Twin Brothers Construction

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Commercial Contractor Business Plan

Market Analysis Summary

There were about 792,000 construction companies in the United States in 2002: 237,000 were building construction contractors; 60,000 were heavy and civil engineering construction or highway contractors; and 496,000 were specialty trade contractors. Most of these establishments tend to be small, the majority employing fewer than 10 workers. About 4 out of 5 workers are employed by small contractors.

Construction offers more opportunities than most other industries for individuals who want to own and run their own business. The 1.6 million self-employed and unpaid family workers in 2002 performed work directly for property owners or acted as contractors on small jobs, such as additions, remodeling, and maintenance projects. The rate of self-employment varies greatly by individual occupation in the construction trades.

The local area is booming at this time, with many development projects running both by public and by private sources. Overall business growth over the past seven years has averaged approximately 9.5% and is expected to continue for at least the next several years. This constitutes an attractive market for TBC. The company will be concentrating on office building construction. This is the fastest growing segment of all the commercial clients requiring our services. The other categories to serve will include building renovation along with a segment it calls the general category, to serve other potential commercial clients.

One longer-term field of operation for the company will be the selling of building material and components to contractors. By slowly establishing itself as a first-rate material provider, the company expects to broaden and strengthen its stance in the local building industry. Initially it will focus on purchasing supplies for its own construction and renovation projects, then use those completed projects as marketing examples to showcase the quality of materials used and the customized approach used to design and construct them.

The company plans to develop marketing alliances with industry leaders and pursue new sales of its services to commercial builders. The market strategy is to capitalize on the company's future alliances by securing city, county, and state government contracts.

TBC also plans to use a direct sales force, relationship selling, and sub-contractors to reach its markets. These channels are most appropriate because of time to market, reduced capital requirements, and fast access to established distribution channels.

4.1 Market Segmentation

The overall Construction Industry was segmented in 2002 as follows (employment in thousands):

Industry

Employment

Percent

Total, all industries

6,731.7

100.0

Construction of Buildings

1,583.8

23.5

Residential building

807.4

12.0

Nonresidential building construction

776.4

11.5

Special trade contractors

4,217.9

62.7

Building equipment contractors

1,842.5

27.4

Foundation, structure, & building exterior contractors

915.4

13.6

Building finishing contractors

879.5

13.1

Other specialty trade contractors

580.5

8.6

Highway, street, and bridge construction

344.4

5.1

Land subdivision

86.1

1.3

Other heavy and civil engineering construction

119.0

1.8

Special trade contractors

4,217.9

62.7

Building equipment contractors

1,842.5

27.4

Foundation, structure, & building exterior contractors

915.4

13.6

Building finishing contractors

879.5

13.1

Other specialty trade contractors

580.5

8.6

Source: U.S. Department of Labor, Bureau of Labor Statistics (March 9, 2004)

For the purpose of this paper we shall segment our initial targeted market as follows:

  • Office Building Construction
  • Building Facilities Renovation
  • General Construction
Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Office building construction 6% 2,517 4,027 4,268 4,524 4,795 17.48%
Building facilities renovation 3% 2,750 2,833 2,917 3,005 3,095 3.00%
General construction 3% 3,264 3,362 3,462 3,567 3,674 3.00%
Total 7.90% 8,531 10,222 10,647 11,096 11,564 7.90%

4.2 Service Business Analysis

The construction industry is divided into three major segments. Construction of buildings contractors, or general contractors, who build residential, industrial, commercial, and other buildings. Heavy and civil engineering construction contractors who build sewers, roads, highways, bridges, tunnels, and other projects. Specialty trade contractors who are engaged in specialized activities such as carpentry, painting, plumbing, and electrical work.

Construction usually is done or coordinated by general contractors, who specialize in one type of construction, such as residential or commercial building. They take full responsibility for the complete job, except for specified portions of the work that may be omitted from the general contract. Although general contractors may do a portion of the work with their own crews, they often sub-contract most of the work to heavy construction or specialty trade contractors.

Specialty trade contractors usually do the work of only one trade, such as painting, carpentry, or electrical work, or of two or more closely-related trades, such as plumbing and heating. Beyond fitting their work to that of the other trades, specialty trade contractors have no responsibility for the structure as a whole. They obtain orders for their work from general contractors, architects, or property owners. Repair work is almost always done on direct order from owners, occupants, architects, or rental agents.

Twin Brothers Construction will concentrate its activity in the following areas:

  • Commercial Building Construction
  • Commercial Building Renovation
  • Buildings Management and Rental
  • Building Materials Supplies