441: Four Things To Consider Before Expanding Your Service Offerings

This Podcast Is Episode Number 441, And It's About Four Things To Consider Before Expanding Your Service Offerings If you're looking to grow your construction business, you might consider expanding your service offerings. Adding additional services is an excellent way to increase your profitability, diversify your income and expand your market. But there are essential things to consider before adding to your income streams.   First things first - find the money. If you don't have savings earmarked to fund your ideas, you'll want to make sure your "scaling my construction business" plan includes adequate financial planning. Applying to a lender for a business loan is one option. In this case, you'll want to include up-to-date cash flow reports, income statements, budgets, and projections in your plan for a potential lender.   If your construction business doesn't have a credit history, you may need to look at other options for financing your plans. Using a business credit card regularly and paying off the balance can help you build a good credit rating, which will help you prepare to apply for a loan down the road.  

Here are four important things to keep in mind when you consider adding to your services.

1. Does the expansion complement your company?

The best way to expand your service offerings is to add value that complements the work you're already doing and is attractive to your current client base. While it takes more effort to bring new customers in, adding something that your existing clients need and that you already have the capacity for is an efficient way to increase your profits.

If you already offer lawn maintenance, find out what other yard work your clients need done, for example. It might be reasonably simple for you to provide those services to your clients, and they'd probably be happy for you to do it rather than hiring someone new.

2. Is your profitability consistently high?

Spending money to hire new people and buy more equipment if your business isn't consistently profitable is risky. It might be tempting if you make much money in one year to jump into offering a new service, but hold back until you've got a couple of years of high profits behind you. That allows you to save money to cover the increased expenses and ensure that the one year wasn't an anomaly.

Invest in your business, but expand your services when your profits are consistently up, not when you've had one outstanding period.

3. Is there a potential partnership or merger that makes sense?

There are times when forming a partnership or otherwise merging businesses makes sense. Is there someone out there who works in a similar capacity that you could work well with? Maybe they are excellent in their field but need help running a business. Explore a partnership or a buy-out.

For example, if you offer Residential Home (Builder) consulting and you know someone who provides relocation services, you might form a partnership so the new company can provide both customized help and relocation services. That can lead to new clients for both you and your new partner.

Keep in mind, joint ventures are a bit like change orders. They can be an incredible opportunity to make or lose much money very quickly.

4. Are you doing it for the right reasons?

There are many good reasons to add new services, but there are also reasons to increase your risks. Competition, for example. While competition can drive innovation, it's not the only reason to add a new service—and doing so just to beat your competitors can lead to mistakes being made and money being lost. Rushing to expand is when companies find themselves in trouble for adding services there's no market for or without a fully-formed plan.

Final thoughts

For your construction company to survive and thrive in any economy, you must pick a niche market and develop your Strategic Business Process Management System (BPM) with definitely written goals of what you want to accomplish and how much money you want to earn from it. Your construction accountant can help provide additional financial advice and support as you update your business plan based on your most current financial records. 

Expanding your business is exciting, but it's important to consider some issues before committing your time, energy, and financial resources. If you're adding new services, do so because it makes sense, you're in a financial position to do so, your clients want it, and you have the capacity for it.

About The Author:

Sharie DeHart, QPA, is the co-founder of Business Consulting And Accounting in Lynnwood, Washington. She is the leading expert in managing outsourced construction bookkeeping and accounting services companies and cash management accounting for small construction companies across the USA. She encourages Contractors and Construction Company Owners to stay current on their tax obligations and offers insights on how to manage the remaining cash flow to operate and grow their construction company sales and profits so they can put more money in the bank. Call 1-800-361-1770 or sharie@fasteasyaccounting.com