Business Plan of the Centennial-Realtors Real Estate Business at Colorado - Term Paper Example

 BUSINESS PLAN Business Plan Of ‘The Centennial-Realtors’ Real Estate Business At Colorado TABLE OF CONTENTS Executive Summary …………………………………………… 3 Business Description ………………………………………….. 4 Form of organization ………………………………….. 4 Business objectives ……………………………………. 4 Success Measures ………………………………………. 5 Financial Success ………………………………………. 5 Industry and Market Analysis ………………………………….. 6 Market Analysis ………………………………………………… 7 Competitive Analysis …………………………………………… 7 Marketing Strategy ………………………………………….….. 8 Marketing Mix ……………………………………..……. 9 Operational Issues …………………………………………….… 9 Human Resource Requirement ………………………………..… 10 Financial Projections ……………………………………………… 11 Conclusion ………………………………………………………… 12 Appendices ………………………………………………………... 13 References ………………………………………………………… 14 Executive Summary ‘The Centennial-Realtors’ will be a unique real estate service provider that would fulfill the personal and corporate goal of providing the target market with outstanding experiences of brokerage, appraisal, property management, financing, home inspection and counseling etc. ‘The Centennial-Realtors’ is a start-up company in Colorado, the Centennial State, with a strong mission of offering comprehensive real estate services to the clients. The fundamental business goal of ‘The Centennial-Realtors’ will be to enter to the highly competitive market and to discover the hidden market opportunities in order to dominate the market of real estate, property transfer, mortgages and title services. As it is a starting business, there will be many challenges, especially because of that the market has been severely hit by the recent economic turmoil and there is fierce competition among the businesses, The Centennial-Realtors’ main emphasis will be to trace out and uncover the opportunities and growing demand areas that are poorly served by the present real estate companies. Apart from the traditional real estate services like mortgaging and title transfer, ‘The Centennial-Realtors proposes to facilitate advanced property search data base so that customers at different places can access the property search data base from internet and mobiles. The company proposes to facilitate customers to get legal helps from the legal advisory department that will work as an agency under the company. The target market comprises of retirement market segment as well as those who require temporary or permanent property transfers and exchanging services. Financial success is of greater importance and the company will focus on unique services to maintain profitable business operations, even though there can be relative losses in the beginning. Business Description Form of organization The Centennial-Realtors LLC will be a limited liability partnership and registered in the state of Colorado. The limited liability, minimum management responsibility and direct pass through of profit and losses for taxation are considered by the company as major advantages of limited liability partnership (Jacobus, p. 63). As limited partnership is the most common form of investing in real estate, the Centennial Realtors find that it is convenient and most appropriate for the business because the general partners can find property, organize and promote the partnership and also invite people to invest money as limited partners. The company will start its initial procedures and legal steps with the available capital sum of $ 25,000 and same time it will look for further investments from the limited partners. The company will offer comprehensive real estate services including mortgage and title services to the customers. Counseling and legal advice services will be provided so that customers will be able to solve legal and other issues that arise out of property transactions. Business objectives The Centennial-Realtors plans to enter in to the market with a vision to continuously offer outstanding real estate services in a way that customers find it unique and satisfy their varying needs. The other objectives include: Attract limited partners in order to enhance maximum investment possible Achieve profit margin and break even by second year it self Set specific policies regarding major aspects of business and its success, including the plan to achieve maximum customer satisfaction so that the business will be able to maintain long term relationship with its customers. Success Measures Discover market segment which is poorly served by the present real estate businesses, it is to say, to follow a co-operative strategy instead of competitive strategy. A market research must be carried out so that potential opportunities for real estate business can be discovered. Other services like facilitating property search and data base etc. Keep close relationship and personal contacts with clients and customers. Maintain a pricing policy that can give a reasonable profit as well as to charge right price on customers. Financial Success With a mission of providing outstanding real estate services, The Centennial-Realtors plans to achieve customer satisfaction and thus to generate reasonable profits in the first year itself. Due to the increased expenses of advertising and initial start up and fixed expenses, the company will not be able to generate high profit in the first year. But, the company’s emphasis on identifying and discovering the hidden opportunities of the real estate market and thus by focusing on the new segments will enable the company earn potential gross profits in the next years. The company will make a net profit of $30,550 in the first year, $38,500 in the second and $42,000 in the third year. Industry and Market Analysis Real estate industry in recent years has been one of the fastest growing industries worldwide though the new entrances are comparatively more and competitive rivalry is highly intensive. The Porter’s Five force analysis given below will help analyze the market conditions that The Centennial Realtors has to consider in doing the business. The industry is highly competitive and the rivalry is very intensive. The above five force analysis shows that competitive rivalry is strong and threat of new entrance is also more because many business people, formally or informally, indulge in real estate business or real estate business agency activities. This can have greater impact on the overall market. Customers are aware of the services being provided by the established businesses and getting customers in the beginning will be a challenge. The bargaining power of customers in real estate industry depends on the collective agreements, customers’ satisfaction for various services provided by different companies etc. Market Analysis The Centennial-Realtors will be focusing mainly on retirement market segment that consists of a large number of individuals and couples who are seeking to retire to Colorado state and its different areas. The retirement segment of the real estate market has been rapidly growing over the last few years. Meredith, Betty and Salter emphasized that US retirement industry has been facing rapid growth in the recent years and it is estimated that US retirement industry includes homes, medical facilities etc. The retirement industry is very wide because it includes thousands of small housing families. Floyd and Allen described that real estate market involves transactions for the rights to use lands and building etc. From the demand side, people, firms and corporations are willing to pay for the spaces for either consumption or for production purposes. The supply side of the real market is that many house owners, building and space owners are willing to sell or exchange their properties to the needy people (p. 154). Competitive Analysis The primary competition comes from the companies and agencies that provide real estate services. As discussed earlier, the competition rivalry is high intensive because real estate industry comprises of a very large number of small businesses they offer real estate services with or without specializing on a particular service like mortgaging or title transferring etc. Advertising, promotions and word of mouth are the major challenges that The Centennial Realtors may have to face in its business path. These also can be considered to the secondary competition because all of these attract customers to the already established businesses and this can be overcome only by offering ongoing services of superior quality and customer satisfaction. Once the company is able to maintain goods relation with customers and thus to enhance customer satisfaction, word of mouth will work out as an advertisement for the company. Marketing Strategy The Centennial-Realtors’ marketing strategy is that it can enter in to the market and with intensive market research it will try to discover the hidden segment of the market. More specifically, identifying varying needs of customers and providing unique services like fast property search from internet and mobile and facilitating property data base will potentially enhance the marketing opportunities of The Centennial-Realtors. As part of marketing strategy, the company will need to focus on catching the attraction of customers through valuable services and with a stable pricing policy that helps the company keep pricing reasonable for both the parties of the company and customers. The Centennial-Realtors will be able to serve the community better than many large firms because identifying the customer and his needs will help the company explore new horizons of the market. As part of marketing strategy, The Centennial-Realtors will go for advertisement and promotion strategies. In order to provide promotional activities, direct personal contacts, public relation and internet tracking of properties for sale will be implemented so that The Centennial-Realtors will be able to attract a good number of customers. Marketing Mix The Centennial-Realtors will have a stable pricing policy so that it can maintain reasonable pricing for the properties for sale. The company will fix a percentage margin for the profit and this can help the company keep its pricing stable and reasonable to the customers. As far as promotion is concerned, The Centennial-Realtors will timely embrace any suitable promotional methods and schemes like direct contacts to the customers and discounting of properties or free services of legal advising etc. The company may add more partners who are willing to work as agents as well so that the company can extends the channels that it reaches to its customers. As far as product or service mix is concerned, The Centennial-Realtors’ service will be unique because it proposes to facilitate internet and mobile tracking and searching of properties for sale from the selected areas in Colorado. Operational Issues The business will be operated as service provider of mortgage, title transfer, property transactions, counseling and appraisal. These services will be offered directly to the customers or through the agents and partners. Customers will be able to access the website of the company and they can register with their username and password in order to help them get details of properties available for sale, properties for purchase and other transaction related details. The Centennial-Realtors will be working with brokers, agencies and franchisees helping them incorporate their companies and manage their taxes and to create business success strategies. Once the company starts its business operation, the company will enjoy a number of potential advantages like long term professional relation with banks, accountants, financial planners, establishing bonds with business groups and trade associations, access to bank loans and credit and reputation among the community too (McCrea, p. 186). Human Resource Requirement One of the most valuable intangible assets of The Centennial-Realtors will be its efficient management personnel. Managing directors and other management team are responsible for all managerial actions like planning, decision making, directing, staffing and so on. A management team of three personnel would be appointed for temporary service (say three months) in order to conduct market research to explore hidden opportunities. The active partners will be actively involving in the business operation. The company will have to look for 5 full time employees for the posts of accountants, legal advisors, property analyzers and office staffs. The company will go for selecting experienced personnel because experience and knowledge of the employees can contribute much to the company’s success. The recruited employees will be provided three days professional development workshops in order to present company’s weaknesses and strengths as well as to enhance them to work effectively for the company. The company plans to pay salary of $ 12,000 to 16,000 annually to the workers plus other incentives like bonus and rewards. The total approximate payroll expenses will be more than $80,000 per annum. Financial Projections Since the company has initial expenses of fixed office set ups and high expenses of advertising and promotions, the company will be able to generate profit only after the first few months. The following diagram shows that company will face aggregate losses of $65,000 in the first month, $32,500 in the second month, $ 10,800 in the third, $ 7500 in the fourth, $ 3500 in the fifth and $ 1800 in the sixth month. The company will start generating profit only on seventh month in the first year. Since the start up is so speculative, the financial management will be looking for limited partners who will invest more in the company. Once the business becomes stronger and established in the real market, the company will be able to generate a steady rate of gross margin. The company will be able to start with its initial amount of $ 25,000 within the next few months with a plan to attract more limited partners to project a total amount of $ 175,000 from the investors. Conclusion This paper has presented a basic business plan for ‘The Centennial-Realtors’, which is going to start its real estate business in Colorado within the next few months. Once it attracts more limited partners, the company will focus on discovering hidden segments of the market and thus to facilitate advanced services of any time property data base access and search for the customers. The company will be able to generate a reasonable profit in the first year itself. Appendices Porter’s Five Force Analysis: The Five Force analysis brought by Michael E Porter (1979) helps a marketer contrasts the competitive or cooperative environment of the industry or firms. The five force analysis comprises of five forces that are competitive rivalry, buyer’s bargaining power, supplier’s bargaining power, threats of new entrants to the market and threats of substitutive products. Profit and Loss Statement of ‘The Centennial-Realtors’ Profit and Loss Account Proforma Statement for three years   Year- 1 Year- 2 Year- 3 Sales 125,000 160,000 185,000 Gross Margin 125,000 160,000 185,000 Expenses:       Payroll expenses 72,000 82,000 89,400 Marketing and sales expenses 3,000 9,000 17,800 Depreciation 0 5,000 7,300 Rent 11,500 16,300 17,500 Insurance 1,200 1,200 2,000 Travel exp 3,250 3,800 4,000 Total Operating expenses 90,950 117,300 138,000 Profit before taxes 34,050 42,700 47,000 Taxes 3,500 4,200 5,000 Net profit 30,550 38,500 42,000 . References Floyd C.F and Allen M.T, Real Estate Principles, seventh and illustrated edition, Dearborn Real Estate, 2002 Galaty F.W and Allaway W.J, Modern Real Estate Practice, Sixteenth Illustrated Edition, Dearborn Real Estate, 2002 Jacobus C.J, Real Estate Principles, Eleventh edition, Cengage Learning, 2009 Kurtz D.L and MacKenzie H.F, Contemporary Marketing, Second and Illustrated Edition, Cengage learning, 2009 McCrea B, The real estate agent's business planner: practical strategies for maximizing your success, AMACOM Div American Mgmt Assn, 2005 Meredith, Betty and Salter, How prepared is the retirement industry for meeting the needs of retiring American workers? Financial Services Review, Retrieved from Allbusiness.com, http://www.allbusiness.com/banking-finance/banking-institutions-systems-savings/11581015-1.html Read More