Business plan for construction solutions company


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Business plan for construction solutions company

  1. 1. Business plan Trust Construction Solutions Submitted by JOB THOMAS #8, SEM-5, MBA (PT) SHOOL OF MANAGEMENT STUDIESCochin University of Science and Technology Cochin, Kerala, India, PIN 682 022 October 2012
  2. 2. 1. Executive SummaryTrust Construction Solutions is a residential home inspection service including Vasthu servingKalamassery and the surrounding community. Trust Construction Inspection Solutions offerscomplete home inspections, as well as additional services including testing of building materialsand vetting structural design of buildings. This service will be offered to home buyers as well assellers. The majority of sales will come from real estate agents who can be contacted easilythrough lead channels.The company has a wide variety of inspection services. These include: foundation analysis forcracks and, settlement, plumbing inspections that look for deterioration, leaks, and check forappropriate water pressure. The companys electrical inspection looks for loose wires, shorts,shock/fire hazards, and proper functioning of Ground Fault Interrupt (GFI) receptacles. The costof the full service is INR 100 per square feet to be inspected.Trust Construction Solutions objectives for the first three years of operation include: To create a service-based company with goal of exceeding customers expectations. To increase the number of clients by 20% per year through superior performance. To develop a sustainable home business.Trust Construction Solutions will maintain the good relationship with sellers, buyers and otherbrokers by providing incentives. Trust Construction Solutions will be providing optional serviceslike structural safety checking of the building. Trust Construction Solutions will be installed as asole proprietorship owned by Job Thomas. The details of sale and profit growth are given inFigure 1. 180% 160% 140% 120% 1 year 100% 2 year 80% 60% 3 year 40% 20% 0% Sale Profit Figure 1 Sale and profit growth of Construction Solutions Business plan for Trust Construction Solutions by Job Thomas 2
  3. 3. 2. Business DescriptionTrust Construction Solutions offers residential home construction monitoring and inspections forowners, buyers and sellers. The majority of service calls will have been derived from strategicpartnerships with realtors. The services of Trust Construction Solutions include:Inspection: Site inspection to comment about the compliance with Vasthu Inspection of cracked or damaged structures for giving recommendation on repair Plumbing inspection and pressure checking Electrical inspection and checking for earth connection Light intensity checking Leak and damage inspection and recommendation Ventilation checking Assistance for testing the material quality Recommendations for optimum resource utilization Suggestion for green construction practicesA comprehensive written report will accompany the service. Trust Construction Solutionssuggests all clients be present during the inspection to increase comprehension of the writtenreport by the client. The cost of the full service is INR.100/- per square feet.3. MarketingTrust Construction Solutions will be focusing on two general groups of customers. The firstgroup is real estate agents. The strategic relationships with the agents will include an economicincentive for them to give Trust Construction Solutions referrals. The agents will provide TrustConstruction Solutions with a steady flow of customers as it is in the agents best interests forthe houses that they are trying to sell to have a complete inspection, ensuring satisfiedcustomers.Trust Construction Solutions will also target individual buyers and sellers. For different reasons,both of these groups have something to gain by having an inspection done on the home theyare trying to sell/buy Trust Construction Solutions will target these groups through focusedadvertisements providing visibility of Trust Construction Solutions.Trust Construction Solutions target can be broken down into three (not mutually exclusive)segments. The segmentation of the market based on the survey is given in Figure 2. Business plan for Trust Construction Solutions by Job Thomas 3
  4. 4. Individual buyers Individual seller 10% Real estate agents 30% 60% Figure 2 Market segmentation Real estate agents: This group of customers is professional realtors in the area. They are targeted because they will recommend, or require, a home inspection before purchase. Requiring the inspection makes great business sense. It forces latent problems to become apparent, significantly reducing the chance of the customer being dissatisfied. By aligning Trust Construction Solutions with many different realtors, Trust Construction Solutions would in essence be spoon fed a constant stream of business. Not only would there be a flow of customers, but they would all be referrals so there would already be the beginning of a trust bond formed as their agent has personally vouched for Trust Construction Solutions. After the initial relationships are set up, the agents would be a relatively easy group to service or maintain. Individual buyers: This group purchase inspections to ensure the quality of products. The house buyer is motivated to determine any problems with the house before they purchase it. The knowledge of what is wrong with it is useful because it will provide insight as to whether the asking price is fair and the information could be used as leverage to adjust the price if it wasnt fair. Individual sellers or builders: this group is a smaller segment relative to the other two, but they still will be a consumer of Trust Construction Solutions. Having an inspection done on the house that they are trying to sell is useful in offering assurances to the buyer regarding the condition of the house.4. OperationsTrust Construction Solutions will open a office at Kalamassery. The office will be functioning atthe premises of the property of proprietor. Mr. Job Thomas. The office with an office managerwill be opened to facilitate the clients to contact and register the work. The manager has to Business plan for Trust Construction Solutions by Job Thomas 4
  5. 5. collect the order and inform to Job Thomas. The proprietor Mr. Job Thomas will visit theworksite for delivering the services. Job Thomas will mark the details of visit in the checklist andrecommendation sheet. The visit report will be issued to the client after 2 days of inspection.The inspection report contains the details of the quality of the component parts of the buildingand suggestions regarding the remedial steps. The clients will be entertained to clarify theirdoubts or suggestion in the execution stage.5. ManagementJob Thomas, the proprietor will manage the firm’s activities. The projected salary of the officemanager is given in Table 1. Job Thomas will also act as full-time consultant in the firm. Thepart-time consultants will be paid based on the piece rate system. Table 1. Personnel Planning Personnel Year 1 year 2 Year 3 Job Thomas INR 120,000 INR 144,000 INR 180,000 Office Manager INR 60,000 INR 66,000 INR 72,000 Total number s 2 2 2 TOTAL INR 180,000 INR 210,000 INR 252,000Trust Construction Solutions will fully leverage its competitive edges (experience andprofessionalism) to turn prospective leads into customers. The customers will be so satisfiedwith the services that they will go on to tell their acquaintances about Trust ConstructionSolutions. In addition to competitive advantages of Trust Construction Solutions, the owner has10 year experience in the real estate agent industry as a paid consultant.The competitive edge of Trust Construction Solutions is based on experience andprofessionalism. Experience: Job Thomas has 12 years of experience as a general contractor. Through these years in the industry, Job Thomas has done almost everything in regards to home building and remodels. Having this firsthand experience gives Job Thomas a very discriminating eye when it comes to inspections. This makes his inspections that much more accurate because he has the knowledge and experience to make informed inspections. While others in the home inspection industry have a reasonable amount of experience, they are generally not as well trained as Job Thomas. One reason for this is that there is the possibility for higher margins by actually doing the work instead of offering inspections. For Job Thomas however, an injury a year ago has precluded him to continue as a general contractor, which in effect has allowed him to pursue this opportunity. Professionalism: loosely defined as exhibiting a courteous, conscientious, and generally businesslike manner; characterized by or conforming to the technical or ethical standards of a profession. Professionalism is an overriding goal and behavior for Job Thomas. This comes across even in a simple conversation with Job Thomas. People are utterly Business plan for Trust Construction Solutions by Job Thomas 5
  6. 6. impressed when dealing with Job Thomas and this is purposeful because they will tell people about him. Most people will agree contractors and home inspectors could use a dose of professionalism, allowing Job Thomas to stand out even more from his colleagues.6. FinancialThe profit and loss account is projected for upcoming three years. The sale, cost operatingexpenses and profit of the projected period is given in Figure 3. It is expected that the proposedbusiness yield profit in the first year itself. INR 700,000 1 year INR 600,000 2 year INR 500,000 3 year INR 400,000 INR 300,000 INR 200,000 INR 100,000 INR 0 Sale Cost Operating Profit expensesFigure 3. Projected sale, cost, expenses and profit of Trust Construction SolutionsThe balance sheet is projected for upcoming three years. The assets, liabilities and capital ofthe projected period are shown in Figure 4. The increase in the asset and capital over the periodis significant over the projected period. The increase in the liability in the projected period ismeager. As the net worth of the company is increasing, it may be concluded there is everychance of growing the business in the positive direction. Business plan for Trust Construction Solutions by Job Thomas 6
  7. 7. 1 year INR 400,000 2 year 3 year INR 300,000 INR 200,000 INR 100,000 INR 0 Assets Liabilities CapitalFigure 4. Projected asset, liability and capital of Trust Construction Solutions7. Critical RisksThere are many different competitors in the home inspection market. At first glance, the serviceappears to be commodity like. Most people offer the same service offering, the same type ofinspections, the same price, etc. However, the level of experience and professionalism of theservice provider does indeed differentiate the companies.The buying patterns regarding the home buyers seem to be based on referrals andadvertisements. The home buyer will often ask someone in the industry if they canrecommend a home inspector provider. If they do not know anyone to ask they will typically lookin the number of local magazines for homes and find an advertisement in there. Lastly, theywould also check the Yellow Pages.Home sellers will either ask their realtor or they will look for some sort of advertisement.The buying pattern for the realtors is that they typically will know of an inspector that they sendtheir clients to. Because they are in the industry, they typically know people so they willgenerally not be looking at advertisements to make a decision as to who to recommend.8. Harvest StrategyThe business is a sole partnership firm. The firm will acquire more staff if required in the future.The leadership change in the firm will be accompanied by ownership change. Business plan for Trust Construction Solutions by Job Thomas 7
  8. 8. 9. Milestone ScheduleTrust Construction Solutions has identified several milestones for the organization to achieve.The achievement of the milestones will be instrumental in the success of the venture. Byenumerating the milestones it provides the organization with clear goals that everyone canfocus their energy on. Milestone Q1 Q2 Q3 Q4 Delivery beyond customer expectation XXXXXX Develop sustainable home business XXXXXX Increase clients by 20% XXXXXX XXXXXX Profitability Meet sale target XXXXXX Business plan for Trust Construction Solutions by Job Thomas 8
  9. 9. 10. AppendixA1. Start-up RequirementsStart-up ExpensesLegal INR 10,000Stationery etc. INR 20,000Brochures INR 5,000Consultants INR 10,000Insurance INR 0Rent INR 20,000Research and Development INR 0Expensed Equipment INR 0Other INR 0 Total Start-up Expenses INR 65,000Start-up AssetsCash Required INR 50,000Other Current Assets INR 0Long-term Assets INR 60,000 INR Total Assets 110,000 INR TOTAL REQUIREMENTS 175,000 Business plan for Trust Construction Solutions by Job Thomas 9
  10. 10. A2. Start-up FundingStart-up Expenses to Fund INR 65,000Start-up Assets to Fund INR 110,000 Total Funding Required INR 175,000AssetsNon-cash Assets from Start-up INR 60,000Cash Requirements from Start-up INR 50,000Additional Cash Raised INR 65,000Cash Balance on Starting Date INR 115,000 Total Assets INR 175,000Liabilities and CapitalLiabilitiesCurrent Borrowing INR 65,000Long-term Liabilities INR 0Accounts Payable (Outstanding Bills) INR 0Other Current Liabilities (interest-free) INR 0 Total Liabilities INR 65,000CapitalPlanned InvestmentInvestor 1 (JOB THOMAS) INR 110,000Investor 2 INR 0Other INR 0Additional Investment Requirement INR 0 Total Planned Investment INR 110,000Loss at Start-up (Start-up Expenses) (INR 65,000) Total Capital INR 45,000 Total Capital and Liabilities INR 110,000Total Funding INR 175,000 Business plan for Trust Construction Solutions by Job Thomas 10
  11. 11. A3. Profit and Loss account (Projected ) Year 1 Year 2 Year 3Sales/Consulting fee INR 400,000 INR 500,000 INR 700,000Direct Cost of Sales (0.2) INR 80,000 INR 100,000 INR 140,000Other Production Expenses INR 0 INR 0 INR 0 Total Cost of Sales INR 80,000 INR 100,000 INR 140,000Gross Margin INR 320,000 INR 400,000 INR 560,000Gross Margin % 80% 80% 80%ExpensesPayroll INR 180,000 INR 210,000 INR 252,000Sales and Marketing and Other Expenses INR 20,000 INR 30,000 INR 45,000Depreciation(0.3) INR 18,000 INR 18,000 INR 18,000Leased Equipment INR 0 INR 0 INR 0Utilities INR 0 INR 0 INR 0Insurance INR 10,000 INR 10,000 INR 10,000License fees and association dues INR 5,000 INR 5,000 INR 5,000Payroll Taxes INR 0 INR 0 INR 0Other INR 0 INR 0 INR 0 Total Operating Expenses INR 233,000 INR 273,000 INR 330,000Profit Before Interest and Taxes INR 87,000 INR 127,000 INR 230,000EBITDA INR 105,000 INR 145,000 INR 248,000Interest Expense INR 13,000 INR 13,000 INR 13,000Taxes Incurred INR 22,200 INR 34,200 INR 65,100 Net Profit INR 51,800 INR 79,800 INR 151,900 Net Profit/Sales 13% 16% 22% Business plan for Trust Construction Solutions by Job Thomas 11
  12. 12. A4. Balance Sheet (Projected ) Year 1 Year 2 Year 3 AssetsCurrent AssetsCash INR 149,800 INR 235,900 INR 304,950Other Current Assets INR 60,000 INR 90,000 INR 120,000 Total Current Assets INR 209,800 INR 325,900 INR 424,950Long-term AssetsLong-term Assets INR 60,000 INR 60,000 INR 60,000Accumulated Depreciation INR 18,000 INR 36,000 INR 54,000 Total Long-term Assets INR 42,000 INR 24,000 INR 6,000 Total Assets INR 191,800 INR 259,900 INR 310,950 Liabilities and CapitalCurrent LiabilitiesAccounts Payable INR 30,000 INR 45,000 INR 60,000Current Borrowing INR 65,000 INR 65,000 INR 65,000Other Current Liabilities INR 0 INR 0 INR 0 Subtotal Current Liabilities INR 95,000 INR 110,000 INR 125,000Long-term Liabilities INR 0 INR 0 INR 0 Total Liabilities INR 95,000 INR 110,000 INR 125,000Paid-in Capital INR 110,000 INR 110,000 INR 110,000Retained Earnings (INR 65,000) (INR 39,900) (INR 75,950)Earnings INR 51,800 INR 79,800 INR 151,900 Total Capital / Net worth INR 96,800 INR 149,900 INR 185,950Total Liabilities and Capital INR 191,800 INR 259,900 INR 310,950 Business plan for Trust Construction Solutions by Job Thomas 12
  13. 13. A5. Ratio analysis Financial ratios Year 1 Year 2 Year 3Current ratio 2.21 2.96 3.40Debt/Net worth 0.98 0.73 0.67Return on tangible net worth 0.67 0.62 0.89Return on assets 0.34 0.36 0.53 Financial ratios 3.50 3.00 2.50 2.00 Year 1 1.50 Year 2 1.00 Year 3 0.50 0.00 Current ratio Debt/Net Return on Return on worth tangible net assets worth Business plan for Trust Construction Solutions by Job Thomas 13