Growing Your Construction Firm – A Guide

Read our guide to help you decide if you should grow your construction company and how.

The forecast for much of the construction industry looks bright, with growth expected in the home, commercial and infrastructure specialties. Is it time, then, to expand your construction business? 

While growth has its appeal in terms of potential profits, it needs serious consideration before you put money and effort into expansion. Burt Moorhouse, general manager at Gulf Copper & Ship Repair, said that, when done right, it can lead to increased profits, but along with that topline growth are other considerations:

  • Increased need for employees, supplies and administration
  • Increased liability
  • Increased financial and operational risks

In fact, growth contributes to most of the reasons a construction business fails, according to Entrepreneur Magazine. Therefore, it’s important to grow intelligently.

Is your business ready?

The first step is to make sure your business is ready to handle the increased responsibility. In general, your business should make steady and consistent profit, according to Thomas Schleifer, author of “Construction Contractors’ Survival Guide.” In addition to assessing your profits, ask yourself these questions:

  • Do you have repeat customers?
  • Are you getting referrals?
  • Are you getting consistent, positive customer feedback?
  • Are you retaining employees?

Next, you need to assess how well your management can take on the increased workload. A larger business with more projects and a wider territory means more employees, more expenses, more accounts receivable, more equipment, more marketing … in short, more working parts to keep running smoothly.

Editor’s Note: Looking for funding solutions for your business? If you’re looking for information to help you choose the one that’s right for you, use the questionnaire below to have our sister site, BuyerZone, provide you with information from a variety of vendors for free:

Before expanding, be sure you have a clear mission statement that reflects what makes you stand apart from the competition. Next, be sure your training program, safety and quality control procedures, and budget can handle the greater load. Have a process in place for acquiring, moving, and tracking equipment and supplies. Naturally, have personnel and processes dedicated to not only reaching out to new customers but following up with current ones and touching base with previous ones.

Grow in your core competency.

Most business experts agree that in construction, the smartest way to grow is in your established area of expertise. This way, you are not learning a new niche, with all its regulations and special considerations, on top of the challenges of growing your company. Here are three common ways to grow your business:

  1. Buy a company that does the same kind of job you do, but in a different location. By finding a company that is established in its market area, you immediately gain trained employees, an established client list and a known commodity in its location. Of course, if the company had problems, your first order of business will be to resolve those issues. At the same time, however, find the procedures it did well – is there something you can apply to your business as a whole? Be sure to train the employees of your new acquisition so they are familiar with your mission and operations.
  2. Add a specialty within your core competency. For example, if you build houses, finishing basements or doing add-ons might be an area of expansion you can easily schedule in, especially during slow periods.
  3. Attract higher-paying clients with a luxury niche or upgrades. Solar technology, in-law apartments and micro-houses are increasingly popular.

Market to attract new customers while encouraging repeat business.

Marketing is an important part of any business, but as you expand your area of influence, you need to embrace this aspect of business with as much as attention as you give your budgeting or operations.

Person-to-person marketing, particularly word of mouth, has always been a mainstay of construction marketing. As you grow, don’t forget this vital area.

  • Bring back previous customers. Encouraging repeat customers may not be as easy in the construction business as in industries like retail, but it’s still an important part of any marketing strategy. 
  • Meet the neighbors. When you are working a job, it pays to have some of your more people-oriented employees walk the neighborhood, introducing themselves to the neighbors and letting them know about the job and dropping off a card with an offer to give an estimate while in the neighborhood.
  • Offer referral rewards. Encourage referrals by offering something – a discount or upgrade for current clients, or a monetary reward or free handyman service for past customers.

Referrals and recommendations are no longer sufficient in this increasingly online society. People turn to the internet more than ever, even for local businesses. Therefore, you need a strong online presence. First, be sure your contact information is up to date in the Yellow Pages, Yelp and other online directories. Glowing recommendations mean nothing if a potential client can’t find you.

Next, be sure your website is geared toward converting viewers into leads. Give a clear statement of what your company does and why it stands out. Include customer testimonials, awards and a digital portfolio of finished work. Your contact information should be prominently displayed and easy to find on any page. Offer an incentive, such as free information, in exchange for visitors’ contact information. 

Of course, the best way to both keep old customers and attract new ones is do terrific work and provide excellent customer service.

Finding employees

One of the greatest challenges facing construction today is the shortage of skilled workers. Over two-thirds of construction firms said they had difficulty finding enough qualified workers in 2016 to fulfill their needs. The primary contributor to this shortage is an emphasis on preparing youth for college as opposed to the workforce. However, there are things you can do:

  • Offer good salary and benefits. This should go without saying, but people in construction are looking to make a good living, and with demand high, competitive salaries are a must.
  • Offer a good working environment. Safety, managers who care, and a culture that supports the employee and fosters strong work ethics will attract workers who may be discouraged by their current employers.
  • Work with an agency. There are staffing services that specialize in labor as opposed to clerical hires.
  • Work with local schools. High schools and community or vocational colleges are often eager to partner with businesses in internship or co-op programs. (Co-op programs are multi-term programs where the student alternates between working one term and attending class the next.) These programs can not only provide less-experienced labor more cheaply, but allow you to train up potential employees to hire after graduation.
  • Hire from other industries. Some, such as the oil industry, have workers with skills that transfer well to construction.
  • Participate in the Helmets to Hardhats program. This federally funded program helps connect military veterans looking for work with construction companies.
  • Work with manufacturers to include installation with sales. For example, have your window company install the windows to free up your employees for other work.
  • Provide continuing education for your existing employees. Train interested employees in other areas of expertise and encourage experienced employees to mentor newer ones.

Funding growth

Even if your company is making a tidy profit now, there are expenses associated with growth. You may need the upfront capital to acquire an existing company, or a new project may mean buying or renting new equipment and purchasing supplies. 

Of course, the best thing you can do for funding your construction firm is to bid intelligently. It may be tempting to low-bid to receive a new contract, but it’s not always the best strategy. Studies have shown that people are suspicious of the lowest bid and are willing to pay a little more to ensure good quality.

If you have a price list in place for services, re-evaluate it. Are you accounting for potential increases in input costs? Are there costs you can reduce in one area and increase elsewhere? By reducing cost on some items, you can show the customer you are balancing their interests with your needs.

Finally, whether you’re getting funding or bidding on a job, be sure you have a cushion for things that could go wrong.

Construction is not a “grow or die” business.

We’ve all heard the adage “grow or die.” It’s not a truism for construction, however. While expanding your construction firm can lead to increased profits if done right, it brings greater challenges than with other businesses. When not handled well, growth can actually kill a construction company.

Just like you would a building site, evaluate your business to be sure you have a steady foundation and the infrastructure to build upon. Then consider your best venue for growing within your core competency. Look at your customer base as well as territory. Be sure you can get the skilled labor and funding to support your increased responsibilities. With all these areas working smoothly, you can expand your construction firm successfully.

Image from yuttana Contributor Studio/Shutterstock

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