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A profitable large loss can still sink you if the float is bigger than your runway
A RocketLevel guide, backed by decades of experience in the trade. A big commercial loss runs long and pays late, while payroll, equipment, and subcontractors come due every week. That gap, the capital you float between doing the work and getting paid, is where a large loss can break a company. Size the gap, shrink it, fund what is left, and decide whether you can afford the job at all.
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Keep this in view: profit is earned at completion; cash is required every week in between. A job that pencils out can still bankrupt you if you cannot fund the months between mobilization and payment.
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Why the gap opens on a large loss
- Long timelines. Multi-unit, multi-carrier large losses run weeks to months before the file is even ready to pay.
- Slow adjusting and supplements. 60 to 90 days or more is common in RocketLevel's experience, and disputes or depreciation holdbacks add more cycles. For a published yardstick, the Restoration Industry Association (RIA) 2025 Cost of Doing Business Report (page 33, FY2024 data) puts the industry average at 60 days to get paid, with the $10.1M to $15M band slowest at 91.
- Net 30, 60 or 90 terms on commercial work.
- Retainage. 5 to 10 percent of each payment held until completion is what we see most often, so on a $1M job that parks $50K at 5 percent and $100K at 10. That range is set by negotiation in the contract, though a few states set a legal ceiling, and California's changed on January 1, 2026. California caps private-works retention at five percent for contracts entered into on or after January 1, 2026, and exempts a residential project that is not mixed-use and does not exceed four stories (Civ. Code 8811, added by SB 61). New York caps it at five percent of the contract sum (Gen. Bus. Law 756-c) on the private construction contracts GBL 756 defines, meaning $150,000 or more and not a one-to-three family dwelling or a residential project of 4,500 square feet or less, and GBL 757 makes a term demanding more void. New Mexico bars withholding retainage on covered contracts outright (NMSA 57-28-5(E)). Look up the state the building sits in before you plan the float around a number.
- The check may route through the owner or a mortgage company before it reaches you.
Meanwhile the weekly burn (payroll, subs, equipment, supplies) never pauses. On a seven-figure loss, a six-figure balance can sit out for two to three months while you keep funding the crew.
A worked example: the gap on a $250K loss
The figures below are illustrative and vary by job, but they show how the gap opens. Picture a $250,000 commercial water loss. By day 30 you can easily have real cash out the door: roughly $60,000 in specialty-equipment rental, about $40,000 in payroll, and around $15,000 in dumpsters and consumables. That is $115,000 spent, on a $250,000 contract, before a single dollar has arrived. Meanwhile a commercial carrier on a payment cycle of 60 to 90 days may not pay until somewhere between day 90 and day 150. That is months of six-figure cash floated on a job that is profitable on paper. The defense is to progress-bill on a schedule of values so cash comes in while the work is being done, instead of waiting for one lump-sum invoice at the end.
First, shrink the float (contract and billing levers)
- Mobilization and emergency deposits. Get a mobilization payment or deposit written into the contract and bill the front end the week you start. The emergency phase is the part of the job with the clearest documentation and the least argument attached to it, which is why it is the fastest money on the file. Do not guess at how fast; measure what your own emergency invoices actually take and plan against that.
- Progress billing on a schedule of values. Bill early and often as milestones complete. A simple cadence: bill the emergency extraction phase early, the structural drying mid-job, and the tear-out and reconstruction at completion, so cash lands at each milestone instead of all at the back.
- Direction of pay and clean documentation. Route the check to you and speed approvals; complete files get paid the first time, not the third.
- Negotiate retainage. A lower rate, a step-down at a completion milestone, or release on accepted line items. Check your state's statutory ceiling first, since in California, New York and New Mexico, set out above, the number you were about to negotiate down from may not be lawful to begin with.