It’s the end of another year. Is it just me or does it seem that the years seem to be going by more quickly? As the year comes to an end, besides celebrating Christmas and the other holidays, we should be putting in some time planning for 2012. As contractors, this planning process that we go through is one of the most important tasks that we must perform. I thought it would be beneficial if I gave you a small checklist to use as you do your annual planning.
• REVENUE: I believe it is a good idea to begin the process by anticipating what your revenue will be and how it will compare to the last couple of years. This is extremely important because all indications are that the economy is not going to rebound significantly until perhaps 2013. In fact, I have heard economists say that this may be the “new normal” when it comes to economic conditions. I don’t necessarily agree with that, but I do feel that it may be a long time before we enjoy robust years like we did in the early 2000s. So budget conservatively. Concentrate on your existing customer base. Sell maintenance agreements to make sure they are your customers. (If you’d like a copy of our maintenance agreement and sales piece, just email me at the address shown.) Anticipate a need to be aggressive with your pricing. Find ways to enhance revenue, such as IAQ. Review the new regional efficiency requirements which go into effect in May of 2013, there may be some opportunities to improve 2012 sales with the changes on the horizon.
• EXPENSES: I realize that you have probably done a lot of things over the last few years to reduce your expenses. This is not a time to stop that process. We all need to keep monitoring all aspects of our operation to make sure that we are operating as efficiently as possible. While we may have already taken the big steps to decrease our overhead, I am sure that every one of us has places within our organization where we can make some additional savings. These incremental savings will go a long way to helping us overcome increases over which we may not have control. Keep in mind that if you operate at a gross profit of 30 percent and net profit of 5 percent, a $100 savings in your overhead will give the same result as about $350 increase in sales. Continue checking things such as insurance, including health, general liability, and worker’s compensation. Review your advertising expenses carefully. I don’t believe this is a time to reduce your commitment to advertising. However, there are so many more options available for advertising that it is important to make sure that we are putting the money in the areas where it will do the most to improve our revenue. Also, keep in mind the goal of making sure you are marketing aggressively to your current customer base. Continually communicate with your employees with regard to the status of the economy in the market where you are located. While they would all like to have significant raises, most employees understand the effect of economic conditions on your business and are happy to have a job.
• OVERALL: Within both the revenue and expense categories, there are many other areas which need to be reviewed. It is much easier to do your planning when everything is on the upswing and you are trying to estimate whether you will grow 15-20 percent next year. It is much more of a challenge when you need to work to make sure that you have growth next year. However, planning is even more important given those difficult conditions. It is so important that we manage operations closely given these economic conditions because experience has shown that many companies have financial problems when we come out of an economic slowdown. We need to make sure that we have the capital, resources, and processes to be able to sustain ourselves as our business increases.
With all of the proper planning, hopefully together, we will all be able to enjoy a happy and prosperous 2012.
Publication date: 12/19/2011