A study of the phases successful companies go through
by George Hedley
August 27, 2019

Over 90% of all construction companies grow for several years, then stop and remain stuck at their current size indefinitely (adjusted for inflation). At its stuck size, a company’s profit margins remain low, hiring slows, work suffers, and the company seems locked in place. So, what will it take to unlock the earning potential of your construction business?

The problem is not your employees, customers, competitors, subcontractors, suppliers or the market—it’s you. To build a better business, you need to go back to the basics. Ask yourself what really matters to you? What do you want your business to become? 

To build your business to its fullest earning potential, you must stop doing the little tasks and start doing what truly matters most to you. Review the following stages in the growth process and consider a new strategy to push your personal career development forward and get your company back on the road to growth.

Stage 1: The Entreprenuer 

Entrepreneurs are never content working for others. They want to go out and make things happen and do things their way. Following company standards, rules and rituals makes them feel boxed in; they need to go it alone and make their own decisions about how to do business, who to hire, how many hours to work, which customers to do business with and how much money they can make.

Then it finally happens. They’re bitten by the entrepreneurial bug, quit their job and start their own business. After the initial shock, the entrepreneur must find the funds to get started. Fearless, the new entrepreneur knows they will figure it out.

Stage 2: The Sole Proprietor 

After starting the company, the entrepreneur moves on as a self-employed, sole-proprietor, small business owner. At this stage, they’re the supervisor in charge of every decision, contract, customer conversation, price, purchase, delivery and job. They are on jobsites almost every day, performing the actual work with the help of a few other employees. Without them, there’s no business and no company. 

Some business owners remain sole practitioners forever as a choice, and that’s OK. Many get forever-stuck with just two men and a truck, while others grow to staff the company with a foreman with two or three crews. Eventually, they have to make a decision: stay or grow.

Stage 3: Staying Stuck 

The owner wins a few more contracts, and as the hands-on supervisor, performs excellent work, gaining even more referrals. Next, they rent a small office and hire a foreman or supervisor, more field workers and an office manager. At this stage, the owner is still serving as the estimator, salesman, project manager, and general field superintendent, with everyone reporting directly to him. 

The work keeps coming. The business owner next hires a junior project manager, estimator and full-time office manager to handle more of the workload. As a closeted micromanager, they begin to stress over everything. They are overworked and out of control. 

Cash flow becomes tight, and too much time is spent chasing money, without much to show for it. The actual work becomes too much to handle, and the pressure of owning and running a business creates a high-stress environment for everyone. 

This is where (and why) most small business owners get stuck, unable to manage, supervise and play a part in every decision. They know they need to do something different, let go of control, hire better employees, delegate, find new customers, improve service, improve costs, or find more hours in the day. In order to grow and be profitable, they realize they must build systems, structure, and a management team to oversee it all. 

Stage 4: Profitable Growth

Instead of trying to handle every task, great business builders focus their energy on the vision of owning a business that works and delivers higher-margin results. By focusing their vision, changing their role and implementing a strategic action plan, their company will start moving in a positive direction. 

They must replace themselves with written and trained operational systems; get the company organized so it will operate without their constant supervision; hire a management team that is accountable to run the company; and implement scorecards to track progress.

Stage 5: Systems & Management Team

Building a great business takes time. Most owners require 1 or 2 years to turn the ship around and step off the hamster wheel. When the role of owner changes to the role of visionary leader, coach, system implementor and profitable revenue generator, the company’s infrastructure will also need to change.

Start with an in-depth management team meeting to draft your strategic business blueprint action plan. Identify where you’ll gain the biggest impact for your efforts. Typical top priorities include higher profit margins, sales revenue, field production, accurate estimating or experienced people. Make a list of what needs to be fixed and rank them—then get to work.

Stage 6: Best-in-Class Margins

The top 5% to 10% of all contractors make the highest margins. They run a tight ship that attracts and retains the brightest employees, keeps reliable customers, does the best work and hits their targets. By focusing on your vision and investing in continuous improvement, you, too, can become one of the best.

These improvements include high profit margins, steady growth, monitored business systems and processes, accurate estimates, the right people in the right positions, a safe workplace environment, a management-team-run company, a sales and marketing plan that delivers high-margin customers, steady workflow, and a wealth-building investment program. 

Stage 7: Valuable Asset

At this final stage, owners become company stockholders, investors, developers and opportunity seekers. When your primary role is to be the owner instead of the manager or worker, you will finally find the time to seek better project opportunities, coach and mentor your key players, seek wealth building investments, develop new business ventures, and enjoy the benefits of business ownership. 

No matter which stage of growth your business is currently in, there always comes a time to take the next step. Make your growth count by being prepared for what’s ahead before you get there.