Business Plan
Content
1.1 DESCRIPTION OF THE PRODUCT Pasal.com is an online grocery store that will deliver day to day items at the door steps of the customers. The idea of the online store came into inception because of the busy life style of the urban nuclear families. The target of pasal.com will be the people who have access to the internet and telephone in the Kathmandu valley. The store will be the first of its kind in the whole country. The customers can order anything available in the store through the internet or through telephone and the service providers will guarantee a home delivery within 1 hour anytime any day. The payment will be made at the customer¶s resident. The goods provided will be bought from the manufacturers and the whole sellers.
1.2 COMPARISION OF THE PRODUCT WITH ITS COMPETITORS Pasal.com is the first of its kind in the country. There has never been a local internet site that deals with day to day items. The closest things to its competitors are the physical grocery store and departmental stores. However due to the online presence of pasal.com will surely provide the business a competitive advantage.
There are few internet sites that have been selling goods in the Nepali market like Muncha.com, thamel.com and shopnbds.com. However these sites are abroad based and they do not deal with day to day items. Pasal.com on the other side will focus on day to day useful items. Another advantage of pasal.com over other such sites is the facility of ordering through telephone. And also we will be the first company that will guarantee delivery within one hour. Another difference of pasal.com with other online business sites is that they require the customers to pay with credit cards. That is one of the major reasons why such sites are not popular among Nepali customers. Pasal.com will try to tackle this problem by allowing the customers to pay on delivery. It¶s like DHL which delivers goods but also lets the customers to choose the products they want on the internet.
1.3 LOCATION Pasal.com will focus only one heavily populated area of the valley in the first five years of year of establishment. The service will be extended to other areas of the valley after 5 years and within 10 years the service will be extended to the whole of the city. The suppliers are also located in the valley.
1.4 MARKET AREA These ready to use products are mainly consumed by the urban population having average purchasing power and fast-paced life-style. Thus the market areas for the product are the areas where these families are located. In the first five years we intend to target Lazimpat. After five years with the experience and the feedback from the area mentioned above the service will be extended to other areas and within 10 years the service will be extended to the whole Kathmandu valley.
1.5 MAIN CUSTOMERS Our main customers are the working class people living in a nuclear family. These are the people who have a busy schedule and they don't have time to go for shopping for the daily use products such as groceries. The number of working class women is getting larger due to the changing lifestyle. They don't have time to go and search for these things. Our service will benefit our customers such that the time they saved for shopping for these products shall be utilized to spend more time with their family and kids. So, we intend to focus those nuclear families and provide our service to their door steps in an affordable price. Also our night service focuses on the parties at home. Due to the degrading security system and limited night life in the Kathmandu valley, people are encouraged to organize parties at home. So, we grasp this opportunity to provide our service to those groups.
1.6 TOTAL DEMAND
The table below shows the average number of each product sold in the area. From the table we can know the independent market demand of each product and the total demand for all the commodities. The total market demand for the 23 products that Pasal.com is going to deal with is Rs. 718693920 per year.
Products
Quantity
No. of Demand/day Demand/month Demand/year shops (qty) (qty) (qty)
Annual Demand (Rs.)
Snacks: 1. Lays 2. Spicy instant fish 3. Noodles 4. Peanuts 5. Cheese Balls Milk Groceries: 1. Green leaves 2. Cauliflower 3. Potato Frozen Meat: 1. Buff Sausage 2.Chicken Sausage Cold Drinks Cigarettes Fruit Juice: 1. Real Juice 2. Frooti 3. Rio Alcohol/Beer/Wine 1. Royal Stag 2. Blue Riband 3. Ruslan Vodka 4. Tuborg Beer 5. Sanmiguel 6. Carlsberg 7. Red wine 24 16 16 36 12 18 4 47 47 47 47 47 47 47 1128 752 752 1692 564 846 188 33840 22560 22560 50760 16920 25380 5640 406080 270720 270720 609120 203040 304560 67680
Demand
30 10 40 14 28 100
47 47 47 47 47 47
1410 470 1880 658 1316 4700
42300 14100 56400 19740 39480 141000
507600 169200 676800 236880 473760 1692000
20304000 7614000 10152000 34347600 5685120 35532000
60 20 9
47 47 47
2820 940 423
84600 28200 12690
1015200 338400 152280
10152000 10152000 9136800
30 20 140 10
47 47 47 47
1410 940 6580 470
42300 28200 197400 14100
507600 338400 2368800 169200
60912000 50760000 47376000 16920000
30 10 6
47 47 47
1410 470 282
42300 14100 8460
507600 169200 101520
10152000 3384000 2030400
64972800 35193600 40608000 103550400 34516800 57866400 47376000 718693920
1.7 MARKET SHARE Using decision guide to calculate our market share, we have many competitors (retails shops), their size is small and their product features is dissimilar to that of ours, we estimate that our market share for the 1st year is 10-15% Therefore, our market share in terms of volume is calculated in a conservative mode ie, Market share = 10% of the total demand per year = 10% of Rs. 718693920 = 71869392
1.8 SALES FORECAST Year First year Second year Third year Fourth year Fifth year Sales Forecast (in %) 50 60 80 100 100
SELLING PRICE The selling price of our product will be calculated using the "Cost-Plus-Method". The cost of the product at Pasal.com will be slightly more than the price of physical stores because it¶s a luxurious service. The calculation for the selling price for each product is shown in the section 4.5. A summary of products and their selling price is given by the table below:
Products Snacks: 1. Lays 2. Dry Meat 3. Dalmot 4. Peanuts 5. Cheese Balls 42.5 44.36 15.2 152.15 10.52 Selling price/unit
Milk Groceries: 1. Green Leaves 2. Cauliflower 3. Potato Frozen Meat: 1. Buff Sausage 2. Chicken Sausage Cold Drinks Cigarettes Fruit Juice: 1. Real Juice 2. Frooti 3. Rio Alcohol/Beer/Wine 1. Royal Stag 2. Blue Riband 3. Ruslan Vodka 4. Tuborg Beer 5. Sanmiguel 6. Carlsberg 7. Red Wine
22.22
9.35 29.27 64.35
117.03 140.44 21.07 99.48
21.07 21.04 21.07
168.53 136.92 158 181.42 181.41 200.13 737.36
1.10 PROMOTIONAL MEASURES Our service is the first of its kind in the country and we intend to take advantage from this. However it is also worth nothing that because our product is a new one people will not know that much about it at first. The most economical promotional measure in this case is door to door advertising. The owners themselves will go to each house in the targeted area. They will try to develop a good rapport with the households. The company will provide special discount to the regular customers. Any customers wishing to take the most use of our service can become a permanent member and can get special discount, privilege product delivery. use of pamphlets and brochures will be the secondary promotional measures. The company is also planning to advertise in local FM stations a few times in a month.
1.11 MARKETING STRATEGY Our product will enjoy a competitive advantage because of the unique nature of the service. We will be providing a service which is being used world wide but will be the first in the country. We intend to apply the skimming price strategy to capture the middle and upper middle class families. The product mix of the service is as follows:
A. Product: We will provide online and telephone ordering system for day to day items, guarantying a quick response B. Price: The price of each product will be slightly higher than in the market. Only customers who can afford some value to the time saved by our service are our customers. The pricing strategy applied is Market Skimming where we target the cream customers. C. Promotion: The major promotional measure is door to door marketing and developing a good rapport with the customers. To retain the customers, regular member customers will be provided special discount offers. Some items which are not provided to the ordinary customers will be provided to the regular customers. Along with that to any customers who has been a regular customer of the company for two years, the company will try and provide any items available in the Kathmandu valley demanded by the customer. D. Place: Pasal.com will focus only one heavily populated areas of the valley in the first five years of year of establishment. The service will be extended to other areas of the valley after 5 years and within 10 years the service will be extended to the whole of the city. The suppliers are also located in the valley.
1.12 MARKETING EXPENSES NRs. 20000 is allocated as the marketing budget for the first year. For the following years the marketing budget will be subsequently decreased by 25% on the previous years expense balance.
2. PRODUCTION PLAN
2.1 SERVICE PROCESS There will be no production involved in the business. The service process is described as follows: First the customers will log on to Pasal.com on the internet. The list of available goods and their price is provided in the site. The customer will order the product and click on the location on the map provided in the site itself along with a written address. Whenever the system receives an order it will place a notification alarm to the computer administrator. The computer administrator will in turn notify the delivery boys about the order. The delivery boys will collect the ordered items from the store and will deliver the goods in their motorcycles. The delivery boys will receive the payment on delivery.
2.2 FIXED ASSETS REQUIRED Fixed Assets Requirement (Production) Sno. 1 2 3 4 Fixed Assets Motorcycle Furniture Refrigerator Computer Total 1 2 40000 30000 Quantity 2 Rate 60000 Amount 120000 20000 40000 60000 240000
2.3 LIFE OF FIXED ASSETS The life of motorcycle and equipment is 10 years and life of furniture is 20 years. Thus, the depreciation for equipment and vehicle is 10% per annum and for furniture is 5% straight line method is used to calculate the depreciation. The per annum depreciation expense for production asset is Rs. 29000 and depreciation expense for office assets is Rs. 800. The annual depreciation expense is Rs. 29800. The per month depreciation expense for production assets is Rs. 2417. The per month depreciation expense for office assets is Rs. 67. Therefore the total depreciation per month is Rs. 2484.
Life of fixed assets (Production) Sno. Fixed Assets Value Rate Depreciation per year Depreciation/month
1 2 3 4
Motorcycle Furniture Refrigerator Computer Total
120000 20000 40000 60000
10 5 10 20
12000 1000 4000 12000 29000
1000 83.33333 333.3333 1000 2416.667
2.4 REPAIRS AND MAINTENANCE The supplier of computers will provide maintenance and repair service for 1 year. The maintenance and repair for motorcycle is assumed to be Rs. 500 per month. And to ensure proper flow of operations the company has allocated Rs. 500.00 for maintenance and repair per month for other equipments. Therefore the monthly repairs and maintenance cost for the fixed assets is Rs. 1000 per month.
2.5 SOURCE OF MACHINERY AND EQUIPMENT The computers will be bought from Infosis Tech at Computer Bazaar at Putalisadak. The owner has a good relationship with the owner of Infosis Tech. Similarly the refrigerators will be bought from Videocon Limited, India.
2.6 PLANNED CAPACITY Pasal.com will operate 365 days of the year for the whole 24 hours. The daily demand is goods worth Rs. 98451.22. However, we won't be using all of our capacity. The capacity use will be increased according to the increase in demand and sales in coming years.
2.7 WORKSHOP LOCATION AND LAYOUT The company will run from a two room flat in Lazimpat. One of the rooms will be used as the warehouse and the other will be used as office and computer room. The required supplies are also found nearby. And also has proper infrastructure and communication facilities required to set-up the working area.
2.8 RAW MATERIALS REQUIRED AND IT'S COST The annual demand and market share for each product is given in section 1.6 and 1.7; the sales forecast for the 1st year is 50% of the market share. The table below shows the total monthly raw material costs. The total monthly cost of raw material is Rs. 2648023
Products Demand/Year (qty) Snacks: 1. Lays 2.Spicy instant fish 3. Noodles 4. Peanuts 5. Cheese Balls Milk Groceries: 1. Green leaves 2. Cauliflower 3. Potato Frozen Meat: 1. Buff Sausage 2.Chicken Sausage Cold Drinks Cigarettes Fruit Juice: 1. Real Juice 2. Frooti 3. Rio Alcohol/Beer/Wine 1. Royal Stag 2. Blue Riband 3. Ruslan Vodka 4. Tuborg Beer 5. Sanmiguel 6. Carlsberg 7. Redwine 406080 270720 270720 609120 203040 304560 67680 40608 27072 27072 60912 20304 30456 6768 20304 13536 13536 30456 10152 15228 3384 1692 1128 1128 2538 846 1269 282 144 117 135 155 155 171 630 Total/mth 243648 131976 152280 393390 131130 216999 177660 2648023 507600 169200 101520 50760 16920 10152 25380 8460 5076 2115 705 423 18 18 18 38070 12690 7614 507600 338400 2368800 169200 50760 33840 236880 16920 25380 16920 118440 8460 2115 1410 9870 705 100 120 18 85 211500 169200 177660 59925 1015200 338400 152280 101520 33840 15228 50760 16920 7614 4230 1410 634.5 8 25 55 33840 35250 34898 507600 169200 676800 236880 473760 1692000 50760 16920 67680 23688 47376 169200 25380 8460 33840 11844 23688 84600 2115 705 2820 987 1974 7050 36.32 38 13 130 9 19 76817 26790 36660 128310 17766 133950 Market Share(10%) Sales (50%) Requirement/month Cost Price Cost Raw Mat. of
2.9 RAW MATERIALS AVAILABILITY Raw materials are purchased from the wholesalers and producers.
2.10 NUMBER OF LABORERS There will be two shifts for the delivery boys. Two delivery boys will be hired for the day and two delivery boys will be hired for the night. a computer administrator will be hired for the day. The computer work will be handled by the owners at night.
2.11 COST OF LABOR S.No. A. Description Direct Labor Delivery (Day) Delivery (Night) Computer Administrator Direct labor/ Month B Indirect Labor Owner 1 20000 20000 31000 1 5000 5000 Boy 2 8000 16000 Boy 2 5000 10000 No. of Laborers Rate/month Amount/month
Indirect Labor/Month Total cost of labor per month
20000 51000
2.12 LABOR AVAILABILITY The labors required will be hired from the local market. The labor will not require much technical and specific skill. The delivery boys should know the target area (Lazimpat) well. Local young people from the locality will not be difficult to find. The workers will be given proper work schedule which will be followed strictly. A labor will have to inform the management at least one month advances if he/she is planning to quit the job. This way the management will have enough time to replace the worker.
2.13 LABOR MOTIVATION To motivate the employees so that they can perform well on the job, following facilities will be provided to them. 1. Safe and friendly working environment will be provided to the workers 2. The wages and salaries will be provided on a monthly basis. 3. Trainings will be provided to the direct labors. 4. Workers will be provided a week long paid leaves per year. 5. Food allowance of Rs. 750 per month (for tea and snacks) will be provided to all employees.
2.14 PRODUCTION OVERHEAD EXPENSES Production Overhead S.No. 1 2 3 4 5 6 7 Total (Per Month) Description Indirect Labor Repair and Maintenance Allowance for food Electricity and Water Depreciation Fuel Rent Amount (Rs/month) 20000.00 1000.00 3000.00 5000.00 2416.67 2190.00 12000.00 45606.67
2.15 PRODUCTION COST PER UNIT
Unit Production Cost Products Sales/month Cost Price Cost of Raw Material Snacks 1. lays 2.Spicyinstant fish 3. Noodles 4. Peanuts 5. Cheese Balls Milk Groceries: 1. Green Leaves 2. Cauliflower 3. Potato Frozen Meat 1. Buff Sausage 2.Chicken sausage Cold Drinks Cigarettes Fruit Juice 1. Real Juice 2. Frooti 3. Rio Alcohol/Beer/Wine 1. Royal Stag 2. Blue Riband 3. Ruslan Vodka 4. Tuborg Beer 5. Sanmiguel 6. Carlsberg 7. Red Wine 1692 1128 1128 2538 846 1269 282 144 117 135 155 155 171 630 243648 131976 152280 393390 131130 216999 177660 2648023 9.20 4.98 5.75 14.86 4.95 8.19 6.71 100.00 2852 1543.8 1782.5 4606.6 1534.5 2538.9 2080.1 31000.00 4195.8 2271.21 2622.38 6777.15 2257.5 3735.18 3060.2 45606.67 250695.8 135791.01 156684.88 404773.75 134922 223273 182800.3 2724629.67 148.17 120.38 138.9 159.49 159.48 175.94 648.23 2115 705 423 18 18 18 38070 12690 7614 1.44 0.47 0.29 446.4 145.7 89.9 656.74 214.35 132.26 39173.14 13050.05 7836.16 18.52 18.51 18.52 2115 1410 9870 705 100 120 18 85 211500 169200 177660 59925 7.99 6.38 6.71 2.26 2476.9 1977.8 2080.1 700.6 3643.98 2909.7 3060 1030.7 217620.88 174087.5 182800.1 61656.3 102.89 123.47 18.52 87.46 4230 1410 634.5 8 25 55 33840 35250 34898 1.28 1.33 1.31 396.8 412.3 406.1 583.77 606.57 597.45 34820.57 36268.87 35901.55 8.23 25.72 56.58 2115 705 2820 987 1974 7050 36.32 38 13 130 9 19 76817 26790 36660 128310 17766 133950 2.9 1.01 1.38 4.85 0.67 5.05 899 313 427.8 1503.5 207.7 1565.5 1322.5 460.6 629.37 2211.9 305.56 2303.14 79038.5 27563.6 37717.17 132025.4 18279.36 137818.64 37.37 39 13.37 133.76 9.26 19.55 % Cost of Raw Material Direct labor Production Overhead Production Cost/month Per Unit
production cost
3. ORGANIZATION AND MANAGEMENT PLAN
3.1 FORMS OF BUSINESS The business will be registered under the name "Pasal.com" as a sole trading private firm. Here the owner will act as investor as well as Director of the company.
3.2 ORGANIZATIONAL STRUCTURE
Owner: Sanam Shrestha Head of Accounts, Marketing, Finance, Operation and IT Computer Administrator Delivery Boys
3.3 BUSINESS EXPERIENCE AND QUALIFICATION OF ENTREPRENEUR The entrepreneur has been involved with some business or similar projects previously. Mr. Sanam Shrestha is a MBA graduate from Ace Institute of Management, giving him enough theoretical knowledge of management and accounting. Mr. Shrestha has organized many college level events and has worked at Young Innovations Private Limited. Mr. Shrestha is also a Bachelor in Business Information System graduate from Kathmandu University, qualifying him as a good IT manager and Information system head. He has worked as a web developer for many organizations.
3.4 PRE OPERATING ACTIVITIES Following are the activities that are to be undertaken before operating the business i. ii. iii. iv. v. vi. vii. Market Survey Developing the web based system Registering the business Preparing business plan Applying for loan and approval Contacting equipment suppliers Hiring and training employees - 3 Weeks - 8 Weeks - 1 Week - 2 Weeks - 2 Weeks - 1 Week - 1 Week
Developing the web based system is a continuous and independent process which will be done by the owner. The Gantt chart for the operating activities as given below: Activities Market Survey Development of System Registration of the firm Preparing the business plan Applying for loan and approval Contacting the equipment suppliers Hiring and training employees 1 2 3 4 5 6 7 8 9 10
3.5 PRE OPERATING EXPENSES S.No. 1 2 3 4 5 Description Survey Cost Registration Cost System Development Cost Transportation Cost Other Expenses Total Pre-Operation Cost Amortization (10%) Per Month Amortization 30,500.00 3,050.00 254.17 Amount (Rs.) 2,500.00 5,000.00 20,000.00 2,000.00
Miscellaneous 1,000.00
3.6 FIXED ASSETS FOR OFFICE MANAGEMENT The company will not have a big office as such. However some furniture and equipments will be required for the efficient running of the managerial functions. Following are the fixed asset requirement for office management: Fixed Assets Requirement (Administration) S.No. 1 2 Fixed Assets Telephone Sets Furniture Total Quantity 4 Rate 750 Amount 3000 10000 13000
Depreciation Life of Fixed Assets (Administration) S.No. Fixed Assets Value Rate Depreciation per year 1 2 Telephone Sets Furniture Total 3000 10000 13000 10% 5% 300 500 800
The per month depreciation expense for the office management fixed assets is Rs. 67.
3.7 ADMINISTRATIVE EXPENSES Administrative Expenses S.No. 1 2 3 4 5 6 7 Description Owner's Salary Depreciation of office equipment and furniture Internet Expenses Communication Expenses Stationary Expenses Refreshments Amortization Amount Rs (Monthly) 20000.00 66.67 5000.00 5000.00 500.00 1000.00 220.92 31787.59 381451.08
Administrative Expense/Month Administration Expenses/Year
4. FINANCIAL PLAN
4.1 TOTAL CAPITAL REQUIREMENT
4.1.1 Fixed Capital Fixed capital = Fixed assets for operations + fixed assets from office = 240000 + 13000 = Rs. 253000 4.1.2 Working Capital Stock of Raw Materials: Our company will have 1 week of stock of raw materials. The cost of stock of raw materials is calculated using the following formula: Cost of raw materials = Monthly Raw Material Cost * (7/30) Cost of Stock Monthly Raw Material cost Daily Raw Material cost Stock keeping days Cost of Stock 2648023 88267.43 7 617872.03
Cash Management The firm requires maintaining a cash balance to pay one month¶s expenses. Cash management = (Monthly Marketing Expenses + Monthly Factory Overhead Expenses (2.14) + Monthly Administration Expenses (3.7) + Monthly Direct Labor expenses (2.11)) Cash Management S.No 1 2 3 4 Particulars Marketing Expenses Service Overhead Administration Expenses Direct labor Expenses Amount (Rs/Years) 20000.00 547280.04 381451.08 372000.00 1320731.12 Amount (Rs/Month) 1666.66 45606.67 31787.59 31000.00 110060.92
Cash Management
Total Working capital per month Working Capital S.no 1 2 Particulars Cost of Stock Raw Materials Cash Management Working Capital Amount 617872.03 110060.92 727932.95
4.1.3 Pre Operating Cost The total pre-operating expense calculated from section 3.5 is Rs. 30,500.00
Thus the total amount required to start the business is Rs. 1011432.95. The calculation for the total project cost is given below. Total Project Cost S.no 1 2 3 Particular Fixed Assets Working Capital Pre-Operating Expenses Amount 253000 727932.95 30,500.00 1011432.95
Project Cost
4.2 FINANCIAL PLAN AND LOAN REQUIREMENT We have decided to take a loan of Rs. 7, 30,000 from the bank and the rest are the contribution of the owner. Loan-Equity Mix S.no A Particulars Fixed Assets (Administration) 1 2 Telephone Sets Furniture 3000.00 10000.00 3000.00 10000.00 Owner¶s Equity Loan Total Amount
B
Fixed Assets (Production)
1 2 3 4
Motorcycle Furniture Refrigerator Computer 20000.00
120000.00
120000.00 20000.00
40000.00 60000.00
40000.00 60000.00
C D
Working Capital Pre-operating Expense
227932.95 30,500.00
500000.00
727932.95 30500.00
Total Percentage
281432.95 27.83
730000.00 72.17
1011432.95 100.00
4.3 SECURITY FOR LOAN Owner has a land at Gwarko, Lalitpur; which can be kept as collateral having market value of Rs. 40,00,000.
4.4 LOAN REPAYMENT SCHEDULE The loan is to be paid over a period of 5 years at an interest of 15% per annum. Loan Payment Schedule Year 1 2 3 4 5 Loan Amount Payable 730000.00 584000.00 438000.00 292000.00 146000.00 Interest (15%) 109500.00 87600.00 65700.00 43800.00 21900.00 Principle 146000.00 146000.00 146000.00 146000.00 146000.00 Total Payment 255500.00 233600.00 211700.00 189800.00 167900.00
4.5 UNIT SELLING PRICE
Unit Selling Price Products Sales/Mont h % Cos t of RM Snacks 1. Lays 2.Spicy Instant Fish 3. Noodles 4. Peanuts 5. Cheese Balls Milk Groceries 1. Green leaves 2. Cauliflower 3. Potato Frozen Meat 1. Buff sausage 2. Chicken Sausage Cold Drinks Cigarettes Fruit Juice 1. Real Juice 2. Frooti 3. Rio Alcohol/Beer/Wine 1. Royal Stag 2. Blue Riband 3. Ruslan Vodka 4. Tuborg beer 1692 1128 1128 2538 9.20 4.98 5.75 14.8 6 148.17 120.38 138.9 159.49 1.73 1.40 1.62 1.86 0.09 0.07 0.08 0.10 0.49 0.40 0.47 0.53 150.48 122.25 141.07 161.98 18.05 14.67 16.93 19.44 168.53 136.92 158 181.42 285152.76 154445.76 178224 460443.96 2115 705 423 1.44 0.47 0.29 18.52 18.51 18.52 0.22 0.21 0.22 0.01 0.01 0.01 0.06 0.06 0.06 18.81 18.79 18.81 2.26 2.25 2.25 21.07 21.04 21.06 44563.05 14833.2 8908.38 9870 705 6.71 2.26 18.52 87.46 0.22 1.02 0.01 0.05 0.06 0.29 18.88 88.82 2.26 10.66 21.07 99.48 207960.9 70133.4 2115 1410 7.99 6.38 102.89 123.47 1.2 1.44 0.06 0.08 0.34 0.41 104.49 125.4 12.54 15.04 117.03 140.44 247518.45 198020.4 4230 1410 635 1.28 1.33 1.31 8.23 25.72 56.58 0.09 0.3 0.66 0.00 0.02 0.03 0.03 0.09 0.19 8.35 26.13 57.46 1 3.14 6.89 9.35 29.27 64.35 39550.5 41270.7 40862.25 2820 987 1974 7050 1.38 4.85 0.67 5.05 13.37 133.76 9.26 19.55 0.16 1.56 0.11 0.22 0.00 0.08 0.00 0.01 0.04 0.45 0.03 0.06 13.57 135.85 9.4 19.84 1.63 16.3 1.12 2.38 15.2 152.15 10.52 22.22 42864 150172.05 20766.48 156651 2115 705 2.9 1.01 37.37 39 0.43 0.46 0.02 0.02 0.13 0.13 37.95 39.61 4.55 4.75 42.5 44.36 89887.5 31273.8 Productio n Cost / Unit Adm n Exp/ Unit Mtkg Exp/ Unit Int Exp/ Unit Final Cost Profit margi n (12%) Selling Price/Uni t Sales Revenue (Rs/Month )
5. Sanmiguel 6. Carlsberg 7. Redwine Total
846 1269 282
4.95 8.19 6.71 100
159.48 175.94 648.23
1.86 2.05 7.56
0.10 0.11 0.40
0.53 0.59 2.17
161.97 178.69 658.36
19.44 21.44 79.00
181.41 200.13 737.36
153472.86 253964.97 207935.52 3098875.89
4.6 PROFIT AND LOSS STATEMENT FOR FIRST YEAR Income Statement for 1st year Particulars Income from sales Less: 1. Raw materials 2. Direct Labor 3. Factory Overhead Gross Profit Less: 1. Marketing Expenses 2. Administration expenses 20000 381451.08 ( 401451.08 ) 31776276 372000 547280.04 ( 32695556.04 ) 4490954.64 Amount (Rs) Amount (Rs) 37186510.68
Earnings Before Interest and Tax Less: Interest Expense Earnings Before Tax Less: Tax. (13%) Earnings After Tax (Net profit)
4089503.56
( 109500 ) 3980003.56 ( 517400.46 ) 3462603.1
4.7 CASH FLOW STATEMENT FOR FIRST YEAR Cash Flow Statement for 1st year Particulars Cash Inflow Equity (Step 4.2) Loan (Step 4.2) Total Sales (Step 4.6) 281432.95 730000 37186510.68
Pre-Operating (Rs.)
1st Year (Rs.)
Total Cash Inflows
1011432.95
37186510.68
Cash Outflows Pre-Operating Expenses (Step 3.5) 30500
Purchase of Fixed Assets (Step 2.2 + Step 3.6) 253000 Purchase of Raw material (Step 2.11) Direct labor cost (Step 2.14) Factory Overhead Expenses (Step 2.14)(Excluding depreciation) Administration Expense (Step 3.7) (Excluding depreciation and amortization) Marketing Expenses (Step 1.12) Increase in inventories (Step 4.1.2) Interest Expense (Step 4.4) Tax (Step 4.6) 31776276 372000 518280
378000
20000 727932.95 109500 517400.46
Repayment of loan (Step 4.4)
146000
Total cash Outflows
283500
34565389.41
Net cash Flows
727932.95
2621121.27
Cash balance at the beginning Cash balance at the end 727932.95
727932.95 3349054.22
4.8 BALANCE SHEET FOR FIRST YEAR Balance Sheet for the first year Particulars Pre-Operating 1st year
Assets Current Assets Cash Account receivable Inventory Total current Assets 727932.95 727932.95 3349054.22 727932.73 4076986.95
Fixed Assets Total gross fixed assets Less: Accumulated Depreciation Total Net Fixed Assets 253000 253000 29800
253000
223200
Pre-Operating Expenses Less Amortization Net Pre Operating Expenses
30500 0 30500
30500 2651 27849
Total Assets
1011432.95
4328035.95
Liabilities Long term loan Less payment Net loan payable 730000 730000 730000 146000 584000
Owners Equity Owners capital in the beginning Accumulated profit Total owners equity 281432.95 281432.95
0 281432.95
3462603 3744035.95
Total capital and liability
1011432.95
4328035.95
4.9 BREAK EVEN POINT FOR FIRST YEAR (BEP) Annual Sales = 3, 71, 86, 510.68 Annual Variable Cost = Annual direct labor cost + Annual cost of raw materials = 3, 72, 000 + 3, 17, 76, 276 = 3, 21, 48, 276
Annual Fixed Cost = Annual Production overhead + Annual administrative expenses + Annual marketing expenses + Annual Interest expenses = 5,47,280.04 + 3,81,451.08 + 20,000 + 1,09,500 = 10,58,231.12
BEP % = (Annual Fixed Cost * 100%)/(Annual Sales ± Annual VC) = = 21%
BEP (Sales Amount) = BEP % * Annual Sales = 21% x 37186510.68 = 7809167.24 The BEP in terms of sales quantity cannot be calculated for multi product costing.
4.10 A. RETURN ON INVESTMENT (ROI) Return on Investment (ROI) = (Net Profit/Capital Employed)*100% = = 80% x 100%
B. ROE (Return on Equity) ROE = = = 92.48%
* 100%
4.11 PROJECT FEASIBILITY This project seems very much profitable and feasible. The BEP is only about 21%. The return on investment is also very high. Similarly the technological aspect of the project that is the computer system has already been developed and has successfully tested. The only problem that may arise is in attracting the customers for the first time. Good rapport development with the customers shall solve the problem. The manpower needed and the goods that are going to be sold are not difficult to find in the market. Thus, this project is feasible from availability of goods and manpower as well. All in this entire project is a very sound, profitable and efficient project.
5. ANNEX
1.2 COMPARISION OF THE PRODUCT WITH ITS COMPETITORS Pasal.com is the first of its kind in the country. There has never been a local internet site that deals with day to day items. The closest things to its competitors are the physical grocery store and departmental stores. However due to the online presence of pasal.com will surely provide the business a competitive advantage.
There are few internet sites that have been selling goods in the Nepali market like Muncha.com, thamel.com and shopnbds.com. However these sites are abroad based and they do not deal with day to day items. Pasal.com on the other side will focus on day to day useful items. Another advantage of pasal.com over other such sites is the facility of ordering through telephone. And also we will be the first company that will guarantee delivery within one hour. Another difference of pasal.com with other online business sites is that they require the customers to pay with credit cards. That is one of the major reasons why such sites are not popular among Nepali customers. Pasal.com will try to tackle this problem by allowing the customers to pay on delivery. It¶s like DHL which delivers goods but also lets the customers to choose the products they want on the internet.
1.3 LOCATION Pasal.com will focus only one heavily populated area of the valley in the first five years of year of establishment. The service will be extended to other areas of the valley after 5 years and within 10 years the service will be extended to the whole of the city. The suppliers are also located in the valley.
1.4 MARKET AREA These ready to use products are mainly consumed by the urban population having average purchasing power and fast-paced life-style. Thus the market areas for the product are the areas where these families are located. In the first five years we intend to target Lazimpat. After five years with the experience and the feedback from the area mentioned above the service will be extended to other areas and within 10 years the service will be extended to the whole Kathmandu valley.
1.5 MAIN CUSTOMERS Our main customers are the working class people living in a nuclear family. These are the people who have a busy schedule and they don't have time to go for shopping for the daily use products such as groceries. The number of working class women is getting larger due to the changing lifestyle. They don't have time to go and search for these things. Our service will benefit our customers such that the time they saved for shopping for these products shall be utilized to spend more time with their family and kids. So, we intend to focus those nuclear families and provide our service to their door steps in an affordable price. Also our night service focuses on the parties at home. Due to the degrading security system and limited night life in the Kathmandu valley, people are encouraged to organize parties at home. So, we grasp this opportunity to provide our service to those groups.
1.6 TOTAL DEMAND
The table below shows the average number of each product sold in the area. From the table we can know the independent market demand of each product and the total demand for all the commodities. The total market demand for the 23 products that Pasal.com is going to deal with is Rs. 718693920 per year.
Products
Quantity
No. of Demand/day Demand/month Demand/year shops (qty) (qty) (qty)
Annual Demand (Rs.)
Snacks: 1. Lays 2. Spicy instant fish 3. Noodles 4. Peanuts 5. Cheese Balls Milk Groceries: 1. Green leaves 2. Cauliflower 3. Potato Frozen Meat: 1. Buff Sausage 2.Chicken Sausage Cold Drinks Cigarettes Fruit Juice: 1. Real Juice 2. Frooti 3. Rio Alcohol/Beer/Wine 1. Royal Stag 2. Blue Riband 3. Ruslan Vodka 4. Tuborg Beer 5. Sanmiguel 6. Carlsberg 7. Red wine 24 16 16 36 12 18 4 47 47 47 47 47 47 47 1128 752 752 1692 564 846 188 33840 22560 22560 50760 16920 25380 5640 406080 270720 270720 609120 203040 304560 67680
Demand
30 10 40 14 28 100
47 47 47 47 47 47
1410 470 1880 658 1316 4700
42300 14100 56400 19740 39480 141000
507600 169200 676800 236880 473760 1692000
20304000 7614000 10152000 34347600 5685120 35532000
60 20 9
47 47 47
2820 940 423
84600 28200 12690
1015200 338400 152280
10152000 10152000 9136800
30 20 140 10
47 47 47 47
1410 940 6580 470
42300 28200 197400 14100
507600 338400 2368800 169200
60912000 50760000 47376000 16920000
30 10 6
47 47 47
1410 470 282
42300 14100 8460
507600 169200 101520
10152000 3384000 2030400
64972800 35193600 40608000 103550400 34516800 57866400 47376000 718693920
1.7 MARKET SHARE Using decision guide to calculate our market share, we have many competitors (retails shops), their size is small and their product features is dissimilar to that of ours, we estimate that our market share for the 1st year is 10-15% Therefore, our market share in terms of volume is calculated in a conservative mode ie, Market share = 10% of the total demand per year = 10% of Rs. 718693920 = 71869392
1.8 SALES FORECAST Year First year Second year Third year Fourth year Fifth year Sales Forecast (in %) 50 60 80 100 100
SELLING PRICE The selling price of our product will be calculated using the "Cost-Plus-Method". The cost of the product at Pasal.com will be slightly more than the price of physical stores because it¶s a luxurious service. The calculation for the selling price for each product is shown in the section 4.5. A summary of products and their selling price is given by the table below:
Products Snacks: 1. Lays 2. Dry Meat 3. Dalmot 4. Peanuts 5. Cheese Balls 42.5 44.36 15.2 152.15 10.52 Selling price/unit
Milk Groceries: 1. Green Leaves 2. Cauliflower 3. Potato Frozen Meat: 1. Buff Sausage 2. Chicken Sausage Cold Drinks Cigarettes Fruit Juice: 1. Real Juice 2. Frooti 3. Rio Alcohol/Beer/Wine 1. Royal Stag 2. Blue Riband 3. Ruslan Vodka 4. Tuborg Beer 5. Sanmiguel 6. Carlsberg 7. Red Wine
22.22
9.35 29.27 64.35
117.03 140.44 21.07 99.48
21.07 21.04 21.07
168.53 136.92 158 181.42 181.41 200.13 737.36
1.10 PROMOTIONAL MEASURES Our service is the first of its kind in the country and we intend to take advantage from this. However it is also worth nothing that because our product is a new one people will not know that much about it at first. The most economical promotional measure in this case is door to door advertising. The owners themselves will go to each house in the targeted area. They will try to develop a good rapport with the households. The company will provide special discount to the regular customers. Any customers wishing to take the most use of our service can become a permanent member and can get special discount, privilege product delivery. use of pamphlets and brochures will be the secondary promotional measures. The company is also planning to advertise in local FM stations a few times in a month.
1.11 MARKETING STRATEGY Our product will enjoy a competitive advantage because of the unique nature of the service. We will be providing a service which is being used world wide but will be the first in the country. We intend to apply the skimming price strategy to capture the middle and upper middle class families. The product mix of the service is as follows:
A. Product: We will provide online and telephone ordering system for day to day items, guarantying a quick response B. Price: The price of each product will be slightly higher than in the market. Only customers who can afford some value to the time saved by our service are our customers. The pricing strategy applied is Market Skimming where we target the cream customers. C. Promotion: The major promotional measure is door to door marketing and developing a good rapport with the customers. To retain the customers, regular member customers will be provided special discount offers. Some items which are not provided to the ordinary customers will be provided to the regular customers. Along with that to any customers who has been a regular customer of the company for two years, the company will try and provide any items available in the Kathmandu valley demanded by the customer. D. Place: Pasal.com will focus only one heavily populated areas of the valley in the first five years of year of establishment. The service will be extended to other areas of the valley after 5 years and within 10 years the service will be extended to the whole of the city. The suppliers are also located in the valley.
1.12 MARKETING EXPENSES NRs. 20000 is allocated as the marketing budget for the first year. For the following years the marketing budget will be subsequently decreased by 25% on the previous years expense balance.
2. PRODUCTION PLAN
2.1 SERVICE PROCESS There will be no production involved in the business. The service process is described as follows: First the customers will log on to Pasal.com on the internet. The list of available goods and their price is provided in the site. The customer will order the product and click on the location on the map provided in the site itself along with a written address. Whenever the system receives an order it will place a notification alarm to the computer administrator. The computer administrator will in turn notify the delivery boys about the order. The delivery boys will collect the ordered items from the store and will deliver the goods in their motorcycles. The delivery boys will receive the payment on delivery.
2.2 FIXED ASSETS REQUIRED Fixed Assets Requirement (Production) Sno. 1 2 3 4 Fixed Assets Motorcycle Furniture Refrigerator Computer Total 1 2 40000 30000 Quantity 2 Rate 60000 Amount 120000 20000 40000 60000 240000
2.3 LIFE OF FIXED ASSETS The life of motorcycle and equipment is 10 years and life of furniture is 20 years. Thus, the depreciation for equipment and vehicle is 10% per annum and for furniture is 5% straight line method is used to calculate the depreciation. The per annum depreciation expense for production asset is Rs. 29000 and depreciation expense for office assets is Rs. 800. The annual depreciation expense is Rs. 29800. The per month depreciation expense for production assets is Rs. 2417. The per month depreciation expense for office assets is Rs. 67. Therefore the total depreciation per month is Rs. 2484.
Life of fixed assets (Production) Sno. Fixed Assets Value Rate Depreciation per year Depreciation/month
1 2 3 4
Motorcycle Furniture Refrigerator Computer Total
120000 20000 40000 60000
10 5 10 20
12000 1000 4000 12000 29000
1000 83.33333 333.3333 1000 2416.667
2.4 REPAIRS AND MAINTENANCE The supplier of computers will provide maintenance and repair service for 1 year. The maintenance and repair for motorcycle is assumed to be Rs. 500 per month. And to ensure proper flow of operations the company has allocated Rs. 500.00 for maintenance and repair per month for other equipments. Therefore the monthly repairs and maintenance cost for the fixed assets is Rs. 1000 per month.
2.5 SOURCE OF MACHINERY AND EQUIPMENT The computers will be bought from Infosis Tech at Computer Bazaar at Putalisadak. The owner has a good relationship with the owner of Infosis Tech. Similarly the refrigerators will be bought from Videocon Limited, India.
2.6 PLANNED CAPACITY Pasal.com will operate 365 days of the year for the whole 24 hours. The daily demand is goods worth Rs. 98451.22. However, we won't be using all of our capacity. The capacity use will be increased according to the increase in demand and sales in coming years.
2.7 WORKSHOP LOCATION AND LAYOUT The company will run from a two room flat in Lazimpat. One of the rooms will be used as the warehouse and the other will be used as office and computer room. The required supplies are also found nearby. And also has proper infrastructure and communication facilities required to set-up the working area.
2.8 RAW MATERIALS REQUIRED AND IT'S COST The annual demand and market share for each product is given in section 1.6 and 1.7; the sales forecast for the 1st year is 50% of the market share. The table below shows the total monthly raw material costs. The total monthly cost of raw material is Rs. 2648023
Products Demand/Year (qty) Snacks: 1. Lays 2.Spicy instant fish 3. Noodles 4. Peanuts 5. Cheese Balls Milk Groceries: 1. Green leaves 2. Cauliflower 3. Potato Frozen Meat: 1. Buff Sausage 2.Chicken Sausage Cold Drinks Cigarettes Fruit Juice: 1. Real Juice 2. Frooti 3. Rio Alcohol/Beer/Wine 1. Royal Stag 2. Blue Riband 3. Ruslan Vodka 4. Tuborg Beer 5. Sanmiguel 6. Carlsberg 7. Redwine 406080 270720 270720 609120 203040 304560 67680 40608 27072 27072 60912 20304 30456 6768 20304 13536 13536 30456 10152 15228 3384 1692 1128 1128 2538 846 1269 282 144 117 135 155 155 171 630 Total/mth 243648 131976 152280 393390 131130 216999 177660 2648023 507600 169200 101520 50760 16920 10152 25380 8460 5076 2115 705 423 18 18 18 38070 12690 7614 507600 338400 2368800 169200 50760 33840 236880 16920 25380 16920 118440 8460 2115 1410 9870 705 100 120 18 85 211500 169200 177660 59925 1015200 338400 152280 101520 33840 15228 50760 16920 7614 4230 1410 634.5 8 25 55 33840 35250 34898 507600 169200 676800 236880 473760 1692000 50760 16920 67680 23688 47376 169200 25380 8460 33840 11844 23688 84600 2115 705 2820 987 1974 7050 36.32 38 13 130 9 19 76817 26790 36660 128310 17766 133950 Market Share(10%) Sales (50%) Requirement/month Cost Price Cost Raw Mat. of
2.9 RAW MATERIALS AVAILABILITY Raw materials are purchased from the wholesalers and producers.
2.10 NUMBER OF LABORERS There will be two shifts for the delivery boys. Two delivery boys will be hired for the day and two delivery boys will be hired for the night. a computer administrator will be hired for the day. The computer work will be handled by the owners at night.
2.11 COST OF LABOR S.No. A. Description Direct Labor Delivery (Day) Delivery (Night) Computer Administrator Direct labor/ Month B Indirect Labor Owner 1 20000 20000 31000 1 5000 5000 Boy 2 8000 16000 Boy 2 5000 10000 No. of Laborers Rate/month Amount/month
Indirect Labor/Month Total cost of labor per month
20000 51000
2.12 LABOR AVAILABILITY The labors required will be hired from the local market. The labor will not require much technical and specific skill. The delivery boys should know the target area (Lazimpat) well. Local young people from the locality will not be difficult to find. The workers will be given proper work schedule which will be followed strictly. A labor will have to inform the management at least one month advances if he/she is planning to quit the job. This way the management will have enough time to replace the worker.
2.13 LABOR MOTIVATION To motivate the employees so that they can perform well on the job, following facilities will be provided to them. 1. Safe and friendly working environment will be provided to the workers 2. The wages and salaries will be provided on a monthly basis. 3. Trainings will be provided to the direct labors. 4. Workers will be provided a week long paid leaves per year. 5. Food allowance of Rs. 750 per month (for tea and snacks) will be provided to all employees.
2.14 PRODUCTION OVERHEAD EXPENSES Production Overhead S.No. 1 2 3 4 5 6 7 Total (Per Month) Description Indirect Labor Repair and Maintenance Allowance for food Electricity and Water Depreciation Fuel Rent Amount (Rs/month) 20000.00 1000.00 3000.00 5000.00 2416.67 2190.00 12000.00 45606.67
2.15 PRODUCTION COST PER UNIT
Unit Production Cost Products Sales/month Cost Price Cost of Raw Material Snacks 1. lays 2.Spicyinstant fish 3. Noodles 4. Peanuts 5. Cheese Balls Milk Groceries: 1. Green Leaves 2. Cauliflower 3. Potato Frozen Meat 1. Buff Sausage 2.Chicken sausage Cold Drinks Cigarettes Fruit Juice 1. Real Juice 2. Frooti 3. Rio Alcohol/Beer/Wine 1. Royal Stag 2. Blue Riband 3. Ruslan Vodka 4. Tuborg Beer 5. Sanmiguel 6. Carlsberg 7. Red Wine 1692 1128 1128 2538 846 1269 282 144 117 135 155 155 171 630 243648 131976 152280 393390 131130 216999 177660 2648023 9.20 4.98 5.75 14.86 4.95 8.19 6.71 100.00 2852 1543.8 1782.5 4606.6 1534.5 2538.9 2080.1 31000.00 4195.8 2271.21 2622.38 6777.15 2257.5 3735.18 3060.2 45606.67 250695.8 135791.01 156684.88 404773.75 134922 223273 182800.3 2724629.67 148.17 120.38 138.9 159.49 159.48 175.94 648.23 2115 705 423 18 18 18 38070 12690 7614 1.44 0.47 0.29 446.4 145.7 89.9 656.74 214.35 132.26 39173.14 13050.05 7836.16 18.52 18.51 18.52 2115 1410 9870 705 100 120 18 85 211500 169200 177660 59925 7.99 6.38 6.71 2.26 2476.9 1977.8 2080.1 700.6 3643.98 2909.7 3060 1030.7 217620.88 174087.5 182800.1 61656.3 102.89 123.47 18.52 87.46 4230 1410 634.5 8 25 55 33840 35250 34898 1.28 1.33 1.31 396.8 412.3 406.1 583.77 606.57 597.45 34820.57 36268.87 35901.55 8.23 25.72 56.58 2115 705 2820 987 1974 7050 36.32 38 13 130 9 19 76817 26790 36660 128310 17766 133950 2.9 1.01 1.38 4.85 0.67 5.05 899 313 427.8 1503.5 207.7 1565.5 1322.5 460.6 629.37 2211.9 305.56 2303.14 79038.5 27563.6 37717.17 132025.4 18279.36 137818.64 37.37 39 13.37 133.76 9.26 19.55 % Cost of Raw Material Direct labor Production Overhead Production Cost/month Per Unit
production cost
3. ORGANIZATION AND MANAGEMENT PLAN
3.1 FORMS OF BUSINESS The business will be registered under the name "Pasal.com" as a sole trading private firm. Here the owner will act as investor as well as Director of the company.
3.2 ORGANIZATIONAL STRUCTURE
Owner: Sanam Shrestha Head of Accounts, Marketing, Finance, Operation and IT Computer Administrator Delivery Boys
3.3 BUSINESS EXPERIENCE AND QUALIFICATION OF ENTREPRENEUR The entrepreneur has been involved with some business or similar projects previously. Mr. Sanam Shrestha is a MBA graduate from Ace Institute of Management, giving him enough theoretical knowledge of management and accounting. Mr. Shrestha has organized many college level events and has worked at Young Innovations Private Limited. Mr. Shrestha is also a Bachelor in Business Information System graduate from Kathmandu University, qualifying him as a good IT manager and Information system head. He has worked as a web developer for many organizations.
3.4 PRE OPERATING ACTIVITIES Following are the activities that are to be undertaken before operating the business i. ii. iii. iv. v. vi. vii. Market Survey Developing the web based system Registering the business Preparing business plan Applying for loan and approval Contacting equipment suppliers Hiring and training employees - 3 Weeks - 8 Weeks - 1 Week - 2 Weeks - 2 Weeks - 1 Week - 1 Week
Developing the web based system is a continuous and independent process which will be done by the owner. The Gantt chart for the operating activities as given below: Activities Market Survey Development of System Registration of the firm Preparing the business plan Applying for loan and approval Contacting the equipment suppliers Hiring and training employees 1 2 3 4 5 6 7 8 9 10
3.5 PRE OPERATING EXPENSES S.No. 1 2 3 4 5 Description Survey Cost Registration Cost System Development Cost Transportation Cost Other Expenses Total Pre-Operation Cost Amortization (10%) Per Month Amortization 30,500.00 3,050.00 254.17 Amount (Rs.) 2,500.00 5,000.00 20,000.00 2,000.00
Miscellaneous 1,000.00
3.6 FIXED ASSETS FOR OFFICE MANAGEMENT The company will not have a big office as such. However some furniture and equipments will be required for the efficient running of the managerial functions. Following are the fixed asset requirement for office management: Fixed Assets Requirement (Administration) S.No. 1 2 Fixed Assets Telephone Sets Furniture Total Quantity 4 Rate 750 Amount 3000 10000 13000
Depreciation Life of Fixed Assets (Administration) S.No. Fixed Assets Value Rate Depreciation per year 1 2 Telephone Sets Furniture Total 3000 10000 13000 10% 5% 300 500 800
The per month depreciation expense for the office management fixed assets is Rs. 67.
3.7 ADMINISTRATIVE EXPENSES Administrative Expenses S.No. 1 2 3 4 5 6 7 Description Owner's Salary Depreciation of office equipment and furniture Internet Expenses Communication Expenses Stationary Expenses Refreshments Amortization Amount Rs (Monthly) 20000.00 66.67 5000.00 5000.00 500.00 1000.00 220.92 31787.59 381451.08
Administrative Expense/Month Administration Expenses/Year
4. FINANCIAL PLAN
4.1 TOTAL CAPITAL REQUIREMENT
4.1.1 Fixed Capital Fixed capital = Fixed assets for operations + fixed assets from office = 240000 + 13000 = Rs. 253000 4.1.2 Working Capital Stock of Raw Materials: Our company will have 1 week of stock of raw materials. The cost of stock of raw materials is calculated using the following formula: Cost of raw materials = Monthly Raw Material Cost * (7/30) Cost of Stock Monthly Raw Material cost Daily Raw Material cost Stock keeping days Cost of Stock 2648023 88267.43 7 617872.03
Cash Management The firm requires maintaining a cash balance to pay one month¶s expenses. Cash management = (Monthly Marketing Expenses + Monthly Factory Overhead Expenses (2.14) + Monthly Administration Expenses (3.7) + Monthly Direct Labor expenses (2.11)) Cash Management S.No 1 2 3 4 Particulars Marketing Expenses Service Overhead Administration Expenses Direct labor Expenses Amount (Rs/Years) 20000.00 547280.04 381451.08 372000.00 1320731.12 Amount (Rs/Month) 1666.66 45606.67 31787.59 31000.00 110060.92
Cash Management
Total Working capital per month Working Capital S.no 1 2 Particulars Cost of Stock Raw Materials Cash Management Working Capital Amount 617872.03 110060.92 727932.95
4.1.3 Pre Operating Cost The total pre-operating expense calculated from section 3.5 is Rs. 30,500.00
Thus the total amount required to start the business is Rs. 1011432.95. The calculation for the total project cost is given below. Total Project Cost S.no 1 2 3 Particular Fixed Assets Working Capital Pre-Operating Expenses Amount 253000 727932.95 30,500.00 1011432.95
Project Cost
4.2 FINANCIAL PLAN AND LOAN REQUIREMENT We have decided to take a loan of Rs. 7, 30,000 from the bank and the rest are the contribution of the owner. Loan-Equity Mix S.no A Particulars Fixed Assets (Administration) 1 2 Telephone Sets Furniture 3000.00 10000.00 3000.00 10000.00 Owner¶s Equity Loan Total Amount
B
Fixed Assets (Production)
1 2 3 4
Motorcycle Furniture Refrigerator Computer 20000.00
120000.00
120000.00 20000.00
40000.00 60000.00
40000.00 60000.00
C D
Working Capital Pre-operating Expense
227932.95 30,500.00
500000.00
727932.95 30500.00
Total Percentage
281432.95 27.83
730000.00 72.17
1011432.95 100.00
4.3 SECURITY FOR LOAN Owner has a land at Gwarko, Lalitpur; which can be kept as collateral having market value of Rs. 40,00,000.
4.4 LOAN REPAYMENT SCHEDULE The loan is to be paid over a period of 5 years at an interest of 15% per annum. Loan Payment Schedule Year 1 2 3 4 5 Loan Amount Payable 730000.00 584000.00 438000.00 292000.00 146000.00 Interest (15%) 109500.00 87600.00 65700.00 43800.00 21900.00 Principle 146000.00 146000.00 146000.00 146000.00 146000.00 Total Payment 255500.00 233600.00 211700.00 189800.00 167900.00
4.5 UNIT SELLING PRICE
Unit Selling Price Products Sales/Mont h % Cos t of RM Snacks 1. Lays 2.Spicy Instant Fish 3. Noodles 4. Peanuts 5. Cheese Balls Milk Groceries 1. Green leaves 2. Cauliflower 3. Potato Frozen Meat 1. Buff sausage 2. Chicken Sausage Cold Drinks Cigarettes Fruit Juice 1. Real Juice 2. Frooti 3. Rio Alcohol/Beer/Wine 1. Royal Stag 2. Blue Riband 3. Ruslan Vodka 4. Tuborg beer 1692 1128 1128 2538 9.20 4.98 5.75 14.8 6 148.17 120.38 138.9 159.49 1.73 1.40 1.62 1.86 0.09 0.07 0.08 0.10 0.49 0.40 0.47 0.53 150.48 122.25 141.07 161.98 18.05 14.67 16.93 19.44 168.53 136.92 158 181.42 285152.76 154445.76 178224 460443.96 2115 705 423 1.44 0.47 0.29 18.52 18.51 18.52 0.22 0.21 0.22 0.01 0.01 0.01 0.06 0.06 0.06 18.81 18.79 18.81 2.26 2.25 2.25 21.07 21.04 21.06 44563.05 14833.2 8908.38 9870 705 6.71 2.26 18.52 87.46 0.22 1.02 0.01 0.05 0.06 0.29 18.88 88.82 2.26 10.66 21.07 99.48 207960.9 70133.4 2115 1410 7.99 6.38 102.89 123.47 1.2 1.44 0.06 0.08 0.34 0.41 104.49 125.4 12.54 15.04 117.03 140.44 247518.45 198020.4 4230 1410 635 1.28 1.33 1.31 8.23 25.72 56.58 0.09 0.3 0.66 0.00 0.02 0.03 0.03 0.09 0.19 8.35 26.13 57.46 1 3.14 6.89 9.35 29.27 64.35 39550.5 41270.7 40862.25 2820 987 1974 7050 1.38 4.85 0.67 5.05 13.37 133.76 9.26 19.55 0.16 1.56 0.11 0.22 0.00 0.08 0.00 0.01 0.04 0.45 0.03 0.06 13.57 135.85 9.4 19.84 1.63 16.3 1.12 2.38 15.2 152.15 10.52 22.22 42864 150172.05 20766.48 156651 2115 705 2.9 1.01 37.37 39 0.43 0.46 0.02 0.02 0.13 0.13 37.95 39.61 4.55 4.75 42.5 44.36 89887.5 31273.8 Productio n Cost / Unit Adm n Exp/ Unit Mtkg Exp/ Unit Int Exp/ Unit Final Cost Profit margi n (12%) Selling Price/Uni t Sales Revenue (Rs/Month )
5. Sanmiguel 6. Carlsberg 7. Redwine Total
846 1269 282
4.95 8.19 6.71 100
159.48 175.94 648.23
1.86 2.05 7.56
0.10 0.11 0.40
0.53 0.59 2.17
161.97 178.69 658.36
19.44 21.44 79.00
181.41 200.13 737.36
153472.86 253964.97 207935.52 3098875.89
4.6 PROFIT AND LOSS STATEMENT FOR FIRST YEAR Income Statement for 1st year Particulars Income from sales Less: 1. Raw materials 2. Direct Labor 3. Factory Overhead Gross Profit Less: 1. Marketing Expenses 2. Administration expenses 20000 381451.08 ( 401451.08 ) 31776276 372000 547280.04 ( 32695556.04 ) 4490954.64 Amount (Rs) Amount (Rs) 37186510.68
Earnings Before Interest and Tax Less: Interest Expense Earnings Before Tax Less: Tax. (13%) Earnings After Tax (Net profit)
4089503.56
( 109500 ) 3980003.56 ( 517400.46 ) 3462603.1
4.7 CASH FLOW STATEMENT FOR FIRST YEAR Cash Flow Statement for 1st year Particulars Cash Inflow Equity (Step 4.2) Loan (Step 4.2) Total Sales (Step 4.6) 281432.95 730000 37186510.68
Pre-Operating (Rs.)
1st Year (Rs.)
Total Cash Inflows
1011432.95
37186510.68
Cash Outflows Pre-Operating Expenses (Step 3.5) 30500
Purchase of Fixed Assets (Step 2.2 + Step 3.6) 253000 Purchase of Raw material (Step 2.11) Direct labor cost (Step 2.14) Factory Overhead Expenses (Step 2.14)(Excluding depreciation) Administration Expense (Step 3.7) (Excluding depreciation and amortization) Marketing Expenses (Step 1.12) Increase in inventories (Step 4.1.2) Interest Expense (Step 4.4) Tax (Step 4.6) 31776276 372000 518280
378000
20000 727932.95 109500 517400.46
Repayment of loan (Step 4.4)
146000
Total cash Outflows
283500
34565389.41
Net cash Flows
727932.95
2621121.27
Cash balance at the beginning Cash balance at the end 727932.95
727932.95 3349054.22
4.8 BALANCE SHEET FOR FIRST YEAR Balance Sheet for the first year Particulars Pre-Operating 1st year
Assets Current Assets Cash Account receivable Inventory Total current Assets 727932.95 727932.95 3349054.22 727932.73 4076986.95
Fixed Assets Total gross fixed assets Less: Accumulated Depreciation Total Net Fixed Assets 253000 253000 29800
253000
223200
Pre-Operating Expenses Less Amortization Net Pre Operating Expenses
30500 0 30500
30500 2651 27849
Total Assets
1011432.95
4328035.95
Liabilities Long term loan Less payment Net loan payable 730000 730000 730000 146000 584000
Owners Equity Owners capital in the beginning Accumulated profit Total owners equity 281432.95 281432.95
0 281432.95
3462603 3744035.95
Total capital and liability
1011432.95
4328035.95
4.9 BREAK EVEN POINT FOR FIRST YEAR (BEP) Annual Sales = 3, 71, 86, 510.68 Annual Variable Cost = Annual direct labor cost + Annual cost of raw materials = 3, 72, 000 + 3, 17, 76, 276 = 3, 21, 48, 276
Annual Fixed Cost = Annual Production overhead + Annual administrative expenses + Annual marketing expenses + Annual Interest expenses = 5,47,280.04 + 3,81,451.08 + 20,000 + 1,09,500 = 10,58,231.12
BEP % = (Annual Fixed Cost * 100%)/(Annual Sales ± Annual VC) = = 21%
BEP (Sales Amount) = BEP % * Annual Sales = 21% x 37186510.68 = 7809167.24 The BEP in terms of sales quantity cannot be calculated for multi product costing.
4.10 A. RETURN ON INVESTMENT (ROI) Return on Investment (ROI) = (Net Profit/Capital Employed)*100% = = 80% x 100%
B. ROE (Return on Equity) ROE = = = 92.48%
* 100%
4.11 PROJECT FEASIBILITY This project seems very much profitable and feasible. The BEP is only about 21%. The return on investment is also very high. Similarly the technological aspect of the project that is the computer system has already been developed and has successfully tested. The only problem that may arise is in attracting the customers for the first time. Good rapport development with the customers shall solve the problem. The manpower needed and the goods that are going to be sold are not difficult to find in the market. Thus, this project is feasible from availability of goods and manpower as well. All in this entire project is a very sound, profitable and efficient project.
5. ANNEX
