Kazan Business Plan

Diane L. Kazan 615.373.4041

Kazan Flooringʼs Business Plan I.

Executive Summary Kazan Flooring, a women owned flooring business will burst into the male dominated world of commercial flooring in Nashville, Tennessee. Kazan will utilize her talent for connecting with people, her reputation, and awareness of trends and events in the marketplace. Kazanʼs owner sees each contract or sale as an agreement, not between a business and its customer, but between partners who wish to create a close and a beneficial long-term relationship. This will help to provide greater long-term profits through referrals and repeat business rather than more costly methods such as advertising, marketing and a street presence.

II.

General Company Description Kazan Flooring is in the business of selling and installing flooring products initially to the commercial building industry in middle Tennessee. The principal, Diane L. Kazan, will be responsible for contacting general contractors for the purposes of obtaining bid opportunities. She will also be responsible for attending pre-bid meetings, preparing bid and estimates, coordinating installations, reviewing contracts, submitting invoices for payments and following to ensure payment. Accounting will be performed by a third party and all installations will be subcontracted. Kazan Flooringʼs mission is to provide flooring products and installation services to builders and retail customers in middle Tennessee. Kazan Flooring will perform this function in a timely manner and with the highest quality installations to ensure the companyʼs financial viability as well as to become the flooring provider of choice by builders and customers in middle Tennessee. Kazan Flooring is anticipating sales revenues of approximately $3,000,000 annually by year three. This will be achieved by a customer mix of 75%: general contractor: private and government owned projects, 25%: builder: residential/remodeler. Initially Kazan Flooring will operate as a home-based business to preserve cash flow and by year two will rent a facility. These facilities will include a showroom area from which to display and show products, a conference room, private offices, and a warehouse to receive, store and stage products for installation. Full-time staff will include to two to three outside sales people targeting general contractors, one in-house sales person/assistant

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and a warehouse / on job-site superintendent. Kazan Flooring will continue to outsource accounting to include payroll services. While in the first year the companyʼs primary objective will be to provide bids to general contractors within stated deadlines, priced to achieve low-bid status, while maintaining a profit opportunity. As a women-owned business, Kazan will obtain the necessary certifications to satisfy the bid requirements on government-owned projects. Both of these achievements will differentiate Kazan Flooring from other competitors in middle Tennessee. Kazan has over ten years of experience in the flooring business and believes that most companies in this genre suffer from several major problems that Kazan Flooring can exploit to its advantage. The first is a failure to meet the contractor/buildersʼ ever-changing installation schedule and not having the resources to react to the change. Secondly, is the failure to respond quickly to customer complaints. Mistakes will happen but the answer is to address them quickly and efficiently to ensure to timely remittance of payment by the customer. Lastly, not managing cash flow, or having an inadequate of cash on-hand will inhibit a companyʼs ability to thrive, let alone survive. This situation creates results in an ability to order products on time, thereby take advantage of discounts and pay installers. Also, failure to complete the paperwork, or submittals associated with commercial projects can affect a companyʼs reputation negatively. Kazan Flooring will follow these key procedures: Hire the best quality installers based on the following: negotiate the pay rate, layout expectations and standards upfront to ensure excellent results with a minimum of “punch-list” items As stated before, Kazan will focus on quality service through better scheduling, project management and problem resolution. Kazan is seeking top-quality installers to create a reliable pool from which to assign to projects, but primarily utilize a “go-team” core of installers. The company will also seek to attract, or be sought out by assertive salespeople from within the industry who hear about Kazanʼ reputation. Another opportunity are those with sales skills from the outside the industry who can be trained on flooring products. Kazan will also use technology such as a MacBook and Iphone, thereby saving time during the bid preparation and through the installation process. Bids and subsequent communication will be primarily through email with a lesser dependence on faxing.

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Maximize purchase opportunities with major suppliers; distributors, and manufacturers to drive the cost of goods lower through bulk purchases, negotiating lower prices through purchase history and through reputation as a growing company in the middle Tennessee area. Kazan will actively use the available resources such as local newspapers; Nashville Business Journal, Sales Leads to stay abreast of the market, and use the information gained to solicit general contractors for an opportunity. Will also utilize the respective government websites to be included in the bid notification process. Attend when possible, events such as the Vanderbilt Diversity Fair to market Kazan to various customers. Otherwise, word of mouth and an excellent reputation will suffice. Kazan will work toward LEED certification to attract those projects who are building green such as the 5th and Main condo project. Kazan Flooring will be established as a sole proprietorship and will be owned by Diane L. Kazan. The principal, Diane L. Kazan chose this form of ownership as it was the least complex and afforded the opportunity to begin operating quickly. Kazan will work with other related companies to form a strategic alliance to share bid opportunities when a performance bond is mandated for example.

III.

Products & Services Kazan Flooring will offer a wide variety of flooring products:





• • • • • •

Carpet: broadloom, tiles Hardwood

Vinyl: sheet and tile Tile: ceramic, porcelain, and natural stone Slab: quartz and natural stone Sundries: applicable moldings, baseboard, carpet cushion

A competitive advantage can result from dollar volume of products, whether it is a direct factory purchase such as Mohawk or Shaw carpet or through the local distribution network. It is also working with the sales representative when there is a volume purchase opportunity for say multiple rolls of carpet or pallets of hardwood or tile. Generally, pricing is undifferentiated except in commercial flooring, when pricing is quoted by the sales representative and is project specific. It may also be based on who calls first, and / or the size of the project and the familiarity, history and success of previous projects the sales rep. has with the flooring customer, e.g. Kazan Flooring. In summary, the relationship with the productsʼ sales representative, account payment history, valid warranty claims for defective products and purchase history are all factors affecting pricing. IV.

Marketing Plan

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Middle Tennessee is made up of ten counties surrounding the city of Nashville with a total population of over one million. There has been a downturn in home building due to the sub-prime situation, however Nashville has faired better than other areas of the country. When compared nationally, home prices of existing homes have decreased less than 5% and inventory is lower and middle Tennessee region has the lowest unemployment in the state. Currently there are 3,000 residents in downtown Nashville with that number expected to grow to over 7,000 by this year. There are multiple condo projects competed, nearing completion, or are in the planning stages; Velocity, Signature Tower, Icon in the Gulch to name a few. Notable names have made the development list including Magic Johnson who has $20 million to invest and Oprah Winfreyʼs father who is building a subdivision in East Nashville. In addition, there are outlying growth corridors which have been identified for residential, commercial; office building, medical and hospitality which include I24 toward the city of Murfreesboro, I65 South to Williamson and Maury counties I40 toward Mt. Juliet and the Route 386 corridor toward Gallatin and Hendersonville. Nashville has also in process of building a multi-billion convention center to be called Music City Center. Nashville's strength even in tough economic time truly rests on one solid foundation—its economic diversity. The area has benefited from low unemployment, consistent job growth, heavy outside investment and expansion, and a broadening of the labor force. Although the city's economy is not reliant on any one area of production, Nashville is a leader in finance and insurance, health care, music and entertainment, publishing, transportation technology, higher education, biotechnology, plastics, and tourism and conventions. In June 2003, Moody's Investors Service placed Nashville 8th in a ranking of the top 10 most diversified local economies. Health care continues to be one of Nashville's top industries; according to the Nashville Health Council, the city is known as the nation's health care center. Twenty-one healthcare companies are based within the city; in total 350 health care companies have operations here. Many service firms specializing in the industry (including accounting, legal, and others) are based in Nashville, including 12 investment and venture capital companies dealing primarily with health care. Health care services companies based in Nashville control more than 2,400 operations outside the city, as well. In 2002, almost 90,000 people in the Nashville metro area worked in the health care industry, earning more than a $4 billion payroll. Nashville is the largest publishing center in the Southeast and one of the top ten largest in the country. Some of the nation's leading printers operate alongside scores of small, family-owned shops. The city is home to Thomas Nelson, the world's foremost publisher of Bibles, and two of the country's largest religious publishing houses. Nashville is also becoming a major distribution center for books and other print media.

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Of all of the products manufactured in the city, music is what makes Nashville most famous. The local recording industry and its offshoots have not only brought worldwide recognition to what was once a sedate southern city, but they have also pumped billions of dollars into the local economy, created a thriving entertainment business scene ranked behind only New York and Los Angeles, and given the city a distinctly cosmopolitan flavor. Nashville music—country, pop, gospel, and rock—generates well over a billion dollars in record sales each year. As a result, spinoff industries have flourished: booking agencies, music publishing companies, promotional firms, recording studios, trade publications, and performance rights associations such as BMI, the Broadcast Music Inc. There are approximately 200 recording studios in Nashville, and most major record labels have offices on Nashville's Music Row, Sony, RCA, Mercury Nashville, MCA, Warner Brothers, Capitol, and Columbia. As Nashville remains a center for the music industry, it continues to draw support businesses and industry to the area. Local music-related advertising firms (especially jingle houses) bring in vast revenues, music video production in the city is at an all-time high, while a burgeoning radio, television, and film industry has enticed some of the country's top producers, directors, and production houses to set up shop in Nashville. The music industry in Nashville is responsible for a good chunk of the city's tourism activity. An influx of new industry in recent years has resulted in hundreds of jobs and on-site training opportunities for local actors, editors, artists, technicians, and other production people. Nashville's entertainment scene brings in more than revenue, however. It draws millions of people to the city each year as well. Tourism is one of Tennessee's biggest businesses with annual revenues of $2.2 billion, and Nashville is known as the hottest spot in the state. New technology is a burgeoning factor in the Nashville economy. Dell Computers operates a manufacturing and technical support center near the airport, which opened in 1999 and employs about 3,000 people. The plastics industry is growing here, as is the biotechnology (including pharmaceuticals and life sciences) industries. Kazan will focus on four markets with the flooring industry; the general contractor (office building, multi-family, hospitality and single family), government (office building, rental housing), house builder and remodeler and lastly, retail – residential home owner. The general contractor and government contracts requires the longest amount of lead time from the bid process through installation. Although it represents the largest segment of the industry meaning size of contract, it is a small community in terms of reputation, so it is imperative to deliver outstanding service. Also, there are terms and conditions of the contract (non-government) to consider with legal ramifications as well, not to the company but increase risk regarding the projectʼs ownersʼ capacity to pay. Kazan will also capitalize on the ownership status as it relates to the woman-owned business advantage and research shows there is only one other woman-owned flooring company in middle Tennessee.

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Home building is a very different segment of the industry and provides Kazan with lower dollar volume and shorter order to install to payment timeline and Kazan can use these jobs to augment the schedule with the larger commercial projects. Over the past decade a number of trends have been observed in the industry and in the middle Tennessee marketplace. This includes a explosion in the building industry, although somewhat tempered in the past few months which has facilitated the opening of new flooring companies. But the opportunities remain, especially for an operation like Kazan who seeks out the business through the bid process, visiting job sites and following the government bid process. Kazan will focus on four markets within the industry, the general contractor, government, home builder / residential, and retail market. The general contractor and government contracts generate the highest volume potential but generally have the lower profit margin and can be a strain on cash flow. Whereas the homebuilder / remodeler have similar profit margins, and perhaps a slightly quicker payment history there also may present a capacity to pay challenge if the finances are mishandled. The retail residential customer offer the highest profit margins and a deposit, or up-front payment is expected, there is generally more time requirements placed on the companyʼs staff and the invoice amount overall is lower. Focusing on the aforementioned four segments will offer Kazan the right mix of opportunity for profit, while minimizing the risk to the company. There is tremendous growth potential by implementing this business plan, taking advantage of all business opportunities while minimizing risk that might impede the companyʼs growth. The flooring business is very competitive in the middle Tennessee market with new entries despite the economy downturn. The barriers to entry and exit in this market are very low making this an industry with a large number or rival firms with high turnover rates. Buyers have a significant amount of power since they have a large number of companies to choose from all offering the identical products.. Moreover, services are undifferentiated, which means that customer loyalty is usually low. Flooring companies must compete on quality and timeliness of service, reputation and price. There is also an attitude that customers are expendable and that there are always more. Kazan can improve on the quality and timeliness of services in this industry by instituting procedures that will avoid and minimize many of the mistakes that other firms make. This includes delayed schedules and high installer turnover. This includes delayed schedules, poor quality of workmanship and shortage of desired materials. Kazan will be equally competitive in price; bid, retail and builder wholesale and will maintain close ties with its customers throughout the entire project to ensure success. Through these simple, and yet crucial steps Kazan will continue to build on its reputation of better service at better prices.

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The main competitors for Kazan include: Ozburn and Hessey, Nichols Tile, Kevco, J & J Flooring and Nashville Carpet, none of which are minority or woman-owned. Each of these competitors has had a presence in the marketplace for a longer, but Kazan can compete with better pricing, delivery of on-time and quality installations, paperwork timeliness and accuracy and reduction/ elimination of punch list items, and using technology. Market Kazan Flooring as a woman-owned business to take advantage of minority opportunities Kazan Flooring and Windows, LLC is a limited liability company consisting of one principal with flooring and window treatment experience of ten years. Kazan Flooring plans to use its existing contacts and the ongoing relationship with those general contractors and other customers to generate additional contracts. Its long-term profitability will rely on focusing on general contractor and government contracts through strategic alliances and a comprehensive marketing program to by promote its new woman-owned status. At startup the promotional budget, will almost be nonexistent which is why Kazan choose to enter the general contractor segment of the business. However, that does not mean there is not work to do. The following is a list of Prospecting for Business Ideas that Kazan compiled to learn about the market, build Kazanʼs awareness and obtain projects. • Newspaper: Look in “Legal Section” for Bid Opportunities, New Subdivision announcements, Business Section: articles on commercial “starts” • Specialty Publications: in Nashville, its the “Nashville Business Journal” - tons of leads in the editorial as well as who “pulled” permits, both residential and commercial. It may be too late on the commercial permits - but you can still contact as they may not have assigned subcontractors. I think the parent company is “Biz Journals and they are nationwide? • Database: Start a database of general contractors so in your down time you can email, call or send a letter introducing yourself. Know who the “big” contractors are, both residential and commercial. • Leads: Dodge Room, Builderʼs Exchange, isqft - there is probably one of these in your area or something like it. They have building plans that are available for bids - you just have to find out who is bidding. • Drive-by: See a builderʼs sign or new construction (this works for residential, not commercial), stop and introduce yourself. If no one is avail. write the telephone numbers, call later and enter the builders information in your “Residential Builder” file • Economy: Move with the economy - if there is more activity in commercial than residential or remodels then that is where you target your efforts. If your personality is an asset use it to your advantage. Include your photo or a photo of your equipment in your marketing. • Barter: Need something...trade for it. New business cards, truck painted...trade your service. A win for both - no taxes 7 Kazan Flooring

• Signage: Ask if you can place a sign in your customerʼs front yard. • Organizations: Interior Designers, Architects, General Contractors - attend their meetings. The interior designers have ASID meetings - buy food for their functions they will give you presentation time. • Financial: Offer a credit card option to pay. • Shows: Chamber of Commerce trade shows and mixers, Home Shows. • Government: Use government (local, county, state, and federal and airport) websites to find out their upcoming building project. • Codes Departments: Visit the local codes departments to find out who has “pulled” permits recently. • Friends: Have friends in the building trade promote you and visa versa. • Personal Visit: Stop by the general contractorsʼ offices. You wont get very far, but you can give the receptionist a gift card (a MA gift card of course). • Thank You Notes: Send a note, but it must be sent w/in 2 days of project completion, with your business card thanking them and asking for a referral. If the job was “huge $” include a MA gift card. • Social Networking: Use Facebook or Linkedup for instance to promote yourself and what you do. • Website: Adds creditability - and your business is very visual - keep it up to date • Reputation: When you land a big customer or contract, you can use that job / customer or builderʼs name to secure the next. • Samples: Can you make “coasters” of your surface product, add your logo and use as “giveaways”. • Daily: Commit to ten contacts every day: email, phone calls, personal visits - this will always pay off. • Suppliers: A relationship with your suppliers can lead to referrals. Add your business card to their bulletin board. • Phone Bank: Take a half a day and make phone calls to “leads” - do this with a friend so you can trade “phones” if a lead works out. This system allows you to contact twice as many as you could have on your own. • Pre-Bid Meetings: plan to attend as an opportunity to learn who the attendees are who will bid the project as well as to increase your awareness. Implementation of these ideas will surely increase the “bid to contact signing” ratio, thereby leading to increased revenue for the company. The company will price each project/job based on time, material, and a 12-40% profit margin, depending on the segment. Kazan will spend the next three years improving its profit margins with the last two years spent on obtaining contracts. Each project is customized to the bid specifics, needs or wants of the customer. Prices are determined by the size of the project, installation (present versus future), quantity of the materials needed, and anticipated versus competitive profit margin (bid situation). Most products in the commercial flooring industry are specified as a parameter of the project. As a result, Kazan will source the product and obtain pricing as directed. Initially, all products will be sold in this fashion and delivered to a third party warehouse 8 Kazan Flooring

or picked up from a local distributor. The installers, with a job ticket, will pick-up the related materials and meet Kazan at the job-site for final instructions. Kazan will supervise the job as needed. Future plans include selling cash & carry product from a website with customer pick-up at the store.

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