Expanding Your Construction Business Part 3
In this five-part article, we are discussing many of the factors involved in scaling out a construction business. In this section, our Chattanooga contractor attorneys will discuss many of the mistakes companies make when they expand their services too quickly.
Know Your Risks
Contractors know that the construction industry comes with many risks. This is why many contractors that have a successful, small company elect to stay small. Whether it’s managing the company’s finances, working on projects that are easy to manage, or not being overwhelmed with stress and too many responsibilities, there’s nothing wrong with maintaining your small business and controlling your overhead costs.
With that being said, if you are ambitious and want to grow your business, you need to be aware of the pitfalls involved in expanding your business.
Challenges With Business Expansion
Here are some common issues contractors experience when they expand their business:
- Overspending: In part one, we discussed a few financial indicators that indicate whether or not you are right for expanding your business. Many successful businesses went bankrupt during The Recession because they overspent and were not prepared to take a loss.
- Investing in Unique Services: In part two, we covered whether or not you are investing in services outside your niche. It’s important that you understand every aspect of your business operation and that clients can easily identify your services in every location.
- Number of Employees: When expanding, you require a greater number of quality employees to provide specialized services. Your business reputation can be compromised if your employees are not meeting your brand’s standard.
- Poor Management: With more jobs and responsibilities, you need management-level employees in place to take on ever-increasing management needs. Does your company have the right leaders in place to expand?
- Forcing Your Own System: If a business has had success doing things “their way,” it may be best to give them some space before mandating too many changes in the way they operate.
- Time-Consuming: Are you willing to spend more time reviewing resumes and interviewing prospective employees, managing more projects, training more workers, and establishing more company policies? The bigger your company gets, the less free time you will have with all the added responsibility.
- Affect Your Process: An expansion can jeopardize a business. Are you losing profitability? You need to constantly assess your business operations and determine how scaling out is impacting your business as a whole.
- Income: Are you creating more income through expansion? This may sound like an elementary point, but contractors must always review the books and determine if the added expenses when expanding are worth the extra cost.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.