5 Steps Subcontractors Need to Take Before Entering a New Geographic Market
As a subcontractor, expanding into new markets can be a reliable method to achieve business growth. You may feel that you’ve penetrated most of the target market in your current geographic territory, and business growth now requires expansion. You may also see an increased need for your services in another city that is showing ongoing growth and demand.
Whatever your reason for looking to expand, you can expect a variety of surprises that are unique to this new geographic area of business for you. Planning, preparation, and a strategic mindset are critical to success. Bear in mind, if you don’t have the excess resources and capacity to bid new work, you shouldn’t be looking at another market. For example, if you only have one estimator and you’re looking to expand to a new market, you may need to reconsider.
We’ve put together a quick guide below on key considerations to review as you look to expand into a new geographic market:
Table of Contents
Step 1: Bidding Research
As you prepare to step into a new territory, market research—or in this case bidding research—is a great first step. Even if you do not expect to be awarded these jobs, bidding projects in the area helps you gain a better understanding of the competitive landscape. For example, this research can help you gauge how competitors are pricing their bids and how you currently measure up against them. It can also help you initially understand if it’s worth it for you to bid in the market altogether.
Quick Pro Tip: Don’t forget to review licensing requirements in your new city, county and state of your new territory prior to bidding. Some licenses may not directly carry over, and additional licenses may be required.
Step 2: Understand The Costs & Don’t Underestimate
If you’ve only operated in your current market for quite some time, it’s easy to underestimate the costs of expanding into new markets. From establishing a new permanent or temporary office to acquiring new warehouse space, to inventory, trucks, equipment and hiring—it all can add up. Just as you focused on bidding research, don’t underestimate the cost of starting fresh in a new area. From the largest expenses to the most minuscule items, it’s important to get granular on the cost of your new territory expansion. Within this step, it’s also crucial to remember that you should consider the cost of traveling to this new territory as an R&D expense and that you may not be able to include those expenses in your bids, in order to be competitive.
Step 3: Commit The Time
To make a new geographic expansion work, be ready to commit the time to make inroads into this new market. To really get a sense of the day-to-day requirements and to get a leg up on the established competitors, it is likely that you may have to move to this new location for a minimum of six months—putting in the time, Monday through Saturday, to quickly establish your presence and grow your business. There’s no substitute for you, the business owner, being there. You can still hire employees in the area, but nothing can replace your physical presence when establishing your footprint.
Step 4: Ensure Online Profiles Are Up to Date
As you establish your business and begin bidding, make sure your digital marketing channels are up to date to establish instant credibility when you begin reaching out and bidding new projects. From your website and social profiles, to the profiles on different bidding sites, make sure everything aligns so that you can establish instant credibility with general contractors that you’re bidding.
Bidding sites to focus on include:
Step 5: Navigate Supplier Relationships
When you enter a new market, you’ll need to establish new supplier relationships. If you are a company that typically relies on net terms to buy materials from existing supplier relationships, finding local suppliers in a new market will be a top priority. Establishing terms will require credibility with your supplier, and the fact of the matter is, that takes time. Make sure you take the time to establish those relationships so you can confidently bid those new projects. Your supplier relationships can also give you insight into market conditions.
When contractors enter new markets with no existing vendor relationships, Billd isn’t just a useful tool, it’s a financial strategy that’ll help you better navigate the new market. With Billd, you can skip the step of having to build new supplier relationships and earn their trust in order to secure terms, because you can use Billd to immediately get 120-day terms in any market you enter.
Key Considerations for Entering a New Geographic Market
Expanding into new markets can foster new growth and opportunity for contractors. However, like any new construction project, creating an effective blueprint for this new market will be the key to creating a solid foundation for success. Taking the above steps into consideration can help you assess if this new geographic expansion will be a fit for your goals or if you should look at other market opportunities. A word to the wise, don’t be afraid to pull the plug if this new market does not seem like a fit or if it’s not working. Don’t grow for ego’s sake, find a new market and do your analysis until you find the right one that fits your goals.
About Billd: At Billd, we provide a payment solution that enables commercial construction contractors to free up cash for material purchases while enjoying the flexibility of 120-day payment terms. You get financing for commercial materials upfront with the freedom to pay it back at your own pace. Learn more about how Billd can help eliminate your company’s cash-flow problems so you can win more bids and grow your business.