Most construction companies start out with a business plan: a road map that outlines goals and details how to achieve them. But once a business is up and running, this document tends to get buried in a file cabinet or on a hard drive.
Construction company owners, however, would benefit from digging out their business plans at year end — or better yet, quarterly. Here are a few reasons why regularly reviewing and revising yours can position your company for continued success.
To monitor performance
Comparing revenue plan projections with actual results helps companies identify pain points as well as the most profitable operational components. A key question to ask is, “Are profit margins higher or lower than expected — and why?” Examining the answer(s) to this question could lead to:
- Adding staff or equipment to meet growing demand,
- Expanding into construction services that will likely boost profits,
- Tweaking jobsite processes to increase efficiency, or
- Flagging unprofitable types of projects.
With the right information in hand, you can recalculate forecasts to respond to current and developing market conditions. In turn, you should be able to set budgets and project milestones to meet those revised projections and keep the company moving forward.
To identify competitive threats
Periodically reviewing his or her business plan provides a contractor with the opportunity to take a hard look at the business and ask questions such as:
- Are we still meeting our customers’ needs?
- Has our target market changed?
- Has the local economy changed?
- Are new regulatory rules impacting operations?
- Are there more or fewer competitors in our market?
The answers to these questions can help redirect a business into more profitable jobs and markets. They can also help construction professionals prepare for disruptions in the industry or address new competitive threats.
To trumpet your accomplishments
Sharing key details from a business plan can reinforce with others that your construction company started with a plan and is meeting the goals laid out. For example, you can celebrate milestones met with informed employees, who should have a better idea of how to prioritize their activities to fulfill the company’s mission. You can also use an up-to-date business plan to recruit new employees and introduce new hires to the company’s culture.
A sound, regularly revised business plan is also an effective means of attracting new partners, suppliers, investors and sources of financing. These entities will likely want to know your company’s basic business concept, market, strategy, financial performance and — particularly in the case of vendors and lenders — its ability to pay bills on time. An updated business plan will accurately provide that information.
Dust it off
A construction company’s business plan shouldn’t be just a “book report” that’s written once when the business is launched and then forgotten. It’s essentially a baseline for monitoring progress and keeping the company on track.
The targets laid out in the plan should become performance goals, with regular reviews of the plan enabling you to determine whether your company can meet those goals or if it needs new ones to accommodate a changing market. So, if you haven’t done so lately, dust off that old business plan and see where you’re headed!