Business expanding too fast?

Couchpotato82

I know this is going to seem like a first world problem but here goes.

I’m in the construction industry.
This time last year I had myself and an apprentice who had just started. My father is a co-owner of the company and at his age is only able to do 20-25 hours a week. For the years between 2009-216 we got by on smaller jobs, scraping and scratching to make a wage.

The old fella would have built up a lot of good contacts down through the years. These contacts are serious operators in the developing side of things. NAMA put a stop to them but they are back building now on quite a big scale. And with a lot more sites opening soon.

I now have 9 direct employees (3 apprentices 6 qualifies) and have been asked to price a new job that would see me doubling the staff at least. The existing staff are all great fellas, lads I’d have known about and would have had dealings with through sport, family etc.

My fear now is that I’ll lose the quality control aspect by taking on guys I don’t know. In the game I’m in a mistake from an employee can cause thousands in damage (water is unforgiving!).

The bigger developers are tight enough on price but I’m finding that a profit of €1200-€1500 per housing unit is achievable. The money is as good as guaranteed though. Even when the crash came we were not left out of pocket as all invoices were paid. I’d honestly trust them unequivocally.

The issue is I’m not a very greedy person. I don’t necessarily want to be a millionaire. My wife is teaching and we’re not under too much pressure financially. We’ve two kids under 3 and as it is I’m not seeing a whole lot of them. I’m concerned that accepting these new big jobs will make it even worse. It’s all well and good to say I’ll do it for 10 years and have enough to retire on but if/when things go tits up I’ll have a whopper of a redundancy bill.
If I turn down the work they’ll just go elsewhere and I’ll be stuck then.
As it is the company is on line to make €100k plus in profit this year (pre-tax)on a turnover of around €800k. I don’t know is this enough of a margin to justify the hassle. My favorite part of the job is being on the tools but that’s not going to last much longer, as the admin is taking up too much time.

I’ve had 7 knee operations already due to various sporting injuries and the nature of my work so I don’t have 20+ years left in the body cos I’m due a knee replacement within 5 years.

What to do? Increase the margins, scale down or scale up.?
Heads melted from it

Jeju

Well done on your achievements so far, it's great to see someone who is dedicated to providing quality work when there are so many short cuts you could take to maximise your takings. What you probably should consider now with you current workforce is to have one of the lads you trust most and has a good ethic about him, someone who holds your values, make him lead or foreman or whatever. At this stage you want someone on the ground that if something happened you, your business would continue unintruped until you return. You can then concentrate more on the important things like quality control, sourcing new suppliers or and acheiving better prices from you current ones. If you have that relationship with your current clients then maybe just concentrate on getting their sites.

thegolfer

In the post you have hit a good few nails on the head, so my feeling is you're on point out where the business is at.

Is it only you, or have you another partner in the business?

Being happy on the tools is nice, but won't make you money, just a wage.

Taking on big jobs leads to possible over trading, being debtors pushed out and living on credit, which is very hard to manage when you do not have good admin.

Can you partner up with another firm to trade, possibly through a joint venture, separate company? A split of skills and management between two lads is ideal.

Past experience with clients has always being this tipping point of big jobs say in Dublin, versus local solid works.

Hire and fire like business, and not personal, take guys on for the set period of time, then move them on, retain the one or two who are solid. Redundancy kicks in after 2 years.

Get a good bookkeeper, as the accounts and figures are critical to know where you stand every month.

If you give this a go, do it right, and not half hearted, be ruthless. It's you're future, kids and wife too.

There is an article by Jim Stafford, a liquidator, about subbies in the construction trade, and he noted that the majority of his work is around the contractors being pushed to the line by the developers, however he noted new legislation around you guys getting paid quicker etc.

I would think a second partner would work here, one who is different to you, finder and grinder. Possibly you on the ground and someone directing from behind keeping the lines open.

Have worked with plumbers and electricians millions in turnover, and that worked for them.

modmuffin

One option is to partner with a similar sized construction company on a project-by-project basis. Assuming they are making $$$ they might be willing to pay you a commission / finders fee

CIARAN_BOYLE

Are your qualifieds manager/supervisor material that you can hand a chunk of quality control work for any new hires to.

Also do your best to mix teams on different jobs. Dont senf a bunch ot new people on a job without someone you trust following up on them.

Dinny76

If you are expanding a partner is a good option. I would look for one who has different skills to you
No need to get another plumber as you understand all this. I would look for a Qs Someone to keep an eye on cash flow deal with contracts admin. The stuff you probably don’t like. You can take a role as a contracts manager to save the body
Will you be able to find the new trades men you require. Rates are going through the roof for labor . You need to make sure when pricing you have enough cover for rate increases.
We work recruiting for professional staff for construction. we have seen a 15-20% increase in wages since January
Have even heard a developer paid a signing on bonus to a guy
Also new staff means new vans equipment etc how will this be financed. When you work it out will you generate a 300000 - 500000 profit. You want this for all the extra risk and pressure. Would it be an option to go to your existing clients and see if you can push your margins and make a better profit for less pressure on your existing projects

Life is short and the kids grow quick!!!

Couchpotato82

Thanks a million guys. Some of the replies here have been very helpful.
I’ve a new lad starting tomorrow. A 30 year old time served plumber who has spent the last 4 years working in a courier business where he advanced to position of manager. Organizing drivers, deliveries store staff etc. Seems a bright guy and is coming on board as more of a manager, the plumbing background is an added bonus.
What I’d like to do in future is split things up and go into partnership with a few of the employees individually.
For eg, if I work for 3 main developers, split the company in 3, each one dedicated to that developer. I could go 50/50 with an employee, set up a new company and let them run the day to day while I oversee the bigger stuff?
Would that be sensible? Obviously the employee would be someone who will have spent a few years earning that responsibility but I’d like to reward a good guy by giving more him an ownership slice.

Thanks a million for the advice, it’s a great help.

Having worked as a developer on a variety of projects my advice would not be to go into partnership.

Your old man has built up good contacts, probably a good reputation and that is very important for you to maintain. When you take on a partner and let them run a project on the back of you securing the contract your opening yourself and your brand up to all sorts of reputational issues in the future. Totally reliant on that partner to deliver the same sort of quality you have been delivering.
The building industry is full of people trying to cut corners, cut costs, bull**** each other, as a developer it can be very difficult and if you can find a reliable contractor who doesn't do that sort of thing you would use him forever. On the last project I had, having around 8 contractors my plumbing contractor was the only one of them who worked on time, fixed things on time, was flexible on invoicing, didn't over bill me. Everyone else gave me problems. So I would say if you are taking on partners the partners are going to do things like that and damage your reputation.

What you need I would say is to start taking on a new foreman or project manager. Hire the first person, train them by your side every day for two weeks with how you like to do things. Then delegate the responsibility. Let them run a site for you where you can go to site once a day and have a meeting with them and the client and get an update on everything and give the once over on quality control. Grow things from there, giving that person more responsibility, and hiring additional project managers when their plate is full.

Doing it this way you can have far more control over everything, maintain reputation, build your company properly, not be constantly negotiating prices, deals with partners, no fall outs, the ability to sack the PM which you can't do to a partner, and a variety of other things

antoinolachtnai

You also have to look at your own lifestyle here. With your health, the reality is that you can't be out pulling pipes through joists anymore, much as you'd like to be.

The 'partnership' idea is not a good one in my view. You can pay lads a good bonus if they can deliver quality work on bonus, certainly, but you need to keep a grip on things. This is what your credibility is based on.

It is good that you have someone to manage the day-to-day. Is there a possibility that you could now focus on recruitment, training and quality management? This might be a good middle ground for you personally. You wouldn't be doing the day-to-day anymore, but you'd still be out there, seeing the work.

Another thing to look at is your technological approach. By using manifold type systems, for example, it may make it easier to check quality, and there is less risk of a hidden bad joint. There are lots of other technological things too, like using mobile phones or tablets to keep a record of exactly what tradesman did what work. You just have to look at what might work for your business.