In the 28 years that I have been in business, I have seen countless companies come and go, many that last only a few years. There can be any combination of a number of reasons that they don’t make it, but I would guess that unregulated growth likely played a role in many of the failures.
Growing a business requires expansion of every part of the operation, not just closing more contracts. In this column, I will identify a few of the most prominent areas that I believe require focus for successful growth.
Sales. For many people, the easiest part of being in business is making sales. Some companies start as a result of a client or clients who are standing by, just waiting to give them their business. If, however, that company doesn’t have the ability to continue bringing in new projects beyond initial contracts, not only will growth be stunted, but also survival will be in question. When we grow our businesses, hire more people, and expand our facilities, we have to have adequate and consistent sales flow to support the larger venture.
Backlog. In the beginning stages of my business we would work hard to develop leads, close contracts, and then perform the installations. When we were done with the installations, only then did we realize we didn’t have any new work lined up. We would then scramble to develop new leads and close new contracts so that we could dive back into installation work. We made the same mistake a number of times before we realized that it is vital to always have work in the queue to maintain an organized rhythm and steady cash flow. It’s not enough to just close contracts, they must also be timed to sustain the company throughout the year.
Personnel. One of the most difficult parts of running and growing an integration business is recruiting, hiring, training, managing, and supervising employees. It is tempting to take on projects based on the idea that “we can always hire a few more employees to get the job done,” but that can be dangerous. There are far fewer qualified and experienced people than there are positions to fill. We often have to hire people from other industries and train them on the specifics of our work. It takes time to find and hire the right people, and it rarely happens on the precise schedule we would all like.
Project Completion. In the early 1900s an Italian economist named Vilfredo Pareto penned the 80/20 rule, which he used to describe the distribution of income in a society–specifically that 80 percent of a country’s wealth is held by 20 percent of its citizens. The 80/20 rule has been applied to many other situations as well.
Not being aware of how the 80/20 rule applies to us can be risky. For example, with integrated systems, generally 80 percent of the project can be completed in 20 percent of the time and the remaining 20 percent of the job can take up to 80 percent of the total time. As we grow our companies, and take on larger and larger jobs, the more dangerous the 80/20 rule can be for us. The first mistake is that we often do not accurately estimate how much time it will really take to do the final finish stages, and what is involved in the fine tuning and testing of the programming.
The finish stage is the body of work that is generally most visible to the clients. Clients don’t pay attention to wire pulls and installation of mounts and brackets, and they are not in our shop to observe the many hours expended building the racks and on the programming of the control systems. They are, however, very aware of the little things that seem to never be complete, the small bugs in the software and the feeling that our employees are there so much that they will never go away. These are the issues that erode our profits and stifle client referrals.
Measured Growth There have been a few situations when we turned down opportunities to bid on jobs that we were pretty sure we could close. Most notably, a major corporate client asked us to bid a project that included systems in 12 locations around the country. This was about 15 years ago, before we are accustomed to doing projects outside our immediate area, and the size of the contract would have been several times our largest at that time. Somehow we knew that the combination of the size of the project and the logistics required for the remote locations would put our business at risk, so we declined to bid on it.
I sometimes think that if I had only a handful of employees and took on only one or two of the largest projects per year, that I would make more money and have an easier time of it. But then I come back to reality and remember that we have hundreds of clients to support and that if we were a much smaller company, it would be much harder to close the largest of the contracts we are currently awarded. Besides, I can’t explain why, but there is some inherent drive in us entrepreneurs to grow our businesses.