Salt Products Manufacturing Unit

Pre-Feasibility Study
(Salt Products Manufacturing Unit)
Small and Medium Enterprises Development Authority Ministry of Industries & Production
Government of Pakistan
www.smeda.org.pk
HEAD OFFICE
4th Floor, Building No. 3, Aiwan-e-Iqbal Complex, Egerton Road, Lahore Tel: (92 42) 111 111 456, Fax: (92 42) 36304926-7
helpdesk@smeda.org.pk
REGIONAL OFFICE Punjab 3rd Floor, Building No. 3, Aiwan-e-Iqbal Complex, Egerton Road Lahore, Tel: (042) 111-111-456 Fax: (042) 36304926-7 helpdesk.punjab@smeda.org.pk REGIONAL OFFICE Sindh 5TH Floor, Bahria Complex II, M.T. Khan Road, Karachi. Tel: (021) 111-111-456 Fax: (021) 35610572 helpdesk-khi@smeda.org.pk REGIONAL OFFICE Khyber Pakhtunkhwa Ground Floor State Life Building The Mall, Peshawar. Tel: (091) 111-111-456 Fax: (091) 5286908 helpdesk-pew@smeda.org.pk REGIONAL OFFICE Balochistan Bungalow No. 15-A Chaman Housing Scheme Airport Road, Quetta. Tel: (081) 2831623, 2831702 Fax: (081) 2831922 helpdesk-qta@smeda.org.pk
Note: All SMEDA Services / information related to PM's Youth Business Loan are Free of Cost December, 2013
Salt Products Manufacturing Unit
Table of Contents
1. DISCLAIMER .............................................................................................................................. 2 2. PURPOSE OF THE DOCUMENT ............................................................................................. 3 3. INTRODUCTION TO SMEDA .................................................................................................. 3 4. INTRODUCTION TO SCHEME ............................................................................................... 4 5. EXECUTIVE SUMMARY .......................................................................................................... 4 6. BRIEF DESCRIPTION OF PROJECT & PRODUCT ............................................................ 5 7. CRITICAL FACTORS ................................................................................................................ 5 8. INSTALLED & OPERATIONAL CAPACITIES ..................................................................... 5 9. GEOGRAPHICAL POTENTIAL FOR INVESTMENT ......................................................... 6 10. 11. POTENTIAL TARGET MARKETS ................................................................................... 6 PROJECT COST SUMMARY ............................................................................................. 6 PROJECT ECONOMICS ........................................................................................................... 6 PROJECT FINANCING ............................................................................................................ 7 PROJECT COST ..................................................................................................................... 7 SPACE REQUIREMENT .......................................................................................................... 7 MACHINERY AND EQUIPMENT.............................................................................................. 8 OFFICE EQUIPMENT.............................................................................................................. 8 RAW MATERIAL REQUIREMENTS ......................................................................................... 9 HUMAN RESOURCE REQUIREMENT ...................................................................................... 9 REVENUE GENERATION...................................................................................................... 10 OTHER COSTS .................................................................................................................... 10
11.1. 11.2. 11.3. 11.4. 11.5. 11.6. 11.7. 11.8. 11.9. 11.10. 12. 13. 13.1. 13.2. 13.3. 14. 14.1. 14.2. 15.
CONTACT DETAILS OF SUPPLIERS, EXPERTS / CONSULTANTS ....................... 10 ANNEXURE ......................................................................................................................... 11 INCOME STATEMENT .......................................................................................................... 11 STATEMENT OF CASH FLOW............................................................................................... 12 BALANCE SHEET ................................................................................................................ 13 13 USEFUL PROJECT MANAGEMENT TIPS .................................................................... 14 USEFUL LINKS.................................................................................................................... 14 KEY ASSUMPTIONS ......................................................................................................... 15
SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -
1.
DISCLAIMER
This information memorandum is to introduce the subject matter and provide a general idea and information on the said subject. Although, the material included in this document is based on data / information gathered from various reliable sources; however, it is based upon certain assumptions which may differ from case to case. The information has been provided on as is where is basis without any warranties or assertions as to the correctness or soundness thereof. Although, due care and diligence has been exercised to compile this document, the contained information may vary due to any change in any of the concerned factors, and the actual results may differ substantially from the presented information. SMEDA, its employees or agents do not assume any liability for any financial or other loss resulting from this memorandum in consequence of undertaking this activity. The contained information does not preclude any further professional advice. The prospective user of this memorandum is encouraged to carry out additional diligence and gather any information which is necessary for making an informed decision including taking professional advice from a qualified consultant / technical expert before taking any decision to act upon the information. For more information on services offered by SMEDA, please contact our website: www.smeda.org.pk
2.
PURPOSE OF THE DOCUMENT
The objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs in project identification for investment. The project pre-feasibility may form the basis of an important investment decision and in order to serve this objective, the document / study covers various aspects of project concept development, start-up, production, marketing, finance and business management. The purpose of this document is to facilitate potential investors in Salt Products Manufacturing Unit by providing them with a general understanding of the business with the intention of supporting potential investors in crucial investment decisions. The need to come up with pre-feasibility reports for undocumented or minimally documented sectors attains greater imminence as the research that precedes such reports reveal certain thumb rules; best practices developed by existing enterprises by trial and error, and certain industrial norms that become a guiding source regarding various aspects of business set-up and its successful management. Apart from carefully studying the whole document one must consider critical aspects provided later on, which form basis of any investment decision.
3.
INTRODUCTION TO SMEDA
The Small and Medium Enterprises Development Authority (SMEDA) was established in October 1998 with an objective to provide fresh impetus to the economy through development of Small and Medium Enterprises (SMEs). With a mission "to assist in employment generation and value addition to the national income, through development of the SME sector, by helping increase the number, scale and competitiveness of SMEs", SMEDA has carried out sectoral research to identify policy, access to finance, business development services, strategic initiatives, institutional collaboration and networking initiatives. Preparation and dissemination of prefeasibility studies in key areas of investment has been a hallmark of SME facilitation by SMEDA. Concurrent to the prefeasibility studies, a broad spectrum of business development services is also offered to the SMEs by SMEDA. These services include identification of experts and consultants and delivery of need based capacity building programs of different types in addition to business guidance through help desk services.
4.
INTRODUCTION TO SCHEME
Prime Ministers Youth Business Loan scheme, for young entrepreneurs, with an allocated budget of Rs. 5.0 Billion for the year 2013-14, is designed to provide subsidised financing at 8% mark-up per annum for one hundred thousand (100,000) beneficiaries, through designated financial institutions, initially through National Bank of Pakistan (NBP) and First Women Bank Ltd. (FWBL). Loans from 0.1 million to 2.0 million with tenure upto 8 years (1 year grace period inclusive) with one year grace period and a debt : equity of 90 : 10 will be disbursed to SME beneficiaries across Pakistan, covering; Punjab, Sindh, Khyber Pakhtunkhwa, Balochistan, Gilgit Baltistan, Azad Jammu & Kashmir and Federally Administered Tribal Areas (FATA).
5.
EXECUTIVE SUMMARY
This pre-feasibility is regarding Salt Products Manufacturing Unit. The salt products manufacturing project entails production of rock salt crystal products ranging from lamps, tiles, candle stands, salt soaps and various decorative shapes / pieces. Salt products are known for their therapeutic / healing effects on body and mind. There is an increasing trend and preference for organic quality products for their natural curative properties. Salt products are equally sought for decorative purposes due to their distinctive colors and composition. There is growing demand of salt products in western countries due to its healing properties for a number of ailments. Pakistans salt products are well known all over the world for their distinctive composition and craftsmanship. Pakistan holds one of the largest reserves of salt deposits in the world. Growing international demand for salt products, availability of cheap and skilled labor coupled with abundant raw material offers new start-ups a very promising opportunity to venture into salt products manufacturing. Salt products manufacturing business venture entails a total investment of about Rs. 1.55 million. This includes capital investment of Rs.1.00 million and a sum of Rs.0.55 million as initial working capital. The project is financed through 90% debt and 10% equity. The Net Present Value (NPV) of the project is around Rs. 11.69 million with an Internal Rate of Return (IRR) of 64% and a payback period of 2.35 years. The project will generate employment opportunity for 11 persons including owner manager. Higher return on investment and a steady growth of business is closely associated with the entrepreneur having some prior experience or education in
the related field of business. This pre-feasibility encompasses essential information regarding various aspects of starting a salt products manufacturing unit business in Pakistan.
6.
BRIEF DESCRIPTION OF PROJECT & PRODUCT
This Pre-feasibility provides information on Salt Products Manufacturing Unit in Pakistan. There are a number of factors for which salt products are sought worldwide, however, therapeutic and decorative, are two distinct reasons salt products are bought all over the world. The Pre-feasibility provides information on key aspects of starting a salt products manufacturing unit. This pre-feasibility details information about investment opportunities for the production of salt products such as salt lamps, candle stand, salt soap, salt spa products, salt inhalers, salt bricks, tiles and blocks etc. Salt products manufacturing unit will primarily focus on indirect export (middlemen / traders). Salt products manufacturing unit requires an investment estimated at Rs.1.55 million. This pre-feasibility is based on a unit with 2 lathe machines (5ft capacity), 1 cutter (24 length), grinder, drill and blowers with a capacity of manufacturing 120,000 units (salt products) per anum. Total employment required for this unit would be 11 persons including owner manager. Total area required for salt products manufacturing would be approximately 1.5 kanals that would be acquired on rent. Estimated rent for such an area is Rs. 30,000/per month.
7.

CRITICAL FACTORS
Awareness / knowledge of international markets and the demand trends for salt products. Regular training and capacity building of the entrepreneur. Prior experience / education in the related field of business. Strict management / supervision controls to minimize wastage. Availability of skilled labor and good quality raw material. Ventilation and adequate safety measures.
8.
INSTALLED & OPERATIONAL CAPACITIES
This pre-feasibility is based on 2 lathe machines and 1 cutting machine with a capacity of manufacturing 400 salt products per 8 hours shift. The total employment required for this unit would be 11 persons. Total number of salt products produced in year 1 would be 60,000 reaching 50% of the total
installed capacity, while maximum capacity (95%) will be achieved with production reaching at 114,000 pieces in year 10 of the project.
9.
GEOGRAPHICAL POTENTIAL FOR INVESTMENT
The said project can be started in any adjoining industrial areas of Khewra, district Jhelum, Warcha, District Mianwali, Kalabagh, District Mianwali. These areas are preferred due to their proximity to raw material and availability of skilled labor.
10.
POTENTIAL TARGET MARKETS
Salt products manufactured in this unit will be primarily exported to European countries such as UK, Germany, France, Italy, and Spain. In addition to these countries, Korea, Japan and Australia are also potential markets of salt products.
11.
PROJECT COST SUMMARY
A detailed financial model has been developed to analyze the commercial viability of Salt Products Manufacturing Unit under the Prime Ministers Youth Business Loans scheme. Various cost and revenue related assumptions along with results of the analysis are outlined in this section. The projected Income Statement, Cash Flow Statement and Balance Sheet are attached as appendices. 11.1. Project Economics
The installed production capacity of the project is 120,000 salt products per year. However during the first year of operations it will operate at 50% of the installed capacity producing 60,000 salt products. The following table shows internal rate of return, payback period and net present value;
Table 1: Project Economics
Description Internal Rate of Return (IRR) Payback Period (yrs) Net Present Value (NPV)
Details 64% 2.35 Rs. 11,694,781
Returns on the project and its profitability are highly dependent on acquiring and maintaining regular orders, prudent procurement of salt and timely
deliveries. Skilled labor plays an important role in the manufacturing operations for quality products. 11.2. Project Financing
Following table provides details of the equity required and variables related to bank loan;
Table 2: Project Financing
Description Total Equity (10%) Bank Loan (90%) Markup to the Borrower (%age/annum) Tenure of the Loan (Years) Grace Period (Year) 11.3. Project Cost
Details Rs.155,290 Rs.1,397,610 8% 8 1
Following requirements have been identified for operations of the proposed business. A rented premises for the unit has been recommended.
Table 3: Capital Investment for the Project
Capital Investment Machinery Furniture & Office Equipment Pre Operational Expenses Total Capital Cost Initial Working Capital Total Project Cost 11.4. Space Requirement
Amount (Rs.) 849,000 117,000 32,000 998,000 554,900 1,552,900
The area has been calculated on the basis of space requirement for production, management and storage. However, the units operating in the industry do not follow any set pattern. Following table shows calculations for project space requirement.
Table 4: Space Requirement
Space Requirement Management building Production area Store
Sqft 150 1,200 4,500
Open area Total Area Premises will be obtained on rent @ Rs. 30,000 per month. 11.5. Machinery and Equipment
900 6,750
Following table provides list of machinery and equipment required for an average salt products manufacturing unit.
Table 5: Machinery & Equipment
Description Cutter 24 Lathe machine 5 Grinder Drill machine 5 with special bit Hand drill Blower Electrification, installation, tools, etc Total
Quantity 1 2 4 1 4 2 1 15
Cost Rs/unit 60,000 300,000 10,000 20,000 3,000 8,500 100,000
Total Cost Rs. 60,000 600,000 40,000 20,000 12,000 17,000 100,000 849,000
Following is a brief description of the process flow; blocks of salt are cut into small pieces by cutters. Lathe machines are used to shape and size salt pieces into lamps and candle stands etc. Finishing operations are carried out on a grinder and drill machine. Natural profile products (natural shape) are made on grinders and hand drills. 11.6. Office Equipment
Following are details of necessary office equipment.

Table 6: Office Equipment
Quantity Computer desktop (used) UPS Computer printer Telephone set Total 1 1 1 1
Cost 20,000 7,500 10,000 1,000
Amount 20,000 7,500 10,000 1,000 38,500
11.7.
Raw Material Requirements
Salt mined from Khewra, Kalabagh and Warcha mines will be used primarily. Raw materials requirements have been calculated on the basis of 4 product categories which the unit will be producing.
Table 7: Cost of Materials
Unit Salt lamp (24 kg) Salt Candle stand (12 kg) Salt Salt soap (0.40.6 kg) Salt Natural profile (34 kg) Salt Kg Kg Kg Kg
Rate (Rs) 5 5 5 5
Quantity (Kg) 3.90 1.95 0.65 4.55
Cost Rs./Unit 19.50 9.75 3.25 22.75
11.8.
Human Resource Requirement
Following table provides details of human resource required for this project:
Table 8: Human Resource Requirement
Description
No. of Employees 1 1 3 6 11
Salary per Employee per Month (Rs.) 20,000 12,000 12,000 10,000 54,000
Owner Manager Accountant Machinist Helper Total Staff
The owner will focus on acquiring orders, purchase of salt and overall management of the unit. The unit is capable of producing approximately 400 products in an 8 hour shift. Salaries of all employees are estimated to increase at 10% annually.
11.9.
Revenue Generation
Following table provides details of the revenue generated by the project in the first year;
Table 9: Revenue Generation Product Unit Sales Price (Rs./Unit) First Year Production First Year Sales Revenue (Rs)
Salt lamp (24 kg) Candle stand (12 kg) Salt Soap (0.40.6 kg) Natural Profile (34 kg) Total Sales Revenue 11.10. Other Costs
No. No. No No
78.00 39.00 13.00 91.00
12,000 12,000 12,000 24,000
936,000 468,000 156,000 2,184,000 3,744,000
Other essential costs to be borne by the company are electricity and communication expenses.
12.
CONTACT DETAILS OF SUPPLIERS, EXPERTS / CONSULTANTS
Director General Mines and Mineral Department Govt. of the Punjab Poonch House, Multan Road, Lahore Phone: (+92-42) 99213313
10
13.
ANNEXURE
Income Statement
13.1.
Income Statement
Revenue Cost of sales Cost of goods sold 1 Operation costs 1 (direct labor) Operating costs 2 (machinery maintenance) Operating costs 3 (direct electricity) Total cost of sales Gross Profit General administration & selling expenses Administration expense Building rental expense Electricity expense Travelling expense Communications expense (phone, fax, mail, internet, etc.) Office expenses (stationary, entertainment, janitorial services, etc Promotional expense Depreciation expense Amortization of pre-operating costs Subtotal Operating Income Gain / (loss) on sale of office equipment Earnings Before Interest & Taxes Interest expense on long term debt (Project Loan) Subtotal Earnings Before Tax Tax NET PROFIT/(LOSS) AFTER TAX
Year 1 3,744,000
Year 2 4,530,240
Year 3 5,436,288
Year 4 6,478,243
Year 5 7,674,227
Year 6 9,044,624
Year 7 10,612,359
Year 8 12,403,195
Year 9 14,446,074
Year 10 16,773,497
748,800 1,296,000 150,000 224,561 2,419,361 1,324,639
906,048 1,422,180 189,750 271,719 2,789,697 1,740,543
1,087,258 1,560,646 238,050 326,063 3,212,016 2,224,272
1,295,649 1,712,593 296,571 388,558 3,693,370 2,784,873
1,534,845 1,879,333 367,291 460,292 4,241,761 3,432,465
1,808,925 2,062,308 452,555 542,487 4,866,275 4,178,350
2,122,472 2,263,097 555,135 636,518 5,577,221 5,035,138
2,480,639 2,483,435 678,305 743,930 6,386,309 6,016,885
2,889,215 2,725,226 825,936 866,460 7,306,837 7,139,237
3,354,699 2,990,558 1,002,595 1,006,056 8,353,908 8,419,589
240,000 360,000 22,882 74,880 18,720 2,400 37,440 100,450 3,200 859,972 464,667 464,667 116,001 116,001 348,666 348,666
263,367 396,000 25,170 90,605 1,317 2,634 45,302 100,450 3,200 928,045 812,498 812,498 106,200 106,200 706,298 30,630 675,668
289,008 435,600 27,687 108,726 1,445 2,890 54,363 100,450 3,200 1,023,370 1,200,902 1,200,902 93,318 93,318 1,107,584 88,637 1,018,946
317,147 479,160 30,456 129,565 1,586 3,171 64,782 100,450 3,200 1,129,517 1,655,356 1,655,356 79,368 79,368 1,575,988 162,697 1,413,291
348,025 527,076 33,502 153,485 1,740 3,480 76,742 100,450 3,200 1,247,700 2,184,765 15,400 2,200,165 64,259 64,259 2,135,907 274,681 1,861,225
381,909 579,784 36,852 180,892 1,910 3,819 90,446 102,577 3,200 1,381,389 2,796,960 2,796,960 47,896 47,896 2,749,064 409,766 2,339,299
419,092 637,762 40,537 212,247 2,095 4,191 106,124 102,577 3,200 1,527,826 3,507,312 3,507,312 30,175 30,175 3,477,137 591,784 2,885,353
459,895 701,538 44,591 248,064 2,299 4,599 124,032 102,577 3,200 1,690,796 4,326,089 4,326,089 10,984 10,984 4,315,106 817,031 3,498,074
504,671 771,692 49,050 288,921 2,523 5,047 144,461 102,577 3,200 1,872,143 5,267,094 5,267,094 5,267,094 1,102,628 4,164,466
553,807 848,861 53,955 335,470 2,769 5,538 167,735 102,577 3,200 2,073,913 6,345,676
6,345,676 6,345,676 1,443,486 4,902,190
11
13.2.
Statement of Cash Flow

Year 0 Year 1 348,666 100,450 3,200 (307,726) (4,103) (24,430) (18,000) 82,375 180,432 180,432 Year 2 675,668 100,450 3,200 30,630 (32,311) (5,268) (32,995) (19,800) 19,337 738,910 (155,201) (155,201) 583,709 Year 3 1,018,946 100,450 3,200 88,637 (69,546) (6,739) (44,385) (21,780) 23,066 1,091,849 (168,083) (168,083) 923,766 Year 4 1,413,291 100,450 3,200 162,697 (80,055) (8,594) (59,495) (23,958) 27,534 1,535,071 (182,034) (182,034) 1,353,037 Year 5 1,861,225 100,450 3,200 274,681 (91,970) (10,929) (79,495) (26,354) 32,905 2,063,714 (197,143) 49,137 (148,006) (49,137) (49,137) 1,866,571 Year 6 2,339,299 102,577 3,200 409,766 (105,468) (13,862) (105,918) (28,989) 39,380 2,639,985 (213,505) (213,505) 2,426,480 Year 7 2,885,353 102,577 3,200 591,784 (120,745) (17,542) (140,762) (31,888) 47,213 3,319,190 (231,226) (231,226) 3,087,964 Year 8 3,498,074 102,577 3,200 817,031 (138,023) (22,153) (186,635) (35,077) 56,723 4,095,717 (250,418) (250,418) 3,845,299 Year 9 4,164,466 102,577 3,200 1,102,628 (157,550) (27,922) (246,937) (38,585) 68,307 4,970,184 4,970,184 Year 10 4,902,190 102,577 3,200 1,443,486 (179,601) 129,613 983,451 424,431 (38,706) 7,770,641 7,770,641
Cash Flow Statement

Net profit Add: depreciation expense amortization of pre-operating costs Deferred income tax Accounts receivable Equipment inventory Raw material inventory Pre-paid building rent Accounts payable Cash provided by operations Financing activities Project Loan - principal repayment Additions to Project Loan Issuance of shares Cash provided by / (used for) financing activities Investing activities Capital expenditure Cash (used for) / provided by investing activities NET CASH
(12,500) (62,400) (180,000) (254,900)
1,397,610 155,290 1,552,900 (998,000) (998,000) 300,000
12
13.3.
Balance Sheet
14.
Balance Sheet
Year 0 Assets Current assets Cash & Bank Accounts receivable Equipment spare part inventory Raw material inventory Pre-paid building rent Total Current Assets Fixed assets Machinery & equipment Furniture & fixtures Office equipment Total Fixed Assets Intangible assets Pre-operation costs Total Intangible Assets TOTAL ASSETS Liabilities & Shareholders' Equity Current liabilities Accounts payable Total Current Liabilities Other liabilities Deferred tax Long term debt (Project Loan) Total Long Term Liabilities Shareholders' equity Paid-up capital Retained earnings Total Equity TOTAL CAPITAL AND LIABILITIES 300,000 12,500 62,400 180,000 554,900 849,000 78,500 38,500 966,000 32,000 32,000 1,552,900 480,432 307,726 16,603 86,830 198,000 1,089,591 764,100 70,650 30,800 865,550 28,800 28,800 1,983,941 1,064,141 340,037 21,871 119,825 217,800 1,763,674 679,200 62,800 23,100 765,100 25,600 25,600 2,554,374 1,987,907 409,583 28,610 164,210 239,580 2,829,891 594,300 54,950 15,400 664,650 22,400 22,400 3,516,941 3,340,945 489,638 37,204 223,705 263,538 4,355,029 509,400 47,100 7,700 564,200 19,200 19,200 4,938,429 5,207,516 581,608 48,132 303,199 289,892 6,430,348 424,500 39,250 49,137 512,887 16,000 16,000 6,959,235 7,633,996 687,076 61,994 409,117 318,881 9,111,064 339,600 31,400 39,309 410,309 12,800 12,800 9,534,174 10,721,960 807,821 79,537 549,879 350,769 12,509,966 254,700 23,550 29,482 307,732 9,600 9,600 12,827,298 14,567,259 945,845 101,690 736,514 385,846 16,737,154 169,800 15,700 19,655 205,155 6,400 6,400 16,948,709 19,537,443 1,103,395 129,613 983,451 424,431 22,178,332 84,900 7,850 9,827 102,577 3,200 3,200 22,284,110 27,308,084 1,282,996 28,591,080 28,591,080 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
82,375 82,375 1,397,610 1,397,610 155,290 348,666 503,956 1,983,941
101,712 101,712 30,630 1,242,409 1,273,038 155,290 1,024,334 1,179,624 2,554,374
124,778 124,778 119,267 1,074,326 1,193,593 155,290 2,043,280 2,198,570 3,516,941
152,312 152,312 281,965 892,292 1,174,256 155,290 3,456,571 3,611,861 4,938,429
185,217 185,217 556,646 695,149 1,251,795 204,427 5,317,796 5,522,223 6,959,235
224,597 224,597 966,412 481,644 1,448,056 204,427 7,657,095 7,861,522 9,534,174
271,810 271,810 1,558,196 250,418 1,808,613 204,427 10,542,448 10,746,875 12,827,298
328,533 328,533 2,375,227 2,375,227 204,427 14,040,522 14,244,949 16,948,709
396,840 396,840 3,477,855 3,477,855 204,427 18,204,988 18,409,415 22,284,110
358,134 358,134 4,921,341 4,921,341 204,427 23,107,179 23,311,606 28,591,080
1,397,610 1,397,610 155,290 155,290 1,552,900
13
14.1. Technology
USEFUL PROJECT MANAGEMENT TIPS
Required Spare Parts & Consumables: Preventive maintenance of machines should be carried out. Availability of the machinery spare parts and consumables must be ensured. Energy Requirement: Generator has not been recommended for the project as it will increase the cost of production. Machinery Suppliers: Multiple machinery suppliers should be contacted and purchase should be made after thorough inspection. The availability of spare parts should also be considered. Such machinery is easily available in local markets of Lahore, Gujranwala, Faisalabad & Peshawar. Quality Assurance Equipment & Standards: The finished products should be according to the design specifications of buyers. Compliance should be ensured for dimensions, weight and especially for the electrical fitting fixtures as the buyers inspect before exporting the products.
Marketing Sales & Distribution Network: The owner should establish long term contacts with the buyers to ensure continuous flow of orders. Moreover he should have links with the suppliers of salt from major salt mines of the country.
Human Resources Adequacy & Competencies: Skilled and experienced staff is necessary for the unit. Staff having requisite experience should be preferred.
14.2.
Useful Links
Prime Ministers Office, www.pmo.gov.pk Small and Medium Enterprise Development Authority, www.smeda.org.pk National Bank of Pakistan (NBP), www.nbp.com.pk First Women Bank Limited (FWBL), www.fwbl.com.pk Government of Pakistan, www.pakistan.gov.pk Ministry of Industries & Production, www.moip.gov.pk Ministry of Education, Training & Standards in Higher Education, http://moptt.gov.pk Government of Punjab, www.punjab.gov.pk
14
Government of Sindh, www.sindh.gov.pk Government of Khyber Pakhtunkhwa, www.khyberpakhtunkhwa.gov.pk Government of Balochistan, www.balochistan.gov.pk Government of Gilgit Baltistan, www.gilgitbaltistan.gov.pk Government of Azad Jamu Kashmir, www.ajk.gov.pk Trade Development Authority of Pakistan (TDAP), www.tdap.gov.pk Securities and www.secp.gov.pk Exchange Commission of Pakistan (SECP),
Federation of Pakistan Chambers of Commerce and Industry (FPCCI), www.fpcci.com.pk State Bank of Pakistan (SBP), www.sbp.org.pk Punjab Mineral Development Corporation (PMDC) www.punjmin.com
15.
KEY ASSUMPTIONS
Table 14-1 Machinery Assumptions
Number of machines installed Capacity utilization (Year 1) Maximum capacity utilization Total production of the unit per 8 hour shift
Table 14-2 Operating Assumptions
6 50% 95% 300 120,000 8 25 1 300 10% 10%
Annual production capacity Hours operational per day Days operational per month No. of shifts Days operational per year
Table 14-3 Economy-Related Assumptions
Cost of electricity & fuel growth rate Wage growth rate

Table 14-4 Cash Flow Assumptions
Accounts receivable cycle (in days) Accounts payable cycle (in days) Raw material inventory (in day) Equipment and spare part inventory (in days)
Table 14-5 Revenue Assumptions
30 30 30 30
15
Production capacity of the unit Sale price growth rate Local sales
Table 14-6 Expense Assumptions
120,000 10% 100% 6 10% 10% 0.50% 1.00% 10 90% 10% 8% 8 12
Pre-paid building rent (months) Rent growth rate Raw material price growth rate Communication expense (% of Sales) Promotional expense (% of Sales)
Table 14-7 Financial Assumptions
Project life (Years) Debt Equity Interest rate on long-term debt Debt tenure (Years) with 1 year grace period Debt payments per year
16

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Pre-Feasibility Study