Jensen Roofing Inc Robert Jensen

Jensen Roofing Inc Robert Jensen

JENSEN ROOFING INC

Prepared For: Robert Jensen

Prepared by: Mike MacKinnon

Kevin Lee

Evan Conrad

Ryan Kehrig

Olajumoke Oni

Aeisha Caracciolo

TABLE OF CONTENTS

1.0  Executive Summary

1.1  Introduction

1.1.1  Industry Overview

1.1.2  Company Overview

1.1.3  Value Proposition

1.1.4  Mission Statement

1.1.5  Goals

2.0  The Operations Plan

2.1  Business Structure

2.2  Management of the Business

2.3  Location of the Business

2.4  Services to be provided

2.5  Materials

2.6  Cost of Sales and Operating Expense

2.7  Typical day of Business at Jensen’s Roofing

3.0  The Human Resource Plan

3.1  Jensen Roofing Organizational Structure

3.2  Job Descriptions

3.2.1  Foreman

3.2.2  Roofer-Helper

3.2.3  Accountant/Financial Advisor

3.3  Wages and Training Costs

4.0  Market Plan

4.1  SWOT Analysis

4.2  Market Analysis Residential Roofing- New Homes under Construction

4.2.1  Potential Customers and Market Share

4.2.2  Pricing

4.2.3  Marketing Strategy

4.3  Market Analysis- Residential Roofing- Major Roofing Repairs

4.3.1  Potential Customers

4.3.2  Target Market

4.3.3  Pricing

4.3.4  The Opportunity

4.3.5  Marketing Strategy

4.4  Combined Market Analysis

4.4.1  Sales and Project Objectives

4.4.2  Select Markets and Service Mix

4.4.3  Service Features

4.4.4  Marketing Plan budget

5.0  The Financial Plan

5.1  Economic Forecast

5.2  Five Year Financial Statements

5.3  Year One Monthly Cash Flow Statements

5.4  Revenue

5.5  Payroll

5.6  Working Capital

5.7  Capital And Financing Budget

5.8  Debt Amortization Schedule

5.9  Depreciation (CCA) Schedule)

5.10  Corporate Income Tax

5.11  Ratio Analysis

5.12  Investment Analysis

5.13  Risk Analysis

6.0  Conclusion

7.0 Index to Exhibits

1.0 Executive Summary

As a result of the current economic environment in Southern Alberta, Robert Jensen has come forward with a desire to establish his own roofing and repair business in the City of Lethbridge. This plan is driven by Robert’s desire to capitalize financially on his roofing skill set and his previous experience in the roofing industry. Currently these skills are in high demand in Lethbridge area making now the ideal time to establish this business.

Operations Plan:

Jensen Roofing will operate as a corporation out of Robert’s personal home. The company will be managed extensively by Robert as he has several years experience in the roofing industry. All necessary financial and management advice will be obtained from a consultant who will be paid on a needs basis. Jensen will focus on building new roofs as this is where the demand is highest, in addition, some roof repairs and replacement work will be done in the summer. Materials will be purchased on a job estimate basis thus eliminating the need to carry inventory.

Human Resources Plan:

The organization structure at Jensen Roofing is simplistic in nature. The entire organization will consist of a two person team: Robert Jensen as president and foreman, and a roofing helper to assist Robert in the day to day operations. Robert will have complete control of all aspects of running and managing the business while the roofing helper will primarily be engaged in performing routine physical labour. A secondary member of the Jensen Roofing team will be the business advisor/accountant hired by Robert. The wage rates used in the financial model projections are taken from the Alberta Building Trades Council of Unions in 2006 grown at 4% to arrive at the 2008 wage levels. The seasonal nature of the repairs business will require Jensen Roofing to lay off the helper in the winter months as Jensen Roofing does not have enough of the new home market share to keep both Robert and the helper busy in these months.

Marketing Plan:

The marketing mix of Jensen Roofing will consist of new home installations and existing home roof repairs. In order for Jensen Roofing to differentiate itself from all existing competitors in the marketplace Jensen will position itself as a premium quality installation company with a focus on timely service with minimal customer hassle. Initially the sales pricing of Jensen will be slightly above the market average as a pricing discount of 5% in year one is required for Jensen to attract initial jobs away from existing competitors. By year four Jensen’s sales pricing will be in the upper echelon of the market as the company’s reputation in the market will be second to none.

The strength of the company’s marketing plan will lie in the ability of Robert to establish himself amongst the Lethbridge construction industry as a reputable man who performs quality work. It is through the establishment of this referral network and word of mouth from satisfied customers that Robert intends to solidify and grow the reputation and market share of Jensen Roofing in the Lethbridge market.

Financial Plan:

Jensen Roofing is going to implement a cost-plus pricing strategy for materials and labour in its business operations. The effect of doing this is that Jensen’s is insulated from any potential losses resulting from any material and labour cost overruns. This basically provides Jensen’s with a built in price floor that ensures the business maintains profitability. The financial model projections for the business highlight a growing net income figure from $43,280 in Year 1 to $181,645 in Year 5. This net income is in addition to Robert already drawing a wage from the business for the actual work he is performing. Capacity requirements are the primary constraint on revenue growth. By year five Jensen has minimal excess capacity hours which indicates that revenues have been maximized under the current business structure

The business plan for Jensen Roofing demonstrates strong revenue and growth potential for this business idea. The original desire of Robert Jensen to increase his annual after-tax profits will be realized as well as providing Robert with the ability to run his own roofing business.

1.1 Introduction

1.1.1 Industry Overview

The roofing market in Lethbridge consists of essentially every building with a roof. This includes residential, commercial, and industrial buildings. Roofs vary greatly in shape and design differentiating on pitch, slope and angles. Roofing in Lethbridge is going through a boom as part of the housing boom occurring throughout Alberta due in part to the thriving oil and gas economy. Demand for skilled labour is enormous in Alberta as well

1.1.2 Company Overview

With the roaring Alberta and Lethbridge economies as a back drop, Robert Jensen’s extensive roofing experience at Charles Hill Roofing, the largest roofer in the Lethbridge area; and his Journeyman Roofing license present the opportunity to incorporate Jensen Roofing Inc. Jensen Roofing will in essence be a personal service business, enabling Robert to perform the same work he did as an employee while allowing him to reap the rewards that normally accrue to ownership.

1.1.3 Value Proposition

The opportunity comes as a function of the aforementioned skilled labour shortage and the low start-up costs required for a roofing business. With a minimal capital investment and increasing demand for his services, the risks normally associated with ownership (ie. that of loss) are mitigated while the rewards thereof can be captured with focused effort. Production capacity will be met early and fixed costs are low. Even in the event of a down turn, the low capital intensity allow for easy exit from the business via liquidation.

1.1.4 Mission Statement

Jensen Roofing aims to provide the customer with a quality constructed attractive roof at a fair cost and in a timely manner. It is Jensen’s desire that customers will have a positive experience and speak highly of Jensen Roofing towards their friends and neighbors.

1.1.5 Goals

1.  Increase personal after tax income to a level not attainable by employment, by ensuring a target gross margin of 40%.

2.  Maintain simple one roofing team business model

3.  Earn and maintain the best reputation for quality workmanship in the market

4.  Reach capacity quickly, but do not materially exceed sole operator capacity

2.0 The Operations Plan

2.1 Business Structure

From inception, Jensen Roofing will be operated as a corporation. Robert Jensen will be the sole shareholder and will be responsible for all the business transactions and decision making, thus the decision making process will be quick and prompt action can be taken on any issues that might arise.

The business will be incorporated for the following reasons:

·  When a company is incorporated it acquires an independent existence, therefore it is separate and distinct from its shareholders and has an unlimited life expectancy.

·  The corporation provides its shareholders with limited liability meaning shareholders cannot be held personally liable for the debts and liabilities of the company.

·  Ownership interests in the company can be easily transferred through the sale or transfer of stock without affecting the corporation’s existence or continued operation.

·  Additional capital can be raised through the sale of stock in the business.

The major drawbacks of incorporation include the possibility of a second level of taxation and the additional administrative expenses of incorporation. The profits of the corporation are first taxed as income to the corporation, then as income in the hands of the shareholder as dividends are paid. Some of the effects of the second level of taxation will be mitigated as Jensen Roofing will be eligible for the small business deduction. Although the costs of incorporation are significant higher than the sole proprietorship form of business, Jensen Roofing is better incorporating because of the nature of the industry in which it operates as there is a high risk of injury and litigation.

2.2 Management of the Business

The business will be managed by Robert as he has several years of experience in the roofing industry working for Charles Hill Roofing. In addition, he will be using the services of a consultant to obtain the necessary financial/accounting and business management advice; the consultant will be Robert’s adviser and will be paid on an hourly and as needed basis.

2.3 Location of the Business

For the first five years the business will be operating out of Robert’s personal home. The business space will consist of a home office where he can choose to meet clients and his garage which will be used as storage space for all the necessary equipment, supplies and left over materials. This space will be adequate as the services are provided at the client’s location. Jensen’s will be focusing its services in the Lethbridge and surrounding areas.

2.4 Services to be provided

Jensen Roofing will be focused on building new roofs as this is where the greatest demand and growth is within the Lethbridge market. The company will however perform some roof repairs and replacements as well during the year and will employ a labourer in the summer months to assist with these repairs and replacements. Robert is able to put on a new roof by himself in ten hours which is approximately one full day of work, a roof replacement will take Jensen and a labourer approximately two and a half days to strip and replace.

Jensen’s will focus its business on residential or small commercial roofs. Due to labour capacity restraints, large industrial contracts will likely not be taken on in the first few years of the company operations. We expect there to be more than enough demand for residential and small commercial roofs to keep Jensen’s busy.

2.5 Materials

Materials will be purchased on a job estimate basis. Robert will sit down with customers (home and business owners, or general contractors) and have them pick out their preferred materials based on samples and pictures that will be provided. These materials will then be purchased from big building supply stores such as Home Depot and Rona. To ensure lower material costs the company will set up a contractor account at these stores. Jensen’s will obtain a Home Depot or Rona credit card for no fee which will allow it to easily make large purchases at any time without consideration for cash constraints. Home Depot and Rona both deliver materials to job sites and will hoist the materials onto the roof with their boom trucks.

2.6 Cost of Sales and Operating Expense

Costs of sales include direct labour and direct materials costs. All of the materials necessary to put on a new roof or replace an old roof can be found in schedule 3 of Exhibit 11. The cost per square foot ranges from approximately $0.89 using an asphalt shingle to approximately $10.34 per square foot when putting on a slate roof.

Operating expenses can be seen in schedule 5 of Exhibit 11. The most significant operating expense for Jensen’s will be fuel costs. Robert will be using his half ton truck to get to and from the job sites. He will also use the truck for his sales meetings and trips to and from Home Depot/Rona to order supplies or pick up small tools or supplies. His three ton truck will also cost him several thousand dollars a year to run. In projecting out fuel costs we included an increase in fuel cost of 15% per year.

2.7 Typical day of business at Jensen’s roofing

Robert Jensen will essentially do everything in the business. Aside from a labourer hired to do menial tasks and having a business consultant/accountant provide services on an as needed basis he will be the only full time staff person at Jensen’s roofing.

Robert will spend most of his day actually building and repairing roofs as this is what will drive the revenues of the company. Robert’s day will begin between six and eight a.m. He will likely spend some of his time in the first few weeks of the business meeting with general contractors to get their business. Some time will also be spend initially setting up accounts at Rona and/or Home Depot but eventually Robert will just order materials over the phone and have them dropped off on the job site the day the job begins. Banking, paying of bills, collections calls and sorting of paperwork for the consultant will be done on in the evenings and weekends. Robert will also spend time in the evenings trying to find new business. He will drive around older neighborhoods looking for houses with older roofs. He will try making cold calls in peoples doorways asking them if they would be interested in a quote and either sit down with them then or make an appointment. This will be his way of breaking into the roof repairs market. He will also spend time in the evenings meeting with general contractors as he is vying for their business.