Big D’s Painting Company This mini case is from the textbook Dave Valdon lives in Maple Ridge, British Columbia, and is contemplating starting his own painting business. Having worked for a national painting franchise during his summers while attending college, Dave feels that he has the experience and skills necessary to be successful with this venture. Because he knows the area, he would like to establish the business in Maple Ridge and the surrounding communities of Pitt Meadows, Port Coquitlam, and Coquitlam. He will concentrate on providing professional and high-quality residential painting services. He intends to base the business out of his home and to set up a home office, as his work will be done at the site of the homeowner. In addition, Dave has been told that part of his home expenses (utilities, rent, insurance, etc.) can be deductible business expenses if he does this.

Although Dave is pretty sure that a viable opportunity exists, he knows that he should prepare an estimate of income for the first year of operations. From his industry experience, he estimates that an average painting job for a residential project is about $1700. His main concern is whether he will be able to obtain enough of these projects to make this a financially viable business. To that end, he has collected some information from outside sources as well as from his experience working in the industry. This information is found below

HOMES IN THE MARKET AREA

Maple Ridge 19,865

Pitt Meadows 3,496

Port Coquitlam 27,134

Coquitlam 15,828

Total - 66,323

 

Dave feels that 33 percent of all home owners initiate painting projects each year in his area. He is not sure how to verify this percentage, however.

Dave estimates there are 100 painting companies in his intended market area. He feels that all will be his competition. He has also made the following estimates concerning his operating expenses for his first year.

Wages (himself and 1 other employee) $60,000

Utilities/phone 1,500

Licence/accounting/insurance 3,000

Vehicle expense 3,000

Advertising 4,000

Equipment/supplies 5,000

Rent 2,500

Contingency 1,000

Total $80,000

 

Questions

1. Using the information provided, prepare an estimate of total potential, market share, and projected income for the first year of operations.

2. What adjustments should Dave make to the above information to be more accurate with total market revenue?

3. What adjustments or additions should be made to the information to be more accurate with the market share and projected income statement for the first year of operations?