It’s a crucial question many contracting companies face: whether or not to expand? Since it could potentially be a make or break decision, it’s important to first recognize the signs that indicate the time is right for business expansion.
Your Company has Consistently turned a Profit
In order to have the resources to support growth, your business will need to have developed a positive cash flow by consistently turned a profit. Otherwise, it may be difficult to buy new equipment or hire additional employees necessary to perform more work.
In the business world, there are upfront costs to expansion you must be able to absorb. You will need to have cash reserves to carry the business until new revenue streams are identified and realized.
You have more Customers than you can Handle
Do you have too many customers and too little time? Are you turning away new jobs? If so, it may be the right time to expand.
Your contracting company will likely be able to grow more easily if there is already an existing pool of potential customers. This sign should give you confidence that if you increased your workforce you would have the extra revenues to meet a higher payroll.
You can Manage the Additional Workload
New customers are usually welcomed news unless you don’t have the manpower to support the increased workload.
Ask yourself these question as you consider expansion:
- Do you have enough employees to shoulder the additional load?
- Can you guarantee the same quality with an expanded customer base?
- Will more work impact your own personal or family life?
Your Industry is Growing
The state of your industry is another key factor. If your target market is growing (like construction is), your company will have a better chance of scaling its business. However, if there are fewer customers available in your area, your expansion could be an uphill battle.
You are Running out of Space
Another signal you may need to expand is that you simply don’t have enough room for all your employees, equipment and materials. While you may be saving money today, a cramped environment can hurt employee morale and overall productivity.
You have a Plan for Business Expansion
Just like you have a business plan, you need to create a plan for expansion.
First, check to see if your team is meeting its current goals. Do you think you have the resources to meet the challenge of business expansion? If you are going to buy or rent another forklift for example, you need to know how you will pay for it and who will operate it.
You should also consider whether you will provide the same services after your company increases in size. Now is the time to set new objectives and identify new revenue streams that will support higher expenses.
Business expansion is a decision to weigh carefully. If you are unprepared to take the leap, it could set your company back. But, if you play your cards right, it can be a solid step forward to a successful future.