Knowing when to grow your business is one of the most important decisions you’ll make as a business owner. Timing is absolutely critical to whether your growth will be a success or a failure.
Of course, you may see what you think are tell-tale signs that it’s time to grow, such as the apparent need to hire more people, or to update your processes or even take advantage of new markets. But are these signs that you’re positioned for growth, or that your business is not working efficiently enough? Are there signs that a business should grow that an owner might not see as such?
What does business growth look like?
The best way to start is to identify what growth would look like for your business. Growth can be measured by volume, capacity, physical coverage, and of course, money. So before deciding IF your business can or should grow, you need to know what kind of growth you are considering.
Next, determine if your market and the type of work you’re doing will sustain growth. I am a roofer, so I evaluate the demand of roofing in my market. I happen to live in a fairly dense and populated part of my state that sees a number of severe storms every year, so I have a large customer base with an established need. I also sell a product that everyone needs (or who will eventually need). Unlike a bathroom or kitchen remodel, which most people “want” but don’t “need,” a hole in a roof is not something you can put off for too long.
The key is to determine if what you are selling to clients is a necessity or a commodity. Typically, businesses built around things people need have a greater chance at scalability than a business built around optional or luxury items. Just make sure you’ve done the research to demonstrate you have enough of a customer base to support the growth.
Goals vs. results
The best indicator I have found to truly identify if my business is growing (or ready to grow more) is if I’m hitting goals that I set. At a minimum, sales goals, customer counts (transactions or jobs sold), and profit percentage goals should be set annually and tracked monthly. If you don’t track goals, then you likely don’t set them in the first place, and there is no way I’d ever consider “growing” my business without data to support the idea.
There are many easy ways to track your goals and results. You can create a simple spreadsheet in Excel or use a more sophisticated CRM solution like JobNimbus. But if you don’t create goals and then track your results with accurate data, you’ll never be able to make an informed decision about whether it’s time to grow your company.
Are you financially ready?
If you are like most business owners, the desire to grow comes after a windfall of success, and that success is typically defined in dollars. I remember my first big year and looking at all of the money I was making. My first thought was, “Wow! Let’s GROW!” So that’s exactly what I did, and it was the wrong thing to do.
I forgot to do my homework. I added an office, I bought trucks, I hired people, and I spent money on marketing and advertising. I almost ran my business into the ground before I realized I hadn’t put enough thought into making sure I actually had the money to grow. Even though my business was hitting the demand metric, I wasn’t at a point financially to support that growth while maintaining the same standards I had previously established.
Growing or scaling your business can be exciting and nerve racking at the same time. For many contractors, the decision to grow is made for us when we take on larger contracts or partner with companies that feed us business. And growing is perfectly acceptable if you are not 100% entirely ready to do so: after all, no risk, no reward. But to do it effectively and without losing your mind (or your business), you need to think through every aspect of growth. AJCEO is happy to review your business plans, talk strategy, help you analyze numbers, and assist you in your growth plans for your business.