Would you rather do five projects at $5000 or one at $25000?
As a business development consultant to the HVAC/R industry, I ask my clients, "Would you rather do five small jobs or one large project for the same price?" Yes, the profit total would be the same. Before you automatically say, "Both!" Think about it before you answer. Is your company geared towards doing more large projects or small projects? That last question may now get you thinking. If you won a bid to do a major project that would keep four employees busy for six months, could it delay future projects or cash flow? What if one of those employees left the company, could you add another to take their place and not put a burden on starting or completing another project? Companies with twenty plus field personnel could easily remove people from other duties to meet a project's deadline. What if you only have eight field personnel? If you need to use half of your field workforce to do one project lasting more than two to three months of continuous daily work, you may want to consider doing smaller projects instead. I have consulted with companies that have been quite successful doing more smaller projects than large projects. They have increased their buying power with certain suppliers and vendors. They keep their employees busy year round and have a continuous cash flow. I have also consulted with companies that do only large projects. They have invested in the tools, vehicles and machines to professionally complete large mechanical jobs. Even though each is different in the amount of work they take on, both are respected in their industry for being able to complete a professional project in a timely manner. This factor alone can produce more projects in the future. Another reason to consider is post-project liabilities. This includes warranties on equipment, materials and labor. Is your service department experienced in commercial equipment or computerized controls? Do they have the tools and diagnostic equipment to properly service the system? How you stand by your work after a project is just as important as the installation. The last factor is investment. To take on major projects would mean an investment in installation equipment, tools and even vehicles. There is a bigger investment in doing large projects: labor. For large projects, most payments are divided in schedules. Can you afford to "pay into" the project before you actually receive a payment? Employees and suppliers have to be paid on time. If your company runs smoother by receiving a constant cash flow, small projects could be a key element for growth. If you are able to pay for labor, overhead and expenses while completing a project, larger projects should be considered. I know that most of you will say you could do both large and small projects, but which one could you do more of and keep within your business plan for reputation and growth. In planning your business growth and forecasting future revenues, it's advantageous to break down your strengths and weaknesses by dissecting these type of scenarios. A strategic plan is just as important when determining how your retained earnings are used for future growth. One of your plan objectives should be how to maximize these earnings.