Control Your Business’ Growth

Growth is good—in moderation. Take these steps to avoid becoming one of the companies whose business is so booming that it actually fails.

You could call it too much of a good thing: A larger-than-expected contract comes in, or your overall project load starts growing exponentially, and all of a sudden you’ve got more business than your firm can handle. Such a scenario can challenge your management abilities and even pose risks to your company’s survival. Experts say that with today’s uneven economy, contractors need to plan well for sudden growth.

Success can sometimes be a problem if it’s not managed correctly. Smaller organizations can absorb a certain amount of growth simply with the owner and one or two workers putting in more hours. But as annual revenues start approaching the $1 million mark, existing systems can start to go awry if your infrastructure is not set up for that level of business.

At this point, owners need to start spending less time in the field and more time in the office, not a situation most contractors relish. But devoting the time to big-picture planning becomes crucial as your business expands. This kind of management is important in any business, but in a business that is growing quickly, it is imperative. The owner’s job is to make sure they are proactively managing the resources they need to deliver the work.

Another important issue for owners is taking the time to understand which jobs are the right jobs for his or her company to accept. It pays to look at your work history to determine which kinds of jobs are the most profitable. You don’t want just volume. Simply taking on more work without recognizing potential revenue impact can result in a cash-flow crunch, since more work requires more manpower, and that added payroll might have to be met before the client or general contractor has paid you.

Planning is crucial when your business starts taking off, and because workers are an electrical contractor’s biggest resource, these preparations need to start with a timetable of when new employees may need to be hired to ensure adequate staffing. Think ahead about how many employees you’re going to need, where you’re going to find them, and what you’re going to do when you get them. Owners need to consider how long it will take to find, hire and train new workers when they’re developing timetables.

Financial planning also is crucial. A line of credit or other financial assistance can help address cash-flow issues, but contractors still have to estimate carefully to ensure the work they accept has a positive bottom-line impact, or they could end up working themselves into bankruptcy. If you do not have a very strong understanding of your financial situation and your margins, you can quickly grow yourself out of business.

Being informed about a general contractor’s financial standing can be important when contractors work as subcontractors on larger projects. In addition, these companies may have specific policies and procedures regarding invoicing and payment, and not following these protocols exactly could delay payment.

All this analysis and planning may seem overwhelming, especially if you’re also facing a backlog of work and a client load that’s beyond what your present staff can support. However, doing your deskwork now, even when you’d rather be working in the field, will give you the opportunity to grow your business even more in the future.