Of the questions I am asked by contractors, “When is it time to grow?” certainly ranks in the top two or three. Trying to hold back my disbelief I want to answer (but normally don’t) “When is it ever time NOT to grow your business?”

For any contractor to purposely not be focused on building his or her business is just short of committing economic suicide. Even most contractors who do not have a formal business plan or financial goals still strive to be successful. Seeing your sales and profitability figures increase is simply an obvious form of measurement if you are growing.

But I don’t think “When is it time to grow?” is the question they’re really asking. Most contractors take very seriously their future and want to be competitively positioned in the marketplace. Thus, they are sincerely interested in recognizing just when is it time to go beyond the “wait for the phone to ring” response to growing business.

What I think they are really driving at is “How do you know that it is time to plan for growth, purchase new or more equipment, add another estimator, or take on more debt to subsidize the business until sales pick up?” From this perspective there are several indicators to consider before taking the first step.

1. Look at your profit margins. Are they increasing or are you making less money than in the past? Declining profits might be due to your firm’s lack of focus on quality performance. You might not be holding your people accountable to reducing operating costs and becoming more financially responsible. On the other hand, if your profits are steadily increasing you might be positioned to take on greater risk because your performance systems and processes under control.