In Part 1 of this article series, we looked at a business that is expanding—hiring more technicians to take on more work. In Part 2, we’re looking at a business that is staying focused—limiting the company size to control the quality of work. Comparing these 2 business growth options is like comparing a sprawling tree outside with a manicured bonsai tree inside. They’re both good in their own ways.
We talked with David Cedrone, the owner of NLT Construction Company, a home remodeling company. For him, the decision to ultimately focus his business is all about quality control.
Focusing on the Sweet Spot
During the past 30 years of the company’s existence, Dave has experimented with both expanding and focusing the business. For the first 15 years, the company was trying to grow and get more jobs. There were also a few years in that period when Dave tried to grow the company beyond his ability to control. From that experience he learned that expansion could compromise the quality of work. “When I hired more crews, I realized that it greatly affected quality and customer attention,” said Dave. “My customers weren’t as happy—and neither was I.”
The real estate market crash of 2008 really affected the home improvement economy and Dave’s business. When things started to pick up again, he had to make a decision. Should he expand to accept all the jobs that were coming in, or should he say no to the work since his crews were booked for the next 6 months?
“I could have hired more people and expanded,” reflected Dave. “But I was opposed to doing that because I knew the quality of work would be affected. I wouldn’t be able to delegate all the details because other people don’t have an owner’s commitment to the company.” Dave resolved to limit the company to two crews, and he is adamant that staying this size was the right decision.
Benefits to Staying Limited
- Keep better control for quality assurance and customer satisfaction
“My clients refer me because of the quality of work I do. In fact, about 95% of my business comes through referrals and word of mouth. And I can only control that quality by staying small,” emphasized Dave. “Clients hire me because they know I personally will be there and will handle things. My reputation is everything.”
Dave takes on every estimate, proposal, and detailed contract for each job himself. He supervises and coordinates everything. He doesn’t even subcontract any carpentry work because subcontractors could compromise the quality. For Dave, it’s 100% about quality assurance.
- Make a comfortable living without extra headache
Many people assume that expanding the business means making more money. However, when Dave experimented with expansion, he found that it wasn’t necessarily true. “Instead, I had more headaches and was working more hours,” he admitted. By keeping the company small and focused on quality, Dave is able to charge more money and make a higher profit on each job. Customers are willing to pay because they know they’ll get quality work. “I’m not out to be a millionaire,” he said. “But I’m making a good living and I’m happy with the hours I’m working and what I’m doing.”
- Avoid the risks of rapid expansion
Dave has observed how competitors that expand too quickly can end up crashing and burning. “I’ve seen many competitors hire more crews and get more jobs,” said Dave. “They make more money initially, but then they expand to the point of combusting. And then they go out of business.”
- Be an expert in all aspects of the business
As a small business owner, Dave gets to spend time in each of the 3 roles of technician, manager, and entrepreneur. He spends about 25% of his time as technician. While he only occasionally picks up the construction tools, he is still able to spend time doing the design work, which he really enjoys. He spends about 50% of his time as manager, coordinating everything and making sure everyone is happy and things are running smoothly. And then the remaining 25% of his time is as entrepreneur.
The main drawback to staying limited is having to turn down work. Right now NLT Construction Company is already booked for the next six months. “I’m turning away business all the time because people don’t want to wait that long for their home renovations,” said Dave. “In fact, just today I received 2 phone calls about clients who want projects done in 2 months. But I’m comfortable kissing that work goodbye, because I know that for the work we already have, every customer is going to be 100% satisfied.”
For Dave, it makes sense to stay focused on quality throughout the process, not just the end product. “Every customer that comes to us hopes that we’re going to do an excellent job, that we’re going to devote time to them and give everything we promised. The process of getting from the first client meeting to the end of the job is just as important as the quality of work we deliver. The only way we can deliver that 100% quality is to stay focused.”
Deciding to Expand or Focus
So, are you hoping to grow a company like an oak tree or a bonsai tree? If you are facing business growth decisions and would like to explore the options with someone, get in touch.