Growth in P-H-C companies can be very challenging. If you accept the growth challenge and perform the right steps, you will succeed in expanding your company. On the flip side, if you do not prepare for growth, you may end up being only in the history books.
Have you heard of growing pains? I remember when I was a kid playing sports, my knees always hurt. The doctors said it was just growing pains. Now that I'm older, why do my knees still hurt? I mention this analogy to illustrate that once you have decided to expand your company, the growing pains do not totally go away.
Sure, you'll add to your business and probably make more money, but different challenges related to expansion will occur. That is why it is important to have a plan, constantly monitor your financial situation and seek outside help.
How do you prepare for growth? How do you know what to prepare for? Do you just suffer growing pains and live with the pain? Can you tackle this growth thing all by yourself? These are all important questions.
Often a turning point occurs when a company's call volume increases and customers are being turned away. Then is when you must decide: Do you grow or do you pick and choose your customers? Some of you may not want to grow your company, and that is OK. Some of you, however, want to grow but want to grow profitably.
I recommend several steps to grow a business profitably. Here are some of them:
- Timely and accurate financials;
- A business plan;
- Cash flow projections;
- Money, money and more money; and
- Outside help. Let's look briefly at each one of these items:
Don't try to grow without outside help.
- Timely and accurate financials. You should be able to get your financials by at least the 10th of the month. Some companies say they do not get their supply house bills and bank statements until after that date. If that happens, change your suppliers and your bank. Most suppliers and banks have their data online now. Use the services offered. If your accounting firm is too busy to process your financials by the 10th, look for another firm. The inability to receive timely and accurate financials is holding back your growth.
- A business plan. A business plan is a road map you dream up stating where you are today and where you will be tomorrow in your business. This plan should include a budget and a SWOT analysis where you analyze your company's strengths, weaknesses, opportunities and threats. The key here is to turn weaknesses into strengths and your threats into opportunities.
A budget is important because growth takes planning and money. It will help keep you on track on the spending side of your business so you don't fly by the seat of your pants. For example, when an advertising salesman walks through your door and you are interested in his product, you should check your budget and see how the additional expenses fit into it.
If these new funds do not fit into the budget and you still want to advertise, you'll need to find another expense item to eliminate to make ends meet.
- Cash flow projections. You will need to see if you have the money in the bank today to grow. In many situations you are not able to use your cash to grow because you don't have any.
With your cash flow projections, you'll be able to see when you'll need the cash and will be able to go to the bank with your projections and ask for the money.
- Money, money and more money. Growth can take a lot of money. Let's say it's time to add a service truck to your fleet. Are you going to pay for this $50,000 to $95,000 purchase with your hard-earned cash? I don't think so. You will need to give the bank items Nos. 1-3 above to get the cash to expand.
Walking into the bank with nothing normally means you will leave with nothing. For instance, if you walk into the bank and tell the banker it will take you a month to update your financials before you can give them to him, what does this tell him about how you run your business?
Be prepared when you meet with your banker with the above items in a binder. You will go a long way with the bank if you're prepared.
- Outside help. Don't feel like you're all alone and try to grow your company without outside help. Belonging to a trade association is a good place to start. You'll find that you will not need to reinvent the wheel since others in the association most likely have been through the same issues you are experiencing. Get involved in your association's peer groups. Discussing your issues with others will help open your mind to other options.
Another benefit of an association is that you'll be able to take advantage of its business coach, if one is available. Or, your association may be able to recommend outside consulting services. In either case, look for a coach who has industry-specific experience.
Growth in our businesses can be very rewarding, or it can be very challenging. The key is to keep the growing pains to a minimum. The more you plan, work the plan and keep planning, the better off you will be.
Lawrence Snow is business coach for Quality Service Contractors, an enhanced service group of the Plumbing-Heating-Cooling Contractors - National Association. For more information, visit www.qsc-phcc.org/ or call 800/533-7694.