When is it time to grow?

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 any contractor to purposely not be focused on building his or her business is just short of committing economic suicide. Even most contractors who do not have a formal business plan or financial goals 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.

1. Look 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. You might not be holding your people accountable to reducing operating costs and becoming more financially responsible. On the other hand, if your profits are steadily increasing you might be positioned to take on greater risk because your performance systems and processes under control.

2. Observe the number of unsolicited calls you receive. If requests for work are increasing it might indicate there is more work available then in previous years or that potential customers have money to spend. Increased requests could also suggest that customers are looking for more responsible and quality based contractors who are highly regarded.

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.

3. Assess the performance load your crews can take on. Can your people do more work? 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 job opportunities somewhere else.

4. Examine 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. Align yourself with other contractors who will feed you the type of business you excel at while you pass on other types of work to them.

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

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

President of Pinnacle Development Group, Brad Humphrey will host Pavement's first web cast, "Squeezing 3%-5% More Profit from Your Business" Oct. 30. Register free at www.forconstructionpros.com/webcast. For help in determining when and how to grow your business contact Brad at brad@pinnacledg.com or visit www.pinnacledg.com.