These kinds of unique services will make your company stand out from others, King says. “If two people are bidding the same [basement] job, and you only do basements, prospective clients will think you have more expertise because your business is built on this one thing. It’s hard to be all things to all people. If you’re small, it’s easier to grow by niche.”
BRANCH OUT Once Amberson fine-tunes his 1 Week Kitchen, he foresees creating franchises. And Hogan hopes to, as he puts it, “excel in community A and then move into community B.” Expanding geographically into a new market is another way to grow the client base, which will ultimately grow revenues, says Case Remodeling’s Richardson. (The company is well known for its handyman franchise.)
But is there an optimum time to move? “Our first priority is to maximize profit and grow within our existing market,” Lutes says. “To what level can one company reasonably capture market share? We have 200,000 people in our market and we have to push out about 30 miles before I can hit bigger demographics.”
King, who has worked in the HVAC industry for many years, suggests this way to determine whether it’s time to move into a new geographic market: “There are permits issued in most states where people are remodeling. Take the total number of permits and divide by the total number of houses in that geographic area for one year. That’s the percentage of houses that actually get remodeling done that year. If your percentage of the market is approaching that, go find another market. But don’t try to go from San Francisco to Los Angeles. Go to the next county, city, or town. Do the same calculations for [those places]. See who’s already doing business there and if it’s right for expansion. Then find yourself a good operations manager or office manager who will take responsibility for getting projects done right.”
Although Jim Gibson, of Gibson Builders in Washington, D.C., didn’t embark on a lot of formal market research, he had a fair knowledge of Maryland’s Eastern Shore, about 90 miles from his office, when he opened Gibson East. The area is a big draw for second homes and retirees from the Washington, D.C., area. “We were asked to look at a $1 million-plus job, and we didn’t want to go down there, but when you’re getting [lots of] those calls, you start thinking,” says Gibson, who does about 80% of his work in custom and spec homes and 20% in remodeling, historic renovation, and restoration.
Gibson’s best superintendent was willing to move to the area. He and Gibson partnered to open the second office, which runs as a separate entity. The client list is long and he isn’t doing a lot of advertising or marketing. “I’m where I want to be now and want to manage what we have,” says Gibson, who sees a strong future in second-home builds and remodels.
By waiting for enough demand from current clients and sending a super who he trusts, says King, “it’s a perfect way for [Gibson] to grow. That’s the best way to do it, if you can.”
BE MORE PRODUCTIVE Everybody aspires to do more with what they already have. Improving productivity can help you increase top of the line, but it may be difficult to see the connection to growth. “I don’t know if I looked at processes as a growth strategy,” says Dale Nikula, owner of Encore Construction, a $7 million company in Dennisport, Mass., “but [rather] what I needed to have in place in order to grow.”
Nikula has systems and checklists for everything. This level of organization has helped his company go from a construction firm to a design/build company with in-house design services. Encore represents two cabinet lines, and has a home services division for small replacement and maintenance projects as well as a home-watch service for traveling clients. “Each of these types of jobs requires us to look at how we are going to produce them. What systems will we need to put in place to produce jobs profitably and to make sure we maintain a certain level of service? Processes help decide where and how we are going to grow.”
To tighten production in order to grow, Starcom Design/Build, in Columbia, Md., went from a lead carpenter to a project manager system. “We weren’t efficient with lead carpenters,” says owner Bob Weickgenannt. “Project managers have allowed us to be more efficient, which equates to more net profit.” He gave carpenters six months to see if they could fit the new model, and just one of the four qualified to become a project manager. Weickgenannt now has three people in sales and design, and subs out all trades. “There wasn’t capital there to grow [with the old system],” he says. “Our profit has tripled since doing project management.”