What's The Best Way To Grow

Growth comes in all forms and each are very different routes and potential outcomes.

You've hit that mark you never thought you'd hit, now what? You know the saying, if you aren't growing you are dying so that decision is set. But how you grow is important. If you know you want to sell, then it's really important to grow in the way that will increase your valuation. Private equity want to see 'greenfielding' or organic growth in nearby zip codes and if you can succeed at that, they will pay a higher valuation for your company. You will want to grow into those new shoes building your sales performance and sharing other resources before investing in a new market as a standalone. Success in a new market will be defined by the buyer as having a sales team and production oversight, and hitting your year-one sales target. Another option for growth is to expand to add a new service like siding or windows or doors - if you are a roofing company for example. You won't get credit from a private equity buyer for this option outside of the overall increase in ebitda/profit, but this may broaden your appeal to a strategic buyer interested in these other offerings. Adding services that increase the revenue/customer is a great model as you keep your marketing dollars down by increasing the value of each customer attained. This option should only be considered if you have a production leader experienced in that specialty to lead the charge to recruit field talent. The next option for growth is service post install, an area few contractors do well. This work is at least double the gross profit of install, lengthens the relationship with the customer and creates a recurring revenue model. This option will secure a higher valuation from any buyer and is relatively easy to setup. The last option may feel foreign to most small contractors but acquisition is many times the easiest way to grow. And the hardest to pull off. This definitely earns you a higher valuation. Identifying the right company requires patience and an understanding of the market. Creating a deal structure that works for both is critical. Then comes the hardest part - integrating the acquisition into your company. There are a few different ways to pull off an acquisition that range from challenging to fairly simple. Knowing what you want to accomplish in the next five years should be the biggest determining factor in which type of growth is for you.