Business Plan 2013 - Claudia Ramirez - Home · Web viewOur company has an array of services from...

Claudia RamirezSmall Business Management

La Venta Cement Business ProposalMGT400

La Venta Cement LLCBusiness Plan 2013

TABLE OF CONTENTSSTART UP COSTANNUAL FIXED OPERATING COSTSFINANCINGANNUAL FIXED OPERATING COSTSFINANCIAL SCHEDULESSUMMARYBUSINESS GOALS AND OBJECTIVESORGANIZATIONAL STRUCTURELEGAL STRUCTUREKEY RESOURCESIMPORTANT BUSINESS PROCESSESPERFORMANCE MEASURES

2


Business Description

My concrete paving company is a local construction company that will specialize in poured concrete to create or repair any customer’s concrete needs in a professional and efficient manner. Our friendly expert staff will assist you with free estimates of any concrete job that you need completed. Our company has an array of services from pouring concrete driveways, parking lots, ramps, streets, stairs, and sidewalks to creating one of kind decorative stamped concrete to add a beautiful touch to any patio, home sidewalk or driveway. Our company will take care of the job from start to finish from breaking and removing old cement and dirt to cleaning all cement at the end of the job to leave your area spotless.

I believe this is a genuine business opportunity because the company would be able to provide customers with an improved product of a variety of cement paving services at a lower price to the customers without sacrificing quality and superior service. Since the company will be a local small business, this would also benefit our customers because we would be able to repair or create any cement job without size being of importance. No job is too small or too big for our company. I also believe there is a growing market for cement paving on city streets, improvements to homeowners properties to increase in value and current pavement is always in need of repairs over time, especially in Wisconsin where our city streets are damaged during the winter season as a result of the snow plows.

The company’s principal products and services we would be providing is construction of durable, safe and cost efficient cement pavement of driveways, sidewalks, streets, and patios. This includes:Concrete highway pavingConcrete Street Repair Concrete Patio Paving Cement Paving Stones Concrete Ramps & Handicap Ramps Concrete Excavation Concrete Removals Concrete Saw Cutting Concrete Sidewalk Repair Concrete Paving Slabs Stamped Concrete in colorTruck PadsCurb Construction Road Construction Driveway Paving

3


Our company’s competitive advantage would be to provide services at a lower cost compared to the competition. Also using the company motto of “no job is too small or too big to handle”, can also sustain a competitive advantage over large concrete paving companies that only handle large jobs. The market segments the Concrete paving company will target are mostly male homeowners between the ages of 35-60 who live in the Southeast Wisconsin area. As a woman who has never been offered improvement services for my home, I would also try and target women homeowners between the ages of 35-55 because this is an untapped market. Also the company will target the City of Milwaukee for job contracts.

The company’s critical success factors would be to be able to cater to local customers is selling our professional and cost efficient services. The business would have to have a positive reputation in the community and this comes with time. The business would also have to serve sufficient customers in order to be able to provide our services throughout the 7 month cement pouring season. Without customers our company would not make a profit and as a result the business would fail.

4


Claudia RamirezMGT-400

Environmental Analysis Review

5


Environmental Analysis

La Venta Cement LLC is primarily engaged in the construction and repair of cement. The company operates out of Milwaukee, Wisconsin and services the surrounding cities and towns. The company’s specializes in poured concrete to construct durable, safe and cost efficient cement pavement.

Strengths

Concrete has become the most widely used construction material in the world for a very good reason, it has the most benefits than any other building material. According to T.W Bremner, Ph.D. some of the benefits of constructing with concrete can be that this material is very low maintenance, cement is durable, the production of cement uses low energy consumption, and cement can be recycled to generate less waste for mankind (Bremner Ph.D. P.Eng, 2007). In specific, producing concrete uses less energy than producing other comparable building materials. A study quoted by the National Ready-Mixed Concrete Association (NRMCA) concluded that the energy required to produce one ton of concrete was 1.4 GJ/t compared to 30 GJ/t for steel and 2GJ/t for wood (Cement Sustainability Initiative, 2012).

Figure 1

Cement is used globally and has had an impact on how we live our lives on a daily basis. Pratz mentions that cement is the building block of the construction industry. Almost every building constructed relies on cement for its foundation (Pratz, 2012). Most streets and highways in the United States are constructed out of concrete because of the materials strength, durability and affordability. Concrete is very versatile and for

6


that reason many things are made out of cement, from the foundation of our own homes to the tunnels and bridges we use on a daily basis. Concrete has a strong reputation as the building material of choice that can date back to the Roman buildings over 1,500 years old such as the Coliseum (Cement Sustainability Initiative, 2012).

La Venta Cement is able to have a competitive advantage in price because the cement used is locally produced by local cement mixers. This minimizes the transportation costs to the customer and also keeps the business 100% local. By being a local cement company, we can provide a large array of services in which we can provide our services to customers with small projects as well as large roads. There will always be a demand for cement services worldwide because there will always be a need to repair concrete over time and create new roads, homes, buildings, and tunnels out of concrete.

Weaknesses

In the cement industry there are also external environmental factors that affect the business directly. Cement consumption is seasonal in nature and demand peaks in the summer months. About two-thirds of cement production takes place between May and October. As a result, cement businesses only work between 6-7 months out of the year. Seasonal employees are hired to work the construction season and as a result of working when the weather permits, reliable and dependable employees are hard to keep. Employee retention is one of the leading challenges in the construction industry as stated by the United States Department of Labor (Labor, 2010). In this industry there is a high turnover of employees which can affect the business. There is a constant need of finding employees and training them for the job.

The concrete business is reliant on incoming business. The damage inflicted by the current economic downturn on the US cement industry can be seen by looking at cement consumption statistics from 2005, the peak of US cement demand, and 2010 (see figure 1.2) (Edwards, 2012).

As a result there has been less of a demand for the construction of new homes. Also, as a result of the poor economy, there have been many cuts in the country and state budgets and as a result there is not a lot of money to modernize the states with new roads and highways. The budget is really used to do the basic repairs of roads already constructed.

The cost of transporting cement is high and this keeps cement from being profitable over long distances. (Pratz, 2012). As a result, cement plants have to be located locally in order to retain profits. At times, the location of the cement project is not close and some profits may be sacrificed or the cost of the project would be increased to cover the cost of transportation.

7


State Consumption (Mt)

Change (%)

2005 2010

Arizona 4.67 1.47 -69

California 15.32 6.16 -60

Florida 11.22 3.62 -68

Illinois 4.54 2.43 -46

Michigan 2.92 1.55 -47

New York 3.15 2.3 -27

Ohio 3.89 2.35 -40

Texas 14.67 10.16 -31

Wisconsin 2.35 1.43 -39

UNITED STATES 122.7 68.71 -44

Figure 1.2: Cement consumption (Mt) for US states and D.C. in 2005 and 2010 and net percentage change (Edwards, 2012)

Opportunities

In its 2012 Spring Forecast, the Portland Cement Association (PCA) reported that it expects cement consumption to grow by 3.7% in 2012 over the level seen in 2011(Edwards, 2012). The strong growth of sustainable construction materials market has an effect on the forecasted consumption growth. The demand for energy efficient construction material is expected in increase, cement is one of the materials that uses the lease amount of energy consumption (see figure 1). This will boost the demand for the concrete industry around the world.

It is always necessary to repair and construct new roads and buildings even when the economy in the United States is poor. City streets and highways that are used every day will be in need of repair even though cement is the most durable material. Home owners that are looking to increase the assessed value of their homes by investing in home improvements will look to fixing their driveways, sidewalks or add a cement patio to their back yard.

8


Cities and states are always looking for ways to modernize their streets and transportation methods. When the cities and states plan on building new roads and tunnels they look to constructing with reliable and durable material that is low maintenance and affordable. Concrete is the most widely used construction material in the world and has a long standing reputation for being strong, durable and affordable.

Threats

The nature of the economy has uncovered a number of threats to the cement industry specifically in terms of construction. The current economy has lessened the number of construction projects, which in turn hurts the cement industry. The cement industry controls the majority of the United States market, but not all of it. About 11.5 metric tons of cement are imported annually to support the unmet need. If other countries can produce and ship cement for a reduced price, the U.S. cement industry is in danger. The U.S. government is also attempting to regulate the cement industry's waste. The Environmental Protection Agency has introduced regulations for the cement industry to cut down emissions. (Pratz, 2012)

Rising energy costs will affect the cement industries profit margins negatively. If the price of producing cement will go up, so will the prices of cement construction and repair. This is a threat to our affordable and low cost approach to our business. There are also other building materials such as asphalt that can be a potential danger to the concrete business. When it comes to initial upfront cost, asphalt is more economical (Rozgus, 2006). But over time, asphalt deterioration can include crocodile cracking, potholes, upheaval, rutting, and shoving. This causes the asphalt to need repairs or replacement. High temperatures also soften the asphalt which allows heavy vehicles traveling along the asphalt roads to deform the pavement (Walker, Entine, & Kummer). Concrete paving needs less maintenance, it is not affected by high or low temperatures and the cost over time is lower than asphalt because of the fewer need to maintenance it. Concrete is stronger, more reliable and durable over time.

Competition with other concrete businesses over projects is a threat to the potential jobs that any cement company can secure. The concrete business is reliant on incoming business and any job lost to the competition will affect the profits on the company. For this reason our cement business will be able to compete with other cement businesses on in terms of lower cost and by providing quality service as a local cement business. In the Milwaukee area there are four large cement companies that obtain the large projects given by the city and state. They are Milwaukee General Construction Co., LaLonde Contractors, Michael’s, and Zignego Company, they focus on large construction and pavement jobs in which hundreds of employees are needed. Our competitive advantage will focus on smaller jobs and homeowner repairs and construction in order to serve the markets that they do not serve.

9



Marketing Plan Review

10


Marketing Plan

Concrete has become the most widely used construction material in the world for a very good reason, it has the most benefits than any other building material. The strong growth of sustainable construction materials market has an effect on the forecasted consumption growth. The demand for energy efficient construction material is expected in increase, cement is one of the materials that uses the lease amount of energy consumption (see figure 1). This will boost the demand for the concrete industry around the world.

Figure 1

Analysis of Target Market

La Venta Cement will be targeting potential customers whose demographics fall within the categories of male gender, between the age of 35-60, are current homeowners and have a median income greater than $45,000/ yr. More specifically the company’s target market would be defined by the population that fits the categories listed above and also who live in the company’s serviceable areas of the Metro Milwaukee area which includes Milwaukee, Ozaukee, Washington and Waukesha counties combined.

My reasoning for targeting these demographic categories is that based on the defined population that are homeowners, there is a possibility of offering them needed cement repair services to their residence. If they are not in need of repairs, there is always ways to improve the esthetic look and assessed value of a home by adding a cement addition like a patio or driveway. Increasing the assessed value of a home is proven to be of great importance to homeowners since the housing market crash of 2007 that caused the stock market crash of 2008 (DeGrace, 2011). Since then, the

11


assessed value of homes have come tumbling down year after year causing many homes to go into foreclosure. Homeowners are looking to increase the value of their homes and our cement company can help.

Demographic specifications of age and median income are important factors in further defining the target market in order to reach the most potential customers. Individuals between the ages of 25-60 with a median income of over $45,000/yr. will be more willing to invest in their properties to further increase the value of their assets. This is my reasoning for targeting a specific age and income demographic.

By taking these specific demographics and combining the population of the Metro Milwaukee area the target market is approximately estimated in the chart below based on the US Census Data of 2010 and the Economic Development Report presented by the Metropolitan Milwaukee Association of Commerce (MMAC).

Target Market: Metropolitan Milwaukee Area

Population Male Gender HomeownersMedian Income

> $45,000 Age 35-551,500,744 756,805 622,087 391,906 434,121

100% 50.40% 41.50% 26.10% 28.90%*Data from: (Metropolitan Milwaukee Association of Commerce, 2012), (United States Census Bureau, 2012)

In the analysis of the target market, I have collected data for the population of the Metro Milwaukee area (1,500,744) and have specifically looked at the portion of that population that are male homeowners between the ages of 35-55. By conservatively estimating the number of individuals whom fit these specific demographics, I have been able to approximate the target market of La Venta Cement.

Taking into consideration that a little over half of the population in the Metro Milwaukee area is male, I am going to make the assumption that half of the number of homeowners are male.

Homeowners 622,087 * .50 = 311,043 Male Homeowners

Of those 311,043 male homeowners, I am going to estimate that 60% of their incomes are greater than $45,000. I make this assumption a high figure based on the fact that if the individual owns a home, I am assuming they have a higher income in order to be able to make a mortgage on the home they are living in. This may not be the case in every scenario, and for that reason I am estimating that 60% of the individuals that are male homeowners have an income greater than $45,000/yr.

12


Male Homeowners 311,043 * .60 =186,626 Male homeowner’s w/ income > $45,000/yr.

The target market focuses on individuals between the ages of 35-55; I am going to estimate that 50% of the figures of male homeowners with an income greater than $45,000/yr. are between the ages of 35-55. I make this high estimate based on the assumption that the United States retirement age is around 65 yrs. old, so individuals who make an annual income greater than $45,000 are assumed to be between the ages of 30-55, which is the peak of their careers.

Male homeowner’s w/ income >$45,000/yr. 186,626 * .50 =93,313 Males between the ages of 35-55, whom are homeowners with an income

greater than $45,000/yr.

La Venta Cement’s target market consists of roughly 93,313 males between the ages of 35-55, whom are homeowners with an income greater than $45,000/yr. The target market for the cement industry has not seen many changes over time. The demographics of the target market are very similar throughout the United States. I note that there is more focus on the markets target income since the economic recession. When the United States went into the economic recession individuals did not have a big interest in improving their hopes or spending money on things other than the necessities because of the economy’s uncertainty. Even though the United States has not fully recovered from the recession, there is a positive outlook for the future of the cement industry. It is always necessary to repair and construct new roads and buildings even when the economy in the United States is poor.

Products / Services

La Venta Cement LLC is primarily engaged in the construction and repair of cement. Our company has an array of services from pouring concrete driveways, parking lots, ramps, streets, stairs, and sidewalks to creating one of kind decorative stamped concrete to add a beautiful touch to any patio, home sidewalk or driveway. Our company will take care of the job from start to finish from breaking and removing old cement and dirt to cleaning all cement at the end of the job to leave your area spotless.

The company’s principal products and services we would be providing is construction of durable, safe and cost efficient cement pavement of driveways, sidewalks, streets, and patios. This includes:

13


Our company’s competitive advantage would be to provide services at a lower cost compared to the competition. Our pricing would be based on the estimated area the customer is looking to pave or repair. The below chart outlines our companies pricing per square foot which includes labor cost, material costs, and removal of debris per project. The price per square foot varies based on the depth of the area being paved. .

LaVenta Cement Pricing Price per square ft.Poured Cement $4.00-$6.25Poured Cement w/ fiber $4.50- $7.00Poured Colored Cement $6.00-$9.00Stamped Patios/Driveways $7.00-$10.00

Sales Forecast

The Portland Cement Association (PCA) forecast has predicted a 7.5% growth in 2012’s cement consumption followed by a continuous growth in the economy and cement consumption in 2013 with an increase of 6% (Davidson, 2012). This will boost the demand for the concrete industry for commercial use as well as residential use. But with the economy making a slow return in the United States, our sales forecast will take into consideration conservative figures to demonstrate the companies yearly sales forecast.

Based on our target market figures and taking into consideration the seasonal nature of the cement industry, I have used the breakdown process to forecast annual sales for La Venta Cement.

14

Concrete Street Repair

Concrete Patio Paving

Cement Paving Stones

Concrete Ramps & Handicap

Ramps

Concrete Excavation

Concrete Removals

Concrete Saw Cutting

Concrete Sidewalk Repair

Concrete Paving Slabs

Stamped Concrete in color Truck Pads Curb

Construction

Road Construction Driveway Paving


Sales ForecastTarget Market

Sales 93,313 People *Capacity per month **Estimated price per job Estimated RevenueMay 1% 933 7 cement jobs 500 sq ft. *5.38=$2,690 $18,830June 1% 933 7 cement jobs 500 sq ft. *5.38=$2,690 $18,830July 1% 933 6 cement jobs 500 sq ft. *5.38=$2,690 $16,140August 1% 933 7 cement jobs 500 sq ft. *5.38=$2,690 $18,830September 1% 933 7 cement jobs 500 sq ft. *5.38=$2,690 $18,830October 1% 933 5 cement jobs 500 sq ft. *5.38=$2,690 $13,450November 1% 933 4 cement jobs 500 sq ft. *5.38=$2,690 $10,760

Annual Revenue $115,670* Taking into consideration the weather and days it takes to finish a cement job**Average Cost by taking the lowest price of cementpricing and dividing it by how many products ($5.38/sq ft) and also averaging the total square feet to be paved to 500 sq ft.

In estimating these figures I took into consideration that the cement season is only seven months out of the year. I have used the seven months and estimated the potential job contracts with a conservative estimate of square footage being paved per job. I have forecasted annual revenue of $69,402 for La Venta Cement.

Promotional Strategy

La Venta Cement will be able to reach a percentage of their target market by advertising the products and services the company offers through various outlets like radio ads on the most listened to radio channels that reach a portion of specific demographics of our target market, like talk radio. There is also the outlet of the World Wide Web in which we will be able to create a website with our company information and a way for potential customers to reach us.

Visiting homes door-to-door will also give the company an opportunity to visit homes that need cement repairs or work. By visiting the homes our employees will be able to give the resident an estimate on the spot and potentially make a sale. Along with visiting residents door-to-door offering our services, we will also make promotional flyers and brochures.

Another promotional strategy is to advertise our products and services in local church bulletins and attending home improvement expos as a vendor. For example, home improvement expos take place at the State Fair Grounds annually. This is a great way to promote the companies services and products.

15



Marketing Mix

16


Product Strategy

The strong growth of sustainable construction materials market has an effect on the forecasted consumption growth. La Venta Cement would like to establish its position in the target market of the Metro Milwaukee area by developing a new approach to servicing customers in need of cement work and over time increasing the company’s job capacity by investing in new machinery and expanding its employee base.

The cement industry is key to the development of cities and towns. Despite the economic and financial crisis, global cement demand grew by approximately 8% in 2011(Lafarge, 2012). In offering quality and affordable cement services to potential customers, La Venta cement would fulfill the customers’ requirements and expectations as a consumer of our products. Our company identifies these expectations and needs as pricing our cement services accurately and reasonably, delivering an efficient and high quality final product, professionalism of the staff and friendly customer service.

Our company values the customers’ needs and expectations and we make them a priority with every cement job that is being complete in order to establish a positive reputation in the community we are looking to establish ourselves in, which is the Metro Milwaukee area. We integrate the identified customers’ needs and requirements from the time one of our staff members goes out to the customer’s home or location where the service is needed and explains the estimate, how the process of removing cement and replacing it is done. The staff member talks the customer through the whole process so there will be no surprises or hidden costs once the cement job is started. Our staff members will be trained to be friendly and professional to the potential customers in order to reflect our company’s values and goals.

La Venta Cement LLC is primarily engaged in the construction and repair of cement. Our company has an array of services from pouring concrete driveways, parking lots, ramps, streets, stairs, and sidewalks to creating one of kind decorative stamped concrete to add a beautiful touch to any patio, home sidewalk or driveway. Our company will take care of the job from start to finish from breaking and removing old cement and dirt to cleaning all cement at the end of the job to leave your area spotless and ready to use.

The company’s principal products and services we would be providing is construction of durable, safe and cost efficient cement pavement of driveways, sidewalks, streets, and patios. This includes:

17


The array of services La Venta Cement offers is a reflection of our product mix capacities. By offering cement repair and services in both regular poured cement and also specialty decorative stamped colored cement the company is able to reach a variety of potential customers who may be in the market for repairing needed cement or looking to upgrade their home by adding specialty cement. By having this range of products, La Venta cement will be able to yield larger sales revenue.

Our product strategy will be multiple products/ one market. All of the products we offer complement one another in a portfolio of products. We have an array of services that the customer can choose from to fit their cement needs. Our line of services fits the needs of many customers from the ones who are looking to repair or construct with regular durable cement, to a customer who is looking to increase the esthetic appeal of their property by adding durable colored decorative cement.

La Venta Cement’s product strategy for growing the company in the future will be multiple products/ multiple markets. As the company grows in size and in job capacity over time, our product strategy will be to offer our portfolio of services to a larger target market area. We will be able to accomplish this product strategy by increasing our employee base and by increasing our inventory of cement machinery. By reinforcing our position of the cement business in emerging markets, we will also be better placed to develop a larger target market.

Pricing Strategy

A unit of sales for La Venta Cement will be 1 sq.ft. of cement. The pricing of our products is below.

18

Concrete Street Repair

Concrete Patio Paving

Cement Paving Stones

Concrete Ramps & Handicap

Ramps

Concrete Excavation

Concrete Removals

Concrete Saw Cutting

Concrete Sidewalk Repair

Concrete Paving Slabs

Stamped Concrete in color Truck Pads Curb

Construction

Road Construction Driveway Paving


Our company’s competitive advantage would be to provide services at a lower cost compared to the competition. Our pricing would be based on the estimated area the customer is looking to pave or repair. The Pricing chart outlines our companies pricing per square foot which includes labor cost, material costs, and removal of debris per project. The price per square foot varies based on the depth of the area being paved. This pricing strategy makes sense based on the fact that customers will more than likely pave around 200 sq. ft or more per cement job. Taking into consideration the costs the company will incur per job and see the profits that will come from each job, gross revenue is sufficient to cover the costs of the company and come out with a profit. A sample situation is laid out below.

CostEmployee Salary 20 hrs $300Fuel 2 trucks 10/gallons $80Cement Delivery 3 yards $120Tools $30Permit $50

$680RevenueService 200 sq.ft * $5.38/sq.ft $1,076

Profit $396 .

Elasticity of demand affects our pricing decision because in today’s economy, customers are looking for the best value for their money. By pricing our unit price low, we are reaching the customers who are interested in our products and services with a limited budget. If we would price our unit higher, we may lose a potential customer to our competition in regards to offering the same product at a lower cost. By pricing our unit lower, our profit is decreased, but we will still be making sufficient profit to run the business and grow in size over time to increase the amounts of jobs we can do in a cement season and in turn increase our incoming profit.

Promotional Strategy

La Venta Cement will be able to reach a percentage of their target market by advertising the products and services the company offers through various outlets like radio ads on the most listened to radio channels that reach a portion of specific demographics of our target market, like talk radio. There is also the outlet of the World

19


Wide Web in which we will be able to create a website with our company information and a way for potential customers to reach us.

Visiting homes door-to-door will also give the company an opportunity to visit homes that need cement repairs or work. By visiting the homes our employees will be able to give the resident an estimate on the spot and potentially make a sale. Along with visiting residents door-to-door offering our services, we will also make promotional flyers and brochures to leave in their mailboxes and magnets for their refrigerators.

Another promotional strategy is to advertise our products and services in local church bulletins and attending home improvement expos as a vendor. For example, home improvement expos take place at the State Fair Grounds annually. This is a great way to promote the companies services and products and to establish a presence in the cement business.

I would estimate the annual budget for advertising will be $1,000. I have conservatively estimated the advertising budget by taking about 6% of the company’s profits and allocating them to advertising. As a starting small business, we would reach our target market by handing out flyers and brochures to people in our target market of the Metro Milwaukee Area. The estimated cost for the printing of 500 brochures in color is $158 through VistaPrint services (VistaPrint, 2001- 2013). Postcards will also be made through VistaPrint like the example below. We will be able to add images of our prior cement jobs and promote the services we offer. We would include our company information and a contact number. We offer free estimates to customers who are interested in finding our approximately how much a cement job will cost. The price of the below flyers would be $69.99 for 500 full color postcards.

For radio commercials I will allocate $500. I make this estimate taking into consideration that we are small business who is fairly new. As the business establishes itself in a better position to allocate more funds for advertising, this amount of commercial will be increased. The price per radio commercial varies based on the time the commercial is aired. On average I could secure around 20-35 radio spots during low radio traffic time over a 2 week period. I could not afford primetime spots at this time, because on commercial could run my total budget during prime time.

20


Advertising in the local church bulletins is a cost effective way to reach a certain demographic. The price for a small ad on the back of a church bulletin would cost $125 for 3 months on the bulletin. I would allocate 3 months of advertising for our business.

The remaining advertising budget would be allocated to paying our staff when they go door-to-door. We are left with only $147 in the budget, which would give us about 10 hours of a staff’s time to walk door-to-door.

The home visitations and dropping off brochures can also be done by the business owner at no cost. This would save us the money and it can be looked at as an investment in the company by its owners.

21



Financial Data

22


Start-up Cost

La Venta Cement start-up costs are going to be $24,500. This includes:

$15,000 for initial equipment needed to work. This includes a dump truck, a bobcat, and a pick-up truck.

$6,000 for start-up cash $500 for advertising $2,000 for inventory of tools and cement $500 for permits and licenses $500 for furniture and phones

The initial investment by owners will be $20,000 and this will assist to buy the equipment needed to start the business up and to finance the start-up inventory and fund the permits and licenses for the company. My start-up costs are more than my cash investment by owners, so I would need to finance $4,500 to start up the cement business.

Annual Fixed Operating Costs

Salaries and WagesLa Venta Cement is a seasonal employment company. The employees of La

Venta Cement will only work for 7 months out of the year. There will be 4 full-time employees for the season and they will get an hourly rate of $15.00/hr. The projected annual salary expense for La Venta will be $16,800.

RentThe company will not be in need of a local office because most of the work will

be done at the property of the customer. A secretary will receive phone calls from interested customers to request estimates and quotes from home. The only cost the company will incur for rent is the monthly rent for the company’s equipment storage. The monthly rent would be $100 a month to park the dump truck and bobcat. This will generate an annual expense of $1,200.

AdvertisingLa Venta Cement will be able to reach a percentage of their target market by

advertising the products and services the company offers through various outlets like print ads and having a web presence. Visiting homes door-to-door will also give the company an opportunity to visit homes that need cement repairs or work. I will be allocating $1,000 annually for advertisement expenses that include printing brochures, flyers and running an ad in church bulletins.

23


UtilitiesLa Venta Cement would incur an annual expense of $1,000 for utilities. This will

cover the utilities used by the company for the secretary who will be working from home.

Other CostsThe company will incur other costs throughout the year like applying for

construction permits, licenses, and tax numbers. This will generate an average of $5,000 per year.

Financing

La Venta Cement will need to finance $4,500 for the initial start of the company. The annual rate of the loan will be approximately 8% for a term of 5 years. This is all dependent on my credit rate at the time of taking out the loan. This information was estimated given my high risk and debt. I contacted my banker at BMO Harris bank for this information and they were able to give me this general estimate. My monthly payment on this loan would be $91. Over the period of one year I would be incurring $471 of interest.

Since La Venta Cement is only a seasonal business, there will be months when the net cash flow will be lower than the others, more specifically the months in which the cement company will not be working. For this reason, the company would need to finance through a line of credit. The company will use this line of credit as needed to keep minimum cash balance of $4,000. The annual interest rate for a line of credit would be 12%.

Annual Fixed Operating Costs

Estimated SalesBased on the target market that I analyzed for La Venta Cement, I estimated

annual sales revenue to be $115,670. This is a conservative estimate taking into consideration the time it takes to complete every cement job and the capacity of our small company. This figure also takes into consideration the environmental nature of this business and the time it takes for a new business to establish themselves in the market.

24


Sales ForecastTarget Market

Sales 93,313 People *Capacity per month **Estimated price per job Estimated RevenueMay 1% 933 7 cement jobs 500 sq ft. *5.38=$2,690 $18,830June 1% 933 7 cement jobs 500 sq ft. *5.38=$2,690 $18,830July 1% 933 6 cement jobs 500 sq ft. *5.38=$2,690 $16,140August 1% 933 7 cement jobs 500 sq ft. *5.38=$2,690 $18,830September 1% 933 7 cement jobs 500 sq ft. *5.38=$2,690 $18,830October 1% 933 5 cement jobs 500 sq ft. *5.38=$2,690 $13,450November 1% 933 4 cement jobs 500 sq ft. *5.38=$2,690 $10,760

Annual Revenue $115,670* Taking into consideration the weather and days it takes to finish a cement job**Average Cost by taking the lowest price of cementpricing and dividing it by how many products ($5.38/sq ft) and also averaging the total square feet to be paved to 500 sq ft.

I expect to have 90% of my sales to be cash and 10% of my sales to be credit, with the expectation of collecting 70% of my credit sales by 30-60 days and the remaining 30% in 61-90 days.

Gross Profit MarginBased on the example below, of the estimated cost of one cement job, the

company’s gross profit margin would be 37% of sales.

CostEmployee Salary 20 hrs/job 2 $600Fuel 2 trucks 10/gallons $80Cement Delivery 12 yds $80/yd $960Tools $30Permits $50

$1,720RevenueService 500 sq ft. *$5.38 $2,690

Profit $970Gross Profit Margin 37%

This is taking into consideration all of the costs that are incurred while doing the cement job, from the cost of fuel for the trucks, employees’ salaries, and permits and tools.

Financial Schedules

Below are the financial schedules for La Venta Cement which outline the financial information in detail for the year beginning December 31, 2013

25


26


27


28


29


30


31


32


33


34


35


SummaryWhile preparing my financial data for La Venta Cement, I can now see on paper

what the benefits would be of owning my own company and also the fixed expenses in order to start the business. Based on the company’s income statement, the net income at the end of the year would only be $15,729. Which does not seem like that much of a profit, but I have included in the businesses financials an owner’s monthly draw of $4,000 during the cement season. The investors of the company will also be 2 of the employees of the company and their salaries were accounted for in the annual salaries and wages expense. So by looking at the larger picture, there would be a benefit to owning a seasonal company.

36



Operating Plan

37


Business Goals/Objectives

La Venta Cement LLC is primarily engaged in the construction and repair of cement. The company operates out of Milwaukee, Wisconsin and services the surrounding cities and towns. The company’s specializes in poured concrete to construct durable, safe and cost efficient cement pavement.

The businesses short term goal is to be well-established small businesses within the first year of having our doors open for business. More specifically to define well-established, I would like for La Venta Cement to have reached out to potential customers in our defined target market by way of marketing material and advertisements. This will be accomplished by printing marketing material like brochures and flyers and leaving them door-to-door and establishing a website with the company’s services and contact information. Also, I would want the business to have had at a minimum of 50% of the projected capacity during the cement season. This would be 20 paid cement projects completed in the first year of doing business. This would be measured by tallying up how many projects were complete at the end of the first cement season. La Venta Cement’s short term goals are reasonable and will be a way to measure the company’s growth in the first year of business.

The businesses long term goals consist of being able to continually increase the cement projects completed per year. I would be able to measure this goal by comparing year one’s completed cement projects total and comparing it to the current year’s project total. The goals would also include having minimal re-work of cement that has to be done and establishing a good reputation with customers by providing friendly and professional service while completing cements projects. This goal will be measured by reviewing the amount of customer complaints and analyzing re-work that has to be done. This will also be measured by follow-up calls to the customer after a cement job is complete to see if they are completely satisfied with the work that has been provided. They will also be asked to give suggestions on what La Venta could do to better serve their needs. This will give us a good perspective of the services we are providing our customers and help us to better serve future customers.

Our short and long term goals will help our company stay focused on the most important aspects of the company; production and service. By meeting these goals on a yearly basis, our company will progress with positive results.

Organizational Structure

La Venta Cement will employ seasonal workers for the cement season which takes place between the months of May and November. The staff will include three cement laborers, one cement finisher, and an office manager/secretary.

38


The cement laborers for La Venta cement will be required to demonstrate physical flexibility, physical strength and stamina which are essential qualities for this profession. They will complete tasks that will include, but not limited to, building scaffolds, constructing wooden forms, spread and pouring cement and concrete. They will properly use a variety of tools necessary for preparing the worksite area for concrete footings, and assembling concrete forms at the construction site locations. They will clean and remove debris from the construction area when the project is complete. They will need to demonstrate professionalism when completing projects and be reliable and dependable employees.

The cement finisher’s job duties will include assuming the responsibility of crew leader. He will smooth and finish surfaces of poured concrete using a variety of hand and power tools. He will be responsible for aligning forms for sidewalks, curbs, or gutters; patch voids; and use saws to cut expansion joints. He will also monitor how the wind, heat, or cold affect the curing of the concrete throughout the entire process of completing the cement project. The decisions of weather permitting conditions to pour concrete will be determined by the foreman.

The office manager/secretary will be responsible for all of the phone calls and creating of business documents (i.e. invoices, contract, and estimates). He/she will be responsible for scheduling cement projects and giving the crew leader the assigned projects for the week. They will also be responsible for the ordering of materials for the projects and marketing materials. This individual must be self-motivated, organized and be able to work well under little supervision.

The office manager/secretary position will be filled by me for the first two years of business to be sure that the business is established and well organized. At the end of the two years, if the company has reached all of its goals, I will hand over the responsibility to a full time secretary which will be hired. I will continue to manage the financial aspect of the company at all times.

Legal Structure

La Venta Cement will be established as an S corporation. S corporations provide the same limited liability to owners (called shareholders in an S corporation) as C corporations, meaning that owners typically are not personally responsible for business debt and liabilities; however, S corporations have pass-through taxation. S corporations do not pay tax at the business level; they file an informational tax return. Business income or loss is reported on the owners’ (shareholders) personal tax returns and any taxes due are paid at the individual level.

The advantages to being established as an S corporation are that owners are not responsible for business debts and liabilities. In the future, when the company is established, the company could raise capital more easily by selling shares of stock. I also believe S corporations seem more of a formal type of small business; this could

39


help with establishing credibility with competitors and customers. Being an S corporation lowers the risk that the Internal Revenue Service will audit our company frequently. It seems like this type of legal structure is looked upon as more organized and formal.

Key Resources

The key resources that I have identified that are needed to provide the sustainability of La Venta Cement are skilled employees and the licensing of the company. Without these two things the company will not be able to function.

La Venta’s employees are a key resource in the running of La Venta Cement. In specific, the company is vitally reliant on cement laborers who are skilled and trained to know how to do the trade of the business in order to complete projects. The cement finisher would also be vital for La Venta Cement, without an employee who is trained to be a cement finisher; projects would not be able to be completed properly. Finally, the business would not run properly without a secretary that would be responsible for scheduling all of the cement projects, creating all of the necessary documents, and ordering all of the supplies needed to work on a daily basis. It is vital for La Venta Cement to have reliable and skilled employees in order for the business to run smoothly.

In order to be able to operate on a daily basis, La Venta Cement must have all of its licensing and permits in order at the federal and state level. In order for this to be in order I will be in charge of filing all applications and licensing at the beginning of the cement season. In regards to the permits needed to be obtained prior to starting any cement project, the companies secretary will be in charge of filling out the application with the city to obtain the correct permit.

Important Business Processes

The most important business processes for La Venta Cement will be the scheduling of cement projects and sustaining dedicated and skilled employees. By completing the scheduling of cement projects on time and in a professional manner, the company will be able to operate. And the company will not be able to operate without dedicated and skilled employees.

La Venta Cement will look to hire dedicated and skilled employees for the team. We will accomplish this by posting positions for individuals who have prior experience working in the cement industry. We will also ask for work references and complete background checks for hired employees. The candidate will be interviewed thoroughly and the best candidate that fits our company’s expectations will be hired.

The scheduling of cement projects is an important business process for La Venta Cement. The secretary that will be in charge of this task needs to be organized in order

40


to be able to accurately schedule the cement projects with the appropriate time needed for each project from start to finish. She also needs to be a good communicator because she will be in charge of communicating all of the projects to the cement team that will be completing the project on site. For the first two years of the business, I will be handling all of the secretarial responsibilities and I have prior experience in scheduling. I am also very organized, so this task will not be much of a challenge for me.

Performance Measures

La Venta Cement’s performance will be measured based on sales, customer service, and product pricing. These will be the most important aspects of the company and will be mapped out with modified vision every year before the cement season taking into consideration the strengths and weaknesses of the company from the prior season.

StrengthsLa Venta cements strengths will be the implementation of our company values.

We will value the customers’ needs and expectations and we will strive to make them a priority with every cement job that is being complete in order to establish a positive reputation in the community we are looking to establish ourselves in, which is the Metro Milwaukee area. Apart from our values, we will compete with other cement companies on the price of our products. Will offer economical pricing and quality service to our customers and in turn will grow our client base.

After every cement project is completed, it will be the responsibility of the secretary of the company to follow up with the customer to make sure that they are fully satisfied and to ask how is it that we can further improve in any way. This will give the customer added attention and they will in turn feel like a valued customer.

WeaknessesOne of the obstacles that we may have to overcome in the commencement of

our business will be having to take on smaller cement projects and turning away large projects. This is because we will need to establish ourselves and secure an intake of capital in order to expand our machinery inventory. As the company will grow and there will be an inflow of capital, we will be able to re-invest all of the money to expand our inventory of machinery and possibly hire more employees over the years.

OpportunitiesLa Venta Cement will take advantage of all available opportunities to expand and

grow the business. With our target market showing a lot of potential customers who may be in need of cement work, there is a positive outlook on the potential sales of the company. With our marketing plan in place, we will be able to meet our sales goals for the year and continue to grow.

41


ThreatsAlong the way, there will be threats of different forms that will prove to be

obstacles for the company. They can be not receiving the required permits and licensing, or losing customers to a competitor. These will be handled with as they come. We will handle all of the threats to our company in a professional manner and do everything possible to overcome them.

42


Works Cited

Cement Sustainability Initiative. (2012). Retrieved from World Business Council for

Sustainable Development : http://www.wbcsdcement.org/index.php/about-

cement/benefits-of-concrete

Bremner Ph.D. P.Eng, T. (2007). Environmental Aspects of Concrete: Problems and

Solutions. 1-14.

Davidson, J. (2012, November 19). 2013 Cement Consumption Growth. Retrieved from

World Cement:

http://www.worldcement.com/news/cement/articles/PCA_Cement_forecast_2013

_748.aspx

DeGrace, T. (2011, December 18). The Housing Market Crash of 2007. Retrieved from

Stock Picks System: http://www.stockpickssystem.com/housing-market-crash-

2007/

Edwards, P. (2012, May 14). Cement in the USA. Retrieved from Global Cement:

http://www.globalcement.com/magazine/articles/698-cement-in-the-usa

Labor, U. S. (2010, January 07). Construction Industry. Retrieved from United States

Department of Labor: http://www.doleta.gov/BRG/Indprof/Construction.cfm

Lafarge. (2012, April 19). Lafarge Cement. Retrieved March 2013, from Lafarge:

http://www.lafarge.com/wps/portal/4_3_2-Strategie

Metropolitan Milwaukee Association of Commerce. (2012). Demographic & Economic

Profile- Metro Milwaukee. Milwaukee: MMAC.

43


Pratz, M. (2012, April). Business Managment: Cement Industry. Retrieved from eHow:

http://www.ehow.com/about_6754859_cement-industry-swot-analysis.html

Rozgus, A. (2006, March). Asphalt Versus Concrete. Retrieved from Public Works:

http://www.pwmag.com/bridges/asphalt-versus-concrete.aspx

United States Census Bureau. (2012, June). US Census Data 2010. Retrieved from

United States Census Bureau: http://www.census.gov/cbdmap/

VistaPrint. (2001- 2013). VistaPrint Promotional Products. Retrieved March 18, 2013,

from VistaPrint: http://www.vistaprint.com/category/promotional-items.aspx?

txi=15188&xnid=TopNav_Promotional+Products_Marketing+Products&xnav=Top

Nav

Walker, D., Entine, L., & Kummer, S. (n.d.). Pavement Surface Evaluation and Rating:

Asphalt Roads. Madison: Wisconsin Transpoortation Information Center.

44

Business Plan 2013 - Claudia Ramirez - Home · Web viewOur company has an array of services from...

Documents

Transcript of Business Plan 2013 - Claudia Ramirez - Home · Web viewOur company has an array of services from...