10
OPINION
How to maintain a steady backlog
I f you want to grow your business, getting your backlog right couldn’t be much more important. A strong backlog gives you the ability to plan ahead – whether that’s for hiring needs, manpower needs, key strategic investments, or general cashflows for things like trucks or raises. These four steps will earn your business a steady backlog, empowering you to chase your strategic goals.
Matt Verderamo
Backlog is a measurement of how much work you have booked that you have not yet billed for. So, for example, the day you sign a $3 million contract, you add $3 million to your backlog. After your first billing – let’s say it’s for $100K – your backlog on that project is now (you guessed it) $2.9 million. To get your total backlog, add up the remaining billings on all of your projects. Since backlog is a key indicator of future billings, and therefore future profits and cash flows, there are many reasons you should be making every effort to maintain a steady backlog. Based on my time as a VP of estimating and sales at a specialty contractor, and my time spent with tens of top construction contractors around the country, here are the top four considerations you should make to ensure you are using this information to best guide your business:
1. What gets measured gets built. The first step of maintaining a steady backlog is as simple as setting a target backlog based on your business’s strategic goals, measuring backlog on your financial reports, and distributing up-to-date backlog data to your estimating team at least monthly, but preferably weekly. As it goes with most things, people won’t focus on it if it’s not measured and in their face. The more you talk about and measure backlog, the better chance you have at achieving your goals. 2. Backlog is a lagging indicator. While you must measure your backlog, it’s important to realize that it is a lagging indicator. This means that whether backlog is low or high doesn’t tell us much – other than that we either do or don’t need work. What it doesn’t tell us are things like:
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THE ZWEIG LETTER MAY 5, 2025, ISSUE 1584
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