G U E S T E D I T O R I A L A Formula for Guest Editorial by Lauren Richardson, Consultant, Successful Ventures Coaching and Consulting There are many great projects mentioned in this issue of South Carolina Construction News. I believe that each one of these projects began with a relationship between an owner and a general contractor or a general contractor and a sub contractor. Whether you have a dedicated busi- ness development staff or you choose to use your staff or perform that function yourself, businesses are grown by building good relationships. There is not always a direct path from the relationship to the opportunity to the project. If you map out the rela- tionships that led to the opportunities represented in the projects that won this year’s ABC of the Carolinas Excel- lence in Construction awards, you will find a complex web of people were involved. I spoke to a contractor the other day who named some fourteen different people who were responsible for giving his company the opportunity to work on several aspects of a major project in 2013. They in- cluded a GC the company had worked with on several past projects, a vendor, and several new people. If you need to grow your business significantly in 2014, you will want to continue to foster relationships with pres- ent clients, vendors and others who might be able to refer your company for a new opportunity. In addition to repeat business and referrals you may need to also go out and develop new relationships, new prospects. Do you know how many new relationships you will need to make your numbers next year? The answer to that question depends on how many of the people you meet turn into opportuni- ties to bid on a project…and also on how many of those bids you win. In other words, how many leads do you gen- erate and how many of those leads do you convert first into an opportunity to bid and second into new project. Helping you chart your course to success 803.431.9493 phone | 866.285.3818 fax info@successful-ventures.net successful-ventures.net 20 – December 2013 / January 2014 — The South Carolina Construction News Growth With these statistics and a few others in hand, you can plan what activity will be necessary for next year and also manage your team. It seems simple, but it is effective. You will need to plug your statistics into the Five Part Formula to get started. See the formula below: 1. Number of Leads x % Conversion Rate = Number of Customers 2. Number of Transactions / Number of Leads = Conversion Rate 3. Number of Transactions / Number of Customers = Average Number of Transactions Per Customer 4. Number of Customers x Number of Transactions x Average Dollar Sale = Gross Revenue 5. Revenue x % Margin = $ Profit This formula will work to plan your personal activity lev- els if you are in the Business Development function at your company and it will also work for a manager or owner who is looking to manage the team. You can use it to forecast based on present activity and to plan for the future. Here’s an example: 20 Leads x 25% = 4 Customers 4 Transactions / 20 Leads = 25% Conversion Rate 4 Customers x 4 Transactions X $750,000 Average Dollar Sale = $12,000,000 in Gross Revenue 12,000,000 x 5% Profit Margin = $ 600,000 Profit You can also run this formula backwards to see how many leads you will need to generate a certain amount of Revenue or Profit. Had I started with the end in mind, I would now know that I need to generate 20 new leads to gain four new customers who each use my services four times at an average of $750,000 per project in order to make my numbers for next year. As a business development professional, I will then begin to create a plan for generating those leads and for converting those leads into customers throughout the year. Each month I’ll know how much activity I need to make my numbers and keep things moving for the months to come. If I find myself behind, then I will know to adjust my activity level or refine my skills to bring things back into line. If you pay attention to this formula on a monthly basis and make even small improvements to any part of the formula the end result will be growth. Successful Ventures, LLC helps business owners and executives identify and make incremental changes that yield significant improvements for the business. Call 803-431-9493 or visit www.successful-ventures.net for more information on our services.