If your business isn’t growing, it’s dying. Continued growth is the engine that generates opportunities for your best employees and long-term financial security for you as a business owner.
Here’s what you need to do to lay a solid foundation for long-term growth and success for you, your family, and your workers.
1. Reinvest Cash Flow For Growth
As a business owner, you’ve got to be disciplined about managing your expenses and pushing most of your excess cash flow back into your business.
It’s very tempting to pull cash out of your business for yourself. We get it. We all have expenses. You can always find some short-term use for the money. It feels good to pay yourself a fat salary as the business owner. And drive around in a high-dollar truck, etc.
But if you want to grow your business faster than competitors, you’ve got to be leaner. The priority for available cash flow has got to be reinvesting in your business’s growth, and capacity for growth.
Before you increase your own salary as the business owner or pay yourself and your partners a dividend, stop and think:
- Can I invest the money in another truck and crew?
- What profitable advertising can I do that I’m not doing yet?
- Can I double down on my successful advertising and marketing?
- Can I invest in the automation of back-office processes?
- Is my IT up-to-date? Or is my growth hobbled by outdated, inefficient technology?
- Am I getting the most out of my website? My marketing campaigns?
- Can I buy leads for my salespeople?
- Can I hire an office manager or assistant to help me focus more on supporting my salespeople and improving my customer experience?
- Can I buy bulk inventory and save money on inventory I’ll have to buy anyway?
- How can I invest in employee training to improve efficiency?
- Can I pay more to my salespeople, and recruit another good salesperson?
- Can I do a pay raise or bonus to my most productive and valuable people?
Lots of your competitors don’t think this way, after a certain point. They hit their comfort zone, and then they start taking too much money out of the company for themselves instead of reinvesting it for growth.
It doesn’t take long for those businesses to stop growing. Then they stagnate.
Their top performers and ambitious employees who want more for themselves and their families get frustrated and begin to leave the company - for growing companies like yours.
Resist the temptation to pull too much money out of your company - especially in the early years. Pull out the bare minimum. Reinvest everything you can for growth, and maximize the value of the enterprise at sale.
Your measure of success should be your company’s EBITDA (earnings before interest, taxes, depreciation, and amortization) and the book value of your company (assets minus liabilities). Not your own salary.
As a business owner, you may go through long periods of time during which you have several key people earning more than you. This is as it should be. Relax. There’s nothing wrong with this arrangement. Because your real compensation, long term, is the steady growth of the value of your company. Not your salary and dividends.
Eyes on the prize.
2. Focus on Sustaining Your Current Clients
Of course, you want to bring on as many new customers as you can handle. But don’t focus on new customer acquisition at the expense of servicing and marketing to your existing accounts.
Studies show that the cost of acquiring a new customer from scratch is as much as seven times higher than generating a sale to existing customers. When you can get to the presentation stage in the sales cycle, a new customer buys between 5 and 20 percent of the time, on average. An existing customer buys between 60 and 70 percent of the time.
3. Embrace Change
Creating a culture receptive to change is a must in the contractor business. It’s important to have intelligent, flexible, and capable leaders at every level of the organization who can adjust to changes in technology and industry practices and who can grow with your firm.
The best way to do this is by starting at the top and working your way down so that everyone understands their role in building or maintaining goodwill with customers, vendors, partners, and communities.
It all stems from having an open dialogue about what needs to be accomplished with team members, your general superintendent, and all field crews. In doing so, engaging staff in the decision-making process as you navigate possible changes to get their feedback and buy-in is crucial. By feeling like they contributed to the decision, they will be more likely to embrace the change, which will not only contribute to the overall success of the initiative but will also increase employee morale.
This can't happen if there isn't transparency in your company culture.
The best way to achieve this is by holding regular all-staff meetings, and discussing how changes will affect the business as a whole. Share any information that may be pertinent to employees.
This can include anything from employee benefits or new company initiatives that will be implemented as your business begins to scale.
4. Hire People Who Can Grow With You
You need a good team to support you. As the owner, you can’t be everywhere. That limits your growth very quickly.
To grow your business, you need to hire staff that’s capable of personal and professional growth along with you.
Don’t get cheap and just hire the bare minimum worker for the job. When you hire a brand new installer, hire the person you can see leading a crew of installers in a year’s time, and potentially managing multiple teams of installers three to five years from now.
When you hire a new personal assistant or secretary, hire the one you can see acting as an office manager in three years, directing several people, and running your back-office operations.
That means you want people who are serious-minded, ambitious, who tend to seek out responsibility instead of avoiding it, and who have the candlepower to think on their feet, and the judgment to make sound and timely decisions even when you can’t be there.
You’ll have to pay a little more to get and keep them.
But you won’t regret it.
5. Make it Easy for Customers to Buy From You
Cash is king. But not many people have a lot of it.
Offering a flexible and affordable way to finance your service is the best way to reach everybody else. That’s where we can help.
Without an affordable financing solution, the sales discussion quickly gets reduced to price. The contractor has no opportunity for adding value and upselling because any solutions are limited to whatever cash the customer has on hand.
The customer always has an excuse to ‘think about it.’ And then shop the deal around to competitors.
And some other contractor can always undercut you for less. You do all the legwork, and you lose the deal.
Having your own financing solution, with a lower interest rate than credit cards, easier to get than a bank loan, and the capacity to lend enough money to cover the project is vital to closing sales and growing your business.
To avoid needless complications that can derail your sale, it’s important to work with a third-party finance company that:
- Understands your industry and typical ticket sizes and transactions
- Makes it easy to apply
- Doesn’t make customers jump through hoops
- Makes quick credit decisions
- Applies common sense underwriting
- Looks at more than just FICO scores
- Pays you quickly.
6. Offer a Best-In-Class Customer or Client Experience
Offering top-notch customer service is a great way to grow your business. Look for ways to make doing business with you a memorable and pleasant experience.
Hotels figured this out a long time ago: People might not remember the little things that go wrong during their stay. But they remember the mint on the pillow.
Chick-Fil-A changed the way quick-service restaurants operated. You still order food at the counter. But they have (fake) flowers on the tables. Pleasant workers (paid a little above the norm for other quick-service restaurants in your area) say “my pleasure” at every opportunity. And they come to your table to refill your drinks.
Every other quick-service restaurant chain in their markets had to up their game in response. Chick-Fil-A set new standards for the fast-food experience. And enjoyed terrific growth at the same time.
One home theater installer we know would take before-and-after photographs of the installation, along with progress notes along the way. He also collected operations manuals for each of the major pieces of equipment he installed. And his staff’s list of the greatest 100 movies ever made.
When the installation was done, he’d present his customers with a beautiful, faux-leather-bound “yearbook” of their installation, and a cheese and wine basket or family snack basket for his customers to enjoy for their first night enjoying their new home theater together.
Think he got referral business? You bet he did! And still does, 15 years after we learned this idea from him. After acquiring several of his competitors and growing his business the whole time.