Drafting a clear well-thought-out plan is the crucial first step in starting a general contractor business. Necessary, indeed, for any commercial venture.
You could start and even run a contracting company without a business plan. But then you’ll be wading blindly into the murky business landscape. That move would leave you unprepared for the twists, turns, and obstacles that lie ahead.
Failing to plan is planning to fail — a cliché saying, but still true. In fact, planning is scientifically proven to increase business performance.
However, appreciating the importance of a general contractor business plan is one thing, and creating one is another. Many entrepreneurs struggle to write effective business plans. And sadly, a bad plan may be worse than no plan at all.
This article addresses “bad” general contracting business plans. More specifically, you’ll find details on the top 10 mistakes you should avoid when writing one for your contracting company.
What to Include in a General Contractor Business Plan
Before going any further, let’s get the basics out of the way. What is a business plan? What does it entail?
A business plan is a formal document that details your company’s goals and objectives. It should also show how you plan to achieve them. Think of it as your company’s blueprint, roadmap, and GPS all rolled into one.
Business plans vary widely from company to company. The document could be dozens of pages or just one page long. It could be highly detailed or a basic overview. It may be written for specific readers or a general audience.
It depends on the nature and size of your contracting business and the purpose of the business plan.
That said, a contracting company business plan generally includes seven key elements:
- Company description. The intro section describes your contracting company. It should highlight its identity, positioning statement, offerings, core values, mission, etc.
- Executive summary. This section is written last but just below the intro. It’s a distilled high-level overview of the business and the plan itself.
- Market analysis and marketing strategies. Market analysis identifies the target market. Your strategies are the proposed plan to leverage that market.
- Business opportunities. What contracting opportunities lie in the target market, and what’s the ideal business model to seize them?
- Financial summary. Your financial plan should detail sales, cash flows, profitability, earning projections, etc.
- Budget. Every contracting company needs an operational budget to keep costs and expenses in check.
- Crew management. This gives a general overview of your team. It mainly describes the work crew, project supervisors, and other HR-related specifics.
There’s more to creating business plans. For an in-depth guide, check out our blog post on how to write a business plan for a construction company.
What Happens if You Don’t Have a Business Plan?
Data from the U.S. Bureau of Labor Statistics (BLS) shows that about 20% of new business ventures fail within the first two years. Meanwhile, 45% fail in the first five years. And 60% of startups never make it past their first decade of operation.
One of the main reasons for these failures is poor planning or the lack thereof.
According to Harvard Business Review, entrepreneurs who write a formal business plan are 16% more likely to succeed than those who don’t.
Don’t get it wrong; a business plan won’t guarantee success for your contracting firm. But skipping the planning phase could set you up for failure. That’s not a risk worth taking.
Here are more specific potential consequences of dismissing a general contractor business plan:
Wasting Time on the Wrong Path
You need the guide rails provided by a contractor business plan.
Otherwise, it’s easy to find yourself on the wrong enterprise path.
A business plan defines your company’s business goals. More importantly, it maps out a distinct route leading to those goals. Lack of a business plan leaves you without a clear line of sight to your destination.
Consequently, you may find yourself jumping from one objective to another. You could be pursuing fleeting goals. A business with no clear heading is doomed to fail.
Missing Opportunities for Business Growth
Entrepreneurs never stand still. They’re always looking for new opportunities to elevate their businesses to success. That’s what you should be doing. But it can be difficult without a business plan.
You need a solid plan to identify and seize worthwhile contracting opportunities. Otherwise, golden chances to grow your business will pass you by.
A big part of business planning involves financial management. This is the Achilles’ heel of small and medium-sized enterprises. Cash flow mismanagement is the top reason most small businesses fail.
A comprehensive business plan covers budgeting, expected earnings, and financing. It should also account for pricing for current and future contracting projects. This ensures cash is always available when needed.
Without a solid contractor business plan, you’ll inevitably face crippling financial surprises down the road.
Losing to Rival Contractor Companies
It’s essential to understand your place in the market. Know where your brand stands among other general contractors in your service area.
Conducting a thorough SWOT analysis helps you identify and gauge your competition. Moreover, it helps differentiate your contractor brand in order to stand out in a crowded market.
SWOT, competitor, and market analyses are all part of business planning. With these, you’ll have a fighting chance against well-organized rivals.
Working without a plan often means solving problems as they arise. Unfortunately, a break-fix approach is a risky way to resolve business challenges. You’ll find yourself scrabbling to put out fires using whatever resources are available.
In the chaos, you may stretch your resources too thin. The slightest hiccups could easily lead to understaffed or overworked construction crews, project delays, cost overruns, and lost revenue.
Making Risky and Regretful Business Decisions
Without a business plan, your business decisions will not be as adequately informed or calculated.
A business plan is a roadmap for your contracting enterprise. It reveals all the critical decisions that must be made at every turn.
Bad decisions are severely damaging. Ill-advised business decisions are not only costly but could jeopardize your entire company.
The Top 10 Things to Avoid When Writing a General Contractor Business Plan
A business plan only works when it’s well written. So, how do you create an effective commercial construction business plan?
A good way to learn how to write a general contractor business plan is to know what not to do. To that end, here are 10 common mistakes you should avoid when developing your business plan:
Not Defining the Business Plan’s Purpose
Business plans are created with a specific purpose. You should have a target audience in mind. What’s the purpose of your business plan? Who’s going to read it?
You can write a business plan to pitch to potential investors or partners. A business plan is also handy when trying to raise money for the company. And some business plans are for your eyes only.
Each of these business plans is written differently to address specific needs. In other words, you can’t have a one-size-fits-all contractor business plan.
A business plan reflects your understanding of the construction industry. It shows your company’s niche. So, be sure to conduct thorough research into every aspect before writing down the plan.
Profile your competitors, study the market, and conduct a detailed SWOT analysis. Use the research findings to back your business ideas.
You’ll need concrete facts and figures. Good data can justify your business model. It can support financial projections and any other claims made in the business plan.
Consistency is key when developing business documents. That’s consistency in visuals, flow, and information.
First, use a professional general contractor business plan template. It’s a great way to maintain consistent formatting, styling, and content flow.
Second, ensure the business plan delivers a clear message. Avoid sending mixed signals with conflicting information. For instance, do not quote statistics that contradict the point you’re trying to make.
Hiding Your Weaknesses
No business is perfect. Every business has at least one weakness.
Do not hide your company’s weaknesses. Then again, don’t dwell on them too much.
Your business plan should acknowledge your weaknesses. Do not present them as faults. They should be viewed as areas for improvement. Explain how you hope to overcome those weaknesses or turn them into strengths.
“Our strength grows out of our weakness…”— Ralph Waldo Emerson.
Setting Unrealistic Goals
It’s great to be optimistic when starting or running a contracting company. But overambition is a common business planning mistake.
Entrepreneurs often make this mistake in financial and growth projections. On paper, it might seem like your business could take off overnight. Unfortunately, numbers don’t always align so perfectly in the real world.
Do not get carried away by projection figures. Focus on achievable goals. Aiming too high could mislead your investors and stockholders. You could even talk yourself into taking risky bets.
Skipping Important Sections
Business plans are divided into various sections. Every section plays a crucial role in the document. Skipping any one of them omits important information. Missing information means the document is incomplete.
However, depending on the target audience, you may withhold some sections. For instance, the parts describing the company may not be necessary for an internal contractor’s business plan.
Writing a Book
There is such a thing as “too much information” in a business plan.
Sure, there’s a lot you could say about your general contracting business. Just don’t put it all in your business plan.
A business plan is meant to be brief and direct. A few pages of text are enough to cover everything. Writing more than that will be oversharing.
Again, keep your audience in mind when creating a contractor business plan. You want to avoid bombarding the readers with irrelevant information. Keep it simple.
Avoid making sloppy mistakes. Typos, omissions, misspells, and grammatical errors have no place in your business plan. Such careless mistakes show a lack of professionalism. That reflects poorly not only on the business plan but on your contracting firm as a whole.
It’s actually quite easy to catch these errors. Have an extra set of eyes read through the document. If possible, have the final draft spell-checked and fact-checked by everyone involved in making it.
Overhyping Your Contractor Brand
Keep in mind that a business plan is not a marketing tool. So, refrain from overly promoting your contracting company.
It’s understandable to be excited about a new business idea. But try not to express that excitement in the business plan. Avoid writing in a “salesy” tone or going on about the merits of the venture. Instead, let the facts and numbers speak for themselves.
Not Reviewing the Business Plan
In business, not everything goes as planned. Sometimes, even a good business plan veers off course. That doesn’t necessarily make you a bad planner. It tells you that business planning is a continuous process.
In the highly dynamic construction industry, a single business plan won’t cut it. A contractor’s business plan needs regular reviews. Updated versions will help keep up with new challenges, threats, and opportunities.
Writing just one version of a business plan and calling it a day leaves you unprepared for inevitable changes in the business.
The biggest mistake you can make when writing a general contractor business plan is failing to write one at all. Or not using the business plan to manage your business. That’s no different than having not written a business plan in the first place.
You can still make mistakes even when fully committed to creating and using a contracting business plan. Luckily, you now know how those mistakes are made and, more importantly, how to avoid them.