Too much of a good thing? Three steps for managing your construction company’s growth

Updated Sep 5, 2013

shutterstock_119933068It’s the time of year when Equipment World editors start scouring Contractor of the Year nominations, looking for the best of the best. Some traits are easy to pick out as the signs of a contender: low turnover, good revenue growth, excellent equipment management, a sterling safety record. While others don’t quite jump out at you, over time you realize that some low-key indicators are actually crucial skills needed to make a firm successful for the long term.

One of those skills I always look for is the ability to manage your company’s growth. But growth is good, right? Yes … but only if you can handle it. If you don’t have the manpower, capital or equipment to satisfy the demand, you’ll have a lot of unhappy ex-clients out there.

The problem seems like a no-brainer to fix. If you don’t have enough people, you hire more. If you don’t have enough equipment, you buy more. Of course, it’s a bit more complex than that. If you’ve truly got more than you can handle on your plate, take a step back and assess the situation.

If it’s a short-term issue, you don’t want to hire a lot of guys you’ll have to lay off later, and you certainly don’t want to take on a bunch of equipment that will be sitting idle in your yard a few months down the road.

So, what to do? Plan, plan, plan. Here are three steps that should be part of your annual planning (which you should be starting now for next year!):

1. Name a number

Decide how much annual growth your company (and you personally) can sustain. If that number is 15 percent, try to hit that target each and every year after. If you project at any time during the year you’re going to be under that goal, you’ll know to actively pursue additional work. If it seems you’ll hit your target easily, choose your jobs wisely and reevaluate your growth target in the following year’s planning.

2. Be picky with your projects

Most contractors like a mix of job sizes; their core range of jobs with a few smaller fill-in projects in between. This is a good strategy that will keep your employees busy; however, you should be killing more than one bird with that stone. Look closely at your finances and carefully assess your revenue on each job before making a commitment to it – it should do more than just keep your crews occupied. Each job needs to be in line with your growth target. If you have an option for a long-term project, bid high enough to account for your growth strategy.

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3. Plan, then reassess

Execution is critical. If you have a growth plan in place, it will help you determine when to hire before you get into a pinch, and give you time to decide if you need to add pieces of equipment as part of your permanent fleet, or if you can simply rent fill-in pieces. You should be holding monthly meetings with your key personnel to determine the health of your firm. Make sure you know exactly where you are in the growth process at all times.

Remember, if you’re on top of the big picture, you may not always have to wade into the minutiae. Let your people do their jobs and resist the urge to make decisions at the micro level. This will allow you to respond, rather than forcing you to react.