Construction Business Plan
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Sample Construction Business Plan Outline
Below is a construction business plan example to help you create each section of your own construction business plan:
Executive Summary
Business Overview
VB Residential Construction Company is a startup construction company located in Milwaukee, Wisconsin. The company is founded by two cousins, Victor Martinez and Ben Schmidt. Together they have over 20 years of experience in constructing homes from design concept, remodeling and renovating homes. They are highly skilled in all aspects of construction and have garnered a positive reputation in the local construction community for their ethical practices and competitive skill set. Now that Victor and Ben have an extensive network of clients and contacts, they have decided to begin their own residential construction company.
Product Offering
The following are the services that VB Residential Construction Company will provide:
- Custom home building/design build
- Home remodeling and renovation
- Project Management
- Kitchen and bath construction
- Roofing
- Siding
Customer Focus
VB Residential Construction Company will target those individuals and industry professionals requiring home construction services in Milwaukee, Wisconsin. Those individuals are landowners looking to develop homes on their lots, architects who have clients needing homes built, developers who have the vision but need a company to make it a reality, and households needing home remodeling services.
Management Team
VB Residential Construction Company will be led by Victor Martinez and Ben Schmidt. Together they have over twenty years of construction experience, primarily in residential builds, remodeling, and renovation. They both started at a young age working and learning from their fathers. When they graduated from high school, their fathers got them jobs at the construction company they were employed at. The four family members worked together for ten years at the construction company. The fathers recently decided they were going to retire from the industry which prompted Victor and Ben to branch out on their own and start their own residential construction company.
Success Factors
VB Residential Construction Company will be able to achieve success by offering the following competitive advantages:
- Friendly and knowledgeable contractors who are able to take any project from concept to reality.
- Unbeatable pricing – Clients will receive the best pricing in town for services on any project while maintaining the best quality and customer satisfaction.
Financial Highlights
VB Residential Construction Company is seeking $200,000 in debt financing to launch its construction business. The funding will be dedicated towards securing a small office space, purchasing two trucks, and purchasing all the construction equipment and supplies. Funding will also be dedicated towards the advertising agency and three months of overhead costs to include payroll of the staff, rent, working capital, and monthly fees to the accounting and human resources firm. The breakout of the funding is below:
- Trucks: $40,000
- Construction equipment, supplies, and materials: $100,000
- Advertising agency in charge of promotions: $10,000
- Three months of overhead expenses (rent, payroll, HR and accounting firms): $40,000
- Working capital: $10,000
Company Overview
Who is VB Residential Construction Company?
VB Residential Construction Company is a newly established contracting company located in Milwaukee, Wisconsin. Founded by cousins, Victor Martinez and Ben Schmidt, they have over 20 years experience in the construction industry. VB specializes in residential remodeling, kitchen and bath construction, as well as custom home building. VB Residential Construction Company also offers residential design, construction, and project management services. VB prides itself in delivering a level of expert craftsmanship to fulfill the vision for the client while exceeding expectations at exceptional value.
Company History
VB comes from the initials of the owners, Victor Martinez and Ben Schmidt, two cousins who have been working in the construction industry most of their lives. Both of their fathers spent decades as contractors and raised their sons working and learning the construction trade. The four have been working for another residential contractor in Milwaukee and have built and remodeled numerous homes for multiple builders and clients. Now that both of their fathers are retiring from the construction industry, Victor and Ben have decided to start their own residential construction company and use their years of experience, expertise, and contacts to be an independent residential contractor.
Since incorporation, VB Residential Construction Company has achieved the following milestones:
- Registered VB Residential Construction Company, LLC to transact business in the state of Wisconsin.
- Located a small office space to have a physical address for the company as well as a receptionist.
- Reached out to their numerous contacts to include real estate agents, developers, architects, and landowners to advise them on their upcoming construction company in order to start getting construction contracts.
- Began pricing out costs for trucks and necessary construction equipment.
- Began recruiting a team of contractors that cover different areas of construction to include mechanical, plumbing, electricians, and roofing.
Services
The following will be the services VB Residential Construction Company will provide:
- Custom home building/design build
- Home remodeling and renovation
- Project Management
- Kitchen and bath construction
- Roofing
- Siding
Industry Analysis
Revenue for the Construction industry is expected to continue growing over the five years as demand for new housing expands. Revenues are expected to reach $107 billion.
Relatively low interest rates, coupled with rising per capita disposable income, is expected to support individual investment in new homes, providing an opportunity for industry revenue growth over the next five years.
Per capita disposable income is expected to rise steadily over the next five years, while concurrently, unemployment will drop, proving favorable conditions for industry growth.
Housing starts are expected to rise an annualized 2.9% and this growth is projected to stem partly from forward-looking consumers that choose to purchase homes while interest rates are low. Relatively low housing stock and relatively low interest rates are expected to lead demand for industry services to increase over the next five years.
Customer Analysis
Demographic Profile of Target Market
VB Residential Construction Company will target those individuals and industry professionals requiring home construction services in Milwaukee, Wisconsin. Those individuals are landowners looking to develop homes on their lots, architects who have clients needing homes built, developers who have the vision but need a company to make it a reality, and households needing home remodeling services.
The precise demographics for Milwaukee, Wisconsin are:
| Total | Percent | |
|---|---|---|
| Total population | 590,157 | 100% |
| Male | 284,873 | 48.30% |
| Female | 305,284 | 51.70% |
| Under 5 years | 41,749 | 7.10% |
| 5 to 9 years | 43,509 | 7.40% |
| 10 to 14 years | 41,324 | 7.00% |
| 15 to 19 years | 43,301 | 7.30% |
| 20 to 24 years | 48,119 | 8.20% |
| 25 to 34 years | 106,407 | 18.00% |
| 35 to 44 years | 73,788 | 12.50% |
| 45 to 54 years | 64,669 | 11.00% |
| 55 to 59 years | 35,109 | 5.90% |
| 60 to 64 years | 27,995 | 4.70% |
| 65 to 74 years | 39,539 | 6.70% |
| 75 to 84 years | 17,394 | 2.90% |
| 85 years and over | 7,254 | 1.20% |
| Total housing units | 260,024 | 100% |
| Households | Families | Married Couples | Nonfamily Households | |
|---|---|---|---|---|
| Total | 7,510 | 5,081 | 4,210 | 2,429 |
| Income Breakdown | ||||
| Less than $10,000 | 8.6% | 6.1% | 3.8% | 15.0% |
| $10,000 to $14,999 | 6.2% | 1.7% | 1.4% | 14.9% |
| $15,000 to $24,999 | 12.6% | 8.5% | 7.6% | 21.9% |
| $25,000 to $34,999 | 13.9% | 11.8% | 10.6% | 18.8% |
| $35,000 to $49,999 | 14.5% | 15.6% | 15.1% | 12.0% |
| $50,000 to $74,999 | 21.2% | 26.1% | 26.8% | 11.1% |
| $75,000 to $99,999 | 9.9% | 12.0% | 14.0% | 4.1% |
| $100,000 to $149,999 | 8.9% | 12.3% | 13.7% | 1.5% |
| $150,000 to $199,999 | 2.6% | 3.9% | 4.4% | 0.0% |
| $200,000 or more | 1.6% | 2.1% | 2.5% | 0.7% |
Customer Segmentation
VB Residential Construction Company will primarily target the following customer profiles:
- Households in search of home remodeling services
- Landowners who would like to build homes on their lots
- Architects who have clients that need home building or remodeling services
- Developers who have already partnered with landowners and/or architects and are in search of a residential contractor
Competitive Analysis
Direct and Indirect Competitors
VB Residential Construction Company will face competition from other companies with similar business profiles. A description of each competitor company is below.
JM Remodeling
JM Remodeling has been in business in Milwaukee, Wisconsin since 1990. They are a full-service design and build company. JM Remodeling specializes in residential and commercial restoration and renovation including custom carpentry, kitchens, bathrooms, roofing, siding, dormers, additions, home gyms, home offices, porches and decks, and mechanical services. JM Remodeling carries a staff of plumbers, electricians, journeymen carpenters, restoration specialists, roofers, siders, sheet metal workers, and expert estimators. JM Remodeling also has an apprenticeship program to train employees within the company. They are licensed, bonded and insured and also part of the National Association of Remodeling Industry (NARI). JM Remodeling also provides warranties on all their services. The work is guaranteed by labor warranties, factory warranties, and extended warranties.
Cream City Construction
Cream City Construction has more than 50 years experience in home design, remodeling and renovation in the Greater Milwaukee area and Southeastern Wisconsin. The home remodeling services they provide are additions, whole house remodeling, kitchens, bathrooms, lower levels, master suites and historic renovations. Cream City Construction is a design build company that works with the client to create the design plans, generate project costs, and build the project.
Cream City Construction is owned and managed by Todd Badovski and Jim Grote. Together they have decades of experience and have spent years refining the skills required to run a high end, quality driven remodeling company. The majority of their projects come from repeat business or referrals from clients delighted with their previous service. Cream City Construction is also a member of the National Association of Remodeling Industry (NARI) as well as the Historic Milwaukee Incorporated.
Sazama Design Build Remodel, LLC
Former restaurant owner Don Sazama established Sazama Design Build Remodel, LLC in 1987 after becoming a Master Carpenter. He wanted to merge his passions of business and design and expand his skills in carpentry and architecture. Don’s firm has completed over 700 homes and won 11 awards from the Milwaukee Home and Livingmagazine. Sazama Design Build Remodel builds homes that are modern and luxurious and have completed many large remodels of bathroom and kitchen renovations. Sazama likes to collaborate with firms such as Ivy Interiors and an award-winning landscape designer, Gingko Leaf Studio. Sazama Design Build Remodel can build and design all aspects of a home – from a home office, outdoor entertaining area, serene spas, and inviting kitchens. The team at Sazama is able to do a historic renovation, build or renovate into something modern and posh, or keep it traditional.
Competitive Advantage
VB Residential Construction Company will be able to offer the following advantages over their competition:
- Friendly and knowledgeable contractors who are able to take any project from concept to reality.
- Unbeatable pricing – Clients will receive the best pricing in town for services on any project while maintaining the best quality and customer satisfaction.
Marketing Plan
Brand & Value Proposition
VB Residential Construction Company will offer the unique value proposition to its clientele:
- Highly trusted and professional contractors with over 20 years of experience remodeling, renovating, and building homes.
- Unbeatable pricing to its clients – VB Residential Construction Company does not mark up its services at a large percentage. They will offer the lowest prices in town.
Promotions Strategy
The promotions strategy for VB Residential Construction Company is as follows:
Word of Mouth/Referrals
Victor and Ben have built up an extensive list of contacts over the years providing home construction services for numerous highly satisfied clients. Most of the clients are repeat customers and have also referred them to other associates for home projects. These referrals and repeat customers are very likely to use VB Residential Construction Company instead of the previous construction company Victor and Ben were employed at.
Professional Associations and Networking
VB Residential Construction Company will become a member of construction and professional associations such as the National Association of Remodeling Industry (NARI) and the Milwaukee Chamber of Commerce. VB will also become a member in associations where other builders, developers, and architects are a part of. They will focus their networking efforts on expanding their client network.
Print Advertising/Billboard
VB Residential Construction Company will invest in professionally designed print ads to display in programs or flyers at industry networking events. They will also invest in two billboards to display in highly trafficked areas of town.
Website/SEO Marketing
VB Residential Construction Company will utilize the same advertising company that designed their print ads and billboards to also design their website. The website will be well organized, informative, and list all their services that VB is able to provide. The website will also list their contact information and a gallery of pictures that show their previous projects. The advertising company will also manage VB’s website presence with SEO marketing tactics so that anytime someone types in the Google or Bing search engine “Milwaukee residential contractor”, “contractor near me”, or “residential contractor near me”, VB Residential Construction Company will be listed at the top of the search results.
Pricing
The pricing of VB Residential Construction Company will be moderate and on par with competitors so customers feel they receive value when purchasing their services.
Operations Plan
The following will be the operations plan for VB Residential Construction Company.
Operation Functions:
- Victor Martinez and Ben Schmidt will be the owners and managers of the company. They will oversee all staff, contractors, and subcontractors. They will also act as project managers for every job they receive and handle all pricing and bids to the client.
- Victor and Ben will employ a team of contractors under them that will have an array of skill sets. The contractors will be trained and experienced either in plumbing, mechanical, electrical, roofing, or siding. Not all contractors need to be certified in all trades, but they need to be certified in at least one of the trades.
- Office manager/assistant to be located at the small office. This person will handle all incoming calls, assist with visiting clients, bookkeeping and maintain files.
- Victor and Ben will utilize a third-party human resources company to handle all hiring, onboarding, payroll, and benefits for the staff. The HR company will also handle all employee issues.
- Victor and Ben will also pay a third-party accounting firm to manage all the high level accounting and tax payments.
Milestones:
VB Residential Construction Company will have the following milestones complete in the next six months.
3/1/202X – Finalize contract to lease small office space
3/15/202X – Execute advertising agency contract
4/1/202X – Begin networking and placing bids for construction jobs
5/1/202X – Begin recruiting and hiring team of contractors
5/15/202X – Purchase all necessary construction equipment, supplies, and trucks
6/1/202X – Start on first official job as VB Residential Construction Company
Management Team
VB Residential Construction Company will be led by Victor Martinez and Ben Schmidt. Together they have over twenty years of construction experience, primarily in residential builds, remodeling, and renovation. They both started at a young age working and learning from their fathers. When they graduated from high school, their fathers got them jobs at the construction company they were employed at. The four family members worked together for ten years at the construction company. The fathers recently decided they were going to retire from the industry which prompted Victor and Ben to branch out on their own and start their own residential construction company.
Victor and Ben are highly skilled at project management and residential construction. They are also both certified in plumbing, electrical, and mechanical. In the next few years, they will be certified as Master Carpenters.
Financial Plan
Key Revenue & Costs
The revenue drivers for VB Residential Construction Company are the upcharge they will charge to the clients for their services. VB will purchase or subcontract a service at cost and will charge a 15% markup in order to obtain the markup fee. 15% is below the normal 25%-30% that other competing residential contractors charge.
The cost drivers will be the overhead costs required in order to maintain a construction company. The expenses will be the costs to purchase and maintain construction equipment and trucks, payroll and overhead costs for the staff, and rent and utilities. Other expenses will be the cost for the advertising agency, accounting firm, human resources firm, and membership association fees.
Funding Requirements and Use of Funds
VB Residential Construction Company is seeking $200,000 in debt financing to launch its construction business. The funding will be dedicated towards securing a small office space, purchasing two trucks, and purchasing all the construction equipment and supplies. Funding will also be dedicated towards the advertising agency and three months of overhead costs to include payroll of the staff, rent, and monthly fees to the accounting and human resources firm. The breakout of the funding is below:
- Trucks: $40,000
- Construction equipment, supplies, and materials: $100,000
- Advertising agency in charge of promotions: $10,000
- Three months of overhead expenses (rent, payroll, HR and accounting firms): $40,000
- Working capital: $10,000
Key Assumptions
The following outlines the key assumptions required in order to achieve the revenue and cost numbers in the financials and in order to pay off the startup business loan.
- Initial Monthly Average Contract Amount: $20,000
- Growth in Average Monthly Contracts: 10%
Financial Projections
Income Statement
| FY 1 | FY 2 | FY 3 | FY 4 | FY 5 | ||
|---|---|---|---|---|---|---|
| Revenues | ||||||
| Total Revenues | $360,000 | $793,728 | $875,006 | $964,606 | $1,063,382 | |
| Expenses & Costs | ||||||
| Cost of goods sold | $64,800 | $142,871 | $157,501 | $173,629 | $191,409 | |
| Lease | $50,000 | $51,250 | $52,531 | $53,845 | $55,191 | |
| Marketing | $10,000 | $8,000 | $8,000 | $8,000 | $8,000 | |
| Salaries | $157,015 | $214,030 | $235,968 | $247,766 | $260,155 | |
| Initial expenditure | $10,000 | $0 | $0 | $0 | $0 | |
| Total Expenses & Costs | $291,815 | $416,151 | $454,000 | $483,240 | $514,754 | |
| EBITDA | $68,185 | $377,577 | $421,005 | $481,366 | $548,628 | |
| Depreciation | $27,160 | $27,160 | $27,160 | $27,160 | $27,160 | |
| EBIT | $41,025 | $350,417 | $393,845 | $454,206 | $521,468 | |
| Interest | $23,462 | $20,529 | $17,596 | $14,664 | $11,731 | |
| PRETAX INCOME | $17,563 | $329,888 | $376,249 | $439,543 | $509,737 | |
| Net Operating Loss | $0 | $0 | $0 | $0 | $0 | |
| Use of Net Operating Loss | $0 | $0 | $0 | $0 | $0 | |
| Taxable Income | $17,563 | $329,888 | $376,249 | $439,543 | $509,737 | |
| Income Tax Expense | $6,147 | $115,461 | $131,687 | $153,840 | $178,408 | |
| NET INCOME | $11,416 | $214,427 | $244,562 | $285,703 | $331,329 |
Balance Sheet
| FY 1 | FY 2 | FY 3 | FY 4 | FY 5 | ||
|---|---|---|---|---|---|---|
| ASSETS | ||||||
| Cash | $154,257 | $348,760 | $573,195 | $838,550 | $1,149,286 | |
| Accounts receivable | $0 | $0 | $0 | $0 | $0 | |
| Inventory | $30,000 | $33,072 | $36,459 | $40,192 | $44,308 | |
| Total Current Assets | $184,257 | $381,832 | $609,654 | $878,742 | $1,193,594 | |
| Fixed assets | $180,950 | $180,950 | $180,950 | $180,950 | $180,950 | |
| Depreciation | $27,160 | $54,320 | $81,480 | $108,640 | $135,800 | |
| Net fixed assets | $153,790 | $126,630 | $99,470 | $72,310 | $45,150 | |
| TOTAL ASSETS | $338,047 | $508,462 | $709,124 | $951,052 | $1,238,744 | |
| LIABILITIES & EQUITY | ||||||
| Debt | $315,831 | $270,713 | $225,594 | $180,475 | $135,356 | |
| Accounts payable | $10,800 | $11,906 | $13,125 | $14,469 | $15,951 | |
| Total Liability | $326,631 | $282,618 | $238,719 | $194,944 | $151,307 | |
| Share Capital | $0 | $0 | $0 | $0 | $0 | |
| Retained earnings | $11,416 | $225,843 | $470,405 | $756,108 | $1,087,437 | |
| Total Equity | $11,416 | $225,843 | $470,405 | $756,108 | $1,087,437 | |
| TOTAL LIABILITIES & EQUITY | $338,047 | $508,462 | $709,124 | $951,052 | $1,238,744 |
Cash Flow Statement
| FY 1 | FY 2 | FY 3 | FY 4 | FY 5 | ||
|---|---|---|---|---|---|---|
| CASH FLOW FROM OPERATIONS | ||||||
| Net Income (Loss) | $11,416 | $214,427 | $244,562 | $285,703 | $331,329 | |
| Change in working capital | ($19,200) | ($1,966) | ($2,167) | ($2,389) | ($2,634) | |
| Depreciation | $27,160 | $27,160 | $27,160 | $27,160 | $27,160 | |
| Net Cash Flow from Operations | $19,376 | $239,621 | $269,554 | $310,473 | $355,855 | |
| CASH FLOW FROM INVESTMENTS | ||||||
| Investment | ($180,950) | $0 | $0 | $0 | $0 | |
| Net Cash Flow from Investments | ($180,950) | $0 | $0 | $0 | $0 | |
| CASH FLOW FROM FINANCING | ||||||
| Cash from equity | $0 | $0 | $0 | $0 | $0 | |
| Cash from debt | $315,831 | ($45,119) | ($45,119) | ($45,119) | ($45,119) | |
| Net Cash Flow from Financing | $315,831 | ($45,119) | ($45,119) | ($45,119) | ($45,119) | |
| Net Cash Flow | $154,257 | $194,502 | $224,436 | $265,355 | $310,736 | |
| Cash at Beginning of Period | $0 | $154,257 | $348,760 | $573,195 | $838,550 | |
| Cash at End of Period | $154,257 | $348,760 | $573,195 | $838,550 | $1,149,286 |
Construction Business Plan FAQs
What Is a Construction Business Plan?
A construction business plan is a plan to start and/or grow your construction business. Among other things, it outlines your business concept, identifies your target customers, presents your marketing plan and details your financial projections.
You can easily complete your construction business plan using our Construction Business Plan Template here.
What Are the Main Types of Construction Companies?
Construction companies can be classified according to the type of constructions that they perform. Some are small renovation contractors, others are new home builders and others are commercial construction companies.
What Are the Main Sources of Revenues and Expenses for a Construction Company?
Construction companies get their primary source of revenue from individual contracts for new homes, remodeling projects or commercial projects.
The key expenses for construction companies are office space rent, salaries and wages, and equipment costs.
How Do You Get Funding for Your Construction Business Plan?
There are many options for financing a construction company like SBA loans, commercial loans, personal loans, or line of credit. There are also equipment funding opportunities that cover expenses associated with necessary tools, machinery and other equipment. Personal savings, credit card financing and angel investors are also popular forms of funding.
What are the Steps To Start a Construction Business?
Starting a construction business can be an exciting endeavor. Having a clear roadmap of the steps to start a business will help you stay focused on your goals and get started faster.
1. Develop A Construction Business Plan - The first step in starting a business is to create a detailed construction business plan that outlines all aspects of the venture. This should include potential market size and target customers, the services or products you will offer, pricing strategies and a detailed financial forecast.
2. Choose Your Legal Structure - It's important to select an appropriate legal entity for your construction business. This could be a limited liability company (LLC), corporation, partnership, or sole proprietorship. Each type has its own benefits and drawbacks so it’s important to do research and choose wisely so that your construction business is in compliance with local laws.
3. Register Your Construction Business - Once you have chosen a legal structure, the next step is to register your construction business with the government or state where you’re operating from. This includes obtaining licenses and permits as required by federal, state, and local laws.
4. Identify Financing Options - It’s likely that you’ll need some capital to start your construction business, so take some time to identify what financing options are available such as bank loans, investor funding, grants, or crowdfunding platforms.
5. Choose a Location - Whether you plan on operating out of a physical location or not, you should always have an idea of where you’ll be based should it become necessary in the future as well as what kind of space would be suitable for your operations.
6. Hire Employees - There are several ways to find qualified employees including job boards like LinkedIn or Indeed as well as hiring agencies if needed – depending on what type of employees you need it might also be more effective to reach out directly through networking events.
7. Acquire Necessary Construction Equipment & Supplies - In order to start your construction business, you'll need to purchase all of the necessary equipment and supplies to run a successful operation.
8. Market & Promote Your Business - Once you have all the necessary pieces in place, it’s time to start promoting and marketing your construction business. This includes creating a website, utilizing social media platforms like Facebook or Twitter, and having an effective Search Engine Optimization (SEO) strategy. You should also consider traditional marketing techniques such as radio or print advertising.
Learn more about how to start a successful construction business: