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How do successful contractors maintain steady business and continue to grow quarter after quarter, year after year? What separates the companies that thrive every season, regardless of the overall economic climate or changing trends, from everybody else in the industry?
It starts with a business plan.
We tend to lose focus if we don’t sit down every year and develop a comprehensive business plan — a road map to guide each segment or department of the company toward its revenue and budget goals. Without a map or concrete metrics, it’s impossible to know where you stand in relation to your goals.
At the start of the fiscal year, every business owner should have detailed answers to questions such as:
Once you’ve answered these questions, write it down. Put it on paper. Consult with a business planning expert or check out online tutorials to make sure the building blocks of your growth and vision are all there. A one-time conversation with managers isn’t a business plan. If it’s not written down, it doesn’t really exist.
Even the best business plan will change over time. It’s not a one-time document to file away until next year; it’s an ongoing strategy for reaching your vision. As a company grows and external conditions develop, successful owners must examine their budgets and goals to make adjustments where needed.
Did any contractors expect COVID-19 to hit last year? Of course not. But companies with solid business plans had an anchor from which to pivot, instead of throwing everything at the wall and seeing what sticks (or doesn’t).
Track and adapt
The pandemic year is an extreme example, but contractors who have a plan in place tend to do better and better each year. With consistent monitoring and flexibility, if you see you’re off track, you can adapt.
In 2021, it doesn’t matter what contracting business you’re in right now; you’re facing rising costs. Can you account for those costs and incorporate them into your business plan? If you see those increases in your daily, weekly and monthly reviews, you can adjust your pricing for service or installation to balance the rising costs of materials and keep the company on track.
Additionally, consistent reviews can tell you why you’re getting out of sync. If you find you’re not generating projected revenue based on the amount of work your company has, it’s because of inefficiency or pricing. Are your staffing and scheduling off? The contracting business is driven by processes. If you’re off track, you can take a step back, examine those processes with your team, identify the imbalance and quickly get it back in order.
Here are some of the important KPIs to monitor daily:
An essential but often overlooked element of a commercial or residential service company’s business plan is a cash flow model that can be monitored regularly. With the industry’s seasonal shifts, it’s imperative to develop a detailed understanding of how much cash your company needs to have available at different times of the year.
How do you meet payroll and debt obligations during seasonal slowdowns? Having a solid cash flow model that meshes with your business plan will help.
Cash flow also is important when companies experience growth. Significant costs are associated with hiring, training, adding vehicles and expanding service. If your company doesn’t have immediate access to cover those costs, growing can be more painful than profitable.
Make the time
Many business owners will say a plan sounds great, but who has the time to create one, much less keep up with it on a daily or weekly basis?
It’s an understandable response. The trades have always been a time-consuming occupation, and contractors are especially challenged these days with having enough people to get work done. But creating and monitoring a business plan can be accomplished without adding an unmanageable workload for any single person.
Besides, if you don’t have a plan, you’ll regret it. Every contractor and business owner should find the time.
People want to know why they’re doing something. Technicians, installers and sales representatives want to work for a company that knows where it’s going. Include them in the planning process and communicate clearly, and they’ll buy in. A plan pointing an entire team in the same direction is easier to implement and manage.
And once they’ve bought in, they’ll become part of the process, working with their department managers to keep the process moving forward. Technology solutions streamlined the collection and management of large amounts of important data so continuous review and revision are possible, and the workflow can be fairly spread across the team.
The PHCP industry should be proud of how it has responded to the challenges of the last year. Business owners and employees were learning about COVID-19 as they went through it. Nobody had the answers, but collectively the industry quickly found ways to protect field workers, office staff and customers so they could continue safely delivering the services that keep the country running.
They also found ways to work differently because they had to. Adaptation was the only way forward. It’s a lesson every contractor should remember as the industry moves into a post-pandemic era. Continue adjusting and learning and be prepared for anything.
Over the last 33 years, John Michel has built a highly successful career in the HVAC, energy services, plumbing and related contracting fields with extensive experience in the residential and commercial markets. As a head coach at Business Development Resources (www.bdrco.com), he understands the relationship between sales growth and the organizational structure required to effectively support and manage growth while maximizing profitability.