In this brave new world faced by building contractors, the old ways of running a company have been shoved aside, making room for the return of a growth strategy often overlooked in the construction industry: the business plan.
Perhaps no other industry has as many third parties looking over its shoulder as construction. Contractors must answer not only to lenders, project owners and shareholders, but also to insurance firms and surety companies. And standing close behind these entities are government regulators, which have raised the bar of accountability even higher during the recent economic downturn.
If a construction company is still standing in today’s economy, chances are that a committed leadership team has demonstrated the flexibility to adapt to change—whether through cost cutting, downsizing or major restructuring. But moving forward, contractors likely will need to revisit and rewrite their existing business plans in response to a construction environment that looks nothing like the past. Some contractors may even need to develop their first real business plan.
Anatomy of a Business Plan
The primary purpose of a business plan is to develop a roadmap for the organization’s future. The process of formulating the business plan is most important—not the end result.
Begin by bringing together a team of employees representing all departments: marketing, bidding, estimating, project management, accounting and personnel. Not only will this ensure that all viewpoints are shared, but it also will assist in securing a broad base of support or “buy-in” from the various divisions.
First, develop a mission statement that reflects why the company is in business—in three or fewer sentences. This step is critical because every company goal in the business plan must tie back to the mission statement.
Next, the planning team should conduct an analysis of strengths (capabilities and resources), weaknesses (potential and existing problem areas), opportunities (potential new markets, services and products) and threats (events that could impact the company’s future profitability or even its existence). This exercise may sound a bit outdated, but it’s a tried-and-true way to paint the most accurate picture of where a company has been, where it stands and where it needs to go.
This assessment also makes it much easier to establish short- and long-term goals for the company. These goals should be measurable and set within a timetable so progress can be monitored regularly.
The following areas (if applicable) should be evaluated and tied to specific goals in the business plan:
- image and identity;
- customer/industry concentration;
- capital growth and availability;
- research and development;
- organizational structure;
- employee relations;
- key performance indicators;
- profitability;
- marketing and sales;
- diversification;
- volume;
- physical facilities and fixed assets;
- personnel development;
- expense control;
- quality control; and
- cash flow.