Glasgow Caledonian University

School of Engineering and the Built Environment

Construction Financial Management Module BNEA041

Assignment One

Company Financial Strategy

You are a Management Consultancy practice and have been approached by McTavish and Company
to advise them on future strategy. This should be undertaken by groups of three to five students. Details
of the company with accounts and project profile were enclosed in Teaching Paper Number One.

The Report should seek to address the current trading and financial difficulties faced by the company
and should focus on the following:

 The type and scale of contracts that the company should concentrate on in the future, and also
the geographical scope of the contracts bid for.

 The bidding strategy for contracts, the target profit margin, the method of allocation of overhead
cost.

 The strategy for speculative housing work, the target profit margins, possible land purchases etc.

 The financial strategy to accomplish the above strategy, the requirements for working capital,
sources of funding and likely costs.

 The management and organizational structure suitable to implement the above, the scope for the
use of consultants rather than employing staff, etc.

The above could take account of the national and local economic environment and be referred to
relevant forecasts and projections. The financial implications of the strategy should be taken into
account. For example, an aggressive marketing strategy for speculative housing will require expenditure
on advertisement. Equally, a proposal to expand geographically will certainly increase overhead costs.

Submission

The Business Plan should be submitted in the form of a Technical Report detailing and justifying the
chosen strategy. It should include cash flow forecasts, projected profitability, complete with relevant
location maps, etc. In addition the Report should contain a submission for funding to the appropriate
bank.

The Report is to be submitted jointly by the group. Each member should append a paragraph outlining
their specific contribution to the group’s work and a summary of what they have learned from
undertaking the project.

A slide presentation for the main findings and recommendations should be included with the report. This
should be submitted via GCU Learn. A hard copy may also be submitted on the same day.
Deliverables

The key deliverables are as follows:

1) The type and scale of contracts that the company should concentrate on in the future, and also
the geographical scope of the contracts bid for.

The report should contain recommendations as to which type of project, client, and procurement route
should be encouraged, accepted or avoided. It should also detail the preferred project size and duration
and upper and lower limits that is acceptable for each. The preferred geographical scope of the
company should be specified.

2) The bidding strategy for contracts, the target profit margin, the method of allocation of overhead
cost.

The report should outline the recommended turnover target for contract work. The percentage mark-up
for profits and for overheads should be specified including the approach to allocation of overhead costs
between projects.

3) The strategy for speculative housing work, the target profit margins, possible land purchases etc.

The report should outline the recommended turnover target for speculative work. The minimum
percentage mark-up for profits and for overheads should be specified including the approach to
allocation of overhead costs between projects. The nature of speculative housing (upmarket or mass
market) should be specified. Also the ideal number of houses built in each phase should be noted. The
strategy for purchase of building land should be outlined. This will not apply if the recommendations of
the group are to avoid speculative work.

4) The financial strategy to accomplish the above strategy, the requirements for working capital,
sources of funding and likely costs.

The report should outline the financial strategy to achieve the above. How much money is needed to
tide the company over until the cash starts to come through? What loan should be requested and over
what period should be repaid. Give an application to a bank for a loan.

5) The management and organizational structure suitable to implement the above, the scope for the
use of consultants rather than employing staff, etc.

Identify the organizational structure needed to implement the above. Make recommendations for
redundancies and any recruitment. Identify what use, if any, can be made of consultants. The cost of
redundancy payments should be taken into account.

Note:

All elements of the report must be consistent with one another. For example the number of staff
employed (in task 5) will have implications for the company overheads and must be taken account of in
tasks 2 and 3. Similarly the repayments of any loan identified in task 4 must be consistent with the
planned profits outlined in task 2 and 3.
The final presentation will involve the submission of a printed report listing the main recommendations
giving reasons for each.

The presentation must include either overheads or power point slides to illustrate the talk.