Business Planning & Setting Targets

Welcome

Hello, and welcome. This is Super Structures General Contractors — a national general contractor headquartered in Powhatan, Virginia — here to help you and your clients build something that lasts. We're glad you're with us, and we look forward to connecting with you.

Alright, Business Planning & Setting Targets. Don't let the plain title fool you. Here's the part that actually matters on the job: Decide your profit on purpose, then build the plan that produces it. Learn it well and the year stops being something that happens to you and starts being something you run.

You can't hit a target you never set. A simple plan beats a fancy one you never use. Most contractors do not lack ambition — they lack a written number and a monthly habit of checking it. The plan in this lesson fits on two pages and takes an afternoon to build.

The essentials

• Vision — what you want the company to become: size, type of work, number of crews, and your own role in three to five years. Are you building a company that runs without you, or a good living that depends on you? Both are legitimate; they need different plans.
• Revenue target — how much work you intend to do this year.
• Profit target — not just revenue; the profit you need. Set it on purpose. Do not hope for leftovers.
• The few priorities — the three to five things that will move the business this year: hire a project manager, fix estimating, add a service line, get the job-cost system working.
• The scoreboard — the handful of numbers you will look at every month to know whether the plan is working.

Make it real with numbers

Work backward, in this order:

1. Profit you want. Start with what the business must produce: a fair salary for you as an operator plus a return for the risk and capital you have in it. The salary is overhead; the return is profit. Mixing the two is how owners convince themselves a company that pays them a wage is "profitable."
2. Overhead you must cover. Add up last year's actual overhead — office, staff, insurance not charged to jobs, vehicles, software, marketing, accounting — and adjust for what will change this year, such as the new PM's salary.
3. Revenue and margin required to produce both. Revenue needed = (overhead + profit target) ÷ gross-margin %. If overhead is $400,000, the profit target is $150,000, and gross margin runs 25%, you need $550,000 ÷ 0.25 = $2.2M in revenue.
4. The volume of jobs, and the win rate, to get there. $2.2M at an average job of $200,000 is eleven jobs. At a 30% win rate that is roughly 37 bids — about three a month — which tells you whether your estimating capacity matches your plan.

If the number in step 3 is far bigger than anything you have ever done, the plan is telling you something: either the margin has to go up, the overhead has to come down, or the profit target has to wait a year. All three are valid answers. Pretending is not.

Know your break-even

Break-even volume = overhead ÷ gross-margin %. With $400,000 of overhead at 25%, the company breaks even at $1.6M. Below that, every month costs you money; above it, each dollar of revenue contributes 25 cents toward profit. Knowing this number changes how you look at a slow quarter, and at a low-margin job that "keeps the crews busy."

Add a cash plan beside the profit plan

A profitable year can still run out of cash in April. Construction pays slowly — pay applications, retainage, and 30-to-60-day terms — while payroll goes out every week. Alongside the profit plan, sketch a twelve-month cash forecast: expected billings and collections by month, payroll and overhead by month, and the low point. If the low point is below what you have in the bank plus your line of credit, the plan needs to change before the year starts, not when the bank calls.

Keep score

Review your targets monthly — the same day each month, the same handful of numbers: revenue to date against plan, gross margin to date, overhead to date, backlog (contracted work not yet performed), bids outstanding, and cash. What gets measured gets managed. A target you look at twice a year is a wish with a spreadsheet.

Going Deeper (Intermediate)

A simple plan beats no plan: set a revenue and profit target, know your break-even, and work backward to the backlog you need. Then build a budget and review against it. Without targets you are just reacting.

Backlog deserves special attention. It is the clearest early warning in the business. If you need $2.2M of revenue this year and it is March with $900,000 under contract and that work scheduled through August, you know today that the second half needs $1.3M of new awards. That is a sales problem you can solve in March. Discovered in September, it is a layoff.

Advanced / Pro-Level

The bid funnel math every owner should run, start to finish:

• Profit goal → required revenue → required backlog, as above.
• Revenue ÷ average job size = jobs to win; ÷ win rate = bids to submit. That drives your estimating capacity and tells you whether you need another estimator, a higher win rate, or bigger jobs.
• Segment it. Run the funnel by job type or client type. Negotiated repeat-client work might close at 60% while plan-room hard bids close at 10%; the plan should push more effort toward the funnel that pays.
• Budget overhead by month and compare actual to budget. Overhead creep — one more truck, one more subscription, one more person — is the quiet killer of a profit plan that looked fine in January.
• Review on a cadence: an annual plan, a quarterly check where priorities can be changed, and monthly numbers. Pros also write down the assumptions behind the plan — win rate, average job, margin — so when the year goes sideways they can see which assumption broke instead of just knowing they missed.
• Targets you don't review are wishes.

Practice Challenge

Overhead is $400k and your gross margin is 25%. What revenue just breaks you even, and what is the next number you would want? (Answer: $400k ÷ 0.25 = $1.6M to break even; above that, each dollar of revenue contributes 25 cents toward profit — so you would set a profit target, add it to overhead, divide by 0.25 to get the revenue target, and back into the backlog and bid volume to reach it. A $120k profit target means $520k ÷ 0.25 = $2.08M.)

In Practice

A contractor who "hopes" for profit ends the year wondering where it went. A contractor who sets a profit target in December, backs into the revenue, backlog, and bids it takes, and checks six numbers on the first Monday of every month either hits it or knows by June exactly why not and what to change.

Common Mistakes to Avoid

• Hoping for profit instead of targeting it
• Counting the owner's salary as profit, so the real return on the business is invisible
• No written goals or priorities, or more than five of them
• Planning profit without planning cash
• Never reviewing the numbers, or reviewing them without changing anything

Takeaway: Decide your profit on purpose, then build the plan that produces it.

Educational content — not legal, accounting, financial, or contractual advice. Margins, overhead rates, and targets vary by company, trade, and region; run your own numbers with your CPA and adapt them to your business.