{{first_name}} I once tried building a hotel without deciding how many rooms it needed and which floor the lobby should go on.
Actually, I didn't. But picture this for a second what kind of hotel that would be. Rooms bolted on wherever there's space. A lobby on the fourth floor because nobody planned for one on the ground. That's not a hotel, that's a renovation project that never ends.
Over last 20 years, almost every contractor I've ever sat across from, started their business exactly like that guy started his hotel. Get the skills, buy a truck, print some signs for the yard, bid on whatever comes across the desk, and figure out the rest as you go.
That's like jumping out of the plane and figuring out how to build the parachute on the way down.
Sometimes it works for four or five years. Then you're running 70-hour weeks, chasing three invoices that are 60 days late, living on a margin so thin you could read a newspaper through it, wondering how you built yourself a job that owns you instead of a business you own.
You don't start swinging hammers without a finished blueprint, you start with the finished building and schedule backwards to the foundation. But the same contractor who'd never pour a footing without a set of drawings will build an entire company without one.
They let the market decide who they become.
I've watched this play out on both sides of the closing table more times than I can count. Two contractors, similar revenue. One decided years ago exactly what kind of company he was building. The other just took whatever came through the door. By the time I meet them, only one of those businesses is one that a buyer wants to buy.
REVERSE-ENGINEER THE BUSINESS, NOT JUST THE BID
Step 1. Start with the number in your pocket, not the number on the sign.
Revenue is a vanity metric. It doesn't pay your mortgage, profit does. Stop chasing “a million-dollar company” if it costs you $950,000 in materials, payroll, and your own sanity to get there. Start with what you actually want to take home. Say it's $200,000 a year in real personal income. Add your owner's salary, overhead, taxes, and a reserve. Do the math and now see what revenue you need to make your business worthwhile.
Step 2. Decide what job you're actually building the company around.
Once you know the revenue number, work out how many jobs it takes to get there, because there's usually more than one road to the same number, and they're not the same business. $1.3 million is 130 small repair calls at $10,000 each, or it's 13 custom jobs at $100,000 each. One of those is a scheduling nightmare and a phone that never stops ringing. The other is a business that a small, focused crew can run. Same revenue on paper. Completely different lifestyle. Decide which one you're building before the market decides it for you.
Step 3. Build the systems for the company you're aiming at, not the one you've got.
If the company you want is the $100,000-job version, you can't run it on back-of-napkin pricing. You will perhaps need three things in place before you feel ready, not after. A real price sheet built on your true labor burden, not a guess. The handful of jobs you do the exact same way every time, written down; site prep, change orders, client updates etc. And a clear line of what you personally stop touching once revenue crosses a set number. Most owners build these systems only once they're drowning. The ones who build backwards put them in early, on purpose, while they still have the patience to teach it right instead of the desperation to hand it off.
(And to be clear, I'm not saying quote every job like it's a $100,000 remodel. I'm saying know which game you're playing before you spend four more years playing the wrong one.)
THE NUMBER THIS WEEK
$1.3 million; the gross revenue a contractor targeting $200,000 in real personal income needs to generate, at a genuine 15% net margin. Not a round number picked because it sounds impressive. Run your own version tonight; swap in your real income target and your actual margin, not the one you hope you're running. Most trade contractors have never done this math once, let alone before they decided how big to grow.
THE QUESTION
If you did this math for your business tonight, would the jobs you're currently chasing even get you to your number or are you scaling the wrong kind of job?
Build deliberately.
Why am I writing this? I've spent over 20 years working alongside construction and trade business owners across Canada. My firm, N3 Business Advisors Inc., has helped hundreds of contractors buy, grow, value, and sell their businesses. I started my career as a teacher, and that part of me never left. So once a week, I put one lesson in your inbox, for free, to help you build a business that buyers line up for. If this was useful, pass it to one owner who needs it. If it wasn't, reply and tell me what you'd rather read about.
Nitin Khanna, CFA · Founder, N3 Business Advisors · Mastering the Business of Construction