Q1 2026 Issue · Published January 5, 2026 · Archive
DFW SMB Cash Flow Index — Q1 2026
The working-capital read on Dallas-Fort Worth small and mid-market operators for the October–December 2025 quarter, published January 2026.
Q1 2026 · Headline
DFW SMBs closed 2025 with working-capital discipline largely intact — but the first signs of cycle lengthening are showing up in manufacturing and commercial trades.
Trades ran a clean fourth quarter with collections on residential work tight and commercial A/R largely under control. Manufacturers ended the year with modestly elevated inventory as operators hedged against early-2026 input-cost uncertainty. Services held steady, with SaaS again posting the best working-capital profile in the index.
This is the Q1 2026 archive. The current issue is Q2 2026.
By Chris Gauvin and Taber Wetz
Q1 2026 — What we saw in DFW
Three themes defined the Q4 close and the opening of 2026 for DFW operators.
1. Trades entered the year with tight A/R discipline
HVAC, plumbing, and residential-heavy electrical contractors in the Metroplex finished 2025 with collections well managed. Texas population growth kept demand steady through a mild winter, and the weighted customer base for most of our residential operators remained broadly creditworthy. Commercial electrical and roofing ran a bit longer on the back of end-of-year holiday slowdowns at GCs, but nothing out of pattern.
2. Manufacturing started showing early cycle lengthening
Tier-2 and tier-3 manufacturers in DFW booked modestly higher inventory at year-end. Our read: defensive stocking in anticipation of 2026 input-cost volatility, not a demand signal. Days inventory outstanding drifted up 3–6 days on the median operator, the first material widening since early 2024.
3. SaaS and recurring services kept printing the best profile
Recurring-revenue businesses closed 2025 with annual prepay renewals stacked into January, keeping CCC near or below zero for the median operator. Professional services held steady overall, with modest DSO drift only in firms heavily exposed to real-estate and construction end-markets.
Macro Backdrop
Small-business sentiment closed 2025 near long-run averages, with labor markets still tight (job openings hard to fill at roughly one in three small firms) and prices rising faster than sales for most categories. Credit was available but not cheap; operators who refinanced in early 2025 were well-positioned, while those on floating rates were feeling the pinch. DFW ran ahead of national norms on demand for trades and slightly behind on manufacturing, consistent with the regional economic mix.
Q1 2026 Benchmarks
Local Fractional's aggregate read for Q1 2026 (covering the Oct–Dec 2025 close). Ranges reflect the observed band across the DFW small and mid-market operator set; the "LF Median" is our central estimate for a representative operator. This issue is the baseline for quarter-over-quarter direction in the Q2 issue.
Days Sales Outstanding (DSO) — days
Lower is better.
| Industry | DFW Range | LF Median |
|---|---|---|
| HVAC | 25–55 | 38 |
| Plumbing | 22–50 | 34 |
| Electrical | 42–75 | 58 |
| Roofing | 28–70 | 44 |
| Manufacturing | 42–65 | 52 |
| CPG | 35–60 | 47 |
| SaaS & Tech | 30–55 | 42 |
| Professional Services | 38–65 | 50 |
Current Ratio
Current assets ÷ current liabilities.
| Industry | DFW Range | LF Median |
|---|---|---|
| HVAC | 1.3–2.2 | 1.7 |
| Plumbing | 1.3–2.1 | 1.7 |
| Electrical | 1.3–2.1 | 1.7 |
| Roofing | 1.2–2.0 | 1.6 |
| Manufacturing | 1.6–2.7 | 2.1 |
| CPG | 1.4–2.0 | 1.7 |
| SaaS & Tech | 1.8–3.5 | 2.4 |
| Professional Services | 1.4–2.3 | 1.8 |
Cash Conversion Cycle (CCC) — days
DSO + DIO − DPO. SaaS often prints near-zero or negative.
| Industry | DFW Range | LF Median |
|---|---|---|
| HVAC | 5–30 | 17 |
| Plumbing | 5–28 | 15 |
| Electrical | 18–55 | 34 |
| Roofing | 13–50 | 27 |
| Manufacturing | 55–100 | 78 |
| CPG | 55–100 | 74 |
| SaaS & Tech | −30–20 | −4 |
| Professional Services | 22–55 | 38 |
Working Capital as % of Revenue
(Current assets − current liabilities) ÷ trailing-12-month revenue.
| Industry | DFW Range | LF Median |
|---|---|---|
| HVAC | 6–14% | 10% |
| Plumbing | 5–13% | 9% |
| Electrical | 7–16% | 12% |
| Roofing | 6–15% | 10% |
| Manufacturing | 16–30% | 22% |
| CPG | 15–28% | 21% |
| SaaS & Tech | −5–10% | 2% |
| Professional Services | 7–17% | 12% |
Values reflect Local Fractional's aggregate view of the DFW small and mid-market operator set as of Q1 2026 (covering the Oct–Dec 2025 quarter). Directional benchmarks for operator self-assessment, not audit-grade figures.
See the current issue
The Q2 2026 issue includes updated ranges, QoQ direction relative to this Q1 baseline, and new commentary on what's changed.
Read Q2 2026 →