Government statistics report that there are nearly 200,000 plumbing and HVAC contractors in the United States. But recent analysis reveals that one in five closes annually.

The Service Roundtable published a white paper that analyzes the keys to business success, and one of the surest ways to remain in business, says Service Roundtable CEO Matt Michel, is to grow; close rates drop rapidly with contractor size.

“The large contractors of tomorrow are the small contractors of today,” he says. “While growth isn't a requirement of success, it does increase the odds.”

Management consulting firm FMI concurs. Its latest business development survey revealed that only 55 percent of contractors said they had a formal business development plan.

With the ability to differentiate oneself from the competition, bottom line results take off. FMI believes “differentiation” starts with having a “rock-solid business plan.”

While the FMI study did report that 69 percent of respondents boasted of their marketing planning process and said it was driving their company's future vision, Cynthina Paul, FMI's director, says this shows smaller contractors “still don't get it.”

The companies that maintain a formal business plan operate at the top of their game, according to the study. They not only shoot for “best practices,” they work on “next practices.”

FMI summarized its “best-in-class” profile of some of its respondents. It was discovered that contractors with the best business developers are those that do their homework and:

  • Survey the market to determine their customers' needs.

  • Utilize market research to broaden their business plan.

  • Organize employees' roles within the company in respect to customer relationships.

  • Hire and train business development and sales people.
To obtain a copy of FMI's “2004-2005 Business Development and Marketing in the Construction Industry Survey Results,” contact Phil Warner at 919/785-9357, or e-mail pwarner@fminet.com.

The Service Roundtable's white paper, “Business Closure Rates for Plumbing & HVAC Contracting Companies,” is available in the “Freebies” section of www.ServiceRoundtable.com.