Mike Andes (YouTube video, 2026-01-19) warns home service business owners about cash-flow dangers when starting jobs without upfront payment. He emphasizes collecting deposits before work begins—at least 50% or enough to cover cost of goods sold—because otherwise businesses go negative on projects and risk insolvency.
At least 50% (or at minimum enough to cover cost of goods sold).
You can't get on a job site, especially larger job sites, and put in labor, materials, time, all of these things. Planning goes into this job and you have no money. No one's giving you any money. You have all these expenses. You paid thousands of dollars for material, hundreds of dollars for equipment rental, and you don't have any money yet. And you're going negative on every single job from day one. And then you're hoping they pay you 30 or 60 days later and you make some profit. I need to cover my cost of goods prior to starting the job. So. So I never go in the red. This is what leads to a lot of cash flow problems for home service businesses, is we don't do this. You gotta collect the deposit before the job starts, at least 50%, at least cover your cost of goods sold. This is how you grow yourself out of business. This is how you grow yourself into bankruptcy by big projects and big jobs that you never collect a deposit on because you went red. You put money into the job via labor, materials, subcontractors, supplies, rental equipment. All of this stuff you got, you poured into the job. And then either like, let's. Hopefully they pay you down the road, but even if they do pay you immediately when the job is done, you had a point in time when you went negative for that project. You had negative cash flow.
