Business Model- Critiques Please

BPI

This is a business model that my father and I have been discussing to expand our current business. The idea behind it is to decrease overhead by putting several services under one roof saving on insurance, etc. I realize that we may not get qualifying agents for each area but we intend to get as many as we can find that are qualified and competent. Thanks, and here it is:

Underground utilities, paving, dirt, erosion control, and land clearing provided for the private and government sectors.
“Brickhill, Inc.” is a General Contracting, Site Preparation, Utility Installation, and Residential and Commercial Services firm to be established in Southeast Georgia providing its services to the South East region of the U.S.

The General Contracting department of Brickhill, Inc. shall be divided into three divisions; Residential, Remodeling, and Commercial.
The Residential Division will be led by while the qualifying agent will be . The objective of this division is to build quality affordable homes in targeted areas of South East Georgia. Price points will be met by using in-house tradesmen and networking with local developers to provide low cost building sites.
The Remodeling Division will be led and operated in the same manner as the residential division. The objective of this division is to provide cost effective remodeling, additions, and design solutions and services to homeowners.
The Commercial Division will be led by who also shall be the qualifying agent. Consulting services will be provided by Construction, LLC. of New Iberia, LA. The objective of this division will be to target small to medium sized commercial and municipal projects in the state of Georgia. Profit margins can be less than average due to the efficiency of in-house tradesmen and the consulting provided by Construction, LLC. thus enabling Brickhill, Inc. to perform a larger volume of work and increase cash flow during the current economic recession.

The Site Work, Pipe, and Paving division will be led by and the qualifying agent shall be determined.
The objective of this department is to target projects in the private and government sector. Profit goals will be met by maintaining only the equipment and man power necessary to perform current projects. Project superintendants will be compensated for exceeding budget goals and timeline expectations. This department will also provide consulting and personnel services to Construction, LLC. of New Iberia, LA.


The services department will be led by . The qualifying agents for the divisions requiring specific licensing shall be determined. The goal of this department will be to target general contractors, homeowners, and businesses in need of the services offered. This department shall also be utilized for the purpose of meeting price goals for the residential and commercial contracting departments. Division Superintendants will be compensated for exceeding sales, budget, and timeline goals.

Sales and Marketing will be led by . A hometown “guerilla” marketing plan will be implemented for the Residential Contracting and Services divisions. Local business will be asked to participate in our marketing campaign in exchange for gift certificates being distributed to our customer base. This should raise community awareness and interest while also building trust by association.

BPI

where sentences stop abruptly is where I took out names. I didn't realize that it would jam it all together when I pasted it. I promise it looked pretty in MS Word.

Bill Z

You don't say who this will be presented to, but if a bank is involved they'll want to see more documentation regarding the experience of the principals and how successful you've been in the past. Also, include the mathematics involved on the specific savings you will experience as a result of combining your overhead under one roof. Quotes from your insurance man based on your future structure verse the two current businesses and other areas of projected savings you can document will help.

Some realistic sales projections would be helpful if you have anyway to prove your numbers such as previous sales records or actual contracts for future work.

Bury them in paperwork and it'll probably work. If this is only for your own use, then put everything in writing just the same, and make sure the logic of the math is solid so you can make an intelligent decision rather than an emotional one. Even if you don't need a loan, go apply for one. A good bank has a bunch of number crunchers who can point out any errors and help you avoid some big mistakes. Never hurts to have an outside opinion.

BPI

Yes, this is for my own use. That's a great suggestion about applying for a loan anyway to check the math and so on. I will do that. We have a pretty solid line of credit but the number crunchers are good at what they do. (Unless they work at Bank of America and the rest of those losers)

Otherwise, do you think its a good way to expand outside of site work and building homes?

Bill Z

That would depend on a few hundred other factors that you didn't include in your original post. There's a lot of reference to "goals, targets, and plans" but no real evidence of how you are able to meet same. I don't know what you and/or your father are good at, but whatever it is this may be a good time to do it well and focus on what you know. On the other hand, if you have experience in the new areas, we may or may not be at the beginnings of a market upturn and you could position yourself at just the right time. It's a slippery slope, if you have your feet on solid ground now, I say watch where you step.

MOTB

You broad stroked some topics that you may get insight from this related thread. Best of luck. Brian

http://www.contractortalk.com/f16/qu...ntation-61587/

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BPI

I appreciate the advice. I realize that I broadstroked some topics and that is mainly because I am asking for advice on the broad subject. I'm still working on numbers and details. I am trying to use this forum as a tool to incorporate good ideas in the early stages of planning. Perhaps a suggestion like, "Here is something else you could use to help with reducing overhead...." Or, " I hate this idea, its sounds complicated". I sincerely appreciate the idea of applying for a loan. Thats great stuff that I can gear towards at this point in my planning. Basically, could you see a business that houses several trades under one roof being successful, and if you were to do it yourself, what ideas would you add into the mix?

mmike032

where in south ga you located?
or do you not want to give that info...
just curious, I'm probally not far from you

BPI

We are in Camden and Glynn Counties. Where are you Mike?

Bob Kovacs

I was perplexed by this statement:

"Profit goals will be met by maintaining only the equipment and man power necessary to perform current projects."

So you're going to buy and sell equipment for each job, and layoff manpower at the end of each project and then re-hire when you get another project? Sounds like a recipe for disaster.

But the strangest of all was this line:

"Profit margins can be less than average due to the efficiency of in-house tradesmen and the consulting provided by Construction, LLC. thus enabling Brickhill, Inc. to perform a larger volume of work and increase cash flow during the current economic recession."

a) What makes you think you're going to "gain efficiency" with in-house tradesmen vs. using subs? Unless you've got a tremendous amount of work to keep those guys working constantly, you'll lose efficiency.
b) How does having profit margins that are "less than average" allow you to perform a greater volume of work and increase cash flow?

IMO, you're putting too many different eggs in one basket. There's a reason companies with such differing skill sets, profit margins, equipment/manpower needs, etc., are kept separate.

Bond Advisor

I'm assuming the below average profit margins leading to increased volume and cash flow is achieved via better "fixed cost absorption". In some businesses accepting lower gross margins via more competitive pricing results in a higher volume of work such that the greater total gross/variable profit is spread over roughly the same fixed cost base.

This tends to be easier to achieve in high production businesses which, unlike most contracting businesses, tend to have a relatively high mix of fixed expenses in their cost structure (think Auto assembly plants and labor costs). In such cases, if lower prices (and consequently lower gross margins) lead to higher sales and production sufficient to offset the lower margins (and, of course, the higher working capital requirements of increased production), then cash flow can increase on account of the decision to accept lower variable margins.

Contracting businesses tend to demonstrate a higher mix of variable costs, despite how it feels in difficult economic times, vs. a factory production model or even many service businesses. So you really have to sharpen your pencils and get the price points right to succeed with a scale-based, fixed cost absorption strategy, especially in difficult economic times where competitors are bidding very aggressively.

California Contractors Insurance Services, Inc.
ssiino@ccisbonds.com