PINACLE
LIQUID DETERGENT
Business Plan to Establish Small Scale
TABLE '( C'NTENTS
I)
SU** AR+))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))%
II)
PR'DUCT PR'DU CT DESC DESCRIPTI RIPTI'N 'N AND AP APPLICA PLICAT TI'N I'N)))))))))))))))))))))))))))))))))))))))))))))))# )))))))))))))))))))))))))))))))))))))))))))))))#
III)
*AR,ET *AR, ET STUD STUD+ + AND PLA PLANT NT CAP CAPA ACIT+ CIT+))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))-
I.)) I.
*AT *A TERIA ERIALS LS AND INP INPUTS UTS)))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))/ )))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))/
.)
TEC0N' TEC 0N'L'G L'G+ + AND ENG ENGINE INEERI ERING NG))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))1 ))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))1
.I)
0U*AN 0U*A N RES'U RES'URCE RCE AND TRAI TRAINING NING REQU REQUIRE*E IRE*ENT NT))))))))))))))))))))))))))))))))))2 ))))))))))))))))))))))))))))))))))2
I.
SU**AR+
This profile envisages the establishment of small scale plant for the production of liquid detergent with a capacity of 30 tons per annum. Liquid detergent is extensive used in households, guest houses, hotels, canteens, hospitals, schools, higher institutions, offices, etc., as a general cleaning agent. The country’s requirement of liquid detergents is largely met through import. The present !0"#$ demand for liquid detergents is estimated at !%% tons. The demand for liquid detergents is pro&ected reach 3'3 tons and #!% tons by the years !0!" and !0!(, respectively. The principal
raw
materials required
are
)odium
lauryl
ether sulfate
or
)L*),
+ocodiethanolamide or +*-, )T, +oo/ing salt, ye water soluble and )ynthetic 1ragrance. -ll raw materials can be obtained locally. The total investment cost of the pro&ect including wor/ing capital is estimated at 2irr #0,000. 2oth fixed investment and initial wor/ing capital have equal #0 share. The pro&ect is financially viable with an internal rate of return 455$ of !#! and a net present
PRODUCT DESCRIPTION AND APPLICATION
- liquid detergent is a surfactant or a mixture of surfactants with ;cleaning properties in dilute solutions.; These substances are usually al/yl ben
MARKET STUDY AND PLANT CAPACITY A.
MARKET STUDY 1. Past Supply and Present Demand
The country=s requirement of detergents is largely met through import. -lthough some brands of detergents in a limited quantity are locally manufactured, the data which is published by the +entral )tatistical -gency on the survey of >edium and Large )cale and *lectricity 4ndustries lumps together with soap. ?ence, in order to analy
#$lume %T$ns& %'((( )*rr&
! 3"( (0
"! 00# 00
believed to indicate the present demand. -ccordingly, present demand year !0"#$ for detergents is estimated at %'3 tons. )ince there is no disaggregated data on the amount of powdered and liquid detergents, the views of /nowledgeable people in the area have been collected. -ccordingly, it was learnt that about (# of the total volume of imported detergents constitute powdered and the remaining 3# liquid. Ta/ing this as a base, the current demand for liquid detergent is estimated at !%% tons.
2. Demand Pr$+e,t*$n
The factors that influence the future demand for detergents are numerous. -mong the ma&or ones population growth, income rise, urbani
!0!0
!0!"
!0!!
!0!3
!0!8
!0!#
!0!(
3%".(8
3'3.'3
8"%.#%
88!.(3
8('."9
8'%.33
#!%."%
The demand for liquid detergent will grow from !'8 tons in !0"( to 3'3 tons and #!% tons by the years !0!" and !0!(, respectively. 3. Pr*,*n and D*str*but*$n
The selling price is based on ;+ostlus >ethod;. - profit mar/up of !# over the total
4n order to develop the operators’ s/ill in production and quality control, it is vital to have a gradual capacity buildup. 4n addition to this, a period is required to penetrate to the mar/et. ?ence, it is assumed that the plant will go into full capacity operation in four years’ time starting with %0 capacity in the first year and progressively developing to 90, '0 and "00 in the second, third and fourth year and then after respectively. The production program of the envisaged plant is given in Table 3.3. Table 3.3: PRODUTIO" PRO!RAMME O T2E E"#ISA!ED /I0UID DETER!E"T P/A"T "$.
IV.
Item Des,r*pt*$n
1st Year
-nd Year
3rd Year
t4 5 1(t4
"
roduction of liquid detergent tons$
!"
!8
!%
30
!
+apacity Atili
%0
90
'0
"00
MATERIALS AND INPUTS A.
MATERIA/S
The principal
raw
materials required
are
)odium
lauryl
ether sulfate
or
)L*),
+ocodiethanolamide or +*-, )T, +oo/ing salt, ye water soluble and )ynthetic 1ragrance. -ll raw materials can be obtained locally. The total annual cost of raw material at full capacity operation is estimated at 2irr "!(,8#0.00. The annual requirement of raw material and their estimated costs are presented in Table 8.". Table .1: A""UA/ RE0UIREME"T OR RA6 A"D AU7I/IARY MATEIRA/S A"D T2EIR OST "$.
Item Des,r*pt*$n
0uant*ty *n t$ns
$st %'((( )*rr&
)odium lauryl ether sulfate or )L*) "
!.80
89.00
+ocodiethanolamide or +*!
".#0
8#.00
)T 3
0.'0
"(.!0
T$tal
V.
8.1(
TECHNOLOGY AND ENGINEERING A.
TE2"O/O!Y 1. Pr$du,t*$n Pr$,ess
The process of manufacture consists as follow@ •
>ix sodium lauryl ether sulfate and water. -dd small amount of water and mix it well.
•
-dd coconut diethanol and mix it well using the stirrer. +ontinue mixing until it become stic/y. -dd small amount of water while mixing to avoid creating bubbles. )et aside the +*-)L*) mixture when it turned cream.
•
4n a separate mixing bowl, mix )T. )et it aside.
•
:et your cream and mixed it again slowly. Bhen the mixture bubbles, add slowly the )T mixture while mixing using the electric mixer.
E"!I"EERI"!
B.
1. Ma,4*nery and E;u*pment
The total cost of equipment is estimated at 2irr 30,#00.00, all of which is required in local currency. The list of equipment required for the envisaged plant is given in Table #.". Table 9.1: /IST O E0UIPME"T A"D T2EIR OST "$.
E;u*pment
Un*t
0uant*ty
Un*t Pr*,e
T$tal $st %)*rr&
Sa
" - &ac/et or apron made of hard material
cs
!
#00.00
",000.00
! - pair of plastic or rubber gloves
cs
!
300.00
(00.00
3 - protective mas/ or scarf
cs
!
!#0.00
#00.00
8 - pair of rubber boots or covered shoes
cs
!
!00.00
800.00
# - pair of protective goggles
cs
!
!#0.00
#00.00
Sub T$tal 1
1(
3=(((.((
E;u*pment
" Bater tan/
cs
"
3,000.00
3,000.00
! Liquid detergent tan/
cs
"
#,000.00
#,000.00
HUMAN RESOURCE AND TRAINING REQUIREMENT
2UMA" RESOURE RE0UIREME"T
A.
Total human resource required is ( persons. The total annual cost of human resource is estimated at 2irr "!',000. The details of the human resource requirement and the estimated annual labor cost including employees’ benefit are given in Table (.". Table 8.1: 2UMA" RESOURE RE0UIREME"T A"D ESTIMATED /A)OR OST %)IRR& "$.
Des,r*pt*$n
" >anager ! -ccountant and cashier 3 Dperator 8 -ssistant Dperator # :uard Sub T$tal Empl$yees bene<*t %-9@ $< bas*, salary& !rand t$tal
B.
TRAI"I"! RE0UIREME"T
2ead $unt
" " " " ! 8
M$nt4ly Salary
!,#00.00 !,000.00 ",#00.00 ",000.00 ",(00.00 ?=8((.(( -=19(.(( 1(=9(.((
Annual Salary
30,000.00 !8,000.00 "9,000.00 "!,000.00 "',!00.00 1(3=-((.(( -9=?((.(( 1-B=(((.((
FINANCIAL ANALYSIS
The financial analysis of the liquid detergent pro&ect is based on the data presented in the previous chapters and the following assumptions@ )ource of finance
"00 equity
iscount cash flow
"0
-ccounts receivable
"# days
5aw material local
"# days
Bor/ in progress
" day
1inished products
"0 days
+ash in hand -ccounts payable A.
# days 0 day
TOTA/ I"ITIA/ I"#ESTME"T OST
The total investment cost of the pro&ect including wor/ing capital is estimated at 2irr #0,000.
C.
I"A"IA/ E#A/UATIO" 1. Pr$<*tab*l*ty
2ased on the pro&ected profit and loss statement, the pro&ect will generate a profit throughout its operation life. -nnual net profit after tax ranges from 2irr %3 thousand to 2irr 9' thousand during the life of the pro&ect. >oreover, at the end of the pro&ect life the accumulated net cash flow amounts to 2irr 9(' thousand. 1or profit and loss statement and cash flow pro&ection see -ppendix %.-.3 and %.-.#, respectively. 2. Rat*$s
4n financial analysis financial ratios and efficiency ratios are used as an index or yardstic/ for evaluating the financial position of a firm. 4t is also an indicator for the strength and wea/ness of the firm or a pro&ect. Asing the yearend balance sheet figures and other relevant data, the most important ratios such as return on sales which is computed by dividing net income by revenue, return on assets operating income divided by assets$, return on equity net profit divided by equity$ and return on total investment
T4e *nternal rate $< return %IRR& *s t4e annual*Fed e<es t4e net present alue $< t4e *nestmentGs *n,$me stream t$tal t$ Fer$. It *s an *nd*,at$r $< t4e e<<*,*en,y $r ;ual*ty $< an *nestment. A pr$+e,t *s a $$d *nestment pr$p$s*t*$n *< *ts IRR *s reater t4an t4e rate $< return t4at ,$uld be earned by alternate *nestments $r putt*n t4e m$ney *n a ban> a,,$unt. A,,$rd*nly= t4e IRR $< t4*s pr$+e,t *s ,$mputed t$ be -9-@ *nd*,at*n t4e *ab*l*ty $< t4e pr$+e,t. 6. "et Present #alue
"et present alue %"P#& *s de<*ned as t4e t$tal present %d*s,$unted& alue $< a t*me
VIII.
Appendix 7.A: FINANCIAL ANALYSES SUPPORTING TABLESAppend*H .A.1 "ET 6ORKI"! APITA/ %*n ((( )*rr& Des,r*pt*$n
Pr$du,t*$n Years
Days $< $erae
1
1. urrent assets
"." -ccounts receivable debtors$ ".! 4nventory a$ >aterials Local materials 4mported materials c$ Bor/inrogress d$ 1inished roducts ".3 +ashinhand
3
9
8
?
B
1(
-9
-?
31
39
39
39
39
39
39
39
"#
"3 "0
"# "!
"% "3
"9 "8
"9 "8
"9 "8
"9 "8
"9 "8
"9 "8
"9 "8
"# '0 " "0 #
8 0 ( "
8 0 % "
# 0 9 !
# 0 ' !
# 0 ' !
# 0 ' !
# 0 ' !
# 0 ' !
# 0 ' !
# 0 ' !
C
C
C
C
C
C
C
C
C
C
-9 -9
-? 3
31 3
39 3
39 C
39 C
39 C
39 C
39 C
39 C
-. urrent l*ab*l*t*es
!." -ccounts payable creditors$
-
3. 6$r>*n ,ap*tal 3.1 "et $r>*n ,ap*tal %1& C %-& 3.- In,rease *n $r>*n ,ap*tal
Append*H .A.PRODUTIO" OST %*n ((( )*rr& $st *tem
+apacity utili
". irect G auxiliary materials !. Atilities 3. Labour, direct 8. 1actory Dverheads epreciation G amortiet*n $sts
>ar/eting costs sales$ III. !eneral Adm. EHpenses
)alaries G wages H benefits$ 5ent payment Transport >iscellaneous T$tal Operat*n $sts
Pr$du,t*$n years 1
-
3
9
8
?
B
1(
%0
90
'0
"00
"00
"00
"00
"00
"00
"00
1-
11
19?
19
19
1(
1(
1(
1(
1(
9'
"0"
""8
"!(
"!(
"!(
"!(
"!(
"!(
"!(
8
#
#
(
(
(
(
(
(
(
!(
30
38
39
39
39
39
39
39
39
#
#
#
#
#
#
#
#
#
#
8
?
B
B
B
B
B
B
B
(
%
9
'
'
'
'
'
'
'
11-
1--
133
13
13
13
13
13
13
13
(8
%3
9!
'!
'!
'!
'!
'!
'!
'!
3(
3(
3(
3(
3(
3(
3(
3(
3(
3(
(
%
9
'
'
'
'
'
'
'
#
(
(
%
%
%
%
%
%
%
--
-1
-BB
3-?
3-?
3-3
3-3
3-3
3-3
3-3
Append*H .A.3 I"OME STATEME"T %*n ((( )*rr& Des,r*pt*$n
Pr$du,t*$n Years 1
-
3
9
8
?
B
1(
T$tal Sales Reenue
319
38(
(9
9(
9(
9(
9(
9(
9(
9(
/ess $st $< !$$ds S$ld
1-
11
19?
19
19
1(
1(
1(
1(
1(
!r$ss Pr$<*t
1B1
-1B
-
-9
-9
-?(
-?(
-?(
-?(
-?(
81@
81@
81@
81@
81@
8-@
8-@
8-@
8-@
8-@
""!
"!!
"33
"83
"83
"83
"83
"83
"83
"83
B
B
11
131
131
138
138
138
138
138
!r$ss Pr$<*t Mar*n
Less -dministrative *xpenses Pr$<*t %l$ss& be<$re Interest= Sales $st TaH Less )elling G istribution +osts Pr$<*t %l$ss& be<$re TaH Less 4ncome Tax 30$ "et Pr$<*t %/$ss&
+umulative 6et rofit Loss$ I Tax holiday period
(
%
9
'
'
'
'
'
'
'
%3
9'
"0(
"!!
"!!
"!%
"!%
"!%
"!%
"!%
I
I
3!
3%
3%
39
39
39
39
39
3
?B
?8
?8
?B
?B
?B
?B
?B
%3
"(!
!3(
3!!
809
8'%
#9(
(%(
%(#
9#8
Append*H .A. )A/A"E S2EET %*n ((( )*rr& Des,r*pt*$n
Year
Pr$du,t*$n Years
(
1
-
3
9
8
?
B
1(
*Hed assets
1ixed investment
!#
!#
!#
!#
!#
!#
!#
!#
!#
!#
!#
Total 1ixed -ssets
!#
!#
!#
!#
!#
!#
!#
!#
!#
!#
!#
#
"0
"#
!0
!#
!#
!#
!#
!#
!#
-9
-(
19
1(
9
C
C
C
C
C
C
+ash on hand G at ban/ ebtors receivables$ )toc/s
%' "3 "0
"%0 "# "!
!8( "% "3
338 "9 "8
8!# "9 "8
#"8 "9 "8
(03 "9 "8
('! "9 "8
%9! "9 "8
9%" "9 "8
T$tal ,urrent assets
C
1(3
1B
-8
38
9?
9
838
-9
?19
B(
+reditors payables$ Dverdraft
T$tal ,urrent l*ab*l*t*es
C
C
C
C
C
C
C
C
C
C
C
T$tal $r>*n ,ap*tal
C
1(3
1B
-8
38
9?
9
838
-9
?19
B(
-9
1-3
-1-
-?8
3-
9?
9
838
-9
?19
B(
!#
#0 %3
#0 "(!
#0 !3(
#0 3!!
#0 809
#0 8'%
#0 #9(
#0 (%(
#0 %(#
#0 9#8
-9
1-3
-1-
-?8
3-
9?
9
838
-9
?19
B(
Less acc. epreciation "et <*Hed assets urrent assets
less urrent l*ab*l*t*es
T$tal net assets *nan,ed by
aidup capital 5etained profits Losses$ T$tal
Append*H .A.9 DISOU"TED AS2 /O6 %*n ((( )*rr& Des,r*pt*$n
Year (
T$tal as4 In
)$$> #alue
Pr$du,t*$n Years 1
-
3
9
8
?
B
1(
11
C
?
B
B
B1
B1
?B
?B
?B
?B
?B
39
1. In
C
C
C
C
C
C
C
C
C
C
C
C
2orrowing long G medterm$ 2orrowing short term$ -. In
C
? %3 #
B 9' #
B %8 #
B1 9( #
B1 9( #
?B 9'
?B 9'
?B 9'
?B 9'
?B 9'
C 3# 3#
-9
-9
3
3
3
C
C
C
C
C
C
C
!#
!#
3
3
3
T$tal as4 Out
1ixed investment 4ncremental wor/ing capital 9. /$an repayment Long G medterm loan rincipal$ )hortterm loan rincipal$ "et ,as4
%-9&
93
B1
8
?
B1
?B
?B
?B
?B
?B
39
umulat*e "et ,as4
%-9&
-?
11B
1B9
-?-
33
8-
99-
81
3(
?1B
?9
"et present alue %J 1(@& Internal rate $< return %IRR& "$te:
3? -9-@
a. )alvage value of assets is ta/en to be the boo/ value of fixed assets. b. 5ecoverable asset is ta/en to be the net wor/ing capital.
