9 Steps to Create a Construction Company Business Plan

I played a lot of touch football when I was around 10 years old. Eight of us neighborhood boys would gather at our local park and choose teams. Then, the two teams would line up across from each other, agree on the rules and get ready to start the game. After a coin toss, one team would kick off to the opponent. The receiving team would have the fastest player catch the ball and run down the field as far as he could without being tackled.

Then, the offensive team huddled to decide their play for the next down. The quarterback usually called the plays, even though he wasn’t always the smartest player on the team. He was usually the one who was the tallest, fastest or had the best arm. Obviously, there wasn’t a playbook, nor did the teams have time to practice their game plan. Before each down, the inexperienced quarterback gathered his team in a huddle and called plays based on what he thought would work and would surprise the opponent. The players were also loosely told what position to play, who would run which way, whose job it was to block and where they were to go—not a very good strategy for a winning outcome.

Are You Smarter than a 10-Year-Old?

Think about starting your construction company. Is your business strategy better than a neighborhood football game? Do you huddle up before every decision? Do you tell your players what to do before every project? Do they know what to do based on written systems and strategies from your company playbook? A professional football team is a good model to copy for small business owners. Professional teams have written strategies for every season and each game. They also have written plays designed to work in every situation they encounter. Do you?

Unless you want to run your company like a young, inexperienced quarterback, you need a winning playbook to follow. When starting a construction company, what needs to be in your business plan?

• Overall company mission, vision and values
• Coaching and staff assignments and responsibilities
• List of players and their strengths and weaknesses
• Training program
• Equipment inventory management
• Offensive plays and strategy
• Defensive plays and strategy
• Business development plays
• Financial plays and strategy
• Draft Your Business Playbook

A professional team must have all the bases covered to put a winning team on the field and make as much money as possible. Where should you start to draft a winning game plan?

1. Determine Your Overall Company Mission, Vision & Values

Sit down with your key managers and take time to discuss why you are in this business and why you own your own company. This exercise will get you focused on the real reason you go to work everyday. I often ask business owners why they are in business. Their typical answer is to make money doing whatever they do, such as plumbing or construction.

You are not in business to do plumbing or construction. You are in business to maximize your resources of time, energy and money so you can get the biggest return in whatever manner you desire.

For example, a construction company is a great start to achieve what you want. It is very rewarding, but demanding, work. But, it is limited in net profit margin potential, as it is very cyclical with thin margins. In my opinion, owning a construction company creates an excellent chance to seek wealth-building opportunities versus just building for others. Building for customers allows you to make some money. When you build for your own company, it allows for passive income, freedom and equity growth. What is your overall company mission, vision and values?

2. Assign Coaching Staff Assignments & Responsibilities

When a professional sports team is not winning many games, what happens? They don’t fire the players — they fire the head coach. And most of the coaching staff gets let go as well. In order to build a winning team, you must surround yourself with the best managers possible. Excellent managers require high pay to keep them. I recently spoke at a national association of material distributors where a successful business owner approached me and stated his goal was to double his company to $30 million in sales over the next 5 years. He loved selling and wanted to try to find someone who could run the operations side of his company. I asked how much he was willing to pay to give himself more free time, double his company and make more profit. He said he was willing to pay $50,000 to $75,000 per year to find a vice president of operations. I smiled and said, “Good luck!” In my opinion, to find the right person would cost him around $100,000 to $150,000 per year.

The problem with small thinkers (and entrepreneurs) is that they try to hire cheap and think they can fill in the gaps themselves with a weak (cheap) manager. When you hire cheap and you fill in the gaps, you don’t make any money, and your business doesn’t grow. Make a list of the top five positions you need filled with the best possible people you can find at whatever it will cost:

• Sales
• Marketing
• Operations
• Estimating
• Finance

Next, decide which will benefit your company the most. Go out and hire at least one top professional to help your company grow. Then, look to the future and do it again and again until your company is growing and maximizing the bottom line.

3. List Your Players, Their Strengths & Weaknesses

Professional sports teams have many people assigned to scouting and managing their players. They realize that winning games requires the right players. Most small business owners don’t spend a lot of time managing their employees and working to help them become the best they can be. Small businesses hire people to do a job and then hope they perform. When they don’t, they get frustrated and complain they can’t find any good help.

To solve this problem, sit down and make a list of all the positions needed to operate your company. Next to each position, list what accountabilities and responsibilities are required to achieve the results you want. Then, look at who you have assigned to each position. You’ll find that several positions are filled with the wrong people. This almost never happens on a professional sports team. The manager of player personnel is always looking to fill each position with the best player possible, even if it means trading away a player for another. And guess what else? The bad players who don’t achieve the expected results are benched or cut from the team quickly. How are you doing as the manager of your players?

4. Design Your Offensive Plays & Strategy

To win more games than you lose is simple—just score more points than your opponents. In business, what plays will guarantee you to win, provide excellent service and provide superior quality? My recent visit to the dentist office is a good example of excellent organization and preparation. I noted while waiting in my chair that all of the tools and supplies for my procedure were laid out in the exact order of when the dentist would need them. And, my new crowns were sitting in a small box ready to be installed. Prior to my arrival, a technician had prepared the room for my dental work. I am sure they must have used a checklist to get ready. What kind of preparation and checklists do you use to ensure your offensive plays work?

Think about where you can lose the most money the fastest. For example, a carpenter forgets to block a wall for a future fixture installation. A slab is poured with the wrong concrete design mix, sub-base material or expansion joint spacing. A foreman proceeds to install extra work without a signed change order. Or a project manager runs a meeting without a standard agenda and forgets to review some urgent approvals in a timely manner. Where have you lost money? Make a list of the plays you need to write out, and make them a company standard.

5. Design Your Defensive Plays & Strategy

Without a good defense, you can’t win many games. Defensive business strategies are those that ensure you don’t get sued or need to sue to earn your money. We use a checklist on our construction contracts to list how many days notice is required for things like approvals, changes, notices, changes, etc. We also have a general contract checklist to make sure we don’t miss a clause that we wouldn’t want to agree to. We also have a collection policy we follow that includes how we invoice, what we do when not paid and how to file a lien. What system do you follow when you want to protect your rights or when things aren’t going your way?

6. Implement a Training Program

Professional sports teams spend a great amount of their time practicing and training. Football players attend a long spring training camp and then practice and train five or six days a week during the season. They only play games once a week. In business, most companies don’t train or practice very often, if at all. They just hire people and throw them into the game and hope for great results. It takes a concentrated effort and a priority to implement a comprehensive training plan with exercises and drills to improve people’s skills.

To start a simple and effective companywide training program, make a list of the top five things each position must do well to win your games. For example, a project manager must be able to organize, manage and lead meetings. A concrete foreman must be able to ensure all the embedded steel is in the right place before each pour. A bookkeeper must be sure a subcontractor’s invoice is correct and any change orders have been fully executed prior to payment and funded by the customer. Estimators must be sure they have read the project specifications to ensure they have included the correct insurance requirements in their bids. While all of these seem simple, each of them will cost you lots of cash if they are not done properly.

Make training a priority by implementing a weekly twenty minute training session for each department or crew. Pick one or two areas to review with the teams. Then, have them practice doing the task on their own with input and coaching. Remember—no pain, no gain!

7. Develop an Equipment Inventory Management System

Imagine being an equipment manager for a professional football team and not keeping an updated list of what you have, what needs to be fixed and what equipment you’ll need in the future. Without a good equipment inventory management system, your team would eventually show up without enough helmets or uniforms for the next game. In your business, employees rely on trucks, skill saws, backhoes, generators, extension cords and screw guns to get their jobs done. With outdated, broken or missing tools and equipment, it’s impossible to get the job done efficiently

Start by making a complete list of all your tools and equipment. Next to each piece, write out the condition, maintenance schedule and rental value. Then, assign someone in your company to be in charge of managing the process for you. The ultimate goal is to keep your crews working efficiently so you can make as much money as possible.

8. Initiate Business Development Plays

The key to success in any business is customers and lots of them. Even in professional sports, an empty stadium won’t keep a team on the field very long. Is your sales system to sell the most tickets and fill all your seats to the top? Do you regularly contact your repeat and loyal customers and thank them for their business? Do you have an ongoing program to reach out to potential customers and lure them into buying from you? Professional sports teams have an entire department focused 100 percent on selling tickets and taking care of their fans. Without a fan appreciation and attraction program, your company will not reach its bottom line potential.

9. Track Your Financial Plays & Strategy

Did your team win or lose? Without a prominent scoreboard, sports are irrelevant. In your business, the score is of utmost importance. What numbers will you keep score of? I suggest you spend time every week getting to know your numbers—sales, gross profit, net profit, job costs, employee costs, equipment costs, receivables, payables, bid-hit ratio and markup trends. Without a clear knowledge of your financial score, you can’t judge how well your team is playing the game.

Play Business Like a Sport

Business is more fun when you manage like a professional sports team owner or head coach. Every day, ask yourself what decisions you need to make and how a coach would go about making the right decision. In order to win, you’ve got to be operating on all nine cylinders described above. Without any of these chapters in your playbook, you will eventually lose more games than you will win.