The Not-So-Sweet Spot
Frequently when I’m working one-to-one with clients and during the free 30-minute consulting calls I offer, I get asked the following question, “What size does my company need to be to make this easier?”
Typically, what they mean by “easier” is working less hours and/or making more profit.
The answer is, “It depends.”
Not to be evasive, but the reality is you can be profitable at any size and be unprofitable at any size. It depends on how well you run your business.
The ugly truth is you’re more vulnerable and will have a bigger hill to climb when you’re a small company, especially if you’re a one-tech shop (the owner works while trying to run the business at the same time). If you get hurt, sick or worse, the business is done for. And you’re likely going to have to continue working very hard until late in life because you’re the only income producer.
The next most vulnerable shops are where there are two to three techs working. If one of the techs quits, gets hurt or gets fired, your sales can be cut by 33 to 50 percent. Plus, if you are in a trade that demands after-hours coverage, your techs tend to burn out because they’re pulling on-call shifts so frequently.
The other nasty truth is almost all of what it takes to operate a two-to-three tech shop can support a four-to-five tech shop. That’s because you already have overhead like a customer service rep to answer the phone, someone doing accounts receivable and accounts payable, possibly an office, phones, computers, software and a whole lot more. But the fewer techs out there making you money, the more profit is elusive.
What is the right number?
Typically, life gets a whole lot better when you grow your company to five to seven techs. I say that because if you lose a tech, you stand to lose as little as 15 to 20 percent of your sales - which hurts but isn’t necessarily devastating. As I previously mentioned, you have many more billable hours to cover your fixed overhead expenses, so there tends to be more profit. And if you have highly visible trucks (I’m talking rolling billboards here), you have a much more dominant position in the marketplace as they roll around your service area getting your name out in front of your target market.
Organic Growth Vs. Acquisition GrowthHaving worked with many owners throughout the years, I can tell you there are only two ways to grow your company. One is organically. That just means you are so in demand and you’re such a great marketer that you have a surplus of calls, and all you need to do is add people. The second way is you acquire other existing companies, close their separate operations and put them under your roof.
The goal is to create a big enough marketing funnel full of the right people calling in the right frequency that it out-strips the amount of calls that your existing techs can do on any given day.
Organic growth is slower and actually more risky at creating call count. That’s because even with the best marketing plan in place, at best, you’re hoping you’ll get potential customers to get the phone ringing. There are ways to maximize your marketing reach but it’s still an educated guess.
Smart acquisition growth is actually a safer and faster way to increase calls than organic growth. When done right - with a plan and the necessary tools - it is actually less risky. Unlike any other marketing vehicle, it’s less risky because you’re buying calls from real customers who are already trained to call when they have a problem they need solved. Now, who you acquire and what you pay for that business is the only thing you need to master.
The most powerful way to grow your company in a sustainable way is to use and master both organic growth and smart acquisition growth. However, if you don’t have systems in place that are repeatable and scalable, then adding more people and calls will only create more chaos.
It takes both smart systems and smart growth to create the sustainable and profitable company you desire that is built to last.