Every profitable contractor has a plan before a customer's system is installed. The better your plan, the more efficient you are and the more profit you make. You don't install a system without a plan … even if the plan is just in your head. If you do, then 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 a poor installation, which takes longer than the budgeted hours. Having “an idea” rather than a “concrete plan” is a formula for losing money on a job.
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 flow chart and budget and a sales/ income statement projection.
That's it. Three pieces of paper. Implementation and tracking are what makes this business plan easy.
First, goals. What do you want to accomplish in 2006? What went right in 2005? What went wrong in 2005? What did you learn and won't do again?
Establish sales goals, profit goals (both gross margin and net profit goals), number of service agreements/ contracts, and employee goals (i.e. hiring and firing). That's your first piece of paper.
The second piece of paper in your three-page business plan is your marketing/sales activities for 2006. It is a simple spreadsheet. To create this piece of paper, answer the following questions:
How many active customers do you have? How many do you want?
How many service agreements do you have? How many do you want?
What advertising did you do in 2005? What were the results?
What public relations activities did you do in 2005? What were the results?
Examine your trade show results. What were the results?
Page two of your three-page business plan, the marketing activity sheet, is created by putting ALL of the activities that you will do for the year along the Y-axis and the months of the year along the X axis. Divide the marketing activities that you plan to do into four groups: residential prospective customers, commercial prospective customers, current customers, and employees. Some activities such as newsletters, you may use for both prospective and current customers.
Here are some suggestions for your marketing activities. This is not a complete list of every marketing action you can take. It is simply meant as a guideline to help you plan your activities.
Residential prospective customers: Spring and fall door hangers, seasonal postcards, referral programs, yellow pages, radio, network television, cable television, daily and weekly newspapers, billboards, public relations activities (press releases, articles for the media, donations to charitable organizations and schools, etc.), web pages, e-mail notices, manufacturer co-op programs and telephone follow up.
Commercial prospective customers: Service agreement letters, seasonal postcards, referral programs, newsletters, public relations activities (press releases, articles for the media, donations, etc.) and telephone follow up.
Current customers: Newsletters, calendars, flashlights (commercial customers), magnets, open house, referral program; telephone follow up; and e-mail messages.
Employees: Service agreement and replacement sales contests, company gathering and a bonus or profit sharing program.
Place an “X” under the month that you plan to do each activity. For public relations activities or media purchases in radio, television, or newspaper, it is helpful to put the planned action or source's name on the X-axis as a reminder to you. There are some activities such as telephone follow up or yellow pages that you will have an “X” under every month. That is ok.
Page three of your three-page business plan is your budget for 2006. It should be based in reality and on what was accomplished in 2005. Monthly financial statements for the past three years will help you establish the monthly averages for your company. Then, decide what you are going set as a goal by asking these questions:
How many jobs come in on budgeted hours? If they aren't, why not?
Do you have the right people doing the jobs?
Do you have a training need? What mistakes are the field labor making over and over again?
What is the warranty percentage?
What is the callback percentage?
How many hours per day are the field of labor actually producing work rather than waiting for deliveries, running to the parts house, travelling, etc.?
Are you getting your monthly financial statements in a timely manner?
What are your gross margin and net profit goals? These are important and an integral part of budgeting for 2006.
When you complete the budget, you have your three-page business plan. Then you must implement it and track results. Put your list of goals somewhere you can see them often. This is a consistent, subtle reminder for you to get them accomplished.
Put your spreadsheet where you can see it too. This is a reminder to do what needs to be done each week.
You probably won't put your budget where everyone can see it. However, there are some contractors who share financial results. If you are one of these contractors, put the results where everyone can see where the company is in relationship to goal.
Review the goals and marketing plan grid each month when you review your financial statements. List the activities you need to do in the next month to stay on track. Review the activities of the past month. Did you accomplish what you wanted to do? Why or why not?
This is an easy way to create, implement, and track your activities. I'll leave you with Dwight Eisenhower's famous statement: “Failing to plan is planning to fail.”
Feedback
We would like to know what you think. Send your comments or questions to us at letters@hvacrbusiness.com.
