How do you know when it's time to grow?

One question continues to be asked of me from contractors across the country: "When is it time to grow my business?" I must admit that my normal, in-your-face response is, "When is it ever time not to grow your business?" Now before you consider me a smarta## of sorts, let me explain my answer.

First, for any company to purposely NOT be focused on building their business is just short of committing economic suicide. Even those contractors who don't 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 measuring your growth.

The contractors asking the questions took very serious their future and wanted to be competitively positioned in the marketplace. But what were these contractors really asking?

Well, I think what they were really driving at was, how do you know when it is time to plan for growth, purchase more equipment, add one more salesperson, or take on more debt to subsidize the business until sales picks up?

Here are some rules of thumb.

First, look at your net profit margins. Are they increasing or are you making less money than in the past? Losing your 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. If your profits are steadily increasing you might be positioned to take on greater risk because your performance systems and processes are under control.

A second consideration is to observe the number of unsolicited customer calls you are getting. If requests for work are increasing it might indicate there is more work available than in previous years or that more companies or property owners have money to spend. Increased requests also could suggest that customers are looking for more highly regarded, responsible, quality-based contractors. Or it might mean that the word is out about your company and the quality of work you do.

Yet a third consideration is to assess the performance load your crews can take on. Can your people do more work? Among your current workforce, do you have a few employees who could lead their own crews or run their own little team of employees? 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, leaving some to look for better job opportunities elsewhere.

A fourth consideration must rest with your own personal convictions. Do you want to grow? Growth is exciting but it is also scary. Adding people, equipment, debt, etc. to your structure requires forethought and planning, which will take more of your time and require you to think "outside the box," looking for new answers to new questions.

Other factors to consider are:

  • Do I have the right people to take on more work?
  • How much more work can I do with my existing equipment?
  • Will my material supplier support me … and at what cost savings?
  • Is work available 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, you should realize that 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 growth opportunities.

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 on being the most profitable. Align yourself with others contractors who will feed you the type of business you excel at while you pass on other types of work to them.

Brad Humphrey, president of Pinnacle Performance Group, and his business partner, Jeff Stokes, are regular speakers at the NPE and NPE West. Reach Brad at brad@pinnacle-performance.com or visit their booth at the 2005 NPE in Atlanta (look for the Next Level Contractor sign).

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