Many years ago, an industry insider told me that no remodeling company would ever grow to more than a million dollars in volume. So much for predictions.
Tell me you want to grow your company, and I'll respond by asking: Why? How? When? Not because I don't think it's a great idea but because there are good reasons to grow and poor reasons to grow. I'm not talking about 5% or 10% growth, which is evolutionary. I'm focusing on growth of 25% or more, which is revolutionary.
I like to hear these answers to my “why” question: Growth would support my personal goals; I want to leave a legacy; I want to have a company that can be sold; I want to build critical mass that allows for career advancement for my staff. These answers concern me: Because it's there; I want to grow my way to profitability; I simply want to be the biggest in my market.
Getting There As for “how,” there are a number of routes to growth. The simplest and least disruptive route may be to raise your average job size. You could add a new profit center, increase your geographical area, or do more of the type of work you already do. You could also join forces with another company. This may be the most problematic way to grow, as you would be adding the complexity of working with a new partner to the complexity of growth.
The “when” of growth — timing — is also key. Here are some signals that you should slow down and get your house in order before attempting to grow substantially:
- Your company's net profit is not at least 5% after owner compensation.
- Your company has poor infrastructure.
- Your employees are not focused on working toward company goals. Accountability is weak. Systems are spotty.
- You do not have a strategic plan or vision for the business.
- You are not managing by the numbers, using accurate profit-and-loss statements, balance sheets, job cost reports, or budgets.
- You are not using a professional-level markup, typically between 50% and 67%, to cover increased overhead and allow for a net profit each year.
Many business experts feel that your risks of failure will be much higher if you grow without getting rid of these problems.
But let's be positive. Here are some indications that you might be in a good position to substantially increase your volume:
- The market is signaling that it will support your growth. You have strong leads and a good backlog of work in the three- to six-month range. The economic outlook in your community is bright.
- Your company is thriving at its current level.
- A larger company will fit your vision both personally and professionally.
- Your staff is ready and willing to grow, and craving the career advancement that growth makes possible.
- As owner, you can and will delegate. You can imagine your primary role becoming that of coach. You have a key management team in place that regularly meets to work on the business.
Growth is a journey, not a destination. In their book, Growing Pains: Transitioning from an Entrepreneurship to a Professionally Managed Firm, Eric Flamholtz and Yvonne Randle describe growth like this: “The sea is unfamiliar, the boat is clumsy, the skills needed are not readily apparent or not fully developed, and there is a constant reminder of the high costs of an error in judgment.”
Growth is also an exciting adventure into new territory. Just be as prepared as you possibly can be.
— Linda Case, CRA, is founder of Remodelers Advantage Inc. in Laurel, Md., a company providing business solutions through a network of experts and peers. 301.490.5620; Linda@remodelersadvantage.com;www.remodelersadvantage.com.