For those of you who have been reading Contractor Cents for a long time, you might recognize the topic of this column.
This is the time of year that I remind readers to plan for the upcoming year. Why? Because as former President Dwight D. Eisenhower said, “Failing to plan is planning to fail.”
So, over the years I have created an easy way to do this. You should get input from your employees so that everyone knows where the company is going, and they have a stake in its success.
In reality, you plan all the time. However, are you planning for the “trees” or the operational side of your business rather than the “forest” - your overall business? For example, when customers call wanting you to replace their heating and air-conditioning system, you usually follow a specific process, whether or not it is written down.
It might go something like this:
A salesperson looks at the job, determines the best system based on the customer’s needs, desires and the configuration of the home, and gets approval on the contract. Then, another person gathers the materials necessary for the job and explains the job to the installation crew. The crew installs the system and someone collects payment. Finally, someone follows up with the customer.
ProceduresThere is a plan to accomplish this. The better your plan, the more efficient you are and the more profits you’ll make. You don’t install a system without a plan, even if the plan is just in your head. If you do, you run the risk of putting the wrong equipment in, not doing what you promised the customer, having to run to the supply house to pick up forgotten parts, or perform a poor installation that takes longer than the budgeted hours. Having an “idea” rather than a concrete plan is a formula for losing money.
If you plan your jobs, you can easily plan your business. Most contractors think that a business plan is many, many pages. It doesn’t have to be. The simple one is a list of goals, a marketing chart and budget, a cash flow budget, and a sales/income statement projection.
That’s it. Three pieces of paper.
The first step is to take a hard, realistic look at your business.
What is really happening? Many times I hear that the owner of the business is the last to know something.
Maybe a key employee is unhappy and looking for a job, or a project is not meeting budget, or there is another issue that is being “kept from the boss.” So when you start looking for what you want to accomplish in 2007, make sure that you get out of the office, into service trucks, and on jobsites. Talk to customers yourself. Find out what is really happening so that you can make reasonable plans for the year.
Your list should include sales goals, business goals, customer goals, residential service agreements and commercial service contract targets, as well as gross margins, net profits, and personal income (which you don’t have to share with your employees).
GoalsHere are some questions to ask yourself and your staff:
What went right in 2006?
What went wrong? What did you learn from it so that you don’t do it again?
How many customers do you have? (Active customers who have done business with you in the past 18 months.)
What did your competition do this year? Were there any new companies that have the necessary skills to run a profitable business?
Are your current competitors getting better? Stronger?
Are they taking sales away from you?
Are you happy with the personnel who work with you? If not, what are you planning to do about the situation?
Once you have determined the goals with your employees, put them where everyone can see them. Break the goals down into monthly objectives. Put the objectives somewhere you can see them and review them each month. Check off each objective as you complete it.
Writing the goals is easy. Accomplishing them is more difficult. The actions required to accomplish the goals require discipline and usually a change in behavior.
This behavioral change is the most difficult part. Experts say that it takes 21 days to change a habit. Even after you change the habit for more than 21 days, you can still go back to your old ways.
Think about how many people quit smoking for years and then start again one day when the stress gets to them. Doing the things that you want to do requires discipline and commitment for the long term.