Fosse Commercial Contractors

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Construction Business Plan

Market Analysis Summary

The Houston area is booming at this moment, overall business growth over the past seven years has averaged approximately 9.5% and is expected to continue for at least the next four years. This constitutes an attractive market for Fosse Commercial Contractors.

We will be concentrating on the customers that will provide us with the greatest margin, in other words those clients desiring office building construction. This is the fastest growing segment of all the commercial clients requiring our services. The other categories we will serve include the restaurant and special facilities segments, along with a segment we will call the general category, to serve all other potential commercial clients.

4.1 Market Segmentation

At the moment our potential list of clients includes all the various businesses in the Houston area and its suburbs. According to the Texas Small Business Association there are 6,512 firms of all types and sizes in the surrounding area. We will concentrate on the customers that can provide us with the greatest margin, in other words those clients desiring office building construction. This is the fastest growing segment of all the commercial clients requiring our services. The other categories that we will serve include the restaurant segment, the special facilities segment, such as gas stations, and theaters, and a category which we will call "general", encompassing all other potential commercial clients.

Market Analysis
2004 2005 2006 2007 2008
Potential Customers Growth CAGR
Office building construction 6% 2,517 2,668 2,828 2,998 3,178 6.00%
Restaurant construction 3% 1,779 1,832 1,887 1,944 2,002 3.00%
Special facilities construction 3% 2,750 2,833 2,917 3,005 3,095 3.00%
General construction 2% 3,264 3,329 3,396 3,464 3,533 2.00%
Total 3.45% 10,310 10,662 11,028 11,411 11,808 3.45%

4.2 Target Market Segment Strategy

Since office building construction has the highest average profit margin, we will focus most of our marketing and servicing toward these customers. Usually these clients require the largest projects in scope, land use, and cost. In addition, they tend to be the most sensitive to completion times. Therefore, we plan to accommodate these clients through a well established and expeditious permitting program, strict cost accounting and supply management, and intensive and comprehensive project management capitalizing on Fosse's experience in the field.

4.3 Service Business Analysis

The Houston area is booming at this moment, with overall business growth for the past seven years averaging approximately 9.5%. This growth level is expected to continue for at least the next four years. One of the prime reasons for this growth is the creation of the North American Free Trade Agreement (NAFTA), that removed trade boundaries throughout our continent. Texas is ideally situated to take advantage of these new conditions and is experiencing a boom to prove it. This makes for a very attractive market for Fosse Commercial Contractors.

The commercial construction industry is highly fragmented across the nation. More than 86% of all construction companies in the U.S. consist of small "mom and pop" style companies employing less than ten individuals. Contrasted to this are the large companies that engage in "heavy" construction such as roads, shopping malls, etc. who often have a nationwide scope and employ several thousands of workers. This creates a highly competitive market with low profit margins. Companies wanting to create a defensible position in this market need some form of competitive edge, such as brand name, low cost advantages, or size.

4.3.1 Competition and Buying Patterns

Currently we have three major competitors within the Houston area. These are TNT General Contractors, Texas Specialty Construction, and Polanski Construction. Each of these companies targets the same clients as Fosse and each has a fine reputation for customer satisfaction. However, the market in Houston is growing so fast that the demand is currently greater than supply. This is an excellent opportunity to gain market share and a defensible position in the industry.

One of the greatest limiting factors in this industry is its strong seasonality. During the winter months, contracts and production drop off sharply, increasing the company's short-term risk of cash flow shortfall.