As a home service contractor, are you really prepared for what the new year will bring?
In other words, have you really taken a critical look at your business to really see if your dollars make sense? Are you charging the right prices? Do you have enough in the bank to fund running 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 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 then 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 deeper into financial stress by raising prices arbitrarily as a way to increase income is a bad business practice.
Digging yourself deeper into financial stress by raising prices arbitrarily 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 either.
A business plan does not need to be overly complicated. It does need to be based in reality and fact. Flying by the seat of your pants isn’t an option in the competitive world of contracting businesses anymore, and while there are organizations and consulting businesses 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 right away, but the longer you wait to implement a plan, the worse it will be for your business’ bottom line.
Why is a business plan important? An overall business plan can be as complex or as simple as you desire. But 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 utilizing research about 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’ 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 need to be written, what services need to be added in order 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 the course of a year? Do you need more customers, or do you just 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 business 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 for expanding into a new area, like adding indoor air quality services and new technology to address IAQ issues, a business plan sets up the steps for following through.
· Create an employee communication process. Aside from external financial concerns, internal communication with team members is crucial to your business’ success. Employees who feel valued and respected as a part of the business are good for your business. Happy team members spread the word, making your business more attractive to prospective employees and customers.
Home service business owners have a great opportunity to take a more active part 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 being able to thrive in the years ahead.
Kim Archer is Vice President of Coaching and a Trainer with Business Development Resources, Inc. (BDR), the premier provider of business training and coaching to HVAC contractors and distributors, established in 1998. BDR’s Profit Coach program has a membership of 600 leading contractors. Ten thousand HVAC professionals across North America attend BDR training courses annually. Nearly 1,000 industry professionals attend Profit Launch, BDR’s planning workshop. For more information, visit www.bdrco.com.