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General Business Discussions A place to talk about general business discussions.

To Grow or Not to Grow


General Business Discussions

A place to talk about general business discussions.
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  #1  
Old 03-12-2009, 02:27 PM
Totally Green Totally Green is offline
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Hey Guys,

I have a dilemma. I've been in business for less than a year. Last year, we grew fairly fast. We picked up 30+ customers and have retained most of them this year and have added another 3 this week. My 5 year goal is to have 7 crews. Right now I have one crew with one stocked equipment trailer. Today, we received a call requesting a quote on 2 apartment complexes. This quote is primarily a price check. The client has a total of 20 complexes in two towns within our service area. I can see the potential for having my business jump into overdrive. On the other hand, a substantial investment would have to be made in order to handle this much work. Then, if I am dumped for any reason, I'm left holding the bag and my business may not survive. I agreed to give a written quote on Monday (Mar 16th). I would appreciate any advice on this matter. My business is too new and too small to make a major financial mistake.

Gary
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  #2  
Old 03-12-2009, 04:41 PM
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Well I am glad you put a bid in, it's a good way to figure out how your bidding skills are doing.

Since you are asking for advice on this. If it were me, I wouldn't risk it. I would rather opt for the long and steady growth vs. the short quick bursts. I like seeing businesses last for as long as the owner wants them and not see them get destroyed by hyper growth without proper stabilization.

What's your view on it so far? Which way are you leaning?
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Old 03-12-2009, 05:35 PM
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Well that is a tough decision, how much of an investment would it take in order to do this? I tend to be a risk taker and for the most part it has worked out however your comment about this being a price check would make me think again, also having one customer with that much control over your company is not a good thing, especially if they sense you are smaller, delayed payments can have a really negative effect on you.

I am staying away from commercial for the most part this year, I have accepted two commercial projects but they are not near the size of what you are talking about.

If you decide to do it, make sure there is an iron proof penalty clause should they back out. Perhaps you could look at a used vehicle to start, if you do take it on, I see trailers are a lot cheaper in the USA than here but then we some to the equipment, I assume you would need to add a ZTR and as you know that is not cheap.
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Old 03-12-2009, 05:45 PM
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It's a tough call & we can give you tips to help but ultimatley... it comes down to how you feel about the job, industry, & future.

If you win the bid you can have them sign an annual contract (or even a multi-year deal) with a cancellation fee if they let you go due to no fault of your company. If they can't do that then you may not want to make he investment.

I had an opportunity to bid on 2 gated communities recently though they are both in the same area, it was about an hour from home & well outside our normal area. I though about it for a bit & thought if I got them both it'd be worth the trip. Then eventually decided not to even submit a bid. It's too far out of my range, but even if it weren't that far I would have been in the same situation as you. I had planned to open a 2nd truck this spring, I am trying to hold off on it now, but may have to before the end of season anyway. Growing pains are tough. You need to grow, but too fast means your expenses are eating profits & overhead skyrockets. If the market steps off or you lose a big client, you can get in big trouble quick.

Good luck!
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Old 03-12-2009, 06:23 PM
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I really don't know which way to go. I would have to have another full outfit (truck, trailer, ZTR, trimmers, crew, etc). At best I'm probably looking at spending $20k. And I agree that having one customer controlling 75% of my business is extremely risky. I do want to grow, but this may turn out to be more than I can handle. As far as this bid being a "price check", I was the one who suggested that. I didn't want to spend a week looking at properties only to find I was out of consideration. He said price was not the determining factor. The company he deals with now is the largest and most expensive in the area but he said that his real complaint with them is the poor quality of work. I'm leaning toward talking to him about only taking a portion (say 3 or 4) of the properties to start. I doubt he'll go for it but I guess it's worth a try.
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Old 03-13-2009, 05:21 AM
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I gave this some more thought yesterday and will throw this out, do you know anyone in the business that you could sub some of the work to, and know them well enough that they will do a good job? What made me think of this is I know two school bus drivers that operate one man lawn mowing shows in the summer, one is a good friend and I could/would consider sub contracting to him.

The other thing that came to mind, are these properties close to your current work? I was wondering if it would be worth hiring a couple of staff, pick them up early and drop them off at a site with a mower or two and a line trimmer, then do your thing with your crew, give them a cheap cell phone and tell them to text you with any issues, and if necessary you could always leave your job site since you have a crew there and move the property guys to another building.

It would be a pain I know but it would take out a lot of the risk, give you a chance to show your stuff and allow your company to grow, bank the profit into a special "Capital Growth" bank account..

It hurts sometimes to grow, been through this many times and seen many companies go through this in my banking years, most of the time it turned out and worked well for them. Going from a one to a two crew is IMHO the hardest leap you will face, it gets easier and the risk goes down as you add more crews. If the economy wasn't what it is I would suggest go for it, I have no idea what to expect this summer, at the moment I am flat out doing reno work and turning away two or three jobs a week, I find this very strange.

In my case I am fortunate, if lawn care struggles, I will focus on mini excavation or if that doesn't work I will simply switch to construction, deck building mainly, If all fails due to the economy I have my woodworking which we are building up now with enough inventory to get it through the summer, I have almost 2,300 woodworking customers from 17+ years of building so that is my rock if you will, it allows me to take a lot of risk which I currently have with equipment purchases, I never would have considered it without something that offered stability and a good rule of thumb is one customer should never represent more than 15 to 20% of your gross revenue, we could all probably take a 20% hit and recover but a 60% hit would put most of us under.
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Old 03-13-2009, 07:27 AM
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I would suggest reading as many business books as you can get your hands on . . .a LCO consist of more than mowers and accounts . . .a way to slow growth AND MAKE MORE MONEY is to simply raise your prices!!!

if you have 10 yards at $20/week
raise them to $25/ a week say you lose 2 yards so now you have
8 yards at $25 you are MAKING as in NET more money because you are doing less work! your mowers are running less, the employees are working less and so on. . . this year i cut my company from almost 20 residential customers to 3 and picked up two large GOOD paying accounts . . . I have 10 gas stations, 2 other commercial accounts and 3 resi acounts. that is about 2.5 days of work (note: the two large commercials are 10 day accounts) these accounts gross = $3,675.00 . . . The only way to make money at a low price (Note: My min. is $40 to stop the truck) such as $20/yard is volume. My company sells on value . . . the customer that wants to pay 20 dollars doesn't care that my employees speak english, wear a uniform, or that i pay taxes . .. some one that has a 250k dollar house does!!!


to sum it up . . . RAISE YOUR PRICES = PROBLEM SOLVED
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