Sub Contracting Construction Work Business Plan

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(1) EXECUTIVE SUMMARY

Purpose of the Plan is to present the bank with details about business plans to undertake engineering work through obtaining sub-contracting work from utilities Contractors especially ESB to undertake various projects across the Republic. This plan also includes information about the business, engineering contacts, market focus and forecasts, competitor analysis, founder and a detailed financial plan.

Construction Limited operates as a sole trader from construction engineering background who undertakes the sub contract with the contractors for unities companies in Republic. Business civil engineering services will be provided to a range of clients. The business success is built upon providing efficient, high quality and reliable services in a safe manner.

Business is facing capital difficulties to purchase mini-Digger and truck to perform the sub contracts with notable contractors. Dennis has over 10 years of experience in engineering work related to digging and laying cables on the roads/streets/construction sites. The target market of this business are mainly securing sub contracts with utilities companies contractors and construction sites where digging activity may be needed. Penetration pricing will be the best strategy in order to increase revenue and market share.

 The Construction industry of Dublin is currently growing rapidly again. It has been observed that current value of Ireland construction is € 11 billion annually and it gives 7.5% to the country’s Gross national Product. Dublin is a well-developed, modern city with all of its major facilities such as roads, public transportation systems, schools, hospitals and shopping centers are located at a convenient distance.

As of 2016, Ireland’s property market, especially in the city of Dublin, has an insufficient supply of housing. Main growth in construction is coming from the private sector including both commercial and residential projects. Being the capital of Ireland, it is also the center for the financial, economic and business activities of the country. Dublin is the second most attractive city for real estate activity in Europe. This opportunity will drive demand for construction of houses and resultantly generate more Digging work. The opportunity will be extensive in order to fill the market demands.

Business plans to:

  • Obtain contracts from utilities companies’ contractors & builders.
  • Provide quality digging service to contractors.
  • Construction of buildings and civil engineering projects.
  • Commit itself in innovation and improvement ensuring to provide the best advice and service possible.

Construction Limited has extensive experience and expertise in engineering work spanning over 10 years. I work full time on subcontracts. In the second and third year I expect to hire one person to support me with the jobs. I and my skilled labor force have the expertise and capacity to deliver quality projects.

Financial projections

Financial Projections of first three years will be as follows:

(2) BUSINESS DESCRIPTION

Founder of business is Construction Limited who operates as a sole trader started his business in the context of rising activity in the economy in 2016. The objective of business is to provide engineering services to undertake work in terms of Digging and performing construction work related to ESB Contactors in Dublin and across Ireland in order to fulfil growing demand of this work.

PROMOTERS & SHAREHOLDERS

Profile of Mr Worker:I have over 10 years’ experience in all aspects of doing road work relating to digging. I established Construction Engineering Limited in 2008 and successfully operated for 4 years until recession hit badly and main sub contracts and activities were stopped. Now, Irish economy is performing well again and accelerated activity is back again, hence demand for my work flourish again and there is plenty of work available through my experience and connection in the industry.I aim to leverage this opportunity and my focus is on building sustainable growth throughout the business through developing relationships with clients and exceeding their expectations on price, quality and delivery, all in a safe working environment. I am responsible for identifying, pitching and ultimately securing new contracts along with maintaining and strengthening effective business relationships with clients.

ADVISERS

Business will engage top advisors to structure the business deals.

LEGAL STATUS

Business is formed as a sole trader business in the name of Mr Construction Limited.

MAIN PRODUCTS & SERVICES

Business will undertake digging projects in Dublin and across the country where services are desired. Dennis has expertise of rendering services in ESB Work for Digging and laying wires/ cables.

Company will carry out projects in an efficient manner, will take away the added pressure of inherently slow traditional work by taking care of all logistics, machines and tools and personnel management and provide own material (where desired) to offer the total package to its customers.

The Market

The Dublin economy is flourishing again since economic crisis. There is overall business growth during the past couple of years and is expected to continue for at least the next four years. This makes an attractive market for the business.

The target market of this company will be utilities companies and any construction sites and residential renovation work. 

LONG-TERM AIM OF THE BUSINESS

Business strives to offer the great impact full and quality digging work

BUSINESS GOALS

Business goals to gain high profit margins.

(3) MARKET ANALYSIS

Detailed market research has been undertaken to understand Irish market in depth

PEST Analysis

Political

In Ireland, Democratic Government is stable, and political stability is a significant factor affecting construction and road works.

Good political conditions for business, lesser corruption, economic freedom, and competitive taxation rates are positive political factors.

Government policies regarding infrastructure and housing are changing due to increase in demand. Due to increased homelessness, there is an added pressure on government to consider housing issues on immediate basis. This is represented by a political pressure to provide housing solutions to public.

Being member of European Union, Ireland has complied with the trade regulations and has to limit its trade, which impacts the supply side of housing sector to a minor extent.

Economic

Construction of the €150 million new ESB headquarters on Fitzwilliam Street in Dublin 2 – one of the largest office developments ever planned for the city began in 2017.

Although the economic condition of Ireland is getting better yet there is high inflation and high taxation rates, a common aftermath of global financial crisis.

Being member of EU, exchange rate in Ireland is stable. Likewise, the interest rate is similar to that prevailing all around the Europe. This represents no devaluation of local currency or appreciation, making prices stable.

The Ireland’s economy has passed through a strategic shift i.e., it is emerging as high-tech and knowledge-based economy from agricultural economy. This means there is a significant shift in lifestyles resulting from increase per capita income of Irish people.

Short population of 4.4 Million, lesser unemployment rate is 11.9 % and higher per capital income of   € 42,000 are favorable factors for housing businesses.

Social

  • Language is English, so no major communication barrier, even attractive international destination.
  • Member of EU and UN makes it a prominent target for investment purposes.
  • High rate of divorce and abortion, which means there are small independent households.
  • Education is free in Ireland, indicating tough competition in labor market.
  • Multicultural society indicating a mix of housing needs.
  • Religion is Catholic yet open for people from all societies and religion.

Technological

  • Housing must follow the EU Commission’s Environmental Technology Program (ETAP) that promotes the green production program support.
  • ETAP also encourages use of those production program that are resource efficient and effective, resulting in lowest wastage.

Porter’s Five Forces (P5F) Analysis

THREAT OF NEW ENTRANTS – LOW

There is upward trend in demand of housing and people have better per capita income. At the same time, economic condition of Ireland is getting better but there is decrease in profitability due to increase in the number of entrants.

Specialized skills to operate the machines and tools and digger will cause only few firms to operate.

Government is making legislation to facilitate the real-estate suppliers so that housing demand can be fulfilled.

Current commercial and residential infrastructure is getting better in Ireland; however, construction companies are required to follow ETAP. That is quite tough as well.

BARGAINING POWER OF BUYERS – MODERATE

  • Given the high demand for subcontractor services for engineering work for utility companies, bargaining power of buyers is considered moderate. However, in the instances of lower demand, there may be powerful clients/contractors are able to exert pressure to drive down prices, or increase the required quality for the same price, and therefore reduce profits in an industry.
  • Clients significantly influence the business operations in electricity sector.
  • Clients have a great choice of picking sub-contractors.
  • Consequently, the bargaining power of the buyers is strong.

BARGAINING POWER OF SUPPLIERS – Relatively HIGH

  • Due to huge demand and lesser supply, the suppliers bargaining power is more than customer.
  • An important category of suppliers is the bank. They have the power to decide whether to fund a venture or not and at what rate.
  • Banks have now become highly conservative especially after the economic downturn for supply of finance construction companies.
  • The industry is seriously affected by the monetary regulations.

THREAT OF SUBSTITUTE – MODERATE

  • In Digging sub contract business, substitute might be some type of new plasterer workers or undertaking in house projects by main developers or main contractors.

RIVALRY AMONG EXISTING COMPETITORS

  • Rivalry is strong due to the large no. of small sub-contractors operating in Ireland.
  • The services offered by sub-contractors cannot be greatly differentiated and is difficult to quantify.
  • In the current economic condition, there is minimal profitability, therefore, only those companies have better chances for survival that have better liquidity position and develop competitive price as well due to economies of scale

Irish Utilities Market/ Construction Sector – A Glimpse

Ireland is one of the most prominent victims of global financial crisis (GFC) 2008-2012. With respect to its construction industry, conditions have been tough even after GFC, due to dramatic price inflation in Dublin, which re-appeared as house price inflation, after heavy slump of six years of GFC. This increase resulted in 40-50% of inflation in housing prices, depending upon the district. On one side, it indicates the opportunity of market expansion, while triggers certain challenges. With the intervention of the Central Bank, housing bubble has been avoided, resulting in normal increase in housing prices, only to be effective in bank lending practices, whereas, the general market is responding to the fundamental market forces of demand and supply.

Market Attraction

Market statistics indicate that the market is very favorable for engineering work construction of new houses and apartments because of shortage of houses at present in Ireland especially in Dublin.

COMPETITOR ANALYSIS

The Road side Engineering work is again on Demand. There are currently various companies and small businesses providing the similar services. Dennis has experience of more than 10 years and possess skill labor which can be considered as major USP of this business. The business will also use the SWOT analysis to identify the strength, weakness, opportunities and threats of the business as well as market industry. There are various businesses in Dublin offering construction engineering work. Moreover, company will set various packages for different contractors so that buying behavior of all contractors can be highlight.

Competitive advantage

The competitive advantages for Business are numerous which will give tough time to their competitors. The company’s owner has experience of 10 years which will be considered as a key advantage. Offering Digging materials to different business and getting contract from several builders will also give competitive edge to Business on various competitors.

Benefits to clients

Business focuses on differentiation through innovation and creativity, and above all, meeting the expectations gap between client’s expectations and solutions available in the market. In this regard, company will offer certain benefits such as;

  • Identification of service’ unique offering based on close working, communication and analysis of contractors/builders and their needs. This also involves providing higher value for a unit of money spend, in terms of the Digging solution, quality of work and overall offering.
  • Direct focus on the gaps between clients’ perception/expectations and Digging service offered for improvement;
  • Working closely with clients to identify their needs and provide innovative solutions.

(4) MARKET & SALES STRATEGY

Business will adopt effective marketing effective strategy in order to increase market share and their revenue. The company will use their local contacts with energy contractors and builders to find new contracts. The services given by the business will be outstanding in comparison with others and will effectively meet the needs of customers/ clients.

SERVICE BUSINESS ANALYSIS

The business is currently managed and worked by Mr. Construction Limited. In the first year, the services will be provided by Mr Dennis Only. The business will hire employee in future when firm will expand its operations. In addition to this, company will also be getting major contracts from various utilities contractors which will help in development of business. The business services can be analyzed by examining the cash flow of business. Apart from this, the financial statement of the business also helps to determine the current status of business.

MARKETING/ SALES STRATEGY

This section describes the marketing and sales strategy, proposed for the business.
Business will adopt effective marketing effective strategy in order to increase market share and their revenue.
Mr Dennis will use their local contacts with Contractors and 2 of companies is already in Contact with Mr Dennis to provide these services. There is a lot of work available and business expect no issues getting
contractors provided it has necessary tool and cash flow to operate effectively.

SALES STRATEGY

This section describes the marketing and sales strategy, proposed for the business. Marketing and sales strategy is integral for three main reasons i.e. entering as a new player in an established market, developing a brand in the industry and growth in market share. Business will implement penetration pricing strategy in order to increase their revenues and market share.
This will give a competitive advantage on all other firms in engineering and construction industry. Company will starts its operations from lower pricing because basic motive of the business is to target large number of audience. Moreover, giving discount and allowances on different occasions will help the company to increase
their sales. .

PRICING

The pricing is mailnly dictated by contractors and negotiated. At present business can contract service of
digging and engineering work at 45 euro an hour.

(5)PEOPLE

DETAILS OF KEY EMPLOYEES

Business has an experienced founder who is qualified and skilled worker having experience of many years and will be rewarded according to each contract.

Role of Mr. Construction Limited

  • Responsible for providing direction for the Contracts won by the Business
  • Creates, communicates, and implements his vision and overall direction.
  • Responsible for the day to day running & work of the contracts
  • Responsible for bidding and signing the contracts
  • Responsible for signing cheques and documents on behalf of the Business
  • Reports and communicates with Builders/Customers

(6)R&D, BUSINESS ASSETS 

BUSINESS ASSETS

Business premises will be the premises/ site work will be undertaken. Hence no business premises needed at the start of business.

Major equipment needed will be Digger, machines, truck and Trailor. There will be no other equipment needed.

(7)FINANCIAL

FINANCIAL INFORMATION

Business major investment will be funding for buying the fixed assets.

Projected Financial Statements for three years are included in the Appendix showing following components.

Profit and loss accounts

Balance sheets

 Monthly Cash flow statements

ASSUMPTIONS

(a)Sales levels

Company will gain contracts on a rolling basis.

(b)Cost of sales

Costs of sales will be mainly motor and haulage expenses for Digger is sub contract for Digging services and heavily labor intensive contract. Other costs are minimal.

(c)Overheads

Main over heads will be general day to day expenses and accounting costs.

(d)Investment required in fixed assets.

Major fixed asset involve is Digger, Truck and Trailor which is required at the start of getting contracts.

FUNDING REQUIREMENTS

(8) APPENDICES

FINANCIAL INFORMATION

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