The engine that could: how contractors can produce a solid business plan

May 31, 2017
If you have a good solid business foundation, it means one thing … you have money. Or, you have a good idea of where you’re going to get it. Money is the foundation of any viable company, and it has to come before a business plan can be marked out well and achieved.  

A solid business plan is what enables success in any professional endeavor. But, contrary to its importance, many contractors haven’t produced a true business plan, and if they have, they struggle following through with it. Think about it, how many have written a business plan showing “X” percent net profit at the end of the year and actually achieved it? Anybody? My guess, very few.

Image: iStock/ThinkStock.

It might look good on paper, but when it’s time to put the petal to the metal, the engine burns up fast. Why do business plans often fail? Well, two reasons. They have no money and no marketing strategy. If you have no money to start and no plan to accumulate more … your chances of seeing any profit at the end of the year is little to none.      

Money is foundation

If you have a good solid business foundation, it means one thing … you have money.  Or, you have a good idea of where you’re going to get it. Money is the foundation of any viable company, and it has to come before a business plan can be marked out well and achieved.  If you don’t have money, you don’t have a business, you just have liability.  Or, just a functioning black hole of increasing debt.  There is no real future if this is the case.  If you don’t commit to putting money in the bank and letting it accumulate, you have no chance of experiencing longevity. My recommendation to all of my clients, who are existing business owners is, to function at bare minimum, you must have $20,000 in a savings account and $20,000 in an everyday operating account…with all bills paid.   Then we move up from there. 

Accumulate money

The engine of any business is in its ability to generate cash and in turn generate enough activity to keep the machine running and the phones ringing.  The calls must be high profit generating, clearly rising over operating expenses. If this is not happening, the stress on a contractor can be paralyzing.  But, once this engine is turned on and cash is being accumulated, not spent, then you can begin to fashion a business plan. What does that mean, you can start building a company on tangible success, not hopes and dreams. 

Build from financial strength

Out of desperation many contractors try to build up their bank accounts with performance type models. Disclaimer, this doesn’t mean performance pay is a bad idea. When I was a contractor, I used a performance pay model for my installers and it was very successful. Why does it not work all the time though? Because, when decisions are made from a position of financial desperation they usually fail. The pressure that these models can cause, creates frustration and lowers employee retention quite often. The “machine” is not powerful enough to supply enough work to make the performance plan succeed. The idea that incentives cause the inspiration needed to improve performance is true, but not in every case, and typically not for the long haul. Why is this strategy often implemented? Contractors try to “fix” their cash flow problems, and when the model stops working, the blame is typically put on the service techs. Which means, performance pay is initiated to solve a business model that is not working to begin with.  Consider it when what you are already doing is functioning successfully; pay to enhance existing performance, not to tune your barely running engine. This is the same for marketing. Contractors think it’s important to establish their brand. But initial cash flow must be used to fuel the engine. This is one of the reasons many of us get stuck in “feast or famine” phases for years.

Build the engine first

In 1972 the Honda Civic was introduced in North America. The 1169cc engine along with the small light body style quickly became popular. And, the civic became the foundation of what is today, not only a passenger car dynasty, but a racing phenomenon. Much like with the Civic, businesses must be built on a solid and powerful engine.  The Civic was introduced right before the 1973 oil crisis and was the choice car because of its ability to run on leaded and unleaded fuel.  A well-built business has a thought-out plan, financial strength, and the capability to weather unpredicted storms. The only way to have any of those is to have a bank account that runs on overflow…not on drip. The only way to do this is with a plan that is made successful by actual profit. The accumulation of cash is the only way to fuel the engine of any business with the hopes of seeing tomorrow.      

About the Author

Rodney Koop | Founder/CEO

Rodney Koop, CEO and Founder of The New Flat Rate, is a motivational speaker, author, entrepreneur and solutions based enthusiast. Over the last three decades, Koop has founded and sold HVAC, electrical and plumbing service companies. Koop is a Master Electrician holding 10 unrestricted electrical licenses and has helped to write and qualify exam questions for state board testing. During his career, Koop has contributed numerous articles and industry assessments to multiple publications and recently authored his first book. Koop is dedicated to challenging all audiences to utilize their brains in creative ways for growing their companies.

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