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The forecast for much of the construction industry looks bright. Follow these tips to expand successfully.
The forecast for much of the construction industry looks bright, with growth expected in the home, commercial and infrastructure specialties. Does that mean it’s time to expand your construction business?
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While growth has its appeal in terms of potential profits, it needs serious consideration before you put money and effort into expansion. For example, business expansion can increase your liability, financial and operational risks, and need for more employees, supplies and administration. In fact, expanding too fast is one of the top factors leading to business failure. It’s important to grow intelligently, and just having a business growth plan might not be enough.
If you’re curious to know whether your construction firm is ready for growth, here are a few key indicators:
Before expanding, you will also need a clear mission statement that reflects the qualities that differentiate you from the competition.
Here are six strategies to help you grow your construction business.
In construction, the smartest way to grow is within your established area of expertise. This way, you are not learning a new niche, with all its regulations and special considerations, on top of the challenges of growing your company. Here are three common ways to grow your business.
Marketing is an important part of any business, but as you expand your area of influence, you need to embrace this aspect of business with as much attention as you give to budgeting or operations.
Person-to-person marketing, particularly word of mouth, is a mainstay of construction marketing. As you grow, don’t forget this vital area.
One of the greatest challenges facing construction today is the shortage of skilled workers. A survey by the Associated General Contractors of America found that 89 percent of contractors are having trouble filling hourly positions and 86 percent are struggling to fill salaried positions. A primary contributor to this shortage is the general emphasis on preparing young people for college as opposed to the workforce. However, there are things you can do:
Even if your company is making a tidy profit now, there are expenses associated with growth. You may need the upfront capital to acquire an existing company, or a new project may mean buying or renting new equipment and purchasing supplies.
Of course, the best thing you can do for funding your construction firm is to bid intelligently. You may be tempted to bid low to receive a new contract, but that’s not always the best strategy. People may be suspicious of the lowest bid and willing to pay a little more to ensure good quality. [Read related article: Elevating Expectations: 5 Ways Product Quality Affects Your Brand]
If you have a price list in place for services, reevaluate it. Are you accounting for potential increases in input costs? Are there costs you can reduce in one area and increase elsewhere? By reducing cost on some items, you can show the customer you are balancing their interests with your needs.
Finally, whether you’re getting funding or bidding on a job, be sure you have a cushion for things that could go wrong.
“While the old saying ‘don’t fix what isn’t broken’ is true, a new perspective can be applied: ‘Improve what is working,'” said Shad Elia, founder and president of New England Home Buyers. “While adapting to new technology can be challenging, with patience and dedication, the rewards can be tremendous.”
Elia recommended looking at the advancements in the construction industry’s software as one possibility. You could employ technologies like data collection apps, drones, building information modeling (BIM) software, virtual reality and wearables, 3D printing, and artificial intelligence. [Read related article: How Machine Learning Is Boosting Business Growth] All of these are expected to grow in availability, popularity and accuracy over the next few years.
“Despite increased digitization in recent years, construction is still lagging behind other sectors in terms of adopting new technologies,” said Mark Perkins, construction territory lead at Peak AI. “It’s a complex and traditional industry that operates on tight margins, and introducing new ways of working can often be deemed to carry high risk.”
“Being within a specific trade association has its benefits to help contractors and construction business owners expand their network,” said Matt Swann, president of Brawn Construction. “Most trade associations offer conferences, events and meetings to allow these workers to meet others in a similar industry.” Swann advised never to burn any bridges and to leverage your business card. “This allows others to remember and stay in contact with you if they want to hire your company to work on a specific project, allowing you to build your reputation.”
Swann said that networking at actual job sites is also crucial because it allows you to meet various contractors to potentially work with in the future.
“Along with the relationship building, you get access to vital information and strategies from experts coming from different places,” agreed Richard Fung, owner of Forever Homes Inc. “Ultimately, you get to expand your firm both by you and by the help of other experts or organizations through attending those events.”
We’ve all heard the adage “grow or die.” It’s not a given for construction, however. While expanding your construction firm can lead to increased profits if done well, it brings greater challenges than with other businesses. When not handled correctly, growth can actually kill a construction company.
Look at your customer base as well as territory before making any development plans. Make sure you can get the skilled labor and funding to support your increased responsibilities. With all these areas working smoothly, you will be able to expand your construction firm successfully.
Skye Schooley and Karina Fabian contributed to this article. Source interviews were conducted for a previous version of this article.