Surveys by various construction industry trade and professional organizations indicate most contractors remain generally optimistic about their prospects for 2019. Yet most also note some concerns over the effects of tariffs, the future of interest rates, and other economic uncertainties.
In the face of these concerns, now is an opportune time to revisit your strategic plan to determine if it’s viable in today’s market or to create a plan if you don’t already have one. Typically, strategic planning involves a handful of major components:
• Vision statement
• Mission statement
• Core values
• Goals, objectives, and key strategies
• Monitoring and follow-up
• Financial plan and budget
These components are essential parts of your strategic plan, but for now let’s focus on the goals, objectives, and key strategies. These elements are most likely to need updating as conditions change. For a construction business in today’s economy, this review generally involves at least six key areas:
1) Sales. Sales goals should be defined in both real dollars and as year-to-year percentage increases. Further, you should break down your sales goals by business segment, type of work, location, and other key variables. There should be an assigned leader for each segment who is responsible for developing and monitoring the sales plan. Remember: what is measured, is managed.
2) Gross profit and net income. Goals for gross and net profit also should be stated as both real dollars and annual percentage increases. Define strategies for managing and controlling major direct cost components such as labor, materials, subcontractors, and equipment costs, as well as indirect and overhead costs.
3) Potential geographic expansion. Most (but not all) construction happens in large population concentrations or areas of growing population. Have you considered your company’s ability to expand its footprint? Your strategic plan should discuss how you could best achieve this—whether through organic growth, acquisition, or a combination of the two. Ideally, you’ll be able to achieve the right balance of expansion and controlled growth.
4) Potential new business lines or markets. The construction industry is notoriously cyclical, so it’s good to seek opportunities for developing a service line that creates a steady source of revenue. It’s also good practice to look at other related markets. For example, an irrigation systems installer might expand to offer service contracts and inspections. Similarly, an electrical contractor who performs “inside” work might consider expanding to take on “outside” high voltage or disaster recovery work as well.
5) Personnel. For several years, finding qualified workers has consistently ranked as most contractors’ number one concern. Your strategic plan needs to specifically address recruitment, training, employee advancement, and safety to ensure you attract and retain top performers. This applies to both skilled trades and key management personnel.
6) Technology. Technology is revolutionizing many aspects of the construction industry. Advances in building information modeling, robotics, drones, satellite and cloud technology, and numerous other fields are changing both the jobsite and the office. Your strategic plan should offer a systematic approach for evaluating and adopting the most promising of these new tools.
Of course, technology’s game-changing impact is being felt far beyond the construction industry. Virtually every segment of today’s economy is changing dramatically because of the digital revolution.
Nevertheless, even as they become more reliant on technology, consumers and businesses will continue to need conventional “bricks and mortar” buildings and infrastructure. As you work to anticipate and respond to these trends in the coming years, having a carefully considered and up-to-date strategic plan will be a useful management tool.