Follow this six-step guide to create a long-term business plan.
Construction business owners who have made it through the worst economic downturn in nearly seven decades have something in common-they are survivors. Now is the time to move beyond surviving to growing. Taking the time to prepare a strategic plan today will help business owners reap the benefits over the next several years by recognizing and seizing new opportunities ahead of the competition.
With ongoing shifts in the economy and the construction industry, strategic planning can seem like a nice-to-have tool but not a need-to-have one. This mentality can mean the difference between capitalizing on a previously unseen market opening or missing out entirely.
Strategic planning is not a one-size-fits-all model. Strategies that work for one company may not be right for another, but any company that commits to the process should see benefits. Use this six-step framework as a guide to create a strategic plan:
1. Establish an internal baseline.
- What is your business objective?
- Identify your core competencies. What are you good at?
- What is your source of volume?
- What is your commercial objective?
2. Establish an external baseline.
- Identify market dynamics and external factors that impact your business.
- Define your market.
- Conduct a competitive analysis.
- Segment your customers by demographics, value to the business, behaviors, needs or any other essential elements on which you would base your decisions.
3. Differentiate and innovate.
- Why do existing customers choose you?
- Articulate what makes you better than the competition.
- How can you innovate?
4. Align and execute.
- Communicate your strategy internally at every possible opportunity.
- Define priorities for salespeople and align those with compensation plans.
5. Review and measure.
- Test your assumptions, demand proof they are working, and learn from your experiences.
6. Evaluate and modify.
- Adjust plans if necessary, and then begin again.
Throughout the process, it is very important to communicate across the organization. Once the plan is in place, it should be shared with all employees. GE Capital surveyed its small and mid-sized clients and found that 52 percent had a strategic plan, but only the executive team knew about it. Employees should understand the part they will play in executing the plan as well as the decisions that result from it.
Construction Industry Trends Can Pinpoint Next Steps
It is wise to look at industry trends to help identify next steps. Some figures may reveal growth opportunities in certain segments, while others may identify struggling niches to avoid.
The good news is that the United States is not likely to see a double-dip recession. Revenues are starting to grow in different facets of the economy, but that does not mean runaway profits in 2011. The economy is entering a slow growth phase. Only cyclical to moderate growth is expected over the next three years.
While non-residential building construction continues to drop overall-to $78.3 billion in the third quarter of 2010 from $104.9 billion in 2009-segments such as education and healthcare are experiencing less of a decline, while the manufacturing, commercial and office sectors continue to decline, according to GE Capital's fourth quarter 2010 Construction Industry Research Monitor.
Single-family residential construction continues to grow, while multifamily residential construction continues to decline. The renovation and improvement markets showed surprising growth in the first half of 2010, but with the widening gap between the current and future expectations of the National Association of Home Builders' Remodeling Market Index, it is uncertain how long that growth will continue.
When it comes to non-building construction, growth is steady. The construction equipment market has also rebounded strongly, with new orders and shipments at their highest levels since 2008.
Setting the Stage for Change
A construction business owner's first step in the strategic planning process is to establish an internal baseline. These early decisions will drive the rest of the strategy so it is important that the goals are specific and measurable. For
