The Engineering Business Plan and the Business Model
Separate from a Business Plan is the Business Model. The Business Model is nothing more then a description of the means and methods the firm will employ to earn revenues projected by the Business Plan. The Business Plan describes what the business wants to accomplish and what resources it will use to reach those objectives. The model represents the business as a system of a series of steps (actions) to generate revenue and make a profit. The model includes the components and functions of the business, as well as the revenues it will generate and the expenses it incurs.
The traditional Civil Engineering Business Model is as simple as the engineering company and the customers within a key market like Land Development. The engineering company provides the services that the customer needs and wants, and in return the client pays a fess for those services. Once the engineering company has paid all of its expenses including salaries, the company is left with its profit.
This model although simplistic works well if there is very little or no competition and there is plenty of demand for your services. But rarely is this the situation especially in a declining market. The model in most cases needs to be more robust. One needs to see the “bigger picture.” In order to support the Business Plan the Model needs to address the four main components of the business; Framework, Financial, Client, and the Offer.
Business Framework (Infrastructure):
Key Resources – What are the company’s capabilities necessary to make the Business Plan possible?
Key Activities – What company activities are necessary to implement the Business Plan?
Key Partners – What company partners are motivated to participate in the Business Plan?
Client (Current and Prospective Clients):
Segment(s) of Clients – What is (are) the targeted audience for the company’s products and services?
Communication and Distribution Channels (Marketing) – What are the means the company will utilize to reach the customer and offer them those products and services? What marketing campaigns will the company utilize to reach its targeted clients?
Client Relationship – What are the processes the company will establish to maintain its relationship with the clients?
Revenue Streams – What are the company’s sources that will generate funds to support the Business Plan?
Cost Structure – What costs will result from engaging in the Business Plan? What will be the company’s expenses?
Value Proposition (The Offer):
What are the company’s products and services being offered to the market?
To sum up the Business Model – The business resources of technical staff and equipment complemented by business partners are able to offer a wide range of products and services with a particular billing rate to potential and existing clients, which are obtained through on-going marketing efforts of the company’s staff with an ultimate goal of presenting a proposal and an agreement between the client and the business to provide certain services and products for revenues.
There are multitude of schematics that are used to represent the Business Model, but they all include the four components; the Business Infrastructure, Financial Strategies, Clients, and the Offer or Proposition. In order to get to the end result, revenues, each of these four components of the Business Model must be operating at the best level of efficiency in order to obtain the most revenues. Failure in any step will either reduce the amount of revenue or completely run your business out of business.
It would be difficult to provide services or products to your clients if the resources necessary were inadequate. Imagine if your firm was contracted to provide a Technical Drainage Study for a 200 acre site, but you were not capable of analyzing a proposed open channel using any of the available commercial software. You then have to sub-contract this work out, hopefully to one of your partner companies, to assist you in this area of expertise. Otherwise, you will not be able to provide the service you were contacted to perform.
The same is true if your firm has all of the necessary engineering design expertise it requires and has also contracted with other sub-consultants to provide surveying services, but you have no marketing expertise. Although there are a number of needy clients in your local market, you have no way of contacting them nor do you even know how to identify your potential clients. The chain is broken because there is no way for you to contract with clients to provide the services you have available. Of course, we you have no clients you have no revenues, and when you have no revenues you have no business.
Even if you have an excellent infrastructure and business partners, and you have a huge pipeline of clients that you obtained through marketing, all will be for not if your proposals do not provide your clients with the necessary services they need at a fair price.
The Engineering Business Model a tool that assists the company to implement the Business Plan. A properly prepared Business Plan and a well designed Business Model will focus your company on the task at hand, which is to obtain contracts and clients and to produce profits. If you have not already done so, now is the time to either put together your first business plan or update an existing one. Once completed, the plan is a resource with a great deal of information. It will make you well of aware of competition, the market, and your company’s capabilities. Updating the plan regularly will keep you well informed on what is happening in your business.
Most engineers have excellent technical skills, but not necessarily the same level of expertise in management. It is responsibility of the engineer to develop these management skills through continuing education. This continuing education can be obtained through Community Colleges, Universities, Professional Training Programs, Professional Organizations, and online training courses. In most states these continuing education courses qualify for continuing education units (CEU) or Professional Development Hours (PDH).