A plan is one of the most important documents needed when starting or maintaining a business. One of the first questions a banker will ask is: “Sir, do you have a business plan?”
A business plan doesn't need to be complicated. In fact, it should be simple, to the point, and answer these 10 basic questions.
- What product/service does the business provide?
- What experience do we have in this business?
- How do we do this?
- What are estimated sales, gross profit, and expenses?
- What is the initial investment and expenses?
- What are the liability risks?
- Who are the target customers?
- What is the future of this market?
- Is labor available?
- Are vendors available?
1. What product/service does the business provide?
We are a subcontractor to general contractors for building the masonry portion of large commercial construction projects. We estimate and submit bids to the general contractor for these projects.
2. What experience do we have in this business?
We have a track record of successful management with several masonry contractors that we have worked for in the past. We will employ an experienced job foreman currently in the market.
3. How do we do this?
We will negotiate and secure masonry subcontracts from general contractors. We will plan and schedule the projects, and acquire brick, concrete masonry units, and other supplies as needed. We will supply and manage the labor force, and manage and complete the projects on schedule.
4. What are estimated sales, gross profit, and expenses?
Sales revenue is expected to be $1.5 -$3 million in year one, $5 - $6 million in year two, and $8 - $12 million in year three. Gross profit for a typical project will be approximately 15%. Expenses will be 35% material, rented field equipment will average 7%, operating expenses will run 5%, and labor, burden, and insurance will cost 38%. Start-up G&A will average $5000 per month for the first three months.
5. What are the initial investment and expenses?
Start-up capital of approximately $150,000 will be needed. A direct labor force of 7 - 12 bricklayers and a like number of tenders will be required for a typical contract. A modular office building located at one of our large jobs will be used for office space initially. There will be two departments in the office: estimating/general management and secretarial/accounting. We will need one foreman for each contract. When four or more contracts are in progress simultaneously, a field superintendent will be needed. We will need $7000 for office equipment and furniture. Inventory will be delivered and consumed at each job with nothing left over. Accounts receivable is collected in the form of monthly pay requests for work completed. Pay requests are submitted to the GC before the 25th of each month. Average AR collection occurs within 45 days.
6. What are the liability risks?
There is the potential for employee injury-related lawsuits, warranty suits, and suits over definition of contract responsibility. Worker compensation insurance should cover most employee injury claims. Liability insurance should cover common disputes, warranty work, and liability cases.
7. Who are the target customers?
We will target select commercial projects by submitting bids to certain general contractors as they are putting together their overall bids to project owners. We intend to bid on schools, churches, shopping centers, and hospitals. The general contractor considers price, experience, and subcontractor capability when making his selection.
8. What is the future of this market?
The projected market looks very good for the future. The largest growing segment of the market over the past six years has been schools. We expect this to continue. Other projects where business will be available include jails, prisons, churches, shopping centers, office buildings, and hospitals.
9. Is labor available?
We have collected names and developed a database of potential employees totaling over 5000. Other sources include masonry associations and newspaper advertising.