Business Planning, Part I by Ruth King When a customer calls wanting you to replace his heating and air conditioning system, you usually follow a specific process...whether or not it is "written down."  It might go something like this: salesperson looks at the job, determines the best system for the customer based on his needs, desires, and the configuration of the home, and gets his approval on the contract.  Then, another person gathers the materials necessary for the job and explains the job to the installation crew.  The crew installs the system and someone collects for the job.  Finally, someone follows up with the customer. There is a procedure or a plan to accomplish this.  The better "your plan" the more efficient you are and the more profit you make. You don't install a system without a plan....even if the plan is just in your head.  If you do, then you run the risk of putting the wrong equipment in, not doing what you promised the customer, having to run to the supply house to pick up forgotten parts, or a poor installation which takes longer than the budgeted hours.  Having "an idea" rather than a "concrete plan" is a formula for losing money on a job. If you plan your jobs you can easily plan your business. Most contractors think that a business plan is many, many pages.  It doesn't have to be.  The simple one is a list of goals, a marketing flow chart and budget, a cash flow budget, and a sales/income statement projection.  That's it.  Five pieces of paper.  It does take time to do it.  However, it is a lot better to have a plan...as some wise person said, if you don't plan you'll get somewhere but probably not where you want to go. Over the next few weeks I will "put the pieces together" for your business plan.  If this seems familiar to you, then you are right.  This series will be very similar to the one I wrote last year.  I believe that every year you should look at a planning process and this is one of the best ways to do it. Let's get started.  What is really happening with your business?  Many times I hear that the owner of the business is the last to know when something is happening.  Maybe a key employee is unhappy and looking for a job, or a project is not meeting budget, or there is another issue that is being "kept from the boss". So, when you start looking for what you want to accomplish in 2005, make sure that you get out of your office, into service trucks, and on job sites.  Talk to customers yourself. Find out what is really happening so that you can make reasonable plans for 2005. Your goals should include sales goals, mix of business goals, number of customer goals, number of residential service agreements and commercial service contract goals, gross margin goals, net profit goals, and personal income goals (which you don't have to share with your employees). Here are some questions to ask when determining the goals: 1.  What went right in 2004? 2.  What went wrong and what did you learn from it so that you don't do it again? 3.  How many customers do you have? (an active customer is one who has done business with you in the past 18 months)? 4.  What did your competition do this year?  Were there any new entrants who have a desire the run a profitable business? Are you current competitors getting better?  Stronger? Taking sales away from you?  Disappearing and you aren't running into them any more?  5.  Are you happy with the personnel who work with you? If not, what are you planning to do about the situation? Once you have determined the goals for 2005 with your employees, put them where everyone can see them.  If the goal is "at the top of the stairs", you have to determine the stair steps, or objectives, to achieve the goals.    Break the goals down into monthly objectives. Put the objectives somewhere you can see them and review them each month.  Check off each objective as you complete it. Writing the goals is easy. Accomplishing the goals is more difficult.  Why? Because the actions required to accomplish the goals require discipline.  And, usually a change in behavior.  This behavioral change is the difficult part.  The "experts" say that it takes 21 days to change a habit.  Even after you change the habit for more than 21 days you can go back to your old ways.  Think about how many people quit smoking for years and then start again one day when the stress gets too bad. So, to do the things that you want to do requires discipline to do them and commitment for the long term.  If you want to put the "easy business plan" together on a weekly basis as you are reading these Contractor Cents, the homework assignment for this week is to answer the goals questions. To contact Ruth King call 800-511-6844 or send an email to ruthking@hvacchannel.tv This article is reprinted with permission from Contractor Cents.