Last month we looked at marketing in tough times with “Soul to Sole Marketing” and the importance of digging down deep in terms of where you have found past successes for your business and how to expand on the successful relationships previously fostered, as well as discovering new territory for uncovering job opportunities. While conducting research for the next few articles on Best Business Practices, it occurred to me that perhaps a blueprint for a creating an organized and successful business might well serve many of our readers - whom like myself, have grown up through the ranks as a field technician (started in the trenches), to now being a business owner and that have never really looked at a formula for a successful business.

Over the next few issues I will discuss the key components of a successful business plan and how you can best apply the principals and strategies to maximize your financial, time and physical resources. I will try to give you relevant web links to research the various ideas we discuss as well as helpful contacts for further development beyond the pages of this article.

I remember when I started my business almost thirty years ago now…I heard associates and friends along with the self help gurus hawking their books on television, talk about in order to build a successful business, you have to have a business plan or a blueprint if you will, to insure that you are able to navigate the waters to success and financial independence. If you’re like me, a business plan took too much valuable time to write, plus how in the world could I project what my business was going to do tomorrow when managing today’s task was a struggle most days. I just didn’t have the time nor did I have the organizational skills to write something as complicated as a business plan.

Well, rest assured my friends and colleagues, if you don’t have a course to follow, the course you follow will be unrewarding, stressful and most likely a total disaster. I have learned that in my personal life as well as my business career that if I don’t set some sort of goals for myself I will run down endless rabbit trails, (that’s a term we use in the south for loosing focus) and loose my way of what’s important. When I first started in business as a young budding entrepreneur, I wanted to be involved in every deal that came along whether I knew all the intricacies of that industry or not. Thank God for loving spouses that were not afraid to tell us “strong men” when we are off course. My wife would tell me many times over the next few years – focus Randy – focus! Without a plan I could not focus.

Many years later my pastor would encourage me to do a personal growth plan every year to accomplish all the spiritual growth and personal achievement I desired for my life. Little did he or I know then that he had provided me with the one single tool that would help me achieve more of my personal goals than any other tool I have ever seen, heard or read about? A personal growth plan along with a sound business plan is the easiest way that I know to stay focused on what’s most important and how to achieve it. More importantly, it gives you a tool by which you can benchmark your achievements against your goals and how well you have planned your business to harness the power to achieve your goals.
A business plan doesn’t have to be 100 page graduate school dissertation. For some of you it might very well be a couple of pages written on a legal pad while you’re waiting for your double cheeseburger and fries. Others of you who enjoy that sort of thing might find a 50 page plan exciting. Regardless of how sophisticated or simple it maybe, the key is that you do one. The economic environment that we most likely will weather over the coming years will be unlike anything we have ever experienced before. The rules that govern how we run our companies are changing daily and with each new week comes a new challenge from Capitol Hill for small business owners. Without a navigational chart or in our case a business plan, we are surely to be blown off course!

For initial planning, I like to use what I refer to as the 5 page plan- I heard that term used somewhere else before so I won’t take credit for it- that defines who your company and yourself are; what your service or product is, what your market niche is as well as who your target market is. It will also help you define what type of customer is going to buy your product or service and how are you going to make money doing it , along with who your competition is an how you will outperform them. A good 5 page plan should also include what your anticipated cash flow requirements are going to be and what the projected profit margins will be.
A good business plan of this type will help you improve your banking relationships in this era where financing is the real ball and chain on the economy. If you’re looking to attract investors to help you take your business to the next level it will be essential that you have a clear plan as to how much money they can make and how you can pay them back. As equally important, it will give you a tool that you can use to benchmark your achievements throughout the year.

You may also want to look at developing a diverse business plan by which you detail multiple streams of revenue. With multiple streams of revenue you can outline different services or products that you would like to sell to different types of clients. Instead of focusing on one certain type of project perhaps you would like to create a second project profile that would produce another revenue stream for your business. A good business plan will help you define precisely what each of those target project profiles look like and how you can manage them. Taking this thought one step further, you could use your plan to help you allocate your personnel resources or equipment resources to each project profile as well.

Most of us don’t think too much about it, but we use a business plan almost daily- you couldn’t survive day to day without some type of business plan. Whether it is a day planner or a smart phone to organize your schedule you are creating a business plan. When you create a project schedule whether it is on a legal pad or a sophisticated gant chart you are still creating a business plan. Though it is specific to that particular project it is still a business plan. Just imagine how much easier your overall business operation would be if you would create a plan to run the entire operation. Now if you could write a personal growth plan to use alongside the business plan…just think how much more effective a manager you could become.
Go ahead I challenge you to give it a try. Start out easy with a short couple of pages defining what it is you want to accomplish this next quarter and what it will take to achieve it. At the end of June look and see where you are. If you hit it pretty well, then try it for the next quarter and then the next. Then try it for the next year if you feel daring. I actually do a brief quarterly plan for the business as well as a yearly plan. I have actually done a five year plan also, but I keep changing it every year based on the achievements or derailments of the previous. But it’s okay to change it, that way you are learning what you are and are not doing right or in accordance to the plan. After you’ve done a couple of plans and modified them you will have gained enough insight to have a real handle on what it is you really want you and your business to achieve. Once you have a handle on benchmarking or business planning – stick to your plan. Occasionally you will have things happened that will require a modification. I know this is an old cliché but, “plan your work and then work your plan”. As for my personal goal plan, I do it yearly.

Here’s one more unconventional approach for you to consider. If you have other employees in your company that are decision makers, ask them to create a brief business plan for your business. You will be surprised at how many fresh ideas you get. Have them do a personal growth plan as well. You might very well be surprised at the end of the year how many of them have actually become better and more effective employees. More importantly, how much your business has benefited from it!

Getting your business to work in a tough economy is perhaps the biggest challenge we face today as small business owners…and without some sort of plan you are almost certain to fail. Outlined here below are some suggestions for categories that you may want to include in your plan whether it’s basic as in the 5 page plan mentioned above or whether it is more detailed and precise;

• Why am I in this business?
• What is my business? Be precise are you an installer, distributor or maybe both.
• How will I market my service or products?
• Where is my market geographically?
• What are my advertising opportunities and how much do they cost? This will allow you to choose the best and most effective means of advertising. Not necessarily, the cheapest, but the most effective.
• Who your competition is and why they’re your competition.
• What is your sales strategy to overcome your competition?

At this point in my plan I have identified the basic points that get me the jobs or projects that we do. Now the next phase of a good plan turns the focus to production…in other words how are you going to get all the new work completed on time, on budget and with the level of quality your customers expect and deserve from your business? You can use this portion of the plan for yet another business organizational tool; you can establish some standard operating procedures with it. These SOPs (soaps) as I like to call them can become a tool to train new hires or for use as a guideline for your office to run when you’re not around.

• How do I delegate the work load? Or in other words, what is the chain of command?
• What are the realistic personnel requirements? How many does it really take  to get the work completed?
• What equipment and tools will they need to perform the task assigned. Just as importantly as what tools and equipment, is how this equipment will be maintained to maximize its end of life usefulness.

Relate your plan to real dollars or capital expenditures and revenue. The basic unit of financial measurement in construction is the job. The payment you receive from each job must cover the basics of direct and indirect construction cost, overhead expense associated with production of the job as well as the overhead expense associated with running your office. I often hear small business operators tell me that they can bid a project cheaper than their competition because they don’t have an office and the overhead expense. I have to remind them that they still require accounting services, payroll services, insurances, licensing fees, vehicle expense, bond expense and the one none of us can elude…taxes. So you see we all have overhead expenses whether we are paying rent and utility expenses or not. I hope that each of your companies is utilizing job costing principals (to be discussed in a future article) as a means to track your actual vs. budgeted expenses? Here are some ideas for planning your expense dollars;

• Develop an expense worksheet. Include your annual sales, what it cost you to make those sale, (materials, inventory, personnel etc.) what your gross profit on those sales are.
• Define your controllable expenses such as outside labor and operating supplies.
• What your gross wage expense will be.
• Equipment repairs and maintenance.
• Advertising.
• Administrative and legal expense.

Now look at your fixed expenses. Things such as I mention earlier;

• Rent or mortgage payments.
• Utility expenses to keep the lights on.
• Insurance expenses for employee benefits, workers comp, general liability and if you own your office, property and casualty.
• Taxes and license expenses along with permit and bonding expenses when required. This business plan will also aid you in securing good bonding resources if you are not already providing bonds for your projects.
• Depreciation.

The next issue to address in your plan, and I believe to be the most important is your cash flow plan. I like to start with defining how much work I can realistically do with my crew and company capabilities. I then like to match that with the projected work availability for the coming month, quarter, year or whatever measure of time you choose to use. I then apply a simple formula like this;

• Anticipated available cash, current available cash (cash on hand) and expected receipts from job 1, job 2, job 3 etc.
• Cash from bank loans (construction loans) lines of credit etc.

Then I apply my projected expenses to the estimated receipts from above;

• Anticipated job expenses for job 1, job 2, job 3 etc.
• Equipment payments ( you can include your vehicles here).
• Taxes
• Insurance
• Overhead
• Loan repayments

With this information you can now determine what your cash flow is and what it will need to be in order to achieve your profitability goal for the specified time period. This planning tool may also show you that because of the economic struggle we are facing that your business needs additional cash reserves to survive till better times. Again this business plan will help you secure those funds.
Throughout this planning process you will need constant benchmarking to see if you are achieving your goals. You will also need to have control and feedback during the various stages of the process in order to effectively manage your business. The guide lines and techniques you develop through business planning will give you the tools you need to be an effective manager as well as a profitable business.

Finally, hopefully by creating a business plan you will learn whether your plan or ideas for your business is doable. Can you achieve the goals you have established? If you discover through this process that perhaps you have been a little lofty in your wishes, then modify the plan to be more accurate and achievable. It’s okay to set your goals high, but if they are unobtainable then you have wasted allot of valuable time creating your plan, and more than likely you will become frustrated and disheartened and abandon the process. I’ll use a quote from the famous Michael Irvin of the Dallas Cowboys during his Hall of Fame acceptance speech, “Look up, Get up and never ever Give up”! There will be failures in your plan, there will be pinnacle achievements, when you learn to balance the two, you will reach higher levels of success than perhaps you ever imagined possible from a small business.

One final word of advice, make sure that when you’re developing the various elements of the business plan that you use data that is relevant to the daily operations of your business. Be sure to use solid data that you have acquired from you’re your past performances. Structure your plan to meet the way you think about your business. Again engage your employees for input. Don’t forget to benchmark the achievements as well as the failures. Once you have done so, fix the items that caused the variation in the plan.

Hopefully, this business plan will give you the necessary tools to reinvent your business in order to achieve the goals you have for your family, your company and its employees. It has been documented and proven that companies that use plans to budget, forecast and recreate are more successful than those whom don’t. One final football analogy from the legendary USC Trojan’s coach, (believe me, being from Tennessee I’ve learned allot about USC Trojan coaches lately) John McKay. He use to always tell his quarterbacks that when being faced with an unexpected blitz – be quick but don’t hurry. So I tell you now if you want to achieve your goals and create a business worthy of selling or passing on – be quick but don’t hurry in creating you business plan. You wouldn’t go on a driving vacation without road maps, so don’t try to weather these turbulent times without your business map. Good luck and God Bless!

Visit the US Small Business Administration’s (SBA) website for a free downloadable Construction Business Plan Template.     www.sba.gov/idc/groups/public/documents/sba.../pub_mp5.pdf

If your one of our Canadian readers, you can visit this site for templates and planning ideas.  www.publications.gov.sk.ca/details.cfm?p=22895&cl=1

If you would like further assistance in developing your plan or in growing your ICF business feel free to email me or phone me to discuss how we might assist you. If you have business related questions you would like addressed here please feel free to email it to me and I will get you the best answer available.

Randy K. Wilkerson
Sustainable Building Strategies, LLC
2312 Honey Grove Lane
Knoxville, TN 37923
865-567-8505
865-357-2353 fax
sustainablebuildingstrategies@gmail.com