Taking Candy From A Stranger?

The new customer seems really nice, let’s skip the formalities and get the work going … That juicy project a few counties over is right up our alley … .The subcontractor we never worked with seems to fit the niche, and we’re in a hurry….If you own a construction company, you probably already know that while “taking candy from a stranger” can be tempting, it can easily backfire too. It’s always wise to pause and think through your “stop/go” choices carefully, before plowing forward. 

Consider The Unknowns and Calculate Your Risks

At Construction Business Owner, Gregg M. Schoppman, a partner with FMI Corporation, reminds us to “look before we leap,” especially when pushing ahead feels tantalizing or irresistible: “You should never accept candy from a stranger, and at a minimum your business development team should conduct adequate vetting about credit worthiness, end user feedback, trade partner feedback, legal track record, etc.” Unknown markets, customers and associates always require extra diligence, no matter how successfully you have managed your business to this point, as Schoppman points out: 

• Traveling to “parts unknown” is a normal rite of passage for many businesses. It is also a surefire recipe for disaster if there is a lack of due diligence….Unknown trade partners, unknown design standards, unknown municipalities and unknown labor rules….One of these by itself might cause margin erosion, but when a firm fails to evaluate all the variables, they can quickly coalesce into a maelstrom.

• The customer…enters your world as the “white knight.” They may represent a newer niche or sector, one that your team or even your market has not seen before.It is easy to fall in love with someone who promises to be everything you needed or wanted, only to find out they were a wolf in sheep’s clothing.

• You needed the people … .You even heard from a trusted voice…about this person not being right … .Several months in, you finally see the signs manifesting in the form of client attrition, margin erosion and possibly a decline within the internal culture of the firm. You saw it coming, but you threw up the blinders.

Having the capacity to scale your construction business is exciting but its success requires balancing ambition with calculated risk-taking. Brush up on these reasons why construction companies typically fail, then steer toward success as you keep these five practical tips front and center:

1. Stress-Test Your Current Capacity:Before adding a new market or a large-scale client, perform a “load test” on your existing operations. Ensure your current project managers and equipment aren’t already redlining. Growth shouldn’t come at the expense of the quality that built your reputation in the first place.
2. Evaluate “Cultural Fit” for New Hires: In construction, technical skill is a baseline, but alignment with your safety standards and communication style is what prevents turnover. When hiring for growth, look for individuals who don’t just fill a gap, but who possess the leadership qualities needed for the future size of your company.
3. Conduct a “Local Intel” Deep Dive: If you’re moving into a new geographic market, remember that construction is local. Differences in building codes, permit timelines, and subcontractor availability can vary wildly between counties or states. Secure a local partner or consultant to avoid being blindsided by regional nuances.
4. Run the “Worst-Case” Cash Flow Scenario:Growth is cash-intensive. Before signing a major contract or lease, model your cash flow based on a 90-day payment delay. If your reserves can’t cover payroll and materials during that gap, you may need to negotiate better mobilization terms or secure a larger line of credit first.
5. Define Your “Exit Door”: Every strategic expansion should have a pre-defined “stop-loss” point. Decide early on what metrics (e.g., six months without a profit margin or a specific vacancy rate) would signal that the new venture isn’t working. Having an objective exit strategy prevents you from “throwing good money after bad.”

Sometimes You Just Have To Say No…

For many of us, actually saying no to a new opportunity can prove difficult, even when we have a long list of good reasons. That’s why Merrill Stewart, Founder and CEO of The Stewart/Perry Company cautions against “yes-icide,” offering this guidance: “As much as we would like to take on the extra work or fulfill the client request, it’s a narrow trail we walk…and saying “yes” can get you off the path just as quickly as saying “no.” With new business, we are all conditioned to say “yes,” even to counterproductive requests. Sometimes saying “no” will make more money for all parties. This is definitely a skill set learned from experience. Being honest about capacity or resources serves everyone and at times requires courage. 

Tools To Leverage for Growth: A Line of Credit and Financial Scores

Many builders find that one of the most powerful tools for a growing contractor isn’t a bigger piece of equipment, it’s a surety line of credit. Having your bonding limits in writing gives you the strategic control to bid on larger, more profitable projects with total confidence. Colonial Surety Company is here to help, with the bonding programs builders need, and knowledgeable experts too. 

For Bonds up to $500K: Use our Hometown Bond Program. It is credit-based, with no financial statements required. 

For Larger Bonds: Get armed with single and aggregate bonding limits, in writing, and even issue your own instant Bid Bonds, via The Partnership Account® for Contractors. Once qualified, get a surety bond line of credit for up to 20 million single, and 40 million aggregate. Receive free financial scores just for completing our easy pre-qual.

Put your business on a growth path with a few clicks, now: 

Bonding Programs at Colonial Surety Company

Founded in 1930, Colonial Surety Company is a leading direct seller and writer of surety bonds and insurance products across the USA. Colonial Surety Company is rated “A Excellent” by A.M. Best Company and U.S. Treasury listed. Let’s connect today: Colonial Surety Company.