Builder Biz Tip – Blog / Discussion

Mission statements and business plans are terms better known in the corporate world than they are for small residential builders. Well, builders who want to be successful better become more familiar with these terms.

Last week, we went through creating a vision of your company. This week we are going to create the road map to bring that vision into reality. It’s time to write a mission statement and create a business plan.

Wikipedia defines a mission statement as a brief statement of the purpose of a company or organization. I like to think of a mission statement in a more useful way. A mission statement should guide employee behavior. Our employees carry a business card with our mission statement printed on it. If they are unsure of the right course of action, they should be able to pull out that card and the mission statement should direct them on the correct course of action.

I recommend that you do the same thing, whether it’s just you or you have 20 employees. Everyone in your company should be working with the same mission. A mission statement should be somewhere between 1 and 3 sentences. Take the time to carefully write it so that it is your overriding guiding principle. It should universally apply to all functions of your business including hiring and firing decisions, money matters, or dealing with customers and suppliers.

Once you have written your mission statement, you need to roll it out to your employees. Explain to them the purpose of a mission statement and how they should use it to guide their actions and to make decisions.

Next, I recommend creating an internal business plan to use as a road map or step by step improvement plan. Business plans are typically used for attracting outside investors. If you are interested in a typical business plan, then you can learn more from the Small Business Administration at http://www.sba.gov/smallbusinessplanner/index.html (you will need to copy & paste).

In this case, we are creating a business plan to be used by only your company. It will lay out the game plan to operate your firm. It will be your blueprint and guide you towards achieving your business goals. A typical entrepreneur has a good business idea but is rarely qualified to manage all areas of a business. A builder running a business is similar. Much of the value in creating the plan is taking the time to think about the areas of your business that are beyond your core strengths. To many times we get caught up working within our business that we rarely take the time to work on our business.

The sections of your business plan to create are as follows:

• Company Description: Take the time to understand and write down your true business. There is a big difference between 1) building unique custom homes for buyers in the spec market, and 2) delivering a customer focused custom home building experience.
• Goals & Objectives: Set and describe your short term and long term goals and objectives. Insure you incorporate step by step milestones to reach your company’s vision. These should be both quantifiable and measurable. Increasing sales by $250,000 every quarter is quantifiable and easily measured.
• Marketing & Sales Plan: Explain how you will sell your homes and services, and how you will move into new markets. Identify the specific marketing techniques you plan to use. Document how you plan to identify, contact and sell to potential customers. Create an advertising plan that allocates resources for media, print, direct response, and public relations. Design or reuse product literature and marketing brochures.
• Operations and Management: Establish a plan to better execute the construction process. Evaluate whether you should be implementing new building techniques or different materials. Now may be the time to jump into the year 2000 and automate some processes using home building software. There are plenty of estimating, construction scheduling, change order, and selection management software available on the market.
• Financial Forecast: Analyze your financial needs and profit projections. Even though you may enjoy being a builder, you need to earn a profit. Forecast your overhead, labor and material costs to understand where improvements can be made. Compare your costs of doing business to your competition. This topic will be expanded upon next week.
• Plan for the Future: Your business plan should be continuously updated. In this section, you are making a list of things to keep your eye on. You are looking ahead to possible changes coming in the future, almost like making predictions. Keep an eye on competition that is entering or leaving your market. Periodically scan the industry to see what new products are being introduced. Set aside time to attend industry shows and take educational classes.

Let’s summarize. All businesses, whether a one man shop or multi-national corporation, need to have common goals and a plan to achieve their goals. The mission statement is written to guide decision making toward common goals. The internal business plan is going to be your road map to improve your business. I strongly encourage you to take the time necessary to create both.

Next weeks topic is your financial scorecard.