Electrical contractors that are planning to enter the emerging energy services market should have a solid business plan to guide their expansion. Getting into this market is a must because customers today are looking for energy conservation, efficiency, production and reliability services. In addition, the market builds on the EC’s existing core competencies—project management, design/build and service work—and provides new revenue opportunities.
Even though expansion may be a natural next step for most ECs, it is still challenging and risky—financially, to the firm’s reputation and to customer goodwill—if there are missteps along the way. Preparing a good business plan will ensure an organized and efficient approach. A well-thought-out business plan is an investment that will pay dividends by helping avoid false starts and costly mistakes.
Why plan your entry?
You would not think of starting a construction project without a schedule, so why would you enter the energy services market without a business plan? Without a good schedule, you not only don’t know how you are going to complete the project, but you also don’t know how the work is progressing during construction. Developing an effective construction schedule requires thinking through a project in advance so that potential problems can be identified and mitigated before they occur in the field.
A business plan is very similar to a construction schedule. The mere act of putting together a business plan forces the EC to think through its market-entry strategy and identify potential problems and pitfalls in advance so that they can be avoided. At the outset, the EC should put together its business plan based on its knowledge of the energy services market, its customers’ needs, and its own capabilities. The plan should provide a blueprint for achieving the strategic and financial goals that are motivating the EC to expand into this emerging market. Intermediate milestones should be included in the business plan to ensure the EC is progressing toward its stated business objectives as planned, and timely corrective action can be taken when circumstances change. Like a construction schedule, the business plan needs to be reviewed regularly and updated as required to reflect changing customer needs, new technologies or a changing business environment.
First, identify who your customer will be. Start with your existing customer base because you know them, and it is much more efficient and less risky than trying to recruit new ones in the beginning. Once you have identified your target market, determine what types of energy services this group of customers needs.
You can determine the energy services your existing customers need in a variety of ways. Since they are probably current service customers, your service technicians who are in these customers’ facilities daily will probably have insight into their possible energy services needs. In addition, you can schedule meetings with these customers to learn firsthand about their energy services needs while making them aware of your firm’s expansion into this market.
Once you know who your customers are and what services they are most interested in, you can begin designing an energy services plan to meet those needs.
Designing an energy services plan that addresses your customer’s needs should start with identifying specific resources in terms of personnel, equipment and home office support that will be needed to deliver these services. Once the necessary resources have been identified, the EC can assess its capabilities to see what resources it currently has internally to provide the desired services. Where there is a gap between what is needed and what is available, the EC should develop a strategy for acquiring that which will close this gap. This may mean reallocating existing resources within the company; training existing or hiring new personnel or subcontracting work to specialist firms or individuals; purchasing, leasing or renting needed test and installation equipment; or establishing other means of getting what is needed to finish the job for the customer.
Next, develop a marketing plan that promotes energy services to current and future customers. The EC needs to determine how best to promote its energy services to its target customers, which is as much customer education as it is selling.
Finally, develop a pricing strategy that recovers both the direct and overhead costs associated with delivering energy services to the customer and provides a reasonable profit for the EC. In the final analysis, the electrical contractor’s business plan must be able to realistically demonstrate that the firm can earn an acceptable return on investment by entering the energy services market.