By Jason Dettbarn, Merchants Bonding Company

For contractors actively pursuing growth, one of the most important strategies they can employ is to assemble a team of trusted advisors, including a surety. A surety’s in-depth understanding of the opportunities and challenges facing contractors can be invaluable. Contractors should take the time to understand their growth goals, and select a surety whose philosophies align with their own. Because while explosive growth may seem impressive, it’s also extremely risky. A more measured and responsible approach usually leads to profitable growth.

Best Practices for Companies Looking for Responsible Growth

Build your balance sheet

• Add capital prior to rapidly taking on more work.

Be cautious and diligent about

• expanding into new geographic territories.
• making large leaps in job size.
• taking on new job types.

Be aware of high fixed-debt ratios

• This can be seen as a negative by sureties, especially if coupled with low liquidity or working capital/cash flow concerns.

Review contracts

•  Don’t immediately accept boiler-plate language. A surety’s claims department can be an excellent resource to successfully leverage contract clauses.

Implement a robust WIP reporting system

• Investing in software can improve internal controls by ensuring accurate and timely project information and financial information is available, which leads to better decision making.

Assemble a strong team of advisors including:

• Construction-oriented CPA
• Attorney
• Banker
• Surety
• Agent

Invest in your own team

• Having the right amount of people with the right skills, along with strategies to retain them – especially at management level – is key to stability and continuity to support growth.

From a surety’s perspective, one of the most important things a company can do to support responsible growth, is to build a solid relationship with their surety. When contractors communicate their goals, along with their challenges and obstacles to those goals, the surety can help mitigate risks on the road to success.

How do I get a Surety Bond?

Surety bonds are issued by Merchants Bonding Company (Mutual) through insurance agents. Contact your local insurance agent or use our Find an Agent tool. They will guide you through the process, informing you of what documents and information are needed by the surety (Merchants Bonding Company (Mutual)) to underwrite your bond.

About the author: 

Jason Dettbarn is Sr. VP, National Contract Surety Leader at Merchants Bonding Company. With more than 25 years of surety experience at Merchants Bonding Company, Jason built his career in contract underwriting.