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Engineering Consulting Business Plan Sample

The guidelines within this sample business plan will provide you with a good overview of starting an engineering consulting business.

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The guidelines within this sample plan will provide you with a good overview of starting an engineering consulting business. Use this example to compile your own.

1Executive Summary

StructureAll Ltd. will be formed as a consulting firm specialising in structural engineering services. A home office in Yellowknife, NT will be established the first year of operations to reduce start up costs. The founder of the firm is a professional engineer with eighteen years of progressive and responsible experience.

The founder, Philip Nolan, provided an initial investment towards start-up costs. Of this, more than half is required for start-up expenses while the balance is to to be placed in the company accounts as working capital.

Related: Free Business Plan Template Download

The firm will specialise in providing three dimensional modeling and visualisation to our clients. State-of-the-art analysis and design tools will be an integral part of the business plan. Implementation of a quality control and assurance programme will provide a focus for production work.

1.1 Objectives

  • Modest revenues the first year, with slow by steady growth over the next two years.
  • Achieve 20% of market value at the end of the third year of operation.
  • Increase gross margin significantly by the third year of operations.

1.2 Mission

Our mission is to provide clients across Canada’s North with structural engineering services for all types of buildings, from concept planning through to completion, with a highly skilled professional team working together, using common sense and practical experience.

1.3 Keys to Success

  • Provide professional quality services on time and on budget.
  • Develop a follow-up strategy to gauge performance with all clients.
  • Implement and maintain a quality control and assurance policy.

2Company Summary

engineering-company-summary

StructureAll Ltd. is a new company which provides professional engineering design services for clients which manage, maintain, and plan for residential, commercial, and industrial type buildings. Our focus will be the public sector market in remote communities across Canada’s North.

2.1 Company Ownership

StructureAll Ltd. will be created as a limited liability company. The company will be privately owned by Philip D. Nolan. Leslie C. Goit will also be listed as a Director.

2.2 Start-up Summary

Our start-up expenses allow for initial legal expenses, licenses, permits, stationary, specialty software, office equipment, and furniture. In addition to these start-up costs, an initial balance will be placed in the company accounts. The software purchases include an allowance of $5,000 for AutoCADD® 2000, $1,800 for National Master Specifications, and $200 for QuickBooks® (accounting package).

Philip Nolan will contribute towards the overall start-up costs.

2.3 Company Locations and Facilities

We will establish a home office in Yellowknife, NT in order to reduce start-up costs. The office space is estimated to be 150 square feet. We will be installing a dedicated fax line as well as a high-speed Internet connection. An interactive website will also be developed which will serve as a marketing tool. The domain name of “structureall.com” has already been reserved.

Related: Business Plan Tools


3Services

engineering-services

StructureAll Ltd. offers complete structural engineering services. We will focus on buildings with the following ‘Use and Occupancies’:

  • Residential.
  • Commercial.
  • Industrial.

The company is ‘project’ oriented where each project involves:

  • Renovations.
  • Rehabilitation.
  • Additions.
  • New construction.

We offer innovative and economical design services, maintaining state-of-the-art design technology. We meet client needs on projects of all sizes and smaller, special design projects.

3.1 Competitive Comparison

StructureAll Ltd. offers their clients superior service accompanied with state-of-the-art analysis and design capabilities. We will offer three-dimensional visualisation services to reduce the possibility of spatial conflicts with architectural elements and other engineering disciplines. In comparison, our competitors rely mostly on two-dimensional models.

We will implement a quality assurance and control program for all projects undertaken. This document will serve to focus on the standards which will be achieved and a means of measuring performance.

A systematic manner of sorting and retrieving a library of structural elements and assemblies will be implemented. Slide libraries will be available from a tool bar within AutoCADD for quick access. We will adopt the layering standards of the American Institute of Architects (AIA). In comparison, our competitors do not have an integrated database. StructureAll Ltd. will adopt the filing systems developed by the AIA. All project information will be tracked using an integrated database management system. All of our business tools will be year 2000 compliant.

Related: SWOT Analysis Samples

3.2 Sales Literature

A brochure system, which covers a broad spectrum of the target market segment will be developed during the initial year of operations. This system will be modular in nature and include many ‘boiler plate’ sections which may be edited to suit specific needs. Brochure inserts will be maintained as individual sheets to facilitate their assembly in any custom situation.

Our website will be developed the first year of operations and include a description of our services, the areas which we plan to serve, contact information, a list of representative projects, and a brief biography of Philip D. Nolan. An Internet domain name has already been reserved for this purpose … http://www.structureall.com A series of templates will be developed for project proposals. The format for all proposals will include:

  • Cover letter.
  • Scope of services for each project.
  • Fee (if requested).
  • Firm’s qualifications to provide services (overview).
  • Project Team (describes each person’s tasks and qualifications).
  • Philosophy of design approach.
  • Relevant experience.
  • Schedule to provide services.

3.3 Service Description

  1. Project Consulting: Proposed and billed on a per-project and per-milestone basis, project consulting offers a client company a way to harness our specific qualities and use our expertise to develop and/or implement plans, from conceptual planning to turnover. Proposal costs will be associated with each project.
  2. Forensic Investigations: Proposed and billed on a per-project and per-milestone basis, our investigations will serve the public and private sector markets. We will focus on troubleshooting buildings where damage and or failure has occurred. Our reports will outline the description of the problem, the nature of the mechanism which has caused damage or failure, and a list of options for remedial action including estimated budget costs for implementation.
  3. Project Management: Our project management services include defining client needs, preparing bid documents, tendering, bid analysis, construction review, payment certification, contract administration, and warranty inspections. Projects include new facilities, renovations, repairs, and remodeling.
  4. Dispute Resolution: We draw upon our broad range of construction and contract administration experience to provide dispute resolution services, including arbitration, mediation and expert reports for litigation. This work is supported by forensic engineering services to identify the cause of failures.
  5. Restoration Engineering: We provide condition survey, design, and construction review services for the repair of building structures.
  6. Home Inspections: We will provide prospective homeowners with an assessment of the various systems in a residential home, including foundations, framing, building envelope and efficiency, mechanical systems, electrical systems, and general safety issues. We provide a photographic record along with a thorough written report.

3.4 Fulfillment

We will turn to qualified professionals to supplement computer aided design and drafting (CADD) services, specialty connection designs, and analysis support services which are areas that we can afford to contract out without risking the core values provided to the clients.

We have fostered several alliances with suppliers of structural elements, including glued laminated lumber, pre-engineered dimension lumber trusses, engineered lumber, and steel to facilitate this strategy.

In the second year of operations, we intend to secure a storefront presence in Yellowknife. At this stage, we will seek qualified northern engineering students to provide them with work experience in a structural engineering office environment.

3.5 Technology

StructureAll Ltd. will maintain complete and comprehensive Windows® based analysis tools for structural design. An integrated computer aided design and drafting tool permits several evaluations to be made on a structure at minimal cost. StructureAll Ltd. will maintain an Internet website complete with file transfer protocol (ftp) capabilities.

3.6 Future Services

Quality Control and Assurance: Serving the needs of the welding industry, we will ensure that certified firms and their employee welders are qualified to perform specific welds in accordance with the requirements of the Canadian Welding Bureau (CWB) as a certified Welding Inspector. We are currently in the process of completing a comprehensive home study program offered through the CWB for this purpose.

There are four firms presently in the NWT which require these services in order to maintain their certification with the CWB. On-site inspections are required four times per year.

Fabrication and Detailing Drawings: Serving the special needs of steel and concrete construction, StructureAll Ltd. will be working toward offering these services to contractors in the future.

Toll-Free Communications: We will provide our clients a toll-free number to access 24 hours a day in the second year of operations.

Related: 9 Different Kinds Of SME Funding


4Market Analysis Summary

engineering-market-analysis-summary

StructureAll Ltd. will focus on traditional Architect/Engineering (A/E) contracts. The owner will usually contract the A/E to perform planning and design services. These design services include preparation of plans, specifications, and estimates.

Construction services may be limited to occasional field visits and certain contract administration requirements. Typically, these types of projects distribute total design fees amongst the professionals involved in accordance with the following guideline:

  • Architecture Design (65%).
  • Structural Design (10%).
  • Mechanical Design (15%).
  • Electrical Design (10%).

Our most important clients will be established architectural/engineering firms who require structural engineering services.

Related: Free Sample Marketing Plan Template

4.1 Market Segmentation

The market for engineering services may be summarised with the following groups:

  • Established Architectural and Engineering firms: Typically, the structural portions of any building project involve a Prime Consultant who pre-selects their team members and promotes their strengths in a proposal call to prospective clients. Our strategy is to offer these established firms a viable resource from which to draw upon. We can undertake the entire structural engineering process or provide assistance to their own in-house staff.
  • Territorial and Federal Governmental Departments: The Government of the Northwest Territories (GNWT) and the newly created Nunavut Territory retain consultants for a variety of purposes. We intend to position ourselves as a local firm offering expertise in consulting, project management, forensic, and restoration engineering. The Federal Government also retains consultants for similar purposes.
  • Law Firms: We will market our services to the legal community to provide dispute resolution services, including arbitration, mediation and expert reports for litigation. This work is supported by forensic engineering services to identify the cause of failures.
  • Contractors: We will offer design/build services to contractors for the multitude of potential projects which the Territorial Government and Nunavut Territory have recently undertaken. Contractors occasionally require structural engineers to submit sealed alternatives for equivalents to construction details.
  • Municipal Governments: Remote Municipal Governments in the Territories can expect to have more autonomy with respect to infrastructure growth and development in the years to come. This initiative is part of the GNWT mandate. We will promote our services to the local municipal governments for this purpose. To attract this market potential, we will offer to train those students in each community who are interested in engineering as a career choice. On the local front, the City of Yellowknife often provides recommendations to builders and homeowners for structural engineering services related to renovations, additions, and new construction.
  • Private Individuals: We will focus attention on homeowners in Yellowknife who are renovating or contemplating an addition to their residence. We will also promote home inspections to those parties contemplating the purchase of a home.
  • Realtors: In conjunction with home inspections, we will make all the Realtors aware of this service.

4.2 Service Business Analysis

The following sections describe in more detail these aspects of the service business environment:

  • Business Participants.
  • Competition and Buying Patterns.
  • Main Competitors.

4.2.1 Business Participants

The majority of consulting services cater to the needs of the Territorial Governments. The Territorial Governments operate on a budget of approximately $1,170 million per year, based on the 1998/1999 Main Estimates. Of this total, approximately $1,028 million is spent on Operating and Maintenance Expenditures while $142 million is allocated to Capital Expenditures.

Within the Capital Expenditures, Buildings and Works is a sub-category. This is the area of the annual operating budget from which all building design consultants must draw upon. Our analysis of the 1998/1999 Main Estimates indicates a total expenditure of $59,339,000. A typical A/E contract derives fee estimates from total budgets. For this analysis, we will apply 9% as a guideline for design fees. This yields a figure of about $5,340,000 in design fees available for distribution to the consulting industry.

The major clients within the Territorial Governments include:

  • Department of Education.
  • Department of Transportation.
  • Department of Municipal and Community Affairs.

Our competition matrix indicates a total of 102 persons within the consulting field in the Territories. This total has been subdivided into the types of positions these people hold. Based on reasonable estimates of salary expectations including 30% burdens for administration yields a value of about $7,800,000. This figure represents an estimate of the revenues required to sustain engineering consultants in the Territories.

From this evaluation, the Territorial Governments account for close to 70% of design fees while other participants in the building marketplace account for the balance. The Territorial Governments retain consultants for the following types of buildings:

  • Schools.
  • Health Centres.
  • Community Halls.
  • Arenas.
  • Warehouses.
  • Firehalls.

These types of buildings are constructed on a rotating basis across several communities in the NT. In addition to new construction, rehabilitation, renovations, and additions are also in demand. Typically, the Territorial Governments issue a proposal call to consultants to service these needs. StructureAll will position itself as a Structural Sub-Consultant or resource to the Prime Consultant. StructureAll Ltd. will also promote its services as structural specialists and project managers to the Territorial Governments.

Related: The Ultimate Marketing Tool Library for Entrepreneurs

4.2.2 Competition and Buying Patterns

Pricing of projects and billing rates are surprisingly variable. In consulting at this level, it is easier to be priced too low than too high. Clients and potential clients expect to pay substantial fees for the best quality professional advice. The nature of the billing, however, is sensitive. Clients are much more likely to be offended when a job starts at $20K and ends up at $30K because of overruns, than if the same job started at $30K or even $35K.

Clients rarely compare consultants directly, looking for two, or more, possible providers of a proposed project or job. Usually they follow word-of-mouth recommendations and either go for the job or not, rather than selecting from a menu of possible providers.

The most important element of general competition, by far, is what it takes to keep clients for repeat business. It is worth making huge concessions in any single project to maintain a client relationship that brings the client back for future projects.

4.2.3 Main Competitors

  • Ferguson Simek Clark (FSC Group): This well established architectural and multi-discipline engineering firm would be our main competitor. This firm has branch offices in Iqaluit, NT and Whitehorse, YT besides a head office located in Yellowknife, NT. Their principal strength is undertaking a project from inception through to completion under one roof. Their weakness stems from an understaffed structural engineering group. At present, there is only one structural engineer who services the needs of all their in-house architects and outside clients. The drafting aspects of any project rely upon recollection and modification of past projects typically. There is no systematic manner in which standard block libraries are maintained or updated. They underutilise the programs at their disposal for structural analysis and design.
  • A.D. Williams Engineering Ltd. (ADWEL): This multi-discipline engineering firm is well established in Yellowknife. Their head office is located in Edmonton, Alberta. They can draw on additional resources from the core group as required to meet the demands of project schedules. At present, there is no resident structural engineer on staff in Yellowknife.
  • Girvan and Associates: This is a small one person architectural and engineering firm which specialises in providing services for residential construction projects. Ian Girvan services the private sector mostly. It is our hope that we can form a strategic alliance to carry out consulting work jointly as needs and occasions arise.

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Construction & Engineering

Commercial Contractor Business Plan

This sample business plan contains the essential elements and guidelines for starting out as a commercial contractor.

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Commercial Contractor Business Plan

Executive Summary

Twin Brothers Construction (TBC) plans to become a leading provider of construction and renovation services in the local area. The company’s overall strategy will be based on a continuing improvement process of setting objectives, measuring results, and providing feedback to facilitate further growth and progress.

TBC is a company, with principal offices located in the local area. The company’s management is highly experienced and qualified: the brothers who will lead the management team have each accumulated over twenty five years of experience in the construction industry.

Products/Services

Through their years of experience, TBC’s owners have developed sophisticated bidding, scheduling and materials solutions for some of the most complex construction projects being done today. The company will use versatile and completely adaptable methods for a variety of building configurations.

Owners, developers, construction managers, general contractors, and sub-contractors are expected to realize substantial savings in labor and material costs by using the company’s construction methods and systems. Applications include commercial and residential structures.

The Market
The housing industry has been growing at a fast pace for several years. An all-time record was set in 1998, when 886,000 new-site single family homes were sold. That represented a 10% gain from the robust total of 804,000 homes sold in 1997. Although there was a slight drop in the number from 2003, this makes for an excellent opportunity for future expansion of the industry.

Twin Brothers Construction plans to rapidly develop marketing alliances with industry leaders and pursue new sales of its services to residential and commercial builders. The marketing strategy will focus on securing city, county, and state and federal government contracts.

TBC plans to use a direct sales force, relationship selling, and sub-contractors to reach its target markets. These channels are most appropriate because of time to market, reduced capital requirements, and fast access to established distribution channels.

1.1 Mission

Our mission is to be the best partner for our customers, suppliers and employees. To realize our vision, we will strive for profitable growth, operational excellence, customer satisfaction and strong brand positioning.

1.2 Objectives

  • To have up to three construction projects established within the first year.
  • To have two building renovation projects in progress by the end of the first year.
  • To locate and purchase our first rental building by the end of the first year.
  • To achieve at least 7% profit by the second year.

1.3 Keys to Success

We believe our keys to success will be:

  • Using the most updated materials and equipment to assure quality construction projects for ourselves and our customers.
  • Educating the customers and providing valuable advice during the construction planning stages.
  • Helping to confirm customer’s research about targeting markets and specific sectors.
  • Overseeing the logistics associated with a project, which can include arranging local transportation, booking meetings etc.
  • Assigning the actual work to an experienced and qualified third-party contractors and sub-contractors.

Company Summary

The brothers will invest a total of $90,000 combined ($55,000 and $35,000) in the start-up of the company. Initial cash requirements will total $50,000. Start-up assets total $55,000.

2.1 Company Ownership

The company ownership will be shared by the Chairman and Chief Executive Officer in the following percentage amounts:

Chairman = 60%
Chief Executive Officer = 40%
Both owners are veterans in the building industry, each with over 25 years experience.

Products and Services

TBC will sell its services to clients in the area of commercial construction and renovation. The company’s staff will design specialized construction drawings that outline the schedule, work sequence and the materials needed for building and renovation construction projects. Owners, developers and general contractors will realize substantial savings in labor and material costs by using TBC’s customized performance methods. TBC’s methods will offer complete adaptability at cost-effective prices. The drawings that the company will furnish to the contractor will specify the order of assembly and erection, including the location of the strongbacks and joists, the location and actual loading of the ties, location of accessories and advise clients of the maximum allowable rate of concrete placement.

A longer-term service will be commercial building rental management. This will include the purchase of commercial building sites or existing buildings that need renovation, coordinating the construction/renovation, then managing the rental of the property. The company will also be looking for existing property owners whose properties need renovation to update and increase its income potential, with TBC eventually taking over the management of these properties on behalf of the owner.

To enter the market with minimum overhead costs, TBC plans to utilize in the first year of operation mainly sub-contractors and independent experts for its building and renovation projects. Accident prevention will be the cornerstone of TBC’s safety commitment. The company will strive to eliminate foreseeable hazards which could result in personal injury or illness; at TBC, health and safety will not be compromised.

Market Analysis Summary

There were about 792,000 construction companies in the United States in 2002: 237,000 were building construction contractors; 60,000 were heavy and civil engineering construction or highway contractors; and 496,000 were specialty trade contractors. Most of these establishments tend to be small, the majority employing fewer than 10 workers. About 4 out of 5 workers are employed by small contractors.

Construction offers more opportunities than most other industries for individuals who want to own and run their own business. The 1.6 million self-employed and unpaid family workers in 2002 performed work directly for property owners or acted as contractors on small jobs, such as additions, remodeling, and maintenance projects. The rate of self-employment varies greatly by individual occupation in the construction trades. The local area is booming at this time, with many development projects running both by public and by private sources. Overall business growth over the past seven years has averaged approximately 9.5% and is expected to continue for at least the next several years. This constitutes an attractive market for TBC. The company will be concentrating on office building construction. This is the fastest growing segment of all the commercial clients requiring our services. The other categories to serve will include building renovation along with a segment it calls the general category, to serve other potential commercial clients.

One longer-term field of operation for the company will be the selling of building material and components to contractors. By slowly establishing itself as a first-rate material provider, the company expects to broaden and strengthen its stance in the local building industry. Initially it will focus on purchasing supplies for its own construction and renovation projects, then use those completed projects as marketing examples to showcase the quality of materials used and the customized approach used to design and construct them.

The company plans to develop marketing alliances with industry leaders and pursue new sales of its services to commercial builders. The market strategy is to capitalize on the company’s future alliances by securing city, county, and state government contracts. TBC also plans to use a direct sales force, relationship selling, and sub-contractors to reach its markets. These channels are most appropriate because of time to market, reduced capital requirements, and fast access to established distribution channels.

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Construction & Engineering

Electronic Engineering Business Plan

This business plan will show you what should be included when it comes to starting up an electronic engineering business.

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Electronic Engineering Business Plan

Executive Summary

Rosafarbenes Nilpferd & Sons Engineering, Inc. (RNSE) has established a strong foothold in a niche technology market for Product Category One* devices. The potential market demand of 180 million units far outstrips the capacity of present suppliers and is growing at a rate of 22% annually. RNSE’s success in taking advantage of this boom market is evidenced by its recent growth in sales and profitability. Sales are projected to grow from the first quarter of Year 1 total of $280,000 to $1,600,000 by the end of the first year, and to exceed $14 million by the end of the third year of operations. A similar growth pattern will cause before tax profits to rise significantly by the end of Year 1 and continue increasing through the end of Year 3. These results will be achieved without large additions to fixed assets. A relatively small banking facility will be needed in the form of a line of credit of $150,000-$200,000 to support the necessary growth in current assets, half of which will represent prime corporate receivables.

1.1 Objectives

While working to develop Rosafarbenes Nilpferd & Sons Engineering’s image as the premier maker of Product Category One devices with the latest cutting-edge technology, the measurable objectives are:

  • Complete work to make RNSE’s products compatible with at least five of the most popular first-tier operating systems (by end Month 5, Year 1), and at least three others within one year.
  • Complete a thorough website redesign and get out a quality mailer to 300 Value Added Resellers (VARs) (by end Month 6, Year 1).
  • On the basis of a professional media analysis, arrange an effective advertising campaign in trade publications designed to target the telecommunications, industrial automation, and instrumentation sectors (by end Month 7, Year 1).
  • Through networking and partnering with operating system developers, technology manufacturers, and other industry players, arrange at least five banners/links on a reciprocal basis with key market-related websites.

1.2 Mission

Rosafarbenes Nilpferd & Sons Engineering’s mission is to develop cutting-edge Product Category 1 solutions for appliance and equipment makers who, due to the fast pace of technology, are under pressure to get their products to the market quickly. RNSE achieves this by maintaining a small “think tank” style technical team, outsourcing the manufacturing, and keeping a marketing offering which caters to the more demanding Product Category One requirements, leaving the simpler high-volume and price-sensitive market needs to the competition.

Note: Proprietary and confidential information has been disguised or omitted from this sample plan.

1.3 Keys to Success

The demand and growth potential is so overwhelming that success in selling Product Category 1 devices is virtually assured provided a few key aspects are kept in mind:

  • There is no problem in contract manufacturing the devices, provided a ready stock of components is available. Careful planning in ordering sensitive components is essential, and sufficient financing must be in place to support long inventory periods.
  • Avoid time-consuming inquiries originating from outside the chosen market targets. Everyone is interested in Technology 1. It is important to weed through the inquiries and respond to those that fall within sales and marketing parameters (needs between 100 and several thousand units, designed for use with high-ticket sophisticated equipment).
  • Move quickly to build a brand awareness for cutting-edge reliability. The market need for Product Category 1 devices is potentially so large that more competitors can be expected. It will be more difficult to build an image later.

Company Summary

Rosafarbenes Nilpferd & Sons Engineering solely owned by Becket Nilpferd, has been in the high-tech business since 1992. To capitalize on the growing demand for the Product Category 1 devices, the company recently shifted from offering consulting services to the development of the Technology 1 hardware and software.  Its first prototype has been vastly popular with its clients and the company soon will start shipping the improved version of its device. The company positions itself as a developer of high-end devices and selectively targets telecommunications companies, as well as smaller industrial automation and instrumentation companies, that have strong demand for the high performance Product Category 1 devices.

2.1 Company History

Rosafarbenes Nilpferd & Sons Engineering was solely service-based for seven years, but as the market for Technology 2 systems began to appear, RNSE shifted its emphasis from consulting to the development of Technology 2 hardware and software. This explains why the Past Performance Table does not show inventory or accounts receivable in years 1997 and 1998. Consulting revenue dropped in 1998 as RNSE limited its consulting activities and began ramping up to produce its first product line which was introduced in 1999. Since then, earnings have increased dramatically from approximately $4,000 in 1998 to nearly $80,000 in 1999 which grew to over $110,000 in the first quarter of 2000.

*Note: Propriety and confidential information has been disguised or removed from this sample plan.

2.2 Company Ownership

Rosafarbenes Nilpferd & Sons Engineering was incorporated as a “C” corporation in the state of Freedonia in 1992.  Becket Nilpferd is the founder, owner, and sole stockholder.  The company is not publicly traded at the time of this writing.

Note: Proprietary and confidential information has been disguised or omitted from this sample plan.

2.3 Company Locations and Facilities

Rosafarbenes Nilpferd & Sons Engineering presently operates from two large offices located in Fezzaewyg, Freedonia.  All manufacturing is out-sourced to contract manufacturers.

*Note: Propriety and confidential information has been disguised or removed from this sample plan.

Products

Rosafarbenes Nilpferd & Sons Engineering’s products are off-the-shelf ready platforms containing all the necessary infrastructure for Technology 1, so that appliance makers can immediately focus just on their own specific product applications.

3.1 Product Description

Rosafarbenes Nilpferd & Sons Engineering occupies an important segment of the “Technology 2 system” market.  A Technology 2 system is any system that is physically incorporated into a product that performs a dedicated function or specific application.  Consumer examples include kitchen appliances and home entertainment systems, whereas commercial examples are point-of-sale terminals, industrial process controls, etc.  The button you press which toggles back and forth between total miles travelled and the trip mileage is an example of the many Technology 2 systems found in new cars.

RNSE specializes in the segment of the Technology 2 system market that relates to Technology 1.  One example is the odometer as an ultra simple Technology 2 system that does not normally require communication.  However, one can imagine a company with a large fleet of vehicles wanting accurate, up-to-date information concerning mileage for purposes of scheduling servicing, or checking routing distances.  The Technology 2 device that would be needed here would require Technology 1.  The “net” in this case would be a small, simple, closed net that would be comprised of the Technology 2 devices (called “smart” devices) connected to the vehicles’ odometer (satellites) and one central terminal (the server) located at company headquarters.  There is a whole array of means to connect the satellites and the server.  A wire would obviously be inappropriate here.  A digital radio wave would be the likely choice.  Each individual odometer device would have a discrete identifier, and would communicate to the server.  Each would have the potential to communicate to and from anywhere on in the world.  However, in our example, it being a closed system, the rest of the world would not be permitted to gain access to these identifiers.

RNSE makes these Technology 1 devices.  The basic device (here called Product Wrasse), about the size of a credit card, is comprised of:

  • A central processing unit (CPU).  This is a very powerful chip supplied by Technology Manufacturer 1 which represents the computing brain.
  • FLASH chip.  This is memory capacity that does not die when power is turned off.
  • SDRAM chip.  Normal memory capacity.
  • A Controller.  This governs the data flow from the satellites to the server.
  • RNSE’s proprietary Product Blennie.
  • Other elements like voltage regulators, electrical conduits to connect chips and external hook-ups.

The Product Wrasse, described above, would be bought by original equipment manufacturers (OEMs) to incorporate into their appliance (such as an odometer).  The unit might also be bought by an “integrator” who takes a basic odometer, plus the Product Wrasse, and adds some software to end up with a “smart” odometer which the market integrator then tries to sell to companies with fleets of vehicles that might have good need for this specialized product.  RNSE would configure the Product Wrasse so that it is compatible with the operating system used in the appliance, and would build in whatever FLASH and SDRAM capacity are needed for the designed purpose of the smart odometer.

RNSE’s third product is an add-on to the basic Product Wrasse and is called the Product Damselfish.  Going back to the odometer example: If the company with the fleet of vehicles would like to be able, once a certain mileage had been reached, to tell the driver: “Time for an oil change,” then the Technology 2 device would need to have audio capability.  Some applications might even need a video screen and a keyboard (like an ATM) for user interface.  These capabilities are available through Product Damselfish.

*Note: Propriety and confidential information has been disguised or removed from this sample plan.

3.2 Competitive Comparison

OEMs who want to benefit from the trend toward Product Category One their products, typically outsource their needs.  This allows the OEMs to concentrate on the design and application of their specific appliance without having to worry about the Product Category One aspect.  Outsourcing this part saves the OEM in development costs, and more importantly, saves time in getting the appliance to the market.

  • Outsource Provider 1.  The processor used is somewhat slower and parts costs are higher than with Technology Manufacturer 1’s CPU chip.  This company, by virtue of its parent being a contract manufacturer-assembler of smart devices, is primarily hardware-focused.  It would not be easy for Outsource Provider 1 to switch from Technology Manufacturer 2’s chip to Technology Manufacturer 1’s.
  • Outsource Provider 2.  This company seems to be market-segmenting to concentrate more on the multi-media market represented mainly by ATMs and kiosks (such as betting kiosks) which require a keyboard and a screen for user interface.
  • Outsource Provider 3.  This company moved in the wrong direction from the start by using their own proprietary software which is built into their devices.  This puts them at a real disadvantage.  Their devices are the slowest, and the least flexible, but still fine for certain non-demanding purposes.  The company has done some work for the HVAC market.  Their lower price reflects their limitations.
  • Outsource Provider 4.  This company, located in Vancouver, in close proximity to Software Manufacturer 1, is primarily a software company made up probably of ex-Software Manufacturer 1 people.  This explains their emphasis on the Technology 2 software.  Despite Software Manufacturer 1’s operating system dominance in one market, the Technology 2 market is different.  There are many widely-used Technology 2 operating systems.  This company buys their hardware from Outsource Provider 1.
  • Outsource Provider 5.  Outsource Provider 5 is a European-based company.  Its products are distributed and supported in America by a separate corporation in California.  This extra layer may explain the added price.  Specs are similar to those of Outsource Provider 1.

Rosafarbenes Nilpferd & Sons Engineering.  RNSE has made a considered effort to offer the fastest CPU chip and to build in the widest range of capacity (from low amounts of FLASH and SDRAM up to high amounts).  RNSE tries to make its units compatible with all the major top-tier Technology 2 world operating systems and will work with the second- and third-tiers as well.

*Note: Propriety and confidential information has been disguised or removed from this sample plan.

3.3 Sourcing

The chips and other basic building blocks used in Rosafarbenes Nilpferd & Sons Engineering’s Product Category One platforms can be purchased from a number of large distributors.  Sourcing is not a problem, but order scheduling must be given careful attention.  Shortages can occur, making it necessary to order well in advance and to stockpile in order to make certain that sales does not outstrip production.

3.4 Technology

Technology is moving at a rapid pace.  The first commercial computer in the early 1970’s had a speed, measured in megahertz, of only 0.1 Mhz.  Now computers are on the market that race at 1,000 Mhz.  Although the speed may still increase, a bigger area for growth involves Technology 2 systems, (rather than personal computers) and especially the Technology 1 use of those Technology 2 systems.  In a speech by Hewlett Packard CEO, Carly Fiolani, aired on television 4/18/2000, in the future nearly….”every appliance, yes, even the toaster, will be connected to the Internet.” Ms.  Fiolani’s vision includes an “Information Utility” which, in her opinion, would work in a similar manner to the gas company, the electric or the water and sewer utility.  For all of the 20th century, manufacturers have produced their appliances under a certain protocol of “assumed power.” They have taken it for granted that every consumer has a Power Service Provider (PSP) that supplies 110 AC to wall sockets all through the house.  The appliance makers simply include a power cord and an appropriately sized plug.  The consumer merely plugs the unit in and pays for whatever power he actually uses.  The emerging technology now refers to another protocol of “assumed communication.”

In the future, appliance makers will assume that everyone has an “Information Service Provider,” and will build in Technology 1 right into every Technology 2 component that goes into each appliance.  The consumer will expect it, just as he or she expects a 110AC power cord.  He will plug in the appliance and register it with that Information Utility referred to by Ms.  Fiolani.  Let’s say the appliance is a VCR.  Until now, we have had to program the VCR ourselves before we leave the house if we want it to record a program on TV that will air while we’re away.

We also have to hope we did it right and actually record the last round of the Masters Golf Tournament (and not end up with several hours of some home shopping channel).  However, with the new protocol, we will be able, from wherever we are, to simply contact our Information Utility (which will have all our appliance records) and say: “Record the Masters for me today.” It will all be arranged remotely by the service provider and it will be included in our monthly bill.  From any remote location, we’ll be able to turn our house lights on, turn down the heat, lock or unlock the house, turn off the hot water heater, sprinkle the lawn, etc.  According to Forrester Research, Inc.  of Cambridge, Ma., by the year 2002 7% of U.S. homes will have security systems, lights, heat, and appliances that can tap the Internet.  This will be a $1 billion market alone.

Product Category One appliances are not going to be reserved for simple on/off features.  Now available on the market are many very sophisticated appliances such as a printer, a sewing machine with computerized embroidery capability, or data stream music.  At the moment these are PC-dependent.  Take a high-tech sewing machine like a Pfaff Model 7570.  This machine with its Technology 2 system can perform complex sequences of operations including executing pre-programmed patterns and monograms and fonts.  The difficult operations which are very user-interface intensive can be performed by the general-purpose PC into which the sewing machine (like a printer peripheral) is plugged instead of by the sewing machine’s Technology 2 system.  If this user-interface capability had to be built into the Technology 2 system of the sewing machine, the cost of that machine would skyrocket.

Likewise, the MP3 player (data stream music) is extremely CPU-intensive.  At the moment the encoding takes place on the general-purpose PC which allows the music player to have much lower requirements for CPU and memory.  These devices are essentially one step removed from the Internet.  Technology is moving quickly to remove the PC intermediary thus making the devices able to communicate directly with a content provider.  Those capabilities of the general-purpose PC will be replaced by the Internet itself thus making the appliances more flexible, more portable, and less expensive.  PCs themselves will metamorphose into very light-weight, very inexpensive units without hard disks and without extensive memory.  All these aspects will be provided by the Internet itself.

Need to use “Winword”? Just log onto the Internet and download the program or any other software you want.  And, it will always be the latest version. Need file capacity? That too, can be provided by the Internet.  A user can move around the globe and access his/her files from a very portable laptop.  If the laptop is lost or damaged there will not be a crisis.  Simply buy another (for maybe $100).  All your files are safe, located elsewhere.  Forrester Research predicts that by 2002 43% of all “smart” products will be non-PC devices.  According to International Data Corporation of Framingham, MA. by the year 2004 such appliances will exceed PCs.

Market Analysis Summary

The market for Product Category One devices is keyed to the production of Technology 2 microprocessors.  Over 180 million 32-bit microprocessors are being delivered annually.  Conservative estimates have the market growing at 22% annually.  Some estimates are much higher.  Market trends indicate that most, if not all, of these microprocessors will be wanting Technology 1.  At the present time, the number of makers of off-the-shelf Product Category One devices is limited and unlikely to be able to fill the demand.

4.1 Market Segmentation

Statistics related to Product Category One devices are very difficult to find, and when found, usually outdated.  A number of industry newsletters (Technology 2 Processor Watch, Microprocessor Report, Technology 2 Systems Programming) will give dollar figures from time to time for the total embedded market.

In 1999 the market was quoted to be $3.5 billion and expected to grow to $9 billion by 2003.  The Product Category One devices sold by RNSE are connected to this total Technology 2 product market.  The more products that are produced, the greater the demand for Technology 1.  According to Jim Turley, Editor-in-chief of Technology 2 Processor Watch…  “in 1997, more than 180 million Technology 2 32-bit microprocessors were shipped.  This does not include the 32-bit microprocessors placed in the 80 million PCs, the three million MACs, or the approximately one million work stations.” Mr. Turley’s article goes on to state that if the low-end 4-bit and 8-bit microprocessors were included, the totals would be more than doubled.  He estimates that there now exist about 35 low-end microprocessors in every middle-class North American home.  It is, however, the 32-bit sector that is growing fastest.  It is this sector that is most meaningful in projecting the market for RNSE’s products.  Of this total of 180 million 32-bit microprocessor units, the market research firm of Information Architects, claims that the market is broken up roughly into thirds:

  • Office Automation (34%).  This included laser printers, faxes, feature phones, etc.
  • Consumer (33%).  Includes video games, portable games, CD players, and high-end audio visual equipment.
  • Communications (28%).  Includes network hubs, routers, switches, telephone infrastructure equipment.
  • Automotive (3%).
  • Military (1%).
  • Other (1%).

Since the total dollar market is predicted to grow from $3.5 billion to $9 billion in the five years 1999-2003, we will assume a 22% annual growth rate over the next three years.  Although the 180 million shipped 32-bit microprocessor data was for 1997, we have not made any growth assumptions for the period 1997-1999, but will apply the 22% annual growth during the next three years to the 1997 data.  It is however highly likely that the market has grown substantially over that period 1997-1999.

In addition to the new Technology 2 microprocessors, there are hundreds of millions of older 4-bit, 8-bit and 16-bit boards that have already been sold.  These too, although ignored in the market study, represent a potential demand for Product Category One devices retrofitted into many of those microprocessors.

The 33% consumer share of the market is characterized by high production runs and price-sensitivity.  VCRs and MP3 players are good examples of products in this consumer market segment.  Similar comments can be made concerning the office automation market segment as well.

The third large sector of the market, telecommunications (28%) does not appear to be as price sensitive nor are production runs as large.  It is this sector that has so far accounted for the majority of Rosafarbenes Nilpferd & Sons Engineering’s sales.

The other category, representing only 1% of the total, probably includes various industrial automation products as well as testing and instrumentation.  These fields, although small in relation to the three major categories, still accounts for over two million microprocessors placed in high-ticket equipment, nearly all of which will need Internet connectivity.

4.2 Target Market Segment Strategy

Rosafarbenes Nilpferd & Sons Engineering plans to concentrate on the telecommunications segment of the market (28% of total market) as well as the industrial automation and testing and instrumentation segments (1% of total) as these sectors are most likely to have more demanding requirements which are suited to RNSE’s premier, cutting-edge of technology architecture.  These sectors are most likely to be installing the Product Category 1 devices into high-ticket item instruments and appliances, thus making these clients less price-sensitive in relation to the high-volume consumer (MP3 players, Palm Pilots, etc).  VARs and OEMs (Fortune 500 as well as venture capital start-ups) connected with these market sectors are the most attractive target customers for RNSE.

4.2.1 Market Needs

The market, whether it is a maker of telecommunication switches, industrial automation equipment, or a VAR with a time and money-saving idea for a specific industry, wants to concentrate on its special product and bring it to the market place as soon as possible–hopefully ahead of the competition.  They want to out-source the Technology 1 need because they know that trying to engineer it themselves would be more expensive and slow down the launch of their end product by six to nine months.  Some Technology 1 needs, for example, an inexpensive 4-bit microprocessor lodged in a thermostat, can be satisfied without spending $350-650 for a Rosafarbenes Nilpferd & Sons Engineering Product Wrasse.  This need would be satisfied by one of the low-end devices (like Outsource Provider 3).  RNSE needs to focus on the customers with the more demanding requirements for Product Category One.

4.2.2 Market Trends

The market trend is to add Technology 1  to just about everything, leading eventually to a view of the future well-expressed by the CEO of Hewlett-Packard (see the section on Technology).  The trend is moving so quickly that the market is having problems keeping pace with the demand.  Reports of component shortages among chip makers have been in the business news.  For the foreseeable future, we can expect Technology 1 products to be a sellers’ market.

4.2.3 Market Growth

The market for 32-bit microprocessors totalled $3.5 billion in 1999 and is expected to grow to $9 billion by 2003.  This amounts to a 22% annual growth rate (see the section on Market Segmentation).  In 1997 180 million 32-bit microprocessors were delivered, not counting those that were used in computers and work stations.  A 22% growth rate comes to an additional 40 million annually.  Nearly all of these (180 million plus 40 million annually) will need Technology 1.  The total unit sales projected for Rosafarbenes Nilpferd & Sons Engineering in the third year will amount to only .00014 of that.  In the absence of more specific market data, we have projected market growth at 22% for every segment of the Technology 1 market, although it is likely that some segments will grow faster than 22% annually and others perhaps less.

4.3 Industry Analysis

The industry encompassing Technology 2 microprocessors, the operating systems housed in them, the makers of components used to build them, and the people developing software to make special applications possible is quickly mushrooming into one of the world’s largest industries.  To be successful in marketing a Product Category One device it is essential to understand the patterns and major players in the industry.

4.3.1 Competition and Buying Patterns

Currently, demand for the Product Category One devices outstrips supply.  With the trend of adding Technology 1 to almost any appliance, demand will continue to grow.  The variety of offered platforms and configurations of such devices lead to the market fragmentation where no incumbent company holds a major market share.  For low-end devices, pricing is one of the major factors.  However, for high-end devices, such as the products supplied by Rosafarbenes Nilpferd & Sons Engineering, high technical specification and flexibility with major operation systems are more important.

4.3.2 Main Competitors

The main competitors for Rosafarbenes Nilpferd & Sons Engineering’s products are listed in the section on Competitive Comparison.  The listed competition is unlikely to even come close to satisfying a small portion of the demand for Product Category One devices indicated by market research.  One hundred, eighty million 32-bit microprocessors being delivered annually with a projected growth rate of 22% is a huge market for Technology 1, not to mention the billions of microprocessors already delivered in stock configuration.  Obviously, much of the Technology 1 will be done by internal engineering.  But this option has serious drawbacks for the company trying to develop this feature on its own.  First, its engineers have to examine hardware and software options, which, given the number to choose from, could take months.

  • Will the component support the input/output (I/O) requirements needed by the product?
  • Do separate add-on components need to be designed and manufactured?
  • Which operating system vendors support the component?
  • Does the hardware vendor support the operating system (O/S) vendor?
  • What about integration of the hardware and software?

After months of evaluation, and spending $25,000 on a leading real-time operating system (plus another $10,000-$20,000 buying and building hardware), more months will pass building, debugging, and integrating the operating system with the software.  More time is spent writing the application.  An engineer (who is an expert in the chosen operating system) will need to be hired, and each year another $5,000 will need to be spent in O/S upgrades and software.  Keeping up with protocols and standards will also take time away from development efforts.  In the end, hundreds of thousands of dollars can easily have been spent just on the task of adding Technology 1 to the product internally.  The end product, now including Technology 1, will have been delayed getting to market by six to nine months.  This delay to market aspect is the strongest deterrent to attempting to engineer one’s own Product Category One device.

*Note: Propriety and confidential information has been disguised or removed from this sample plan.

4.3.3 Industry Participants

There are several major components in the industry:

  • Microprocessor Manufacturers
  • The sheer variety and quantity of microprocessors is huge in relation to desktop computers.  There are only a few choices with desktop computers as Technology Manufacturer 1’s MMMM architecture increasingly dominates.  But with microprocessors there are NNNN, PPPP, QQQQ, MMMM, and RRRR which represent only a tiny fraction of the total volume of microprocessors shipped each year.  Even if we restrict the count to only 32-bit chips, there are more than 100 different microprocessors currently on sale.  This does not take count of the all the different speed grades or packaging options.  These 100 different microprocessors represent more than a dozen instruction-set architectures and more than 30 different vendors worldwide.  Some of these manufacturers have large sales forces and large marketing budgets.  The ability to attract the attention of one of these large manufacturers is key to marketing Product Category One devices.  If the Product Category One device uses an Technology Manufacturer 1 chip, Technology Manufacturer 1 has a vested interest in pushing its CPU customers to use that particular device.

Operating Systems
Microprocessors must have an operating system in order to function.  Again, unlike the desktop market where DDDD dominates, there are many competing operating systems.  So many in fact that they are graded as “First Tier,” “Second Tier,” etc.  When a manufacturer of an automated milling machine chooses an Product Category One device, he will want one that is compatible with his chosen Technology 2’s operating system.  In fact, the first time he hears about a particular Product Category One device it is likely to be through the salesman who sold him his operating system.  If the operating system is GGGG, marketed by Software Manufacturer 2, for example, the salesman will recommend only Technology 1 devices that are compatible with GGGG.

Market Integrators
Market Integrators are often referred to as value added resellers (VARs).  There are countless VARs who develop special applications which are usually industry-specific.  For example, Reseller 1 is a VAR engaged in software related to building maintenance.  This involves Product Category One thermostats and other building maintenance connected equipment in large office buildings.  These VARs are heavy users of Product Category One devices.

OEMs
Original Equipment Manufacturers have quickly recognized the importance of adding the power of the Internet to their equipment, for example, the manufacturer of an automatic scale for use in a production line.  The scale will weigh every packet of tea passing along the belt to check that the weight is within certain tolerances.  If not, the packet is removed from the line by compressed air.  By adding Technology 1 to the scale, the scale’s activity no longer needs to be visually monitored by a human in the production hall, but can be remotely monitored from a central location.  This is especially interesting for a factory with a dozen production lines.  The same evolution is having an impact on almost every type of equipment.  The OEMs are important customers for Product Category One devices as the device adds very little cost relative to the ticket price of the equipment.

*Note: Propriety and confidential information has been disguised or removed from this sample plan.

4.3.4 Distribution Patterns

There are large established distributors of microprocessor chips, and other components.  It is possible that one, or all, of these distributors may consider offering an Product Category One device soon with a few limited configurations.  However, the main distribution channel for RNSE’s products is direct.  The buyer may have heard about RNSE through an Technology Manufacturer 1 salesman, or through an operating system salesperson, but the sale would be handled directly.  Most inquiries come initially via telephone or email over RNSE’s website.

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Construction & Engineering

Construction Business Plan

Using this sample business plan will ensure that you know how to go about starting a construction business.

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Construction Business Plan

Executive Summary

Introduction
Fosse Commercial Contractors LLC is a small construction company formed from the merger of Fosse Painting & General Construction and West General Contractors. The company has successfully operated in the Houston area for the past ten years working on both small and large scale construction, repair, and alteration projects focusing on residential contracting. With the business boom that is occuring in our local area and the desire to improve overall profit margins, the company is planning to shift its target market from residential clients to the larger commercial customers. This business plan will lay out our goals and tasks to make this transition successful and create enough market share to succeed in this highly competitive market.

The Company
Houston based Fosse Commercial Contractors, LLC began in 1985 when Mr. Robert Fosse began his own company, Fosse Painting and General Construction. In 1993 the original company was merged with another small scale local company, West General Contractors and the company began to bid successfully for larger scale projects. As part of its growth and altered focus, FCC is planning on changing its charter from a limited liability company to a class C corporation registered in Texas. This will allow FCC greater access to investment funds to fuel its growth.

Services
Fosse offers comprehensive services designed allow the company to do whatever it takes to finish a project. Some of these services include; design work, remodeling and alterations, permitting, site preparation, carpentry, cement foundations, painting, and plumbing and utilities installation. In addition, skills Fosse lacks can be subcontracted.

The Market
The Houston area is booming at this moment, overall business growth during the past seven years has averaged approximately 9.5% and is expected to continue for at least the next four years. This makes for a very attractive market for Fosse Commercial Contractors.

We will be concentrating on the customers that will provide us with the greatest margin, in other words those clients desiring office building construction. This is the fastest growing segment of commercial clients requiring our services. The other categories that we will serve include the restaurant segment, the special facilities segment, and all other potential commercial clients.

1.1 Objectives

Fosse Commercial Contractors plans to:

  • Significantly expand into the commercial and office building contracting market to improve profit margins and increase local market share.
  • Expand services and decrease costs by creating a permanent painting crew, as well as adding a bookkeeper and an accountant to our staff.
  • Begin to market and offer services in the San Antonio area in preparation for opening an office there in Year 4.

1.2 Mission

Fosse Commercial Contractors (FCC) strives to offer the finest quality design, site preparation, cost estimates, construction, repair, and alteration to clients needing large scale construction services, whether it be office buildings, warehouses, large apartment complexes, public works, etc. Fosse maintains the highest standards of service in the commercial construction industry.

1.3 Keys to Success

The local commercial construction market is booming at the moment. In order to achieve a defendable position in this environment, Fosse must concentrate on the following tasks.

  • Secure at least five large scale commercial contracts over the next three years.
  • Expand our customer base through expansion into other geographic areas to retain a sufficient level of profitability.
  • Increase marketing expenditures by 15%.

Company Summary

Fosse Commercial Contractors, LLC began in 1985 when Mr. Robert Fosse began his own company, Fosse Painting and General Construction in the Houston area. In 1993 the original company was merged with another small-scale local company, West General Contractors, and the company began to bid successfully for larger scale projects.

In 2002 the company’s management came to the conclusion that the firm had grown sufficiently to alter its primary target market segment from the residential construction segment to the higher margin office and commercial construction segment. The company plans to implement this change by the middle of Year 1. As part of its growth and altered focus, FCC is planning on changing its charter from a limited liability company to a class C corporation registered in Texas, allowing greater access to investment funds to fuel its growth.

2.1 Company History

Fosse Commercial Contractors, LLC began in the Houston area in 1985 when Mr. Robert Fosse, who had worked in the residental construction business for ten years began his own company, Fosse Painting and General Construction in the Houston area. For the next eight years the company grew slowly, working mostly on small scale residential projects while gaining a reputation for quality services and reliability. In 1993 the original company was merged with another small-scale local company, West General Contractors and the company began to bid successfully for larger projects. The company maintains a General Contractor’s license in the state of Texas.

In 2002 the company’s management came to the conclusion that the firm had grown sufficiently to alter its primary target market from the residential construction segment to the higher margin office and commercial construction segment. The company plans to implement this change by the middle of 2004.

2.2 Company Ownership

Fosse is a Limited Liability Company registered in the state of Texas. Fosse Commercial Contractors, LLC is exclusively owned by Mr. Robert Fosse (50%) and his partner, Michael West (50%). The company is expecting to alter to a Class C corporation chartered in Texas in 2004. This will create greater investment opportunities through the acquisition of investment capital from a limited number of shareholders.

Services

Fosse offers a comprehensive package of services designed to allow the client to work with one of our managers and create a project the company can carry forward to completion. Some of the myriad services Fosse offers are:

  • Design work
  • Remodeling and alterations
  • Permitting
  • Site preparation
  • Carpentry
  • Cement foundations
  • Painting
  • Plumbing and utilities installation
  • Exterior renovations
  • Subcontractor assessment and evaluation.

Market Analysis Summary

The Houston area is booming at this moment, overall business growth over the past seven years has averaged approximately 9.5% and is expected to continue for at least the next four years. This constitutes an attractive market for Fosse Commercial Contractors.

We will be concentrating on the customers that will provide us with the greatest margin, in other words those clients desiring office building construction. This is the fastest growing segment of all the commercial clients requiring our services. The other categories we will serve include the restaurant and special facilities segments, along with a segment we will call the general category, to serve all other potential commercial clients.

4.1 Market Segmentation

At the moment our potential list of clients includes all the various businesses in the Houston area and its suburbs. According to the Texas Small Business Association there are 6,512 firms of all types and sizes in the surrounding area. We will concentrate on the customers that can provide us with the greatest margin, in other words those clients desiring office building construction. This is the fastest growing segment of all the commercial clients requiring our services. The other categories that we will serve include the restaurant segment, the special facilities segment, such as gas stations, and theaters, and a category which we will call “general”, encompassing all other potential commercial clients.

4.2 Target Market Segment Strategy

Since office building construction has the highest average profit margin, we will focus most of our marketing and servicing toward these customers. Usually these clients require the largest projects in scope, land use, and cost. In addition, they tend to be the most sensitive to completion times. Therefore, we plan to accommodate these clients through a well established and expeditious permitting program, strict cost accounting and supply management, and intensive and comprehensive project management capitalizing on Fosse’s experience in the field.

4.3 Service Business Analysis

The Houston area is booming at this moment, with overall business growth for the past seven years averaging approximately 9.5%. This growth level is expected to continue for at least the next four years. One of the prime reasons for this growth is the creation of the North American Free Trade Agreement (NAFTA), that removed trade boundaries throughout our continent. Texas is ideally situated to take advantage of these new conditions and is experiencing a boom to prove it. This makes for a very attractive market for Fosse Commercial Contractors.

The commercial construction industry is highly fragmented across the nation. More than 86% of all construction companies in the U.S. consist of small “mom and pop” style companies employing less than ten individuals. Contrasted to this are the large companies that engage in “heavy” construction such as roads, shopping malls, etc. who often have a nationwide scope and employ several thousands of workers. This creates a highly competitive market with low profit margins. Companies wanting to create a defensible position in this market need some form of competitive edge, such as brand name, low cost advantages, or size.

4.3.1 Competition and Buying Patterns

Currently we have three major competitors within the Houston area. These are TNT General Contractors, Texas Specialty Construction, and Polanski Construction. Each of these companies targets the same clients as Fosse and each has a fine reputation for customer satisfaction. However, the market in Houston is growing so fast that the demand is currently greater than supply. This is an excellent opportunity to gain market share and a defensible position in the industry.

One of the greatest limiting factors in this industry is its strong seasonality. During the winter months, contracts and production drop off sharply, increasing the company’s short-term risk of cash flow shortfall.

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