Frequently during my consulting work one-to-one with clients, and during the free 30-minute consulting calls I offer, I get asked the following question: “At what size company does this get easier?”
The answer is, “It depends!”
Not to be evasive, but the reality is you can be profitable at any size and be unprofitable at any size. It does depend on how well you run your business.
However, the ugly truth is you’re more vulnerable and have a bigger hill to climb when you’re a small company. Especially, if you’re a one-tech shop (that means the owner works while they try to run the business). If you get hurt, sick or worse, the business is done for. And the fact is you’re most likely to have to keep on working very hard till late in life because you’re the only income producer.
The next most vulnerable shops are where there are two to three techs working. The reason this type of shop is vulnerable is because if one of the techs quits, gets hurt or gets fired your sales can be cut by 33-50%. Plus, if you are in a trade that demands after-hours coverage, your techs tend to burn out because they’re pulling on-call shifts so frequently.
The other nasty truth is almost all of what it takes to operate a two- to three-tech shop can support a four- to five-tech shop. That’s because you already have overhead, such as a CSR to answer the phone, someone doing accounts receivable and accounts payable, possibly an office, phones, computers, software and a whole lot more. But the less techs there are out there making you money, the more profit is elusive.
So what is the right number?
Typically, life gets a whole lot better when you grow your company to a five- to seven-tech shop. I say that because then if you lose a tech you stand to lose as little as 15-20% of your sales – which hurts, but isn’t necessarily devastating. You have many more billable hours to cover your fixed overhead expenses like the ones I briefly covered above so there tends to be more profit.
And if you have highly visible trucks rolling (I’m talking rolling billboards here), you have a much more dominant position in the marketplace as they drive around your service area getting your name out in front of your target market.
How do you grow your company to this size?
Well, having worked with a lot of owners throughout the years I can tell you there are only two ways to grow your company. One is organically. That just means you are so much in demand and you’re such a great marketer that you have calls and all you need to do is add people. The second way is you acquire other existing companies and put them under your roof.
Master one of these two processes and you will be on the high road to “Having Less Stress and More Success”. Master them both and you’ll be unstoppable.
Give Me 60 Minutes And I'll Show You The Secrets To Running A Profitable Service Business ... Even During A Recession!Al Levi is a consultant and a contributing editor to PM magazine and blogs for many other BNP trade magazines. He is presenting a free online video opportunity called the “60 Minute Recession Solution” Online Video Seminar.
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