Issue 7 of 9: Growth Strategy

Construction Ownership Transition Issue 7 of 9: In general, with all other key factors including cash flow, profitability, and customer satisfaction being equal, a contractor that is growing will be able to better handle an ownership transition.

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Succession: Ownership Transition Issues - Number 7 Growth Strategy. Impact. Nothing will have a more dramatic impact on a contractor than bringing on a more quality revenue on a recurring basis.

Without executing a profitable and sustainable growth strategy, the value is significantly lower for all parties. 

Consider this the same as investing in a piece of real estate.

  • Minimal growth is the equivalent of buying the home you are living in with a 10-15 year mortgage.  The mortgage will eat up most of your disposable income for that period of time, and in the end you will own the house along with any market appreciation it had. Not a bad deal but not a major creation of wealth, though it was a good forced savings plan for the new owners.   
  • Strategic growth is the equivalent of buying a 20-unit apartment complex in a good neighborhood that will cash-flow a mortgage as-is with existing occupancy rates and rents. However, part of the deal includes an adjacent lot where you can develop another 50 units over the next ten years in three phases.  

The second structure is more complicated with more risks and financing required. It will also create more value for both past and future ownership groups, as well as more opportunities for employees.  

What is your strategic growth plan and how does that factor into succession? This is where an experienced but unbiased third party can be extremely valuable to bring into the discussion.


Succession
Continue building value in your business, yourself and your key team members with a good succession strategy....

Succession
Continue building value in your business, yourself and your key team members with a good succession strategy....

Making a Contractor Less Risky
There are two major things that will control risk and variability for the ownership.
Incentive Compensation for Contractors - Succession
Succession planning works best when leaders of the organization spend time helping leaders at all levels to think as business owners. This level of thinking includes cash flow and funding sources for all organizational planning.
Eric Hoffer - "Learners Inherit the Earth"
How would you rate the overall effectiveness of your team when it comes to learning something new and applying that knowledge? How would you rate your own effectiveness at learning?