Typically, building service contractors evolve from small companies to big companies in a predictable pattern. How these stages of evolution are handled will determine how much a contractor can grow. By identifying the current level of your company growth, you may be able to expand by overcoming the pitfalls that are somewhat unique to each stage.

The first level is the start-up phase. Contractors in the start-up phase will typically be working for wages, perhaps with a small mark-up and little sophistication. Often, these companies will not have charge accounts and may have clients buy the cleaning supplies for them.

A major factor for success in this stage includes opening a checking account under the business name and setting up a simple bookkeeping system, even if it’s on a household computer. Try to run the business as a business. Put yourself in front of the janitorial suppliers in the market, find out who sells what, find out who has the tools that benefit you the most.

As business grows, a BSC comes to the second stage: hiring the first outside employee. Companies in this phase need to start handling taxes. For the first time, you must understand burdening the labor rate. It is also a good idea to hire an accountant. BSCs in this phase should research suppliers, and set up house-charge accounts to buy from distributors.

As a company adds more employees and accounts, it becomes more difficult for the owner to run the business. So, in the third stage of evolution, a BSC will usually add a manager to help shoulder the burden. Sometimes, the manager is offered a position as a partner. The new partner can help out in a lot of different ways: account management, sales, covering for the owner.

This is a most critical phase of business growth. It is probably the first phase that can put you out of business and into bankruptcy. In this stage, be cautious about selling any part of your business in a partnership situation. Most business partnerships end in divorce. A partnership split up can ruin friendships, marriages and lead to financial trouble.

Also, keep the books clean, and make sure to follow proper accounting procedures. Most importantly, be sure you know exactly what your new partner is doing all of the time.

The next growth phase is to branch out to other locations. Branching out is a dangerous time for a business because companies are subsidizing new business from the profits of existing business. Set limits on your risk exposure. If non-profitable business consumes the energy and resources of good business, service levels drop and the good business may be a t risk over time.

If you feel like your company has been having growing pains, perhaps its time to evaluate your stage of evolution. By identifying your corporate stage you may be able to push on to the next one.




POSTED ON: 3/1/2004