cash type. He started setting aside 5% of every check for reserves and 10% for growth. Within 6 months, he had $75K in the bank and was no longer losing sleep.

Want help setting up a real-world cash system that separates survival from strategy?

Pick up your free copy of my new book, “The 7 Minute Conversation-How to Hear the Story Your Small Business Financial Statements Are Telling You-CONTRACTOR EDITION”.  Go to www.7MinuteConversationBook.com

Ready to find out where your cash and profits are really going? Book your free 15-minute Profit and Cash Flow Call with me. No pressure. Just real clarity. I’ll help you see where your money’s hiding — and what to do about it. Schedule at www.CashFlowCallWithLarry.com