Default-Proof: A Subcontractor’s Guide to Survival

Prioritize cash flow management: Subcontractors often finance projects initially; overextending cash flow is a primary cause of failure. Negotiate favorable payment terms and plan for delayed payments.

Be diligent with contracts: View contracts as your primary risk management tool. Review all clauses, especially payment terms, dispute resolution, and scope, and don't hesitate to redline unfair provisions.

Develop 'walkaway power': Understand your value to general contractors. Don't be bullied into unfavorable terms; good subs are in demand, and GCs often need you as much as you need them.

Build a strong advisory team: Engage specialists like construction CPAs, contract attorneys, and experienced insurance brokers. Their expertise can save significant time and money by preventing costly mistakes.

Dial-in financial processes: Implement robust bookkeeping and accounting systems to track estimates, productivity, billing, and changes in real-time. This minimizes rework and avoids unpleasant financial surprises.

Maintain a healthy backlog: General contractors monitor subcontractor backlogs to avoid overextension. Demonstrate a clear understanding and management of your current and upcoming workload.

Understand insurance nuances: Recognize the difference between surety bonds (which require personal indemnification) and subcontractor default insurance (SDI). Your strong financial and operational profile can significantly reduce insurance premiums.