Business Information
Project Overview
Avenue Park Garden Services (APGS) are a start-up company situated on the suburbs of the Mott Haven division of the South Bronx. The company will start operating on March 2014 as a sole proprietorship. Extensive coverage of the targeted market will begin in two months ahead of the commencement date. The company will offer professional garden blueprints, landscaping services and repair services for individuals and businesses in a geographical area covering Manhattan and Mott Haven division of the South Bronx. The peak trading season for the company is expected to be between March and October, while the low season is expected to be between November and February. During the low season the company will continue to operate but on a limited number of clients.
Objectives of the project
The main objectives of the project in the initial year of operation include: First, to successfully commence business operations on March 2014. The second objective is to be the leading company in garden planning, design and maintenance services in the entire Manhattan region. Last but not least, the company aims to achieve sales of $120000 in the first year exclusive of Value Added Tax (VAT), and net earnings of $30000, prior to tax and promoter drawings. In the following year (which is not in this plan) sales are projected to rise to over $200000 with the addition of staff.
Services to be offered by the company
Avenue Park Garden service (APGS) will offer all gardening services as per the customers’ needs. The services that will be offered by the company will include: garden planning and design service; garden construction, landscaping and lodging services; turf cutting; edge and couch maintenance; pruning/trimming hedges; clip removal; and maintenance of other special features, for instance, aquatic features and outdoor architectural elements among others.
Business structure and ownership
The company is a sole proprietorship, which is also known as a sole trader business. In other words, the proprietor (promoter) will possess, run and work on a full-time basis. The proprietor has massive and widespread experience in the field of horticultural garden. He has worked among the top horticultural services companies in different capacities, the latest as operations manager in professional landscaping and gardening. In addition, he holds a Bachelor of Science degree in horticulture specializing in soil science and plant propagation. The proprietor has also completed a number of entrepreneurial courses including Mott Havens Enterprise Board’s Business Start-Up Program.
Organization and Staffing
Besides the proprietor, the company will also have one extra permanent staff in the first year, and it is probable that two extra employees will be needed in the following year. Staffing will be based on the following skills: landscape/garden design, application of learned or gained knowledge, ability to carry out physical duties and excellent customer care. As a matter of fact, the company has already identified the first employee and he is expected to start working in the opening week of operation. The business will be operated from the proprietor’s residence. The residence has adequate facilities to host a professional and well organized operation, including well equipped office, safe and sound workshop, and a warehouse.
Quality Standards, Advisors and Financiers
The company will be a member of the New York Sate Turf and Landscape Association (NYSTLA). NYSTLA dictates the code of conduct in the industry and offers regular technical training for all its members. The company’s main advisor is the Mott Havens Enterprise Board. The company has already received business advice from the board. The principal financiers include American Express Bank, Atlantic National Bank and New York Private Bank and Trust among others.
Market précis
The gardening services market in the United States has been growing at a mean rate of 10 to 15 percent for the last one decade. Manhattan and Mott Haven division of the South Bronx (which is the target market) is also experiencing a similar trend. The growth rate is attributed to the growing awareness of visual effect and utilization of green spots around private and public structures and facilities, as well as commercial buildings, for example, hotels, large Bed and Breakfasts, offices, and manufacturing plants among others. Another factor is attributed to the current architectural designs. The current contractors and engineers are helping and advising clients in planning green areas, so as to conform to the current architectural designs and meet the clients’ needs and preferences.
The growing market for garden service is also as a result of the green revolution. With the recent technological breakthroughs in the field of agriculture, the food requirements of the ever increasing population have been met by increasing areas under cultivation. Such areas include top of the skyscrapers, backyards and designated rooms among others. Last but not least, the market is growing because of the busy schedule experienced by many individuals, especially the working class. These people want results but have no time to attend to such undertakings. In addition, these individuals have relatively good income to hire an expert to carry out the task.
As already been mentioned, the targeted areas for sales include Manhattan, Mott Haven and the surrounding areas. The landscaping and design services will particularly target companies, government premises and new buildings within the target areas. However, maintenance services will target individual homes mainly in Manhattan and surrounding areas, as well as the continuing garden and landscape projects already planned by the company.
From a research conducted by the proprietor in the last few months a number of companies have committed to work with a company when the business commences. Two local authorities and other neighboring organizations have confirmed to include the company in their tender listings. In addition, the company expects to sign more than 50 clients in the first year of operation for maintenance work for private gardens. Based on the proprietor’s experience it is estimated that over three quarter of the company’s operations will be project work and the rest maintenance work.
The company is expected to have two sets of competitors within its target market. These are individual garden maintenance operators and large operators. Individual garden maintenance operators normally offer essential landscaping services, grass cutting and other additional services. The exact number of these businesses is not easy to assess but they are roughly 30 genuine operators. Additionally, there are some of the service providers who belong to this group but operate illegally basically in the suburban areas.
Larger operators, similar to the Avenue Park Garden service, offers comprehensive design, landscaping and patch services. These businesses have permanent employees and are estimated to be roughly 20 within the company’s sales area. These businesses employ more than four staff and have a considerable number of clients. The five large operators within the target market include: Mark Shields Garden and Landscape services, JCT groundwork, Property Services and Landscaping, Buffalo Gardening and Landscaping design, and Neave landscaping services.
Company’s competitive Advantage
The company’s main competitive edge will be excellent work and unfaltering expertise. Other competitive advantages will include: design capacity, proficiency in production, historical contact with the targeted areas of sales, and promptness within a limited budget. During the first year, the proprietor will carry out all the company’s operation with the help of a single employee. However, in the second year, two additional workers will be hired. The proprietor and the employees will work as a team, enabling direct evaluation of all employees and direct participation with the task in sight so as to make sure that clients’ needs and expectation are met.
The competitive edge of unflagging professionalism will be upheld through prompt response to client inquiries, turning up on time, availing all the required equipments, reserving breaks for the employees and keeping up tidiness. To facilitate communication, each and every employ will own a communication gadget, where messages can be sent directly without unnecessary interruptions. A number of these measures sound so basic but will help the company stand out from the local rivals.
The proprietor has worked for different companies under different capacities for over two decades, the latest being an operations manager in professional landscaping and gardening. He also holds a Bachelor of Science degree in horticulture specializing in soil science and plant propagation. In addition, the company will employ highly qualified staff. Therefore, the company’s proficient personnel will offer a competitive advantage in the industry. The proprietor having worked in the targeted areas in sales for different companies also provides a competitive edge since he has interacted with some of the clients on a personal level. Last but not least, the company’s highly qualified personnel will ensure that the projects are completed on time and within the budget.
Distribution Channels and Marketing Strategy
Avenue Park Garden Services (APGS) will basically have two channels of distribution namely: direct contacts with the clients and public tendering process. The tender process will be through architects, civil engineers, building designers and other public organizations. The company’s marketing and promotional strategy will involve designing and printing of colorful brochures elaborating on the types of services offered by the company, for instance, garden design and landscaping services. This will be done within two months before the commencement date. After that, the brochures and introductory letters will be mailed to the potential customers. This will be carried out within a month before the commencement day. Subsequently, the mails will be followed by phone campaigns and this will conducted in two weeks before commencement date.
An article on company launch will be published in the local dailies. Calendars on gardening events and maintenance services will be mailed regularly to specific homes after the launch. The company will also carry out numerous promotional activities in the future, instance, newspaper advertisements, use of billboards, and radio and TV advertisements among others. Referrals and endorsements will also be used selectively. Lastly, the company will each and available opportunity to build their brand and preserve customer loyalty.
Sales Strategy
Avenue Park Garden Services sales strategy will principally be based on personal interaction with potential clients. In addition, the company representatives will regularly meet these clients to assess their needs and requirements. The brochures, design proposals and quotations will also be used to execute sales. In addition, calendars on gardening events and maintenance services will be sent to potential clients. Most of these will contain a portfolio of the company’s past and recent works, the proprietor’s achievements, and pictorial presentations. They will also provide competitive prices and budget estimates for different type of works.
With regard to garden design and landscaping services, prices are set professionally using industrial information and stage management. Premium prices are based on the principle of optimal returns. Maintenance service will vary according to the seasons (peak and low season). Average prices per week for maintenance service will be $45 in the boom period.
Financial Data
Capital expenditure requirements and other sources of funding
The initial capital expenditure requirements for the first year are $16250 exclusive of Value Added Tax, and the company will be financed for start-up by a combination of bank loan, credit from the promoters, and lease for transportation. Basically, the loan will be $16000 and $5000 overdraft facility. Earnings and the bank overdraft facility will be used to fund the successive cash flow demands. New York Private Bank and Trust agreed in principle to loan $1600 for capital expenditure requirement, subject to a comprehensive business plan and official approval. Other sources of funding will include promoter’s loan of $10000 to the company. This loan will not be paid back until the business stabilizes. American Express Bank also agreed to in principle to give the company an overdraft facility worth $5000. The overdraft facility will also be subject to comprehensive business plan and official application/approval. Lastly, the company will acquire lease finance for transportation purpose.
Postulations
The company is expected to achieve sales of $120000 in the first year exclusive of Value Added Tax (VAT), and net earnings of $30000, prior to tax and promoter drawings. It is estimated that by the end of the first year creditors would owe the company roughly $4000 inclusive of VAT. Correspondingly, the company will also owe creditors a substantial amount of cash. Garden design and landscaping services will operate on stage-payment system. Payment for maintenance work will be in cash after completion of work. Finally, the promoter will make $30000 drawings by the end of the first year.
Financial projections
Profit and loss projections are in appendix 1, while Cash flow projections for the first year are shown in appendix 2.
Environmental and Industrial Analysis
The gardening and landscaping service industry in the United States is the fastest growing sector of the agricultural economy. In New York, gardening and landscaping services sales have gone up to over $3 billion. The latest research on the economic impact of the industry in the US economy was carried out in 2005. In the report defined garden and landscape service industry in broad terms to include equipment manufacturers, brokerage services, architectural services and the impact to the national economy.
Garden and landscape services businesses comprise of the proprietors, administrators, overseers, administrative staff, manual laborers, and sales individuals with expertise and proficiency in an array of subjects. An individual with a degree in landscape horticulture qualifies to be a supervisor in the industry. A graduate qualifies to be a manager or a supervisor with some work experience in the industry. The responsibility of the supervisors varies from one company to another. However, core set of knowledge and expertise are required in order to be successful supervisor.
The industry also includes a wide range of businesses involved in production, delivery and services related to ornate plants, scenery and garden provisions and apparatus. A section of the industry incorporates general plant sales outlet, greenhouse and lawn producers, landscape engineers, outworker and maintenance companies, and marketing agents among others. In addition, the industry allied to urban forest management by offering excellent planting materials and expertise for breeding, sustaining and handling urban wooded areas.
The economic impact of the U.S. economy was approximated at 148 billion in productivity, 2 million jobs, $100 billion value added, 70 billion in employment earnings, and 7 billion in circumlocutory taxes. For the production and industrial sector, for instance greenhouse and lawn equipment manufacturers, the industry contributed $40 billion and 310000 jobs. The industry also has other numerous advantages including aesthetic and health advantages which are usually ignored in the cost-benefit analysis. The main reason why people seek the services of this industry is beautification. However, ornamental trees have numerous health benefits.
The industry’s revenue has always been on an upward trend. This is mainly attributed to the outsourcing of garden and landscaping services by both public and private institutions. However, experts warn that the revenues may soon slump due to changes in the real domestic income which is affected by a number of economic indicators. The economic indicators include changes in interest rates, taxation policies, health policies, unemployment and many more. The decline in real household income reduces the propensity for seeking the services of the industry. The recent food quality protection policies will also have a negative impact on the industry, for instance, barring the use of chemical containing chlorpyrifos.
Scholars believe that the projected economic crisis in the U.S. will hit the industry very hard like the subprime mortgage crisis. The crisis will reduce the construction of new residents, residential sales and the overall real estate values. Bankruptcies of many businesses continue to go up and the pressure on government budget increases. As a result, the demand for products and services of the industry will slump. All in all, the garden and landscape service industry like many other sectors is very sensitive to economic shocks. The anticipation of future economic changes has impelled some companies to pool resources, with larger operators acquiring small operators to expand their market. Analysts believe that these operators may go global to reduce the above risks.
The top five companies in the industry control nearly 8 percent of the total market share giving the industry with a low market share concentration. The industry is also dominated by small operators. Information from garden and landscape magazines show that nearly 20 percent of the companies had two or less employees, 22 percent had between 3 and four employees, 18 percent have ten to twenty employees and the rest had more than 25 workers.
In addition, the annual revenue of companies with less than two employees was $50000 or less. Companies with three to four employees had annual revenue of $50000 to $100000, while those with more ten employees earn $200000 to $500000. The figures are supported by data from the U.S. Census Bureau. The data show that over 87 percent of the operators have less than fewer employees. In other words, the industry comprises of small businesses and this is changing with time.
The key success factors in the industry include: the capability to compete for major contracts; providing services to households with relatively high disposable income; maximizing seasonal opportunities; use of low volume marketing or sales strategy; ensuring efficient quality control; access to highly competent and professional staff; capability to embrace new technologies; and the ability to adjust an array of inputs consistent with the cost measures.
The industry faces a number of barriers to new entrants. The principal barriers include economies of scale, licenses/permits and capital intensity. Economies of scale denote the existence of monopolies in the industry. The garden and landscape service industry in the U.S. has a low degree of market concentration with five companies controlling a large market share. The market is fragmented and is comprised of numerous small firms. However, the industry offers opportunities for recessive operators, whether within certain locality or field specialization.
The degree of capital intensity in the garden and landscape service industry is normally low. The cost of capital is relatively low and numerous individuals can start operating using their own domestic equipments. In addition, the business does not necessarily require conventional office. Last but not least, the industry has few licenses and regulations. In a nutshell, the industry has very few barriers to entry.
Porter’s five forces analysis of the U.S. garden and landscape service industry
This model is based on the comprehensive outlook on the company’s strategies that meets the opportunities and threats within and without the industry. The five forces as identified by porters include: threats of new entrants, bargaining power of suppliers and customers, threat of substitutes, and the rivalry within the industry. Porter’s five forces analysis not only offers a significant foundation for strategic analysis but also examines the viability of the industry to come up with possible course of actions.
U.S. garden and landscape service industry is regarded as a distinct industry. As a result, the Porter’s five forces and other externalities have considerable impact on the individual companies. Globally, the industry is regarded as the market leader because of its outstanding service delivery and distinguished brands. However, over the recent past, the industry has been faced with stiff competition both within and without the country. For that reason, industry analysis is very crucial for the companies in order to cope with the current and prospective challenges.
The ease of entry into a market dictates the level of competition. The threat of entry significantly depends on the barriers put in place to ward off the new entrants. Five major operators control the largest share of the U.S. market to a near monopoly. Despite of the fact that U.S. garden and landscape industry has limited restrictions to the new entrants, smaller operators have always found it very difficult to access this market. Nevertheless, the transformation of the country’s real estate industry, high unemployment rate and the state of the economy has attracted new entrants into the market.
Customer’s bargaining power in the U.S. garden and landscape service industry is very high. This is due to the fact that buyers have numerous options to choose from. Therefore, players in this industry need to focus most of its attention on consumer satisfaction and provision of exceptional services. The power of the supplier in the U.S. garden and landscape service industry is also important and has significant impact on the company’s competitive capacity. For this reason, a number of companies have established strong ties with its suppliers and other complementary companies.
The U.S. garden and landscape service industry has highest threat of substitutes, especially given the high number of players within the industry. In addition, most of the services provided can be done clients themselves. The threat increased with the entry of “black market operators. These are who operate their businesses illegally within the estates and are charging low prices for the service rendered. Therefore, companies must take notice of the threats within this market segment. Last but not least, the level of competition among small operators is very high. The competition has become stiff due to a large number of players in the industry. This high number is mainly attributed to the fact that there are fewer barriers to entry and low capital requirement. These small operators not only face competition from their counterparts but also large operators who nearly monopolized the industry. However, most companies have been able to maintain a competitive edge over their rivals by improving its apparatus, increasing the market share, offering exceptional services and promoting their brand.
Operational plans
As already been mentioned, the company will offer various services which include garden planning and blueprint service; garden construction, landscaping and lodging services; turf cutting; edge and couch maintenance; pruning/trimming hedges; clip removal; and maintenance of other special features. Discretionary services will also be offered upon client’s request. For this reason, the company will try to be as flexible as possible. In case a customer is not fully satisfied remedial services will be provided. The targeted areas for sales will cover Manhattan and Mott Haven division of the South Bronx. The landscaping and design services target corporate bodies and new buildings. However, maintenance services will target individual homes in Manhattan, as well as the continuing garden and landscape projects already planned by the company.
The services will be offered based on the schedule created, with priority given to landscaping and garden design services. The schedule will be adjusted from time to time depending on the season, type of work available, magnitude of work available and many other factors. As regards individual clients the company will target both middle and high income earners. This segment of the population is the most likely to use the services offered by the company. The company will use all the available resources to increase its clientele and probably expand its area of operation. Since players in the garden and landscape service industries, the company will form alliances with different suppliers to ensure that inputs are available in time and are of the right quality. Such alliances will also make sure that the company benefits from discounts and attractive prices.
Equipments
This section addresses the ownership of the equipment, maintenance design and storage that would enhance its durability and performance.
Materials
Generally, materials that will be used for day to day business operations include: fertilizers, Agrochemicals, flowers and plant seedlings, laws, food and beverages, and oil and water among others. Fertilizers and agrochemical will be supplied by the local agrovet. Flowers and plant seedlings will also be supplied by a neighboring horticultural distribution center. Lawns will be supplied by Harris Interactive lawn Merchandisers, while oil, food and beverages from the neighborhood supermarket. Last but not least, water will be provided by the clients. In case water is not available at the client’s premises the company will hire a water tanker.
Communication
Efficient communication helps the company to avoid time and money wastage. Therefore, it is important for the company any to develop an excellent communication strategy. As already been mentioned, communication within the company will be affected both by face to face conversations and through mobile phones. On the other hand, communication with the clients will be through convenient means, for instance, phone calls, face to face interactions, and mails among other channels.
Personnel
The company will be run by the proprietor and one employee in the first year. However, in the following year two additional staff will be added. Employees’ wages will not be constant. It will depend on academic qualifications and level of experience. In addition, the company will sponsor its workers to pursue relevant courses, including a number of entrepreneurial courses from the Mott Havens Enterprise Board. The proprietor will act as the manager, supervisor, and salespeople. He will even help with the manual work. On the other hand, employees will basically carry out the ground work. Nonetheless, the proprietor will consider delegating some of the work to highly qualified and experienced employees.
Risk Management
Some of the risks that may be encountered in the industry include property damage, injury to the staff, theft, vandalism, poor workmanship and fire among others. Some of these risks are due to negligence and ignorance. Therefore, exceptional work ethics and extensive training are required. For this reason, the company will invest personnel training. Both formal and informal training will be applied. Formal training will involve sponsoring employees to take certain relevant courses. On the other hand, informal training will entail giving out instructions during work. Informal training will be important because of the proprietor’s massive experience and academic qualifications.
Benefits to Community
American community faces numerous challenges including health, environment, economy and communal conflict. Garden and landscape service industry has played a major role in alleviating these problems. Urban flora influences both physical and biological environments. For example, it helps to ease the negative effects of metropolitan development by modifying climate, preserving energy, reducing carbon dioxide, enhancing the quality of air, reducing soil erosion, mitigating noise pollution, and beautifying the city. The urban temperature tends to be warmer than the surrounding rural areas because the vegetation cover has been replaced by various building materials. A number of studies have shown that vegetations can minimize the heating effect of urbanization by more than 8 percent, hence saves the cost of installing coolers. Therefore, gardening and landscaping activities have a direct effect on the immediate environment.
Gardening and landscaping activities also have an impact on the property value. Real estate experts argue that approximately 20 percent of the property value is tied up in the landscape. In addition, landscape/garden design influences the marketability of a property. Gardening plays a big role in improving urban nutrition and health by availing fresh fruits and vegetables, as well as improving the income of the urban households. Furthermore, it enhances individual health by being a source of exercise, stress mitigation and recreation. Some medical scholars argue that individuals who interact with vegetation are in a better position health wise.
Gardening also acts as a tool for strengthening family ties and brings communities together. A number of studies have established that accessibility to nature is very vital in life fulfillment. Last but not least, gardening and landscaping services enhance the economy of an area by providing jobs to the unemployed, provide government revenues in the form of taxes and increases market for products of the allied companies.
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