In the current economic climate, many construction firms are eager to explore new business strategies. Some expand their range of services and project types to existing clients. Others capitalize on their market reputation to add new clients in familiar settings. Still others look to expand into new territories both here and abroad. Of the three, geographic expansion carries the most risk. While entering new markets has its challenges, there are a number of things construction companies can do to mitigate their risk.

Successful firms have deep local knowledge and connections. They know their local economy, business practices, politics, regulatory environment, unions, labor markets, subcontractors, suppliers, and competitors. They’re prominent members of the communities they serve. However, once outside their territorial comfort zones, it’s a whole new ballgame.

When factored into the planning process, the technical aspects of the expansion can be addressed with relative ease. Before venturing into new territory, your company must be diligent in gaining a thorough understanding of the regional and local building codes, prevailing safety standards, labor and wage laws, and sales and use tax law.

It’s the people side of the equation that can get messy.

Outside firms do not have the benefit of experience with local subcontractors. They don’t know which employ sound business practices or possess the internal standards and financial strength to produce quality work on time and within budget. They don’t have established processes to ensure a smooth working relationship and address issues as they arise. They don’t have a shared history of mutually beneficial work to motivate “walking the extra mile” when the situation demands it. Given the current shortages in skilled labor, they may be pressed to take on less experienced workers which increases project risk.

The firm’s internal resources may find themselves stretched thin to accommodate the expansion. Seasoned employees may be asked to take temporary assignments away from home to manage the local expansion while instituting the firm’s culture and business practices in the new environment. “Home office” employees may find themselves working extra hours to establish relationships with new suppliers and build the operating infrastructure to support the remote work teams.

If the planned expansion extends beyond the U.S. borders, all of the foregoing challenges become all the more acute. Navigating time zones, language barriers and currency exchange adds further risk.

And yet, where there’s a will and a clear profit potential, there’s a way.

Business expansion is the natural outgrowth of a successful firm, whether it includes adding new clients, expanding services to existing clients, or entering new markets. With an appropriate amount of planning and discernment, it can elevate the firm’s market presence, reputation and financial strength to the benefit of the owners, employees, clients and communities it serves.