How to Create a Construction Business Plan (And Why You Desperately Need One)

Do you have a business plan for your building company?

Without a construction business plan, you are setting yourself up for failure...

Imagine if you went to build a house for a client without a plan?!

Establishing the strong foundations of a business is much the same. It requires diligent planning and the coordination of many complex aspects to be successful.

Creating and maintaining a solid business plan is essential for aligning your goals and strategies, ensuring streamlined operations, and managing your finances effectively. Many custom home builders struggle with this critical aspect, leading to operational inefficiencies and missed growth opportunities.

In this article, we’ll explore the importance of a construction business plan, detail the essential components of a Quarterly Strategic Plan (QSP), and share best practices for effective planning. Keep reading to master your business planning process.

The Importance of a Construction Business Plan

A construction business plan is more than a roadmap; it's a strategic tool that aligns your business goals and strategies. A home builder business plan can help you:

Streamline Operations: Ensuring every team member knows their role and responsibilities, which reduces inefficiencies.
Improve Marketing: Targeting the right audience with the right message.
Enhance Financial Management: Keeping track of expenses and revenue for better budgeting and forecasting.

While having a business plan before starting a construction business is ideal, it’s equally essential for established companies to continually update their plans. APB recommends creating a detailed three-year plan with a roadmap for the next 90 days, known as a QSP. This approach ensures that your long-term goals are broken down into manageable, actionable steps, keeping your business on track for sustained growth.

Essential Components of a Construction Business Plan

A best practice construction business plan is structured to cover all critical aspects of your business. APB’s QSP breaks this down into components, ensuring every area of your business aligns with your strategic goals. Let’s take a closer look.

Core Values

Core values form the foundation of your building company’s culture and operations. These principles guide decision-making and behaviour, ensuring consistency whether you’re present or not.

Core values aren’t just catchy phrases; they must be practical and understandable for everyone on the team. They set the standard for how your company is perceived internally and externally, helping to build a cohesive team and establish a strong reputation in the market.

By clearly defining and adhering to your core values, you create a reliable and trustworthy business environment.

Purpose

The purpose of your building company goes beyond just making money; it’s your reason for existing. This purpose should resonate with your core values and align with the fundamental question of ‘why’ your business matters.

To define your purpose, start with a single word that encapsulates your mission — such as "community," "excellence," or "comfort" — and then expand it into a few clear, practical sentences.

A strong, heartfelt purpose drives your team’s enthusiasm and commitment, inspiring both employees and customers and fostering long-term loyalty and success.

Big Hairy Audacious Goal (BHAG)

A Big Hairy Audacious Goal (BHAG), coined by Jim Collins and Jerry Porras in "Built to Last," is a long-term, ambitious objective that drives progress and motivates your team.

A BHAG should be clear, compelling, and easy to understand. This goal is a powerful vision that can inspire and unite your team and push your business toward extraordinary achievements.

Setting a BHAG creates a focal point that keeps everyone aligned and working towards a common objective, so your business remains forward-thinking and dynamic.

SWOT Analysis

A SWOT analysis is a strategic tool for evaluating your company’s Strengths, Weaknesses, Opportunities, and Threats. It provides an overview of internal and external factors impacting your business.

Strengths: Identifies what your company excels at, such as a skilled workforce or a strong reputation.
Weaknesses: Recognises areas for improvement, like inefficient processes or limited marketing reach.
Opportunities: Investigates external improvement opportunities, such as market growth, new technologies, or government grants.
Threats: Identifies challenges like regulatory changes, economic downturns, or increased competition.

A thorough SWOT analysis is necessary for setting realistic goals and developing effective business strategies. Regularly revisiting your analysis will keep it relevant as your business evolves.

Goal Setting: 3 Years

Setting three-year goals provides a clear, fixed point in the future to aim for and serves as a benchmark for your building company’s progress. Refining these goals keeps your business on a steady path toward long-term success.

Envision your building company in three years, considering key aspects such as the number of homes built, team size, revenue targets, and profitability. Focus on significant milestones like hiring key staff, expanding office space, and achieving financial targets.

Lock in this future date and don't adjust it every quarter; keeping it consistent is crucial for measuring your progress accurately.

Goal Setting: 1 Year

After setting your three-year goals, focus on what you want to achieve in the next 12 months. This one-year goal should be a fixed date, just like your three-year target, providing a clear benchmark to aim for.

Start by considering your current situation and the changes you plan to make. Your one-year priorities should align with your three-year objectives, serving as stepping stones toward your long-term vision.

Refine these goals as needed so they are realistic and actionable, and use them to guide your quarterly planning sessions.

Goal Setting: 90 Days

Setting 90-day goals helps you break down your long-term plans into actionable steps. These short-term goals align with your one-year and three-year objectives and make sure each action moves you closer to your ultimate vision.

Review your strategic plan, including your SWOT analysis, BHAG, and priorities, to define specific targets for the next 90 days. Focus on what you can realistically achieve in the next quarter, basing your goals on actual data, benchmarks, and informed predictions.

This structured approach allows for measurable progress and timely adjustments, keeping your business on track for success.

Ideas & Stop Doing Lists

The Ideas & Stop Doing Lists help you refine your focus and strategy. Use these lists to keep your strategic planning dynamic and effective.

The Ideas List is a fluid space to jot down potential strategies and innovations as they arise. Capturing these for later review helps ensure that valuable ideas aren't lost.

The Stop Doing List identifies tasks that hinder progress. Reflect on activities that don't align with your goals, such as unnecessary meetings or over-committing. Eliminating these distractions will help you be more efficient and reach your goals more quickly.

Rocks

Rocks are the key projects or priorities to tackle within the next 90 days. Unlike general 90-day goals, rocks are specific, significant tasks directly supporting your strategic objectives. They should be clearly defined and actionable.

Identify your rocks by reviewing your ideas, Stop Doing list, SWOT analysis, BHAG, and purpose. Assign each rock a responsible person and set a clear deadline. Limit each individual to no more than three rocks to maintain focus and efficiency.

Creating Your Construction Business Plan: 5 Best Practices

Developing a solid construction business plan requires careful preparation and strategic involvement. Here are a few best practices and tips that will help you.

Prepare for Your Strategy Session

Preparation is vital to a productive strategy session. We know your day is busy, but it’s vital to remove yourself from the daily business hustle and dedicate four to eight uninterrupted hours to strategic thinking. This focused time allows for deep reflection and planning, free from distractions.

Choose a quiet, off-site location and gather all necessary materials, including financial reports, KPIs, previous business plans, and a notepad for calculations and notes. Ensure you have the basics like cold water, a calculator, and internet access. Setting clear expectations and providing relevant materials in advance helps your team contribute effectively.

Get the Right People Involved

Involving the right people in your strategic planning process is fundamental. You need the perspectives of key stakeholders to ensure your plan is realistic and geared toward achieving your long-term objectives.

So, who are these key stakeholders? Typically, this means the owners, business partners, and other significant influencers who deeply understand your building company's operations and goals. Day-to-day staff and middle management should not be involved at this stage.

If you’re a solo operator, consider involving a trusted mentor or business coach to provide accountability and additional insights.

Be Precise With Your BHAG

A clear BHAG will go a long way to motivate your team and drive progress. When developing your BHAG, be as precise as possible.

APB recommends four types of BHAGs to create a compelling vision that aligns with your long-term objectives:

KPI-driven: Measurable goals, such as "Building 200 homes in your city."
Competitor-driven: Goals focused on outperforming a particular competitor.
Role model-driven: Aspirational goals, like "Becoming the top custom home builder in your region."
Transformation-driven: Goals aiming to innovate and transform industry practices.

To craft a precise BHAG, start by identifying the core objective that will significantly impact your business. Ensure it is ambitious yet attainable within the set timeframe. Use specific, measurable terms to define your goal so you can track and assess progress accurately.

For example, instead of a vague goal like "grow the business," set a clear target like "increase annual revenue by 50% within three years."

Engage your team in the process to ensure buy-in and commitment. A well-defined BHAG aligns with your company's vision and serves as a motivational and strategic anchor, guiding daily actions and long-term planning.

Regularly review and adjust your BHAG as needed to keep it relevant and aligned.

Do a Deep SWOT Analysis

Thoroughly analysing your company’s strengths, weaknesses, opportunities, and threats provides insights that might be overlooked in a superficial assessment.

To conduct a thorough SWOT analysis, begin by dedicating sufficient time — at least 30 minutes per section. Use zero-based thinking: start with a blank template and avoid preconceived notions. This method encourages fresh, unbiased insights and helps you accurately assess your business environment.

If working with a team, have each member prepare their own SWOT analysis independently first, then discuss collectively to incorporate diverse perspectives. This collaborative approach ensures a well-rounded understanding of your company's internal and external factors.

During your analysis, ask detailed questions:

Strengths: What unique advantages does your company have? What do you do better than others? Identify tangible assets like skilled employees, strong brand reputation, and robust financial health.
Weaknesses: What areas need improvement? Where do potential risks lie? Consider aspects like outdated technology, skill gaps, or inefficient processes.
Opportunities: What market trends, new technologies, or external factors can you exploit? Look for growth areas such as emerging markets, partnerships, or regulatory changes that favour your business.
Threats: What external challenges could impact your business? Consider threats like regulatory changes, economic downturns, and competitive actions.

Taking the time to consider these factors thoroughly allows you to create a solid and well-informed strategic plan. Regularly revisiting and updating your SWOT analysis ensures that your strategy remains relevant and adaptive to changing conditions.

Focus on the Right Goal Setting Metrics

APB recommends focusing on both Lag Indicators and Lead Indicators to gain a comprehensive view of your business performance.

Lag Indicators reflect past performance and help you understand the results of your efforts. Key lag indicators include:

Revenue: The total income your company generates.
Gross Profit: Revenue minus the cost of goods sold, indicating profitability.
Net Profit: Gross profit minus all other expenses, showing your overall financial health.
Cashflow: Ensures you have enough cash to cover liabilities and operational expenses.

Lead Indicators predict future success and guide your proactive efforts. Key lead indicators include:

Number of Leads: Potential clients who have shown interest in your services.
Conversion Rates: The percentage of leads that turn into paying customers.
Ad Spend: Investment in advertising to generate leads and sales.
Preliminary Contracts: Agreements made before the final contract, indicating future business.

By monitoring these metrics, you can make data-driven decisions that keep your business on track. For example, understanding your revenue targets and gross profit margins helps you set realistic goals and allocate resources effectively. Tracking lead indicators like ad spend and conversion rates allows you to adjust your marketing strategies to attract high-quality leads.

Your Next Steps

Ready to move from planning to action? Membership with APB can help you implement the systems and strategies that will take your building company to the next level.

With access to 50+ ready-made systems and a growing community of builders like you, you'll have the support and resources you need to reach your goals.

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