Business Plan For Soap Making.docx

BUSINESS PLAN ON

LIQUID SOAP MANUFACTURING

Prepared By:

COOPERATIVE MULTIPURPOSE SOCIETY ADDRESS: Telephone: Email:

OCTOBER 2013 1

TABLE OF CONTENT

Chapter

Page

Table of Content

2

Executive Summary

5

1.0

BUSINESS OVERVIEW

7

1.1

Business Idea

1.2

Description of Business

7

Vision and Mission Statement

8

The Objective of the Company

8

1.3

Value Proposition

8

1.4

Current Status of the Business

1.5

Description of the Business Industry

9

1.6

Contribution to Local and National Economy

10

2.0

SALES AND MARKETING PLAN

11

2.1

Market Research

11

2.2

The Opportunity

11

2.3

Target Market

11

2.4

Distribution Strategy

11

2.7

Promotional Strategy

12

2.8

Competition

12

2

3.0

PRODUCTION PLAN

15

3.1

Description of the Location / Factory

15

3.2

Raw Materials Needed

15

3.3

Production Equipment Table

16

3.3.2 Utilities Requirement & Cost

16

Equipment Depreciation (Table 3.1)

17

Documentation

18

Cost Forecast (Table 3.3)

19

3.4

Production Process / Techniques

19

3.5

Production Cost

21

Direct Material Cost Per Product (Table 3.2)

21

Cost Assumptions

22

Stock Control Process

22

Opening Stock (Table 3.4)

22

3.7

Pre-operating Activities and Expenses

23

4.0

ORGANISATIONAL AND MANAGEMENT PLAN

24

4.1

Ownership of the Business

24

4.2

Profile of the Promoter

24

4.3

Key Management of Staff

26

Table 4.1: Salary Schedule

26

FINANCIAL PLAN

27

3.6

5.0

3

5.1

Financial Assumptions

27

5.2

Start up Capital Estimation

27

Table 5.1: Required startup capital estimate

27

Source of Capital

27

Table 5.2: Source of Funds

27

Loan Repayment Plan

28

Table 5.3: Loan Repayment Schedule

28

Financial Projections

28

5.3

5.5

5.6

Table 5.4: Profit and Loss Plan Table 5.5: Cash Flow Plan

6.0

BUSINESS RISKS AND MITIGATING FACTOR

29

6.1

Business Risks

29

4

EXECUTIVE SUMMARY Liquid soap as a washing agent is fast replacing detergents in Nigeria. Since the advent of liquid soap in Nigeria, the detergent producers have not found it easy copping with the competition. This is because of the simple fact that liquid soap is fast gaining grounds for laundry and dish washing. Liquid soap has several advantages over Soaps and detergents hence its preference for laundry and dish washing. Since the advent of liquid soap in Nigeria, several skill acquisition centers have incorporated liquid soap making into their curricula hence the proliferation of several small scale liquid soap production companies.

The Business Description The entire process of soap making, from start to finish, takes about 2 days which include mixing the raw materials, letting it cool down and molding the mixture to obtain the finished product.

Cooperative Background We commence operation about a year ago. We intend to start new business by going into soap making production.

Marketing Our cooperative aims at producing a minimum capacity of 3,000 cartons of 75Cl bottles per month. There are a lot of ways to market our liquid soap. We shall package it as a souvenir in weddings and birthday parties. We shall extend our marketing to drop supermarkets and grocery stores, supply it to restaurants and eateries, supply it to bars and cool joint owners, supply it to guest houses and hotels.

Financial Plan Our Cooperative equity contribution

=

N2,500,000.00

Loan required

=

N10,000,000.00

Startup Capital

=

N12,000,000.00 5

Duration

=

24 months

Interest rate

=

20% per annum

Sales and Cost forecasts as well as Profit and Loss statement reveal the following: Gross Profit:

=

N31,484,700.00

Net Profit:

=

N15,490,501.36

Moratorium:

=

2 months

Tenure of loan:

=

24 months

The purpose of the loan is for operational expenses, procurement of water treatment plant and office equipments. The risks The risks identified in this business are fire outbreak, accidental discharge of reagents for laboratory analysis, sustaining injury within the factory, motor accident that may involve the truck drivers and theft. We shall mitigate the risk challenges through insurance policy against fire, installation of fire extinguisher and provision of First Aid Box for staff.

CHAPTER ONE 6

BUSINESS OVERVIEW Liquid soap as a washing agent is fast replacing detergents in Nigeria. Since the advent of liquid soap in Nigeria, the detergent producers have not found it easy copping with the competition. This is because of the simple fact that liquid soap is fast gaining grounds for laundry and dish washing. Liquid soap has several advantages over Soaps and detergents hence its preference for laundry and dish washing. Since the advent of liquid soap in Nigeria, several skill acquisition centers have incorporated liquid soap making into their curricula hence the proliferation of several small scale liquid soap production companies.

1.1

The Business Idea Making soap is a creative hobby one can turn into a successful business because everyone needs soap. Every bar must eventually dissolve, so every customer can be a steady customer, provided our soap is good. As with anything else, quality will be the determining factor in the success of our business. We hope to make good products in order to capture sufficient public interest which can make our business to thrive.

1.2

Description of the Business

a. Identity of the Business The name of the business enterprises shall be …. Cooperative, a business name registered with state ministry of Commerce and Industry.

b. Business Location

The business is located at …………………………

Mission Our mission is to create value for customers by continually improving health and reducing preventable illnesses through the use of our soap. 7

Objectives of the Business The objectives of our cooperative are the following: 

Develop a complete product which meets regulatory standards by second month of Year 1.



Become the specialty soap of choice for restaurants and day cares across the community by the end of Year 2.



Achieve sales of N5 million by the end of Year2.

1.3 Keys to Success 

A branding campaign to build awareness of our products as the standard for ensuring good washing compliance.



1.4

Consistent education on hand washing and personal hygiene. Current Status of the Business The business is yet to commence operation. It is indeed a start up business.

1.5

Potential Challenges in the Soap Making Industry.

In the recent years, we have seen massive changes in this industry, these changes include:  New technology  National Competitive pressures  Unstable foreign exchange.  Workers bad attitudes It has been a challenging time for many enterprises producing soaps. Competition has been fierce, market shares have been changing rapidly, and some players have experienced severe financial problems. 1.6 Contribution to Local and National Economy The following are the benefits and contribution of this business to the economy:  Employment generation for the teaming unemployed youth in the state.  The company and staff pay taxes to the government which will increase government revenue. 8

 Improved healthy living and promote longevity among the citizens. A healthy workforce is a benefit to the economy.

9

CHAPTER TWO MARKETING PLAN The industry is highly competitive due to the fact that many players are involved. A lot of trainings on soap making are going on every day. New players are entering the market on a regular basis. The major strategy in order to become a force to reckon with is to have a well planned out sales and marketing strategy. Considering the large scope of our potential markets, we feel it is imperative to focus our limited resources on a particular geographic region where we can establish demand for our product. After successful market penetration, we will begin implementation into the restaurant and hospital markets. Target Market Segment Strategy 

Our target market includes restaurants, eateries, laundry and dry cleaning companies. These markets consist of medium to large organizations. Organizations such as Mr. Biggs, Tantalizers, Chicken Republic and Captain Cook represent very attractive opportunities for our products.



Organizations of this type are attractive because they are well managed, successful, health conscious and nationwide. Within these organizations we will target decision level managers with the power to implement use of our product in those locations.

2.1

Product Packaging and Delivery

Our Coop will produce a line of institutional liquid soaps with a quality raw materials blended into the mixture, utilizing the brightest colors possible . The liquid product will be packaged in 75cl plastic bottles while the bar soaps will be wrapped in high density nylon.

2.2 The Opportunity The market survey shows that there is a great demand for soaps for washing and cleansing.

Pricing Strategy 10

The method adopted for setting our prices is prevailing market price method. We intend to have an introductory price that is 10% less than the prevailing market price.

Selling Price: DEALER’S PRICE (N) MARKET PRICE (N)

S/N

PRODUCT

1.

Toilet Cleanser (75Cl)

3,600.00

4,080.00

2.

Liquid Soap (75Cl)x12

3,000.00

3,360.00

3.

Bar Soap (180g)x20

800.00

1,000.00

2.4

Distribution Strategy

We shall canvass to market men and women perceived to be dealers of similar products. Friend, families and associates are not out left. We wish to adopt two approaches, first, direct sales to the customers, and secondly, to supply the dealers in the major markets in Ondo State and the neighbouring states. As we introduce our business to various people, we shall ask them for referral to potential buyers. This shall be handled by our marketing team. We shall also employ the services of sales agents. Our products shall be conveyed to desired destinations through a truck, preferably a 2.5 tons truck.

2.7

Promotional Strategy

Our strategy for penetrating the market is as follows:

a.

Publicity and Advertisement Publicity and advertisement in this context involve creating public awareness.

b.

Sales Method

We shall give priority to customer care and satisfaction. Good public relations must be established. We shall see our prospective customers to be our real employers. In selling our 11

products, we shall supervise our sales agent in the selling process. Every member of staff is a potential marketer of our products. Appropriate commission shall be giving to members of staff that could open and close a sale. We shall give some determined discount to consistent customers, dealers and agents. As a matter of policy, we shall allow credit facility to only accredited dealers and those who can give us a credible guarantor.

2.8

Competition In the market we shall be competing with, but not limited, to the following products: 1.

Morning Fresh

2.

Mama Lemon

3.

Harpic

4.

B-29 Bar Soap

5.

Sunlight Soap

6.

Canoe Soap

Sales Assumptions: 1.

The sales are expected to be high during dry season. Obviously, a lot of people get thirsty when the weather gets hot. In addition, during ceremonies like house warming, naming, wedding, burial, Christian and Muslim festivals, there shall be increase in sales.

2.

Sales fall during the raining season.

12

Sales Forecast

Table 2.2: SALES FORECAST (Bi-monthly) P1 P2 50Cl Bottle

P5

P6

P7

P8

P9

P10

8,000

10,000

12,000

14,000

12,000

10,000

9,000

9,500

10,000

12,000

14

650

650

650

650

650

650

650

650

650

650

65

5,200,000

6,500,000

7,800,000

9,100,000

7,800,000

6,500,000

5,850,000

6,175,000

6,500,000

7,800,000

9,1

10,000

12,000

14,000

15,000

13,000

12,000

11,000

10,000

11,000

12,000

1,4

420

420

420

420

420

420

420

420

420

420

42

4,200,000

5,040,000

5,880,000

6,300,000

5,460,000

5,040,000

4,620,000

4,200,000

4,620,000

5,040,000

58

14,000

14,500

15,000

15,800

14,500

14,200

14,000

13,800

14,500

15,500

17

100

100

100

100

100

100

100

100

100

100

10

1,400,000

1,450,000

1,500,000

1,580,000

1,450,000

1,420,000

1,400,000

1,380,000

1,450,000

1,550,000

1,7

10,800,00 0

12,990,00 0

15,180,00 0

16,980,00 0

14,710,00 0

12,960,00 0

11,870,00 0

11,755,00 0

12,570,00 0

14,390,00 0

11 0

Qty Price/ Unit Amt

Sachet

P4

Qty Price/ Unit Amt

75Cl Bottle

P3

Qty Price/ Unit Amt

Total Revenue

13

CHAPTER THREE PRODUCTION PLAN 3.1

Description of the Location / Factory The factory is located within the industrial park. The factory is easily accessible with good facilities, such as water, dedicated power line and hospital facility.

3.2 PRODUCTION EQUIPMENTS AND DEPRECIATION SCHEDULE

Table 3.1 Equipment Reverse Osmosis

Unit 1

Cost

Value

1250000

Life Span (Months) 60

1,250,000.00 Bottle Packaging Machine

1

PVC Label

1

1450000

20,833.33 60

1,450,000.00 250000

24,166.67 60

250,000.00 60 kva generator set

1

750000

4,166.67 120

750,000.00 Distribution Van

1

1500000

6,250.00 60

1,500,000.00 Shrink Wrapper – Full Automatic

1

Composite filters (sand and carbon)

1

Air Ultraviolet Sterilizer (AUV)

2

Water Tanks (2,000L)

3

Pumping machine

6

850000

25,000.00 60

850,000.00 1100000

14,166.67 60

1,100,000.00 45000

18,333.33 60

90,000.00 30000

1,500.00 60

90,000.00 15000

1,500.00 60

90,000.00 Ozonator (8g)

1

850000

1,500.00 60

850,000.00 Automated Sachet filling Machine

1

Monthly Depreciation

420000

14,166.67 60

420,000.00

7,000.00 14

1 -

1

8,690,000.00

-

138,583.33

UTILITIES REQUIREMENT / OPERATING COST Table 3.2 S/N

Particulars

Qty Used

Unit Price

Monthly 1.

PHCN

2.

Fuel (Diesel)

3.

Office Stationeries

4.

Laboratory Analysis

1,800

Monthly Cost

12.00

21,600.00

240L

160

38,400.00

1500

2.00

3,000.00

TOTAL

5,000.00 68,000.00

COST ASSUMPTION 1.

It is expected that when sales or demand increases, the cost of production must also increase.

2.

Since season affects our business positively as well as negatively, the cost of production is likely going to fall during the raining season.

15

3.3

Cost Forecast

Table 3.3: COST FORECAST (Bi-monthly) Cost P1 P2 50Cl Bottle

P5

P6

P7

P8

P9

P1

8,000

10,000

12,000

14,000

12,000

10,000

9,000

9,500

10,000

12,000

535

535

535

535

535

535

535

535

535

535

4,280,000

5,350,000

6,420,000

7,490,000

6,420,000

5,350,000

4,815,000

5,082,500

5,350,000

6,420,

10,000

12,000

14,000

15,000

13,000

12,000

11,000

10,000

11,000

12,000

348

348

348

348

348

348

348

348

348

348

3,480,000

4,176,000

4,872,000

5,220,000

4,524,000

4,176,000

3,828,000

3,480,000

3,828,000

4,176,

14,000

14,500

15,000

15,800

14,500

14,200

14,000

13,800

14,500

15,500

67

67

67

67

67

67

67

67

67

67

938,000

971,500

1,005,000

1,058,600

971,500

951,400

938,000

924,600

971,500

1,038,

8,698,000

10,497,50 0

12,297,00 0

13,768,60 0

11,915,50 0

10,477,40 0

9,581,000

9,487,100

10,149,50 0

11,634 0

Qty Cost/ Unit Amt

Sachet

P4

Qty Cost/ Unit Amt

75Cl Bottle

P3

Qty Cost/ Unit Amt

Total Cost of Sales

16

3.4

Operating Activities

Table 3.4: Operating Activities and Expenses (Bi-monthly) Expenses P1 P2 P3 P4 P5

Salary Expenses Repair & Maintenance

P6

P7

P8

P9

494,000

494,000

P11

494,000

494,000

P12

494,000

494,000

494,000

494,000

494,000

494,000

494,000

100,000

80,000

110,000

50,000

85,000

60,000

40,000

4,000

5,000

24,000

24,000

24,000

28,000

28,000

30,000

24,000

24,000

26,000

28,000

28,000

30,000

6,000

4,000

4,000

6,000

6,000

6,000

6,000

5,000

5,000

5,000

4,000

6,000

10,000

494,000

5

120,000

Advertising Delivery /transport Telephone

8,000

5,000

Utilities 136,000

136,000

136,000

136,000

136,000

136,000

136,000

136,000

136,000

136,000

136,000

136,000

1

Total Operating Expenses

764,000

743,000

768,000

714,000

749,000

734,000

700,000

659,000

671,000

668,000

662,000

786,000

8

Initial Operating Expenses

764,000

17

3.5

Production Process and Techniques

1. Put all of your oils and beeswax into the pot and place it on the stove element at about level 3 (low). You want to heat the oils very slowly. If you heat the oils too high it will take much longer for it to cool to the temperature to make soap.

While the oils are heating use a bit of vegetable oil to oil the plastic container that you will be using as your mold. Use the freezer paper (shiny side towards the soap) to line the bottom of the plastic container, smooth the paper as much as possible. The oil keeps the paper in place and the paper ensures that you can remove your soap from the mold without sticking. Tape the edges of the freezer paper to the outer sides of the mold.

2. Clip your thermometer on the edge of the pot and remove the pot from the element.. The temperature should be about 150o . If it is higher, don't worry, it will cool down in time.

18

Mixing the Lye: Important: Please read the warnings on all of the pages

Gather the following items Lye Distilled Water Stir Stick Rubber Gloves Pyrex Container and Safety Glasses

3. When the oils and lye mixture are at the right temperature you are ready to begin pouring. Remove the Thermometer and rinse and wash thoroughly. Set aside

Slowly mixing the oils pour the lye mixture into the pot with the oils. Keep stirring slowly. Stir, stir, stir,…. and stir some more. Some people say that if you stir too quickly you will ruin the soap, others say if you stir too slowly you will ruin the soap. There is much discussion about this stirring, I suppose because there is so much of it. I stir so as not to slop any out of the pot, otherwise I have not had any problems in that regard. You have to stir for about 20- 30 minutes, I usually only can stand to wait 20 minutes. If the mixture starts to thicken, you are just about done, if not proceed to the next step. If you have a stick blender, put it into the pot and turn it on. Make sure you don't mix in any air, always keep the hand blender under the surface of the liquid, you don't want to stir in any air, or splash any of the mixture.

19

Add any herbs or colouring quickly and all at once. Use the stick blender to mix everything together. Add your fragrance. Some fragrances are not designed for soapmaking and will seize your soap. Always use fragrances which have been tested in cold process soap or essential oils.

4. Cutting

and

shaping

the

soap

After 24 hours uncover the soap, and measure and score the top of the soap lightly in the shape of the bars you like. Each person is different in the size of bar that they prefer. A small bar of soap sold in the grocery store is 2"X3", but I have found 2 1/2 X 3 1/2 makes a much nicer sized bar.

3.6 PRODUCTION COST

a.

Direct Material Cost for 50CL Bottle Direct Materials

Qty

Cost Per Unit (N)

1.

Raw Material

100,000L

15.00

1,500,000.00

2.

50cl Bottle

200,000

12.00

2,400,000.00

Cap cover

200,000

1.00

200,000.00

Packaging Cartons Nylon

8,333

2.00

16,666.00

Transportation

8,333

3.00

24,999.00

Label

200,000

1.00

200,000.00

4.

Labor

5

18,000.00

5.

Electricity

1,800Kwh

12.00

3.

Total Cost of Production Total Cost per Crate Total Cost per unit

Amount (N)

90,000 21,600.00 4,453,265.00 534.41 22.27

20

Table 3.5: Opening Stock Stock / Item 50cl Sachet Nylon

Quantity

Unit Cost

150000

Total 1 150,000.00

Packaging Nylon

15000

3 45,000.00

50cl Bottle

80000

12 960,000.00

75cl Bottle

55000

14 770,000.00 -

Bottle caps

135000

1 135,000.00

Labels

135000

1 135,000.00 -

TOTAL 2,195,000.00

3.7

Pre-operating Activities and Expenses Table 3.6: PRE-OPERATING ACTIVITIES AND EXPENSES Item Description Amount Rent Equipment Renovation/ demarcation

Two years See Table 3.1 for Details For all the painting, refixing

Advertising

To create awareness of the business

Business registration TOTAL

NAFDAC Registration

144,000.00 8,690,000.00 447,000.00

260,000.00 9,541,000.00

21

CHAPTER FOUR 4.0 4.1

ORGANISATIONAL AND MANAGEMENT PLAN Ownership of the Business

The business is owned by Akure Solid Pillar Foundation Cooperative Multipurpose Society, comprising of ten members.

4.2

Key Management Staff

 General Manager  Production Manager  Marketing Manager 

Accountant

ORGANISATION CHART Managing Director

Production Manager (Existing)

Factory Assistant (existing)

Factory Assistant (Proposed)

Sales Officers (Proposed)

Proposed Account Officer

22

Details of Salary Schedule SN

Designation

No of staff

Salary

Monthly Salary

Annual Salary

1.

Managing Director

1

N65,000

#65,000

N780,000

2.

Production Manager

1

N300,000

#30,000

N360,000

Marketing Director

1

#30,000

#30,000

3.

Sales/Marketing

2

N12,0000

#24,000

N288,000

4.

Factory Workers

4

N12,000

#48,000

N576,000

5.

Cleaner/Office Assistantt

1

N10,000

#10,000

N120,000

6.

Drivers

2

N20,000

#40,000

N480,000

TOTAL SALARY

12

N247,000

N360,000

N2,964,000

23

CHAPTER FIVE 5.0 5.1

FINANCIAL PLAN Financial Assumptions

We assume inflation will be relatively stable, while the interest rate is taken to be 20% per annum to illustrate the worse scenario. Other assumptions include: Tax at 5% of net profit, depreciation is considered using straight line method, the insurance at 5% on total capital expense.

5.2

Startup Capital Estimation

Table 5.1: Required Startup Capital Estimate ITEMS

AMOUNT COMMENT

Pre-operating Expenses

9,541,000.00

Opening Stock Initial Operating Expenses 2months

2,195,000.00

Total Startup Capital Estimated SOURCES OF FUNDS

12,500,000.00 AMOUNT %

Personal Fund /Equity Bank Loan

2,500,000.00 10,000,000.00

Total Funds Sourced

12,500,000.00

764,000.00

20% 80% 100%

Table 5.2: Loan Repayment Schedule Month

Principal

Monthly Principal

Monthly Interest

Principal + Interest

Cumulative

0 10,000,000.00

24

1 10,000,000.00

-

166,666.67

166,666.67

166,666.67

2 10,000,000.00

-

166,666.67

166,666.67

333,333.33

3 10,000,000.00

454,545.45

166,666.67

621,212.12

954,545.45

4 9,545,454.55

454,545.45

166,666.67

621,212.12

1,575,757.58

5 9,090,909.09

454,545.45

166,666.67

621,212.12

2,196,969.70

6 8,636,363.64

454,545.45

166,666.67

621,212.12

2,818,181.82

7 8,181,818.18

454,545.45

166,666.67

621,212.12

3,439,393.94

8 7,727,272.73

454,545.45

166,666.67

621,212.12

4,060,606.06

9 7,272,727.27

454,545.45

166,666.67

621,212.12

4,681,818.18

10 6,818,181.82

454,545.45

166,666.67

621,212.12

5,303,030.30

11 6,363,636.36

454,545.45

166,666.67

621,212.12

5,924,242.42

12 5,909,090.91

454,545.45

166,666.67

621,212.12

6,545,454.55

13 5,454,545.45

454,545.45

90,909.09

545,454.55

7,090,909.09

14 5,000,000.00

454,545.45

90,909.09

545,454.55

7,636,363.64

15 4,545,454.55

454,545.45

90,909.09

545,454.55

8,181,818.18

16 4,090,909.09

454,545.45

90,909.09

545,454.55

8,727,272.73

17 3,636,363.64

454,545.45

90,909.09

545,454.55

9,272,727.27

18 3,181,818.18

454,545.45

90,909.09

545,454.55

9,818,181.82

19 2,727,272.73

454,545.45

90,909.09

545,454.55

10,363,636.36

20 2,272,727.27

454,545.45

90,909.09

545,454.55

10,909,090.91

21 1,818,181.82

454,545.45

90,909.09

545,454.55

11,454,545.45

22 1,363,636.36

454,545.45

90,909.09

545,454.55

12,000,000.00

23 909,090.91

454,545.45

90,909.09

545,454.55

12,545,454.55

24 454,545.45

454,545.45

90,909.09

545,454.55

13,090,909.09

10,000,000.00

3,090,909.09

13,090,909.09

GRAND TOTAL

25

Table 5.3:Bi-Monthly Profit and Loss Statement (24 Months) Components 1 2 3 TOTAL SALES TOTAL COST OF SALES GROSS PROFIT

4

5

6

7

8

9

10,800,00 0.00

12,990,000. 00

15,180,000. 00

16,980,000. 00

14,710,000. 00

12,960,000. 00

11,870,00 0.00

11,755,000. 00

12,570,000. 00

1 0

8,698,000 .00

10,497,500. 00

12,297,000. 00

13,768,600. 00

11,915,500. 00

10,477,400. 00

9,581,000. 00

9,487,100.0 0

10,149,500. 00

1 0

2,102,000 .00

2,492,500.0 0

2,883,000.0 0

3,211,400.0 0

2,794,500.0 0

2,482,600.0 0

2,289,000. 00

2,267,900.0 0

2,420,500.0 0

2 0

764,000.0 0

743,000.00

768,000.00

714,000.00

749,000.00

734,000.00

700,000.0 0

659,000.00

671,000.00

6

333,333.3 3 277166.6 667

333,333.33

333,333.33

333,333.33

333,333.33

333,333.33

181,818.1 8

181,818.18

181,818.18

1

277,166.67

277,166.67

277,166.67

277,166.67

277,166.67

277,166.6 7

277,166.67

277,166.67

2

12,000.00

12,000.00

12,000.00

12,000.00

12,000.00

12,000.00

12,000.00

12,000.00

12,000.00

1

1,386,500 .00

1,365,500.0 0

1,390,500.0 0

1,336,500.0 0

1,371,500.0 0

1,356,500.0 0

1,170,984. 85

1,129,984.8 5

1,141,984.8 5

1 5

715,500.0 0

1,127,000.0 0

1,492,500.0 0

1,874,900.0 0

1,423,000.0 0

1,126,100.0 0

1,118,015. 15

1,137,915.1 5

1,278,515.1 5

1 5

35,775.00

56,350.00

74,625.00

93,745.00

71,150.00

56,305.00

55,900.76

56,895.76

63,925.76

8

679,725.0 0

1,070,650.0 0

1,417,875.0 0

1,781,155.0 0

1,351,850.0 0

1,069,795.0 0

1,062,114. 39

1,081,019.3 9

1,214,589.3 9

1 9

EXPENSES Operating Expenses Interest

Depreciation

Rent

TOTAL EXPENSES NET PROFIT BEFORE TAX Income Tax

NET PROFIT AFTER TAX

Table 5.4: Bi-Monthly Cash flow Plan (24 Months) Components Pre 1 Startup CASH INFLOW Cash at Hand (beginning of month) Cash Sales

2

3

4

5

764,000.0 0

1,732,891. 67

2,183,617.4 2

2,981,568. 18

4,142,798.9 4

10,800,00 0.00

12,990,00 0.00

15,180,000. 00

16,980,00 0.00

14,710,000. 00

6

7

8

4,874,72 4.70

5,324,59 5.45

5,766,78 5.61

6,227,8 0.76

12,960,0 00.00

11,870,0 00.00

11,755,0 00.00

12,570, 00.00

26

Equity 2,500,00 0.00 Loan Proceed 10,000,0 00.00 Total Cash Inflow CASH OUTFLOW Pre-operating Expenses Opening inventory Total Cost Operating Expenses

12,500,0 00.00

11,564,00 0.00

14,722,89 1.67

17,363,617. 42

19,961,56 8.18

18,852,798. 94

17,834,7 24.70

17,194,5 95.45

17,521,7 85.61

18,797, 80.76

8,698,000. 00

10,497,50 0.00

12,297,000. 00

13,768,60 0.00

11,915,500. 00

10,477,4 00.00

9,581,00 0.00

9,487,10 0.00

10,149, 00.00

764,000.0 0

743,000.0 0

768,000.00

714,000.0 0

749,000.00

734,000. 00

700,000. 00

659,000. 00

671,000 00

333,333.3 3

333,333.3 3

333,333.33

333,333.3 3

333,333.33

333,333. 33

181,818. 18

181,818. 18

181,818 18

-

909,090.9 1

909,090.91

909,090.9 1

909,090.91

909,090. 91

909,090. 91

909,090. 91

909,090 91

35,775.00

56,350.00

74,625.00

93,745.00

71,150.00

56,305.0 0

55,900.7 6

56,895.7 6

63,925. 6

11,736,0 00.00

9,831,108. 33

12,539,27 4.24

14,382,049. 24

15,818,76 9.24

13,978,074. 24

12,510,1 29.24

11,427,8 09.85

11,293,9 04.85

11,975, 34.85

764,000. 00

1,732,891. 67

2,183,617. 42

2,981,568.1 8

4,142,798. 94

4,874,724.7 0

5,324,59 5.45

5,766,78 5.61

6,227,88 0.76

6,822,5 5.91

9,541,00 0.00 2,195,00 0.00

Interest

Loan Repayment Income Tax

Total Cash Outflow Cash Balance (end of the month)

SENSITIVITY ANALYSIS 0

1

2

3

4

5

6

7

8

9

12,50 0,000

11,564,0 00

14,722,8 92

17,363,6 17

19,961,5 68

18,852,7 99

17,834,72 5

17,194,5 95

17,521,78 6

18,797,881

21,212,

Red Rev 20%

9,251,20 0

11,778,3 13

13,890,8 94

15,969,2 55

15,082,2 39

14,267,78 0

13,755,6 76

14,017,42 8

15,038,305

16,970,

Cash Outflow

9,831,10 8

12,539,2 74

14,382,0 49

15,818,7 69

13,978,0 74

12,510,12 9

11,427,8 10

11,293,90 5

11,975,335

13,474,

Inc Cost 15%

11,305,7 75

14,420,1 65

16,539,3 57

18,191,5 85

16,074,7 85

14,386,64 9

13,141,9 81

12,987,99 1

13,771,635

15,495,

Cash Inflow

10

Presented

(12,50 0,000)

1,732,89 2

2,183,61 7

2,981,56 8

4,142,79 9

4,874,72 5

5,324,595

5,766,78 6

6,227,881

6,822,546

7,738,3

Scenerio 1

(12,50 0,000)

(579,908 )

(760,961 )

(491,155 )

150,485

1,104,16 5

1,757,651

2,327,86 7

2,723,524

3,062,970

3,495,8

Scenerio 2

(12,50 0,000)

258,225

302,726

824,261

1,769,98 4

2,778,01 4

3,448,076

4,052,61 4

4,533,795

5,026,246

5,717,1

Presente d

Scenario 1

Scenario 2

27

NPV

4,808,83 3.47

IRR

(7,623,9 55.15)

28%

(2,231,9 32.97)

6%

16%

CHAPTER SIX 6.0 6.1

BUSINESS RISK AND MITIGATION FACTOR Identified Risks The water processing factory is associated with some risks which include: i.

Fire hazard / outbreak

ii.

Machine breakdown

iii.

Employee accident

iv.

Vehicle breakdown

v.

Equipment safety

Mitigation Strategies i.

Fire Hazard / Outbreak Fire Hazard or Outbreak refers to a situation when the factory and/or its machinery ignite as a result of error committed by member of staff. In order to prevent such occurrence, the management shall ensure strict compliance to instructions on the usage of the machineries. All electrical appliances must be switched off before the company closes for the day. Industrial fire extinguisher must be installed at strategic point in the factory.

ii.

Machine and Vehicle Breakdown Machine and vehicle breakdown is a situation where these equipments cease to function due to technical fault In order to avoid these situations, control measures must be put in place to provide adequate servicing for all machines.

iii.

Employee Accident To curb this accident, operators must be well trained and vast in the used of the equipment. He/she must be sensitive and conscious to the factory environment. Secondly, men and women of good medical records shall be employed. However, First Aid Boxes shall be made available in the company.

iv.

Safety of the Equipment Location

28

The equipments are safe and secure due to the tight security arrangement put in place by the Cooperative Society coupled with the security surveillance of the industry park.

6.2

SWOT ANALYSIS Analysis

i. Strength: We have quality products with attractive Packaging at affordable prices. We have competent, efficient and loyal Staffs that are purpose driven to Succeed. ii. Weakness: Presently having low market share, low financial and equipment capacities.

iii. Opportunity: We are close to our target market. Also close to the source of raw Materials. iv. Threat: Power failure. poor water supply and poor maintenance culture of the facilities being managed by Government officials.

Implication on the business

Timely production. Timely delivery of Products. Our products are prepared to meet needs of people, result is good sales

There shall be limitation to the level of our capacity. This limitations may Affect our advertisement, promotional strategy and, production level.

We shall be seen as part of the community that offers the citizens not Only good products but also provide employment for the people. These will affect our production since we largely depend on these for production.

29