Here are three points to consider when expanding to a new location.
Brothers Bob Trost and Jeff Trost were sent south to run new company locations.
Deciding to expand is a big decision that requires a lot of forethought. When Trost Irrigation expanded from its Michigan headquarters into Florida, and then ultimately North Carolina and Chicago, owner Terry Trost put a lot of thought and planning into each move. The company’s vice president Doug Trost, offers the following points to consider before deciding to expand your own business.
Know the location.
Before making the move southward, Terry Trost and his sons (all involved in the business) spent time in the potential new locations to “feel out the market,” says Doug Trost. “We watched jobs go together and observed other companies like ours to see how things ran.”
Trost says it also helps to have already made connections in the new region. Since Trost Irrigation expanded along with a home builder, it helped to have that relationship. “I’d be nervous about going somewhere where I didn’t have any contacts,” he says. “I would go through all your contacts and see if there’s anyone you know in that area that you can connect with to help grow the business.”
Know the market.
“Make sure you do the research,” says Trost. “Don’t jump into a new market blindly. Find out exactly what type of work is there and what the market is like, because it can really differ based on geographic location.”
Part of knowing the market is getting to know the pricing, Trost adds. “During our research we learned that the price ranges are different down in the South compared to what they are up here in Michigan,” he says. “The margins are different too. It’s important to get used to those differences so that your pricing is still competitive and you’re not bidding too low or too high.”
Find the right person.
Trost had an advantage in the fact that the company was family-run. Both of his older sons jumped at the opportunity to take over new divisions in Florida and North Carolina, and his youngest son helped carry on the Michigan legacy. But without the advantage of being a family business, it becomes even more critical to find the right person.
In an economy where everyone seems out for themselves, that may mean keeping a tight reign. “It can be difficult to find someone trustworthy in this day and age, so I would suggest making sure you still keep a tight watch until you are comfortable giving the person full control,” Trost says.