2011
Kent and Sons Masonry
Business Plan for Kent and Sons Masonry –
Plans for Formalization of Business and
Financial Analysis
Bernadette Moser
EBAC052
Student 11047073
Kent and Sons Masonry - Business Plan 2011
1 Contents
1
Contents ............................................................................................................................. 1
2
Table of Figures .................................................................................................................. 3
3
EXECUTIVE SUMMARY .................................................................................................... 4
4
BUSINESS PLAN ............................................................................................................... 5
5
4.1
Introduction .................................................................................................................. 5
4.2
The Industry ................................................................................................................. 5
4.3
Mission Statement ....................................................................................................... 6
OPERATIONS PLAN .......................................................................................................... 7
5.1
6
7
8
Order of Business ........................................................................................................ 7
5.1.1
Contact by client. .................................................................................................. 7
5.1.2
Preparation of quote. ............................................................................................ 7
5.1.3
Presentation of quotation. ..................................................................................... 7
5.1.4
Project Execution. ................................................................................................. 8
5.1.5
Final Invoicing ....................................................................................................... 8
Organization ....................................................................................................................... 9
6.1
Principals of Organization ...........................................................................................10
6.2
Human Resources Strategies .....................................................................................12
6.2.1
Required Resources ............................................................................................12
6.2.2
Future organizational structure ............................................................................13
MARKETING .....................................................................................................................14
7.1
4P Analysis .................................................................................................................14
7.2
STP Analysis ..............................................................................................................14
7.3
Competition.................................................................................................................15
7.4
Marketing Expenses ...................................................................................................15
7.5
Product Mix .................................................................................................................16
7.6
Marketing Revenue Increases ....................................................................................16
Finances ............................................................................................................................17
8.1
Initial Financial Assumptions .......................................................................................17
8.2
Current Assets ............................................................................................................17
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Bernadette Moser
EBAC 52
Kent and Sons Masonry - Business Plan 2011
9
8.3
Balance Sheet ............................................................................................................18
8.4
Income Statement .......................................................................................................19
8.5
Expenses ....................................................................................................................20
8.6
Cash Flow ...................................................................................................................21
Risk Analysis .....................................................................................................................22
9.1
Breakeven Analysis ....................................................................................................22
9.2
Product Mix Sensitivity ................................................................................................23
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Bernadette Moser
EBAC 52
Kent and Sons Masonry - Business Plan 2011
2 Table of Figures
Figure 1 - Example of Workmanship .......................................................................................... 4
Figure 2 - Restoration Project .................................................................................................... 5
Figure 3 - Accent Work .............................................................................................................. 6
Figure 4 - Project Flowchart ....................................................................................................... 7
Figure 5 - Stone Patio and Stairs ............................................................................................... 8
Figure 6 - Organizational Chart ................................................................................................. 9
Figure 7 - House numbers carved in natural slate installed in granite pillars .............................11
Figure 8 - Future Organizational Structure ................................................................................13
Figure 9 - Marketing Expenses .................................................................................................15
Figure 10 - Product Mix .............................................................................................................16
Figure 11 - Revenue Increase from Marketing ..........................................................................16
Figure 12 - Current Asset Values ..............................................................................................17
Figure 13 - 5 Year Balance Sheet .............................................................................................18
Figure 14 - Net Income .............................................................................................................19
Figure 15 - Expenses Summary ................................................................................................20
Figure 16 - Cash Position ..........................................................................................................21
Figure 17 - Cash Flow ...............................................................................................................21
Figure 18 - Breakeven vs. Utilization .........................................................................................22
Figure 19 - Product Mix Sensitivity ............................................................................................23
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Bernadette Moser
EBAC 52
Kent and Sons Masonry - Business Plan 2011
3 EXECUTIVE SUMMARY
With an expected growth of 10,000 new homes for Saskatoon and area in the next 5 years,
there is a growing market for high-end masonry construction. Saskatoon is experiencing
unprecedented growth with higher than average home prices and home salaries. Kent and Sons
Masonry is strategically placed to take advantage of the market expansion. The company has
completed many high value projects in the area and is recognized as a premium service
provider. The business has been built on the reputation as established master stonecutters.
Kent and Sons Masonry is a locally owned Saskatoon based company involved in the
residential construction industry. They specialize in granite and limestone fieldstone bringing
the beauty of natural stone to life in residential homes and recreational properties. Like each
stone is unique, each creation is a work of art, created with old world craftsmanship, each one
an individual project never duplicated.
Their mission statement reflects the nature of their business, their pride in craftsmanship and
uncompromising quality, providing value added for their clients. Each project is unique, a work
of art.
The company is debt free, and is fully equipped to provide services as required. Cash flow is
based in initial security deposit from the client followed by progress payments and final
completion holdbacks.
Based on projections Kent and Sons would expect net incomes from $114K to over $120K in
year 10 of operation. This is based on an 80% utilization of available labour. Breakeven occurs
at 58% utilization of available labour.
Expected significant capital expenses will be vehicles and equipment. Full advantage of capital
cost allowances will be utilized to reduce taxes.
Initial financial analysis indicated substantial cash account to an estimated $921K in year 10 of
operation. No consideration was given to alternative investments of excess cash at this time.
Figure 1 - Example of Workmanship
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Bernadette Moser
EBAC 52
Kent and Sons Masonry - Business Plan 2011
4 BUSINESS PLAN
4.1 Introduction
Kent and Sons Masonry is a specialty business that works in hand-cut fieldstone and
cultured quarried rock in the residential home building industry for clients in Western
Canada. Business is primarily carried out in the province of Saskatchewan, but they will
take contracts in Alberta and British Columbia. Kent and Sons specializes in hand-cut
granite fieldstone, and limestone installed in traditional jointed style, dry-pack stacked
limestone or university style limestone. All natural stone is picked from the fields and handcut. If possible stone will be taken from local fields around the property providing the client
with a project that is indeed special. When requested they will construct projects from
quarried/cultured stone brought in from various Canadian suppliers.
4.2 The Industry
The home construction business in the City of Saskatoon is very busy with new areas being
developed. Based on recent studies, 10,000 new units will be required in the city by year
2016. There are also an increasing number of clients who are purchasing property in the
older neighbourhoods such as the University area who are tearing down old homes and
erecting new custom homes or are renovating older homes with existing stonework. Many
home owners who are constructing homes in these older areas want to build a home that fits
in with the neighbourhood, a new home that does not look out of place beside older homes
with stone house-fronts, walls, and fireplaces. Home owners purchasing older heritage
properties want to maintain the integrity of the look of the original structure but often these
older homes are in need of repair or reconstruction and there is a growing demand for
restoration work, fixing deteriorating stone-work and ensuring the structure meets current
building code standards. There is also a large demand for decorative work on homes with
cultured quarried rock.
Figure 2 - Restoration Project
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Bernadette Moser
EBAC 52
Kent and Sons Masonry - Business Plan 2011
4.3 Mission Statement
Like every stone is unique in its beauty, each design is a work of art, a one of a kind
piece never duplicated.
Kent and Sons Masonry believe in using old world
craftsmanship to bring the natural beauty of stone to life in your home.
Figure 3 - Accent Work
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Bernadette Moser
EBAC 52
Kent and Sons Masonry - Business Plan 2011
5 OPERATIONS PLAN
5.1 Order of Business
Contact by
Client
Preparation
of Quote
Presentation
of Quote and
Negotiation
Project
execution
Final
Acceptance
and Invoicing
Figure 4 - Project Flowchart
5.1.1
Contact by client.
When we are contacted by a client we arrange to meet with them at their home. We
bring our portfolio of previous jobs with pictures to show them the different styles of work
we do. In consultation with the client we determine what style of stonework it is that the
client desires, and if possible we take them out on a site tour of previous projects in the
style they are interested in so they can see the actual end product. If the project is a
restoration on an existing home or cottage, a site visit is arranged with the client to
assess the project and determine what needs to be done to restore it to its original state.
5.1.2
Preparation of quote.
When we have determined the style of stonework desired by the client, we make a site
inspection if the home is currently under construction to take site measurements, or if the
project is in its initial stages, we take dimensions from the blueprints to determine square
footage requirements, determine what other materials such as cinderblocks and
masonry cement are required and prepare a quotation for the client. In a restoration
project measurements are taken, current condition of the project is assessed and a
determination is made of what needs to be done to restore and or repair the project.
5.1.3
Presentation of quotation.
Quotation is presented to client along with timelines for completion of the project. If the
price is agreed upon, a contract is drawn up and a deposit is taken from the client as a
down payment for the project.
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Bernadette Moser
EBAC 52
Kent and Sons Masonry - Business Plan 2011
5.1.4
Project Execution.
When preparing to begin the project, a meeting is held with the homeowner and their
general contractor outlining site requirements for the storage of materials, electricity for
lights in hoardings, structural requirements which may need to be installed and
construction begins. As the job progresses billing is done on a progress basis with the
final payment due upon completion and cleaning up of the site.
5.1.5
Final Invoicing
Upon completion of the product the customer sign off successful completion and final
invoicing is performed. Final 10% of holdback is released.
Figure 5 - Stone Patio and Stairs
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Bernadette Moser
EBAC 52
Kent and Sons Masonry - Business Plan 2011
6 Organization
Wayne Kent Stonemason
Adam Kent Stonemason
Apprentice
Labourer
Labourer
Figure 6 - Organizational Chart
The business is operated as a partnership between Wayne Kent and his son Adam Kent. They
are equal partners in the business, both responsible for the day to day operations. They share
responsibility in the hiring and training of staff. Wayne is predominantly responsible for new
project construction and Adam is responsible for renovation and restoration projects. As a small
business they have chosen to remain a partnership at the current time. They have no need to
take on private investors and wish to retain their autonomy allowing them the advantage of
choosing the projects they accept and setting their own pricing structure. They share equally in
the profits earned from the business. They employ an apprentice and one to two labourers as
the job needs require.
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Bernadette Moser
EBAC 52
Kent and Sons Masonry - Business Plan 2011
6.1 Principals of Organization
Wayne Kent is a professional stone cutter and artist. He was trained by his grandfather
John Kent a professional mason who immigrated to Canada
from Europe in the 1930s. John Kent was a mason who built
stone cairns and monuments in Banff National Park, and
Prince Albert National Park, Point of Interest markers in
provincial and municipal parks and various sites around
Saskatchewan, as well as stone house-fronts, retaining walls
and fireplaces at residential and recreational properties
throughout Saskatchewan. In the 1960s he did extensive work
for the federal government in the national parks. Wayne Kent
apprenticed with his grandfather in the late 1960s and early
1970s. In 1977 he apprenticed with Hagblom Masonry of Saskatoon, working with
Italian stonecutters on site on campus at the University of Saskatchewan. In the early
1980s Wayne worked on restorations at the President’s residence on campus at the
University of Saskatchewan, as well as renovations at the Royal University Hospital. In
1985 he supplied and hand-cut all the limestone for the Geological Sciences Building
also at the U of S campus. In 1988-89 he conducted a 9 month study in northern
Saskatchewan with a grant from the federal government to explore the possibility of
opening a stone quarry in northern Saskatchewan around Deschambault Lake. He
brings 40 years of experience as a stonecutter to the business.
Adam Kent joined his father in the business in 2006 beginning as a labourer picking
rocks in the field and mixing mud. He learned the art of splitting
stones, shaping them and the different techniques for building
stone projects by working on site with his father. He specializes
in restoration and renovation projects on existing masonry work;
he is skilled in restoring deteriorating stonework to its original
look, or adding onto existing stonework in renovations matching
the look so it’s impossible to tell the old from the new. He is also
the chief estimator for the company.
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Bernadette Moser
EBAC 52
Kent and Sons Masonry - Business Plan 2011
The company also employs an apprentice who is also a sculptor who works in natural
stone. She cuts and shapes the stones, as well as when requested does stone carvings
for clients, carving house numbers or images which can be set into the work.
Figure 7 - House numbers carved in natural slate installed in granite pillars
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Bernadette Moser
EBAC 52
Kent and Sons Masonry - Business Plan 2011
6.2 Human Resources Strategies
6.2.1 Required Resources
In order to facilitate continued operations and anticipated growth, Kent and Sons will require a
conservative human resource strategy to mitigate operational risks by the lack of resources and
provide for successional planning and organic growth. Per Figure 6 - Organizational Chart the
basics of the existing firm include the two partners, an apprentice and two helpers. For
anticipated growth there will be a requirement for additional resources.
6.2.1.1 Apprentices
To facilitate growth an additional apprentice should be considered. This will allow the expansion
of projects for additional revenue and reduce the risks of resources leaving, sickness, holidays,
etc.
6.2.1.2 Helpers
Additional helpers will also assist in reducing the requirements placed on the partners for limited
value added tasks and free them to procure additional projects and revenue.
6.2.1.3 Accountant / Clerk (part time)
To comply with legal and financial requirements consideration should be given to a part-time
accountant and clerk. This will free the principal partners for project execution and business
development opportunities.
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Bernadette Moser
EBAC 52
Kent and Sons Masonry - Business Plan 2011
6.2.2
Future organizational structure
In order to provide for succession and organic growth, consideration should be given to a future
organizational structure. Utilizing two teams of masons will allow for revenue growth. As well,
the two principles can begin to focus on a marketing strategy. The new organization structure
would also provide some risk mitigation if one of the two principles become unable to work.
Wayne Kent
Senior
Stonemason
Adam Kent
Junior
Stonemason
Apprentice
Stonemason
Helper
Apprentice
Stonemason
Accountant /
Clerk (part
time)
Helper
Figure 8 - Future Organizational Structure
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Bernadette Moser
EBAC 52
Kent and Sons Masonry - Business Plan 2011
7 MARKETING
7.1 4P Analysis
•
•
•
•
Product
• Premium pricing strategy will allow premium products. Focus on the core product
group, primarily custom stonework.
• Key products are hand-cut granite fieldstone projects and hand-cut limestone
and dry-pack stone.
• Additional products offered to client is quarried or cultured stone products.
Place
• Restrict initially to the regional market. (Saskatoon and area). Develop the
pedigree. Focus on high end homes and heritage properties.
Price
• In the current market regionally pricing is service sensitive – Not enough skills to
service current Market demand. Hence premium pricing.
Promotion
• In addition to word-of mouth
• Builders and trade exhibits.
• Vendors agreements with premium builders
7.2 STP Analysis
Segmentation
• The market segment will be higher end housing and commercial using premium natural
products.
• The target market is predominantly professional people constructing a new home or
renovating or restoring an existing property, especially in the heritage home market.
• This target market can afford the premium or executive finishes for residential
construction, thus allowing premium pricing strategies.
Targeting
• In order to position for the segment, the pedigree needs to be established and
communicated to the target segment.
Positioning
• Kent & Sons needs to expand on the heritage and pedigree of its past. Develop the
history of premium product regionally.
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Bernadette Moser
EBAC 52
Kent and Sons Masonry - Business Plan 2011
7.3 Competition
• KOBY MASONRY
• CITY MASONRY
• TORUS STONE MASONS
• GRACOM MASONRY
In the local market the main competitors in the masonry business do brickwork or masonry
projects with cultured or quarried stone. These businesses do a great deal of commercial work
and residential in new areas where all houses look the same. There is limited competition with
builders working in natural fieldstone. We are a niche market, when a client is looking for
traditional stonework or restoration of existing work maintaining the original integrity of the style
there really is no one else in Saskatoon providing this service.
7.4 Marketing Expenses
Kent & Sons Masonry
Yearly Marketing Costs
$860.00
$1,475.00
$1,500.00
Canadian Home
Builders Assoc.
Homestyle Show
$540.00
Phone Book
$2,160.00
Web site
Gardenscape
Figure 9 - Marketing Expenses
Marketing expenses for Kent and Sons Masonry remain fairly consistent from year to year. An
annual membership in the Canadian Homebuilders Association gets their name listed as a
stonemason, which allows them exposure in a broader marketplace. Renting booth space at
the annual Homestyle Show, and at Gardenscape allows them to showcase themselves to
consumers who are planning construction or renovation, even landscaping projects. By
participating in these trade shows they will be able to bring brochures picturing some of their
work, samples of natural stone products, even scaled down panels of actual work giving
potential clients a hands-on look at what they have to offer. They have advertising in the local
phone book yellow pages under masonry, stonework, and brickwork for the homeowner
planning or managing their own projects. They will be setting up a website with pictures of their
work throughout the province, with contact information for their business.
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Bernadette Moser
EBAC 52
Kent and Sons Masonry - Business Plan 2011
7.5 Product Mix
Current Product Sales
Natural Stone
$120,000
$144,000
Quarry Stone
Restorations
$24,000
Figure 10 - Product Mix
Currently Kent and Sons Masonry earn 50% of their revenues from the sale and installation of
natural stone products of cut granite and limestone. From the remaining 50% of their revenue,
40% of it is earned from renovation and restoration projects, and 10% from projects constructed
with quarried or cultured stone.
7.6 Marketing Revenue Increases
Revenue Increases from Marketing Strategy
Original Revenue
% Increase
$ 288,000
Year 0
5%
$ 302,400
Year 1
7%
$ 308,160
Year 2
10%
$ 316,800
Year 3
15%
$ 331,200
Year 4
25%
$ 360,000
Figure 11 - Revenue Increase from Marketing
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Bernadette Moser
EBAC 52
Kent and Sons Masonry - Business Plan 2011
8 Finances
8.1 Initial Financial Assumptions
The current business is being operated as a home business, thus the formal financial
documents are not available. Assumptions on equipment values and owner equity are included
in year one of the proposed balance sheet.
The business is operated on a cash basis. They have no operating loans or lines of credit.
When a contract is signed with a client a down payment of 50% of the value of the contract is
taken. From this amount, any materials necessary that must be purchased for the project are
paid for upon delivery, therefore they incur no interest charges or carry any accounts payable
balances. Day to day operating expenses including wages are paid as they come due.
Revenue is received from the client on progress payments based on the progression of the job.
The final 10% of the project is paid to Kent and Sons Masonry upon completion of the project,
site clean-up and after final inspection by the client. They do not extend credit to their clients,
so do not carry any accounts receivable.
8.2 Current Assets
Misc., $10,000 ,
13%
Vehicles, $20,000 ,
25%
Equipment & Tool,
$50,000 , 62%
Figure 12 - Current Asset Values
All assets for the business are owned free and clear by Kent and Sons. They own two late
model trucks, with a combined value of $20,000. Equipment consisting of flat-bed trailer,
compressors, gas powered mixers, stone saws, drills, wedges and feathers, hammers and
miscellaneous hand tools have a value of $50,000, and miscellaneous equipment such as
scaffolding, benches, hoarding and heaters have a value of approximately $10,000.
They store approximately 100 tonnes of stone in a compound they rent south of Saskatoon. As
required they go out to fields to pick stone, generally in the spring and fall so they always have
stone on hand. The only costs associated with the natural stone is the fuel to get out to the field
and the minimal storage fees they pay.
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Bernadette Moser
EBAC 52
Kent and Sons Masonry - Business Plan 2011
8.3 Balance Sheet
As shown on the balance sheet cash balance over the next five years is such that consideration
should be given to explore other investment options for excess cash held in the company. At
present time there is no plan in place to invest the extra cash.
2012
Cash
Equipment, Tools,
Vehicles
Accum.Dep'n
Inventory
Total Assets
2013
$
37,035
$
80,000
$
(28,313)
$
$
88,722
2012
LT Debt
2014
$
107,546
$
130,500
$
(65,044)
$
$
173,002
2013
$
181,834
$
181,000
$
(98,406)
$
$
264,429
2014
2015
2016
$
301,575
$
191,500
$
(132,409)
$
$
360,666
$
378,266
$
252,000
$
(170,361)
$
$
459,905
2015
2016
$
$
-
$
$
-
$
$
-
$
$
-
$
$
-
Sub Total
$
-
$
-
$
-
$
-
$
-
Retained earnings
$
83,722
$
5,000
$
168,002
$
5,000
$
259,429
$
5,000
$
355,666
$
5,000
$
454,905
$
5,000
Sub Total
$
88,722
$
173,002
$
264,429
$
360,666
$
459,905
Total Liabilities
$
88,722
$
173,002
$
264,429
$
360,666
$
459,905
A/P
Shareholder’s Equity
Figure 13 - 5 Year Balance Sheet
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Bernadette Moser
EBAC 52
Kent and Sons Masonry - Business Plan 2011
8.4 Income Statement
Based on utilization rates of 80%, and a conservative estimate of organic growth over the years
net income will continue to increase at a nominal rate. This also takes into consideration the
periodic replacement of vehicles and equipment. The income statement has been adjusted to
reflect our projected annual increases as a result of our marketing efforts.
Some critical assumptions are the product mix of 75% natural stone and 25% cultured. There
has been no allowance for interest revenue of held deposits.
Net Income
$200,000
$179,208
$180,000
$153,722
$160,000
$133,919
$140,000
$120,000
$160,783
$186,836
$166,174
$139,738
$125,790
$114,622 $114,702
$100,000
$80,000
$60,000
$40,000
$20,000
$2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Figure 14 - Net Income
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Bernadette Moser
EBAC 52
Kent and Sons Masonry - Business Plan 2011
8.5 Expenses
Annual operating expenses incurred by the business are considered adequate and reasonable.
The major expense incurred by Kent and Sons Masonry is wages. Both Wayne and Adam Kent
take a base salary of $50,000 per year. The apprentice is paid $22.00 per hour, with labourers
being paid $18.00 per hour. Wages are based on a 40 hour work week, 50 weeks of the year.
The business operates year round, erecting hoarding around projects to protect from inclement
weather, and heating the hoarding in the winter. The operating expenses projected show an
increase based on projected inflation rates.
CCA Expense
$28,313
Benefits
$29,354
Wages / Salaries
$174,000
Accountants / Lawyers Fees
$5,000
Marketing
$7,000
Safety Equipment
$2,400
Tools
$3,000
Equipment maintenance
$6,000
Phone / Internet / Satellite
$6,000
Fuel
$25,000
Rental of Storage
$4,200
Office Rental
$7,800
$0
$50,000
$100,000
$150,000
$200,000
Figure 15 - Expenses Summary
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Bernadette Moser
EBAC 52
Kent and Sons Masonry - Business Plan 2011
8.6 Cash Flow
$1,000,000
$900,000
$800,000
$700,000
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
$-
$921,455
$775,215
$683,496
$593,567
$458,817
$378,266
$301,575
$181,834
$107,546
$37,035
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Figure 16 - Cash Position
With the strong cash position Kent and Sons Masonry will be in if they maintain an 80%
utilization rate it is recommended that they replace one of the trucks every two years. This will
allow them to take advantage of the full capital cost depreciation for tax reduction. It is also
recommended that 25% of the net income be paid each year to the employees as a
performance dividend. Having an incentive program in place to pay dividends back to the
employees based on the year’s performance is a good policy to encourage employees work to
full capacity at all times.
$90,000
$80,000
$70,000
Cash
$60,000
$50,000
$85,313
$82,059
$40,000
$83,467
$30,000
$20,000
$10,000
$6,135
$2012
$40,089 $39,925
2013
2014
$37,303 $33,262
$36,193 $34,663
2015
2016
2017
2018
2019
2020
2021
Figure 17 - Cash Flow
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Bernadette Moser
EBAC 52
Kent and Sons Masonry - Business Plan 2011
9 Risk Analysis
9.1 Breakeven Analysis
The most critical variable in the success or failure of Kent and Sons Masonry is utilization of
human resources. If they maintain 80% efficiency rates they will see revenue and income grow
by more than quadruple in five years. The breakeven point at which they begin to lose money is
at 58%. The increase in income from 80% to 100% utilization is almost double. By comparison
if their efficiency drops much below 50% it can be seen that income quickly drops into the red
which would result in bankruptcy for this company.
The other critical variable for this business that could affect their success is having contracts to
do. At present time this is not an issue for Kent and Sons as they are currently booked many
months in advance. They have a niche in the marketplace for residential construction that
caters to the executive client purchasing or building high end homes.
$150,000
$100,000
Income
$50,000
$0
100% 90% 80% 70% 60% 50% 40% 30% 20% 10%
Percent Util.
Income
($50,000)
($100,000)
($150,000)
Percent Utilization
Breakeven vs. Utilization
Figure 18 - Breakeven vs. Utilization
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Bernadette Moser
EBAC 52
Kent and Sons Masonry - Business Plan 2011
9.2 Product Mix Sensitivity
Current revenues are earned from work done primarily from natural stone products. Stone work
constructed from granite or limestone fieldstone hand cut and shaped is installed at a rate of
$120 per square foot, with approximately 12 square feet laid per day. Stone work from natural
stone comprises approximately 75% of the revenue from stone. The other 25% of the revenue
for new installations is from the installation of cultured quarried rock. This cultured and quarried
rock is purchased from a supplier at a cost of $30 per square foot, and installed at a price of $80
per square foot with approximately 30 square feet per day laid.
When we look at product distribution comparing income earned with varying percentages of
work derived from cultured stone versus granite fieldstone we see that at the current rate of
production with 75% of the work done in fieldstone and 25% done in cultured stone the income
is around $80,000 per year in the first year. If Kent and Sons increases contract work in
cultured stone and decreases the work done in natural fieldstone income would rise
significantly, with reversing the product mix working 70% in cultured stone and 30% in natural
fieldstone income in the first year would almost double. Even though they must purchase the
cultured stone, they can lay more square footage in a day as this stone is uniform in size and
shape and installs somewhat like brickwork, requiring minimal tooling, so they gross more per
day working in this medium. However, the business has built its reputation on its work in
natural fieldstone. There are not a lot of stonemasons left that use the old craftsman techniques
with hand cutting and shaping of stone and this is a specialty of their business.
Product Mix Sensitivity
$250,000
$200,000
$150,000
$100,000
Net Income
$50,000
20%
30%
40%
50%
60%
70%
80%
90%
100%
Cultured
100% 90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Granite
0%
10%
$-
Figure 19 - Product Mix Sensitivity
23
Bernadette Moser
EBAC 52