Being forced to grow your business. Wrap your brain around that for a second.
Wouldn't that be an interesting predicament to find yourself in? How would you respond?
Would you scream "YES", sign the contracts and figure things like staffing and cash flow will work themselves out fine when the time comes?
Would you say "Thanks, but no thanks. I don't want to run that big of an operation."?
Today, we are going to explore the ramifications of each of those two paths. We are also going to explain how you should prepare your business for the time when growth is forced on you. If you implement the systems and solutions we share with you in our newsletters, in our private library at www.USCTCA.com, and through our coaching services you WILL have growth forced upon you.
An Example of Forced Growth
An excellent example of a forced growth business resides about a mile from my house. Back in the late 80's, Walmart had a well-earned reputation for hopping from firm to firm for its MEP design services until Henderson Engineering landed the account. At the time, Henderson was quite small, probably no more than 30 employees. Thirty years later, Henderson continues to keep Walmart happy and employs well over 400. The Walmart
account fueled (forced) a tremendous growth in Henderson's business.
Two important lessons should be learned from Henderson's success:
- Don't take your key customer for granted. Keep your best people on the account.
- Aggressively pursue other business to protect yourself against the sudden loss of the primary account.
It took Henderson a while to build the staff and perfect the systems to handle Walmart's volume of projects cost effectively and without error. Once Henderson's owners had ensured they could keep Walmart happy they immediately set a goal of keeping
Walmart's business limited to 25 percent of its sales. They couldn't turn down Walmart projects so their goal meant developing other clients that would represent three times the Walmart volume. That is a classic example of forced growth. In order to keep its foundational client happy, Henderson was forced to grow massively. The owners really didn't have a choice.
At some point in time, most construction companies experience a burst in sales. Few are ready for it. Few know how to keep the sales coming in after the burst. Few know how to hire well. Eventually quality slips; and as quality of work and customer service was the reason for the growth opportunity in the first place, sales dry up and the business is left in a financial bind trying to pay for new equipment and a new office.
Growth can and should be managed. Most business owners struggle with the challenge of generating opportunities for growth. What few admit to is how they stumbled when growth suddenly dropped in their laps.
Unprepared For Growth
Here's what happens when an unprepared business experiences growth.
The business struggles with cash flow. Money flies out the door for labor and materials yet trickles in slowly from clients. The P&L looks great but the bank account is starved. Vendors get upset and lenders prove uncooperative and unsympathetic.
The crews wear out from the long hours. The office struggles to keep up with the paperwork and stay ahead of the crews with materials, equipment and direction. Overtime shoots through the roof and/or the new hires work considerably slower than the old-timers. Job costs escalate rapidly as all of the above drives up the time needed to complete each project. Deadlines are missed and quality slips.
Hopefully you now realize that the correct answer to the first path - signing the contracts and worrying about cash and staffing later - is to punt. If you aren't 100 percent sure you can staff the projects and meet the deadlines with minimal slip in quality and productivity - and that you have the cash reserves to fund the growth without extending your payables aging - then decline the opportunity. Failure to perform will cause far greater headaches than a temporary rejection of an opportunity.