Designing a Scalable Financial Strategy for Your Construction Business

yesBy Paul Reyes-Fournier

Nearly 6 percent of all small businesses in the United States are in the construction industry, according to the Small Business Administration. While you may have an office out of your home, most of the business you do probably happens from the back of your truck. By its very nature, construction is as big or as small as the next contract you land, so it only makes sense to design your company to be scalable and avoid waste.

 

Business Planning and Scalability

Many business owners think of scalability as the ability to rein back costs if times get lean. While this is true, scalability also enables you to expand your business when it is appropriate. Scalability needs to be part of your business plan and the foundational strategy of your company. Keep your basic costs as low as possible and identify how and when you will scale up. Keep the increases to a minimum and limit the amount of time that you maintain the resource.

Subcontractors

You already are accustomed to using freelancers and outsourcing work in the form of subcontractors. Your company seldom does your own plumbing, electrical and roofing, since these would be additional salaries that need to be paid on a routine basis. Because you already have a subcontractor-focused business model, it makes sense to expand it to other aspects of your business like clerical, marketing and accounting. This is a strategy used by small construction companies as well as large international Fortune 500s. For example,Google works with GenPact Ltd. for its AdWords sales support.Similarly,Amway has developed a freelance service modelwhile offering the benefits associated with working with a big name organization.

Virtual Office

Office space is an expensive fixed cost and you have to pay it whether or not you use it. In short, it is the antithesis of scalability. Instead, set up a virtual office. Create your digital area, assign people to work in it and monitor your employees' productivity just like you would in a physical office. You also canrent out conference spacesthat let you have email, telephone and fax. These physical areas also offer snail mail and workspaces for a low monthly cost. The best part is that you only pay for what you use.

Marketing

Simply put, outsource your marketing. The world of social media and review sites has made advertising easy and budget friendly. Social media marketing takes a daily commitment that you may not have the time or will to pledge, though. Since small business is often synonymous with family business, you may be able to outsource your marketing to a family member. If not, look for professional social media marketing agencies that offer a per-deliverable pay schedule.

Measure Your Scalability

Successful businesses use financial ratios to analyze the strengths, weaknesses and overall health of the company.Use financial ratioslike the current ratio and the debt ratio to let you know if you are carrying too much fixed debt, requiring you to scale back.

With a Bachelors in Physics and a MBA, Paul Reyes-Fournier worked in aerospace and education but his passion to do something good for the world led him to a career in the non-profit sector where he has served as the CFO of a multi-million dollar rehab agency. He has lobbied Congress for funds to help homeless individuals and served on the BOD for social service organizations. He is a published author, co-author of CoupleDumb.com, and has written for JG Wentworth, Walmart, and LifeLock.

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