Business
Plan For:
J & J Home Builders Ltd.
Jonathon Boutin
Comm 447
11/25/2009
J & J Home Builders Ltd.
Executive Summary
As a new start up home building business, J & J Home Builders
Ltd. looks to be a very viable venture in the means of a
lifestyle business for the projected term. With a very positive
Net Present Value along with a large Internal Rate of Return,
showing this business has great potential but involves a huge
time commitment.
The business will be run by Jonathon Boutin the co-owner. In the
owner we have relevant work experience and a clear understanding
of business. Within the business there is going to be a strong
onus on the general manager to make sure the people working for
him are doing things in a quality manner, as when things are
done right they tend to look and finish better all at the same
time, which leads to happy customers
With a central location of Wakaw, the business will be very
visible as it is along highway 41 and the name will be put out
there through very active marketing in the means of attending
home shows wherever and whenever and simply by doing a good job
and making customers happy, which can go a long way. The goal
for this business is to increase housing numbers by 3 each year
with the first year starting with 4 homes. These first 4 homes
will be achieved anyway possible, even with onsite construction
or spec homes.
The financial structure of the company comes in the form of
$250,000 in equity and $150,000 in debt. With this financing
comes the set of all the capital needs for the business
including the land, show home/office, storage shed, and various
other hard assets. Dividends begin in the fourth year.
All in all J & J Home Builders should be able to thrive in the
red hot economy and even hotter housing market in Saskatchewan.
As our mission statement reads, “our aim is to make your new
home building experience a relaxing one with timelines intact
and the finished product being the home of your dreams”. If this
mission stays true to its words, there is little reason why J &
J Home Builders would not be able to succeed financially and
strategically in the future.
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J & J Home Builders Ltd.
Table of Contents
1.0 Business Summary
1.1
1.2
1.3
1.4
1.5
Introduction
Mission Statement
Company Overview
Goals & Objectives
Financing
2.0 Operations Plan
2.1
2.2
2.3
2.4
2.5
2.6
2.7
Location
Site Plan
Quality Control & Building Specifications
Average Business Day, Week, Month
Supplier Analysis
Capital Budget
Operating Expenses
3.0 Human Resources Plan
3.1
3.2
Job Descriptions
Organizational Hierarchy
4.0 Marketing Plan
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
Industry Overview
Competition
Direct Competition
Indirect Competition
Product
Price
Place
Promotion
Customers & Target Market
Marketing Strategy
5.0 Financial Plan
5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
5.9
Sales Forecasts & Net Income
Operating Expenses
Capital Budget
Debt Amortization
Financing Budget
Dividend Policy
Ratio Analysis
Risk Analysis
Investment Evaluation
6.0 Conclusion
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J & J Home Builders Ltd.
1.0 Business Summary
1.1 Introduction
J & J Home Builders Ltd. is a new ready to move home building
start up looking at an opportunity to dive into the red hot
Saskatchewan housing market. The building site will be centrally
located in Wakaw, Saskatchewan. J & J Home Builders looks to be
a first choice builder for anyone looking for a quality RTM home
or cabin. The idea behind it is to have great people working for
you (sub contractors, carpenters, etc…) to bring upon great
results.
1.2 Mission Statement
“Our aim is to make your new home building experience a relaxing
one with timelines intact and the finished product being the
home of your dreams”.
1.3 Company Overview
J & J Home Builders Ltd. will look to stand behind a very
knowledgeable leader who was relevant work experience in the
home building industry; along with the home building knowledge,
he has a solid background in the understanding of business and
how it works with a Bachelor of Commerce Degree majoring in
Management from Edwards School of Business at the University of
Saskatchewan. Along with the General Manger and co-owner, J& J
Home Builders also boasts a jack of all trades carpenter/yard
foreman with nearly fifteen years of experience.
Through the years of experience of the founder and the hired
carpenter, there is a large network of contacts that have been
established with some of the best subcontractors around in the
industry. The idea behind having a network of relationships with
real professional sub contractors is that they will always give
you the results you look for and that you need when you are
building a house for a client. There is a need for a culture to
be instilled in everyone that quality work will result in above
average pay and better working conditions for everyone involved.
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1.4 Goals & Objectives
1st Year
As a new start-up company J & J Home Builders Ltd. is looking to
custom build four ready to move homes. Four seems like a small
starting number, but as a start-up business in this kind of
industry where first impressions and past work mean almost
everything, it may be difficult to come by four sorts to say
guinea pig customers. People who build new homes entrust someone
to build their house and look for someone that has done good
work in the past. It has much to do with word of mouth referrals
and goodwill from past customers.
Along with the plan to build four houses in our first year,
there will be a lot of work required to get the building site
up, running and in good working condition. The first goal is to
have the lot levelled, gravelled and cleared for house building,
and then power needs to be run in the yard to all the 11
available building spots. Along with all of the landscaping
there is a chain link fence that needs to be put up then the
focus will be to start construction of the required buildings.
The first and most important features once the yard is set up is
too quickly but carefully build the show home/ office so that
potential customers can see the type of work that we do and also
a place for the operations to be based. Once the show home has
been completed, the next project in line will be building the 80
by 50 storage shed. Importantly once the yard has been levelled
and the power run, building of customer’s homes can commence,
without the completion of the show home, supply shed etc….
The plan for first year production to be equal to 4 houses or a
combined 4800 sq/ft of building done, we plan to take on
whatever work to make these projections. A first option would be
to build a “spec home”, which is an RTM house that will be
completely finished inside and out with all that is required is
to have a site ready and to move the house onto it. The house
would be available on the first come first serve basis, after
that home, the rest of the homes will be custom built. It’s
worth noting that if the “spec home” idea is popular their might
be a move towards doing one or two each year. Also another
option for meeting the quota would be to also do onsite homes.
Onsite building takes away the convenience of RTM building, but
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J & J Home Builders Ltd.
garners a $220 sq/ft price tag compared to $105 sq/ft price of
RTM construction. Onsite building could also be considered at
any time in the future. Going to onsite building will be done if
the potential customer wants a two story house or a very large
house, because two story and large homes can be nearly
impossible to move, and if there is a home site where moving a
house in would be very difficult, onsite building would be the
way to go.
5th Year
At the fifth year, the plans are to be a full capacity, which is
15 houses per year. Based on the time it takes to complete a RTM
from the start to the finished liveable product(100 days) and
our strict timelines, it would seem out of reach to attempt
building more than that. At the fifth year there is a hope that
there will be economies of scale with regards to sub contractors
and pricing. At the fifth year there will be two hired jack of
all trade carpenters, if the general manager is not able to keep
up at his end of the spectrum we will towards hiring a foreman
who specifically makes sure all the houses are on schedule while
organizing and scheduling in the sub contractors,
Importantly at the capacity of 15 homes, there should be enough
time to manoeuvre around the sub contractors busy schedules.
However beyond that point of 15 homes, it would be very
difficult and stressful to keep our timelines and it would need
to be seriously considered to hire on certain sub contractors so
that they would be able to be there exactly when they are needed
and that would become very costly for the company and unfeasible
in the long run.
1.4 Financing
The financing of this business is to be a combination of debt
and equity valued at $400,000. The equity portion of the
business will come from two individuals, one being myself
Jonathon Boutin, along with Andrew Kowalchuk, for a combined
investment of $250,000. The additional $150,000 of funding will
come in the form of debt/grant from the Saskatchewan Métis
nations Business Development program as well as bank debt. Jon
Boutin will be the general manager and co-founder of the
business, while Kowalchuk will serve as a silent partner and is
content to wait until the fourth year to receive a return on his
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investment from the business in the form of dividends. J & J
Home Builders Ltd. will be an incorporated business for
liability purposes.
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J & J Home Builders Ltd.
2.0 Operations Plan
J & J Home Builders Ltd. will specialize in ready to move home
construction however given the amount of homes done per year
would venture into onsite home building construction however the
idea/plan is that there will be too much demand in RTM’s to
venture away from them. The business will be run by a general
manager (Jon Boutin) along with a hired carpenter/yard foreman,
and a secretary/interior designer who can work with customers on
deciding the finishing touches of their homes. In the third
year, there will be a hiring of a second carpenter to help out
with the increase in production. Housing plans and layouts will
be available, but customers are encouraged to bring their own or
make changes to existing ones to make their new home suit their
needs.
2.1 Location
The business will be located in Wakaw, Saskatchewan along
highway 41 on a 25 acre lot valued at $50,000. The Wakaw site
will give the business a very central location with Saskatoon a
50 minute drive, Prince Albert 40 minutes, and Humboldt and
Melfort both a 60 minute drive. The actual building site is
located 2 miles east of Wakaw, with direct and very visible
access to highway 41, along with direct access to all utilities.
The other advantage to this site is that highway 41 is a main
route for moving homes. The building of RTM homes has become
very popular especially in the suburbs of the cities, and also
with the movement to acreages that have been coming up all
around the cities, specifically Saskatoon. With this trend of
new home building people are beginning to see the price
difference of RTM construction and it in accordance has become
increasingly popular.
2.2 Site plan
The building site will be able to accommodate the construction
of 11 ready to move homes at all times, as well the building
will be fenced off, and have a large 80 by 50 storage shed and a
state of the art show home/office.
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2.2 A View of Site Plan
2.3 Quality Control & Building Specifications
Quality control is always a very big issue when it comes to
housing. The quality control will be monitored by the GM and the
hired carpenter. The whole plan is to have professional sub
contractors so that quality control will hopefully not be so
much of an issue. All homes will be given touch ups once the
move is complete and all customers will be given a Home Owners
Warranty for five years as well as a ten year structural
warranty. As well, the house will need to be certified to be
complete by the homeowner, until then within limits the house
will be fixed accordingly. Quality control will also tie
strongly to our building specifications which will be done
exactly to Saskatchewan Building codes.
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Building Specifications
All Construction will be done to Saskatchewan Building Codes.
Roofing System
 Engineered Trusses @ 24” O.C.
 7/16” OSB sheeting with H-clips and water and ice on
valleys and eaves
 Metal drip edge and 24” soffit overhang
 25 year Grade 1 asphalt shingles (metal clad roofing
available cost differences are extra)
Exterior Walls
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2 x 6 Construction Grade Spruce @ 16” O.C.
Double top plate and single bottom plate
3/8” OSB sheeting
2*10 headers over all doors and windows
Interior Walls
 2 x 4 Construction Grade Spruce @ 16” O.C.
 Double top plate and single bottom plate
Flooring System
 3/4” OSB tongue and groove sheeting glued and screwed
 Engineered I-joist flooring system with blocking
 Sanded plywood floor in linoleum and tile areas
Insulation
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R20 insulation in exterior walls
R40 blow in insulation in attic
Poly box system on all exterior walls and ceilings
CMHC approved poly and caulking in all required areas
Tyvek house wrap and all windows and doors all poly wrapped
Electrical
 100 amp electrical box
 All plugs, switches and lights all roughed in (final
connections on-site)
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 Central vac rough-ins along with telephone and cable roughins.
Plumbing
 One piece fibre glass tubs for all full bathrooms
 Low flush toilets with lined tanks
 Sinks provided for each vanity and double sinks provided
for kitchen
 All Moen taps and faucets
 Roughed in exhaust fans and furnace vents
 All drains and water lines installed on floor joists
Exterior Finish
 Vinyl Siding w/ stone accents (will be base price) or
Stucco finish
 Prefinished aluminum facia and aluminum soffit w/ choice of
colour
Windows and Doors
 Triple pain energy efficient certified Windows. Come in
sealed units. (White Frames)
 Steel clad energy efficient exterior doors with jambs.
Includes one garden door and a sidelight window/door for
front entrance.
Interior Finishing & Millwork
 1/2” drywall on walls and ceilings. Concrete board in
bathrooms (vaulted ceilings available in applicable homes).
 Stippled ceilings and rounded drywall corners
 Closet shelving systems
 Weiser door appliances
 Interior doors are primed and painted as well as casings
and base board
 3 coats of eggshell latex paint (1 primer and 2 coats of
paint)
 There is a maximum of up to 4 different paint colors after
that $250/color.
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Flooring
 $7.00 a sq/ft budget. Includes: carpet, linoleum, laminate,
hardwood, tiles, etc...
Kitchen Cabinets
 $8 sq/ft budget.
 Framed flat panel doors available in oak, maple, hickory,
white and a variety of different stains.
 Bevelled edge counters and/or moulded laminate tops
(granite tops available for the difference of extra cost)
2.4 Average Business Day, Week, Month
Average Business Day
 The average business day will begin at 8am and commence at
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5pm with regards to office hours.
The sub contractors will be given keys to the compound and
will be able to work on the houses at hours that work for
them; they will be expected to lock the compound when they
leave.
The business day for the GM will consist of dealing with
customers, suppliers, sub contractors, the carpenter,
quality control, scheduling subcontractors, and any
problems that are to arise.
The average business day for the carpenter will consist of
arranging supplies, picking up supplies, and doing the
necessary work to the houses (flooring and finishing).
For the interior designer/secretary the day will consist of
answering phones, relaying messages, minor accounting and
assisting customers with interior designing issues.
Average Business Week
 The average business week consists of hours of 8am to 5pm
Monday to Friday and 8am to 12pm every second Saturday.
 There will be progress reports done on each house to
determine the stage there at, if they are on schedule or
not, and what needs to be done to get the house back on
schedule.
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Average Business Month
 At month end all financial transactions will be put
together and submitted to the accountant for the proper
filing.
 There will be an even more through progress report done on
all houses; there will be a determination of time until
completion, the areas that need to be addressed to get the
house completed on time, and the new housing starts that
are to occur in the coming month and when they must be
started.
2.5 Supplier Analysis
The good majority of the building supplies will come directly
from Warman Home Centre or the Home Hardware Building Centre in
Prince Albert. The housing packages will be purchased through
Warman Home Centre or Home Hardware and subsequently they will
supply much of what is needed to put the house up this includes:
lumber, siding, windows, doors, drywall, millwork, etc... The
cabinetry will be supplied by Gessner Cabinets which is located
in also located in Wakaw. The flooring portion of the building
will be supplied through a large flooring company in Edmonton,
Alberta. The plan is that this family owned and operated
business will be able to provide J & J Home Builders Ltd. with
all the flooring needed, all at their wholesale costs which
gives customers a lot more flexibility with regards to
purchasing power and choice in flooring. Moving the homes will
not be covered in the $105 sq/ft price, but there will be an
affiliated home mover in Sawitsky Building Movers also located
in Wakaw.
Another thing worth noting with the supplier for J & J Home
Builders is that the suppliers will be paid their due amount
every 20 days, as the houses and cabins being built will require
5 progress payments during the period. Essentially the plan is
to have homes built in 100 days so around every twenty days the
progress payments will be required from the home owners.
2.6 Capital Budget
The Capital Budget will highlight the necessary’s to allow the
business to begin operations. This is a quite capital intensive
business to get things running but requires little after that;
the assets that are needed to begin are wide-ranging and
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expensive. The bulk of the capital budget costs are coming from
the purchase and development of the land into a building site,
along with a show home/office and a large storage shed to
alleviate transportation costs, and to avoid damaged supplies.
Also there are vehicles needed. There is a list of the capital
budget assets and their prices in the financial section of the
plan on page 26 of the report.
2.7 Operating Expenses
Yearly operating expenses are accounted for in all aspects and
the increase in costs from year to year are taken into account
with an inflation rate of 2.5% Wages are the most costly
expense. Included in the financial section on page 25 are the
projected year by year operating expenses.
3.0 Human Resource Plan
As an owner and a primary investor of J & J Home Builders,
Jonathon Boutin will take the job of General Manager and will
oversee day to day operations of the business. Along with
Jonathon there will also be two other salaried employees for the
first two years of business, while in the third year a third
employee will be hired to deal with the influx of production
which is 4 houses to 10. The majority of the work on the will be
done by a group of professional sub contractors who need to have
a good track record to be considered to do work for the company,
also part of the work will be done by the hired carpenter(s)
depending on what’s going on at the time the work needs to be
completed.
3.1
Job Descriptions
1. General Manager
 Tasks first and foremost involved ensuring that the
business is running like a well oiled machine and at the
same time ensuring the business is meeting its goals and
making money.
 Making sales with potential clients, and making plans to
meet their needs.
 Ordering materials needed through the suppliers and at
the same time undertaking inventory control measures
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J & J Home Builders Ltd.
 Do quality controls checks on the houses under
construction on a regular basis.
 Hire professional trade’s people to do their specific
tasks on the homes or cabins under construction.
 Work to ensure that the homes or cabins under
construction are on schedule and strive to keep timelines
in check and customers happy.
 Deal with financials and make sure that everything is
accounted for and on budget.
2. Interior Designer/ Secretary
 Answer phones, do minor accounting work, submit
necessaries to the accountant and keep the office clean
and running smoothly
 Assist customers in terms of interior designing schemes
they want for their new home or cabin.
 Do the entire interior designing scheme for the spec
homes in a cost effective manner.
3. Carpenter(s)
 Help out in all aspects of construction where needed.
This can include framing, painting, floor laying, etc...
 Essentially do what is needed to keep all the homes on
schedule
 Do touch up work on the homes or cabins when they have
been moved on to their site
 Work as a yard foreman and allocate materials to the
houses when the materials are needed (run supply shed)
 Pick up and deliver building supplies when they cannot be
delivered.
 Work as the floor layer(s), and finishing carpenter(s)
for the business, there will be sub contractors that come
in if the carpenter(s) can`t keep up with the demand.
4. Sub Contractors
 Framers- The framers will be expected to do the work of
framing the houses, installing windows, doors, shingles
and siding. Essentially bringing the houses to the lock
up stage.
 Electricians- The electricians will be expected to do all
the rough in electrical which involves the panel and
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running the wires and also some of the finishing in the
house such as plugs, switches, doorbells, telephone
lines, central vacs, etc...
Plumbers- The plumbers will be expected to run and rough
in all water lines, heat ducting, roof vents, exhaust
fans, chimneys, dryers vents, while installing all:
sinks, toilets, tubs, showers, faucets, etc...
Drywallers/Mudders/Tapers- The job of doing all this work
will likely be completed by one sub contractor and
includes preparing the walls and ceilings for primer and
paint.
Cabinet Builders- The cabinet builders will be
responsible to provide kitchen cupboards and bathroom
vanities, laundry room cabinets along with any other
special features the home owner wants. Along with the
cabinets they will be expected to provide countertops,
and installation. The cabinet supplier will be Gessner
Cabinets which is also located in Wakaw.
Insulators- The insulator will be expected to insulate
all interior walls, and complete the blow in insulation
in the attics. As well, the sub contractor completing the
insulation will also be expected to do the poly wrap to
seal up the house.
Home Movers- The homeowner will be responsible for the
cost of moving the house however there will be an
affiliated home mover within the business. The home mover
will be Sawitsky Building Movers also located in Wakaw.
Floor Layers- The floor layers job description will
include the installation of hardwood, laminate, tiles,
linoleum, and carpet. The linoleum and tile areas will
involve installation of a plywood sub floor. The floor
layers will likely be the carpenter(s) working directly
for the company.
Finishers- The finishing carpenters will be involved in
hanging the interior doors and door jambs, baseboards,
closet shelves, paint touch ups, silicone and any other
finishing touches that are needed. A good majority of the
finishing work will be done by the hired carpenter(s) if
time permits them too.
Painters- The painters will be given the job of doing 3
coats on the walls and stippling the ceilings. The first
J & J Home Builders Ltd.
coat will be of primer and subsequently 2 coats of the
paint.
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J & J Home Builders Ltd.
3.2 Organizational Hierarchy
Co-owner/ General
Manager
Carpenter(s)
Subcontractors
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Interior
Designer/Secratery
J & J Home Builders Ltd.
4.0 Marketing Plan
4.1 Industry Overview
The Saskatchewan housing Market is one that has grown
substantially since 2007. From the period of 2007 to now there
has been an extremely large amount of housing inventory moving,
with houses being built and sold with large amounts of money
changing hands in the process.
Along with this red hot housing market, Saskatchewan has been
blessed with an equally as hot economy that has been allowed to
prosper even in the current economic downturn that has plagued
much of Canada and the rest of the world. Now as the world
continues to slowly but surely climb out of this economic hole,
it shows one thing and that is the fact that if Saskatchewan
prospered so greatly while in a downturn, then the sky is the
limit going into a potential economic upturn.
Along with Saskatchewan’s hot economy, it has definitely
inspired a mass movement of former and also of new people to
Saskatchewan. This however has started to create a housing
problem. In effect it has driven housing prices to record levels
and can be blamed for the looming housing shortage. As a result
building numbers have risen substantially, with respects to the
high prices of real estate and the shortage of homes available.
New home construction has taken off, with the prices of building
a new home sometimes substantially less that the prices to buy a
house of similar stature. This trend however hasn’t only
occurred in big centers like Saskatoon and Regina but has spread
to the rural and suburban communities and more specifically to
the acreage communities outside of the cities.
With this large increase of housing, it has created a lot of
work for homebuilders and with a shortage of skilled labour and
a large increase in the prices to build new homes, which is in
the vicinity of $220 sq/ft. With that $220 sq/ft there is little
in the way of finishing besides the main level of the house,
which usually doesn’t include a finished basement, paved
driveway/walkway or a landscaped yard. Along with this $220
sq/ft price tag it’s creating a problem with affordability for
some people.
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4.2 Competition
The competition for building homes is very competitive with
large companies that build hundreds of houses in a year to
private contractors who complete several homes all the way to
people who build their own homes. Competition then stems from
our perspective to direct competition and indirect competition.
4.3 Direct Competition
The Direct Competition stems from other companies who specialize
in building RTM homes. There are numerous numbers of direct
competition provincially, however to be reasonable were going to
consider our direct competition to be with 120km of Wakaw for
the means of moving the houses; as the distance gets further,
the prices of moving grow higher and higher. The direct
competition that provide the same services as us include:
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J & H Builders
Warman Home Centre
MacDiarmid Lumber
Zak’s Building Supplies
Pinnacle Builders
Blue Stone Developers Group
Prince Albert Co-op RTM division
4.4 Indirect Competition
The definition of indirect competition, consists of anyone who
builds homes, this includes major home building companies in the
cities, private contractors, or anyone who takes on the daunting
task of building their own house. Included is a brief list of
large home builders in Saskatoon and local contractors that
would be indirect competitors:
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Dundee Homes
North Ridge developments
Steve Hrapchak construction
TBO construction
4.5 Product
The product will consist of ready to move homes or cabins with
exceptional quality and craftsmanship. Along with this the
houses or cabins will be built to Saskatchewan building codes
and standards as well as the timelines will be kept as close as
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possible weather permitting (we need to remember we are in
Saskatchewan). Lastly and most importantly our aim is to have
the finished product being the home of your dreams!
4.6 Price
Pricing for these houses/cabins will be $105 sq/ft. This price
is right in line or slightly higher than competitors, but at
this price homeowners can expect certain upgrades. Another thing
worth noting in this pricing placement is that people can go
above and beyond the allotted prices per square/foot, but also
they can upgrade one area at the expense of another area of
construction. The sole idea here is that the final price comes
out to $105 sq/ft no matter what. The Cost of Goods Sold pricing
strategy is as included below:
COGS Breakdown
Price sq/ft
Framing including windows and doors
$22
Exterior finishing
$10
Electrical
$6
Plumbing
$10
Dry walling
$11
Interior Finishing & Millwork
$6
Flooring
$7
Cabinetry
$8
Total
$80
4.7 Place
The placements of our homes are going to be in a very wide and
vast target market. The image we are going after is to be a
trusted home builder with a great track record of quality to go
along with it. Another placement feature we are going to go off
of is the fact that a house can be built on our lot in Wakaw,
Saskatchewan and can be moved to almost anywhere you can dream
of. However moving prices go up with distance, but still the
point is that our houses can be built in one place and moved to
where they are wanted or needed.
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J & J Home Builders Ltd.
4.8 Promotion
The promotion of our homes is going to come majorly in the form
of the theory of Ready to Move homes; being that they are a low
cost substitute to on-site home construction, yet although there
has been an increase in the number of RTM homes/cabins, their
needs to be more of a communication to the public about the huge
difference in pricing. So the breakdown goes as follows; a RTM
from J & J Home Builders Ltd. comes with a cost of $105 sq/ft,
after this, it involves moving the house which usually goes at
around $12 sq/ft depending on size, a basement or grade usually
run in the range of $30 sq/ft, along with that comes tying in
the utility hooks up to the home at about $7 sq/ft and your
house is liveable. So all together this runs the total price of
the house to the $152-$155 sq/ft price range, which comes out to
be a $65 sq/ft price difference from onsite home construction at
$220 sq/ft with all the same amenities. So to sum that up for a
1200 sq/ft house the price savings would be $78,000.
The promotion also is going to come from the work we have done
in the past, if the work you do is of good quality people are
going to want that in their own homes if and when they get their
home built, chances are you’re going to be given the job. As a
spin off we will be situated in people’s minds as a high quality
home builder.
4.9 Customers & Target Market
The target market for J & J Home Builders are specifically going
to be rural or suburban people looking to build one story houses
or cabins.
Our target market specifically targets the suburban and rural
home builders because the urban market would be one that would
be difficult to enter into and to potentially attempt to move
houses into the city would be very difficult due to strict laws
and lack of space thus making suburban and rural markets more
appealing. These markets are also ones that have been growing
substantially in the last several years due to the economic
prosperity and shortages in housing. The cost savings from RTM
construction have the potential to take over a large majority of
this market in the future where houses are going to be one
level.
22
J & J Home Builders Ltd.
There is also the large and looming potential cabin market that
has the potential to explode once a large majority of baby
boomers cash in on their large RRSP’s and looking to build their
retirement cabins at the lake.
Another target market that was examined was the building of
“spec homes”. In these spec homes, everything will be completed
and all that is required is the moving. These houses will be
ready for direct sale and when talking to competitors, they have
proven to be quite profitable in the past due to the potentially
lower cost of goods sold price. However the only means of
building these homes would be if sales were slow, but if the
sale of custom homes is going on line with projected sales, then
this idea could be essentially forgotten.
Another potential target market to look at would be to do onsite home construction. If a house is too big or two stories
high, it would make moving difficult if not impossible, so this
is where we would look to accommodating the customer. However
it’s worth noting that if we are in line with projected sales
for the year we would kindly decline the job or defer it back to
when we have time to do the job.
Another thing to mention about the target market is that we are
looking to the middle to high middle income earners as customers
as building a house costs a lot of money that everyone is not
able to afford.
4.10 Marketing Strategy
In this type of business, the best marketing is word of mouth
marketing and that comes from happy customer’s referrals. So the
whole idea behind this business is to do great work and make
sure we have happy customers and success should follow. Beyond
that it still takes a lot of active marketing to get to the
point of success.
The marketing strategy is going to consist of a lot of
travelling and leg work. This leg work is going to come in to
play with getting the company name and reputation out there;
through attending home shows, conventions and any other type of
networking event that is going on in the direct area. Beyond
that marketing will consist of a lot of newspaper advertising
and a large sign that will grace the front of the building site.
23
J & J Home Builders Ltd.
5.0 Financial Plan
5.1 Sales forecasts and Net Income
Before diving into the sales forecasts and our net income
determination we need to make some assumptions; all financial
calculations with regards to sales and COGS is assumed to be
that the average house size is 1200 sq/ft. While beyond this
there are a large number of situations that have not been
accounted for in the financial analysis. It’s nearly impossible
to predict if they will happen and if things run smoothly, then
they won’t even be considered. First of all, there is the
potential that there may be some onsite home construction which
will garner a much larger $220 sq/ft price tag but an equally
higher cost of goods sold. As well there will be the possible
construction of “spec homes” which can be done at a lower cost
of goods sold than $80 because we are in charge of all the
finishing touches. Second there is potential that the cost of
goods sold of $80 can be lowered for all houses which mean a
higher profit margin. If all building supplies are purchased in
large volumes from one supplier, there will be the potential for
large volume discounts from the supplier. Below is an appendix
from the financial plan showing the sales, revenues, cost of
goods sold, operating costs and net incomes by year.
For the year Ended
2011
2012
Revenue
504,000
882,000
1,260,000 1,638,000 1,890,000
Cost of Goods Sold
384,000
672,000
960,000
1,248,000 1,440,000
Gross Margin
120,000
210,000
300,000
390,000
450,000
Total Operating Expenses
178,013
197,128
241,878
257,431
271,726
Net Income
-58,013
12,872
56,110
112,021
150,641
24
2013
2014
2015
J & J Home Builders Ltd.
Included is a breakdown of Revenue and Cost of Goods Sold.
Revenue
Year
Houses per year
Average $/House= 105sq/ft
Average size/house per sq/ft
Average growth houses/year
Revenue
Cost of Goods Sold
Year
Gross Profit Margins %
Houses Year
Cost of Goods Sold Rate=
80sq/ft.
Average house size sq/ft
COGS
2011
4
105
1200
504000
2012
2013
2014
7
10
13
105
105
105
1200
1200
1200
43%
30%
23%
882000 1260000 1638000
2015
15
105
1200
13%
1890000
2011
24%
2012
24%
2013
24%
2014
24%
2015
24%
4
7
10
13
15
80
1200
384000
80
1200
672000
80
80
1200
1200
960000 1248000
80
1200
1440000
5.2 Operating Expenses
The total operating expenses are rated and rise each year by a 2.5% rate of inflation. Included below are
the year by year operating expenses.
Operating Expenses
Year
Wages
Utilities
Property Taxes
Accounting & Legal Expenses
Business License
Advertising Expense
Vehicle/Equipment Maintenance Expense
Fuel Expense
Employee Benefits
9.4%
Insurance Expense
Maintenance
Total
25
2011
95000
5,000
1,500
3,500
150
9,500
5,000
10,000
8,930
4,000
2,500
145080
2012
104,000
5,125
1,538
3,588
154
9,500
5,125
10,250
9,776
4,100
2,563
155717
2013
148,000
5,253
1,576
3,677
158
9,500
5,253
10,506
13,912
4,203
2,627
204664
2014
165,000
5,384
1,615
3,769
162
9,500
5,384
10,769
15,510
4,308
2,692
224094
2015
180,000
5,519
1,656
3,863
166
9,500
5,519
11,038
16,920
4,415
2,760
241356
J & J Home Builders Ltd.
5.3 Capital Budget
The Capital Budget is one that shows how capital intensive this
business is to get going, however once the business is running
there is little need for capital assets. The main and most
important assets are the show/office and the purchasing of the
land. Also included are vehicles, a forklift, the building
equipment which consists of side skirting for the houses in
winter time and heaters, as well there is the 80 x 50 storage
shed for all the building materials.
Capital Budget
Year
2011
Land
50,000
Storage Shed
Show Home
35,000
70,000
Delivery Truck
20,000
Vehicles
30,000
Building Equipment
2012
2013
5,000
Forklift
2014
2015
2500
12,500
Office Equipment
2,000
Total
224,500
0
0
2,500
5.4 Debt Amortization
The long term debt will be paid down at a fixed rate of $22,354
with an interest rate of 8% and a term of 10 years. The ending
balance for the debt load after the fifth year of operations is
$91,688.
Principle Reduction vs. Interest Payments
15000
10000
5000
0
1
2
Principle Reduction
26
3
4
Interest Payments
5
0
J & J Home Builders Ltd.
5.5 Financing Budget
The equity will be invested by Jonathon Boutin and Andrew
Kowalchuk, with $150,000 coming from Mr. Boutin and $100,000
coming from Mr. Kowalchuk. The rest of the financing will via a
loan from the Saskatchewan Métis nations Business Development
program and the rest coming from a commercial bank.
Financing Budget
Bank Debt
Common Shares
Total
150,000
250,000
400,000
5.6 Dividend Policy
Dividend payments will begin in the fourth year of operations,
and will be paid out as follows.
2014- $100,000
2015- $100,000
5.7 Ratio Analysis
Year
2011
2012
2013
2014
2015
Debt to Equity
60%
Gross Profit Margin
24%
24%
24%
24%
24%
Debt Ratio
42%
38%
30%
26%
20%
-10%
2%
5%
7%
8%
19%
12%
12%
10%
10%
Net Profit Margin
Wages/Sales
5.8 Risk Analysis
Risk analysis can be analyzed by two very key variables. The
first risk analysis variable will be the number of houses sold
per year, which means everything to the business. Also the other
critical variable is cost of goods sold. Below are the levels of
importance of the variables
 Number of houses sold 1 most important critical variable
 Cost of Goods sold
2important but not detrimental to
business success
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J & J Home Builders Ltd.
5.9 Investment Evaluation
From the top down, the analysis of this business comes down to
the figuring of the Net Present Value and the Internal Rate of
Return to decide if this business is in fact viable. Below are
the NPV and IRR and they are very respectable numbers, as well
included is the terminal value of the business.
Terminal Value
NPV
IRR
28
666,544
$192,175
59.9%
J & J Home Builders Ltd.
6.0 Conclusion
Through all of the analysis with operations, human resource
management, marketing and financials, it has become very clear
that J & J Home Builders has potential. With large dividend
payments and cash to spare, it appears that money as it always
will be a factor; our critical variables will need to be met in
order for this to be of less importance. The variables include
making the amount of budgeted sales, while the cost of goods
sold should also be lowered with negotiations and continued
sales to the supplier. The location is central, is along a main
house moving route being highway 41 and its closeness to 4
cities makes it extremely attractive. Along with an excited and
experienced co-owner/general manager the business has great
potential to flourish and grow into the future.
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