When it rains it pours. Suddenly, the phone rings louder than ever and your backlog has increased from two weeks to two months. You are excited. This windfall is sure to put a lot of money in your pocket and allow you to do more for and with your business.
Or will it?
All reliable prefinished basement waterproofing contractors and crawlspace insulation and sealing installers will eventually face two types of growth. One will reward you for all your hard work. The other has the potential to bankrupt you.
The example above creates a dilemma for a new or small business: should you add staff and equipment to accommodate the rush of new work, or wait and just take as many calls as you can? Before making that decision, the contractor should ask himself a simple question: what is the cause of all the recalls?
If seasonal rains have flooded all basements within the city limits, you should remain cautious. This “window gain” may be temporary; therefore, adding overhead (new employees and equipment) can be disastrous. That doesn’t mean the contractor doesn’t have to do anything. In fact, this can be a great opportunity to introduce your services to a new neighborhood. Just because he can’t answer every distress call doesn’t mean this isn’t a fluke.
Now, I said that the seasonality of the situation may mean that this is not a lasting increase, unless you can tie it to your strong and consistent marketing effort. Perhaps you’ve noticed an increase in happy customer referrals and more phone calls during sudden weather issues. These trends may indicate that it is time to add staff and perhaps purchase another truck.
Over the years, my friend and colleague Roy Spencer, owner of Perma-seal Basement Systems in Downers Grove, Il., has learned how to analyze growth. That’s how he expanded from a small business to a corporation that has served over 100,000 satisfied customers.
“You don’t want to be swayed by circumstances. Do you have a plan? Or are you just reacting to whatever comes your way? Sticking to a plan and making your own decisions is the best way to grow,” the 30-year-old said. – veteran year says.
Roy and I break down growth into two categories: seasonal and solid. You can assume the growth is real, or solid, if the increase has persisted over a two-year period. Anything less can be a short-lived event that tricks you into making a capital investment you can’t sustain.
“Some contractors over-expand in good times. I think that’s a bad idea. You want to build flexibility into your business. That means you’ve saved money that will allow you to pay for new equipment and employees when the time is right. You have to be fiscally responsible,” says Roy.
He is right. Compare two cellar or basement contractors with the same talent and initiative. One succeeds and builds a lasting reputation, while the other fails. Why? One word: management. The “unlucky” guy is going broke not because he lacks knowledge about basement waterproofing, crawlspace sealing, and indoor air quality. As the saying goes: “If you don’t have the guts of the business, you have nothing to do to run the business.”
But don’t despair if you think your business skills need improvement. Sometimes the best thing a contractor can do is hire a business manager. Surround yourself with the right people who complement your skills and you will succeed.
