20
A BUSINESS PROPOSAL ON CEMENT DISTRIBUTION BUSINESS IN NIGERIA.
INTRODUCTION:
This proposal is for establishment of cement distribution company, details of its start-up operations and the raising of additional N3,000,000 for its operations. In fact, the high demand for cement in Nigeria for both private, industrial and government infrastructural development needs entails that there has always been a continual need for cement distributors all over the country at all times. As a matter of fact, the problem of inadequate housing for the teeming population of approximately 180 million Nigerians is getting even more complicated as the years go by. The housing deficit at the moment is put at about 17 million units.
In short, this shows that the market is large enough to accommodate more new comers. SAMEZ VENTURE is going to be a wholesale distributor in this market. Its marketing strategy entails that it does not stock the commodity for more than two days.
EXECUTIVE SUMMARY
This project is to establish a cement distribution outfit/business in Ekwulobia, Aguata LGA, Anambra state, Nigeria for SAMEZ VENTURE. The purpose of this business proposal is to raise additional N3,000,000 for the establishment of the said Cement Distribution outlet. The major product to be marketed is the Dangote brand of cement. This business proposal which incorporates both the Business Plan and feasibility studies will show the expected financials and operations over the next three years.
The following reports and recommendations relate to the business plan and feasibility study to establish a cement distribution depot. This project will need a start-up capital of N3,000,000, which is required to finance both current and non-current assets. . SAMEZ VENTURE has a N1,000,000 venture capital to augment with the N3,000,000 to be borrowed.
SAMEZ VENTURE vision is to become a household name in the distribution of Dangote cement in Ekwulobia, areas. This project is envisaged to be situated in Ekwulobia, in order to provide easily accessible cement to the multiple cement users situated in the location. The financial projections show that the project will be financially stable as it progresses.
By the end of the first year the expected net profit/ earnings from sales before tax is N11,276,000 while net profit/earning after tax is N9,020,800, giving a 100.2% returns on investment (ROI) and 225.5% return on Equity (ROE). It is also expected to grow by 20% in subsequent years. This is shown by the expected earnings for the second year which gives N14,423,500 profit before tax and N 11,538,800 profit after tax generating 128% ROI and 228.5% ROE respectively.
The competitive edge of the business is in its ability to penetrate into the market freely, and the use of marketing strategies that will promote rapid turnover. It has in mind to establish a tipper haulage at head office at Ekwulobia and open two other depots in Umunze and Uga within the next three years. This project is highly recommendable, because judging from the above profitable measures; it shows that the project offers good investment benefits which is found technically feasible, financially viable and economically desirable
NAME OF BUSINESS:
The name of the company is SAMEZ VENTURE
NATURE OF BUSINESS:
SAMEZ VENTURE was established on the 6th of April 2017. The primary object clause of the company is cement distribution "to carry on business of trading, marketing, sales and distribution of general goods, such as cement and blocks, tipper haulage, commission agents, manufacturers' representatives, general suppliers and general contractors." The company intends to commence business in cement distributorship in one location in Ekwulobia for the next three years, thereafter it will establish additional two warehousing locations within Aguata for expansion purposes.
SITE LOCATION:
The project is intended to be situated in Oko road area of Ekwulobia, Anambra state of Nigeria. It will lease a large store/warehouse where the operations will take place.
OFFICE ADDRESS:
56 Oko road area of Ekwulobia, Anambra state, Nigeria
OBJECTIVE:
The objective of this business as indicated in this business proposal ( business plan and feasibility study) include:
To make cement available to the members of the public at a very affordable price.
To close the gap in cement product supply chain that always cause product scarcity. This will make cement available to the public at all times.
To focus the activities towards specific services delivery that will achieve the above objectives, and thereby to become a leader in this market.
To generate customer satisfaction so that at least 80% of our customer base is repeat business.
To generate sufficient cash flow to finance the activities of the company, and the future growth and development of the company.
To provide key resources needed by the company and its owners.
To expand the business at a rate that is both challenging and manageable, and competitively enviable.
To maintain a Constant growth in sales in 12 months.
VISION:
To become a household name in cement distribution in Ekwulobia, Aguata LGA of Anambra state Nigeria. Achieve sales and services and profit growth goal of 20%, in the next three years.
MISSION STATEMENT:
SAMEZ VENTURE mission is to become the recognized leader in its targeted local market in cement distribution, and to give customer optimum satisfaction, through its innovative, quality, and timely service delivery.
PURPOSE OF THE BUSINESS PROPOSAL:
The aim of this plan is to set up SAMEZ VENTURE using only 55% loan from the investors and 45% equity. The plan is to liquidate the loan with the interest within the first three years. It is hoped that by this time . SAMEZ VENTURE would have been able to generate enough fund to stand by itself at this capacity of operation. Further expansion and diversification will be the subject of a Growth Model Plan.
COMPANY PROFILE:
SAMEZ VENTURE was established on the 6th of April 2017. The primary object clause of the company is cement distribution "to carry on business of trading, marketing, sales and distribution of general goods, such as cement and blocks, commission agents, manufacturers' representatives, general suppliers and general contractors." The company is located at Ekwulobia, Nigeria. SAMEZ VENTURE is a 100% Nigerian owned company engaged in providing high end user services with latest and innovative business support solutions that add value to any new or existing businesses.
PRODUCTS AND SERVICES:
Explained below is a description of the products offered by SAMEZ VENTURE
Wholesale Distribution of Dangote Cement:
The primary revenue source for the business will come from the wholesale of Dangote cement to the general public. The owner intends to carry out multiple strategic marketing activities that will promote the distribution business which will generate high turnover for the business. He intends to source inventories/stock from closest Dangote cement factory to the location of the business. Four employees (which include one Supervisor, one security man, one sales attendant, one driver) will be involved in the business operations and to assist customers with their needs.
Dangote Cement is a fully integrated cement company and has projects and operations in Nigeria and 14 other African countries. Its operations include,manufacturing/ importation, packaging and distribution of cements.
CUSTOMER NEEDS:
The market characteristics shows that there is steady demand for the commodity. Our survey also reveal that over 60% of the buyers ask for Dangote brand of cement. The fact that there is housing deficit and people are eager to have roof over their heads promotes the demand for cement. The location of this business is going to be in Ekwulobia and later in Umunze and Uga where there are a lot of building construction going on at all times. SAMEZ VENTURE will sale to both retailers and direct consumers who could buy not less than 100 bags at a time.
PRICING:
One known fact about cement business is that it has a stable retail price which apply generally to all marketers. It is not foreseeable that a single wholesaler will be able to manipulate the price of the commodity. In such a price taker market, marketers make other marketing efforts to promote sales instead of price cut.
SAMEZ VENTURE will take the following measure to promote sales:
Good publicity fliers, posters, and sign- posts
Regular visits to customers, construction sites etc.
Retailers friendship – good public relations with retailers, this will make him form a clique of retailers that he can always count on.
PROMOTIONS PLAN:
The long-range goal is to gain enough visibility to leverage upon so that SAMEZ VENTURE will be able to expand with additional two warehouses in other parts of Aguata within its three years of existence.
The unique marketing approach / analysis using word of mouth, free gifts, loyalty cards, special offers will be applied. A special awareness contact marketing will be carried out by a dedicated staff within the first two months of the start-up of the business.
BASIC ASSUMPTIONS:
This investment business plan and feasibility study, is anchored on the following critical assumptions:
SAMEZ VENTURE will have an annual turnover of N405,600,000.00 in the first year with growth rate of 20% per year in subsequent years.
The Owner will acquire N3,000,000 of debt funds and personal equity contribution of N1,000,000, to grow and develop the business.
The loan will have a 3 year term with a 25% interest rate. Repayment of 33.33% of the loan annually while interest accrues only on the outstanding loan annually.
Some macro-economic indicators like the price level and exchange rate will remain stable, at least, in the next one year, and that even when prices change, cement always maintain a constant rate of return..
Democracy will continue to thrive thereby engendering political stability necessary for socio-economic growth and development.
The present macro-economic indicators, (economy-wide trends), government economic policies and the conditions peculiar to cement trading business in Nigeria provide reasonable assurance that the assumptions are realistic and will hold. Therefore one is assured that some of the necessary conditions for the unhindered operations of Alpha Merchant Ltd. can be guaranteed.
MANAGEMENT TEAM:
This will be made up of the Managing Director and the following;
Supervisor = 1 person
Sales Girl = 1 people
Driver = 1 person
Security = 1 person
MILESTONE:
Activities are scheduled as follows:
Start-up capital to be ready by 5th March, 2018
Every preparations to be concluded by 26th March, 2018
The business to start off 1st August 2018
Acquisition and disposal of five truck load of cement each week.
Opening of two other branches within or after three years.
Sales promotion activities at construction sites.
SWOT ANALYSIS:
The proposed Alpha Merchants Ltd is going to be located in Ekwulobia, Umunze and Uga areas of Aguata LGA, Anambra state where there are a lot of competitors. A SWOT analysis carried out on the project reveals the following:
STRENGTHS
The project is situated at the commercial city, giving it the opportunity of having substantial demands.
Shop situated in Ekwulobia, Umunze and Uga areas of Aguata LGA.
Sited within construction areas
Product is in high demand
Product does not expire easily
The company will capitalize on its strengths to advance.
WEAKNESSES
SAMEZ VENTURE is a new comer in the business.
The source of product supply is Dangote factory
The choice of selling only Dangote cement for now.
OPPORTUNITIES
The external environmental analysis reveals certain new opportunities for profit and growth of the business. Some examples of such opportunities include:
The market trends favours Dangote Cement brand
Households, social organizations favours relocation to Ekwulobia, Umunze and Uga areas of Aguata LGA
Market trend reveals an all-year-round demand
THREATS
Changes in the external environment also may present threats to the business. Some examples of such threats include:
The presence of other variety of product in the market
Environment and Health regulations agency threats
Tendency of existence/emergence of price war
Lack of market entry barriers.
MARKET ANALYSIS:
We identify cement distribution business as non-gender sensitive. What we have found out is that every human needs house to live in. We have identified that every one from the age of twenty upwards wants to own a personal house.
There are five key factors that drive the demand for cement in Ekwulobia:
Every family needs a roof over her head.
Every grown up person; ages 20 and above need to be in his/her house.
Governments (Local, State, and Federal) embark on infrastructural development efforts
regularly
Estate investors continue to build more houses.
Urban growth has continued to grow and develop all round.
Social organizations like Churches, Mosques build regularly.
Our target market is therefore segmented into seven subgroups:
Segment Expected Demand:
Constructions firms 20%
Block moulding firms 25%
Government agencies 15%
Households 8%
Estate owners and managers 15%
Retailers 7%
Social organizations 10%
MARKET PLAN
Since cement business is a standard price market , that is to say, a price taker, SAMEZ VENTURE will adopt various service delivery strategies to attract and sustain customer loyalty.
These will be in the form of:
Use of the business van to deliver goods to customers
Making bulk delivery direct to customers sites
Making flexible purchase plan for customers'
MARKETING OBJECTIVES:
Marketing objectives are to:
Attract buyers
Increase turnover
Create customer
Create customer satisfaction.
MARKETING STRATEGIES:
SAMEZ VENTURE will apply a lot of marketing strategies which will aim at increased turnover. These will include:1. Good public relations2. Advertising methods – distribution of fliers, use of banners etc.3. Sales incentives like free delivery service, advisory services etc.
FINANCIAL ANALYSIS:
In order to carry out this project, plans on how to raise the venture capital are stated below.
Table: Source of Funds:
REQUIRED START-UP CAPITAL
Requires start-up capital is N4,000,000. N3,000.000 of this is the loan fund being sought.
Table: Total Start-up Capital Expenses:
FIXED CAPITAL INVESTMENTS/EXPENSES:
Table: Fixed Capital Investment
OPERATING EXPENSES:
FINANCIAL PROJECTIONS
MARKET DEMAND ASSUMPTIONS: In this proposal.
Estimate: 5 Trucks must be sold per week
Growth rate is 20% in year 2 and 3
BREAK EVEN ANALYSIS:
Break even analysis based on sale of number of trucks per week for 52 weeks of the year. The monetary values are in Naira.
SAMEZ VENTURE chooses this, it must not sell less than 2 trucks per week to break-even.
Break even analysis based on sale of number of trucks per month for 12 months of the year. The monetary values are in Naira.
From these break even analysis:
The company must not sell less than 5 trucks in a month
As a distributive trade all start-up expenses are considered as fixed
The company intends to expand within 3 years with additional 2 branches
The Business Plan is bench marking 5 trucks per week for 52 weeks of the year, this will enable proper utilization of borrowed fund and make it achieve its objectives
Because most of the fixed costs are due towards the year end, the company can increase its turnover and earnings above 5 trucks a week for 52 weeks in the year without incurring further costs.
BUSINESS RATIOS:
All the business ratios generated in this business proposal are shown in this table
Economically, this business will not only create wealth and benefits to its promoters, the project will fetch its entrepreneur's good financial resources for business expansion.
CONCLUSION
Based on the projections of SAMEZ VENTURE above, the project has a very good chance to be financially successful. More importantly is the positive economic impact it will have in the lives of the people of Ekwulobia and its environs. The management is free to make their expansion decisions after three years of operations.
