Understand the Risks Then Make That Big Move

So you want to expand your company. Your traditional market profit is contracting due to increased competition or decreased project availability. Maybe a special opportunity has presented itself. Or you are just ready to move to the next level.

In general, a company makes such a move in some combination of the following ways:

• Attempts types of work not previously undertaken
• Moves to a more fruitful geographic region
• Significantly increases or decreases the size of project
• Works for a different class or type of owner
• Takes on a significantly larger number of projects

Any of these actions, taken individually, can lead to increased backlog. The project requirements can be anticipated and plans made. However, as the factors compound, chances of encountering problems increase. Studies show that if three of the five factors are present, the probability of significant trouble, and the resulting financial woes, are almost assured. Moving to a new geographic region and taking on a project that is much larger than your traditional size is risky but probably manageable. If, however, that project is also different than your traditional type of work, disaster may be at hand.

Plan for the Pitfalls Pitfalls will be encountered, and recognition of these potential problems will help you manage your resources for a successful expansion or change in business mix. Proper anticipatory planning leaves room to learn the requirements of the new arena. A few of the questions you need to answer are:

• Does an owner require a lot of additional paperwork or must you supply information that has traditionally been provided to you?
• Do you have the personnel resources suited to manage the size work you are pursuing, away from home?
• Can your office staff handle the increased estimating, purchasing and oversight requirements of many new jobs?
• Does your project management adequately understand the local labor conditions and other unique business traditions in a location far from your traditional work area?
• Do you understand the technical requirements of engineering and construction, especially the differences in finish requirements or start-up?
• Have logistics been adequately analyzed?
• Will your check and balance system rupture?

When you look realistically at the unknowns, it becomes evident succeeding in an expansion program will take effort and the time to learn the skills necessary to work under the different conditions.

One key to success is risk management. Identify the risks of expansion. Then keep those risks to a manageable number.

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The following article appeared in the Texas Contractor.

by Mary Jo Poindexter, P.E. Ms. Poindexter is the Principal of Engineered Construction Specialists, Inc., a construction management consulting firm in Houston, Texas