Business Plan (Precast Concrete Houses)

Table of Content

4. Business Plan

4.1 Executive Summary

4.2 Company Description

4.2.1 Product Need/Opportunity recognition

4.2.2 Company overview

4.2.3 Mission statement

4.4.4 Vision statement

4.2.5 Organizational Structure

4.2.6 Roles and Responsibilities

4.3 Product Description

4.3.1 Products and services offering

4.3.2 Benefits of Precast homes

4.4 Entrepreneurial Assessment

4.4.1 Product definition

4.4.2 Competitive advantages from traditional construction

4.4.3 SWOT analysis of precast homes

4.4.4 SWOT analysis of Business

4.4.5 Cost comparison with traditionally built home

4.5 Marketing Plan

4.5.1 Executive summary

4.5.2 Market description

4.5.3 Marketing objective and issues

4.5.4 Segmented needs and corresponding benefits

4.5.5 Marketing strategy

4.5.6 Product awareness plan

4.6 Financial Plan

4.6.1 Initial funds

4.6.2 Initial expenses

4.6.3 Salaries

4.6.4 Office expenses

4.6.5 Sales projection

4.6.6 Income projection

4.6.7 Income proportion plan

4.6.8 Cash flow analysis

4.7 Operational Plan

4.8 Exit Strategy

4.8.1 Annual business analysis and corresponding strategies

4.8.2 Summary of exit strategies

4.9 Entrepreneurial Model

4. BUSINESS PLAN (Rapid Homes (Pvt) Ltd)

4.1 EXECUTIVE SUMMARY

Rapid Homes is a prefabricated homes construction company based in Karachi. This company is

an initiative in order to develop and strengthen a new market of prefabricated homes in

housing construction industry of Pakistan. It provides quality, economical, safe & quick new

homes construction services by utilizing a prefabricated technology.

Rapid Homes offers a complete precast concrete house on the buyers request and

manufactured according to international codes and specification. Our company will provide the

services like architectural and structural designing, site preparation, home installation and

assembling, outsourced plumbing and electrical services, and finishing services which include

doors, windows, paints, flooring etc. to its prospective clients.

Precast homes provides a number of benefits along with its application like material durability

and sustainability, variation in architectural finishes, low maintenance cost, speed in

construction, economical on mass production and quality assurance due to the manufacturing

of precast elements in yard within the controlled environment and supervision. The cost

comparison between precast houses and traditional built, depicting us on average 30% saving

as compared to traditional built house. The number of above features and cost saving will be

utilized to motivate our customers, change their perception and to build our business.

Taking advantage of current housing shortage in Pakistan i.e. 8.8 million housing units which

are escalating at an annual rate of 700,000 units, this healthy number will allow the new

housing company like Rapid Homes to enter in housing market of Pakistan and play its pivotal

role in reducing housing demand by incorporating precast technologies. There is an annual

demand of 500,000 housing units for next 20 years in Sindh Province. Karachi city (Our Business

Location) with a major proportion of population of Sindh has an annual demand of more than

100,000 housing units which is escalating rapidly due to increase in population and low speed

construction operation.

Currently there is no proper knowledge of precast homes is present in the minds of our

targeted customer. People have wrong myths associated with this product including stability

issues, architectural flexibility etc. So our primary marketing objective is to build awareness and

knowledge about precast houses among our target market through the use of entrepreneurial

marketing i.e. utilizing fewer budgets and using the channels that are within our control

including family, friends, relative etc. to market our product. To establish well regarded brand

named linked to meaningful positioning, we will have to work really hard by doing excellent

pilot projects and adding new but customer driven features in our product to create a

memorable and distinctive brand image projecting innovation, quality and customer value.

We will deploy a number of least expensive marketing techniques to spread our brands name

including public relations, website, attend trade shows and local fairs, words of mouth

marketing and conduct workshops at different places.

The best part of this business is its low investment requirement to take flight, and that is also

contributed by owners. After 2 years of pilot projects and savings of salaries, our initial

investment will be up to Rs. 740,000. We will setup our business in IBA Karachi incubation

center with an initial cost of Rs. 50,000 and monthly expenses of Rs. 15,000 excluding salaries.

The financial statements and sales projection shows a profit of Rs. 517,000 and that is

increasing after every two consecutive years due to increase in our sales. At the end of fifth

year the statement show us a total profit of Rs. 42, 70,000. At the end of each year the profit of

business will be divided in proportion for different purposes. Owners will get 10% (each), 15%

will be for business development, 25% for new product technologies and rest of the proportion

will be saved for future contingency or financial need of company.

Phase 1 of business (2 to 3 years) comprising two main activities in order to build credibility and

collecting investment for starting business includes doing jobs by potential business owners of

rapid homes and doing pilot project for the customers, we will attract from our circle of

influence. Then those customers will act as our loyal recommending agents for future potential

customers. Phase 2 consist of approximately 5 years start from launching the Rapid homes

officially by setting its office in Incubation Centre IBA Karachi. At the end of this phase Rapid

Homes will have Rs. 4.2 million by selling at least 28 homes. In this phase, company will even

make its customer which will be even outside of the initial circle of influence of business

(business owners).

4.2 COMPANY DESCRIPTION

4.2.1 Product Need/Opportunity Recognition

Pakistans current housing demand is 1.5 million per annum but only 0.6 million homes are

constructing annually. Also there is current shortfall of 8.8 million units in country. Punjab

province of Pakistan has a total population of 82 million with a residential market of 10.535

million units and current shortfall of 5 million units. This rate is increasing at an annual rate of

700,000 units. Whereas if we see the potential housing market of Sindh there is an annual

demand of 500,000 housing units for next 20 years. There is an annual demand of more than

100,000 housing units in Karachi, which is escalating rapidly due to increase in population and

low speed construction operation.

In addition to this huge lag in housing industry, there is a common complain which

customer/clients used to do is a lack of quality assurance and control of construction which

ultimately results in bad customers relation and low quality house for clients. This problem can

also be countered in the Rapid Homes product i.e. precast concreter house which will

manufacture in yard in a control environment reducing quality issues and then installed on site.

4.2.2 Company Overview

Rapid Homes is a prefabricated homes construction company. The legal status of company

will be LLC (Limited Liability Company) firm because of the advantages and protection it

provides with its business form. Like it provides the authority to raise more capital on the name

of company by hiding the name of owner, widely used and well suited for SMEs, and flexibility

to form by more than one owner. The detail comparison between different forms of business is

shown in appendix D. This company is an initiative in order to develop & strengthen a new

market of prefabricated homes in housing construction industry of Pakistan. It provides quality,

economical, safe & quick new homes construction services by utilizing a prefabricated

technology.

Rapid Homes offers a complete precast concrete house on the buyers request &

manufactured according to international codes & specification. The company will provide the

services; include designing, marketing, sales, delivering and assembling of prefab homes.

4.2.3 Vision Statement

To serve as a leader in the Prefab housing construction sector of Pakistan.

4.2.4 Mission Statement

To delight our customers by providing the quality, safe, economical & quick home construction

product, services & facilities to them.

4.2.5 Organization Structure

Organizational Structure (Assumptions)

The organizational structure of this company has been developed by taking several

assumptions:

Rapid Homes will initiate its business as LLC business with only owners as a permanent

business partner and no outside employee except legal advisor.

All business partners have equal share and equity in the business, whereas legal advisor

has fix monthly salary.

The organizational structure will come into application after 4 to 5 years when company

will have enough profit, revenue and demand of more structured organization.

The organizational structure may or may not vary depending upon the size and maturity

of an enterprise.

Organizational Structure of Company

CEO

Vice President Finance

External Finance

Manager

Internal Finance

Manager

Vice President Sales &

Marketing

Sales Engineer

Site Supervisor

Foreman

Marketing Manager

Marketing Team

Vice President Procurement &

Customer Relation

Procurement/Contr

act Manager

Customer Realtions

hip Manger

Vice President Technical

Design Team

4.2.6 Roles and Responsibilities

Roles & Responsibilities of CEO (Chief Executive Officer)

CEO will be acting as a head of business.

Overall responsible for the finance issues of company.

Responsible for business development.

One must gather all the teams & company to focus them toward the companys vision.

Build and implement company policies for the betterment of customers, business

partners, and employees

Overview companys balance sheets, marketing strategies, sales figures and other

concerned issues.

Meeting with board of directors and keep them motivated by showing them the

monthly & annual financial reports of company.

Roles & Responsibilities of Board of Directors

Aligning the business in right direction.

Frequent meeting with top management of company to build & implement company

policies.

Attracting and contributing financial & business investments.

To expand and develop the business in new dimension.

Roles & Responsibilities of Vice President Finance

Keep check & balance of all business accounts.

Handle core finance management issues of company.

Look after the investment, loans, insurances, business taxation, cash flow and other

internal finance matter of company.

Responsible for inviting & attracting new business investments, opportunities &

partnerships.

Able to take key finance decisions of company.

Approve budget for marketing strategies.

Required Skills

Should be MBA finance or an equivalent level of qualification.

Min 05 years of relevant finance related experience.

Roles & Responsibilities of Vice President Sales & Marketing

Look after for the overall sales, growth, sales services before and after delivery of

product.

Build, manage and implement new marketing strategies for company & product

promotion.

Responsible for identifying, targeting & attracting potential customers.

Required Skills

Should be BE or Bsc in Civil Engg with MBA Marketing.

Min 05 years of relevant sales experience in construction product manufacturing

company.

Able to develop & implement all marketing strategies.

Roles & Responsibilities of Vice President Procurement & Customer Relationship

Responsible for overall contract management (B2B, B2C).

Responsible for attracting and maintaining relations with potential customer &

businesses.

Coordination with the Sales department in smoothing the process from product

ordering to delivering and satisfying customers need & requirements.

Required Skills

Should be BE Civil or Construction Management & MBA in relevant field.

Relevant experience in procurement of services & products.

Responsible for tender negotiation, contract management to fulfill company &

customers interest.

Roles & Responsibilities of Vice President Technical

Responsible for continuously innovating & adding values in the product to make our

offerings competent.

Responsible for approving of final designs of prefab houses before sending to the

manufacturers.

Coordinating with the Sales Engineer (Sales department) in the technical issues of

product life cycle.

Required Skills

Should be B.Arch or BE Civil & preferably Masters in relevant field.

Good Knowledge about prefabricated & precast homes technology, green technology &

other latest homes technologies.

Relevant experience of structural or architectural designing.

Proficient in different designing software.

Roles of External Finance Manager

He/she is responsible to arrange the loans.

Strong relation with banks.

To develop the contact with investors.

Required Skills

Bachelors Degree or above, major in finance or accounting.

2 years experience.

Roles of Internal Finance Manager

To maintain the balance sheet.

To control cash inflow and outflow.

Budgeting

To handle the taxation issues of business.

To transfer the salaries & bonuses of company staff.

Required Skills

B.com or ACCA,

2 years experience.

Roles of Sales engineer

Developing long-term relationships with clients

Persuading clients that a product best satisfies their needs in terms of quality, price and

delivery;

Providing pre-sales technical assistance and product education, and after-sales support

services;

Preparing reports for head of sales and marketing

Meeting regular sales targets and coordinating sales projects.

Supporting marketing activities by attending trade shows, conferences and other

marketing events.

Making technical presentations and demonstrating how a product meets client needs

Providing training and producing support material for other members of the sales team.

Required Skills

BE Civil

2 years of experience

Roles of Site Supervisor

To handle the site

Problem solving skills.

Pressure handling

Required Skills

Diploma in civil.

5 years of experience.

Roles of Foreman

Technical knowledge about assembling the pre-cast members.

Site preparation

Prepare the foundation.

Required Skills

Diploma in Civil

Relevant training of precast homes assembling

Roles of Marketing Manager

Screening and estimate the marketing strategies made by marketing team.

Researching and reporting on external opportunities

Identify the current and potential customer

Developing the marketing strategy and plan

Measuring marketing strategies success

Required Skills

BBA (Marketing)

5 years experience

Roles of Marketing Team

Develop innovative marketing strategies keeping in view our target market, product

offerings, unique features of our products & services.

Keep themselves up to date about new marketing methods

Required Skills

BBA (Marketing)

1 year experience/ fresh

Roles of Procurement/ Contract Manager

Float the tender for internal and external requirements of company

Responsible for outsourcing of product

Contracts between Business to business and customer to customer

Required Skills

B.E Civil

Relevant experience of 2 years or more

Roles of Customer Relationship Manager

To resolve quarries of customers

To provide friendly environment to customers & satisfy customers need on his

demands.

Required Skills

Excellent communication and persuading skills

Fresh BBA or with 1 year experience

Have pleasant personality

4.3 PRODUCT & SERVICES DESCRIPTION

4.3.1 Product & Services Offerings

Rapid Homes will provide the following products and services to its clients:

1. Architectural & Structural Designing

2. Site Clearance & Preparation

3. Precast Concrete Homes

4. Home Installation & Assembling

5. Plumbing & Electrical Services (Outsourcing)

6. Finishing Services

1-Architectural & Structural Designing

The company will provide architectural and structural designing services in-house. It will allow

us to facilitate our customers by delighting them with the most suitable, economical and

durable house designs that will fit their needs.

2-Site Clearance & Preparation

The company will deploy labor (hired on daily wages/subcontracting) to clear and level the site.

In addition it will include excavation (if needed), laying necessary foundation and lean concrete

so that it will provide smooth concrete finished surface to install precast homes on it.

3- Precast Concrete Homes

Rapid Homes will provide precast concrete manufactured house to his clients. The

manufacturing will be done by manufacturer. All the structural elements of house include,

slabs, wall, column, footing (if needed) will manufacture off the site and then transported to

the site for assembling and installation.

4- Home Installation & Assembling

The manufacturer will deliver the complete house from factory to site. Then Rapid Homes will

utilized the labor (hired on daily wages/subcontracting) to assemble and install the house. In

addition two of potential future business owner will also utilize their time and energy on site for

work and quality supervision. It will cut down the cost of extra helper of site supervisor.

5- Plumbing & Electrical Services

These services will be outsourced to small but good reputation contractor. The cost of material

and labor in this operation will be bear by customer. The major reason behind this approach is

every customers demand is different regarding the standard and quality of electrical and

plumbing fixtures they need in house. So to minimize risk we allow our customer to bear the

cost of these fixtures and services themselves.

6- Finishing Services

The cost of material and labor for finishing services will be incurred by our company as

mentioned in the costing budget of house. The finishing service will include paint, aluminum

windows, doors, vinyl flooring in kitchen, bathroom and store rooms while ceramic tiles in the

rooms and lounge.

4.3.2 Benefits of Precast Concrete Homes

The benefits & features associate with Rapid Homes precast concrete design would be including

resistance to fire, high winds and storm damage; reduction in home maintenance, and high

energy efficiency for homeowners.

1. Material Durability

Precast concrete housing provides exceptional long-term durability and requires little or no

conventional home maintenance, such as painting, staining, weatherproofing, or aluminum

cladding. Resistance to fire and natural disasters such as tornados, earthquakes, and flooding

are measurable benefits of a concrete domicile.

2. Variety in Architectural Finish

Numerous architectural treatments are possible with precast concrete. Many high-quality

surface textures, colors, and finishes are now available with precast plant production methods.

Permanent brick and stucco exterior finishes offer even more options for architectural

designs.

3. Lower Long term Maintenance Cost

Because precast concrete exteriors maintain their just-built look with little maintenance and

their operating costs are much lower than those of a conventional house, the concrete building

retains high resale value over time. These energy and maintenance savings, and the retention

of real estate investment value, are measurable economic benefits for any potential home

buyer.

4. Speed

Fast construction on site means the project reaches hand-over more quickly, and so the client

can occupy or let the building earlier. Consequently, there are savings in land, labor, rents,

overheads and financing costs, and a faster return on investment. Furthermore, if less time is

needed on site, then there is less pressure on the design team to find a suitably lengthy

weather window for construction activities.

5. Quality

One of the key perceptions attributed to production in controlled environments such as precast

concrete factories is that the greater degree of control (and the lesser degree of risk) will result

in a higher quality product compared to its on-site equivalent. The ability to work in a weather-

independent and controllable environment means that strength, surface quality and

consistency, and detailed design features in precast concrete components should be much

easier to achieve. Indeed both the material and dimensional properties of the product should

benefit from such a production environment.

4.4 ENTREPRENEURIAL ASSESSMENT

The entrepreneurial assessment has been done to measure the feasibility of precast homes in

order to see whether the companys product has those promising features that provide it an

edge over traditional homes or not. For this we have define company product and its relative

advantages, SWOT analysis of product and business, cost comparison between traditional and

precast homes.

4.4.1 Product Definition

The product will be manufactured from concrete in the manufacturing yard and then

transported to the site and assembled accordingly. The product will be prepared in the form of

modules and panels that will assemble to prepare a complete home on site.

4.4.2 Competitive Advantages from Traditional Construction

1. Economical on Mass Production

Precast homes are very economical when mass produced or manufactures similar homes

because of the repetitive use of molds result in the cost regaining of molds. The company will

provide almost standardized 80 sq.yd and 120 sq.yd homes with little bit customization in final

touches, or color etc.

2. Speed

Fast construction on site means the project reaches hand-over more quickly, and so the client

can occupy or let the building earlier. Consequently, there are savings in land, labor, rents,

overheads and financing costs, and a faster return on investment. Furthermore, if less time is

needed on site, then there is less pressure on the design team to find a suitably lengthy

weather window for construction activities.

3. Quality

One of the key perceptions attributed to production in controlled environments such as precast

concrete factories is that the greater degree of control (and the lesser degree of risk) will result

in a higher quality product compared to its on-site equivalent. The ability to work in a weather-

independent and controllable environment means that strength, surface quality and

consistency, and detailed design features in precast concrete components should be much

easier to achieve. Indeed both the material and dimensional properties of the product should

benefit from such a production environment.

4.4.3 SWOT Analysis of Precast Concrete Homes

Table 4.1 SWOT analysis of Precast Concrete Homes

STRENGTHS

Speed, Quality, Economy

Low Maintenance

Seismic Resistant

Universal Application

WEAKNESS

Lack of awareness, acceptability &

availability

Resistance to Change

Fear of Unknown

Unfamiliarity of Architects and

Engineers

Lack of Exposure to the technology in

Technical Institutes

OPPORTUNITIES

Large market of affordable houses

Population is increasing causing

housing market expansion

Unskilled labor

Target middle class

Large Size Projects

Demand for Quality Construction

Cost efficient technology

THREATS

Govt. Tax Policy, Lack of Govt. Support

& Encouragement

Bad Past Experience with Substandard

Technology & execution

Lack of Standardization

Imaginary Problems

Difficult to customize

4.4.4 SWOT Analysis of Business

Table 4.2 SWOT Analysis of Business

STRENGTHS

Excellent Customer Service

Excellent Sales Service

Calculated risk (Affordable loss)

Less Investment required

Time and cost efficient

Quality Product

WEAKNESS

Initially Low Profit Margin

Less Customization in Product

Nonexistent Market

OPPORTUNITIES

Market demand of 700,000 houses

annually

No Market Competitors

Standardized Housing Schemes

Product innovation and improvement

Changing trend of people towards pre-

cast

Flood and earthquake affected areas

First mover advantage

High profit margin in Mass production

THREATS

Wrong customer perception

High risk associated with product

Market entry barriers

Non-supportive attitude of contractors

Non-adopting attitude various industry

stakeholder

Economic slowdown

Lack of knowledge about product

4.4.5 Cost Comparison with Traditionally Built Homes

We have assumed that if manufacturer do not have the mold/precast shuttering already

prepared for the house manufacturing, it will cost them to prepare mold so we have taken Rs

400/Sft. This additional cost will incur the manufacturing cost of molds plus the profit margin of

manufacturer itself.

Table 4.3 Variable Cost of Precast 80 sq.yd House

Wall Cost 80/0.4 * 1500 Rs. 300,000 Roof Cost 80 * 9 * 400 RS. 288,000

Total 300,000 + 288,000 Rs. 588,000 Site Preparation 10 % * total cost Rs. 58,800

Assembling Crane 3 % * total cost Rs. 17,640 Assembling Labor 5 % * total cost Rs. 29,400

Finishes cost 25 % * total cost Rs. 1,47000

Variable Cost Total + Finishes + Site +

Crane + Labor Rs. 8,40,840

Table 4.4 Cost of Traditional Built 80 sq.yd House

Approximate Cost Rs. 1700/ sft * 80 * 9 Rs. 12,24,000

Table 4.5Variable Cost of 120 sq.yd House

Wall Cost 120/0.4 * 1500 Rs. 450,000 Roof Cost 120 * 9 * 400 Rs. 432,000

Total 450,000 + 432,000 Rs. 882,000 Site Preparation 10 % * total cost Rs. 88,200


Finishes Cost 25 % * total cost Rs. 2,20,500 Variable Cost Total + Finishes + Site Rs. 12,61,260

Table 4.6 Cost of Traditional Built 120 sq.yd House

Approximate Cost Rs. 1700/ sft * 120 * 9 Rs.18,36,000

Table 4.7 Variable Cost of 250 sq.yd House

Wall Cost 250/0.4 * 1500 Rs. 937,500 Roof Cost 250 * 9 * 400 Rs. 900,000

Total 937,000 + 900,000 Rs. 18,37,500 Site Preparation 10 % * total cost Rs. 1,83,750


Finishes Cost 30 % * total cost Rs. 5,51,250 Variable Cost Total + Finishes + Site Rs. 27,19,500

Table 4.8 Cost of Traditional Built Cost 250 sq.yd House

Approximate Cost Rs. 1700/ sft * 250 * 9 Rs. 38,25,000

4.4.6 Summary of Cost Comparison

Table 4.9 Summary of Cost comparison

House Size Traditional Cost Precast Cost %

Comparison

80 sq.yd House Rs. 12,24,000 Rs. 8,40,840 31 % Less



Note

This variable cost only include the civil works and finishing cost including structural cost,

paint, windows, doors, ventilators and floor finishes as according to the package.

This is an approximate comparison which is an effort to depict a maximum realistic cost

comparison and it can vary with the level of customization customer want in our

standardized homes and little bit due to external factors.

This is the cost which is utilized in complete manufacturing, transportation, site

clearance and preparation, assembling and final finishes of homes.

The cost does not include the internal profit of Rapid Homes and solely representing the

manufacturers cost plus finishing cost.

4.5 MARKETING PLAN

4.5.1 Executive Summary

Rapid Homes will be a new precast homes building company envisaged to be the fast growing

precast house construction company in Pakistan. The company will offer its product as a

quality, economical and time efficient solution for home buyers and to those who are willing to

construct their homes. Our product will offers a competitively unique combination of advanced

features and benefit depending upon our targeted markets. We are targeting specific markets

including Low Class and Middle Class as defined in the table below as Aspirers and Seekers

and Strivers respectively.

Taking advantage of current housing shortage in Pakistan i.e. 8.8 million housing units which

are escalating at an annual rate of 700,000 units, this healthy number will allow the new

housing company like Rapid Homes to enter in housing market of Pakistan and play its pivotal

role in reducing housing demand by incorporating precast technologies.

Our primary marketing objective is to convince and attract potential targeted market toward

our product by removing wrong perceptions from their minds through educating and providing

awareness to them and then instilling positive brand image about precast homes by delighting

and creating customer loyalty.

Our secondary marketing objective is to sell out at least 4 housing units in 1st year.

4.5.2 Market Description

Pakistans current housing demand is 1.5 million per annum but only 0.6 million homes are

constructing annually. Also there is current shortfall of 8.8 million units in country. Punjab

province of Pakistan has a total population of 82 million with a residential market of 10.535

million units and current shortfall of 5 million units. This rate is increasing at an annual rate of

700,000 units. Whereas if we see the potential housing market of Sindh there is an annual

demand of 500,000 housing units for next 20 years. There is an annual demand of more than

100,000 housing units in Karachi, which is escalating rapidly due to increase in population and

low speed construction operation.

Above insight provide us the potential figure to start our business in any of the region of

Pakistan i.e. Punjab province and Sindh Province. We would like to base our business location in

Karachi initially because of the advantages it provides:

An annual demand of 100,000 housing units in Karachi city, increasing number of

housing schemes and big population.

The city possesses more opportunities in terms of business collaborations, associations,

investments etc.

We can also expand our services to the villages which are sprouting on the edges of

Karachi city like Abdullah Goth etc.

4.5.3 Pricing Strategy

Since we need to perform projected sales calculation, for the reason we will find the average

unit pricing. For pricing, we first need to determine the unit cost require to produce the

product;

Unit Cost = Variable Cost + Fixed Cost/Unit Sales

Fixed Cost = Cost that do not vary with the level of sales normally include rent, interest,

management salaries etc.

Variable Cost = Cost vary directly with the level of production and include cost related to the

direct production of product.

We have taken the fixed cost of Rs. 50,000 at the start of business.

For determining variable cost we have taken an average of variable costs of 80, 120 and 250

sq.yd homes already done in entrepreneurial assessment. The average variable cost has already

been determined in section 4.4.5 as:

Variable Cost = Rs. 16, 07,200

Unit Cost = Rs. 16, 07,200 + Rs. 50,000/4

Unit Cost = Rs. 16, 19,700

This is also called the Breakeven Cost the price at which our unit revenue equals unit cost and

profit is zero. But we will add 19 % markup (profit margin) and this can be determined by:

Markup Price = Rs. 16, 19,700 + (Rs. 16, 19,700 * 0.19)

Markup Price = Rs. 19, 24,000

This will be an average selling price of the home.

4.5.4 Marketing Objectives and Issues

The rule of entrepreneurial marketing is to spend fewer resources and more focused on

building credibility by doing work. Due to work, our initial customer will start words of mouth

marketing which will result in the recommendation of our company. Our marketing techniques

are of slow pace but utilizing minimum resources and causing companys growth in steady and

less risky manner.

First Year Objective

To build awareness and knowledge about precast houses among our target market through

words of mouth marketing with a sales target of at least 4 houses.

Second Year Objective

To build and attract more targeted customers by spending no budget on marketing activity

formally and keeping same sales target of 4 houses.

Third Year Objective

To attract more targeted customer and retaining old one by providing excellent services, new

product features and increasing our sales target up to 6 houses

Fourth Year Objective

This year we will spend Rs. 100,000 on our marketing activity including publicity of our past

done projects, latest offerings, and unique features to attract at least 6 houses this year also.

Fifth Year Objective

This year we will increase our marketing budget for up to Rs. 200,000 to achieve the sales

target of at least 8 houses in a year.

Issues

In relation to the company and product launch, our major issue is the ability to establish well

regarded brand named linked to meaningful positioning. For this purpose, we will have to work

really hard by doing excellent pilot projects and adding new but customer driven features in our

product to create a memorable and distinctive brand image projecting innovation, quality and

customer value.

4.5.5 Segmented Needs and Corresponding Features/Benefits

Table 4.10 Segmented Needs and Corresponding Features/Benefits

Target Segment (Annual Income)

Customer Needs Corresponding

Features/Benefits

Aspirers (Rs. 90,000 Rs. 200,000)

Limited Budget/Low Cost housing

Quality Product Less Spacing capable of

accommodating more people

Standardized low cost houses

Less customization & features

Space saving furniture on reasonable price

Quality product

Seeker (Rs. 200,000 Rs. 500,000)

Medium-Low cost housing

Quality Product Medium level of

aesthetics & beauty Less construction time

Standardized housing system

Medium customization features

Quality Product More finishing &

aesthetics

Strivers (Rs. 500,000 Rs.

1,000,000)

Quality Product Aesthetics & Beauty Fast construction of

home More conscious of

uniqueness & individuality of product

Quality & Fine product More customization

features More value added

features

4.5.6 Marketing Strategy

Our marketing strategy will base on the positioning of the product as a Time Efficient and

Cost Effective quality product. The cost differentiation will be done to the Aspirers as they

seek economical & quality product. The time effectiveness of our homes will be targeting the

Seekers and Strivers who need the homes to be built as early as possible with sustainable

quality and provide beautiful aesthetic look to home.

Positioning

Rapid Homes will position itself as a Precast homes Builders that manufacture, assemble and

provide quality, economical, safe and environmental friendly precast houses to its prospective

clients. Low cost housing customer will be very persuaded by the low cost standardized quality

precast homes that the company is uniquely positioned to provide. Rapid Homes provide a

good deal to the customers whose time is precious and they need house to be built as early as

possible. Rapid Home will also position itself to provide the latest innovative homes features at

a value added price that allows for reasonable profits.

Rapid Homes will use the following method to position and market itself and its product to its

potential buyers.

1. Public Relations

Rapid Homes will capitalize on all opportunities for public relations. Leveraging all of its

memberships in precast building, local contractors, green building, and different construction

associations locally. Rapid Homes will strive to be a community leader and voice for precast

homes in the local communities. All company milestones will be celebrated with press releases.

2. Website

The website will be an enormous channel of information and communication. Ease of use and

aesthetic website design will be areas in which we will heavily invest. Brochures will also be

printed that highlight the major pieces of educational material that will be most compelling.

Website content will include:

Explanations of how and why precast design, modular construction, and smart materials

are beneficial for the environment, cost and time savings.

Virtual tours of floor plans.

Questions regarding financing precast homes vs. Traditional built homes.

The timeline they can expect the project to follow.

FAQ and links to precast homes resources

3. Outreach

To reach out to our target market, we will attend trade shows, Earth Day Fairs, local festivals

that attract the local home buyers crowd in the towns and cities with the highest

concentrations of our targeted group. Taking our message to our customer will be done

through sophisticated and informative displays and brochures.

We will also provide educational seminars and workshop related to precast homes construction

and its associated technologies to local technical colleges and universities. Through this

program, Rapid Homes will be educating the next generation of home buyers, thus young

people will go home and educate their parents about the products uniqueness.

4. Words of Mouth Marketing

All of our marketing efforts are also an attempt to encourage and facilitate word of mouth

communication. Rapid Homes recognizes the significance of this channel for generating buzz,

interest and sales. Providing Rapid Homes customers with a positive experience, one worthy

enough to tell their friends and family about is our end goal. This is a very successful marketing

channel in the architectural industry.

4.5.7 Competitive Edge Strategy

Initially Rapid Homes do not have any competitive edge over our competitors except time

saving, cost efficient and quality product. But over the couple of years, business will develop

competitive edge in its product in terms unique value offering by incorporating latest

technology in our product. For this purpose the business will be spending 25% of companys

annual revenue on latest housing technologies develop locally.

In addition to this strategy we will extend our product line over the years by continuously

researching about the related products and services which our loyal customer would like to

avail and like.

4.5.8 Product Awareness Program (Pilot Project)

Objectives

To create and build a physical evidence of our product.

To build our business portfolio, experience, networking and convince targeted market.

To learn the market facts and refine our product more according to customers need

and expectations.

To do an in-depth research and study on how to offer unique value proposition in our

product.

Implementation of Pilot Project

The time period of pilot project will be approximately 2 years or until we will deliver 3 to 4

houses. The primary target customers will be our family relatives, family friends etc. until unless

we will be able to sell our houses in our circle of influence, only then we can go in market to

convince someone else. Following figure show the simplest process of ordering to delivering of

house:

Figure 4.2

Acquire Customer

Order

Designing of

House

Order to

manufacturer and

site preparation

House delivery by

manufacturer and

installment onsite

Finishing /

Landscaping

Startup /

Handover to

Customer

Outcomes

Delivering 3 to 4 quality houses means, we have developed 3 to 4 loyal customers.

Loyal customer will act as a recommending agent of our product in their circle of

influence including their relatives, family, friends etc.

We can convince customers by showing them our past projects; we will have done in

pilot project.

We can develop and update our website by putting latest projects details and pictures

along with them.

4.6 FINANCIAL PLAN

4.6.1 Initial Funds

During our pilot project, all of our business owners (three) doing jobs plus we will be selling the

houses to people in our family and relatives. The detail of pilot project has shown in marketing

plan. By doing jobs and selling 3 to 4 houses, we will have an initial self-funding detail as

follows.

We are 3 partners each will be employed for 15000 Rs/month on a civil engineering job, so total

will be 45000 Rs/month in all. If we multiplied this figure by 24 months (pilot project duration),

we get Rs. 10, 80000. Each one of us will be sharing 30 % of his earned salary for starting

business. The total of 30 % from 3 partners will become Rs. 3, 24,000. Assuming that by selling

each unit we are earning a profit of Rs. 50,000 at least. After successful sales of 4 housing unit

our profit will become Rs. 200,000. In a nutshell we will be having a self-investment of Rs.

524,000 which is a good sign as we will not seek investment from outside.

Table 4.11 Sources of initial funds

Sources Per Month (Rs.) Per year (Rs.)

Professional Job Salaries (3 Members)

45000 (each at Rs. 15000) 540,000

30 % Retention of Salaries 135000 162000

Profits from Units sold (2) - 100,000

Total Funds after 2 Years 524,000

4.6.2 Initial Expenses

Our initial business expenses is primarily depend upon the approach we choose in between

selecting IBA as an office or go for self-office approach. For determining which approach is most

suitable in case of our business we have done a detail comparative analysis between both

options.

We have done a theoretical comparison of advantages and disadvantages of both choices,

which has shown in appendix A. In addition, we have also done the benefit over cost ratio

between both options and found out that IBA is much viable and handsome approach in terms

of growth and development of our business than going for self-office approach which possesses

heavy overheads and more susceptible to financial risk. The summary of net benefit/cost

comparison is shown in below figure. For detail analysis check appendix A.

Net Comparison Over 5 Years

Table 4.12 Net Comparison of Income of 5 years

Revenue IBA Self-Office

Revenue in 2 Years 11,94,000 -564,000

Revenue in 3rd Year 10,70,000 266,000

Revenue in 4th Year 970,000 106,000

Revenue in 5th Year 10,14,000 170,000

Net Revenue in 5 Years 42,68,000 -22,000

In case of IBA approach our initial expenses will include rent of IBA, website development and

hosting, printer registration of company, printing business cards, essential business heads,

brochures, and informative material etc. For all this we have set a budget of Rs. 40,000 with

contingency amount already added. We will bear all these expenses from our self-investment.

4.6.3 Salaries

Initially by adopting bootstrapping approach, we will not hire anyone except a legal advisor on

an annual basis by paying Rs. 5000 per month. Although we have added the salaries of owner

i.e. Rs.10, 000 per person per month, but we will not withdraw our salaries until there will be

no sale or we have positive cash flows. In the fifth year we will have hired a site supervisor at a

Rs. 20,000 per month. The detail of monthly salaries has been shown in Appendix B.

4.6.4 Office Expenses

While selecting IBA approach we will be facing following types of office expenses per month as

shown in table.

Table 4.13 Monthly office expenses

Expenditure Cost (Rs.)

Office Rent 10,000

Telephone/Internet 3,000

Stationary 1000

Misc. 1000

Total 15,000

4.6.5 Sales Projections

We have set very realistic and achievable sales target for consecutive initial 5 years of business.

The basis for the 4 house for 1st year is to attract each customer from our past customer profile

to which we will have deliver quality precast house during our pilot project (product awareness

1st Year 2nd Year 3rd Year 4th Year 5th Year

No of Houses 4 4 6 6 8

0

2

4

6

8

10

No

of

Ho

use

s

Projected Sales Target

1st Year 2nd Year 3rd Year 4th Year 5th Year

Rupess 617000 617000 1071000 971000 1014000

0

200000

400000

600000

800000

1000000

1200000

Ru

pe

es

Income Projection

period). Then for the succeeding year our target remain same and to attract more customer

from the circle of influence of previous customers. After 2 years of sales we will have almost 8

houses sold, which allowed us to take a risk of expecting 6 houses in 3rd year, based on

expecting customers from the circle and recommendation of those 8 loyal customers. Similarly

on these grounds we have recorded to be expected sales in 4th year will also be 6 houses per

annum. After building profile of loyal customers of more than 20 customers, we are assuming

that the sales for 5th year can grow up to or even beyond 8 houses.

Graph 4.1 Projected Sales Target

4.6.6 Income Projections

Fortunately our business is showing profit which is a very good sign; it is due to the fact that we

have minimized the financial expenses by acquiring office space in IBA plus reducing the office

overheads (salaries) by adopting bootstrap approach. For the 2 years we will be working at

same salaries and sales will be uniform ultimately causing same profit over twice years. The

graph is depicting increase in companys income due to increase in sales in third year. In the

fourth year the income line in graph is slightly inclining downward due to the reason we have

increased our expenses by adding marketing budget of Rs. 100,000. In the fifth year our income

will remain approximately same because the profit increase in sales will be countered by our

increase in office overheads in the form of marketing budget and appointing site supervisor.

Graph 4.2 Income Projection

Table 4.14 Cash Flow Projection of 5 Years

1st Year (Rs.) 2nd Year (Rs.) 3rd Year (Rs.) 4th Year (Rs.) 5th Year (Rs.)

Sales 76,96,000 76,96,000 1,15,44,000 1,15,44,000 1,53,92,000

COGM 64,29,000 64,29,000 96,43,000 96,43,000 1,28,58,000

Total Expenses

650,000 650,000 830,000 930,000 15,20,000

Net Profit w/o Tax

577,000 617,000 10, 71,000 971,000 10, 34,000

Cumulative Revenue over

Years

577,000 11,94,000 22,65,000 32,36,000 42,70,000

*Detail income statement of each year is shown in Appendix C.

4.6.7 Income Proportions Plan

After paying all the office expenses, salaries and other necessary payments, whatever amount

will be left in companys bank account will divide for different utilization. We have set different

proportion of companys income for owners profit, business development, contingency,

product research and incorporating new technologies etc.

Table 4.15 Income proportion plan

Expenses Percentage of Income

Detail

Owners Profit Sharing 10 % (Each Partner)

Each person will be getting 10% share on companys annual income except their monthly salaries.

Business Development 15 % This percent of amount will be served in business development operations and processes.

Future Contingency 30 % This 30% will be saved for future contingency or any other financial crisis/need of company.

Product Research & New Technologies

25 % 25% of every years income will be spent on buying new technology, material, researching (outsourced) etc. to build competitive advantage in terms of unique offerings.

4.6.8 Cash Flow Analysis

We have developed cash flow analysis in order to see cash outflow and inflow for a particular

financial year. By developing this analysis we will be able to build strategies for maintaining

balance between inflows and outflows of company.

-200000

-100000

0

100000

200000

300000

400000

500000

600000

700000

Month1

Month2

Month3

Month4

Month5

Month6

Month7

Month8

Month9

Month10

Month11

Month12

Ru

pe

es

Cash Net Flow

First Year Cash Flow

Graph 4.3 First Year Cash Flow

Corresponding Strategies

At the start of 1st year the graph is showing a cash outflow of Rs. 90,000, which we will

counter by spending from our initial investment i.e. Rs. 740,000.

In the second month there is also an office and salary expense of Rs. 50,000, which we

will pay from our initial investment, or we can choose not to withdraw our salaries until

there will be any sale.

In the third, sixth, ninth and twelfth month we will have a cash inflow by selling each

unit, also in alternate months we will bear our expenses by spending this cash inflow

amount in companys account.

The graph is showing downward slope after 3rd month, for every 2 months indicating no

cash inflow in this duration.

If there will be any risk of less sales than our expectations, then we have money in our

account to counter the expenses for almost 2 years.

-100000

0

100000

200000

300000

400000

500000

600000

700000

800000

Month1

Month2

Month3

Month4

Month5

Month6

Month7

Month8

Month9

Month10

Month11

Month12

Ru

pe

es

Cash Net Flow

Second Year Cash Flow

Graph 4.4 Second Year Cash Flow


First and second month of second year showing a monthly expense of Rs. 50,000 which

will be easily paid from previous years income.

In the third, sixth, ninth and twelfth month we will have a cash inflow by selling each

unit, also in alternate months we will bear our expenses by spending this cash inflow

amount in companys account.

The graph is showing downward slope after 3rd month, for every 2 months indicating no

cash inflow in this duration.

If there will be any risk of less sales than our expectations, then we have money in our in

the form of previous year income and initial funding amount to counter the expenses

easily.

-200000

0

200000

400000

600000

800000

1000000

1200000

Month1

Month2

Month3

Month4

Month5

Month6

Month7

Month8

Month9

Month10

Month11

Month12

Ru

pe

es

Cash Net Flow

Third Year Cash Flow

Graph 4.5 Third Year Cash Flow


Due to sales in second month of third year we need to bear our first months expenses

from our previous year income.

This year we have increased the salaries up to Rs. 15000 due to increase in our sales

target.

The graph is showing cash inflow in every even month of year, which is cumulatively

increasing even after subtracting cash outflows of every month.

If there would be any financial risk occurred due to low sales then we have the

capability to withstand by utilizing our financial contingency of previous two years.

-200000

0

200000

400000

600000

800000

1000000

1200000

Month1

Month2

Month3

Month4

Month5

Month6

Month7

Month8

Month9

Month10

Month11

Month12

Ru

pe

es

Cash Net Flow

Fourth Year Cash Flow

Graph 4.6 Fourth Year Cash Flow


First month expenses will be countered by previous year income.

Fourth years graph is showing a cash inflow in every even month of a year, which is

increasing in zigzag shape due to subtraction of cash outflow in every alternate month.

Marketing budget of Rs. 100,000 has added to meet the sales target of 6 housing units.

The budget has cut into pieces of Rs. 25000 and will contribute in the cash outflow of

first, third, fifth and seventh month of the year.

If there would be any financial risk occurred due to low sales then we have the

capability to withstand by utilizing our financial contingency of previous two years.

-400000

-200000

0

200000

400000

600000

800000

1000000

1200000

Month1

Month2

Month3

Month4

Month5

Month6

Month7

Month8

Month9

Month10

Month11

Month12

Ru

pe

es

Cash Net Flow

Fifth Year

Graph 4.7 Fifth Year Cash Flow

Corresponding strategies

This is most beneficial year in terms of our sales target of 8 housing units.

First month expenses will be countered by previous year income of company.

The graph is showing upward slope for every two months and downward slope for one

month indicating cash inflow for two consecutive months and only cash outflow for one

month respectively.

This year we have set marketing budget of Rs. 200,000 which has divided into four

pieces of Rs. 50,000 each, spend in first, fourth, seventh and tenth month of year.

If we will unable to achieve our sales target, we are able to bear our office and salaries

expenses for an year because of our profit from previous years.

4.7 Operational Plan

Phase 1

Phase 2

Phase 3

Figure 4.3

Customer

Acquire

Designing of

House

Order Secure

Preparation of

Detail Drawings

Order to

Manufacturer Site Preparation

House

Delivered

House

installment &

Finishes

Startup

Phase 1

Phase 1 is comprises of primary operational activities starting from customers entry in the

company and put their requirement for economical and quality house, then the designer will

prepare the architectural design according to their need and requirement keeping in mind the

companys standardized house designs (already built). After the green signal by respective

clients, the company will secure its order by taking an advance payment according to the terms.

Then the designer of company will prepare detail drawings including shop drawings, structural

drawings, construction drawings, specifications etc.

Phase 2

Phase 2 starts from ordering the precast house manufacturer by sending him detail house

drawings and specification. Same time on the other hand, company will hire labors for site

preparation including site clearance, leveling, soil compaction, elevation increase, lean concrete

etc. This phase will end on the successful delivery of house onsite and site preparation.

Phase 3

Phase 3 is will continue from the delivery of the manufactured house members and elements

that will install onsite with the help of cranes and labors. After the installment finishes will be

made in house including windows, doors, ventilators, flooring, and paints. This phase will end

by handing over the complete house to the end customer/consumer.

4.8 EXIT STRATEGY

4.8.1 Annual Business Analysis and Corresponding Exit Strategy

After 1 year of business

To get/build customers

If customers build at the end of

2nd year of business

If not

If customer build at the end of

3rd year of business

If not (After 3rd year of business)

Money will be spend

on advertisement (customer making)

(After 4th year of business)

(During 5th year of business)

Figure 4.4 Flow chart of exit strategies

Starting company

after pilot project

If only 1 house sold

out (worst case)

If two house sold

out

Company will not

adopt exit strategy

Merger with

reputed contractor

Company will again

be separated

Merger with

another contractor

Company will again

be separated

Become separate

and go for investor

If Customers build Continue as

separate company

Go for IPO (Initial

public offering)

4.8.2 Summary of Exit Strategies

After the 5 years of business, if the business will not make enough profit/revenue, the company

will be going to adopt one of the following exit strategies depending upon the circumstances:

1. Rapid Homes will merge with another existing strong reputation precast contractor in

order to keep itself in market.

2. Rapid homes will merge with the existing precast manufacturer.

3. Rapid homes will be acquired by another big contracting firm or precast manufacturer.

4. Rapid homes will go for IPO (initial public offering).

4.9 ENTREREPRENEURIAL MODEL

Phase One:

In Phase one, the potential future owners of rapid homes will be doing two major activities to

build credibility and initial investment by themselves. The Phase One will comprise of 2 to 3

years approximately.

1. They will be doing professional engineering jobs to gain experience, exposure, build

professional networks and credibility, at on an average salary of Rs. 15000 per month.

From that salary, they will be contributing 30% of their salary for starting business

(detail is given in section 4.6.1)

2. They will be running pilot project (detail is given in 4.5.7) by convincing, facilitating and

attracting the potential customers of the product i.e. Precast Concrete Homes from

their circle of influence including family, relatives and friends.

At the end of the phase 1 business will have been possibly achieved following outcomes:

1. Development of personal and business credibility by acquiring job experience and selling

houses in pilot project respectively.

2. Saving money by doing jobs for initial business expenses.

3. Building potential networks by working with construction industry.

4. Refinement of the product by taking feedback from pilot project customers, removing

faults which might come in actual operation and correcting product and business

assumptions.

Phase Two

The Phase two will comprise of 5 years approximately, the business will be officially launched

by acquiring office space at IBA Karachi Incubation center at as least as Rs. 10,000 per month as

rent and Rapid Homes will maintain IBA Karachi incubation for at most of 5 years. The business

will start attracting customer in the circle of already built loyal customers of pilot project.

1. At the end of this phase Rapid Homes will have Rs. 4.2 million by selling at least 28

homes.

2. In due of this phase, Rapid Homes will be establishing and projecting itself as a loyal

home construction brand.

3. In this second phase, business will even make its customer which will be even outside of

the initial circle of influence of business.

The competitive edge will be developed during this phase by continuous value addition in terms

of technology incorporation in business product and increasing product and service line. (Detail

is shown in section 4.5.6).

Documents

Business Plan (Precast Concrete Houses)