You’ve decided you want to grow your contractor business. Now, you’re a couple of years into it, and it’s just not happening. It seems like you’re stuck in one place, doing fine getting by, but not growing. Here are five top reasons you may not be getting the growth you want.
Market and structural roadblocks
The many types of construction contractors mean there are many reasons for low to no growth. Contractor companies that are partnerships and sole proprietorships often have growth problems due to no planning for growth. Contractor companies that are LLCs or Subchapter S corporations often miss their growth targets because they lack the nimbleness to adapt to changing markets.
Contractor companies specializing in specific sectors like retail will sometimes become too dependent on a single type of business. As the market in the sector rises and falls, so does their growth while remaining at a loss as to when and how to diversify.
The types of contractors in construction who see astronomical growth are limited. That’s because any contractor business is at the mercy of its structure and the people available. After all, a contractor business is only as valuable as the people working there.
A contractor business might have all the project opportunities required for growth. And yet, without the matching structure and the right people on the job, it may never win those contracts. Not having the right people can also inhibit a contracting company’s plans for merging or acquiring another company to spur its growth.
In fact, today’s high-paying construction jobs often originate at contracting companies in the merger and acquisition stages. These companies are going for growth by acquiring another company or merging their company with another. These growth moves can give them new territories in which to operate or even new markets in which to compete. But to accommodate that growth, they need highly specialized people from the get-go.
So, there are many global market and sector challenges to contractor business growth. They can be transient or entrenched; contractors can control some of them and have almost no control over others. But you’ll also find localized reasons a contractor business isn’t growing, and it often starts with the business plan.
Not planning for growth
More often than not, a contractor business is one with nine or fewer employees. In fact, according to the U.S. Census Bureau, 570,719 out of the 701,477 contracting firms in the U.S. fit that description. These small businesses have their origins in one or two people. They had construction skills and decided to sell those directly to customers instead of working for another contractor. Many didn’t take the time to prepare a thorough business plan, opting to just start building. After all, it was something familiar, and they could see progress right away.
The problems of not having a business plan crop up in times like these—when the owners are looking for that elusive growth. There are a number of reasons why these businesses struggle to grow: from not having enough cash flow to having too much risk in marginal projects. Without a growth plan, a big part of a business plan, the business ends up wandering through highs and lows without sustainable growth.
However, that’s not only the case for small companies. Even larger contractor companies often don’t have thorough business plans, or they have plans they never review. If you don’t have a business plan and you’re struggling to grow, go back to square one and create one. If you have a business plan, pull it out and actually start planning for growth.
Going it alone
This one is very prevalent in sole proprietorships. The contractor business owner tries to do everything themselves. But they can’t, and they burn out long before growth begins.
In larger firms, this shows up as micro-management. Key leaders all follow the same playbook of trying to make decisions for everybody. Whether it’s a lack of trust, or mistakes in hiring, or both, these companies usually suffer from little to no innovation. Since their people cannot participate in managing the day-to-day, the businesses begin to stagnate, and stagnation doesn’t support growth.
There’s another more damaging result, though. Their people aren’t growing in the skills and experience needed to support growth.
Not knowing the right people
Contracting in construction is a people business. Deals often happen person-to-person. That’s why leaders of growing construction firms are on the golf course, at the city council, making the charity circuits, and working with the media to fashion their firm’s reputation. Once established with the right connections, contractors start getting the rewards of word-of-mouth advertising. This advertising is in the ears of people who can advance their company’s growth. As long as their projects deliver the value their clients expect, a constant flow of work goes their way, channeling their growth.
The right people don’t have to be politically connected or the media darlings of the industry. But they do need to be the people in the chain of influencers relative to the type of projects you need for growth according to your business plan. So, maybe they don’t play golf and prefer watching baseball. The people who are the right people for your contracting business growth are the ones who can help you get the projects that fulfill your growth goals.
Any contractor business is a document-heavy, multi-process, risk-laden venture. Doing business with paper and FAX limits the types of projects you can do and their amount. However, in truth, even relying on a sole document management solution is passe in today’s contracting world.
Automation means changing the dynamics of the job site by empowering people to do the things they are good at while letting automation handle the rest. Using a project management platform like Procore lets your people do their jobs more quickly, efficiently, and accurately. Drones, exoskeletons, automated building processes, automated machines, and virtual reality are the next generation of tools you can deploy to help your people excel.
That’s a huge boost for business growth because when your people are at their best, you’ve got the most important growth factor nailed down.