There are two business planning tools I wouldn’t consider entering 2009 without. Both are important every year, but they will be critical in the months ahead.
The first is your budget, which shows how you will achieve a profit. The second is your marketing plan, which shows how you will attract the right kind of leads that will generate the right kind of sales.
With the economy in an uproar, budgeting aggressively has never been more important. Our most successful clients live their budget; many say that the knowledge provided by it proved crucial to their companies’ relative health during the last 12 months.
If you’ve ignored the budgeting process in the past, reverse course now! There is much you can control, and you need a detailed map to negotiate these treacherous business waters.
Plan realistically. Hunker down and get back to basics. There are three numbers you need to hit correctly: volume, gross profit percentage, and overhead percentage. Do not overstate either of the first two, or underestimate the third, or your plan will be in trouble.
Share risk. Get buy-in. Bring your staff into your inner circle and ask them to scrutinize every line item in overhead and job costs. Pick their best money-saving or marketing ideas, and assign a champion to drive their implementation and develop metrics to measure their success on a regular basis.
Review and adjust. Every month, meet with your staff to review actual numbers against your budget and forecast the rest of the year. Pinpoint where the company stands, and develop an action plan to immediately get your plan back into balance.
Have a backup plan in your desk drawer. If your budget was too rosy, know exactly what to do and when to do it in order to return to profitability. Having this plan on hand will enable you to be nimble and make fast, effective changes.
Fear that you and your staff lack the expertise to develop this budget? Bring in your accountant or a consultant. The expense will be well worth it.
If you don’t have a marketing plan, create a short, concise one. Guidelines:
Do the math. How many leads do you need? To get this number, divide your sales goal by your average job size. This is the number of jobs you need to sell. Then multiply this number by the number of raw leads you typically get for every actual sale you make. For instance:
$1 million in sales ÷ $25,000 average job size = you need 40 sales
40 sales x 8 raw leads = you need 320 leads
Be aware that many remodelers are working twice as hard to close sales. You may need to double your lead goal.
Diversify.In today’s market, I recommend that full-service remodelers budget at least 3% to 4% of their volume for marketing. Spread this money between many activities; if one is a bust, the others will help support your lead flow.
Focus on two areas: your “circle of influence” (past clients and friends of the company) and opportunities for face-to-face interaction (seminars, networking, local charitable work, etc.). Promote your company, ask for referrals, and follow up with thank-you calls and notes.
Target your demographics. For marketing outside your circle, peruse your client records to identify the household income range, neighborhoods, and types of jobs where you have historically made the most money and done the best work. Use this information to hone your marketing to your most profitable clients.
Your leadership has never been more important than it will be in 2009. Be disciplined and strong, and inspire your team to rise to the many challenges ahead.
—Linda Case is founder of Remodelers Advantage, in Laurel, Md., a company providing business solutions through a network of experts and peers. 301.490.5260; email@example.com; www.remodelersadvantage.com.