The Business Plan

As with all businesses, the importance of a solid business plan shouldn’t be overlooked. I understand that it’s been said before so many times, and this type of planning can seem unnecessary and boring, and they usually just end up in the bottom of a drawer somewhere.  I get it, we’re builders, makers, and creators… not pencil pushers. And this is actually the very reason why so many construction contractors don’t have a business plan – they’d rather shoot themselves in the foot with a nail gun than sit down and draft one up. But, ironically, that’s pretty much what those same guys are doing – shooting themselves in the foot because without a business plan they’re stuck in the slow lane, and can’t get across to the more profitable and rewarding lane of the successful business.

If you don't plan, you don't have a real business.

Now, I worked hard to get to where I am today and the fact that you’re reading this tells me you have too. We’ve been getting up at the crack of dawn for years, we’ve slugged our guts out as trainees and apprentices. Business is about survival, every day we fight to survive, but we also want to build it to a point where business can thrive, and you really diminish your chances of having a successful business without a plan. That’s why, today, we’re looking at business planning for construction contractors.

What is a Business Plan?

Think of a business plan as a blueprint for your business – a written document or ‘road map’ covering things such as information on the business itself, its objectives and operations, the services provided, marketing, finances… the list goes on.

Your business plan doesn’t have to cover all these elements. It can – and should – be tailored to your business and it can be as simple or as complex as you like. But it needs to be detailed enough so that it genuinely helps you achieve your business goals. Your plan should be reviewed yearly and updated whenever your business experiences growth or any major changes that render any aspects of the plan outdated. Failure to do this will see you trailing your competitors.

Putting one together involves some research, finding and compiling information, sketching out a draft or two, and even getting some professional help if needed. Think of it as you would your most potentially lucrative and rewarding project if you must. Whatever your method, get it done. You won’t regret it.

I’d like to take a look at some key focus areas for your business plan.


Some contractors choose to start off with a bit of background – such as:

  • how the company came about
  • the experience of the owners and how they will help drive success
  • the physical location of the main office if it already exists or where it will be

Now on that last point, you might think that office location doesn’t matter, especially if you’re running your business from home as many contractors do initially. And if you are running your business from home, you’ll probably find that most of your work is local to you or at least in a localised area to which you and your team willingly travel every day. Whether the location is already established or not – give this aspect some thought. You and your supervisors, project managers, suppliers, and ground crew need to be located close enough to where the majority of your work is done, not only for logistical reasons but also for the overall success of the business.

Determing Your Target Market

Naturally, the next thing you want to look at in your business plan will be determining your target market. This is the who, what, and where of your ideal project scenario.

  • Who are your ideal clients? What is their purpose for coming to you? What do they want from you that they can’t get from someone else? If it’s you who are approaching them through a tender process, what is it about your business that appeals to them as clients?
  • What is your ideal type of work? Does this present a niche area or are you looking at more generalised construction? What is the size and scale of your ideal projects?
  • Where are your clients located? Where is your work done? Is any part of your work fabricated off-site? If so, what logistics are involved with transporting and installing the work? Where are your projects in relation to you, your team, your supplies, etc.

This section can be an eye-opener, and if you’re struggling to get started with your business plan, you might like to start with researching your target market first as this will lead to a lot more questions and answers.


Next up, we’re looking at personnel. In this section, you want to look at everyone you need to hire to run your business. We’re talking to everyone from administrative and planning right down to the guys who are on the tools every day doing your actual build work.

You may be doing several, or even all of the roles when starting out. At this point, it’s a good practice to create a company structure showing each role, and how you envisage the roles that relate to each other. You would simply put your name under each role, this way you develop a structure for when you are ready to expand, and you have a plan for where and when new staff would fit in, and which roles they would fill or take over from you as your company grows.

Also, consider including where you’ll need to get in sub-contractors or other professionals who are not necessarily part of your business but who will be regular players all the same. Look at how you will go about finding and onboarding your staff and how you’ll source these external services as well. The more research and planning you do on this now, the better you’ll be able to tender for and plan your projects. You’ll also be in a better position when unexpected circumstances arise (and they will) which will require external help.

Costs: Equipment & Labour

Now let’s look at two key areas of costs:

  1. Equipment
  2. Labour

Equipment – Do some research and planning on all of the equipment you’ll need to invest in. Not just tools and machinery, but vehicles, office equipment, technology and software, memberships and subscriptions – whatever you need to get set up and to keep the business running, include it here. But make sure you really do your research so that your purchases fit your need and add real value to your business. Don’t just go out and buy something because ‘Joe Bill and Sons’ are using the same gear. Similarly, don’t just jump on a new software package because it popped up in your inbox at 50% off “for a limited time only”.

As for labour, we looked at this in length the last article. We reviewed who you will need to hire or engage in various capacities, but you also want to look at what each of these types of labour will cost your bottom line. Why is this so important in the business planning stage? Remember, around 90% of construction project cost overruns are attributed to labour costs, and wasted labour hours account for around 30% of the total hours spent on a project. The fact that this is a known risk means you should be planning for this early on. And speaking of education – in the last episode we talked about this being one of the ways in which you can keep your team engaged and efficient and your labour costs down. So factor into your business plan the cost and application of educating, training and coaching your team both initially and ongoing.

Financial Management: Cash Flow

Let’s take look at financial management or cash flow. How will you manage your finances so that each stage of the marketing, planning, and building process runs smoothly – and with room for contingencies? How will you keep track of cash flow so that any red flags are caught early on and any opportunities are captured? We’ll look more closely at methods for recording and monitoring this vital information in a future article because doing so is one of the differences between operating at a survival-only level versus building a business for real long-term growth.

This is one of the most important aspects of your business plan. If the numbers side of things is not your strong point – get some help here. There is absolutely no benefit to skipping over this section or not giving it the attention it deserves. Poor planning and management of cash flow will break a business. Cash flow should never be left to chance, so get this section down pat before you move on to anything else.

Overheads, Profit Margin, & Revenue

Researching and planning the financial management element of your business plan will inevitably lead you to plan for overheads, profit margin, and revenue. Now, of course, you may make your way to these later elements and realise you need to go back and review or amend some earlier elements such as personnel and labour, for example. That’s fine, in fact, that’s good! This is the purpose of first and second drafts and a very good example of the value of a business plan; you’re working out these important elements on paper now before it has the potential to cause problems in real time on real clients’ projects with your very real capital.

So when it comes to overheads – we’re looking at the cumulative cost of running your business as a whole. We’re looking at what wriggle room you have left over for unexpected costs, project delays, clients who won’t pay, skills and material shortages – even a global pandemic and global supply chain issues! What aspects of the cash flow process can be tweaked to ensure your overheads are well and truly covered? Importantly, you’re also looking to factor in safety nets here.

Naturally, working through your cash flow and overheads is going to reveal the state of your profit margins and revenue. Looking at your margins and revenue gives you the ultimate indication of whether or not all of this is worthwhile. And if – on paper – you start to realise this isn’t a feasible venture, don’t sweat it. In fact, pour a drink and congratulate yourself for coming to this conclusion here and now. Then get a good night’s sleep and come back to it in the morning. Go back over your plan and work out what you can change to get the result you want.


Now there’s one more element I want you to include in your business plan… Administration – the very boring bane of many construction contractors’ existence. But one that will save you a lot of headaches. If you’re lucky enough to be able to afford some administrative help on your team, you won’t have to do the whole lot yourself.

Basically, the administration will cover – at a very minimum – the management of all of your important documentation including completing and storing that which is legally required of your business. But in reality, it can cover:

  • Policies and procedures
  • Accounts payable and receivable
  • Timesheets, rosters, and payroll
  • Planning documentation such as spreadsheets, schedules, checklists, and other useful forms or documents
  • Estimating and quoting systems and procedures
  • Software-based management systems
  • Tracking and review tools and processes
  • Work Health and Safety

…and plenty more. Don’t get bogged down and overwhelmed by this aspect of the plan but do make a solid effort of it. Again, get some help if you need to. Having solid administrative processes to bring all of this planning and execution together helps your plan to be realised and actioned. Administration helps us keep track of our projects, our team, our time and our money.

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