When is it Time to Grow?

The time is always right to invest in your business, but there are several indicators to consider before taking the first step

Of the questions I am asked by contractors, "When is it time to grow?" certainly ranks in the top two or three. Trying to hold back my disbelief I want to answer (but normally don't) "When is it ever time NOT to grow your business?"

For a contractor to not be focused on building their business is just short of committing economic suicide. Even contractors who do not have a formal business plan or financial goal still strive to be successful. Seeing your sales and profitability figures increase is simply an obvious form of measurement if you are growing.

But I don't think "When is it time to grow?" is the question they're really asking. Most contractors take very seriously their future and want to be competitively positioned in the marketplace. Thus, they are sincerely interested in recognizing just when is it time to go beyond the "wait for the phone to ring" response to growing business.

What I think they are really driving at is "How do you know that it is time to plan for growth, purchase new or more equipment, add another estimator, or take on more debt to subsidize the business until sales pick up?" From this perspective there are several indicators to consider before taking the first step. ➊Look at your profit margins. Are they increasing or are you making less money than in the past?

Declining profits might be due to your firm's lack of focus on quality performance.

On the other hand, if your profits are steadily increasing, you might be positioned to take on greater risk because performance systems and processes are under control. ➋Observe the number of unsolicited calls you receive. If requests for work are increasing, it might indicate there is more work available then previous years or that customers have more money to spend. Another reason for the increase in unsolicited calls might be due to your company's reputation. Your crews' performance, the friendly communication of your estimators, superintendents, foremen, or even office employees might be driving referrals. ➌ Assess the performance load your crews

can take on. Among your current workforce do you have a few more employees who could lead their own crews or run their own team? If this is the case, growing your business could very well reward the people in your organization who are looking for more responsibility. Not growing your business would restrain such people, moving some to look for jobs elsewhere. ➍Examine your personal convictions. Do you want to grow? Growth is exciting, but it is also scary. Adding people, equipment, debt, etc. to your existing structure will require forethought and planning. Such planning will take a greater amount of time and require you to think "outside the box" looking for new answers to new questions.

In the end, if you are not personally motivated and driven to grow or expand your business, chances are good that you will fail. Bigger is not always better. If you are not driven to have the biggest contracting business in your area then focus instead on being the most profitable.

When to grow your business depends on many additional considerations. Do I have the right people? How much more work can I accomplish with my existing equipment? Will my material supplier support me and at what cost savings? Is there the work to support my aggressive growth projections? Am I capable of managing and leading more people and interfacing with more customers?

While not every question can be answered right away, the more you uncover about the costs and benefits of growing your business, the more confident and prepared you will be to take on growth opportunities. ■

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Known as The Contractor’s Best Friend, Brad Humphrey continues to write and speak in support of the construction industry. His international podcast, sponsored by A.C. Business Media and Caterpillar, continues to be one of the favorites of suppliers and contractors alike. As Vice President of Pavecon Ltd., a large and growing pavement maintenance contractor, Brad continues to develop, teach, write, and share his 35-plus years of industry knowledge. Visit Brad via several industry groups on Facebook.com.