Growth Factor

WasherRick

New member
As I attempt to plan the first year of my business I find myself struggling to find the magic number or percentage of the gross revenue to reinvest in the company. I would like to know how you arrived at this number for your business. I am not asking for the exact number. I just want to know your option on how fast a company like ours should grow (given the market can support the growth). Do you feel there is a push by commercial property managers for PW contractors to cover larger areas and handle greater volume once you have established yourself as a reliable vendor who does quality work. If so how have you handled this issue. If you don’t grow fast enough they could switch to a larger company. However, if you grow too fast you risk losing the quality and reliability that made you attractive in the first place. How did you find the sweet spot?</SPAN>

As always thank you to everyone for making this site such an awesome resource. </SPAN>
 

BlueBliss

New member
Gross Revenue-expenses-food for wife and kids=$ to reinvest!
It will be hard to "plan" for what percentage you want to reinvest in the beginning. Keep excellent books and prepare to live very frugal at home. Don't let a single account force you to take on debt to grow.
We hold about 10% for equipment and 10% for advertising, and that might be our "reinvestment for growth". Those were my %'s I first started w/ in my business plan, and we still use them today. But, be sure to feed your family first, and grow w/ what's left! Your books will tell you if you're just exchanging dollars!
 

Scott Stone

New member
I don't agree with the don't let a single account cause you to take on debt to finance growth. However, if you do take on a large enough account that you need to finance growth, you need to run the numbers so many different ways, and need to have a rock solid contract that will pay all the debt in the first year, at least that is the guidelines I like to follow.
 

BlueBliss

New member
Scott, how many years of business did you have under your belt before you landed that huge contract? I'll admit my comment was a bit definitive, so I'll clarify...
If a nationwide service provider or chain-store approaches you with more work than you can handle, don't rush to buy 3 more rigs w/ debt to meet their demands!
If you're going into debt, try to diversify! I believe you said you have one customer that practically requires a dedicated rig. Congratulations! Now try to ween your dependence on them!
If a large company (or municipality) that you've serviced well for years and have a great relationship with, awards you a solid contract... As long as you know you can deliver, retire on it!
But, until then, try not to bet your livelihood on a small number of finicky customers, especially before you have proven yourself!
I think Scott is a great example! No one would have walked away from his opportunity! But, very few would have had the experience and ability to make that happen! Had I tried, I likely would have failed to perform on that level, and bankruptcy would surely follow!
 
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