How to Create a Business Plan for Your Construction Business

04
April 2019
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Whether you are starting up a new construction business or already have one in place, a solid business plan is always a good idea.

A business plan is essentially a map of what you plan to do and how you plan to do it, acting as a reference point to keep your construction business headed in the right direction.

Start by defining what your business is now and how you envision your business down the road, then – depending on your specific needs – move forward with either a succinct lean startup plan or a more comprehensive traditional business plan.

Establish Business Goals and Identity

The benefit of planning your business is knowing what your business is and what it aspires to be.

Planning your business can help you identify your:

Vision statement: a description of how you see the future of your construction business.
Mission statement: a definition of your construction business’ values and objectives.

Once you’ve identified your goals and established your company identity, it’s time to get down to the business of planning your business.

Choose the Right Business Plan

There are two different ways you can approach a business plan for your construction business. Go lean with a short and simple plan, or get in-depth with a more traditional plan.

Lean Startup Plan

Perhaps you have all of your funding in place and need to establish an outline that will act as a map for you once business is underway. If so, you don’t need to write a complicated business plan, but, instead, can keep it short and sweet. A lean business plan can be a one-page document that includes this basic information:

Overview
What type of construction will you specialize in? Who will your ideal client be? Clearly define the type of work you will be doing and who you will be doing it for.

Earning
What will you charge clients and how will you receive payments? How will you make money during the slow season? Be sure your construction business will be able to stay afloat year-round.

Marketing
How will customers learn about your contractor business? How will you encourage client referrals? Clearly define your marketing plan and use that plan as a map to guide you in your day-to-day marketing endeavors.

Success
Decide which metrics you will use to measure success (i.e. number of clients, annual net income) and what it is that will make determine that your business is a success.

Challenges/ Questions
Write out a list of specific challenges your business may face and a proposed solution for each, as well as any questions you may have about your business along with the answers you have found.

Most businesses that are just getting started need of startup capital. If you’re going to apply for a loan, a lender will typically want more information about your contractor business plan then a lean startup plan can provide.

Traditional Business Plan

Executive Summary
What is your company and why will it be successful? This summary should include information about your service as well as some basic information about your location, employees, and leadership team. When asking for financing you should also include financial information and high-level growth plans.

Company Description
This section should delve into details about the problems that your contractor business will solve, being specific about the clients, organizations, or businesses that you will serve.

How will your contractor business have the competitive advantage? Perhaps your location or experts on your team will give you the competitive edge. Consider this a bragging section but keep it honest. Don’t boast about promises that you can’t come through on.

Market Analysis
Be sure that you have a thorough understanding of both the industry outlook and your target market through competitive research that shows what other construction companies are doing and where their strength lies.

What are your most successful competitors doing, why does it work, and how can you do it better? Ask and answer these essential questions in order to prove that you will be a contender in your chosen market.

Organization and Management
How will your contractor business be structures and who’s going to run it? What is the legal structure of your business?

This section will detail if your company will be a sole proprietorship, a general or limited partnership, or a C or S corporation.

Include a chart that shows who is in charge of the different aspects of your construction business, highlighting how each individual's experience contributes to the success of your business. Including a resume or CV for the key member of your team can add authenticity by showcasing the value that their experience will bring to your business.

Service or Product Line
What services will you be providing and how will it benefit clients? Detail what the lifecycle of your services will look like.

Explain in detail any research or development work you’ve done for the service you’ll be providing.

Marketing and Sales
How will you attract clients? How will you earn their referrals?

A marketing strategy strategy isn’t universal or fixed, but rather something that evolves and changes between markets and over time.

This section should detail your complete sales and marketing strategies so thoroughly that you will be able to easily refer to it when you’re making financial projections down the road.

Funding Request
How much funding will be needed over the next five years? What will you use it for?

Clearly detail how much you need, why, and the specifics of the financing you’re seeking.

Specify if you want equity or debt, which terms you’d like applied, and the amount of time your request will cover.

Be clear about how you’ll use the funds. Will you be using them to pay for:

  • tools
  • equipment
  • materials
  • salary
  • bills (until generating revenue)

Describe your strategic financial plans that include paying off debt or selling your business.

Financial Projections
Provide financial projections that will justify your funding request by proving that your business will be financially successful.

For a contractor business that is already established, be sure to include the following from the past five years:

  • balance sheets
  • income statements
  • cash flow statements

Be sure to list any other collateral you could put against a loan.

If your business is new, provide a thorough projected financial outlook for the next five years that includes forecasted:

  • income statements
  • balance sheets
  • cash flow statement
  • capital expenditure budgets

Be even more specific with first year projections, including quarterly or monthly forecasts.

It’s essential that you both clearly explain your projections and make it clear how they match up to your funding requests. Charts and graphs that outline financial forecasts can be very instrumental in illustrating the story of your contractor business.

Appendix
This section is where you will provide supporting documents or other materials are specifically requested.

Common items you’ll want in this section include:

  • credit histories
  • resumes
  • photos of completed projects
  • letters of reference
  • licenses
  • permits
  • legal documents
  • other contracts

Running a contractor business isn’t just about how well you know your trade, but also how well you can manage financials, marketing, and operations. A well laid plan will help your construction business take its first step and help keep it on track well into the future.

 

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