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Note: All SMEDA Services / information related to PM's Youth Business Loan are Free of Cost
May, 2014
Pre-Feasibility Study
TABLE OF CONTENTS
1.
DISCLAIMER ........................................................................................................ 2
2.
3.
INTRODUCTION TO SMEDA................................................................................ 3
4.
5.
6.
7.
8.
9.
SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST
Pre-Feasibility Study
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 taken 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
SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST
Pre-Feasibility Study
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 and 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.
SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST
Pre-Feasibility Study
4. INTRODUCTION TO SCHEME
Prime Ministers Youth Business Loan program, 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 by the
National Bank of Pakistan (NBP) and the First Women Bank Ltd. (FWBL).
Small business loans from Rs. 0.1 million to Rs. 2.0 million with tenure up to 8
years inclusive of 1 year grace period, and a debt : equity of 90 : 10 will be
disbursed to SME beneficiaries across Pakistan, covering; Punjab, Sindh, Khyber
Pakhtunkhwah, Balochistan, Gilgit Baltistan, Azad Jammu & Kashmir and
Federally Administered Tribal Areas (FATA).
5. EXECUTIVE SUMMARY
This pre-feasibility study provides information on key facets of starting a Boutique
business for Women Designer Wear. Growing number of boutiques have
become an emblem of successful clothes business in Pakistan. Most people
especially women prefer them over ordinary garment brands. There has been a
mushroom growth in women designer wear boutiques since the last decade as
they offer versatility and sophistication. This trend is not confined to metropolis
alone but has also spread to small cities and towns. The rise is attributed to a
growing middle class, exposure to media, entertainment, movies, internet and
also to a fleet of qualified fashion designers graduating from fashion schools
every year. Aspiring fashion graduates or potential entrepreneurs may find this
growing sector a good prospect to capitalize on their potential, talent and market
opportunity.
The boutique business venture entails a total investment of about Rs. 1.28
million. This includes a capital investment of Rs.0.73 million and a sum of Rs.
0.55 million as working capital. The project is financed through 90% debt and
10% equity. The Net Present Value (NPV) of the project is around Rs. 5.63
million with an Internal Rate of Return (IRR) of 50% and a payback period of 2.74
years. The project will generate direct employment opportunity for 10 persons.
Higher return on investment and a steady growth of business is expected with
the entrepreneur having some prior experience in the related field of business.
This pre-feasibility encompasses essential information regarding various aspects
of starting a Boutique Women Designer Wear business in Pakistan.
SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST
Pre-Feasibility Study
7. CRITICAL FACTORS
Following are the factors critical for the success of this business venture;
Ability to produce / acquire unique designs and safe guarding such design
from piracy.
SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST
Pre-Feasibility Study
100
900
225
9. GEOGRAPHICAL POTENTIAL
POTENTIAL TARGET MARKETS
1,125
FOR
INVESTMENT
AND
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Pre-Feasibility Study
10.
The process of converting fabric into designer wear garments mainly follows the
below mentioned sequence:
Purchasing of
Raw Material
Designing
Pattern Making
Stitching
Cutting
Embroidery
Finishing
Presentation /
Display
Market/Clientele
SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST
Pre-Feasibility Study
11.
Project Economics
All the assumptions in this financial model are based upon maximum production
of 1,125 dresses. Whereas, the production target at 75% capacity utilization is
844 dresses.
The following table shows internal rate of return, payback period and Net Present
Value.
Table 2: Project Economics
Description
Details
50%
2.74
Rs. 5,632,402
Returns on the project and its profitability are highly dependent on the unique
designs and quality of purchased raw material.
11.2.
Project Financing
Following table provides the details of required equity and variables related to
bank loan;
Table 3: Project Financing
Description
Details
Rs. 128,623
Rs.1,157,611
8%
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Pre-Feasibility Study
11.3.
Project Cost
Following fixed and working capital requirements have been identified for
operations of the proposed business.
Table 4: Capital Investment
Capital Investment
Amount (Rs.)
228,500
342,700
Office equipment
112,000
Pre-operating Cost
51,011
734,211
2,695
85,388
261,000
Cash
202,941
552,024
11.4.
1,286,234
Space Requirement
The area has been calculated on the basis of space requirement for stitching unit
and outlet which has to be taken on rent.
Table 5: Space Requirement
Space Requirement
Stitching Unit Area
Outlet
Total Area
Sq. ft
2,250
300
Rent / Sq.
ft
Rent per
month (Rs.)
13,500
100
30,000
2,550
43,500
Stitching Unit will be rented in the outskirts of big cities where skilled workers are
available.
SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST
Pre-Feasibility Study
11.5.
Following table provides list of machinery, equipment and furniture required for
an average stitching workshop for Boutique.
Table 6: List of Machinery, Equipment and Furniture for Workshop
Description
Quantity
Cost
Total
Rs/unit
Rs.
26,000
52,000
33,500
33,500
53,000
53,000
50,000
50,000
37,000
Workshop Accessories
(Embroidery Frame sets,
Scissors, Cutting & Measuring
Scale, etc)
13,400
17,920
Total
11.6.
256,820
Following table provides details of office furniture and equipment required for this
project.
Table 7: List of Office Furniture and Equipment
Quantity
Cost
Amount
40,000
80,000
Printers
15,000
30,000
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10
Pre-Feasibility Study
Telephone Sets
1,000
for
Air conditioners
63,600
Shop
147,000
1
55,000
2,000
55,000
8,780
Total
40,000
426,380
11.7.
Normally raw material cost of the dress varies between 15% to 30% of its sales
price, but in this pre-feasibility study, it is assumed that cost of a dress will be
24% of its sales price.
11.8.
Following table provides details of human resource required for the project along
with monthly salaries;
Table 8: Human Resource Requirement
Description
No. of Employees
Salary per
employee per
month (Rs)
Owner / Manager
25,000
Production Manager
22,000
Master Tailor
13,000
11,000
Embroidery Worker
10,000
12,000
Sales Staff
12,500
Guard
10,000
Total
10
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11
Pre-Feasibility Study
It is assumed that the owner would have prior experience or knowledge about
Boutique business. Owner will design all the dresses with his team and tnhe
stitching process will start. Other staff stated above will perform as per their
assigned job description. Salaries of all employees are estimated to increase at
10% annually.
11.9.
Revenue Generation
Product
Dresses
Sales
Price
(Rs./Unit)
First Year
Production
at 75%
capacity
Casual
675
3,000
507
1,521,000
Semi Formal
337
6,600
253
1,669,800
Formal
113
15,000
84
1,260,000
844
4,450,800
(35)
(184,800)
Total Sales
Finished Goods
Inventory Minus
1,125
Total Sales
Revenue
4,266,000*
Category
% Of Total Outfits
Casual Wear
60%
30%
Formal Wear
10%
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12
Pre-Feasibility Study
Category
Casual Wear
3,000
6,600
Formal Wear
15,000
Table 12: Precentage of Costs
Category
Casual Wear
24%
24%
Formal Wear
24%
11.10.
Other Costs
An essential cost to be borne by the Boutique is rent of the outlet and workshop.
A promotional expense in this pre-feasibility study is taken @7.5 % of sales
which is essential for this business as marketing plays an important role in the
growth of this business.
12.
Pakistan
Cotton
Fashion
Apparel
Manufacturers
&
Exporters Association.
5-Amber Court, Shaheed-eMillat Road, Karachi.
www.pcfa.pk
Pakistan Design Council
17 Aziz Avenue, Canal Bank,
Gulberg V, Lahore, Phone: (042)
3576 4592
http://www.pfdc.org/
Fashion Apparel Design &
Training
Institute
24-D
Block-6,P.E.C.H.S,
Karachi
-74500
Tel:4549485-4547607
SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST
13
Pre-Feasibility Study
13.
ANNEXURES
13.1.
Income Statement
Income Statement
Year 1
4,269,375
Year 2
5,213,588
Year 3
6,094,316
Year 4
7,099,055
Year 5
7,827,079
Year 6
8,609,786
Year 7
9,470,765
Year 8
10,417,842
Year 9
11,459,626
Year 10
12,605,588
1,024,650
908,500
16,172
123,894
2,073,215
2,196,160
1,251,261
1,040,084
19,748
151,294
2,462,388
2,751,200
1,462,636
1,144,269
23,085
176,852
2,806,841
3,287,475
1,703,773
1,258,867
26,890
206,008
3,195,539
3,903,516
1,878,499
1,387,967
29,648
227,135
3,523,249
4,303,830
2,066,349
1,526,763
32,613
249,849
3,875,574
4,734,213
2,272,984
1,679,440
35,874
274,833
4,263,131
5,207,634
2,500,282
1,847,384
39,462
302,317
4,689,444
5,728,397
2,750,310
2,032,122
43,408
332,548
5,158,389
6,301,237
3,025,341
2,235,334
47,748
365,803
5,674,227
6,931,361
720,000
21,600
522,000
123,877
106,734
21,600
14,400
320,203
94,453
5,101
1,949,969
246,191
792,000
23,760
574,200
136,265
130,340
23,760
15,840
391,019
94,453
5,101
2,186,738
564,462
871,200
26,136
631,620
149,891
152,358
26,136
17,424
457,074
94,453
5,101
2,431,393
856,082
958,320
28,750
694,782
164,880
177,476
28,750
19,166
532,429
106,811
5,101
2,716,465
1,187,051
1,054,152
31,625
764,260
181,368
195,677
31,625
21,083
587,031
106,811
5,101
2,978,732
1,325,097
1,159,567
34,787
840,686
199,505
215,245
34,787
23,191
645,734
162,003
5,101
3,320,607
1,413,606
1,275,524
38,266
924,755
219,456
236,769
38,266
25,510
710,307
178,450
5,101
3,652,404
1,555,230
1,403,076
42,092
1,017,230
241,401
260,446
42,092
28,062
781,338
178,450
5,101
3,999,290
1,729,108
1,543,384
46,302
1,118,953
265,541
286,491
46,302
30,868
859,472
178,450
5,101
4,380,864
1,920,374
1,697,722
50,932
1,230,849
292,096
315,140
50,932
33,954
945,419
200,342
5,101
4,822,487
2,108,874
246,191
564,462
67,200
923,282
1,187,051
119,945
1,445,042
123,043
1,536,649
1,555,230
1,729,108
180,570
2,100,944
2,108,874
96,081
96,081
150,109
87,963
87,963
476,499
77,294
77,294
845,989
65,738
65,738
1,121,312
53,224
53,224
1,391,818
39,671
39,671
1,496,978
24,994
24,994
1,530,236
9,097
9,097
1,720,010
2,100,944
2,108,874
Tax
NET PROFIT/(LOSS) AFTER TAX
150,109
7,650
468,849
49,398
796,590
90,697
1,030,615
131,273
1,260,546
147,047
1,349,932
153,547
1,376,689
191,502
1,528,508
267,689
1,833,256
269,275
1,839,600
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
Administration benefits 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
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14
Pre-Feasibility Study
13.2.
Balance Sheet
Balance Sheet
Assets
Current assets
Cash & Bank
Accounts receivable
Finished goods inventory
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
Export re-finance facility
Short term debt
Other liabilities
Total Current Liabilities
Other liabilities
Machinery & equipment lease payable
Office equipment lease payable
Office vehicle lease payable
Deferred tax
Long term debt (Project Loan)
Long term debt (Working Capital Loan)
Total Long Term Liabilities
Shareholders' equity
Paid-up capital
Retained earnings
Total Equity
TOTAL CAPITAL AND LIABILITIES
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
202,941
2,695
85,388
261,000
552,024
271,886
81,878
90,140
3,621
114,699
287,100
849,323
638,279
90,933
102,867
4,655
147,482
315,810
1,300,026
1,150,458
108,432
117,239
5,965
188,977
347,391
1,918,462
2,043,460
126,512
133,456
7,235
229,193
382,130
2,921,986
3,144,139
143,127
146,802
8,754
277,323
420,343
4,140,488
4,164,951
157,614
161,482
10,592
335,561
462,377
5,292,578
5,394,446
173,375
177,630
12,817
406,029
508,615
6,672,912
6,738,274
190,713
195,394
15,508
491,295
559,477
8,190,659
8,304,815
209,784
214,933
18,765
594,466
615,424
9,958,187
11,522,321
230,762
236,426
11,989,510
228,500
342,700
112,000
683,200
205,650
308,430
74,667
588,747
182,800
274,160
37,333
494,293
159,950
239,890
149,072
548,912
137,100
205,620
99,381
442,101
114,250
723,272
49,691
887,212
91,400
633,810
198,415
923,624
68,550
544,347
132,277
745,174
45,700
454,885
66,138
566,724
22,850
365,423
264,090
652,363
0
275,961
176,060
452,021
51,011
51,011
1,286,234
45,909
45,909
1,483,980
40,808
40,808
1,835,128
35,707
35,707
2,503,082
30,606
30,606
3,394,693
25,505
25,505
5,053,206
20,404
20,404
6,236,606
15,303
15,303
7,433,389
10,202
10,202
8,767,585
5,101
5,101
10,615,651
12,441,531
47,636
-
58,486
-
69,068
-
80,839
-
90,174
-
100,484
-
112,097
-
125,201
-
140,012
-
126,291
-
47,636
58,486
69,068
80,839
90,174
100,484
112,097
125,201
140,012
126,291
1,157,611
1,157,611
1,029,061
1,029,061
889,841
889,841
739,066
739,066
575,777
575,777
398,935
398,935
207,416
207,416
128,623
150,109
278,733
1,483,980
128,623
618,958
747,582
1,835,128
128,623
1,415,549
1,544,172
2,503,082
128,623
2,446,164
2,574,788
3,394,693
680,545
3,706,710
4,387,255
5,053,206
680,545
5,056,641
5,737,187
6,236,606
680,545
6,433,331
7,113,876
7,433,389
1,157,611
1,157,611
128,623
128,623
1,286,234
SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST
680,545
7,961,839
8,642,384
8,767,585
680,545
9,795,095
10,475,640
10,615,651
680,545
11,634,694
12,315,239
12,441,531
15
Pre-Feasibility Study
13.3.
(2,695)
(85,388)
(261,000)
(349,083)
Year 1
Year 2
Year 3
150,109
94,453
5,101
(81,878)
(90,140)
(925)
(29,311)
(26,100)
47,636
68,945
468,849
94,453
5,101
(9,054)
(12,728)
(1,035)
(32,784)
(28,710)
10,850
494,943
796,590
94,453
5,101
(17,499)
(14,372)
(1,310)
(41,494)
(31,581)
10,583
800,471
1,030,615
106,811
5,101
(18,080)
(16,217)
(1,269)
(40,216)
(34,739)
11,771
1,043,777
Year 4
1,260,546
106,811
5,101
(16,616)
(13,346)
(1,519)
(48,130)
(38,213)
9,334
1,263,968
1,349,932
162,003
5,101
(14,486)
(14,680)
(1,838)
(58,238)
(42,034)
10,311
1,396,069
1,376,689
178,450
5,101
(15,761)
(16,148)
(2,224)
(70,468)
(46,238)
11,613
1,421,014
1,528,508
178,450
5,101
(17,338)
(17,763)
(2,691)
(85,266)
(50,862)
13,103
1,551,244
Year 5
Year 6
Year 7
Year 8
Year 9
1,833,256
178,450
5,101
(19,071)
(19,539)
(3,257)
(103,172)
(55,948)
14,811
1,830,631
Year 10
1,839,600
200,342
5,101
(20,978)
(21,493)
18,765
594,466
615,424
(13,720)
3,217,507
1,157,611
128,623
(128,550)
-
(139,220)
-
(150,775)
-
(163,289)
551,922
(176,842)
-
(191,520)
-
(207,416)
-
1,286,234
(128,550)
(139,220)
(150,775)
388,633
(176,842)
(191,520)
(207,416)
(734,211)
(149,072)
(551,922)
(198,415)
(264,090)
(734,211)
(149,072)
(551,922)
(198,415)
(264,090)
202,941
68,945
366,393
512,180
893,002
SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST
1,100,679
1,020,812
1,229,495
1,343,828
1,566,541
3,217,507
16
Pre-Feasibility Study
13.4.
Marketing
13.5.
Useful Links
17
Pre-Feasibility Study
14.
KEY ASSUMPTION
Table 13: Operating Assumptions
25
30
15
30
15
7.5% of sales
3% on administration expense
Travelling Expense
2.5% of sales
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18