BOW HOME SERVICES
INCORPORATED
BUSINESS PLAN
Colton Wiegers
Table of Contents
Table of Figures ............................................................................................................................................. 2
Executive Summary....................................................................................................................................... 3
Business Plan................................................................................................................................................. 4
Introduction .............................................................................................................................................. 4
Industry ..................................................................................................................................................... 4
Operations Plan............................................................................................................................................. 5
Organization.............................................................................................................................................. 6
Revenue Model ......................................................................................................................................... 8
Capital Budget ........................................................................................................................................... 8
Marketing ...................................................................................................................................................... 8
Product ...................................................................................................................................................... 8
Place .......................................................................................................................................................... 9
Price .......................................................................................................................................................... 9
Promotion ............................................................................................................................................... 10
Target Market ......................................................................................................................................... 10
Competition ............................................................................................................................................ 11
Product Mix ............................................................................................................................................. 11
Financials..................................................................................................................................................... 12
Revenue Schedule ................................................................................................................................... 12
Variable Cost ........................................................................................................................................... 12
Income Statement .................................................................................................................................. 13
Risk Analysis ................................................................................................................................................ 15
Return ......................................................................................................................................................... 15
Conclusion ................................................................................................................................................... 16
Sources ........................................................................................................................................................ 16
Table of Figures
Figure 1 ......................................................................................................................................................... 6
Figure 2 ......................................................................................................................................................... 7
Figure 3 ......................................................................................................................................................... 8
Figure 4 ....................................................................................................................................................... 10
Figure 5 ....................................................................................................................................................... 11
Figure 6 ....................................................................................................................................................... 12
Figure 7 ....................................................................................................................................................... 13
Figure 8 ....................................................................................................................................................... 13
Figure 9 ....................................................................................................................................................... 14
Figure 10 ..................................................................................................................................................... 15
Executive Summary
With population growth in Saskatoon of 4.2% in the last year and expected growth of 2.5% going
forward (City of Saskatoon 2012) there is a growing market for trades. As most large established
companies are moving into new builds and projects there has become a large demand for companies in
the renovation sector. Property managers and home owners are in need of established companies that
can take on large projects for them since the rise of new neighbourhoods has set the bar higher for
quality when renting or selling living space. BOW Home Services Incorporated plans to capitalize on this
growth and, with increasing economies of scale, take hold of this renovation market so that we can still
see growth during new build slowdowns.
BOW Home Services offers home and property improvement services to owners and managers in areas
such as painting, carpentry, flooring, and minor plumbing and electrical work. BOW operates primarily in
Saskatoon and the surrounding area and. We work with homeowners and commercial managers to help
improve and increase the value of their property.
The company will hold a very low amount of debt that can be paid off within the first 6 months of
operation. Capital costs will be low with equipment being bought as needed. After the first set of jobs
are complete the company will be financed entirely by cash flows.
Based on projections, we see the company being profitable immediately and by year 5 it is expected to
be worth $1.5 million. With majority of expenses being variable, the company can trim or grow when
needed to either reduce operating expense or capture new opportunities.
Cash will continue to be reinvested in the company in order to grow with dividends being paid out as net
cash exceeds $100,000. Given the current and forecasted market, BOW Home Services will expect to see
continuous growth over the next 5 years and excess cash will be put towards working capital in order to
keep up with this growth.
Business Plan
Introduction
BOW Home Services is a property improvement company that uses services such as painting, carpentry,
wallpapering, flooring, and drywall to increase the value of residential and commercial buildings. BOW
operates primarily in the Saskatoon area but will take on projects outside of the city when it is
convenient. The company will specialize in painting and use this service as a means of getting to know
property managers in Saskatoon. The company will utilize its first summer as a means of generating
working capital for the winter projects. From painting, BOW will branch off into offering other services,
upon request, as the company transitions into apartment suite turnarounds. These suite turnarounds
will be a way to ensure consistent work for BOW employees in between large summer projects and
during the winter season. By utilizing the consistency of suite turnarounds and the scale of large projects
BOW will be able to retain team members and keep cash flows consistent.
Industry
Saskatoon and the surrounding area is an ideal market for companies in the trades. Preliminary reports
show that new home builds have increased 29.0% from the beginning of 2013 to 2014. Additionally,
non-residential building permits, which includes commercial permits, have increased 28.6% from the
end of 2012 to 2013. (SREDA 2014) Although BOW Home Services does not plan on targeting new
builders at this moment it essentially means that this market will have many openings for established
companies in Saskatoon such as Aspen Interiors and All Surface Finishes. The movement of the labour
force into the new build market will leave a void in the renovation side that BOW can take advantage of.
In terms of existing residential projects, from end of 2013 to beginning of 2014 there has been a 33.4%
increase in new listings. This coupled with the fact that population in the past year has risen 4.2%, with
expected growth of at least 2.5% in following years, indicates that although people are selling homes
they may not be leaving. (City of Saskatoon 2012) These factors all indicate that there will be an
abundance of new construction work and renovation work as well. With the aging workforce in
Saskatoon, due to the baby boomers, we are also seeing only a 4.8% increase in the labour force from
2013 to 2014. (SREDA 2014) This indicates even more opportunity for BOW since it is evident that the
labour force has yet to catch up with the construction increases. As stated previously though, BOW will
not focus on new builds but instead capitalize on the open renovation market. Although data is not
available to confirm this, one could conclude increasing new builds will push apartment owners and
managers to constantly improve their property so that they remain competitive in the rental market.
These conclusions have been confirmed by conversations with property managers from Turanich
Developments and Avenue Living. Outlook is very good for BOW’s target market, and by focusing on
renovations BOW can ensure that they will not run out of work when new builds slow down.
Operations Plan
Summary
Execution of BOW’s operation will be simple. The acquiring and completion of projects can be broken
down into 2 phases. The first phase involving the acquiring of the job and the second involving the
completion and invoicing of the job.
The target client will be reached either by phone or in person. As will be discussed in the marketing plan,
these reaches will be very specific as we will want to deal with the person directly in charge of
renovation projects. When this person is met with and introduces the project to BOW, whether it be a
large project or a suite turnaround, BOW will evaluate the project and submit a quote for it. This quote
will be sent to the current facilities manager as well as any other managers needed for approval. After
the quote is received negotiations will begin on the quote until a point of agreement is met.
Once pricing has been approved, execution of the project will commerce. Typically projects will take
anywhere from one to four weeks for completion. After completion and walkthrough, unless progressive
payments are specified, the final invoice with any adjustments will be submitted and then paid out on
the decided terms. Depending on the company, payment may be immediate or have a hold of up to 60
days. This will be factored in when determining how much working capital is needed in the beginning. As
per BOW’s model, after the current project is completed it would be expected that introduction of the
next project will begin immediately. These verbal agreements of continuous work will be key for BOW to
have consistent cash flows and keep giving employees consistent hours.
For residential work, which will be taken on but not necessarily seek out, the operations model will be
very similar. It will be more likely that a home owner will reach out to BOW through a referral for
example and from there meeting and job evaluation will begin. There will typically be less negotiations
for residential work since homeowners likely don’t have a reference point for pricing unless they look
for more quotes. Projects will begin immediately and typically last two days to one week. Payment will
be received immediately upon completion. No deposits on projects will be taken in either situation.
BOW will focus on property managers for over 90% of production but will be open to residential work as
well. Creating a mix of consistent commercial work while incorporating different projects will be a part
of BOW’s mission to keep the workplace from becoming tedious.
Organization
Owner/Manager
Painting Project
Leader
Painter
Painter
Painting Project
Leader
Painter
Painter
Painter
Figure 1
BOW’s organizational structure will be broken down into sides with both sides being managed by the
owner. The full-time year round crews and the seasonal summer painting crews. This chart represents
the first summer of operation for BOW Home Services. Not all painters will be hired at once but it is
expected that with the acquiring of larger projects that this capacity will be reached within 2 months.
This workforce will largely be comprised of seasonal workers with the goal that 2 or 3 painters will stay
for fulltime work. Each team will be assigned to a specific project at any given time. These projects, as
outlined previously, will aim to be commercial and last 1 to 4 weeks with residential work sprinkled in.
Painting project leaders will be expected to have at least 3 years of experience and will be paid $18-20
per hour starting. All other painters will not require experience, although it will be preferred, and will be
paid $14-15 per hour. The exact number of employees during the summer will be flexible and this model
represents the goal for team sizes.
Owner/General
Manager
Suite Project
Leader
Painter
Carpenter
Painting Project
Leader
Painter
Figure 2
The figure above represents the year round crew that will handle apartment suite turnarounds and
smaller interior painting work. This side of the organization will be used to develop careers with BOW
and give summer workers the opportunity to work throughout the year if they choose. This crew will
develop near the end of the outdoor painting season. Wages for workers at the bottom of this chart will
start at $17 per hour and project leaders will start at $22 per hour. All employees in this model would be
required to have experience in their respective area and the project leader would be required to have
handyman work abilities.
The purpose of these 2 sides to BOW is so that we can guarantee cash flows for the company and work
for employees at all times. In the start-up summer the first painting crews will be utilized to get our foot
in the door with managers so that we can move into the turnarounds in the winter. This two-step
strategy will have the results realized in the second summer when both sides are operating in full. By
having suite turnarounds running in the second summer of operation we can mitigate the chance that
bad weather will cause us to lose money. Crews can temporarily float between jobs when needed so
that deadlines are met and employees get steady paychecks. By combining the consistency of
turnarounds with the higher profits of seasonal work BOW can continue to grow throughout the entire
year.
Revenue Model
Revenue will be generated from commercial and residential projects that the company takes on. Pricing
for these projects will vary anywhere from $800-$20,000 but on average will be $6400. Since prices vary
by project the metric to be used will be a mark-up of 50% from estimated labour and supplies cost.
Assuming full capacity for the starting crew of 4 employees, first week’s revenue would be roughly
$4000 accounting for longer time to finish due to training. After this week revenue will be expected to
be around $4700 each week from employees. By the end of the first month there would be roughly
$18,000 of revenue from employees. This is a conservative estimate of company revenue considering
that while managing in the first month there would be time for the owner to work as well and generate
revenue for the company. For our conservative model we will exclude this and allow the entire month
for management, training, and job acquiring. This revenue model also assumes that the company will
acquire projects that pay within two weeks of completion.
Capital Budget
Wages
Week One
Week Two
Week Three
Week Four
Total
Manager Salary
0
5198
0
5198
10396
0
0
0
2500
2500
Equipment Supplies
Insurance Lease
Total
6000
1000
2000
0
9000
0
0
0
0
5198
0
1000
0
0
1000
0
0
0
2000
9698
6000
2000
2000
2000
24896
Figure 3
The table above shows how much cash is needed at the end of each week in the first month of
operation. As stated in the revenue model, the company would expect to bring in roughly $18,000
within the first month of operation. Under the assumption that the first project taken on is finished and
paid within the first month this would create a required equity investment of about $15,000 to cover all
expenses in the first 4 weeks. If payment on the first job exceeded a month required capital would be
around $25,000 as shown above. In extreme situations capital may be needed to cover more than one
month if receivables is 60 days. However, it would be assumed that the company would not need to rely
completely on this types of agreements when starting up. This could however be the situation when
moving into the suite turnarounds.
Marketing
Product
BOW Home services will be offering a variety of home improvement services that will all center on
painting. As will be shown in the financials report, painting will be the core service offered at each
project and other services will stem from it. Carpentry, drywall, flooring, and plumbing will be services
that complement each job but are not directly sought out. In moving into suite turnarounds these other
services will become a critical factor in completing projects and more emphasis will be put on them.
Essentially every job will be guaranteed to have painting work done, with extra services added in when
needed.
Place
BOW will be operating primarily inside of the City of Saskatoon given the market favorability stated
above. Work will also be done outside of the city when the situation arises but this will be likely be
pursued only if there is a lag in projects or if the crew wants to work somewhere different. Most work
will be done on the middle income neighbourhoods in the city as they are more likely to have property
in need of renovation and are willing to spend the money on it.
Price
Pricing will be different for each project taken on. The average price per project is estimated to be
$6400.00, indicated by a company in the industry, but can fluctuate from $1000 to $20,000. The metric
used for pricing will be a 50% markup from the labour and supplies cost. In most cases labour would
represent 40-45% and supplies would be 20-25%. The remaining 35% of profit would be used to cover
overheads such as lease and management expense with additional funds going back into the company.
In cases where work is more consistent such as turnarounds, profit margins may land in the 25%-30%
range but there would be greatly reduced management costs due to the repetition of the project. Below
is a figure showing BOW’s pricing model in comparison to other substitutes. Larger bubbles indicate how
represented this substitute is. As seen here, BOW’s closest comparisons are from Aspen and In House
Teams in terms of pricing and value added. Aspen is mostly in new builds so they are not direct
competition. However, in house teams will be the biggest area of competition to BOW. Essentially the
company needs to be chosen over the hired contractors that the property managers already have, but
likely at a higher cost. Reasons for choosing BOW could be that quality is lagging in the in house team,
the company wants to get more projects done, or that they simply want a new set of people taking on
projects so that other options may be seen.
PRICE
Aspen
Bow Home
Services
Quality
and
Structure
One
man
team
In House
Team
College
Pro
Seasoned
Contractor
Figure 4
Promotion
Promotion will be kept fairly minimal since our consumers will be extremely targeted. The only
strategies that will be utilized will be advertising and branding on business cards, shirts, and company
vehicles. This will simply be to bring in calls from individuals that we meet or people that see our vehicle.
Marketing budget each year will be kept very low if there ever is one. Outlets such as radio and website
will be considered if there is ever felt to be a need but as it stands we would expect the initial marketing
budget for the year to remain under $1000.
Target Market
Anyone with a home, office space, or apartment will want to do work with us but ultimately we will be
targeting property managers as they have a variety of service needs and a near unlimited source of
work. BOW will position itself as a one stop shop when it comes to our painting and turnaround
projects. If a building needs work done from one of our other services we will combine it into the
project. Consolidating all services is why managers will choose us as it leads to less work for them and
less time finding additional companies. By researching property managers in the city and making phone
calls we will determine who the facilities managers are for each building and reach out to them in order
to work together. This targeted marketing strategy will be very cost effective as it is estimated through a
basic search on Google that there would be around 50 locations to contact. For the proposed model,
BOW would need to secure only 2 or 3 of these and have repeat work from them to keep crews busy.
Competition
As stated previously, the market is currently very favourable for companies in the trades in Saskatoon.
As a result, competition is not as intense and price wars are not as much of a concern in the renovation
and repaint market. The main area of competition will be against the apartments own in house team
and this is where BOW needs to come up with a point of differentiation. Since price is very likely going to
be higher, BOW will distinguish itself by embracing the one stop shop when approaching painting and
turnaround projects. By servicing all aspects of a project BOW can offset the higher price tag given that
management costs for the company will decrease dramatically in terms of managing their own staff or in
finding other companies to do certain services. BOW will strive to provide a professional experience
throughout the process in ways such as follow-ups which is an area that many builders claim is a
problem when dealing with individual contractors.
Product Mix
Based on projections, we would estimate the breakdown of revenue to come from the following areas in
the first year of operation.
Product Mix
5%
25%
70%
Painting
Suites
Other
Figure 5
As seen here painting will be the main revenue driver during the first year of operation. It is likely that
this will not change very much as the year’s progress since summer painting will become a very large
division of BOW. It is important to note that this breakdown shows painting in apartment suites to be
included in the painting piece. All other work in suites such as carpentry, flooring, and others are
represented in the 25%. The additional 5% of other represents revenue brought in from other services
when doing a painting job. This can include but would not be limited to, fence replacement, deck repair,
brick repair, or drywall work done when on a painting job. This product mix is by no means set in stone
but it would dictate how we would advertise the company. Since painting is our largest operation we
would likely introduce BOW as a painting company when speaking with someone. However, if suite
turnarounds picks up then this mix could be adjusted to reflect it.
Financials
Revenue Schedule
Figure 6
The revenue schedule shown above incorporates revenue gained from both the summer and winter
season. The average projects per month is an average over the entire year. The reason for a large jump
into the second year is that in the second summer both sides of BOW will be in operation, with the
suites once again continuing into the winter, and the jobs per month is an average throughout the year.
Growth in operation of the turnaround crew is not seen until the third year but if the opportunity arises
this could be adjusted to include a new team member.
Variable Cost
Since pricing is made based on a factor of labour cost, we can use the yearly wage of an employee to
determine how many workers are needed to sustain the proposed growth. The benefit to this approach
is that if more projects are acquired we can easily see how many additional employees are needed to
keep up with them. Likewise, we see a slowdown in projects then we will be able to determine how
many employees to lay off during this slow time. There will become a critical point however, that we
estimate to be around 3 full time employees that if the company falls below this then production will
become too slow to take on the projects we would like.
Number of Employees:
Manager (full time)
Full time staff
Part time staff
1
4
0.61
100,000
1
6
0.30
1
7
0.75
1
9
0.13
1
9
0.83
Figure 7
Based on an estimated average hourly rate of $20 per hour across all employees we can see that the
average full time employee can generate $100,000 of revenue for the company. Combining this with the
proposed growth in the revenue schedule we now know how many full time staff are needed each year
to keep up. This is low in the first year but immediately jumps up as BOW gets in full swing of its 2 sides.
Wages for employees can always be adjusted but with the pricing model if an employee getting a raise it
will not harm profit margins since we price based on labour costs. It would be assumed that a $30 per
hour employee can generate twice as much revenue as a $15 per hour employee would. Once again to
clarify, the management role would be taken on by the owner, myself, and I would only be taking a
$30,000 salary in each year.
Income Statement
Income Statement
For the year ended
2015
2016
2017
2018
2019
460,800
104,832
355,968
77%
629,758
143,270
486,488
77%
774,603
176,222
598,381
77%
913,063
207,722
705,341
77%
982,684
223,561
759,124
77%
Operating Expenses
Accounting and Legal
Advertizing (Marketing)
General Supplies
Insurance
Property Taxes
Telephone
Utilities
Repair and Maintenance
Wages
Employee Benefits
Misc Variable Costs % Sales
Capital Cost Allowance
Debt Interest
Total Operating Expenses
3,000
1,000
1,500
2,400
1,200
4,000
204,675
28,573
4,608
1,280
252,236
3,075
1,025
1,538
2,460
1,230
4,100
280,798
39,199
6,298
1,037
340,759
3,152
1,051
1,576
2,522
1,261
4,203
342,854
47,862
7,746
842
413,067
3,231
1,077
1,615
2,585
1,292
4,308
416,370
58,125
9,131
685
498,418
3,311
1,104
1,656
2,649
1,325
4,415
449,372
62,732
9,827
559
536,951
Taxable Income
Income Taxes
Net Income
103,732
13,485
90,247
145,729
18,945
126,785
185,314
24,091
161,223
206,923
26,900
180,023
222,173
28,882
193,290
Sales
COGS
Gross Profit
Figure 8
150,314
As stated, the variable supplies cost will average to be about 23% of each job. Employee wages on
average represents 45% when incorporating promotions throughout the year. This income statement is
very telling of the operations of BOW as it shows that 95% of operating costs incurred are variable. This
lowers the risk involves because of the low amount of fixed cost each month. Certain items such as
marketing budget will be embraced when there has been money accumulated throughout the year but
would not be considered until at least 6 months into operation. Overall retained earnings represents
nearly 20% after taxes and after management salary is paid out. Dividends will be paid out whenever net
cash exceeds $100,000. The reason for keeping this large of an amount is that we foresee in the future
when working with larger clients that the projects will become bigger and therefore more working
capital will be needed at any given time. Although there is flexibility given that most operating expenses
are variable, we still need to keep in mind how many jobs are needed to keep the base crew going. Since
price of each job will always vary, the number of projects acquired each month will be the critical
variable in determining if the operation can run as proposed.
Figure 9
This sensitivity analysis serves as a break even analysis for BOW. Since variable costs go up as we hire
more employees or take on more projects a break even chart over 5 years is not as valuable since we
would simply not grow if we saw a lack of projects. As seen, as low as 4 projects per month is enough to
keep BOW profitable, although it is not ideal. Once we start seeing our projected number of 6 projects
per month we can see that the business is very profitable quick. This serves as a risk analysis as well,
given that we have so much room below our projections we know that even in slow months the
company can still turn a profit.
Risk Analysis
Overall the investment into BOW Home Services yields low amounts of risk with high returns. The
company does however have some critical points and assumptions that, if false, could hurt the
company.
Lower than expected projects or average project size:

This risk is mitigated by the fact that BOW runs 95% on variable cost. What this means is that
layoffs may occur to keep the company from losing money. However, if staff ever dipped below
3 it would be an indicator that it may be time to pull out as only 2 members likely could not take
on the projects that BOW would be accustomed to.
Slow-down in the economy and in new builds:

By positioning ourselves in the renovation and repaint market we protect ourselves from an
economic slowdown. However, if the prevalent companies in the new market start moving into
the renovation side we would be heavily reliant on our relationships with property managers to
keep our work. This could result in a pricing war and we could ultimately see profit margins fall
a bit if the market became saturated.
Problems in retaining clients resulting in less consistent work:

Given that our industry is already project based it is common for employees to work more
hours near the end of a project and have a day off in between the next job. If this ever became
substantial and employees were averaging less than 40 hours each week then it would be a sign
to either layoff staff or exit the industry.
These risk factors are key for the success of BOW but even if they fail it does not necessarily dictate the
failure of the investor/owner. Assets are in equipment so losses would be minimized here as the
equipment could be resold. Overall the low risk combined with the high returns make this a very feasible
and pursuable business venture.
Return
Net Cash Flow
Dividends
Terminal Value
Total Cash Flow to Equity Investors
110,525
-
119,760
10,525
33,893
130,285
118,551
64,177
110,525
130,285
164,177
182,729
12,141
182,729
779,478
974,348
Figure 10
Overall BOW is very profitable within its first year of operation. As seen, on top of my manager salary,
dividends begin to pay out by year 2. Dividends are paid out when cash on hand exceeds $100,000
which is a very conservative amount to pay out at. It is important to note that terminal value will depend
on the value of the contracts, if there are any, which the company holds. Excluding terminal value we
can still see a cash flow to equity investors of over $100,000 each year. The net payback including the
terminal value exceeds $1.5 million by year 5 indicating that even if the company needed an initial
investment triple the amount budgeted that it would still be very profitable. The current model does not
include any debt financing but even if the company was financed fully by debt we would not see any
drastic changes in net cash flows or net payback. Given that the equity invested is so low we will not
point out the internal rate of return, but it can be noted that it is quite high.
Conclusion
This has proven to be a very profitable business model with very few risks involved. Marketability is
showing to be quite easy given the economic conditions in Saskatoon and expenses to get this moving
are very low. From a management perspective my biggest challenges will be finding jobs and finding and
keeping good workers to do them. Flexibility in the model can allow me to enter different service
industries with very little capital or efforts making this a very adaptable business. Financially the
company relies on variable factors to run and has low cost to enter. This puts even more emphasis on
the need to build strong relations with clients and employees in order to embrace growth in the
company. I look forward to seeing how it will play out.
Sources
Government of Saskatchewan 2014.
http://www.saskatoon.ca/DEPARTMENTS/COMMUNITY%20SERVICES/PLANNINGDEVELOPMENT/FUTUR
EGROWTH/DEMOGRAPHICANDHOUSINGDATA/Pages/PopulationEstimateProjection.aspx
SREDA 2013. http://www.sreda.com/saskatoon-region-economic-report-2013-quarter-4/
SREDA 2014 http://www.sreda.com/research/infodata-centre-publications-reports-on-the-economy/
*All other estimates and projections are done based on reports of BOW Home Services throughout the
past year.*