Residential Construction Business Plan Sample

This residential construction business plan sample is focused on the growing Chicago, Illinois market. Building homes in the bustling and populous city of Chicago requires innovation and functionality.  Our residential construction business plan writers created this sample.

 

Executive Summary

Buckham Builders Inc. (herein also referred to as “Buckhum Builders” or “the company”) was incorporated on June 26, 2020 in Chicago by President, Gary Buckhum.  To date, Buckhum Builders has focused on purchasing, upgrading and selling residential properties, and is now looking to expand into the new home construction market by gaining certification through the General Construction License program.

Founder and President, Gary Buckhum is an experienced construction professional with 15 years in the industry. He is an experienced builder and property upgrader/seller for both residential and commercial properties, and has worked as a HVAC installation and service professional. Throughout his career, Gary has managed projects of varying sizes, but has developed an affinity for land development projects, overseeing multiple builds from idea to completion. Gary sees a clear opportunity in the growing residential market in Chicago. Today, he is looking to gain General Construction License to enter the new residential construction market, applying his knowledge and experience to this new opportunity. 

 

Buckhum Builders is distinct from other developers in the sense that Gary Buckhum takes pride in making each  home distinct and unique to one another. The company prides itself on providing a ‘classic modern’ architecture and design, catering to a growing niche of middle class and upper middle class homebuyers, entering the market for the first time and looking to purchase a newly built home. Primarily focused on sustainable, energy efficient homes provides the company with a competitive advantage and compliments growing market demand for this segment of new home development in Chicago.

 

Buckhum Builders is currently in the process of applying for General Construction License approval to build new construction residential properties.  Founder and President, Gary Buckhum has a strong existing network of key contractors, partners, and realtors that are prepared to support the company’s growth in the new residential construction market. Already having generated substantial revenue from previous builds, the company has successfully sold five properties and is able to fund this next stage of expansion without the requirement for substantial external financing. 

 

Business Overview

Buckhum Builders specialized in the design and development of spec residential homes.  The company currently designs, builds and lists homes on the market, catering to a specific sector in the residential construction market that is seeing impressive growth and demand. Now, looking to enter the new home market with General Construction License approval, the company will be able to build new homes that will be sold directly to the buyer via a real estate broker or realtor, providing a seamless construction and home purchase experience. 

 

Mission Statement

Our mission is to build high-quality, sustainable, classic modern homes catering to the growing middle and upper middle class homeowner market. 

 

Vision Statement 

Our vision is to become known as one of the top companies for sustainable custom and spec home design in Chicago, serving both individual homeowners and large development projects. 

 

Core Values

Gary Buckhum and the Buckhum Builders team strives to withhold core values of integrity, honesty, respect, team work, fairness and responsiveness. These core values are reflected internally in managing and dealing with one another, and externally when building homes and working with clients and partners. 

 

Integrity, Honesty, Respect, Team Work, Fairness and Responsiveness 

 

Milestones

The company has achieved the following milestones thus far:

• Purchased a large section of land with no need for external financing or loans
• Purchased a large shop for inventory with no need for financing or loans
• Achieved the company goal of purchasing, updating, and selling five homes in 2021
• Successfully secured $600,000 in cash to finance first spec home development
• Incorporated the company on July 7th 2020
• Established growth and expansion goals for the next three years

 

Goals and Objectives

The goals and objectives for Buckhum Builders are as follows:

• Hire a handyman, project manager and warranty specialist
• Reinvest all profits into the company to fuel growth
• Build 5-10 spec homes per year
• Become known as a competitor in the custom home market in America
• Build and establish long term relationships with tradesmen and suppliers 
• Achieve net $2,000,000 per year in revenue 

 

Market Analysis

Buckhum Builders operates in the residential construction industry in Chicago. In particular, Buckhum Builders operates within the niche sector of sustainable, energy efficient homes located on larger lots. The company builds spec homes, custom homes, upgrades to existing buildings, and in the future plans to get into large scale residential development projects. The following section will outline the relevant trends, government regulations and competitive landscape as it relates to Buckham Builders in Chicago. 

 

Government Regulations

Occupational Health and Safety Act (OHSA) 

Construction companies are required to abide by several rules and regulations as stated under the OHSA. The various applicable regulations are detailed in the ‘Green Book’, and outline  the applicable laws and regulations as they relate to construction projects. Within each category, a construction company must abide by the various regulations and rules as they apply to each individual project. Some regulations require inspection via a third party, while others require that workers receive mandatory training and certification to operate safely on site. The categories are as follows: 

 

• Construction Projects
• Confined Space 
• Critical Injury
• OHS Awareness and Training
• JHSCs- Exemption
• Unilateral Work Stoppage
• Inventory of Agents of Combinations of Agents 
• Offices of the Worker and Employer Advisors

 

After Sales / Service Policy

Buckham Builders Inc.. follows General Construction License’s warranty policy and it is as follows:

 

Warranty Overview

The statutory warranties on work and materials that you provide on the home take effect on the Date of Possession and last for a total of seven years. The Date of Possession is the closing date or, in the case of a condominium unit, the occupancy date/interim occupancy date.  The statutory warranties are divided into the three timeframes outlined below. 

 

One-Year Warranty

• Requires that the home is constructed in a workmanlike manner and free from defects in materials
• Protects against unauthorized substitutions of items of construction or finishing that are referred to, or selected by the purchaser, in the purchase agreement
• Protects against Chicago Building Code violations

 

Two-Year Warranty

• Protects against water penetration through the basement or foundation 
• Protects against defects in materials, including windows, doors and caulking, or defects in work that result in water penetration into the building envelope 
• Covers defects in work or materials in the electrical, plumbing, and heating delivery and distribution systems 
• Protects against Chicago Building Code violations that affect health and safety, including but not limited to fire safety, insulation, air and vapour barriers, ventilation, heating, and structural adequacy

 

Seven-Year Warranty

Provides coverage against major structural defects. These include:

• Defects in work or materials that affect a structural load bearing element of the home, resulting in an actual structural failure
• Defects in work or materials that materially compromise a structural load bearing element of the home, even if failure has not occurred or is not imminent
• Defects in work or materials that materially and adversely affect the use of a significant portion of the home

 

Condominium Common Elements

For most condominiums, the common elements have the above warranty coverage. The condominium corporation is entitled to submit warranty claims for defects in work or materials in the common elements. There is no warranty coverage for the common elements of either a common elements condominium or vacant land condominium. Common elements warranty coverage begins on the date the condominium corporation is registered. 

 

Coverage Limits

For all purchase agreements or construction contracts signed on or after February 1, 2021, these new warranty limits are in place:

• The maximum statutory warranty coverage available for freehold homes and condominium units is $300,000.
• The maximum coverage for condominium common elements is $100,000 multiplied by the number of units, up to a maximum of $3.5 million.
• The maximum combined coverage for a condominium project (units and common elements) is $50 million.
• There is a maximum of $50,000 for warranted damage caused by environmentally harmful substances or hazards, including mould, for freehold homes and condominium units.

 

For all purchase agreements or construction contracts signed before February 1, 2021, these warranty limits remain:

• The maximum statutory warranty coverage available for freehold homes and condominium units is $300,000.
• The maximum coverage for condominium common elements is $50,000 times the number of units, up to a maximum of $2.5 million.
• The maximum combined coverage for a condominium project (units and common elements) is $50 million.
• There is a maximum of $15,000 for warranted damage caused by environmentally harmful substances or hazards, including mold, and a maximum of $25,000 for coverage of septic systems.

 

Market Trends 

City of Chicago trends

The city of Chicago has a population of 14.9 million people as of 2022. The total number of housing units sold in 2021 was approximately 263,799, with an average house price of $887,290. In 2021, there were a record 100,089 housing starts in the city, alongside the highest rental starts at more than 13,000. There is a strong demand for housing in Chicago, with a study done by Scotiabank noting that Chicago was the city with the lowest supply of homes per capita. Despite a noted slowing in the number of home sales in 2022 from 2021 levels, average price per home is still increasing. These market dynamics display an apparent shortage of homes in Chicago, and need for increased supply of mid-market homes for first time homebuyers and middle/upper middle class individuals and families. 

 

Residential Construction Trends

The Chicago home builders market was valued at $32.9BN in 2021 with a compound annual growth rate of 3.8% between 2016-2021. There are approximately 54,190 businesses in the industry, employing over 82,000 employees. The homebuilders market primarily supplies single unit houses, double house construction and row house construction, with the vast majority (85%) of jobs allocated to single unit house construction. Key drivers of this market include per capita disposable income to fund housing purchases, the overnight rate at which financial institutions lend money impacting interest rates on mortgages, the value of residential construction, and housing starts. In the USA, speculation over the housing market ‘bubble’ increased uncertainty in the market, as housing prices continue to rise in response to foreign investment in the American housing market, with young American first time home buyers increasingly becoming crowded out of the market. However, increased government support through tax policies and fiscal measures, and an increasing supply of new housing units attempt to alleviate the economic and financial pressures of homeownership while also stimulating the wider American economy.

 

Key Competitors

Buckhum Builders competes with other businesses located in Chicago providing services to residential homebuilders and developers. The top three competitors are as follows:

 

Omega Homes: is a custom home builder located in the Central Business District. Omega Homes specializes in both single home design, as well as large multi unit development projects. Similar to Buckhum Builders, Omega Homes is a registered General Construction License custom home design builder, and specializes in modern stylish homes. The Omega Homes team includes architects, designers, and trades, and operates in various locations across Chicago.  In addition to construction services, Omega Homes offers lot selection, design, planning, construction financing, interior design and decor services. 

 

Sanchez Homes: is a luxury custom home builder serving the Central Business District. They take a customized approach, working closely with each individual client at all planning and building stages to ensure high quality customer satisfaction. Sanchez Homes is General Construction License certified and part of the Central Business District Home Builders Association, and has won the Best of Houzz award in 2015, 2017, 2018, 2019 and 2020. They are able to deliver on any architectural style, and have experience working with Heritage Homes. 

 

Greenmark Builders: is a luxury custom home builder company that has been in business for over ten years. Greenmark Builders is equipped with a skilled team of architects, handymen, designers, and project managers to work closely with customers throughout the entire design process. In addition to offering homebuilding services, founder and CEO Mark also runs a YouTube channel where he shares tips and tricks on home improvement projects and current Greenmark Building Projects. 

 

Products and Services

Buckhum Builders specialized in spec home construction. The company purchases old homes or plots of land, updates or tears down old homes to replace with new modern homes, and sells them directly to target customers on the open market. Homes are funded and built by Buckhum Builders, and the team has a strong attention to detail in regards to customer fittings, design preferences, and customer taste. The Buckhum Builders construction process gives the buyer a custom home fitting without the hassle of managing a construction project. 

 

Pricing Model

Buckhum Builders currently operates in the spec home market, where Gary Buckhum will purchase homes or plots of land, build and upgrade the building envelope and re-sell the home. 

 

Houses are bought and sold at fair market price, with the price spread earned through the upgrades and building design done by Buckhum Builders. Spec homes are built, funded by the company, and sold directly to a buyer. Projects start a minimum of 100k per project and are set by square footage. Field workers and contractors are paid approximately $25 per hour. 

 

Competitive Advantage 

The company’s competitive advantage is built on the industry experience and expertise of Gary Buckhum. With over 15 years of relevant industry experience, Gary sees an opportunity in the larger lot custom home market, where he is able to deploy his expertise and knowledge to high quality home building. Gary is inspired by creating homes that are thoughtfully designed with practical features, unique touches, and tasteful interiors. With a strong existing network of key contractors, partners, and real estate professionals, the Buckhum Builders team will be able to effectively scale in the residential construction market, and develop strong customer goodwill by producing high quality homes that are on time and within budget. 

 

Gary has experience in house flipping and building of spec homes, and plans to focus efforts in this market where he knows his team can be successful. By taking a personalized approach to each home, and designing with the homeowner in mind, he will be able to tactfully deploy resources in a way that allows the design of unique custom homes at a middle price point. 

 

Key Success Factors

Key success factors for this business are determined by market credibility and having proven prior success. Alongside credibility, it benefits companies to have proven financial, managerial and technical ability to undertake new projects on. Access to a skilled and trustworthy workforce, subcontractors, and tradespeople, and the ability to expand and retract operations due to changing market conditions. Finally, maintaining healthy margins is integral to success, and the ability to source raw materials at a good market price, and work efficiently to complete projects on time and within budget is imperative to success. 

 

Sales and Marketing Plan

The company primarily serves the Chicago market located within 200km of the nation’s capital, Central Business District. Buckham Builders designs custom classic modern homes, catering to upper and middle class families who live in city centers, suburban areas, or rural settings. 

 

Target Customer

The company’s target customers are middle class and upper middle class families and individuals. Some may be first time home buyers, but it is not limited to this particular sector. The company currently operates as a spec home builder, listing tasteful homes on the market, designing and building to cater to current market trends and demands for housing. 

 

In the USA, the middle class is defined as households ranging from $53,413-$106,837 per year in cumulative income, and the upper middle class is defined as households ranging from $106,827-$373,894 in cumulative household income. In the USA, these two categories make up 68% of the total population with 10% being in the upper middle class, and 58% being in the middle class. As such, Buckhum Builders has a substantially large market to target. 

 

Buckhum Builders design philosophy is luxurious classic modern. The architectural style will be in the mid-point between ultra modern and classical design, attracting a wide range of homeowners and homebuyers who are in the market to purchase a home. By selling homes directly into the market, Buckhum Builders will be able to reach their target audience with a high purchase intent, growing interest and awareness in Buckham Builders and building strong goodwill over time. 

 

Key Channels

The company will use a variety of digital marketing channels to advertise their services. These include social media, Search Engine Optimization (SEO), emailing, and phone calls. Additionally, key personnel from the Buckham Builders team will work to establish partnerships with key contractors, project managers and property developers to develop and maintain long term partnerships as preferred contractors. 

 

Since the company will sell homes directly on the market, Buckhum Builders will also leverage partnerships with key realtors to promote and sell newly built homes. This will be a key channel for Buckhum Builders, increasing exposure, brand awareness and recognition over time. By partnering with key realtors that cater to the target customer and market, the company will ensure homes are being shown to appropriate audiences to generate substantial sales. 

 

Key Performance Indicators

The company will track the following key performance indicators (KPI’s):

• Profitability ratios
• Gross Profit Margin
• Number of homes built
• Number of site inspections conducted
• Total cost of rework
• Waste/recycling per job
• Percentage of labor/equipment downtime
• Relative Market Share
• YOY Sales Growth
• Retention Rate
• Employee Retention and Satisfaction
• Customer Satisfaction

 

SWOT Analysis

 

Operational Plan

Buckham Builders is owned and operated by Gary Buckhum and Sharon Greyhound. The company builds and sells spec homes, working with real estate brokerage companies to sell newly built and upgraded homes. 

 

Buckhum Builders primarily deals directly with real estate brokerage companies, which require a 10% deposit on purchase. On closing, the remaining purchase price is deposited directly into the Buckhum Builders account, minus an additional realtor and lawyer fees. 

 

Health & Safety

The Chicago Health and Safety Association (OHSA) recognizes construction sites as high hazard work environments and have a variety of relevant risks dependent on the job site. As such, there are a variety of safety requirements that must be implemented in order to operate a construction site in the city. The OHSA has implemented a number of safety regulations and standards as outlined in the 1926 OHSA including general safety requirements, health provisions, occupational health, sanitation, hazardous substances, mandatory training, and PPE & life saving equipment. 

 

Staff and contractors may also require mandatory safety training and certification in order to work on construction sites. This include, but are not limited to, WHMIS Certification, Fall Protection, Confined Space, First Aid and more. Construction sites may also require a designated safety manager on site to monitor and implement safety policies. 

 

Equipment & Inventory

The company currently owns a half ton truck and a variety of required materials and tools required to build a home. Gary Buckhum and his team currently rent major heavy equipment, or rely on key contractors to supply the necessary equipment depending on job type. 

 

Location

The company is registered at 6882 Lakes Park Drive in Greely Chicago, K4P 1M6

 

Risk Analysis

The residential construction industry is closely tied to the overall economy and national GDP. The main risks associated with the residential construction industry sector are as follows:

 

Design Defects and Budgetary Planning Buckhum Builders designers will pre-assess construction jobs and set project budgets accordingly. As such, there are risks associated with unforeseen accidents and defects impacting the ability for the company to complete projects on time and within budget. Buckhum Builders will mitigate these risks by using industry best practices to estimate project costs and take a proactive approach to spot potential defects prior to starting on components of the project. It is the responsibility of the Lodestone team and contractors to conduct due diligence and maintain regular check-ins to ensure the project is on track. 

 

Residential Construction Cost: Residential construction cost includes the cost of the land, cost per square foot, and the cost of materials and relevant equipment. The residential construction cost is directly associated with overall housing value and subsequent profits for Buckhum Builders and other contractors. Rising residential construction costs pose a risk to Buckhum Builders as they may result in less revenue for Buckhum Builders, as well as declining home purchases. While it is challenging to avoid these increasing costs, Gary Buckhum will mitigate this risk by relying on existing partnerships and long term contracts with key suppliers, aiming to avoid price increases. Additionally, the team will deploy the experts of tax planning and pricing specialists to ensure they are able to price homes competitively while also maintaining healthy margins and profits. 

 

The overnight rate: The overnight rate is a rate set by the Bank of America at which major financial institutions borrow and lend short-term funds to one another. When interest rates are low, construction activity typically picks up due to low-cost financing. Conversely, higher interest rates make it more difficult to obtain financing for mortgages and financing. While Buckhum Builders is not immune to overall changing economic conditions, throughout market research and understanding ensures that the company is operating in a sector that is seeing increased growth and demand in Chicago and across America. 

 

Management Team

 

Gary Buckhum

President

 

Gary Buckhum is the founder and President of Buckham Builders. He has over fifteen years  of experience in the construction industry, working as a HRAI certified contractor, house flipper, and general contractor. He is knowledgeable and experienced in residential hydronics design, with experience in installing and maintaining furnaces, boilers, water heaters, pool heaters, fireplaces, and AC units. He has worked as an independent contractor since 2015, and has developed a strong network of key contractors and partners he will leverage and deploy in future projects with Buckhum Builders. 

 

As the President of Buckhum Builders, Gary has experienced success in investing in residential and commercial units, performing enhancing upgrades to increase the property value, and then reselling the properties in the market at fair market value. Gary is prepared to lead the company into its next stage of expansion into the new homes market, and is committed to growing the team and resources to bring the company to success. He is a capable leader and sales professional, with experience managing projects and key team members. He is a member of the American Professional Sales Association and enjoys working with people. Gary is ambitious and committed to scaling Buckhum Builders to become a widely known and respected residential development company in Chicago. 

 

Sharon Greyhound

Business Manager

 

• Maintains records of financial transactions by establishing accounts; posting transactions; ensuring legal requirements compliance.
• Develop systems to account for financial transactions by establishing a chart of accounts; defining bookkeeping policies and procedures.
• Maintains subsidiary accounts by verifying, allocating, and posting transactions.
• Balances subsidiary accounts by reconciling entries.
• Maintains general ledger by transferring subsidiary account summaries.
• Balances general ledger by preparing a trial balance; reconciling entries.
• Maintains historical records by filing documents.
• Prepares financial reports by collecting, analyzing, and summarizing account information and trends.
• Complies with federal, state, and local legal requirements by studying requirements; enforcing adherence to requirements; filing reports; advising management on needed actions.

 

Key Personnel

 

Handyman

Employee: TBC

Salary: $50,000 annually 

 

Responsibilities:

• Ability to finish outstanding projects on job site
• Clean facilities by sweeping, dusting etc.
• Perform maintenance and light repairs
• Perform routine landscaping on the grounds
• Paint and fill gaps or crevices (on walls, sidewalks etc.)
• Undertake light installation or carpentry (e.g. build cabinets)
• Repair equipment or appliances
• Assist tradespeople with electrical, plumbing or HVAC repairs
• Undertake duties as assigned or emergency tasks (e.g. shoveling snow)
• Identify and report the need for major repairs

 

Project Manager

Employee: TBC

Salary: $75,000 per year

 

Responsibilities: 

• Determine and define scope of work and deliverables
• Predict resources needed to complete project
• Obtain necessary permits, approvals, and other regulatory prerequisites
• Draft and submit budget based on scope of work and resource requirements
• Manage costs in order to meet budget
• Provide direction over contracts and subcontracts
• Manage construction schedule and activities
• Issue progress updates as needed regarding costs and timelines
• Ensure work is done in compliance with all relevant building and safety codes
• Select and manage subcontractor and supplier relationships
• Coordinate efforts across entire project between all involved parties

 

Warranty Specialist
Employee: TBC 

Salary: $75,000 annually

 

• Being a point of contact for those who have sent in claims
• Assessing, organizing and filling out paperwork pertaining to claims
• Ensuring correct filing and storage of paperwork and records in case it is needed at a later date
• Liaising with accounting teams to ensure payment is received for any work commissioned
• Being in contact with any engineering or technical teams to schedule work carried out as part of a claim
• Arranging for delivery of parts or replacement items if a claim requires it
• Scheduling servicing or repair appointments

 

Key Contractors

Buckhum Builders has longstanding relationships with the following contractors and building suppliers. Each company has a strong commitment to excellence, strong customer service, and abide by all provincial safety and regulatory requirements: 

 

Caleb Warren

Building Materials and Truss supply

 

Scott Timber

Building Materials and truss supply

 

Fortress, Inc.

Drywall Services

 

Stone Life Corporation

Countertop Supply

 

Hopewell Plumbing and heating

Plumbing and HVAC supply 

 

Morris Flooring

Flooring supply and installation

 

Logan Electric

Electrical supply 

 

Marigold Kitchens

Cabinet supply

 

Financial Plan

The following financial plan incorporates a variety of variables including population growth in Chicago, production from competing construction companies, existing clients of competitors and the potential for economic challenges. Moreover, these projections have been conservatively developed and incorporate all potential expenses. 

 

Pro Forma Income Statement

 

Pro Forma Cash Flow Statement

 

Pro Forma Balance Sheet