Back in the days when the economy was booming, it was fairly easy to grow your business. There was a lot of work to go around, and competition wasn’t as stiff as it is nowadays. Growing your business was as easy as bidding more work, making more money, hiring more employees as needed. However, when the economy crashed, it became more difficult to grow your business. The old ways of bidding more jobs, making more money and hiring more people didn’t work any more because there weren’t as many jobs to go around, and the competition for the jobs that were available was a lot tougher.
Even though the economy was a lot tighter and companies began to fail, there are many businesses that have found ways to continue making money and grow.
How to grow your business
According to Ted Garrison, CSP, Garrison Associates/New Construction Strategies, Ormond Beach, Fla., contractors have to start being involved in all aspects of a project-from inception to the day it is torn down. The key is to redefine what construction means. “Building things is what contractors do, that’s not the business they are in,” Garrison says. “The business they are in is solving problems for clients.”
Companies that are changing the way they think about construction are making more money and are profitable, Garrison says. To do this, “contractors need to figure out what their value proposition is, and start figuring out how to add value.”
George Hedley, licensed professional business coach and certified speaking professional at Hardhat BIZCOACH & Hardhat Presentations, Newport Beach, Calif., says there are two common ways to grow your business: lower your price and bid more work. However, he notes, this is not the most effective strategy in today’s economy.
“To maintain bottom line profitability, companies have to be strategic about how to grow,” Hedley says. While low price is one way to grow a business, it’s not necessarily a good strategy. Another option is to improve productivity, but most contractors are already as lean and mean as possible right now. The alternative, he explains, is for companies to look for better customers in better markets, and to add more services and products. To make that happen, contractors need to add marketing and business development components to their business plans.
Create a Business Plan
Denis Leonard, Ph.D.,CMQ/OE, CQA, CSSBB, president of Bozeman, Mont.-based Business Excellence Consulting LLC notes that planning is essential to growing a business. “It is not the strategic planning document itself but the thought, analysis and array of options that have been established during the planning process,” he says. “The document articulates the range of scenarios that may play out and how to best deal with each of them.”
“Without the thought and planning, everything is done by the seat of the pants and risky,” Leonard explains. “The plan itself allows a fast reaction to each change that happens using the best options available. No time is wasted wondering what to do it has already been thought through.”
Leonard says it is important that the objectives of the plan are Specific, Measurable, Attainable, Relevant and Time based (SMART). “They should also have assigned who is responsible for leading the achievement of the objective as well as detailing how to achieve the objective,” he explains. “That is the real detail of the plan.”
Having a business plan was important for Adairsville, Ga.-based metal fabricator Downey Metal Products Inc. to add another paint line and increase its factory from 30,000 square feet on 2 acres to 110,000 square feet on 11 acres. Owner John Downey Jr. turned to the Small Business Development Center at the University of Georgia for help putting together a business plan, which he was then able to take to his bank to help secure a Small Business Administration
(SBA) loan to fund the expansion, which added a new paint line on one side of the facility allowing Downey to fabricate on one side and finish on the other side, creating a fab-to-finish program.
Downey’s business plan included a five-year projection and was based upon past sales. Also incorporated into the business plan was the new paint system. “The business plan basically provided us with some guidance to be able to tell if we were meeting our benchmarks or not,” he explains.
While the wrap-up process of getting all of the equipment up and running in the new facility took a little longer than expected, Downey says things are starting to “catch fire now, and we’re looking to basically shatter all of our previous sales records this year. We’re pretty excited about it.”
When it comes to the planning process, “I would recommend starting as far in advance as possible,” Downey says. “It’s all in the strategic planning.”
Add More Services
Other sources of finding growth opportunities can come from monitoring the competition and benchmarking best practices, says Leonard. Seek new niches and new applications of your product/services to stretching your abilities, he adds.
Garrison adds that contractors need to redefine their business by differentiating themselves and doing something different. “Companies that are changing and starting to look at things differently are coming back and saying, ‘you know, construction is actually fun again,'” he says. “They’re making more money, they’re profitable.”
At McHenry, Ill.-based Metalmaster Roofmaster, Dave Kozial, vice president of finance, and Rock Smeja, vice president of marketing, explains how the company reinvested in its business and recently purchased new state-of-the-art fabrication equipment for composite metal wall panels. “We invested in a few different areas to try and become more versatile,” says Smeja. “We did our research and realized that we needed to branch out into a couple of different areas of the market that were related to our core business that would in-turn allow us to expand our market share.” In addition to expanding into the composite metal wall panel market, the company focused on growing their service department, as well as investing in the most advanced estimating software.
In response to a reduction in margins as a result of the recession, Kozial says they had to develop other markets to increase sales volume and profitability. Metalmaster Roofmaster has diversified beyond being just a commercial roofing and sheet metal contractor through Sno Gem, a snow retention and roof accessory company; Smeja LLC, a real estate holdings company; and Limitless Innovations, a retail innovations product company.
To increase sales volume, Kozial explains that it was critical to “keep our costs in line, and use any excess capital to reinvest in the company to make ourselves more competitive, such as investing in the new estimating software and the new fabrication equipment. This allowed us to go out in a couple of different directions marketwise.”
Redefine Your Business
Differentiating yourself from the competition is essential to growing your business. “We need to change the way we think about the business,” Garrison says. “And we have to be focused in on the solution.” It’s important to ask the question, how do we add value? To do that, Garrison says, contractors need to get outside what they normally do.
“You have to look at the total picture,” Garrison adds. “And when people do that, it changes the whole thing.”
Create a vision and then communicate how the strategy will achieve that vision, Leonard says. Detail the barriers and pitfalls and how they will be overcome; all while understanding your current capacity and what expansion is needed in regard to labor, knowledge, management/supervisors, skills, certifications, trucks, etc.
“Contractors have to use their creativity and innovation to solve problems in a better way,” Garrison adds. “Not just try and follow plans and compete on price.”
**Photos courtesy of Metalmaster Roofmaster
