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How do you get a services business to the point of hiring people to scale?

I own a project services business meaning we provide project services on a “one off” basis to our clients. We are slowly getting more business, but my challenge is having enough cash on hand to HIRE team members? Our income is erratic throughout the year due to 60/90 day pay cycles and having additional cash tied up in projects. (10k one month, 2k the next, 50k the next etc.)Right now its just me and I recruit/1099 all my guys through agencies (which costs me more).Quick stats: 2013 revenue was $250k, 2014 is projected to be $500k+, no investors, all organic growth, 10yrs in business.Thanks in advance for advice.

  • Service Business + One Off + Scaling are not normally put together as a recipe for success. Though not impossible to achieve; you may be better off looking at the mechanics of your business first and see if you can architect it to scale (though I am sure you have, as you have been in business for 10 years).

    Putting aside getting investment from a third party (hard to get on a service business).

    Have you thought about the following:

    Invoice factoring (high risk; unless managed well)
    Getting rid of the agency and head hunting yourself (more of your time)
    Rewarding early payment on invoices to clients (taps the margin)
    Charge a 50% deposit upfront and balance on completion (neg a better rate for client to get paid on your own terms)

    Then consider how you get around the whole one off issue, can you sell your current clients a different service with re occurring revenue?

    Ideas
    Maintenance contracts (or some kind of monthly retained service)
    Consult on projects (rather than do the heavy lifting and leaving you exposed financially)
    Cosy up with a larger competitor and be the sub contractor (obvious risk here but just an idea)

    Lastly, you mentioned you have been in business 10 years working on a one off basis. If scale is what you are looking for – maybe try something else? It is always the hardest decision to make; as the time invested and the blood and sweat you have poured in will feel like it has been done for nothing. But it hasn’t…

    On a personally level, I have multiple service business projects that I get paid on a revenue share. Though these businesses have the same chicken and egg situation as you. The role I play is scalable one… As I work ON, rather than IN the business.

    At some point I will hand this over for someone to manage day to day and build more using the same principles. The moral of the story is to “nail it”, then “scale it”.

    Hope this helps.

    Good luck!

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  • I’ll speak directly about my experience founding and growing a service business. You either need to pick one of the two revenue/sales models.

    1.) You need to find recurring revenue. You can do this with a smaller sales force than #2 and still grow your business.
    or
    2.) You need to massively scale your sales efforts relative to delivery. This means long, long hours for you as founder until you get your first big contract. If you are a project based company, then your sales force will always be approx. 4x larger than the project delivery team.

    3.) Applies to both #1 and #2. Find a big contract. Big in this context means a contract large enough to hire employees for 1+ years. You’ll have a very hard time scaling if your contracts give you just enough cash flow to survive.

    In summary, pick #1 or #2, build a sales force appropriate to the model, and sell like a mad man/woman.

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