Residential Remodeling Business Plan

Anywhere Remodeling, Inc. will change its focus to differentiate ourselves from fly-by-night contractors and improve its sales and customer service functions. The goal is to increase sales to more than $2 million in three years, while also improving the gross profit and working capital. We want to become known as the best quality remodeling company around.

This business plan leads the way. It renews our vision and strategic focus: adding value to our target market segments in our local market. It also provides the step-by-step plan for improving our sales, gross margin, and profitability.

This plan includes this summary, and chapters on the company, products and services, market focus, action plans and forecasts, management team, and financial plan, management and working capital.

1.1 Objectives

1. Sales increasing to $2 million by June Year 5.
2. Improve net profitability to 12% by end of fiscal year Year 5.
3. Provide 10% of gross sales for Owner and 10% of gross sales for company.

1.2 Mission

Anywhere Remodeling is a full service remodeling company that is devoted to building the dream homes of local high-end clients.

We believe that attention to detail and customer service sets us apart from our competition, and it is what allows us to continue to focus on high-end projects. We work with the property owner to select the highest grade materials possible, and we continue to contact the customer even after the job has been completed.

1.3 Keys to Success

Marketing: Creating a desire for our services above all competitors is a key to our continued success, as well as creating the perception that we are the top of the line.

Craftsmanship: No matter how good the marketing program is, poor-quality work will destroy our base of referral business. It will also take us out of our high end market.

Communication: Our communication systems, both internally and with our customers, are the key to excellent performance – projects completed on schedule, on budget and to our customers’ satisfaction. We also must ensure that the customer feels like we have been responsive to his/her every request so that we can get a good referral.

Building Material prices: In order to turn a profit, we need to have a good feel for the prices of materials in our area, and where to get the best deals.

Anywhere Remodeling, Inc. started as a proprietorship originally named Right Stuff Construction in August 1989, serving Anywhere, World. Its customers pay 10-15% extra to feel “taken care of.” Their need to trust a contractor allows them to feel comfortable with slightly higher than average prices.

2.1 Company Ownership

Anywhere Remodeling, Inc. is an S corporation owned in majority by its founder and president, Bob Hammer. There are two part owners: Steve Field & Bill Sales. Neither owns more than 15%, but both are active participants in management decisions.

2.2 Company History

Anywhere Remodeling, Inc. was founded in 1989 as a sole proprietorship registered in Anywhere, World as Right Stuff Construction, owned and operated by Bob Hammer. It was a originally a handyman business specializing in house painting.

After seeing an influx of competition in response to the recent housing crisis, Bob decided that the best way to adapt to the market was to take advantage of the fact that new building permits are down. The theory is that because new home construction is down, those people who have the extra money to spend will be more likely to hold on to their assets and remodel existing homes rather than go out and buy a new home.

Anywhere Remodeling, Inc. is a full-service remodeling contractor. At present we do mostly high-end, single room, kitchen/bath and whole house remodels. It is our philosophy that we can offer a quality product in a timely fashion giving the customer one-on-one service.

This includes:

• Whole House Remodeling
• Historic Home Remodeling
• Wing Remodeling
• Single Room Remodeling
• Kitchen Remodeling
• Bath Remodeling
• Green Remodeling
• Handyman Services

Anywhere Remodeling is focusing on both the commercial and residential markets of Anytown America, with the residential being about 80% of the overall volume of the company.

As housing prices fall, potential clients will be more apt to remodel their high-end homes, rather than try to sell them.

4.1 Market Segmentation

In an era of decreasing residential property values and relatively stable rates of personal income growth, Anywhere Remodeling, Inc. is focusing on two segments of the residential remodeling market:

1) Neighborhoods where homeowners have achieved success in their careers and have room in their budget for investment in their homes, but are not eager to incur a much higher mortgage payment by selling their house and ‘buying up.’ [Such targeted neighborhoods have housing stock with room to expand and are deemed to be worth the upgrade expenditures.]

2) Run-down neighborhoods that have been targeted by community decision-makers for renewal.

About 20% of Anywhere’s overall volume consists of remodeling projects for businesses within the community areas being revitalized.

4.2 Target Market Segment Strategy

Anywhere Remodeling’s targeted market groups were chosen because of the long-term potential for continued sales. Assuming high quality work and effective word-of-mouth marketing, the targeted, potentially upgradeable, neighborhoods afford a continuing supply of work to do. The business remodels, while providing a smaller portion of the firm’s income, offer an important opportunity to build relationships and generate trust with business owners and managers who have homes in the targeted ‘upgradeable’ homes.

4.3 Service Business Analysis

As a whole, the building industry is a very fragmented industry. Despite large homebuilders, no single company has as much as a 2% market share.

The remodeling industry is even more diluted with only a handful of companies in the nation showing annual sales in excess of $10 million. Under the standard definition, all remodelers fall into the category of a small business.

4.3.1 Competition and Buying Patterns

The remodeling market is made up of potential customers who weigh three competing values: Price, Quality and Service. There is a saying that a remodeling company can deliver any two of those values. A large portion of the potential customers are asking for quality and service, and then go shopping for price. These customers are extremely difficult to work for and make a profit.

There is another segment of the market that is concerned with getting a “fair” price, but is primarily concerned with getting quality work and superior service–they want to be “taken care of.” This customer is generally happy to work with one contractor, developed a trusting relationship, and pay a little bit more for this comfort.

Anywhere Remodeling, Inc. will change its focus to differentiate their services from fly-by-night contractors, improve its sales and customer service functions and increase the amount of work received from past clients and referrals. The marketing challenge is to improve the company’s image, allowing estimators to price work more profitably, reduce or eliminate the amount of work competitively bid for, and to raise the perceived value the client gains by hiring Anywhere Remodeling.

5.1 Sales Strategy

1. Anywhere Remodeling needs to sell the company, not the price.

2. Anywhere has to sell its quality and service. The actual remodeling is like the razor, and the support, service, design and hand holding are the razor blades. We need to serve our customers with what they really need.

The Yearly Total Sales chart summarizes an ambitious sales forecast. Anywhere expects sales to increase significantly from $750,000 last year.

5.1.1 Sales Forecast

The important elements of the sales forecast are shown in the Total Sales by Month in Year 1 chart. Total sales will increase substantially over the next several years.

5.2 Marketing Strategy

The marketing strategy is the core of the main strategy:

1. Emphasize quality and service.
2. Build a relationship business–treat the customers like members of the family.
3. Take care of the customers for the rest of their life.

5.3 Competitive Edge

Anywhere Remodeling, Inc.’s competitive edge is its reputation in the community. Over the past five years, Anywhere has won a number of awards for quality and design, both nationally and locally. Its satisfied customer base continues to expand and spread the word.

5.4 Milestones

The following table lists important program milestones, with dates and persons in charge, and budgets for each. The milestone schedule indicates our emphasis on planning for implementation. The most important programs are the sales and marketing programs listed in detail in the previous topics.

The Anywhere Remodeling website will be the virtual business card and portfolio for the company, as well as its online “home.”

It will showcase the construction experience within the company, as well as the portfolio of all the past and current projects done by Anywhere Remodeling.The website will include a resources area, offering articles, research and weekly newsletters to interested parties.

The key to the website strategy will be combining a very well designed front end, with a back end capable of recording leads and proposal requests.

Anywhere Remodeling is a company that desires to be of service to others. Its whole existence is keyed to helping people who have need to improve the quality of their life. Anywhere encourages team work and cooperation in helping the customer. The company is very loyal to its employees and provides them with the security and satisfaction to know that they are the business and that without them the company would not exist.

7.1 Personnel Plan

The Personnel Plan reflects the need to bolster our capabilities to match our positioning. Our total head-count should increase to 12 this first year, and to 17 by the third year. This reflects a ~5% growth per year.

The most important element in the financial plan is the critical need for improving several of the key factors that impact cash flow:

1. Anywhere Remodeling must do a better job of collecting deposits and asking for (demanding) prompt payment from the customers.
2. We must bring the gross margin up to 35%. This is related to improving the marketing program which will generate higher quality leads and jobs.

8.1 Important Assumptions

The financial plan depends on important assumptions, most of which are shown in the General Assumptions table below. The key underlying assumptions are:

• A slow-growth economy, without major recession.
• There are no unforeseen changes in technology to make our services immediately obsolete (very unlikely).
• We assume access to equity capital and financing sufficient to maintain our financial plan as shown in the tables.

8.2 Break-even Analysis

The break-even analysis can be found below.

8.3 Projected Profit and Loss

The most important assumption in the Projected Profit and Loss statement is the gross margin, which is supposed to increase, up quite a bit from the last year. The increase in gross margin is based on changing our sales mix due to increased target marketing based on 5% assumptions between years.

Month-by-month assumptions for profit and loss are included in the appendices.

8.4 Projected Cash Flow

The cash flow depends on assumptions for payment days and accounts receivable management. The projected 75-day collection days is critical, and it is also reasonable.

8.5 Projected Balance Sheet

The Projected Balance Sheet is quite solid. We do not project any real trouble meeting our debt obligations–as long as we can achieve our specific objectives.

8.6 Business Ratios

The table follows with our main business ratios. We do intend to improve gross profit and collection days.

8.7 Long-term Plan

The long-term plan is shown in the Appendix.