Business Planning & Setting Targets
You can't hit a target you never set. A simple plan beats a fancy one you never use.
The essentials
- Vision — what you want the company to become (size, type of work, your role).
- Revenue target — how much work you intend to do this year.
- Profit target — not just revenue; the profit you need (set it on purpose, don't hope for leftovers).
- The few priorities — the 3–5 things that will move the business this year (hire a PM, fix estimating, add a service).
Make it real with numbers
Work backward:
- Profit you want →
- Overhead you must cover →
- Revenue and margin required to produce both →
- The volume of jobs (and win rate) to get there.
Keep score
Review your targets monthly. What gets measured gets managed.
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're just reacting.
Advanced / Pro-Level
The bid funnel math every owner should run:
- Start with the profit goal → required revenue → required backlog.
- Break-even volume = overhead ÷ gross-margin % (e.g., $300k overhead ÷ 20% = $1.5M just to break even).
- Work the funnel: revenue ÷ average job size = jobs to win; ÷ win rate = bids to submit; that drives your estimating capacity.
- Add a cash plan alongside the profit plan, and review on a cadence (annual plan, quarterly check, monthly numbers). 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's the next number you'd want? (Answer: $400k ÷ 0.25 = $1.6M to break even; above that, each dollar of revenue contributes 25% toward profit — so you'd set a target above $1.6M and back into the backlog and bid volume to reach it.)
In Practice
A contractor 'hopes' for profit and ends the year wondering where it went. One who sets a profit target and works backward to the revenue and margin needed actually hits it.
Common Mistakes to Avoid
- Hoping for profit instead of targeting it
- No written goals or priorities
- Never reviewing the numbers
Takeaway: Decide your profit on purpose, then build the plan that produces it.
Educational content — not legal, financial, or accounting advice. Run your numbers with your CPA.