Derek Kinsaul, founder of Survey Works Austin, talks to us about how he grew his service business from just himself as a freelancer to having multiple service teams, an admin, and a project manager. He discusses what events shifted his mindset from freelancer to business owner.
How To Grow Your Service Business From Just You To A Whole Team Summary:
- When you can’t keep wearing all the hats in the business – find more heads
- Scale into people costs – start with part time, or contractors if need be
- Understand where you’re pricing, accounting for additional people costs, puts you in the competitive landscape
- When you can’t handle all the people and the work – find a manager or admin
- Keep detailed financials to make sure your projects or services continue to be profitable enough to support your admin or management expenses
- Focus on quality and professionalism so you can continue to move upmarket with your customers
- Have a goal to get to “asset stage” where you can step out of the business for vacation and not have everything come to a stand still – or start doing more business development : )
Chris: Entrepreneurs that own service businesses are always asking our small business consulting firm in Austin how they can grow their business more. Derek, you’ve done a great job of that, but before we dive in, how did you end up starting Survey Works Austin?
Derek: Before this, I worked in the Oil and Gas industry for a national surveying firm. I’ve been in the surveying industry for over 20 years. I knew that I wanted out of the O&G industry because I had seen exactly what the next 10 years of my life was going to look like. I wasn’t looking forward to what I saw. I also knew that I was willing to accept a little more risk and possibly stress to go out on my own and see if I could create my own future. I also saw O&G as the cyclical industry that it is. I was in O&G during 2010-2015, which were the golden years. I kind of saw that this was going to last for a bit but eventually that this boom had to end. I knew more and more people would turn the tap on and eventually, prices would come back down. I’m also a bit of an outdoorsy person, so I knew if I was going to stay in energy, I’d need to move over to something more renewable like solar or wind.
I didn’t have a specific plan when I left the company, I just planned to pursue some hobbies for a little while. So that’s what I did. However, because of my experience, some unique opportunities fell in my lap here in Austin and I was ready to give it a shot and go on my own. I started as a freelancer and the jobs I was getting were because of my network. It also turned out that in 2015-2016, Austin real estate was getting really hot. So it was a good time to enter the market and offer surveying services.
Chris: There is usually a point where a business owner decides that it’s time to go from freelancer to operator, meaning having an actual company with some employees and some structure. When did that happen for you?
Derek: It took about a year and a half. It was obvious to me after that time period that I liked some of the things I was doing, but didn’t want to be wearing as many hats. Both because it was exhausting but also because I knew I wasn’t the best at all of the stuff the business required. I picked the hats I wanted to wear and decided to hire for all the other roles and responsibilities that I didn’t like as much or thought would be better done by other people.
Chris: A lot of people are nervous to make the jump to finally hiring employees or extra help. How did you do it?
Derek: At first, I started by hiring contractors and only giving them work when I had enough to send them out on jobs. But eventually, it became apparent that a contractor wasn’t going to be able to produce the quality of work that I expected from my business. So I decided it was time to hire full time employees. Because we were small, I wasn’t able to offer the most competitive pay or the best benefits package. So I had to hire people that were a bit less experienced and spend more time working with them to make sure they created the quality of product that I needed.
In hindsight, I’ll say that having all that real estate work to put my employees on really helped a lot. They were expecting at least 35 hours a week of work, and because of how hot the market was, we were able to provide that. Having a tailwind or a ton of demand like that makes starting and scaling a business a lot easier.
Chris: Tell us a bit about the dynamics of the land surveying market.
Derek: Land surveying is a strange market because it’s under-served due to it be regulated but also an unpopular business to be in. As a result there is not a ton of supply. This has created a stratification that is unique. The larger companies just won’t even look at some of the smaller work. They have too much overhead and more than enough work; they don’t bother with doing smaller jobs. They have benefits and salaries that are reflective of the huge contracts they are used to getting for commercial jobs. These costs prevent them from competing in the smaller projects.
Survey Works has gotten to a really interesting spot where we have been focused on smaller jobs but have been getting bigger and bigger commercial projects as our reputation has grown. Also, a lot of the bigger companies will send work my way because they trust the quality of our work and don’t want to send someone to anyone they don’t trust. We have even started to discern between good and bad survey bids. Some jobs are just not going to be profitable because there is some small shop that is willing to do the work for break-even. Those firms also carry some risk in terms of maybe not getting the survey right.
What we have done that has worked really well is decided which types of work we are going to specialize in and stick with it. This gives us domain expertise, allows us to create processes that create efficiencies, and ultimately allow us to do jobs at a competitive price and still create margin. We also have a very clear idea of what our overhead costs are and that allows us, in the bid process, to know how profitable a job is likely to be and if there is cushion in there for error. If there isn’t enough cushion, we know to pass on the work. That’s been a huge risk management tool for us.
Chris: What was the next major turning point for Survey Works Austin?
Derek: The point at which it was no longer feasible for me to be able to run the company effectively with the amount of work and staff that I had. At that point I realized I needed a manager or an admin or someone to help me. There was just always a shortage of time in the day and a shortage of capacity.
Chris: How are you positioning the brand in the market nowadays?
Derek: Surveying is a lot like practicing law in that everyone does it a little differently. It’s an opinion based profession. I’m offering a professional opinion, which leaves it open to a high amount of interpretation. This means there is also a big range of skill and experience levels, as well as professionalism.
A lot of firms are starting to increase profit margins by decreasing their quality standards to create lower prices. We are going the opposite way however. We are focused on increasing our professionalism, skills, and experience levels. We’ve chosen this path because we are starting to go after bigger and bigger bids and that’s what that market requires.
Chris: How do you compete against the big players?
Derek: A lot of times the big companies are being held to the same profitability standards for their smaller projects as their larger projects. Because we are more efficient and more cost effective, we are usually able to provide better quality at the same or a lower price.
Chris: What’s the next growth milestone for Survey Works Austin?
Derek: We are maybe 4 hires away from being able to support a management team that can allow me to spend more time on business development and new markets. My focus is to move into new markets that have the same tailwinds we were able to experience in Austin. If the market takes a turn for the worse, then we will tighten up on processes and just keep working on getting more and more efficient. We already run lean so I think we can ride it out better than most.
Chris: As a finance based small business consulting firm in Austin, a big question we work through with service business owners is how to measure utilization and capacity. How do you calculate that?
Derek: We keep it really simple. We take each employee and have them at a set amount of billable hours per week. And then we track weekly where they are at to the target. We use a time tracking software that is linked to our financials as well as individual projects. That allows us to get project level profitability to budget, as well as monthly profitability of billable work being booked to COGS.
Chris: Any final thoughts for other service business owners?
Derek: I wish I had hired higher level people from the beginning. Looking back, it would have been better long term to just take a lower profitability early on and hire more experienced people and just get off to a great start with a high level of professionalism and skill rather than building up to it and trying to pinch pennies early on. The work was always there, the demand was always there, but I was just scared that it wasn’t or that it would dry up. Hiring good people has never been a mistake for me. I’ve always gotten more out of it than I paid for or expected to get.
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