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Your construction company has been around for a couple of years. Business is booming and sometimes you’re so busy it’s hard to keep up with all the jobs. The next natural step would seem to be to grow your business. But how do you know if you’re really ready to renovate? Learn about calculated growth for general contracting businesses below.
Critical Planning Blueprints Before Investing in Growth
Get in the good Books
Keeping detailed and accurate accounting records is key to measuring and forecasting growth. Hiring a professional accountant is a decision that should pay for itself in time spent focusing on your core business areas.
With an accountant, you’ll have a clear view of your overhead and profit margins. You’ll know which clients to expect payment from immediately, and whose money you might have to wait on. Plus, you might receive a higher return come tax season.
With financial visibility, you’ll have a good grip on when to pop the roof of your business – you’ll know when to grow.
Consider your Markup and Margin
When you first started your contracting business, you may have been tempted to bid low to attract early satisfied customers who will give you great word-of-mouth reviews.
If you’re looking to expand, you need to think about the cost of the services you provide and their value. In other words, it might be time to charge more for jobs.
Here’s a great guide for the going rate different types of services, including plumbing and HVAC. It accepts suggestions from the contractor community so you can contribute if you see something missing or an incorrect rate. It’s something you can pass onto your current clients as well, if they’re concerned that their payments are increasing.
Know when to hire
You’re both a skilled tradesperson and a smart business owner. In growth mode, you focus on expert workmanship and finding the next big project.
If you’re spending a lot of time on daily tasks you could pass off to an apprentice, and the business is cash flow positive with satisfied clients, you’re in a good position to grow your team.
You’ve considered your current team’s skills, and what you need help with most. Here’s a great guide to median salaries in various fields, so you can ensure you’re paying the industry rate to your apprentice or labourer.
Consider Cutting Costs Before Expanding
Something to remember when growing your team and business is that costs scale with growth, too. You can consider cutting costs as a means to increase cash flow and fund that expansion.
Calculate the savings from renting or borrowing tools your team doesn’t use very often – or, if you have some, you may even be able to sell old tools or equipment you no longer need.
Once you’ve reduced the amount of equipment you have, consider a smaller storage space or yard for reduced rent. If possible, share space with similar companies. You may find you no longer need storage space at all if you can lock your tools in secure vehicles and park them somewhere safe (and cheap).
Your fleet of work trucks may be the key to reducing costs as well. If you have multiple team members who often work on the same site or project, have them drive together to save gas rather than providing a personal truck for each person. GPS tracking apps, like this one from our friends at Jobber, will ensure your employees are spending their time on work-related tasks. Also, their Map View Routing feature can help you assign new jobs to nearby employees, saving time and travel expenses. Finally, it may seem counterintuitive to spend money to save money, but preventative maintenance on your fleet will ensure you don’t encounter costly repairs down the road.
Scheduling Payments to Optimize cash flow
Receiving late payments is a problem every contracting business experiences at one time or another – especially during busy season. In Canada, nearly half (48.5%) of invoices from small business are paid after they’re due. They’re late.
Here’s solid advice about how to have the conversation about getting paid from our CEO Steven Uster.
You’ve likely considered invoice discounting to ensure early payment. Learn more about the risks of invoice discounting here.
Savvy business owners use FundThrough to help grow their businesses. We can advance you the funds for unpaid invoices – the funds you need to grow.
Learn more about invoice financing and what FundThrough can do for you.
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