In this five-part article, we are discussing if contractors should expand their business. In the first part, we discussed whether or not your business is in a comfortable enough financial position to expand. In this section, our Knoxville construction attorneys will discuss other important factors to consider before growing your business.
Things to Consider
Determining whether or not to expand your contracting business goes well beyond just your company’s financial position. Throughout this series, we will discuss many important topics. Here are some important questions contractors should be asking themselves:
- Is the timing right to expand?
- Are you prepared to put in the extra time and effort to grow your business?
- Do you have enough quality workers and key management personnel to scale out your business?
- Are your business operations finely tuned or do they need to be adjusted?
It’s always important that contractors understand that the larger a company becomes, the more prone that company is to experiencing setbacks and challenges. In other words, a minuscule issue at a small company can become magnified into a catastrophic problem at a larger company.
Do You Offer Specialized Services?
As we will discuss in more detail in the third, fourth, and fifth sections, businesses fail in their expansion efforts for a variety of reasons. However, one common problem is that the expanding business will steer too far away from their specialized area of expertise. Although it may be enticing for a company to offer a wide range of services, it’s always important to find your niche and allocate resources to strengthening the unique services that you provide to your clients.
The Rainy Day Fund
Although expanding a business is always an exciting proposition, ambitious contractors should not sacrifice their “rainy day fund” in the process. Although we want to achieve business goals, you never want to invest so much capital into an expansion that you can’t take a loss for a few seasons or even a few years.
There are many ways a construction business can be impacted by unexpected financial hurdles. For example, owners will make late payments, you will work on time-consuming projects for little profit, OSHA citations will be issued, and litigation stemming from a project dispute will continue to loom. In other words, contractors need a contingency plan in place and they should reserve funds for that inevitable rainy day.
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.