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Surety Corner: Growing your business, a bond company’s perspective

Surety Corner: Growing your business, a bond company’s perspective

A big focus of most successful businesses is growth.

It’s often the name of the game. You have a profitable business, so why not grow it and enjoy those same profit margins with higher revenues?

With growth comes challenges and growing pains. It requires enhanced levels of sophistication and tighter controls to be put in place. How many times have you heard of contractors doubling their revenues only to halve their margins and end up with the same net profits or worse, end up in a loss position.

Surety bond companies understand that growth is challenging, so when contractors are growing by leaps and bounds, they usually want to know what controls are in place and what the plan is to sustain profitability. This article will discuss some of the areas that need special attention to ensure that you are growing with a solid foundation.

The first area that owners should focus on when looking at growth is whether they have the right team in place. This doesn’t just mean your estimators and project managers but it means, accounting, human resources, marketing and business development. It also expands outside your company to encompass subtrades, suppliers, software providers, lawyers, external accountants and insurance and surety bonding professionals.

Hiring these days can be extremely challenging but it is absolutely necessary that each area of your business has the right people driving forward a strategic plan. With the right team in place, you can be putting together controls and processes to ensure that as you grow you can maintain strong margins and avoid the typical growing pains that most contractors see.

Andrew Doucet, the director of construction at RCS Construction, has seen the importance of this first hand.

“At RCS we live and breathe by wanting to have the right people in the right seats, and that’s from the top down. It is crucial to select the right partners. Whether it is suppliers, consultants or even clients, to be financially successful you need to execute with a strong team with the same goals and focus for a successful project from inception to completion. The overall goal is for everyone on the project team to get paid what they deserve and have a client that is walking away with a product that they are proud of, their clients and staff enjoy, and their ROI is on track.”

The next important area we will touch on is company systems. Like we talked about in the proceeding paragraph, having the right controls in place will minimize risk. This can include investing in accounting and project management software, data analytics and BIM systems.

In some cases, this is now expanding to include the use of AI and Robotics. The important thing to remember here is choosing the right system for your needs. There are numerous options and it is never one size fits all. In addition, when adding in any new technology adoption becomes critical.

In most Canadian construction the adoption of technology has been slow. As a result, staff can be reluctant to adopt it. Ensuring staff are engaged in the rollout and there is a method to provide regular training and track adoption is critical to seeing the full value of these systems.  

Health and safety is another critical area for the business. Owner’s are requiring a higher standard of health and safety onsite. Add in the additional requirements that COVID places on a jobsite and this can often be overwhelming.

Many owners now require COR to bid on projects and securing this can be a full-time job for staff. Ultimately, as your company grows health and safety must be part of the DNA. If the size of the business doesn’t justify a full-time health and safety person, then it should be championed by the ownership group until such time as that is justified. Regular onsite safety meetings, incident logs and a method to formally review health and safety infractions are all ways to minimize hours lost because of health and safety issues.

Building a financial buffer is something many companies will have heard from their bonding companies. Construction is a risky business and becomes riskier every year. Projects are more complex, new project delivery methods are arising every year, health and safety requirements are increasing, labour and materials are challenging to procure and supplemental conditions are expanding all the time.

These are just a few of the headwinds that contractors face. Over time, building equity and working capital can help you deal with an unexpected challenge in the business. This can be a hung receivable, a dispute with a project owner, a schedule delay or a government shutdown. Those companies that are able to build this buffer can survive and often thrive in times of challenges because as others are retreating, they are able to find meaningful opportunities to enhance their business.

Lastly, the idea of succession planning is often left too late. We’ve discussed it in previous Surety Corner articles. Many construction companies fade away because they haven’t spent enough time focusing on how to succeed the business. This is a process owners need to take an early and active role in whether this means transition to senior management, selling to family or an outright sale to a third party.

How and when this occurs along with what the current owners’ goals are through succession need to be considered so that they can enjoy the fruits of their labour and ensure the legacy of the business lives on.

The team at FCA Insurance Brokers wants to wish all of our readers a safe and happy holiday season. We’ve really enjoyed writing these articles in 2021 and look forward to resuming in 2022. As always, if you have feedback or a topic you would like us to touch on, please reach out.

Andrew Cartwright is the vice-president of surety for FCA Insurance. Andrew recently joined FCA after a decade long tenure as RVP for a large national surety company. Chris Dardarian is a surety bond broker at FCA Insurance. He has been in the industry for 15 years working as both a surety bond underwriter and a broker in Ontario and Quebec. Chris has helped numerous growing contractors access higher surety capacity to meet their goals. Send comments and column ideas to

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