Remodeling Business Plan

Introduction

Comgate is a custom mill house specializing in creating architectural woodwork in the form of wall paneling, custom cabinets, and other products for the local residential market. After initial losses and several thin profit years of competitive bidding construction projects, Comgate is creating this business plan in order to bring its mission statement into clearer focus. Prior years were marked with intense efforts to bid as many jobs and high-stakes negotiations. Because pricing policy was “flexible”, margins were small to avoid insufficient production staff.

Comgate is able to increase sales and create more margins. It can also improve efficiency and overall profitability by focusing on its target market and restructuring. These changes will result in greater accuracy when pricing, billing and tracking of costs is done for comparison purposes. Profits will increase.

The Company

Comgate’s mission is to be a profitable competitor in Connecticut’s high-end residential custom woodwork market. It will emphasize custom work of the highest quality, and specialize in the most demanding needs of new and remodeled designer homes in the $3 to $15 million price range.

Products

Comgate is a provider of custom-made architectural woodwork. These include wall paneling as well as molding, custom cabinets and molding. New CAD capabilities will significantly increase sales of high-end products. This is because it targets design professionals who can influence the choices of subcontractors for homes that cost more than $3 million. “Custom” is the key word at Comgate. The average home wouldn’t use our products. Comgate only makes custom woodworking. No finished goods are available for purchase. It is not common for finished goods to be made up for stock.

The Market

This industry is well-respected and mature. Many mill shops can be found in the same market, but they are all focused on different areas. One mill shop may be focused on custom furniture and have special relationships with upholstery shops. Others may be more focused on standard kitchen cabinetry. Comgate targets the residential market at the top ($3-15 million homes). This work is stable and less price sensitive, even in economic downturns. The company’s most powerful competitive tool is its CAD capacity. The program has been specifically developed to meet the needs of the custom woodwork industry and will be able to penetrate the most prestigious residential markets. Comgate should be able to set itself apart from the competition, and be able to fully utilize its recently expanded production capacity.

Comgate has begun to link its CAD capabilities with the practices and skills of design professionals. This will enable the company to outsource some of the simpler parts of a project to other mill shops while keeping the more difficult work in-house. Being able to present another mill shop with exact detailed CAD drawings, together with precise dimensions and material lists, will allow Comgate to increase sales and profits, and to concentrate on the more challenging custom woodwork products.

Financial Projections

Sales will rise to $1.2 million and nearly $800,000. By the end year 3, the company has added over $110,000 in sophisticated new Computer Numerical Control machinery (CNC). Profits will grow as well. An increase in receivables and a desire to reduce accounts payable for Year 2 will cause a short-term demand for $30,000.

1.1 Mission

Comgate&#8217’s mission is profitably competing in the high-end residential market of custom woodwork in Connecticut. We will emphasize on custom work of the highest quality, and specialize in the most demanding needs of new and remodeled designer homes in the $3 to $15 million price range.

1.2 Keys to Success

The most important keys to success in the contractors’

Mill shop industry:

1. Avoid bidding on projects that will be awarded primarily based upon price. Also, avoid projects undertaken by disreputable companies (no matter how badly they need work), large projects (more than 20% of sales last year), and projects that do not fit into the company’s niche market. These projects are unlikely to improve the company’s marketing strategies.
2. It is important to correctly price the job. This means:
   • Accurate listing and take-off.
   • A clear understanding between the company’s client and its supplier in relation to quality and terms and conditions of payment.
   • Correct calculation of material (including wastage) and labor required to complete the project.
   • Correct application of overhead factors and profit margins, plus any special considerations.
3. An administrative system with operating procedures that tracks job costing accurately and compares the bid price to the actual cost of completing job. Continuous adjustments to bid formulas.
4. Reliable production staff that can communicate with administration in order to produce the job on time, as per bid, using maximum labor, materials and machinery.

1.3 Objectives

Comgate&#8217’s major goals are:

1. Increase production. The new machinery and four production workers have been carefully measured to ensure that the full productive capacity is reached. It is hoped to reach 80% of the capacity monthly in the fourth quarter of Year 1. 85% in Year 2 and 90% in Year 3. This 80% of capacity translates into monthly production of 342 feet of crown molding, 22 pilasters, 54 doors of various grades, and 77 linear feet of cabinets (or some equivalent combination of these items). This will translate into monthly sales of $608,816.
2. A much simpler task is to maintain site contract workers (six) at present, full employment levels will generate monthly revenue of $34,623 which (after expenses) nets the company $21,794.
3. Continue efforts to bring the company’s in-house CAD capability to the attention of more design professionals, especially those in Hartford, New Haven, Stamford, Norwalk, and Shelton, as these are the areas with the greatest concentration of the chosen $3 to $15 million residential homes.
4. Join the Connecticut Chapter of the American Society of Interior Designers (ASID) as an industry partner as well as the Connecticut Society of Architects (CSA). Get listed in their directory.
5. Completion of the required administrative changes is necessary to ensure that all work gets properly billed in a timely manner and that jobs are properly tracked so that later cost comparisons can be made with bid prices.
6. You must complete the operations manual you have begun.