To Thrive, Contractors Need Strategy to Ramp Up Future
People who can quickly assess problems and react thoughtfully are drawn to the service sector of our industry. We are flexible by nature and, accordingly, we are poised to strategically take advantage of opportunities as they present themselves. A company’s annual business plan is the framework for this dynamic action and the strategic creation of this plan is key to success in any economy. The mechanical contracting business has evolved and become fiercely competitive. As a result of the recent economic downturn, in many geographic markets there may be twice as many bidders as there have historically been on most projects. The days of “just fix it” are becoming few and far between. The most successful contractors are the ones that understand their costs and plan for future growth.
Successful business planners create a comprehensive business timeline that includes goals, assigns responsibility to team members, and establishes a reporting structure to provide updates and monitor progress. How hard is it to establish a business plan for a service operation in the HVACR industry? What are the basic requirements?
Before I address these key questions, let me take you back about five to 10 years in my own service-oriented career. At that time in my history, if my boss had raised the question about a business plan for the service department, I would have expected him to lay out details of the plan he expected. With the benefit today of a long view, I realize this boss was also responsible for business plans of other departments, as well as the service department. It was my responsibility, not his. It was incumbent upon me to attain the expertise and to create the best plan that I could. So, on with our story: What are the first steps for an annual business plan?
The first is simple; you need to understand where you are today. Begin with a department review - a look back. What results do you anticipate for the current year? What is the status of your set of pre-established goals and how would you characterize and quantify the progress made this year?
The next step is to look forward to identify what issues, challenges, and problems might your business face in the coming year that could affect your financial performance. In addition, ask yourself what must be done to address these issues so that your plan can be successfully achieved? What opportunities and threats could you encounter in your market, or area of responsibility, that can impact your sales, margins, or competitive advantage?
Next, create a financial budget that includes expected sales, gross profit, margin, and cost of sales, overhead items and net income. To help achieve your projected budget, create specific goals. When determining these goals, create action-item definable goals that will help you achieve your business plan when completed. Keep in mind the threats, opportunities, and staff requirements needed to fulfill your business plan. Make your goals realistic and, most importantly, create accountability and a method for reporting status and completion.
A growth-oriented service company will also include items such as marketing, IT (information technology), HR (human resources), safety, training, tools, and major equipment and facility needs in its business planning process. As you plan ahead, it is important to position your company for growth. Does your plan support you for where you want to be in the next two to three years? The hard work and effort you put into a well thought-out business plan can pay dividends in achieving your financial and business goals. Companies that plan ahead can more easily overcome obstacles in their path.
TRAININGIn conjunction with business planning, companies should also periodically review their training initiatives and requirements to ensure that employee development follows the growth projected in their business plan. Too often, training takes a back seat as we deal with daily operational issues.
Most contractors were not trained to be financial experts. Strategic planning does not come easy to all of us. We are in the customer service business; our focus is to provide solutions to improve and maintain the environmental needs of our customers. And that we do very well! There are many companies that can help contractors facilitate strategic business planning. The Mechanical Service Contractors of America (MSCA) offered a Strategic Business Planning program in October at its annual education conference. This workshop provides contractors with the critical tools to conduct business planning sessions.
Given the very wide spectrum of strategy planning tools made available to each of us via the MSCA, I believe the future of our respective companies depends in large measure how each of us makes use of these critical tools.
Publication date: 11/23/2009