1.

Elements of Running A Successful Construction Business

Company Organization:
The objective is to show control, efficiency and effectiveness of standard administrative
functions. Also to outline how the company will operate, to show lines of authority and
chain of command, and to clarify responsibility.
What is your organization structure - organization charts become visual depictions of
how your company is to operate. Structure typically centers around administrative,
financial, personnel or human resources, technology, field operations, sales and
marketing, customer service, manufacturing or production, product or service delivery,
quality control, estimating, executive management and leadership.

Does everyone know who reports I answers to whom?

Are clear lines of authority and responsibility established?
Do you have a bookkeeping and accounting system set up?
What are your administrative policies, procedures and controls for management
reporting?
What are your administrative policies, procedures and controls for employee training,
probation periods, promotions, incentives, discipline, coaching, etc?
What are your administrative policies, procedures and controls for travel, phone usage,
supplies, car allowance and other expenses?
What are your management philosophies and style?
How will you motivate employees?
How will you create a positive work environment?
How will you manage for goal attainment?
How will you encourage creativity and entrepreneurship?
How will you foster commitment and loyalty in your employees?
What is your current personnel makeup?
What is your average or expected turnover?

Elements of Running A Successful Construction Business

What are your personnel needs?

How will you attract and compensate employees?
How do your personnel know where they stand?
What are they supposed to do? (Job descriptions)
When are they supposed to do it?
How are they supposed to do it?
What are the expectations of management and prospects for employee
advancement?

Common Mistakes to Avoid:

Using a poor or inadequate system of accounting and other business records

Failing to have some preconceived notions on how to manage and encourage
the best possible performance.
Not having enough personnel to accomplish the tasks at hand.
Being overstaffed; too many people doing too little work.
Established no clear lines of authority or accountability; having poor management
control systems.
Planning inadequately for future staff needs in light of growth or other changes.
Adopting poor training and orientation procedures for personnel.
Offering substandard compensation and incentives.
Having top-heavy management (too many chiefs and not enough Indians to do
the work)
Failing to demonstrate company purpose and commitment to team goals (not
showing that what is good for the whole is good for the parts).

Management
Management has to do with the tasks, getting work done. Management has to do with
overseeing and inspecting the work to be sure that it is done correctly the first time for
quality.
Management has to do with setting up the proper controls, processes, standards,
practices and systems that allows work to get done efficiently and effectively.
Management is not leadership. Both management and leadership is needed within an
organization for it to be successful.

Elements of Running A Successful Construction Business

Leadership
Leadership has to do with people and culture, and creating an environment where
people enjoy going to work. Leadership has to do with coaching, supporting, motivating
and inspiring employees to do their best.
Leadership is what company owners and top management do to bring out the best in
their people. Leadership is all about setting a good example and modeling the behavior
you want your employees to practice.
Leadership is something that can be learned, cultivated and developed over time.
Leadership is about maximizing employees' performance by building them into a strong,
cohesive team who are working for a common goal or vision.
Leadership is about excellence and helping to move the company forward so the
company and employees can reap the benefits of sustained success and growth.
Leadership is not management.

Elements of Running A Successful Construction Business

Outline for Business Plan

I.

COVER LETTER
A. Nature of Business
B. Solicitation for Financing
C. How Much?
D. Purpose
E. Repayment Plan
F. Security Collateralization

II. EXECUTIVE SUMMARY

Ill. PRODUCT I SERVICE DESCRIPTION
A. lntro to Your Company
B. Company History
C. Technical Description of Product I Service
1. General Contracting Function
a. Job Management
b. Mobilization
c. Financing
2. In-house Production Function
a. Capabilities
b. Mobilization
3. Subcontracting Function
D. SIC Code and Description
E. Summary of Jobs
1. Description of Best Three Representational Jobs
a. Restaurant
b. Finish Out
c. Specialty I Commercial
2. Complete Job List
3. Illustrations, Pictures, Etc.
IV. ENVIRONMENTALANALYSIS
A. Economic Overview
1.Economic Trends and Effects On:
a. New Starts
b. Finish Out I Remodeling
c. Contract Prices and Bidding Process
1. Suppliers
2. Efficiency
d. Business Cycle
B. Consumers- Potential Buyers
1. National
2. Texas
3. Metroplex
a. Categorical description of type of buildings, volume,

BASICS- Outline for Business Plan

C.

D.

E.
F.
G.

H.

cost/profit, technical differences, etc.

b. Past, Present, Future
4. Need for GC Services
5. Target Market and Customers
a. General Description and Rationale
1. Type of Building
2. Geographical Emphasis
b. Big Projects
c. Small Projects
1. Cost I Volume I Profit
2. Cash Flow Considerations
6. Total Market Share
a. Share of Market
b. Sales Projections
Regulatory Environment
1. Labor Availability
2. Zoning I Permits
3. Bonding
4. Insurance
Competition
1. Area Contractors
a. Sales
b. Employment
c. Scope of Activity
d. Geographic Scope
e. Customer Base
f. Strengths and Weaknesses
g. Competitive Advantages I Disadvantages
Suppliers
Subcontractors
Labor
1. Availability
2. Price Stability
3. Business Relationships
Bidding Process
1. Large vs. Small Projects
2. Procedures
3. Cost I Volume I Profit
a. Original Contract
b. Change Orders
4. Contract Procurement
a. Determination of Price
b. Legal Aspects
c. Bad Debt and Credit Checking
d. Negotiations

BASICS- Outline for Business Plan

V. FORM OF ORGANIZATION AND MANAGEMENT

A. Legal Form of Organization
1. Present Rationale
2. Plans for the Future
B. Organization
1. Organizational Chart
2. Job Descriptions
3. Vision, Mission and Core Values
4. Standard Operating Procedures- SOP's
C. Principles
1. Business Background
2. Management Experience
3. Work Experience
4. Education
5. Personal Info.
D. Compensation Policies
1. Base Salary and Benefit Package
2. Incentives and Bonus Plan
E. Professional Services
1. Legal
2. Accounting
3. Banking
4. Insurance & Bonding
5. Public Relations
6. Consulting
VI. CASH CYCLE DEVELOPMENT
A. Facilities and Fixed Overhead
1. Location
2. Capital Requirements
3. Personnel
4. Overhead
5. General Administration Budget
B. Variable Expenses
1. Supplier Terms
2. Subs
3. Labor
4. Other
C. Revenues
1. Contracts
a. Billing Cycle
b. Warranties
2. Other Revenue Sources
D. Cash Cycle
1. Illustrations and Descriptions
2. Methods of Control
BASICS- Outline for Business Plan

VII.
A.
B.

C.
D.

E.

F.

VIII.
A.

B.

C.
D.

MARKETING AND SALES

Industry Overview
Sources and New Business
1. Architects
2. Real Estate Personnel
3. Designers
4. Public Records I Government
5. Private Services
6. Owners and Past Clients
7. Networking
8. Professional and Trade Associations, ie. AGC
9. Reputation and Word of Mouth
Geographic Feasability
Marketing Objectives
1. Sales
2. Profit
3. Growth
4. Target Market
Marketing and Strategies and Tactics
1. Sales
2. Profit
3. Geographic
4. Public Relations and Promotion
5. Media Relations
6. Exceptionally Satisfied Customers
7. Personal Selling
Customer Relationships and Customer Loyalty
1. Deliver Customer Service
2. Know and Meet Customer Needs and Expectations
3. Create an Exceptional Service Experience
FINANCIAL ANALYSIS
Sales
1. Historical Analysis
2. Projections
3. Profit
Breakeven
1. Current
2. Contingency Analysis
Cash Budget
Income Statements
1. Historical
2. Proforma

BASICS- Outline for Business Plan

E. Balance Sheets
1. Historical
2. Proforma

F. Ratio Analysis
1. Historical
2. Proforma
3. Comparative
G. Controlling
1. Purchase Orders
2. Voucher Approval
3. Job Scheduling and Budgeting
4. Check Writing
5. Adherence to Budgets
IX. FINANCIAL STRUCTURE AND FINANCING REQUIREMENTS
A. Analysis of Debt Structure
B. Risk Analysis
C. Debt Requirements
D. Equity and Owner Compensation
X. SUPPORTING DOCUMENTS
A. Resumes
B. Personal Financial Statement
C. Letters of Reference
D. Suppliers List
E. Sub List
F. Customers
G. Lease Agreements, Etc.
H. Insurance Policies
I. Credit References
J. Income Tax Statements
XI. APPENDICES

BASICS- Outline for Business Plan

2.

Developing a Business Plan

Introduction to Business Planning

What is a Business Plan:
The primary value of your business plan will be to cerate a written outline that evaluates
all aspects of the economic viability of your business venture including a description and
analysis of your business prospects.
A business plan is an essential step for any prudent entrepreneur to take, regardless of
the size of the business. This step is too often skipped but the discipline required to
develop a plan will impact your ability to succeed not only in the short-term but also over
the long term.
Business plans can vary enormously. They can range from a one page outline or a
comprehensive document including detailed market analyses, competitive analysis, and
three-year financial projections. Many concepts for a new business can take shape on
something as primitive as a cocktail napkin similar to what Herb Kelleher did when he
first conceived his idea for Southwest Airlines.
Why Prepare a Business Plan:
Your business plan is going to be useful in a number of ways. Here are some reasons
not to skip this valuable tool.
First and foremost, it will define and focus your objective using appropriate
information and analysis.
You can use it as a selling tool in dealing with important relationships including
your lenders, investors and banks.
You can use the plan to solicit opinions and advice from people, including those
in your intended field of business, who will freely give you invaluable advice. Too
often, entrepreneurs forge ahead ("My Way!") without the benefit of input from
experts who could save them a great deal of wear and tear. "My Way" is a great
song, but in practice can result in unnecessary hardships.
Your business plan can uncover omissions and/or weaknesses in your planning
process.
What to Avoid in Your Business Plan:
Place some reasonable limits on long-term, future projections. (Long-term means over
one year.) Better to stick with short-term objectives and modify the plan as your
business progresses. Too often, long-range planning becomes meaningless because
the reality of your business can be different from your initial concept.

Avoid optimism. In fact, to offset optimism, be extremely conservative in predicting

capital requirements, timelines, sales and profits. Few business plans correctly
anticipate how much money and time will be required.
Do not ignore spelling out what your strategies will be in the event of business
adversities. Use simple language in explaining the issues. Make it easy to read and
understand.
Don't depend entirely on the uniqueness of your business or even a patented invention.
Success comes to those who start businesses with great economics and great passion
for what they are doing and not necessarily great inventions.
Necessary Factors to Produce a Successful Business:
A sound business concept. The single most common mistake made by
entrepreneurs is not picking the right business to begin with. The best way to
learn about your prospective business is to work for someone else in that
business before beginning your own. There can be a huge gap between your
concept of a fine business and reality.
Understanding of your market. A good way to test your understanding is to
test market your product or service before you start. You think you have a great
kite that will capture the imagination of kite flyers throughout the world? Then
hand-make some of them and try selling them first.
A healthy, growing and stable industry. Remember that some of the great
inventions of all time, like airplanes and cars, did not result in economic benefit
for many of those who tried to exploit these great advances. For example, the
cumulative earnings of all airlines since Wilbur Wright flew that first plane are
less than zero. (Airline losses have been greater than their profits.) Success
comes to those who find businesses with great economics and not necessarily
great inventions or advances to mankind.
Capable management. Look for people who you like and admire, have good
ethical values, have complementary skills and are smarter than you. Plan to hire
people who have the skills that you lack. Define your unique ability and seek out
others who turn your weaknesses into strengths.
Able financial control. You will learn later the importance of becoming qualified
in accounting, computer software and cash flow management. Most
entrepreneurs do not come from accounting backgrounds and must go back to
school to learn these skills. Would you bet your saving in a game where you
don't know how to keep score? People mistakenly do it in business all the time.
A Consistent business focus. If you think of specific products or services, you
will find that specialist will outperform non-specialists. Zero in on something you
can do so well that you will not be subject to competing with someone with a
lower price.

Understanding the Planning Process

Start-up entrepreneurs often have difficulty writing out business plans. To make it
easier, here are ten steps that will get you to a worthwhile plan:
1. Write out your basic business concept.
2. Gather all the data you can on the feasibility and the specifics of your business
concept.
3. Focus and refine your concept based on the data you have compiled.
4. Outline the specifics of your business. Using a "What, where, why, how, when,
who" approach might be useful.
5. Put your plan into a compelling form so that it will not only give you insights and
focus but, at the same, will become a valuable tool in dealing with business
relationships that will be very important to you.
6. Conduct a Situation Analysis that helps you assess current facts that are known
regarding your business and the company's strengths, weaknesses,
opportunities and threats (also known as a SWOT analysis). Looking at your
business in this manner helps to identify critical issues, opportunities and top
priorities that will impact your company's performance and allows you to take
positive action.
7. Establish goals, strategies and tactics. Translate your top priorities and critical
issues into measurable goals that help you determine "how" you are going to
implement.
8. Establish accountability for Plan implementation. Incorporate into your plan the
details of "who" is going to do "what" and "when". Putting together a detailed
implementation timetable with mileposts established in advance will help you stay
on track.
9. Set up measurements in your plan to help you assess your progress toward
achieving your goals and take time to celebrate the successes. This approach
helps to build team confidence and cohesiveness in working toward your vision.
10.Save a clean copy of your plan to refer to each week keeping in mind that plans
are not set in concrete and can be changed as the need arises. Consider using
a second copy of your plan as a working copy where you can place notes to help
on stay on track regarding what you are accomplishing and where you need to
be accomplishing more.

Components of a Plan
Includes a systematic assessment of all the factors critical to your business purpose
and expected results.
An Executive Summary. The objective is to get the reader to keep on reading;
to highlight the most significant points of your plan.
A vision statement. A vision is a realistic, credible, attractive future for your
organization. It is a carefully formulated statement of intentions that defines a
destination or future state of affairs which an individual or group finds particularly
desirable.
A mission statement. This is an enduring statement of purpose for an
organization or "reason for being" that identifies the scope of its operations in
product and market terms, and reflects its values and priorities. A mission
statement will help a company to make consistent decisions, to motivate, to build
an organizational unity, to integrate short-term objectives with longer-term goals,
and to enhance communication.
Core values. They are the collective principles and ideals, which guide the
thoughts and actions of an individual, or a group of individuals. Values define the
character of an organization -they describe what the organization stands for.
They answer the question- who we are. Values are the essence of a company's
philosophy for achieving success. They are the bedrock of corporate culture.
Values provide employees with a sense of common direction and guidelines for
day-to-day behavior.
The people. By far the most important ingredient for your success will be
yourself. Focus on how your prior experiences will be applicable to your new
business. Prepare a resume of yourself and one for each person who will be
involved with you in starting the business. Be factual and avoid hype. This part
of your business plan will be read very carefully by those with whom you will be
having relationships, including lenders, investors and vendors.
However, you cannot be someone who you are not. If you lack the ability to
perform a key function, include this in your business plan. For example, if you
lack the ability to train staff, include an explanation of how you will compensate
for this deficiency. You should add a partner to your plan or plan to hire key
people who will provide skills you don't have. Include biographies of all your
intended management.

Your business profile and business concept. Define and describe your
intended business and exactly how you plan to go about it.
Targeted market and customers. Describe your customer profile and why they
want or need your product or service. Also define what you will do to build
customer relationships and deliver superior customer service.

Describe your products and/or services. Know what it is that you are selling
or offering in the way of value to your customers. Products are tangible and they
can be viewed or tested in advance, inventoried and stockpiled. Services are
intangible so they become more difficult for customers to experience on the front
end- thus if you offer services, keep in mind that the interaction between the
seller and buyer becomes much more important in the selling process since this
is where the buyer gains confidence in what he/she is purchasing.
Economic assessment. Provide a complete assessment of the economic
environment in which your business will become a part. Explain how your
business will be appropriate for the regulatory agencies and demographics with
which you will be dealing. If normally available from local planning departments.
Also know the growth trends for your business- find out if the market for your
product or service is growing or shrinking.
Cash flow assessment. Include a one-year cash flow that will incorporate your
capital requirements. Include your assessment of what could go wrong and how
you plan to handle problems.
Business Organization. Explain the form of business organization you intend to
use and why it is best for your business. Also include the names of your
attorney, accountant, insurance agent and any other outside professional
resources.
Licenses. List what licenses you will require to go into business.
Insurance. List the forms of insurance coverage including costs that are
anticipated.
Risk analysis. Identify areas in which the company's risks should be minimized
before selecting strategies. Small businesses are most vulnerable to financial
risk including undercapitalization, inefficient collection practices, and insufficient
reserves to cover emergencies.
Technology assessment. Evaluating software and hardware capabilities both
currently and in the future to streamline internal and external flow of information,
operations, etc.
Premises criteria. Outline your location criteria having to do with space
requirements, future requirements, site analysis study if needed, demographic
study if needed, lease check-off list, estimated occupancy cost as a percent of
sales, and zoning and use approvals.
Accounting. Furnish, as a separate exhibit, your starting balance sheet and
projected income statements for the first six months to one year.
Analysis of costs. Identify all of your costs- fixed, variable, product, service,
delivery, etc.
Internal controls. Explain your intended internal controls and cash controls,
check signing policy, strategy for controlling short-term cash, and control for
incoming merchandise.
Pricing power. Explain the unique qualities or circumstances concerning your
product or service that will enable you to maintain profitable pricing.

Computer and communication tools. Furnish a tabulation of each piece of

equipment you intend to use including a description and the budget for each.
Includes communication equipment, telephones, pagers, fax machines,
computers, internet capability, etc.
Marketing Plan. Describe your overall marketing and sales strategy including
how you plan to get and retain customers. This also includes public relations,
promotional and publicity strategies you will use to build your company's image
and reputation in the marketplace and with other key company stakeholders, ie.
Employees, customers, key influencers, etc. Also assesses your strengths and
weaknesses against your top competitors and helps to establish your competitive
advantages.
Employee development. Includes your plans for recruitment, hiring and training
of your employees. Also addresses how you will address the career
advancement of your employees and what type of succession plan is in place to
replace top management over time.
Growth plan. Describes how you anticipate growth occurring - at what point in
time and what preparations you are making to plan for this growth. This may
refer to development of profitable pilot operations, sources for new financing,
incentive compensation plan for managers, benefits packages and policies, etc.