Jason has worked for 12 years growing his pavement maintenance business. He has put the time in “grinding it out” and now the business appears successful and healthy, at least from the outside.
There are plenty of positive things happening. He had good crews in place for paving, sealing and concrete work. The overall quality was good. The company has three good sales people who in turn had several good customers that provided repeat business. In the office, he had a bookkeeper and a few office staff that kept the books balanced and the business moving.
On a personal perspective, Jason’s life balance is certainly better than the early years. While he is still required to work in the business, he can get away for vacation in the winter and make it to his kids’ school and sports events often.
Behind the scenes however, there were storms brewing that have him worried and puzzled. As he reviews financials, margins are eroding a bit and he isn’t sure if it is on the estimating or the operating side or both. When he attempts to dig in to the problem, his staff can’t get him the right data he needs to analyze properly. Sales are basically flat, and the sales team seems content. Jason is getting more and more calls from previous customers who indicate they were happier with the level of service that Jason once provided them. Leads are coming in and the sales people are busy doing estimates, but win rates are falling slightly from year to year. Most frustrating to Jason is the fact all kinds of details are dropping through the cracks. He also finds himself having constant conversations with employees who seem to find all the problems, but rarely have solutions.
So, what is really going on in Jason’s business? Why is this moment so critical for Jason and owners like him?
The short answer is this: Jason has grown his business from start-up to existence to the success stage. In the success stage, while the business is making a profit, owners have several options. They can attempt to operate the business as is, exit the business through a sale or transition, or re-invest and move the organization to the growth stage.
Let’s weigh Jason’s options in more detail. Keeping the business “as is” is difficult long term for several reasons, not the least of which is Jason will have to continue working in the business and losing the freedom he always dreamed of. Jason could potentially sell the business. The issue of selling is based on the size of Jason’s business; the sale price may not be sufficient to sustain his lifestyle based on his young age of 38. The third option is moving to the growth mode.
In reality, the growth stage is likely the right choice for Jason given his age, desire to have more freedom and increase profits. However, navigating the growth stage is very difficult for many owners. While every company is certainly different, there are a few common areas that must be addressed for a company to move into and succeed in the growth stage. Let’s review the top five areas and analyze them in light of Jason’s predicament.
1. Systems and Processes. As you grow, you find that the simple systems and processes stop working. You need better data on production, job cost, sales, and customers that you can glean intelligence from. You also need clear processes that are documented for others to follow. This means developing standard operating procedures (SOPs) and flowcharts for every key process in the company.
2. Cash. Growth requires cash and lots of it. As sales increase, your line of credit will need to increase. You must re-think strategies around purchasing of equipment and debt in general. New banking relationships requiring timely reports will be required. A renewed focus on key performance indicators will be necessary at the owner and manager level.
3. Personnel. In the growth stage, you need more professional managers. This means that some of your people that brought you to the success stage will not have the skills to perform in the growth stage. Growth requires a new organizational structure with personnel that have the competencies and experience to accomplish what is needed.
4. Delegation. Growth requires delegation to the new professional managers that you put in place. Delegation requires clear roles, responsibilities and performance management discussions – things that often were undefined in the previous business stages. More challenging is when the owner doesn’t want to give up authority and decision making.
5. Planning. Growth only occurs when planning and execution go hand in hand. In smaller companies, owners typically made all the decisions and often personally executed them. In the growth stage, owners and managers have to clearly outline the direction for the company and then develop detailed strategic and operational plans to accomplish that move.
So Jason is right. He has reached a critical moment. His organization is successful but with the current symptoms he is seeing and experiencing, his company has plateaued. He has a decision to make: Should he attempt to keep his business as it is? Sell? Or re-invest for growth?
For Jason to reach the growth stage, he must address the five areas discussed above and successfully navigate through them. It won’t be easy as it requires new skills and decisions which are risky and have layers of complexity.
However, the rewards are great. If successful, Jason will achieve new levels of profit, freedom and ultimately value for the company -- the very reasons he started the firm and why he wanted to become his own boss to start with.
Is your business similar to Jason’s? Are you successful but struggling to grow? Attending to the five areas above, and executing changes necessary to succeed in the growth stage will launch you forward to new levels of growth and profitability.
Jeff Stokes is CEO of Next Level Contractors LLC based in Lawrence, KS. Through a customized roadmap, they guide owners to reach the next level in their contracting business. Jeff and the NLC team can be reached at email@example.com or at www.nextlevelcontractor.com