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Construction  Co  

Business  Plan  2013 – 2015

Table of Contents I.  Executive  Summary  ...............................................................................................................................  1  II.  Business  Overview  ...............................................................................................................................  2  III.  Company  and  Owner  Structure  ......................................................................................................  4  IV.  Management  Structure  ......................................................................................................................  5  V.  Operations  ...............................................................................................................................................  8  VI.  Staffing  ...................................................................................................................................................  10  VII.  Market  Analysis  ................................................................................................................................  10  Target  Segment  of  the  Business  ..........................................................................................................................................  14  Pricing  Strategy  ..........................................................................................................................................................................  15  Sales,  Promotion  and  Distribution  .....................................................................................................................................  15  Major  Competitors  ....................................................................................................................................................................  15  SWOT  Analysis  ............................................................................................................................................................................  17  

VIII.  Financial  Analysis  ...........................................................................................................................  21  IX.  Investment  Schedule  ........................................................................................................................  21  X.  Governing  Law,  Regulations  and  Licensing  ................................................................................  22  Ministry's  Building  and  Safety  Standards  Branch  of  British  Columbia  (Provincial  Regulations)  ..........  22  Lateral  Bracing  Requirements  .............................................................................................................................................  22  National  Model  Construction  Codes  ..................................................................................................................................  23  

XI.  Risk  Management  ..............................................................................................................................  23  References  ..................................................................................................................................................  25  

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I. Executive Summary The Business The proposed company is a residential construction start-up firm, which competes in the ‘New Home Building & Renovation’ sector of the British Columbia homebuilding industry, where Mr. Mohammad Abedi will provide construction management services for residential construction bid owners. Mohammad Abedi is currently the Chairman of the Board of Directors for an Iranian-based residential construction business, Nik Ejray-e- Sepahan Construction Company. The company is located in Iran, manages approximately 50 workers, and earned annual gross revenue of $1.4 million CAD in 2011. Mr. Abedi is looking launch a similar residential construction start-up company in the province of British Columbia, and bring his 13 years of management experience in the industry to create jobs, market share and revenue through this company. The Market Although the Canadian homebuilding industry produced fluctuating growth over 2007-2010 due to economic conditions, it ended with positive growth in 2010 of 35.6%. This trend of moderate growth continued as the industry grew by 2.1% in 2011, to become a $66.9 billion industry with a sales volume of 175,623 housing units. The compound annual growth rate of the industry over the past five years (2007-11) was 5.2% Positive Growth Forecast In 2016, the Canadian homebuilding industry is forecast to have a value of $86.7 billion, which is an increase of 29.6% since 2011. In the same year, the industry sales volume is forecasted at 206,034 housing units - an increase of 17.3% since 2011. Small-Sized Firms, Moderate Rivalry Approximately 265,000 firms compete within the Canadian construction industry, and of these, more than 68,000 (25%) operate in residential construction. The vast majority of firms competing within the residential construction industry are small; nearly 90% of all firms have less than five employees. In 2011 market value grew by 2.1%, which should cause rivalry to ease as industry players operate in an expanding market meaning there is more revenue for players to share. Overall rivalry is rated moderate. Both factors are favorable for a prospective new industry entrant. Financial Requirements By applying his knowledge, industry experience and successful business model of his current business, Abedi is seeking $400,000 to funding the new start-up business, and enter this industry in the Province of British Columbia. This financial requirement is necessary to begin operations in the market, successfully compete for bids on projects, and to meet the cash flow requirements with consideration for the key risks that the new firm faces when entering this industry in 2013. With a understanding of the business, managerial experience and success with his current business, Mr. Abedi believes there is a viable commercial potential to gain market share in this industry and to create a profitable business over the next three years, by implementing the plan as outlined in this business plan document.

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II. Business Overview The proposed company (The Company) is a residential construction start-up firm, which competes in the ‘New Home Building & Renovation’ sector of the British Columbia homebuilding industry, where Mr. Mohammad Abedi will provide construction management role in the company, and through its services. Mohammad Abedi is currently the Chairman of the Board of Directors for the Iran-based company, Nik Ejray-e- Sepahan Construction Company. In this role he manages a team of 50 employees, where the company has provided upgrades and construction services on residential structures over the past 13 years. The company prides itself on its proficiency and quality workmanship in their services throughout Esfahan, Iran, and has gained the excellent grade of building construction from the government of Iran. The company saw the equivalent of $1.4 million CAD gross revenue for the fiscal year ending March 20, 2012, and sees a 20-30% gross profit margin on services, based on 2011-12 financial history. Mr. Mohammad Abedi is seeking to extend the extensive experience and knowledge he has gained over the past 13 years managing a construction business in this industry, and enter the residential construction business in British Columbia. In the newly formed company Mr. Abedi will take on the role as a construction manager through the company, where he will oversee and schedule construction for clients. Key Success Factors The key success factors to the proposed business outlined in this plan are the following1: 1. Business Management One key success factor for an entrant into the Canadian Homebuilding Industry is a strong management team, with both experience and thorough knowledge of the industry. This includes organizing and planning, job loss control and quality control. This requires an experienced management team that is capable of adapting successfully to such factors as changing interest rates, unemployment rates and construction materials costs, while maintaining company operations from day-to-day. 2. Financial Conditions Availability of cash flow is highly essential for companies in the construction industry, in order to continue their businesses. The most core financial areas covered by this condition are: Control of cash flow, capital/financial strength, management’s response to country's economical conditions, profit margins, timely payment of and ability to secure low interest rates. 3. Owner-Manager Characteristics Owner characteristics is considered one of the main important factors to company success in the construction industry. These characteristics include (from most to least important): Leadership, experience, communication skills, honesty, education level and network/connections.

1 Critical Factors to Company Success in the Construction Industry by G. Arslan, and S. Kivrak. International Journal of Social and Human Sciences 2 2008. https://www.waset.org/journals/ijshs/v2/v2-81.pdf

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4. Quality of Work and Workmanship Based on the analysis of the sub-factors of quality of work and workmanship, the most important factors are client satisfaction, use of good quality materials, and teamwork and harmony. Client satisfaction is the most essential item, as it is highly important for winning future projects in this industry. Lesser-rated factors of quality of work and workmanship are: completion of job on time, qualified consultants, qualified personnel and good subcontractors. 5. Sales and Marketing The most important factors of sales and marketing for a construction firm are: company image, good advertisement and competitive pricing. Mr. Mohammad’s 13 years experience in this industry provides strong ability to meet each of these key success factors, and develop the company through its initial start-up phase, into a profitable firm. Commercial Viability of the Business The British Columbia residential homebuilding and construction industry is a growing industry, and stands as an excellent business opportunity in terms of commercial viability for a small independent business to gain market share and profit. This commercial success viability is summarized as follows:

• Industry is highly fragmented2; this provides a strong opportunity for a small independent start-up to gain market share.

• Industry is projected to grow; the Canadian homebuilding industry is forecasted to grow 29.6% between 2011-16 to a $86.7 billion industry. Market volume of Canadian homebuilding industry is projected to increase 17.3% over the next 5 years, to 206,034 housing units2.

• The business is run by strong management; Mr. Abedi possesses the key skills and experience to manage a $1.4 million construction company profitably.

Strong Management Mr. Abedi has successfully managed a team of 50 workers for the past 13 years, and has extensive knowledge of the many elements of running a small business in the construction industry: from purchasing to gaining access to suitably priced materials, to effective hiring, and quality workmanship in professional grade spec in coherence to the building and safety standards as set by the Ministry's Building and Safety Standards Branch of British Columbia3.

2 MarketLine Industry Profile: Homebuilding in Canada by MarketLine. July 2012. 3 The 2012 BC Building Code, 2012 BC Plumbing Code, and 2012 BC Fire Code, based on the 2010 National Building Code of Canada, 2010 National Plumbing Code of Canada, and 2010 National Fire Code of Canada, are regulations that establish minimum standards for the industry. http://www.housing.gov.bc.ca/building/

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Mohammad Abedi is excited to bring his skills and experience to Canada and the Province of British Columbia through his business, and help contribute to employment opportunities for Canadian construction workers through this business. The following business plan provides a detailed illustration of the proposed business, and how the company will successfully achieve this outcome.

III. Company and Owner Structure The proposed business outlined in this business plan is an incorporated business with the province of British Columbia, offering services in the residential construction industry. The company will be owned 100% by Mr. Mohammad Abedi, and seeks financing of $400,000 in the form of debt financing. Additional company financing may be available from Nik Ejray-e- Sepahan Construction Company, Mr. Abedi’s company based in Esfahan, Iran.

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IV. Management Structure The proposed company will operate under the following organizational chart, where the employee size will grow with the company successfully obtaining work bids. Core Elements of the Business

• Business Development • Operations • Finance • Administration • Management

Year 1 In Year 1, Mr. Abedi will work independently, assuming responsibility for the execution in all vital tasks, and grow by adding independent contractors, assuming the following organizational chart: Mr. Abedi will assume a majority of the company’s essential tasks in the early start-up phase on the company, as the company pro-actively seeks projects, submits bids and grows sales:

1. Sales strategy 2. Estimating 3. Bidding 4. Bonding 5. Planning the work 6. Executing the plan

CONTRACTOR

Marketing Clerical Operations Controls Personnel

Sales Equipment Estimates/Bids Purchasing Financial Mgt.

Job Supervision Time Keeper

Bonds

(owner/contractor)

Chart 1

(All report to contractor)

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As the work grows, the company will hire independent contractors on a per-job basis, as the company projects to generate approximately $500,000 revenue within the first 12 months of operations. Year 2 In the second year of operations, the company’s organizational structure will grow with its sales, into the following structure:

   Chart  2  

               

 CONTRACTOR  

   

   

   

 

   Operations

                 

Sales

               

 Marketing

   

             

Personnel

                 

Company Policy

                                 

Engineer/Estimator

 General Superintendent

 Office Manager

         Estimates-Bids

 Job Foreman

 Financial Mgmt

         Contract Administa.

 Job Foreman

 Bonds

         Equipment

     Clerical

         Inspections

   

 Purchasing

As the company grows, specialists are added, including an engineer/estimator, an office manager and a general superintendent. These additional tasks will be hired on as work and sales permit. Year 3 Providing the company executes its sales volume as per projected, the organization growth will expand to partner with key management individuals to help assist the future growth of the firm. The two primary areas of the company are: office administration and construction operations. Construction operations include all job site project management and quality control, whereas the

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sales/administrative arm of the business extends to business development, bids, purchasing and all areas of personnel and strong financial management. Potential management partners will be selected through a very strict criteria, based on minimum 10 years of experience managing a company of approximately 50 contractors/employees in the construction industry. Partner selection will also be heavily dependent on the individual’s quality of industry contacts, capital and any additional knowledge and/or unique experience that may be applicable.

   Chart  3  

               

 PARTNERS  

   

   

(owners)

   

           

   

   

Partner

     Partner

Partner Construction

   

 Office Administration

         Operations

 

 Sales

         Contracts

     Organization

         Inspections

     Personnel

         Job Management

     Financial Management

         Equipment

   

 Purchasing

         Job Foreman

   

 Estimates - Bids

         Job Foreman

        Key Staff In the first 12 months of the business, the primary role of Mr. Mohammed Abedi will be to acquire key industry contacts, bid successfully on jobs and build the business on a foundation of continuously growing and improving business relationships between vendors, independent contractors and clients. Abedi will develop the staff members as needed throughout each growth stage of the company, based very similarly on the industry organizational model used by his current Iranian company. With his experience successfully growing a residential construction company from its original start-up phase, through the various stages of growth, he will use his knowledge to implement an effective plan for the company in the Canadian market.

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V. Operations The following is a brief outline of the bidding process, which is the primary factor for obtaining sales as a firm in the residential construction industry. Step 1. An owner (client) for construction project issues a bid package. The owner’s bid-seeking criteria are for a responsible, qualified contractor (or series of contractors) to do the outlined work at a reasonable cost. The bid package, or bid documents, includes the project plans, specifications, quantity lists, schedule information and data on any specific equipment or products to be used. Bid come in the form of public or private projects. Public are those projects with an agency or governmental owner, and must be advertised in advance, where they allow any qualified contractors to bid if they choose to. Private owners may opt to limit the process to contractors they have selected as bidders. Step 2. Cost the project, Determine project feasibility The Company determines an estimate of its costs to complete the project: determines material costs and availability, the labor and equipment that will be needed, the order of work, and scheduling requirements. This is done to uncover issues such as finding whether an important component has a long lead-time for delivery that may conflict with the owner's desired construction schedule. Another typical issue is whether owner-supplied quantities do not match the quantities as management has estimated them. Questions are addressed by asking for clarifications from the owner. A responsible owner will both answer these questions and share new or updated information with all the bidders. Management may perform site visits to identify potential problems that may be costly, like access issues or conflicts with existing structures or improvements. Step 3. If project is feasible in terms of: (a) profitability, (b) time frame requirements by owner & (c) management’s ability to complete project in quality manner, the Company will submit its bid. Step 4. For accepted bids, all documents are completed. As a construction management firm, The Company accepts itself bids for the various divisions of work from subcontractors or general contractors, and performs the work. Value Added Role of Construction Management Services The Company adds value at this stage of the construction process by taking full responsibility of the project’s completion, from start to finish for the proposed project, and assuming the management role to carry out the construction services. This allows an owner to outsource the development of a construction project to qualified construction management team to oversee proper construction quality and regulations are properly adhered to.

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Target Market: Immediate Customers The owners as described in the bidding process above are the company’s primary target market. These include most specifically, owners who issue construction management bids for residential construction and renovation projects. Capital Investment Requirements The Company’s requirements for capital in terms of equipment, materials and contractors depend largely on the bid specifics. For example, certain projects will provide materials as part of contract. Each project will require a particular piece (or set) of light and heavy equipment to complete the job. All equipment in Year 1 of operations will be rented for each job, and will be incorporated into each bid proposal’s list of costs.

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VI. Staffing

For the first year of operations, the company will restrict its hiring of additional services to independent contractors. This ranges from bookkeeping, insurance and legal services, to the construction services from independent contracts as required. They will be contracted on a job-by-job basis, and will be selected based on knowledge, qualifications for their specific trade, and level of experience.

VII. Market Analysis

The Homebuilding Industry: Definition

The homebuilding industry is defined in this report as the construction of new residential buildings, including houses and apartments. The industry is considered in terms of production. Volumes refer to the number of new individual dwellings completed in a given year. Values are calculated as the product of volume and average (mean) annual price of a new dwelling to an end-user (such as an owner-occupier), even when the dwelling remains in the ownership of the developer.Market Data4

Market Value The Canadian homebuilding industry produced fluctuating growth over 2007-2010, ending with positive growth in 2010 of 35.6%. This trend is set to change with moderate growth over the forecast period. The Canadian homebuilding industry grew by 2.1% in 2011, and is valued as a $66.9 billion industry. The compound annual growth rate of the industry over the past five years (2007-11) was 5.2% Market Value Forecast In 2016, the Canadian homebuilding industry is forecast to have a value of $86.7 billion, which is an increase of 29.6% since 2011.

4 Research for the Canadian homebuilding industry is sourced from MarketLine Industry Profile: Homebuilding in Canada by MarketLine. July 2012.

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Market Volume The Canadian homebuilding industry shrank by 6% in 2011 to reach a volume of 175,623 housing units. The compound annual growth rate of the industry in the period 2007–11 was 2.2%. Market Volume Forecast In 2016, the Canadian homebuilding industry is forecast to have a volume of 206,034 housing units, an increase of 17.3% since 2011.

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