Business Plans Make Dollars & Sense

A business plan can reveal an honest picture of how your business is doing

As a home service contractor, are you really prepared for what the new year will bring?

In other words, have you taken a critical look at your business to really see if your dollars make sense? Are you charging the correct prices? Do you have enough funds in the bank to run your business for six months during a crisis? Can you pay all your team members what they deserve? Are you paying yourself what you deserve? Is your profit margin where it needs to be? Do you have peace of mind over your finances?

Thriving Means Having a Plan

You don’t want to merely survive whatever the future brings. You want to thrive, and that means taking the initiative to review where your business is by examining expenses, income, and liabilities, creating an attainable business plan, and putting it into motion. There is much to be thankful for and hopeful about as we head into 2021, but without having a realistic business plan, you could be setting your business up for failure.

A business plan can reveal an honest picture of how your business is doing. If your plan is waiting until year-end and having your accountant tell you your business barely stayed in the black or is heading into the red … well, that’s not a business plan.

Digging yourself into a deeper hole of financial stress by arbitrarily raising prices as a way to increase income is a bad business practice, too. If your prices are out of line with your competition, you get less business because your prices are higher. That’s not helping. Same thing with letting yourself fall into victim mode. Sticking your head in the sand and hoping for the best is not a viable plan.

A business plan does not need to be overly complicated. It does need to be based on reality and fact. Flying by the seat of your pants isn’t an option in the competitive world of contracting businesses anymore. While there are organizations and consulting firms to help contractors create business plans, it’s up to each business owner to take the bull by the horns and make it happen. Lack of follow-through can be a real mistake. It may not show up in your financials immediately, but the longer you wait to implement a plan, the worse it will be for your business’s bottom line.

Why Is a Business Plan Essential?

An overall business plan can be as complex or as simple as you desire. However, any business plan has to include a budget. To be successful, your business needs to make financial sense, and having a set budget is a way to see where the money is going before it becomes a problem. Often, contractors and other small business owners wait until it is too late to get their finances under control, but by having a plan, your business has checks and balances to alert you when something’s not right.

A good business plan makes sense by helping your business:

• Make sure your pricing is on target.
  • By researching your competitors’ pricing and the general pricing for services in your area, your business plan and budget will give you current pricing guidelines. Revisiting this every year keeps your business’s pricing up-to-date.
• Determine how much new business is needed.
  • Your business plan should be a tool to help your business expand if that is what you want to do. How many new units do you need to sell, how many contracts must be written, and what services need to be added to create more income?
• Know your customer statistics.
  • Do you know how many customers you have and how much revenue you receive from each one over a year? Do you need more customers, or do you need to optimize business with your current customer base? A business plan contains customer data that makes financial planning easier and helps determine where your company has gaps, offering ideas to fill them.
• Identify service opportunities.
  • A good business plan includes a blueprint for future expansion. If your service business sees an opportunity to expand into a new area, like adding indoor air quality services and the latest technology to address IAQ issues, a business plan sets up the follow-through steps.
• Create an employee communication process.
  • Aside from external financial concerns, internal communication with team members is crucial to your business’s success. Employees who feel valued and respected as a part of the business are suitable for your business. Happy team members spread the word, making your business more attractive to prospective employees and customers.

Home service business owners have an excellent opportunity to participate more actively in their markets and communities by stepping up their game. Creating a business plan, increasing margins and profits, and being proactive will make all the difference in thriving in the years ahead.

About the Author

Kim Archer is president of Business Development Resources (BDR), the premier business training and coaching provider in the home service industry. She is the visionary behind BDR’s Profit Coach program, which supports a collective client revenue of $2.1+ billion. As the architect of BDR’s Profit Launch Business Planning workshop and driving force behind several of BDR’s financial training classes, Kim proves daily that true leaders don’t adapt to change—they define it. Learn more about Kim and BDR at www.bdrco.com.

Read the article by BDR President Kim Archer in Contracting Business.