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Growing (or Not Growing) Your Construction Business

 
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Old 10-19-2015, 09:45 PM   #1
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Growing (or Not Growing) Your Construction Business


We started hitting on this last week on another thread , so here it comes full bore :

Should you? When? Why ? How?

The reason I'm starting this thread is I have pretty strong feelings about it. Growing a company can make you wealthy, and can also bankrupt you, and everything in between. Before anyone even starts in, here's my take on it:

Should you ? If you want to and know how , and if you are willing to work hard to keep it going . Read that again : if you want to. Growth is not a requirement in the market .
If you arent really good at this, no ,you shouldn't . You need to get better, not bigger . Growth will accelerate your demise.

When? Most companies grow this way: first they do good work and get in demand . Then, they fear losing work, clients or money so they quit scheduling jobs one after the other and start running multiple jobs simultaneously. Is this the right way? The right time? Not always.

Why ? The number one reason, in my opinion , should be this: You want to. To serve your clients faster, broader or better .

How? Having been at this 20 years and having grown my company , and took a lot of hits along the way, the best advice I personally have to give, in a general way, is to do it the same way you build a house . With money, a plan and a process. You have to have the infrastructure , people and money to handle the increased demand on the administrative side , and keep in mind , we are also talking about building more work.

More bids, more e mails, more calls, more fuel, more contracts, more meetings , more orders, more deliveries, more liability, more floors to protect, more details, more people, more payroll , more debris to hail away and more to finish and collect . And more headaches , and after all this , hopefully more money.

That's reality .

I 've seen some beautiful stories and some really bad crash and burns also, and started this, so at the minimum , newer guys are aware of the pitfalls that can come with it.

Lastly, growing doesn't mean you are better,smarter or anything , neither does playing it small. It's simply a choice , a choice that needs to be made wisely .

Let's hear what you guys think:
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Old 10-19-2015, 10:17 PM   #2
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Re: Growing (or Not Growing) Your Construction Business


All I can say from my short experience looking back now, I would've done a small handful of things differently.

Instead of a small fleet of equipment (5 trucks, 3 trailers) I would have had 3 smaller trucks and one smallish trailer. I would have only had two other employees plus myself. One of those employees would have been focused on sales and the other project management/repairs and myself being wherever I need to be. Everything else would be sub-contracted.

If I ever need to do it again, that is exactly what I'll do.

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Old 10-19-2015, 10:47 PM   #3
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Re: Growing (or Not Growing) Your Construction Business


Alright . That is referred to as a guy with a plan .

Also, he brings up a good point...manpower ...really several good points .

One , it has been researched and a 3 man crew is the most efficient . A small crew, with the boss as lead, is the best it gets normally.

What I also like is he is distinguishing between sales and production. That s key. Sales , production and administration are the 3 components that you always have to cover.

Also, he has a mindset to keep himself free and flexible . If , in the process of growing a company, you lose that , you will lose something you likely went into business to have . freedom .

I may be reading this in, so forgive me if I'm wrong , but he seems to indicate he has reached a point , or level of commitment, where scaling back isn't easy. That can really happen .

I think, as posts from seasoned guys come on here , you will see a general theme of growing slowly and surely . Rate of growth is arguable , but generally speaking, with a shortage of tradespeople, you can outgrow your infrastructure really fast. In other words, you can have business you can't service profitably pretty fast.

Also, the size of your business has to fit you...your temperment, your style and your ability to handle stress.

Here's a specific tip I' ll drop in early : if you want to grow or expand , as much as able, keep your jobs geographically close . Not so close Mrs . Jones sees you down at Mrs. Smiths maybe, but real close , so you can stay on top of things. It can make a huge difference in how well you execute .
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Old 10-20-2015, 05:00 AM   #4
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Re: Growing (or Not Growing) Your Construction Business


Interesting topic----- I will have more time to discuss it in a month or so---- but finishing up my end of season rush just now.
However-----
I haven't found a 3 person crew to be the most efficient----and it also varies from task to task.
I have read----and observed---- that a crew of 1 is most efficient.
not necessarily most productive---- but most efficient

reasoning?--- when you add a second worker to the crew--- one person becomes supervisor---and one is supervisee. the supervisor loses efficiency in his own work because of lost time/concentration on overseeing the other mans work.
there are ,of course many instances when 2 men are more than twice as productive as one man---- but not universally.

We try to arrange things so that we work in teams of 2 if possible---- for safeties sake.
Typically one man in lead and one man in support---- and the support man ends up spending a lot of time just watching.......... which is ok with me.
we have 3 men in the field currently. usually I try to break projects up so that on the same jobsite one man can work over here efficiently---and two men can work over there efficiently.
for us, it's a good system because we can move the least experienced guy from task to task where he can either be the most usefull OR learn the most.
we can't effectively hire trained guys off the street--- so we have to produce our own. that's our bottleneck on growth---training employees

Next year our least experienced guy will be too valuable to be stuck in "support"---so we will be adding a 4th field worker at entry level. this will hold average costs down while letting us field anywhere from 1 to 5 men on a given project- but most typically either 2 @ 2 man projects or 1 and 3 man projects simultaneously----with me selling elswhere.

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Old 10-20-2015, 08:15 AM   #5
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Re: Growing (or Not Growing) Your Construction Business


Good job. I may be wrong on that stat, it was likely 3 are most productive.

Like he posted , it varies.

Another area where growth is tricky is keeping all the extra payroll making you money .

Hes doing a good job .
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Old 10-20-2015, 09:17 AM   #6
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Re: Growing (or Not Growing) Your Construction Business


People often confuse the difference between growth and expansion.

For example, my company brings in enough money to get 3 more vehicles and 6 more guys. For me, that would be expansion for when the need arises. But without anyone to manage this expansion, I wouldn't be achieving any growth.

That said, I can grow my business but it will take me a few years for that to happen. If I try to do it in a matter of weeks, I can see myself doing more harm than good.
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Old 10-20-2015, 09:32 AM   #7
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Re: Growing (or Not Growing) Your Construction Business


This guy understands. This is called being aware, and it is a must have trait to succeed.
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Old 10-20-2015, 01:44 PM   #8
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Re: Growing (or Not Growing) Your Construction Business


I think you have to know your market. That's where your opportunity is. If you're local, you compete local, that's where the opportunity is. You either create new business or you take business from the competition. That being said, you have to branch out as needed. Don't hire too many at first. Looking back, I would have changed some things as well. One is hiring and expanding when I did.

It takes time to grow a business. Sound advice, hire a team that cares about your business as you do. A/B test everything. Find what works through testing and optimize it.
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Old 10-20-2015, 01:52 PM   #9
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Re: Growing (or Not Growing) Your Construction Business


Expanding ,or growing slowly keeps you from getting in deeper than you want to, too fast.
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Old 10-20-2015, 01:59 PM   #10
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Re: Growing (or Not Growing) Your Construction Business


Quote:
Originally Posted by AGullion View Post
Expanding ,or growing slowly keeps you from getting in deeper than you want to, too fast.
What's slow? What's fast? I think what you are saying is one should grow at manageable rate. Too slow and you lose opportunities. Too fast and too many things to overlook, mismanage etc...
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Old 10-20-2015, 02:03 PM   #11
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Re: Growing (or Not Growing) Your Construction Business


That's a good way to say it. You can grow as fast as you can make it work and not compromise your quality , service or destroy profits .
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Old 10-20-2015, 02:18 PM   #12
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Re: Growing (or Not Growing) Your Construction Business


In a nutshell, TNT kind of nailed it on growth rate....when you can't staff it,service it or emotionally or financially do it , its time to slow your roll.

Here's a catch.. If you go too far too fast, and a lot of things factor in to defining it, you may not be able to scale back once the side is torn off someone's home. It's like Iraq or Vietnam.... It's just not that simple to back out .
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Old 10-20-2015, 02:35 PM   #13
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Re: Growing (or Not Growing) Your Construction Business


Regardless whether a contractor is large, medium or small if they do not hold onto his/her morals, ethnics, word, etc - everything that separates him/her from the curs and hacks - is lost.

One must have the firmest of grip on that in and of itself no matter what occurs along the way on the journey...in my opinion.

There are a lot of unscrupulous people that one comes across in the process of building a business. Is it more so in the contracting world? I don't know...

The great employees, clients, vendors, providers and subs become a wonderful breath of fresh air once they are a consistent part of your team.

It can be very tough to have people's best interest at the forefront of your being and business when so many people truly don't give two f's about you.

If one can ply their craft and survive the gauntlet I truly believe that it is worth the effort and dividends will start to accrue.

Bottom line - know who you are and what you want your business to be and stick to it's core values while always reflecting upon your situation to update and improve as one 'grows' in whichever manner they choose.
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Old 10-20-2015, 02:39 PM   #14
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Re: Growing (or Not Growing) Your Construction Business


That needs to be made into a sign ...and posted everywhere. Good point dude. If you sell out to get rich , you still lose.

And that leads to another point ....all this I have posted, is said under the assumption you do things honourably.
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Old 10-20-2015, 02:55 PM   #15
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Re: Growing (or Not Growing) Your Construction Business


I always wanted a crew and to be about where we are now. Never planned on being a one man show. Been my goal from the beginning to be a mid sized GC.

My dad never wanted to be very big and never tried to do it until we teamed up. He was very happy being smaller, and I think he is happy in our current size, its a good deal for both of us, and as long as he doesnt have to run much work or especially personnel or subs, and can go on vacation when he wants he is going to be happy.

As far as growth, Ive only been guilty of taking on too much once really for US, it was a hard lesson that remodels arent new construction that i was used to at that time. Train hands from the ground up, lead hands that work out for us generally are the ones that started out just workers on our crew.

At this point we use subs for a lot more, much smaller crew, although we never sub trim and rarely cabinets, but a lot of other things. We used to do all carpentry in house, and even set the forms and did the steel for additions. I have zero desire to run that many guys right now though.

Recently we had issues with some subs, or we were an issue for some subs, and have to stop taking on little jobs for a while. Too much of a jam to try to do the bigger stuff and a few jobs like bathrooms or something similar. If it is a deck or some built ins or something we can do in house we still take them on, but if many subs are involved we have to pass. Unless it is for an existing client, have to take care of them if they will wait. Most existing clients i just say it will be at least this long, and I will give you at least a weeks notice. Then i go and get all the stuff together and put in the shoo storage area for staging so my guys can just grab and go when timing is good for fill in.

A lot of growth issues i have seen simply come from lack of organization, daily planning and generally keeping up with things. Thats why most people are always late to start and finish jobs. Complete lack of trying to develop a real world system that works.

Personally i learned to schedule labor and projects in a hard assed commercial GCs company, where liquidated damages were common. No room for excuses. Makes running what i do now seem relatively simple and stress free. A lot of subs and contractors in the residential world would never make it in commercial, they'd end up sued, broke and sitting on the curb.

Building up operating capital is as important for what our company does though, and how much we have determines how much we can take on simultaneously.

Good thread. Interested to read other posters responses on the matter.
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Old 10-20-2015, 03:42 PM   #16
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Re: Growing (or Not Growing) Your Construction Business


Boy that's solid ....that's really good advice, and very honest.
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Old 10-20-2015, 03:43 PM   #17
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Re: Growing (or Not Growing) Your Construction Business


We are finally back to pre recession numbers. It took a long time. Difference is we are doing the same numbers with two guys and me part time as we did with 3 full time and me helping once in a while

If you're looking to grow a business read my posts and do the opposite. Instead of adding more guys and obviously more overhead I just keep raising my prices so i continuously have a packed schedule of the more profitable jobs with just the one crew while keeping my overhead as low as I possibly can.

Is this a formula that will make me rich? Hell no. But I see my friends that do 1.2 to 1.5 million in sales working like dogs with tons of stress, offices, secretaries and at the end of the year we make the same money. I'll take the simpler lifestyle thanks.



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Old 10-20-2015, 03:47 PM   #18
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Re: Growing (or Not Growing) Your Construction Business


Theres another killer post.. And it brings to mind another point: what we think things will be like in the future, vs. what they end up looking like once you get there.
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Old 10-20-2015, 04:07 PM   #19
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Re: Growing (or Not Growing) Your Construction Business


I can't comment much on growth as I'm in my first years and as a general rule, I keep job size to what I can do myself with no employees and not a lot of subcontracting.

I can say that its been a good thing for me to "keep it under control." There has certainly been opportunity to take on more work, larger projects, and employees. A large part of what has kept me from going that route is seeing the pitfalls of other local contractors that I know who tried to take on to much to fast.

My dream was always to have a company similar to Jaws. A few employees, shop, good tools/equipment. I wanted to be able to take on large whole house remodels and additions. That is still where I would like to end up but I understand more now that in doing so you create a machine that needs to be constantly fed.

I look at my P&L over the last two years and it takes less than 30 hrs/month to cover my overhead. Then its really up to me whether I want to make a killing and work my butt off or take it easy. I like that I don't have to come up with money for any debt payments, or payroll, or even have a lot of work booked because I know I'm fine.

Here's the kicker with all that. You've got limits. You can only make so much because you are limited to the hours you can work solo, and the gross sales that you can pull off solo. So I'm learning pretty quick that there is a ceiling to what I'm going to be able to make. And then there is a ceiling to the types of work I can do because I don't have the resources to execute larger jobs.

So its a two edged sword.

Looking to the future...I'd like to maintain this steady level of growth. I'd like to cash flow everything. No debt. When the time comes for employees I'd like the books to look similar to what I have now. I want plenty of wiggle room. No wondering how I'm going to come up with payroll because I don't have operating funds, no wondering how I'm going to make payments and pay for overhead on a huge shop, no wondering how I'm going to make it if the economy slows down.

The best way I see to make this a reality is to control growth, which will almost certainly mean many missed opportunities, but it will also mean many missed pitfalls.

Those are some of my thoughts/plans.
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Old 10-20-2015, 05:11 PM   #20
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Re: Growing (or Not Growing) Your Construction Business


The kicker on growth , is you don't always know where the boundaries are .. Until its too late.

Example...you add a crew and a remodel, and think it's all fine , then the remodel makes some changes , and its over the new crews head. Now you have to pull off one to do the other . You went from 2/guys to 4, but only one job is now paying out, because you had to stop one . Uh oh.....

It doesn't always go this way , but this one of many scenarios .

Again, its not a problem if you have trained staff and the infrastructure to do it.

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