As a business owner, asking yourself the question, ‘Am I ready to expand?’ is crucial to evaluating where your business is in its growth cycle. Expansion can look different for different owners depending on where you are in the growth phase. Things to consider include adding technicians or trucks to your fleet, and ultimately, adding more territory to your existing service area, and additional locations in new markets. Lastly, once you are in the expansion phase, you may consider acquiring companies to add services or market share. Key indicators over time, will move you from testing the waters to committing to a detailed expansion plan – from planning to execution. Once you decide, it’s important to bring forth your growth vision for you and your team.
Demand vs. Service Capabilities
When assessing your company’s growth cycle, you will have to look at where you were historically in the past five years, how it compares to the current demand, and what is the forecasted growth. The first thing to look at is the demand for your services. Is your company's current tech and appointment capability meeting the demand? Below I offer some steps we took as well as innovative solutions to labor shortages when you need to hire quickly.
1. Demand Outnumbers Service Capabilities
One of the things I noticed before expanding Eco Plumbers, Electricians, and HVAC Technicians was that it was becoming increasingly difficult to complete all the daily service appointments coming our way. After investing in our brand for several years, we were the top-of-mind choice for our customers which is the ideal outcome. However, that also meant an increased demand for our popular offers. And I quickly realized if we didn’t assess our company’s growth cycle and make some decisions, our service would suffer. As it was, we were rescheduling too many appointments which wasn’t the customer experience Eco strived to deliver. Expanding our team size was the first solution to reach our goal of providing quality same-day service — fast.
2. Creative Solutions for Labor Shortages
With recent labor shortages, especially in the trades, we needed more plumbers to help us serve more customers. I’ve always believed in giving back by providing opportunities for others to make a life for themselves in the trades. Becoming a plumber right out of high school, earning my contractor's license by the age of 23, and now a business owner for over two decades has changed my life in countless ways. I often say, “The trades saved my life!”, which is why I committed to creating Eco’s own plumbing school, The Eco Plumbers University. We aren’t the first company to train our plumbers, but we took it to a new level with the NexTech Academy curriculum, hands-on training in a lab built like a home, and ride-along training with plumbers in the field. Since opening the doors in January of 2021, we’ve graduated over 110 plumbers. This was important to Eco being able to grow faster and expand to other markets. Your company may not be able to do it exactly this way, but there are innovative solutions you can adopt right now that will benefit you as you grow. Try remote training for any people in the company who want to move into the tech area. Or recruit from high school vocational programs by hosting a career day. Lastly, pay competitively because the word will get around and make your company more attractive to potential candidates.
3. Excellent Execution Leads to Eventual Expansion
Other things that will positively impact being ready to expand are if your tradespeople are performing at a high level, presenting a professional front, and your company’s support teams are executing well. Focus on being excellent in every department now. And make sure your team is aligned with your vision. The people you have on your team from the CSRs and dispatchers to operations and marketing play a huge part in indicating if you are ready to grow. It’s important to consider the manpower it will take for team members to be involved in an expansion. Regardless, you’ll be in a much better position if you have a great team of people who believe in your vision and are willing to do what it takes to make the expansion successful.
4. Growth That is Trending Up
Pay attention to industry trends and monitor internal KPIs. This will allow you to make a wise and confident expansion move with the input of trusted internal executives and from your network and strategic partners. If the industry is trending upward in terms of growth, that is more opportunity for your growth. But it also means you have to be ready to compete.
5. A Cash Reserve
Also building a reserve of cash for reinvesting in the company can help you find easy ways to grow when noticing that new customers are seeking your services from local, untapped markets. When we decided to expand by adding service areas beyond central Ohio to southwest Ohio in the Dayton region, we had a team working on the expansion for several months before our grand opening in April of 2021. We set about to achieve a certain set of goals. (a.) We set up digital marketing tools so that we could add to the budget or add additional lead sources as the team size grew. (b.) We also created a playbook for expanding to new markets that we later used when we began planning our expansion into the Cincinnati market earlier this year. (c.) We also decided to invest more heavily in radio to establish the brand faster as the market is more competitive. Interestingly, these two service areas are connected, so it was beneficial that the Dayton team could support the Cincinnati team as they got up and running.
6. Preparation Meets Opportunity
Have a well-thought-out plan before expanding, so that you can be open and prepared for any opportunity. Recently, when researching expansion further south from central Ohio, the opportunity to acquire a residential and commercial heating and cooling business presented itself. After learning more about their current business, the plan is to move forward. So, we will bring them into the Eco brand and add all the other service lines in that market, then focus their current brand on commercial services. This southern expansion was more straightforward as this service area is already covered in the radio and TV DMA that we utilize for central Ohio. Once the Eco brand goes live in this new area, it will be a matter of adding cities and zip codes to the search campaigns we already have running.
If you decide to expand into a new market, research fair market prices. Even when expanding within the same state, there can be wildly fluctuating price differences from city to city. Also, be aware with the expansion, you may need to raise your prices. If you add more trucks, techs, and support team members, you’ll have more overhead costs in payroll, insurance, incentive pay, health care, and 401(k) contributions. If you are adding physical space, you’ll need to account for the expense of the larger building. The same is true for higher interest rates on your line of credit, higher dealer fees on finance plans, higher material costs, and fuel costs in the current economic conditions. All these changes may require an increase in prices. Customers will notice that you’ve raised your prices and they may look for a new service provider or find a local handyman. Be prepared for the loss of some customers. Certain ones may not understand the reasons behind the increase. But if you plan for this, you should be able to sustain. The goal is to remain competitive and run a tight ship while still bringing value and quality service to your customers.
As the company grows, grow your memberships as well. A membership plan with monthly payment options secures clients to the company while providing them with multiple benefits. This will help you weather difficult economic conditions by creating monthly revenue from your members and being able to fill slower seasons with annual whole-home inspections and maintenance services for appliances like tank-style and tankless water heaters and heating and cooling equipment.
Finally, I recommend developing a network of mentors from businesses you admire that have scaled and reached the heights you want to attain. Companies in other markets may hold the key to solving an expansion or growth dilemma. Annually establishing and updating your 1-year, 3-year, and 10-year plans are where your goals come to life and will help you paint the picture for your team of a company that is positioned for growth.
Aaron Gaynor, is the owner and CEO of Eco Plumbers, Electricians, and HVAC Technicians, a $60M.and growing home-service business serving central and southwest Ohio. A master plumber, Aaron started the business that would become Eco in 2007 after losing everything when his first business failed due to the housing market crash. Aaron now aspires to help other contractors find and embrace their purpose. Aaron will be a featured speaker at Freedom Event 2023.