[2024] How to Scale a Construction Business

Leadership

Eight years ago, Dave embarked on what would soon become the adventure of a lifetime. With nothing but his trusty tools in the back of his Ford F150, he set out to transform his raw talent as a carpenter into a thriving custom home building business.

He was doing great. So he thought. He was acquiring new customers every month, hiring new people, but somewhere along the way, Dave got stuck. He didn’t know how to scale a construction business and ran into some common issues all contractors face.

 

Top Construction Industry Growing Pains

 

Cash Flow

Cash flow is the lifeblood of any construction business, and it’s often in jeopardy, especially during large-scale projects. When Dave was building a new home, managing his WIP (work in progress) was everything.  He paid many of the costs up front. But getting that money back? That could take anywhere from six months to a year. That’s a long time to keep the lights on without incoming cash.  

It’s far worse if Dave when subcontracting, as he would get paid after the prime contractor.  Sometimes those payments would be delayed for months!

 

Finding Great Team Members

One of the biggest challenges when scaling a construction business is finding team members that are passionate about the work. Ones who truly love what they do. 

There are a few reasons for this.  

Labour is a major issue for all businesses and especially so for trades. Fewer people are entering (and staying in) the trades. Many of those who do switch from job to job to find the best pay.  

One reason for the job shifting is that many construction business owners simply look for people to swing hammers. Doing this means they’re not building a great environment where people connect, grow and want to stay.  Business owners need to focus on the employee experience, including developing purpose in business.  Apply the same craftsmanship that Dave does in building a home to building a great place to work.

 

Customer Acquisition

Have referrals died up? Nothing in the ol’ sales pipeline? Unfortunately, this is all too common for most construction companies. The market is highly saturated and everyone’s competing for every dollar and new customer. Dave felt this too. But he didn’t really know where to go from here.

 

You Need Disciplined Execution

 

Build a Standard Implementation Process

To scale his business, Dave focused on standardizing the implementation process. By understanding the customer journey—from dreaming up designs and securing mortgages to watching their homes being built and finally receiving the keys—Dave could streamline operations and ensure a consistent, high-quality customer experience. 

More importantly, Dave could create moments – memories that the customer would remember forever.  These high-points would drive returning customers and referrals. 

 

Strategies for How to Scale a Construction Business

Scaling a construction business starts with a clear purpose. Dave aimed to create an environment that would ignite his team’s passion—one that provided opportunities and motivations that he and his leadership team never had. This purpose-driven approach helped foster a workplace where every team member felt valued and instrumental in the company’s success.

 

Build a Pipeline of Talent 

Realizing early that hiring skilled workers would be a continual challenge, Dave established connections with local trade schools. This strategy allowed him to build a pipeline of talent, bringing in fresh, trained individuals eager to start their careers in construction, ensuring a steady flow of new ideas and energy into the business.

 

Improve Employee Experience

Dave knew that a happy team leads to happy customers. By improving the employee experience—through better training, competitive salaries, and growth opportunities—his team felt more engaged and committed. This positive internal culture reflected in their work quality and customer interactions, which in turn, led to more referrals and higher profits.

 

How do you fix the cash flow problem?

 

Progress Payments

Dave learned the hard way that traditional payment schedules in construction can strangle your cash flow. So, he switched gears. Instead of waiting until the end of a project to get paid, he began structuring contracts with progress payments. 

This approach breaks down the total fee into chunks that are payable at different milestones—like laying the foundation, completing the framing, and finishing the interiors. It’s a game changer. Now, cash comes in steadily throughout the project, which means Dave can manage expenses better and even start lining up the next job without a hitch.

 

Focus on Smaller Projects as Opposed to BIG CASH Ones

Dave also discovered the value in tackling smaller projects. While the allure of ‘big cash’ jobs is strong, they often tie up resources and take longer to pay off. Smaller projects, on the other hand, are usually quicker to complete and simpler to manage. 

They require less upfront investment and tend to pay out faster. This means Dave can keep his team busy and maintain a healthier cash flow, turning over multiple small projects could equal or even surpass the revenue from one large one.

Balancing fast cash with big cash is vital for keeping his team busy and a constant flow of good cash. 

 

Find Other Services You Can Take on With Your Skills

Expanding the range of services offered has also helped Dave keep the cash flowing. He looked beyond new builds, exploring renovations, repairs, and even consultancy for DIY builders. Some of these potential strategies made sense, others, not so much.  

Working with his coach and team, Dave created clarity about exactly who they wanted to serve (and would pay them the best rates) and found additional services that made sense to that customer.  The result was more one-time revenue and the start of several recurring revenue streams.  This not only fills gaps between larger projects but also attracts a broader client base. 

By diversifying his offerings, Dave utilizes his team’s versatile skills and taps into different market segments, ensuring there’s always work on the table. It’s about making the most of what you have, and for Dave, that meant seeing every skill as an opportunity for growth.

If you want to scale your business and do it the right way, reach out to Incrementa. Let’s talk!

Mike Knapp

STRATEGIC PLANNING & EXECUTION

Mike has been helping businesses achieve their goals for more than 20 years. He believes there is a better way for business owners and leaders to build their businesses and achieve their big goals. As a Gravitas Impact Premium coach, he leverages the 7 Attributes of Agile Growth™ to simplify the art of strategy and discipline of execution.

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