Fosse Commercial Contractors LLC
Executive Summary
Opportunity
Problem
Customers in the Houston area are in need of beautiful office buildings, warehouses, public works etc. The area is expanding rapidly and they need a company that can provide high quality work and materials to build the spaces that were needed.
Solution
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.
Market
The Houston area is booming at this moment, business has grown in the area for the last few years 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.
Competition
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.
Why Us?
In the construction industry the primary ways to compete are through low cost or better project management. One of the most important processes for winning a contract is the bid process. Fosse has a unique competitive edge over most of its competitors. Mr. David West, FCC’s General Projects Manager, is the nephew of Charles Nunn, who owns McHoughton’s Lumber, one of the Midwest’s major construction material suppliers. Through this relationship, Fosse has been able to gain a very advantageous supplier contract allowing Fosse to obtain its materials at a significant discount. With this edge the company can underbid its rivals and achieve a low cost leadership role.
Expectations
Forecast
Fosse has only a small amount of debt and intends to stay that way. We expect to see increased profits from our market shift efforts by the end of Year 2. Over the next three years we expect lower profits as we make inroads into this tough market. We estimate that we will be able to reduce marginal costs and increase overall profitability by Year 3 or Year 4 as we grow and take advantages of economies of scale.
We also think we can grow. For this next year we intend to significantly increase overall revenues to close to $900K, from $572K this past year. We have the market, the people, and the capabilities. It’s time to grow.
However, growth is expensive. We are prepared to inject new capital to support losses for most of this first year. We can turn a profit for years 2 and 3.
Financial Highlights by Year
Opportunity
Problem & Solution
Problem Worth Solving
Customers in the Houston area are in need of beautiful office buildings, warehouses, public works etc. The area is expanding rapidly and they need a company that can provide high quality work and materials to build the spaces that were needed.
Our Solution
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.
Target Market
Market Size & Segments
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.
Target Market
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.
Competition
Current Alternatives
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.
Our Advantages
In the construction industry the primary ways to compete are through low cost or better project management. One of the most important processes for winning a contract is the bid process. Fosse has a unique competitive edge over most of its competitors. Mr. David West, FCC’s General Projects Manager, is the nephew of Charles Nunn, who owns McHoughton’s Lumber, one of the Midwest’s major construction material suppliers. Through this relationship, Fosse has been able to gain a very advantageous supplier contract allowing Fosse to obtain its materials at a significant discount. With this edge the company can underbid its rivals and achieve a low cost leadership role.
Keys to Success
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%.
Execution
Marketing & Sales
Marketing Plan
Fosse plans to market itself through a variety of methods. First, the company will use a referral system with local businesses. We will also air radio spots and publish ads in a variety of commercial construction trade magazines. In addition we will leverage our pre-existing contacts with the local real estate companies. Finally, as a member of the local construction association, we will be updated on new projects let out for bid.
Sales Plan
The most critical part of sales is not the marketing, but the bidding process, in which companies offer their designs, services, material quality, project timeline estimates, and costs. The company that offers the best combination of these variables is the most likely to get the contract. Therefore very detailed project planning, including supply agreements, labor needs, subcontractors, presentation, and other factors, is crucial for Fosse in winning contracts. We will be designing a standardized method for doing this with all our contracts, with an emphasis on quality, timeliness, and low cost to outbid our competitors.
Milestones & Metrics
Milestones Table
| Milestone | Due Date | Who’s Responsible | |
|---|---|---|---|
|
Plan vs. actual review
|
Jan 20, 2020 | Management | |
|
Plan vs. actual review
|
Feb 24, 2020 | Management | |
|
Plan vs. acrual review
|
Mar 15, 2020 | Management | |
|
Plan vs. actual review
|
Mar 24, 2020 | Management | |
|
Plan vs. actual review
|
Apr 28, 2020 | Management | |
|
Plan vs. actual review
|
June 23, 2020 | Management |
Key Metrics
Key Metrics
- The number of large scale contracts per year.
- New construction – we need over 50% of our business as new construction.
- #of repairs – we would like to repair other’s work but we need to repair ours too.
Company
Overview
Ownership & Structure
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. This will create greater investment opportunities through the acquisition of investment capital from a limited number of shareholders.
Company History
Fosse Commercial Contractors, LLC began in the Houston area 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. Then 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.
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.
Past Performance
Team
Management Team
Fosse’s management consists of Mr. Robert Fosse and Mr. David West. Mr. Fosse will concentrate on client contacts and bidding along with overall management of the company. Mr. West will be the company’s General Project Manager, coordinating all project management and concentrating on cost controls, suppliers, day-to-day project supervision, labor relations, etc. Mrs. Janet Fosse will be our office manager, handling client satisfaction,invoicing, permitting, and general book keeping. Most of our labor needs will be met through Contractor-Temps a nationwide temporary labor company.
The company is planning to expand it personnel to add a number of job superintendents as soon as the number of projects increases. These superintendents will have the following duties:
- Direct supervision of all work at the job site.
- Quality control.
- Scheduling subcontractors and material deliveries.
- Verifying and insuring that all work is done in accordance with plans.
- Insuring that all work is performed in accordance with all OSHA guidelines.
In addition, as business increases, we will hire additional job superintendents and project managers as needed.
Personnel Table
| 2020 | 2021 | 2022 | |
|---|---|---|---|
| CEO | $42,000 | $42,840 | $43,697 |
| Project Manager | $42,000 | $42,840 | $43,697 |
| Office Manager | $26,400 | $26,928 | $27,467 |
| Temporary Contractors (6.67) | $129,600 | $132,192 | $179,784 |
| Job Supervisor (0.33) | $24,000 | ||
| Totals | $240,000 | $244,800 | $318,645 |
Financial Plan
Forecast
Key Assumptions
We do not anticipate a significant increase in profits until our 3rd year as we will need time to penetrate our new market. We plan on basing dividend payouts on overall performance and health of the company and may decide to retain such earnings for future growth.
Revenue by Month
Expenses by Month
Net Profit (or Loss) by Year
Financing
Use of Funds
We will use the influx of capital to expand into a new market. There is a lot of opportunity to grow and be successful. We need to buy equipment and get experts and do the website to refocus our brand
Sources of Funds
We will be using our sales and cash from our already established business to expand and make our business more profitable.
Statements
Projected Profit & Loss
| 2020 | 2021 | 2022 | |
|---|---|---|---|
| Revenue | $949,145 | $1,484,000 | $2,034,000 |
| Direct Costs | $711,859 | $1,113,000 | $1,525,500 |
| Gross Margin | $237,286 | $371,000 | $508,500 |
| Gross Margin % | 25% | 25% | 25% |
| Operating Expenses | |||
| Salaries & Wages | $240,000 | $244,800 | $318,645 |
| Employee Related Expenses | $48,000 | $48,960 | $63,729 |
| Sales and Marketing Expense | $2,400 | $2,400 | $2,400 |
| Utilities | $1,380 | $1,380 | $1,380 |
| Insurance | $3,600 | $3,600 | $3,600 |
| Amortization of Other Current Assets | $0 | $0 | $0 |
| Total Operating Expenses | $295,380 | $301,140 | $389,754 |
| Operating Income | ($58,094) | $69,860 | $118,746 |
| Interest Incurred | $1,520 | $1,051 | $731 |
| Depreciation and Amortization | $1,774 | $1,775 | $1,774 |
| Gain or Loss from Sale of Assets | |||
| Income Taxes | $0 | $1,412 | $29,060 |
| Total Expenses | $1,010,533 | $1,418,378 | $1,946,820 |
| Net Profit | ($61,388) | $65,622 | $87,180 |
| Net Profit/Sales | (6%) | 4% | 4% |
Projected Balance Sheet
| Starting Balances | 2020 | 2021 | 2022 | |
|---|---|---|---|---|
| Cash | $40,428 | $22,548 | $66,375 | $141,831 |
| Accounts Receivable | $23,157 | $21,675 | $30,917 | $42,375 |
| Inventory | $43,320 | $92,750 | $127,125 | $127,125 |
| Other Current Assets | $37,991 | $37,991 | $37,991 | $37,991 |
| Total Current Assets | $144,896 | $174,964 | $262,408 | $349,322 |
| Long-Term Assets | $20,421 | $20,421 | $20,421 | $20,421 |
| Accumulated Depreciation | ($8,000) | ($9,774) | ($11,549) | ($13,323) |
| Total Long-Term Assets | $12,421 | $10,647 | $8,872 | $7,098 |
| Total Assets | $157,317 | $185,610 | $271,280 | $356,420 |
| Accounts Payable | $25,400 | $92,432 | $126,463 | $126,463 |
| Income Taxes Payable | $21,677 | $0 | $1,412 | $7,268 |
| Sales Taxes Payable | ||||
| Short-Term Debt | $31,307 | $15,395 | $7,897 | $8,137 |
| Prepaid Revenue | ||||
| Total Current Liabilities | $78,384 | $107,827 | $135,771 | $141,868 |
| Long-Term Debt | $7,732 | $27,971 | $20,074 | $11,937 |
| Long-Term Liabilities | $7,732 | $27,971 | $20,074 | $11,937 |
| Total Liabilities | $86,116 | $135,797 | $155,845 | $153,804 |
| Paid-In Capital | $0 | $40,000 | $40,000 | $40,000 |
| Retained Earnings | $71,201 | $71,201 | $9,813 | $75,435 |
| Earnings | ($61,388) | $65,622 | $87,180 | |
| Total Owner’s Equity | $71,201 | $49,813 | $115,435 | $202,615 |
| Total Liabilities & Equity | $157,317 | $185,610 | $271,280 | $356,420 |
Projected Cash Flow Statement
| 2020 | 2021 | 2022 | |
|---|---|---|---|
| Net Cash Flow from Operations | |||
| Net Profit | ($61,388) | $65,622 | $87,180 |
| Depreciation & Amortization | $1,774 | $1,774 | $1,774 |
| Change in Accounts Receivable | $1,482 | ($9,242) | ($11,458) |
| Change in Inventory | ($49,430) | ($34,375) | $0 |
| Change in Accounts Payable | $67,032 | $34,031 | $0 |
| Change in Income Tax Payable | ($21,677) | $1,412 | $5,856 |
| Change in Sales Tax Payable | |||
| Change in Prepaid Revenue | |||
| Net Cash Flow from Operations | ($62,207) | $59,223 | $83,353 |
| Investing & Financing | |||
| Assets Purchased or Sold | |||
| Net Cash from Investing | |||
| Investments Received | $40,000 | ||
| Dividends & Distributions | |||
| Change in Short-Term Debt | ($15,912) | ($7,498) | $240 |
| Change in Long-Term Debt | $20,239 | ($7,897) | ($8,137) |
| Net Cash from Financing | $44,327 | ($15,395) | ($7,897) |
| Cash at Beginning of Period | $40,428 | $22,548 | $66,375 |
| Net Change in Cash | ($17,880) | $43,828 | $75,456 |
| Cash at End of Period | $22,548 | $66,375 | $141,831 |
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