Supporting Responsible Growth for Contractors
For contractors actively pursuing growth, one of the most important strategies they can employ is to assemble a team of trusted advisors, including a surety. A surety's in-depth understanding of the opportunities and challenges facing contractors can be invaluable. Contractors should take the time to understand their growth goals, and select a surety whose philosophies align with their own. Because while explosive growth may seem impressive, it's also extremely risky. Merchants Bonding Company's commitment to our common sense underwriting philosophy, along with our extensive experience, means we recommend a more measured and responsible approach to profitable growth.
BEST PRACTICES FOR COMPANIES PURSUING RESPONSIBLE GROWTH
Build your balance sheet
- Add capital prior to rapidly taking on more work.
Be cautious and diligent about
- expanding into new geographic territories.
- making large leaps in job size.
- taking on new job types.
Be aware of high fixed-debt ratios
- This can be seen as a negative by sureties, especially if coupled with low liquidity or working capital/cash flow concerns.
Review contracts
- Don’t immediately accept boiler-plate language. A surety's claims department can be an excellent resource to successfully leverage contract clauses.
Implement a robust WIP reporting system
- Investing in software can improve internal controls by ensuring accurate and timely project information and financial information is available, which leads to better decision making.
Assemble a strong team of advisors including:
- Construction-oriented CPA
- Attorney
- Banker
- Surety
- Agent
Invest in your own team
- Having the right amount of people with the right skills, along with strategies to retain them - especially at management level - is key to stability and continuity to support growth.
From a surety’s perspective, one of the most important things a company can do to support responsible growth, is to build a solid relationship with their surety. When contractors communicate their goals, along with their challenges and obstacles to those goals, the surety can help mitigate risks on the road to success.