Why Business Development Plans Make Sense

HERE’S A QUOTE from 1956 that I jotted down during a marketing seminar earlier this month at the MCAA annual convention in Scottsdale, Ariz.:

“Doing business without advertising is like winking at a girl in the dark. You know what you are doing but nobody else does.”

That sentiment is as true today as it was almost 50 years ago, particularly in the contracting industry. A much more recent survey from industry consultant FMI indicates that contractors, on average, spend 0.81% of their total annual sales for promotional activities such as advertising, public relations, special events and brochures.

As you know, you receive this magazine every month at no charge because of the number of your suppliers who see the value of advertising to you. If your business is not what you want it to be, you should consider the advantage that such marketing activities would give you over your competitors.

FMI contends that advertising, promotional events, direct mail and increased public relations efforts will help to get your name into the market. Opportunities to submit proposals and make client presentations will follow your marketing and sales efforts.

Advertising, though, is just one element that is highlighted in FMI’s 2004-2005 Business Development and Marketing Survey. Other issues include business development plans, profitability, training, compensation and leadership.

The red flag that FMI raises is the fact that just a little more than half of all contractors responding to the survey — a group that includes mechanical contractors — have created a formal business development plan. This becomes a big deal because FMI ties a contractor’s effective business development plan to its profitability. In other words, a substantial number of contractors can’t achieve their optimum performance because they can’t give their customers a good reason to choose them other than lowest price.

Interestingly enough, the Mechanical Contractors Association of America devoted a considerable amount of time at its meeting to examine how its members could work more efficiently with their supply chain partners. A key challenge for manufacturers and wholesalers is to get contractors to buy not on low price but to look at the total cost of a product through the entire cycle of a project. Inefficient ordering, shipping and invoicing can obliterate any savings that the initial low price might promise.

Contractors face the same challenge with their own customers. The whole purpose of the business development effort is to increase the number of satisfied customers and fill the backlog with more profitable work, FMI says. Selling on low price will accomplish neither objective.

About a third of the contractors in FMI’s survey say they do a great job differentiating their company from the competition. These firms are among the most profitable and most effective business developers and marketers. The areas where these firms have the most advantage over competitors are relationships, customer service and the quality of their workforce.

Not surprisingly, these contractors did not get that way by accident. They invest more money than their competitors on researching their markets and targeting customers; training business development professionals and salespeople; and compensating these employees.

Spending more money for market research, training and compensation requires that owners, CEOs, presidents and other top executives get deeply involved in the business development plan. This is another characteristic that distinguishes the more successful companies in the survey.

Of the overall respondents, only 18% of CEOs and 35% of owner/presidents lead the market planning process. When company leaders do take charge, the business development plan is more likely to be followed.

Regardless of the size of your company, creating a business development plan makes sense. If you’re proud of the quality of the work that you do, you should do what you can to let other people know about it.