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BUSINESS PLAN FOR CONEQ RENTALS LIMITED
Strictly Private & Confidential
Conrad J. Sabga BSc. (Hons)
MSc. Management
CASS Business School
City University, London
July, 2005
�This project was completed as a part of the MSc. Management degree at the CASS Business
School. This work is my own. Where the work of others is used or drawn on, it is attributed to
the relevant sources.�
Signed�������������.
Supervisor: Dr. Julia Balogun
©This project is protected by copyright. Do not copy any part of it for any purpose other than academic study without the permission of the author
Conrad J. Sabga MSc. Management
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Table of Contents
Contents ...���������������������..��.�.��� - 2 -
Dedication ���..���...���..�����.�����...�..��.......� - 4 -
Abstract �.���������������..�..���..����..�....... - 5 -
Acknowledgments .��������..�������������..��.. - 6 -
1.0 Chapter One - Introduction ������������..�����.������.. - 7 -
1.1 Introduction ���������������..���������.���.. - 7 -
1.2 Objectives ��������������������..��������. - 7 -
2.0 Chapter Two - Literature Review ���������������������. - 10 -
2.1 Scope �����������������������������.... - 11 -
2.2 The Business Plan ����������..�������������.... - 11 -
2.3 Types of Business Plans ��������������..�������.. - 12 -
2.3.1 General Plan ���������������.��.�.��� - 12 -
2.3.2 Operational Plan ��������..��.���.���.��� - 12 -
2.3.3 Dehydrated Plan ������.���..����.��.���� - 12 -
2.4 Business Plan Format ������..����������.������. - 13 -
2.4.1 Objectivity �����������������..�����.. - 13 -
2.4.2 Assumptions ����������������..�����.. - 13 -
2.4.3 Length of Projections ���������..���..�����. - 13 -
2.4.4 Length of Plan ����������������..���.�.. - 13 -
2.5 Contents of a Business Plan ����������������.���� - 14 -
2.5.1 Cover Page ������������.������.���� - 14 -
2.5.2 Table of Contents ���������������.����.. - 14 -
2.5.3 Executive Summary ������������������... - 15 -
2.5.4 Market and Customer ������������������ - 15 -
Conrad J. Sabga MSc. Management
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2.5.5 Description of the Business ���������������.. - 16 -
2.5.6 Organisational Structure and Management Summary ����. - 16 -
2.5.7 The Service Provided ������������������. - 16 -
2.5.8 Pricing Strategy ��������������������.. - 17 -
2.5.9 Business Strategy ������������������..� - 18 -
2.5.10 Financial Plan and Projections ��������������. - 19 -
3.0 Chapter Three - Research Methodology ����������������..�. - 20 -
3.1 Scope �����������������������������.... - 21 -
3.2 Literature Research Methodology ������������������. - 21 -
3.3 Interview Methodology �������������������.���.. - 22 -
3.3.1 Interview Questionnaire Rationale ������������.. - 23 -
3.3.2 Interviewees ���������������������... - 24 -
4.0 Chapter Four - Business Plan for ConEq Rentals Ltd ����..�������. - 25 -
5.0 Chapter Five - Conclusion ��������������������.���� - 26 -
5.1 Concluding Remarks �����������...�.����������.. - 27 -
5.2 Reflections �������������������������.�..�. - 27 -
5.3 Learning Outcomes ����������������..�������.. - 28 -
5.4 Recommendations ��������������������..���� - 29 -
6.0 References ��������..����������������������.. - 30 -
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Dedication
For my parents, who have given me everything and made me the man that I am. I Love you.
Conrad J. Sabga MSc. Management
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Abstract
Title: Business Plan for ConEq Rentals Limited Conrad J. Sabga Having been exposed to all facets of my family�s construction business, I have developed an
ardent interest in the efficiency of operations as I am a proponent of the notion that �efficiency
breeds profitability.� One of the main areas that captured my interest was the plant and
equipment department of the company. The recent shortage of skilled labour has caused
construction projects to become equipment intensive, and the general lack of control in these
operations has diminished efficiency and ensued in lost time and money.
It is with this is mind that I have proposed to divest the equipment operations from the core
company by means of establishing a subsidiary company to transfer all departmental
responsibilities and functions. Albeit a subsidiary company, it will operate as an independent
entity, with strict business policies and procedures to govern the way in which the equipment
and plant is being maintained and utilised and to ensure that value for money is achieved.
The scope of this project is to develop a business plan for this new subsidiary company to
present to the board of directors and the bank in order to gain acceptance and financial
support. I have done a great deal of research into the area of business planning and the
production of plans to ensure that all the relevant areas have been covered and that the
proper format was followed. It is my intention to present this business plan in August 2005
and to move forward assiduously thereafter.
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Acknowledgments
I would like to recognize the following individuals, without whom this project would not be
possible.
First and foremost, the Almighty God, for giving me the strength and patience to complete this
study.
Honourable mention must be given to Dr. Julia Balogun, whose patience and continued
guidance was most helpful and greatly appreciated.
Thanks must also be given to Mr. Stanley Ruiz for his generous advice and assistance in the
financial elements of this project.
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CHAPTER ONE
1.0 Project Introduction
1.1 Introduction
With an accelerated rate of construction activity in Trinidad and Tobago, the industry is faced
with a labour shortage and increased demands from both public and private sector clients.
Contractors are becoming hard pressed to find ways of becoming more efficient in their
operations and in maintaining their competitive advantage. Beaver Construction Limited
(Beaver), the largest private sector contractor, has realized this and has decided to divest
some of their operations in order to maintain control and improve efficiency in their daily
operations.
It is with this in mind that the board of directors of Beaver has proposed the establishment of
a subsidiary company to cater to the company�s construction equipment needs and to transfer
all departmental responsibilities. Although this newly formed company will be a wholly owned
subsidiary of the parent company, the BCL Group (BCL), it will operate as an independent
entity thus affording Beaver a quality service expected from a premier provider while keeping
the profit within the group.
1.2 Objectives
This project will serve to satisfy a number of aims and objectives; however its primary
purpose is to develop a competent business plan that can be used to aid the establishment of
the subsidiary company in January 2006. The main objectives are outlined hereafter.
1.2.1
To gain understanding of the purpose of business planning and the structure and production
of a business plan for a new company.
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1.2.2
To produce a comprehensive business plan for ConEq Rentals Ltd. for presentation to the
board of directors of the BCL Group in order to gain acceptance and to move the plan
forward. This plan will also outline the contractual conditions under which Beaver and ConEq
will operate to ensure that it is a mutually beneficial transaction.
1.2.3
To conduct a financial feasibility of the proposed company in order to gain the financial
support of the Royal Bank of Trinidad and Tobago (RBTT).
1.2.4
To gain an understanding of how financial accounts are produced and the procedure and
accounting principles that need to be followed.
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CHAPTER TWO
2.0 Literature Review
2.1 Scope
The aim of this chapter is to give a concise account of the theoretical information researched
pertaining to the subject areas outlined in chapter one. The information shown in this chapter
has been compiled from all the sources used during the research phase of this dissertation
and the superlative information selected to best support the aims and objectives of this
project.
2.2 The Business Plan
A business plan is a systematic way of approaching future problems and overcoming them. It
is not however a form of clairvoyance which will predict what will happen to the company in
the future but rather the opposite (West, 1988). It defines the structure of the company and
the object of the business activity. It contains a market analysis and details of strategic
marketing, management structure, personnel and finance. A business plan plays an essential
role in business administration. When properly conceived, it acts as a valuable tool (Barrow,
2002).
�A well written business plan can provide a pathway to profit for new and existing businesses�
(Person, 1998). All businesses can potentially benefit from a well written and executed
business plan. (Person, 1998) outlines the three main purposes for writing a business plan:
1. A business plan will serve as a guide during the lifetime of the business. It is a
blueprint of the business and will provide the tools to analyse the business and
implement changes. It will also serve to provide benchmarks against which future
performance can be measured.
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2. A business plan is a requirement if you are planning to seek financing. It will provide
the potential lenders or investors with detailed information on all aspects of the
company�s past and current operations and provide future projections. A business
plan for a new company will have no history, and will therefore rely on the credit
records and financial statements of the individuals involved in the business.
3. If the scope of the business has international potential, the business plan will provide
a standard means of evaluating the business in a foreign marketplace. This is
becoming increasingly important as businesses today cannot overlook the potential of
international commerce brought about by changes in communications, technology
and transportation. The business plan will demonstrate ways in which the business
can compete in the global economy.
(Barrow, 2002) states that nearly two in every three businesses don�t have a business plan
and coincidently the same proportion of businesses fail within the first five years of setting up.
Barrow outlines the most common reasons for business failure as:
• Insufficient turnover
• Poor management and supervision
• Lack of proper accounting
• Competition
• Not enough capital
• Bad debts
• Excessive remuneration to owners
With this in mind the business plan will serve to provide management with focus and direction
to mediate against failure and to ensure the success of the endeavour. Lack of planning can
be attributed as the principal reason for business failures and it is important to remember that,
�the business that fails to plan, plans to fail� (Person, 1998).
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2.3 Types of Business Plans
There is no fixed format for a business plan, but rather it is adapted for its purpose.
(Timmons, 1990) identifies the main differences between business plan as the �length� of the
plan and the level of �detail� involved. Timmons summarizes the three main types of business
plans as:
2.3.1 General Plan
A general plan is geared towards equity investors or debt providers. It also serves as a good
�primer� for new employees or if you need to communicate the value of the enterprise to
various stakeholders (Timmons, 1990). The people reading these plans generally don�t read
the entire plan but rather spot read and the format of the plan must take account of this and
be structured in a way that is easy to follow and to hold the reader�s interest.
2.3.2 Operational Plan
An operational plan is typically for the entrepreneur and their team to guide the development,
launch, and initial growth of the venture. The length of these plans is usually longer that the
general plan as it contains more detailed specifications and information.
2.3.3 Dehydrated Business Plan
This type of business plan is the shortest of the three. The main purpose is to provide an
initial conception of the business, a more concise articulation of the people, the opportunity,
and the finances required. It is often used to test initial reactions of the business idea. It is a
preliminary document used to receive feedback before investing significant time and effort in
a more detailed business plan.
Although the different types of business plans can be used independently, the common
approach is an amalgamation of all three. There is a generally accepted format that venture
capitalist, banks, and investors are comfortable with and this should be followed to avoid the
frustration of an unfamiliar format (West, 1998). The contents of the business plan will vary
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depending on the business type, the complexity of the business and the person the business
plan is geared towards.
2.4 Business Plan Format
As stated earlier, the format of a business plan is dependent on a number of factors; however
there are certain areas that should be addressed to ensure that the plan is methodical,
constructive and helps to better the chance of the venture being successful. There are a
number of factors that should be considered when preparing a business plan. (West, 1988)
outlines the following criteria:
2.4.1 Objectivity
In order to be workable the plan must be pragmatic and must take account of all possible
shortcomings of the firm and the limitations of the people involved. This will ensure that the
plan is achievable with the resources available and it is also important that entrepreneurs
never deceive themselves about the likely future prospects or refrain from identifying
significant risks that can act to the detriment of the venture.
2.4.2 Assumptions
Every business plan will demand that the organisation makes certain assumptions about the
future. Some of these will be more important than others and it is vital that the key
assumptions are clearly identified.
2.4.3 Length of Projections
Many businesses have fixed ideas about the timescale that should be considered to forward
plan accurately. There is no fixed rule; however, for the average business a three year
projection will be adequate.
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2.4.4 Length of Business Plan
With regards to the suitable length of a business plan, there is no right or wrong answer. The
British Venture Capital Associations (BVCA) states that �it should be long enough to cover the
subject adequately and short enough to maintain interest�. However, the current trend is to
produce more succinct plans for maximum impact. There is no need to include every detail
because investors will usually follow up with their own detailed investigations (Pinson and
Jinnett, 1998).
2.5 Contents of a Business Plan
The content of a business plan will be governed by the information applicable to the business
type. Considering the capacity of this project, the following contents as outlined by (Pinson
and Jinnett, 1998) and the British Venture Capital Association (BVCA) are pertinent to the
scope of the venture and the people it is intended for.
2.5.1 Cover Page
The cover page of the business plan should include the following information:
• Company name
• Tagline
• Contact person and address
• Phone, fax and email information
• Disclaimer
Although these items are self explanatory the cover page is important to distinguish your
proposal from others and too ensure that readers have the necessary contact information
easily at hand if they wish to contact you.
2.5.2 Table of Contents
A detailed table of contents is important to allow spot reading as many investors� will not read
the entire document. The table of contents should include major sections, subsections,
exhibits and appendices.
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2.5.3 Executive Summary
This is often described as the most important and influential part of a business plan (West,
1988). (Timmons, 1988) states, �If you don�t capture the readers� attention in the executive
summary, it is unlikely that they will read any other part of the plan.� Timmons goes on to
state that the start of the executive summary should �lock the reader� and should avoid the
monotonous and common approach that is so often used. The executive summary should
include:
• Description of opportunity
• Business concept
• Industry Overview
• Target Market
• Competitive advantage
• Business model
• Compelling economics
• Team
Most of the areas will be explored in more detail in the body of the plan and the executive
summary should be no more than two to three pages long.
2.5.4 Market and Customers
This section is designed to familiarise the reader with the nature and potential of the general
market. It should be brief and the include information such as:
• Description of the industry
• Current size
• Historical and forecasted rate of growth over next five years
Once the plan has defined the market, the target customer should be examined. (Timman,
1989) recounts the statement by a venture capitalist who stated, �The most impressive
entrepreneur is one who comes into the office and not only identifies the customer but who
can also name the customer by address, phone number and email address.�
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2.5.6 Description of the Business
This section presents a brief summary of the organisation of the business, the business
history, present state, and future projections. The description should include:
• When and why the company was formed
• Form of organisation
• The nature of the services provided
• The development of the company
• The future projections
• Location
• Ownership
• Project readiness
2.5.7 Organisational Structure and Management Summary
This section should give an overview of the company�s organisational structure and is often
portrayed in a diagrammatic form. The British Venture Capitalist Association (BVCA) states,
�The importance of this area cannot be over emphasized. Special care should be taken to
emphasize the experience and competence of each key management executive.� The data
on the company executives should include the following:
• Business experience
• Educational Background
• Significant Awards
2.5.9 The Service Provided
The section helps to define the scope of the services that will be offered and provided. The
review should include:
• What the service is
• Why is the company able to provide the service
• How is the service to be provided
• Where will the service be provided
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2.5.10 Pricing Strategy
The pricing structure is �critical� to the success of a business and is determined through
research and analysis of financial considerations. (Pinson and Jinnett, 1998) states that the
basic market strategy is to price within the �price ceiling� and the �price floor�.
The price ceiling is the highest cost a consumer will pay for a service based on the perceived
value. This considers:
• What is the competition charging
• What is the quality of the service
• What is the nature of the demand
• What is the image being projected
The price floor is the lowest amount at which a service can be offered in order to satisfy all
associated costs and the projected profit margins. This considers:
• Variable expenses
• Office overheads
• Interest Expense
• Tax expense
Pricing should be justified based on the above considerations and there should be ample
contingency within the pricing structure for unforeseen events.
2.5.5 Business Strategy
The business objectives and the steps that will be taken to achieve the objectives must be
considered. Any risks that may prevent the organisation from reaching its goals and
objectives should be identified and the mitigating measures outlined. A strengths,
weaknesses, opportunities and threat (SWOT) analysis should be conducted to demonstrate
that these factors have been considered.
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2.5.8 Financial Information
This section will provide a summarised review of the financial information regarding the
venture coupled with assumptions adopted in preparing the projections. Typically the
projections should cover the upcoming three to five years and the financial information should
include:
• Profit and loss account
• Summarised cash flow statement
• Balance sheet
• Source and use of funds
The British Venture Capitalist Association (BVCA) suggests that the financial projections
should be accompanied by a commentary summary identifying the main components and
results of the financial projections. Charts and graphs can also be used to enhance the
presentation of information and to illustrate the key data clearly.
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CHAPTER THREE
3.0 Research Methodology
3.1 Scope
The aim of this chapter is to give a concise account of the methods used in obtaining the data
and information needed to produce the business plan.
Since this project is practical in nature most of the information and data was gained from first
hand experiences and from documentation obtained from the BCL Group. The researched
information provided a theoretical foundation on which the business plan was constructed. It
provided a suitable structure and ensured that all relevant content was included and that there
were no critical omissions.
3.2 Literature Research Methodology
There have been many publications pertaining to the importance of business planning and
how plans are to be constructed. Although there is no hard fast rule, the structure used is
best suited given the nature of the business and the people it is intended for.
The CASS Business School library provided ample literature regarding business plans and
the starting up of new companies. The internet served as a helpful tool for data collection, and
allowed the author to gain different views from sources simultaneously as well as access
online data bases quickly and easily. The internet also allowed information to be viewed from
sources around the world which enabled cross references to be made.
The review of the process of business planning and the content of plans show the need for
the following practical information and data to be collected:
1. Full list of heavy construction equipment owned by Beaver Construction Ltd. with the
associated book value.
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2. Direct and Indirect costs incurred in the equipment operations.
3. Financing structure (i.e. type of loan, interest, payback period, and collateral
requirement)
4. Industry charges for equipment rentals.
5. Board of Directors particulars (i.e. experience, education, etc.)
6. Deal structure between Beaver Construction Ltd. and ConEq Rentals Ltd.
7. Current and projected position of Beaver Construction and the BCL Group.
8. Current and projected state of the local economy and the construction industry.
9. Accounting particulars (i.e. depreciation rate, income tax, levies etc)
Although the author has personal experience with most of these areas, confirmation was still
required to ensure the accuracy and reliability of the business plan and the conclusions made.
All of the information was available from reviewing records held by Beaver and from speaking
to company personnel in the applicable departments.
Financial data such as direct and indirect costs, equipment inventory, financing requirements
and company revenue projections was obtained from the records held in the accounts and
operations departments and from the interviews conducted with senior personnel. Market
information pertaining to external equipment rental costs was taken from the database
maintained by the senior procurement officer.
It is important to note that since this company is an internal services company and will not
initially be competing in the broader sense that there is no need to explore and analyze the
environment, market and customers in which it operates within the scope of this project.
However, if entering the broader market becomes an option, this research will then be
necessary.
3.3 Interview Methodology
The main form of data collection came from a semi- structured question list which formed the
basis of interviews from seven individuals from varying professions and departments within
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the BCL Group. Interviewing a cross section of people helped to give an accurate perspective
on the equipment operations, the problems being encountered and other financial and
statistical data.
3.3.1 Interview Questionnaire Rationale
The purpose of the interviews was to establish the general view of different professionals
within the BCL group pertaining to the business plan and purpose. This was done in a semi-
structured format, although, to maintain consistency in the topics discussed, a fixed set of
questions were asked. Before conducting these interviews, a question bank and format of the
interview was discussed with a construction executive to ensure that the correct questions
were being asked and that nothing was overlooked.
Question 1: What are your professional qualifications, education and business experience?
This question served to identify the information needed for section of the business plan
relating to the board of directors.
Question 2: In your experience, how would you describe the current equipment operations?
This question served to establish the interviewee�s overall view and to introduce the line of
subsequent questioning.
Question 3: What are the shortcomings in the equipment department and what do you think
are the effects of these shortcomings on overall construction operations?
This question served to indicate how the problems were viewed by different departments and
the problems specific to those departments.
Question 4: From a strictly operational level, what are your views on outsourcing the
equipment needs of the company?
This question was to gain individual perspective on the proposed venture.
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Question 5: Based on current booked work and projected work over the next five years, what
do you predict the equipment load to be?
This question was meant to help projections.
During the interviews, the questionnaire was issued verbally. The information discussed in the
interviews and the individual views of the interviewee was documented by hand as the
interview progressed.
The questions answered in these interviews would enable cross-referencing between
interviewees as well as comparison to the views of different departments. Six interviews were
conducted in total, and the individuals chosen from different professions and departments
within the company to avoid biased views.
3.3.2 Interviewees
The following professionals were interviewed at separate times by telephone conversation in
April 2005.
Conrad Sabga Sr. Chairman and Chief Executive, BCL Group of Companies
Howard Sabga Sr. Managing Director, BCL Group of Companies
Stanley Ruiz Chief Financial Officer, BCL Group of Companies
Imtiaz Razack Procurement Officer/Logistic, Beaver Construction Limited
Andros Belfonte Site Coordinator/Engineer, Beaver Construction Limited
Roderick Aqui Plant and Equipment Manager, Beaver Construction Limited
Steve Alvarez Senior Project Manager, Beaver Construction limited
All of the individuals were enthusiastic and generous with the degree of information they
provided, Most of the individuals selected for the interviews have had more than fifteen years
experience in the construction industry in Trinidad and Tobago.
Conrad J. Sabga MSc. Management
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CHAPTER FIVE
5.0 Conclusion 5.1 Concluding Remarks With the increasing demand for the construction process to become more efficient and
sustainable, it must be appreciated that anything that can potentially improve site productivity
should be capitalized on. This said, construction plant and equipment brings a level of
consistency to a project and tasks that were previously done by numerous employees are
being replaced by equipment, drastically increasing the overall efficiency.
Beaver Construction, like many other companies has realized the need for more control of
their equipment operations and has decided to explore the option of outsourcing to a
subsidiary company. Although this has proven to be quite beneficial with other companies and
on paper may appear feasible, the true evaluation of its success will only be determined after
the plan is implemented.
Some final words for consideration: �An unproductive site in an inefficient site, an inefficient
site is an unprofitable site, an unprofitable site is an unsuccessful company and an
unsuccessful company is unsatisfied stakeholders� (BCL Group, 2004).
5.2 Reflections
Although the main objective of the ConEq business plan it to obtain start up finance, a
business plan also serves as an internal tool to aid management in the successful running of
the company. As stated earlier, the construction equipment market shows tremendous
potential and while ConEq will initially serve the needs of Beaver Construction exclusively; the
future may see the company competing in the broader market. In order to allow the company
to explore this opportunity, there are competencies that must be developed to allow them to
Conrad J. Sabga MSc. Management
28
satisfy the industry requirements and to provide a level of service expected from a premier
provide.
With the passing of the health and safety bill by the Government of Trinidad and Tobago,
safety in the workplace has become a number one priority with companies spending millions
of dollars to ensure that they are in compliance with the standards. Additionally, companies
are also only dealing with other companies who have similar HSE standards and procedures.
ConEq intends on following an integrated health, safety and environmental policy adapted by
the OSHA standards from inception. This ensures that their operations are executed in a
manner acceptable to any international organisation and that all employees receive the
necessary training and resources to allow them to expedite their work without compromise.
Their affiliation with the Construction Equipment Institute (CEI) is also an accreditation that is
not sought after by any of the current construction equipment providers. This will give ConEq
a strategic advantage in the future as it will demonstrate that they have gone one step further
that the competition, bringing a higher level of service excellence to the market place.
However, in order to successfully penetrate the broader market in the upcoming years,
ConEq must ensure that their operations are run truly independent of Beaver in order to
create a unique identity and brand name. Their affiliation with the BCL Group can potentially
have a drawback effect as other contractors may not wish to deal with them due to their
association with Beaver Construction. Nevertheless �money talks� and once a competitive
pricing strategy is adopted ConEq can potentially overcome this barrier. Since the demand
has exceeded the supply in certain areas, most of the equipment companies do not market
aggressively. An effective marketing campaign will also need to be implemented to build
public awareness, capture customers and to service the market overflow.
ConEq will be well poised to expand their scope of activities from being strictly an internal
service company to a viable market contender once these areas are identified and a strategic
plan is implemented.
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5.3 Learning Outcomes
Having undertaken this project, there are three main areas of learning from which I benefited.
• I now understand the importance of business planning and the purpose of a properly
formatted business plan. My research into the area showed me what a
comprehensive business plan must entail and the way in which it should be
presented in order to serve its purpose.
• Since I will play a vital role in the project implementation, having personally
undertaken the business planning helped me to gain a deeper understanding of the
company and where the potential obstacles lie. I also feel very confident that I can
present this project to the bank and board of directors as I am comfortable with the
content of the plan and I feel certain that I can answer any questions that are directed
my way.
• Developing the financial aspects of the business plan, although quite difficult at times,
helped me to gain a true appreciation for the compilation of company accounts and
the method of producing the balance sheet, cash flow statement and income
statement with the associated accounting policies.
5.4 Recommendations
Producing a business plan was an interesting experience and although I gained a lot of
knowledge from my research I was at times overwhelmed with the amount of work involved. I
would recommend a team approach to benefit from different perspectives and educational
backgrounds.
Objectivity is also a crucial characteristic of a business plan and cannot be stressed enough.
It is important to always remain impartial towards the content of the plan even if negative
things have been identified. This will ensure that the plan will be accurate and really satisfy its
purpose and not just be utopian.
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References
Barrow C. 2002, �Setting up and Managing your own Business�, Kensington West
Productions
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URL: www.beavertt.com (Accessed on 23/04/05)