Introduction
Comgate is a custom millhouse that creates architectural woodwork such as wall paneling, custom cabinets, or other products for the local market. Comgate’s business plan is being created after several losses and thin profit years in competitive bidding projects. This will help to define its mission. Prior years were characterized by hectic efforts to bid as many jobs as possible. Margins were very thin because the pricing policy was “flexible” to ensure that there was enough work for production staff.
Comgate is able to increase sales and create more margins. It can also improve efficiency and overall profitability by focusing on its target market and restructuring. These changes will assure more accuracy in pricing, billing, and tracking of costs for comparison purposes. Expect to see an increase in profits.
The Company
Comgate’s mission will be to profitably compete in Connecticut’s high end residential market for custom-made woodwork. It will specialize in the most challenging needs of designer homes with a price range from $3 to $15 Million.
Products
Comgate is a provider of custom-made architectural woodwork. These include wall paneling as well as molding, custom cabinets and molding. The recent addition of state-of-the-art CAD capability will help substantially to increase sales of higher-end products by targeting design professionals who are in a position to influence choices of subcontractors building “trophy” homes costing over $3 million. “Custom” is the key word at Comgate. Our products are unlikely to be used in the typical home. Custom woodworking of the type carried out by Comgate is made to order only. No finished goods can be held in stock. It is not common for finished goods to be made up for stock.
The Market
The industry has a long history and is well represented. There are many mill shops that are focused on special areas in the same region. One mill shop may be focused on custom furniture and have special relationships with upholstery shops. Other mill shops may focus on standard kitchen cabinetry. Comgate targets residential homes at the highest price ($3-$15million). This work is more price-sensitive, and it’s relatively stable even in economic downturns. The company’s most powerful competitive tool is its CAD capacity. The program is designed specifically to be used in the custom woodwork sector and is expected make substantial inroads into residential markets at the highest end. Comgate should be able distinguish itself from the competition and be able fully to utilize its newly expanded production capacities.
Comgate has begun to link its CAD capabilities with the practices and skills of design professionals. This will enable the company to outsource some of the simpler parts of a project to other mill shops while keeping the more difficult work in-house. Comgate will be able to provide another mill shop with detailed CAD drawings along with precise dimensions. This will enable them to increase their sales and profits and allow them to focus on more difficult custom woodwork products.
Projections Financial
Sales will rise to $1.2 million and nearly $800,000. By the end year 3, the company has added over $110,000 in sophisticated new Computer Numerical Control machinery (CNC). Profits are expected to grow. A desire to shorten accounts payable in Year 2 to take advantage of all available trade discounts, together with rising receivables, will result in a short-term need for increased bank lines of credit of approximately $30,000.
1.1 Mission
Comgate’s mission is to compete profitably in the high-end residential market for custom woodwork within the state of Connecticut. We will be focused on high-quality custom work, and we specialize in the most difficult needs of newly built and renovated designer homes priced between $3 and $15 million.
Success Keys 1.2
The keys to success in the contracting industry are key.
mill shop industry are:
- Avoid bidding projects which are likely to be awarded based primarily on price, projects being undertaken by those who are disreputable (no matter how badly the company needs work), projects which are too big (more than 20% of last year’s sales), or projects which do not fit the company’s niche market and thus unlikely to advance the company’s marketing strategy.
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Correctly price the job. This means:
- Accurate takeoffs, and listing.
- A clear understanding between the company and the client, in reference to quality and terms of payment.
- Calculate accurately the material required for completion of the project (including wastage).
- Correctly applying overheads factors and profit marges, as well any special considerations.
- A set of operating procedures supported by an administrative system that tracks job costs and compares bids to actual costs for completing the job. Constant adjustments to bid formulas.
- Reliable production staff that can communicate with administration in order to produce the job on time, as per bid, using maximum labor, materials and machinery.
1.3 Objectives
Comgate’s major objectives are:
- Increase production. Given the new machinery and four production staff, full productive capacity has been carefully measured. The goal is for the monthly production to be at 80%, 85%, and 90% respectively in the last quarters of Year 1 and Year 2. This 80% of production translates to 342 feet in crown molding, 22 pilasters (or equivalent combination), 54 doors of various grades and 77 linear foot cabinets. This will result in monthly sales of $60,816.
- A much simpler task is to maintain site contract workers (six) at present, full employment levels will generate monthly revenue of $34,623 which (after expenses) nets the company $21,794.
- Continue efforts to bring the company’s in-house CAD capability to the attention of more design professionals, especially those in Hartford, New Haven, Stamford, Norwalk, and Shelton, as these are the areas with the greatest concentration of the chosen $3 to $15 million residential homes.
- As an industry partner, you can join the Connecticut Chapter of American Society of Interior Designers. Be listed in their resource directory.
- You must complete all administrative changes necessary to ensure that work is properly invoiced and paid in a timely fashion. Also, you need to ensure that jobs are accurately tracked to allow for cost comparisons with bids.
- Finish the operation manual that was started.