Steps to Follow When Creating a Predictable Revenue Stream in the Construction Industry

by | Jun 14, 2017 | LE Smith News & Blog | 0 comments

countertopEveryone knows that a small business needs a business plan to be successful in their field. However, not everyone realizes just how much hard work goes into creating a viable business plan. And once you put that plan into effect, you still have to be prepared to adapt and evolve as necessary. That’s why one of the most important things any owner can do is create a pipeline describing their revenue stream, and this is especially true in the construction sector.

Creating a reliable and predictable revenue stream is of the utmost importance if you want to run a successful business, but volume and sales will always vary from month to month. Without a steady pipeline that allows you to forecast the months ahead, your business simply won’t be prepared to deliver. Understanding the hills and valleys of your revenue is the best way to analyze your business. Here we give a simple guide of how to create a predictable revenue stream in the construction industry.

Step one: Understanding the importance of forecasting your business
Until you can predict the future, it’s incredibly difficult to forecast how much revenue your company will bring in over the next 30 to 60 days. Of course, you may need this information to hire workers and order materials. On top of that, forecasting your business’s revenue will help you answer important questions such as:

  • It is feasible to offer discounts?
  • Can you afford to hire new employees or do you have to let people go?
  • Will you need to hire short-term subcontractors?
  • Is the company able to take on new projects at all?

In creating a revenue pipeline, you should analyze sales from the last three months. You need to evaluate how your business performed during the same period in previous years, and consider the strength of the local economy. Once your accountant has gone over the books for a given month, check to see how close your forecast was to the actual revenue. This difference will tell you how much uncertainty to expect in the future.

Step two: Establish a strong relationship with your suppliers
It is crucial to establish a strong relationship with your suppliers. When you know you have great materials to offer at a fair price, your clients will be happy. Since the construction industry is so broad, there are a lot of different partnerships that need to be considered, from equipment vendors to quality countertop distributors. When properly maintained, a laminate countertop can last 10 to 20 years, so when you offer quality countertops and materials, word of mouth will spread, and your business will soon bring in more reliable revenue.

Step three: Analyze the market
A predictable revenue stream cannot happen without understanding the market demand.This includes plenty of different factors that can make or break your business:

  • The market demand for your particular products and services.
  • Labor costs.
  • The going rate for material costs.
  • Prior sales, as a way to analyze if your business can handle and afford new changes.

With these three steps in mind, your business is on its way to forecasting a predictable revenue stream.

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