Business plan

Of

ECO FASHION PAPER BAGS

By- SANTOSH WATPADE

(MBA finance)
santoshwatpade@yahoo.co.in , santoshwatpade10@gmail.com

Eco-Fashion Bags Pvt. Ltd.

MIDC, Patalganga, Dist- Raigad, Maharashtra.

Email- ecofashion@gamil.com, paperbags@yahoo.com

Telephone No. -
Fax No.-

1
 Table of contents

Sr. No. Topic Head Page No.

1 Table of contents 03
2 Executive summary 04
3 Company profile 05
4 Product profile 07
5 Marketing plan 09
6 Operation plan 14
7 Human resources plan 18
8 Finance plan 22
9 Abbreviations

2
Executive Summary

EFBPL Company offers eco-friendly paper bags to the people who adore nature at the

Same time believe in following current fashion trends.

Our clients are malls, multiplexes, Departmental stores, gift shops, hyper markets,
super markets, specialty stores, etc. GG Company offers variety of paper bags of
proven quality to satisfy different requirements of customer.

Changing lifestyle & fashion has been a major factor of growth of this industry. Ban
on plastic bags in many states is like a ray of hope for this industry. Market
penetration strategy has been used to gain & expand market share. Trusted employees
and skilled employees secure future growth of the organization.

EFBPL Company is a private company formed by eleven promoters. Promoters will

be taking hands on management roles in the company. Each Promoters contribution
will be Rs. 200000 and rest of capital will be raised through bank loan. Based on the
size of our market and our defined market area, our sales projections for the first year
are 7200000 units.

Because of our endless efforts we are confident to achieve our vision which is “To
become a proactive, integral & responsible member of our environment &
communities & become a strong global supply base for world class products.”

3
Company profile:

Eco fashion paper bags pvt. Ltd. Is one of the emerging paper bags company in
Maharashtra. We are into the manufacturing of eco friendly paper bags as there is
increasing awareness of hazards of plastic bags to the environment among the people,
and the ban imposed on plastic bags throughout India

Vision :

To become a proactive, integral and responsible member of our environment and

communities making us a strong global supply base for world class products.

Mission:

To constantly grow the customers by designing superior and cost effective product
through contribution of ideas.

Values:

Excellence
Integrity
Passion
Teamwork
Commitment

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Company logo:

The logo contains the picture of earth supported by three green arrows. The blue
colour of earth symbolizes coolness, royalty and consistency. The supporting three
green arrows indicate that the company is highly concerned about protecting the earth
environment.

We are focussing on automated processes and quality of products where as most of the
industries in this sector are still using manual and semiautomated processes. We are
stirving to replace the plastic bags by our ecofriendly paper bags.

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PRODUCT PROFILE:

Environmental issues have been driving market towards use of more eco-friendly
products. Government also join hand by banning the plastic and environmental
hazardous products. This has been a motivation for us to venture in this field.

We are using recycled paper to produce eco friendly paper bags as it not only stop
cutting of trees but also prevent degradation of environment.

Our product is an eco friendly and also stylish, trendy and of high strength and unique
design, we are having flexible manufacturing facilities to produce bags as per
customers specification and needs.

Products range:

The bags of six sizes are being manufactured,

Size ranges from;

18”×24” to 40”×50”.

We can also manufacture bags according to the customers‟ specifications &

requirement.

Product strength:

Our entire product having good busting strength and it is between 18 to 36 g/inch.

Product quality:

We are committed to produce superior quality products. Raw material is being

purchased from selected reputed supplier.

Product price:

Our price range is between Rs 3 to Rs10.

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Total Company Risk

Product Market Risk

Customer loss
Product Obsolescence
Competition Increases
Product Demand Decreases

Financial Risk
Capital cost change
Inflation
Default on debt
Exchange rate changes

Legal Risk
Shareholder lawsuits
Employee discrimination lawsuits

Regulatory Risk
Environmental law change
Price support ends

Tax Risk
Income tax increases
VAT and Excise tax increases

Input risk
Input price increases
Labor strikes
Key employees leave
Supplier fails

Operational Risk
Machinery breakdown
Product defect increases
Inventory Obsolescence

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MARKETING PLAN

EXECUTIVE SUMMARY (Marketing):

With paper bags we would first target the big cities of Maharashtra like Mumbai,
Pune, Nagpur, Nasik, Aurangabad and Kolhapur. And our plant location would be a
place between Mumbai and Pune [Patalganga] which is very advantages because our
majority of customer resides in Mumbai and Pune.

The current demand of the product in six cities is around 40lakhs/month and is
expected to go high because the customer becoming more environment friendly and
the government restriction on plastic bags has been helping this industry to grow.

Fashion and lifestyle of the customers are also changing has been an important factor
for the growth of this industry.

Consumer acceptance and brand recognition are the major barriers for us to enter in
the market. We are new in this industry we need to first build trust, develop
relationship with customer, develop our brand and win customer loyalty.

Our product quality is as good as our competitors but our USP is price of products, we
operate at low margin to build market share excellent network of transport help us to
reach customers at right time, at right place with right product.

We are ready to provide the higher credit than the existing supplier initially. We are
committed to excellent quality of high strength and flawless products. The key to
success would be excellent service, quality products at a reasonable price and sales
force capabilities.

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SWOT analysis

Strength:

Low cost with high quality

Dedicated & punctual staff
On time delivery
Favorable access to distribution networks

Weaknesses:

Entry.
Inexperience.
High cost structure.
Limited area of operation.
Not able to enjoy economy of scale.

Opportunities:

Scope of export.
Large market.
Changing of lifestyle / fashion.
Environmental conscious customer.

Threats:

Large number of competitors.

Threats of substitute product.
Highly sensitive & volatile market.
New regulation.

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MARKETING STRATEGY

Marketing objective:

Within three years we would like to expand our business to rest of the big cities of
India and will become important domestic player in terms of market share. In fourth
year of our business we will export our product and would go for backward
integration.

Target market:

Our customers would be malls, multiplexes, hypermarkets, supermarkets,

departmental stores, speciality stores, gift shops etc. Our target market is six cities in
Maharashtra and we are focussing primarily on Mumbai, Pune but there are also plan
for other cities too.

Demand forcast:

The Demand of the product in six cities is around 40lakhs units/month.

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Strategies:

Low pricing strategy we are using because of large number of competitors in the
market. We are using market penetration strategy by keeping low price we would
enter in to the market and expand our customer base and increase our market share.

Promotion:

For promoting our product we using following strategies like;

Discounts,
Salesperson incentives,
Word of mouth,
Friends‟ network,
Commission to sale person, credit to customers,
catalogs,
Contract with the NGOs working on environment friendly projects like use of
paper bags,
Travelling and other incentives etc.

Promotion budget would be Rs 3 lakhs for first year, 5 and 8 lakhs for second and
third year respectively.

Market research:

Data is collected by two ways primary data collection and secondary data. Primary
data through buyers‟ intention survey in which information is collected about their
buying intensions, buying quantities, their existence suppliers etc.

Secondary data is collected from industry trade journals, experienced industry people
i.e. experts etc. Sample size were 170[6 cities] and conveyance sampling is used.

Competitors:
1. A.L paper house, jaipur, Rajasthan.
2. Delhi paper bag manufacturer, Delhi.
3. Vishal paper bag company, Mumbai, Maharashtra.

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Sales forecast:
On the basis of buyer intention survey the sales is forecasted to be around 6 lakhs
units/ month. Our capacity is 10 lakhs units/ month. We have decided to use only 60%
of our production capacity in first year. Our target sales would be around 6 lakhs
units/month in 6 cities which is under our production capacity.

CONTROLS:

Marketing organisation:

1 sales manager will be responsible for the sale in six cities.

7 salesmen; 3 for Mumbai, 2 for Pune, 1 for Nasik and Nagpur and 1 for Aurangabad
and Kolhapur [first year]

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OPERATION PLAN
A) Plant Location:-

The plant location for the manufacturing of paper bags is at PATALGANGA

MIDC (RAIGAD) Maharashtra.

Distance from Mumbai is 75 kms.

Distance from Pune is 77 kms.
Size of land= 2000 Sq ft.
Approximate cost of land= Rs 540000 (270 Rs, per Sq Ft).
Approximate construction cost= Rs 510000.
Power requirement for plant= 3phase,

Location Advantages:-

1) Reasonable cost of land.

2) Infrastructure facilities.
3) Transportation facilities.
4) Near to target market.
5) Easy availability of skilled and unskilled labour.

B) Plant Machineries and Equipment:-

I) Automatic Paper Bag Manufacturing Machine.

Number of machine= 1.
Cost of machine = Rs 4,80,000/-
Size of machine= 12‟x 6‟x 5‟ (in feet).
Production capacity= 30,000 bags per shift (8 hrs).
Utilized capacity = 24,000 bags per shift

II) Automatic Screen Printing Machine.

Number of machine= 2.
Cost of each machine= Rs 22,000/- for 1 machine.
Size of machine= 3‟x4 ‟x 4 ‟ (in feet).
Production capacity = 12000 bags per shift (8 hrs).
(Single machine)

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 III) Eylet Machine.
Number of machine=3.
Cost of each machine= Rs 20,000/- for 1 machine.
Size of machine= 2‟x 1, 1/2‟x 4‟ (in feet).
Production capacity =6000 bags per shift (8 hrs).

IV) D-Shape Eylet Machine.

Number of machine=1.
Cost of machine= Rs18, 000 /-
Size of machine= 2‟x 1.1/2‟x 4‟ (in feet).
Production capacity= 6000 bags per shift (8hrs).

C) Plant Layout:-
The „U‟ shape plant layout is taken into consideration for easy and smooth flow
of materials from one machine to another. The sequence of machineries is
arranged in specific manner according to their respective production capacity
and flow of materials so that there should not be the problem of Bottle Necks.

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FIGURE OF PLANT LAYOUT:-

P
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MATERIAL
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D) Raw Material Requirement:-
For producing the paper bags the CRAFT Paper is used as a raw material.
The required specification is in terms of Busting Factor and GSM of the paper.
For producing the quality bags the busting factor of the craft paper should
range between 18 to 36 g/inch and the GSM of the paper is between 120 to
400.

Average paper consumption for 1 bag= 125 gm (Avg. of all sizes of bags).
In one shift of 8 hours 24000 bags are produced and required approximate 3000
kgs of raw materials i.e. 3 tones of craft paper every day. In a month of 25
working days 75 tones of craft paper is needed.

E) Suppliers :-
The supplier plays an important role for supplying the raw materials on time, at
reasonable cost and at high quality. If the supplier fails then production of bags
becomes in danger so the company have 4 suppliers to avoid the risk of falling
short of raw materials.

I) Name of supplier: - Premium Paper & Board Industries Ltd.

Address: - A/604, Kol-Dongri Cooperative Housing Society, Parsiwada
International Airport Road, Andheri East, Mumbai, Maharashtra.
Contact No.:-91-22-3294187, 91-22-2825212
E-mail id:-

II) Name of supplier:-Rama Pulp & Paper Ltd.

Address:-1, Chateau Windsar, 86 Veer Nariman Road, Mumbai, Maharashtra.
Contact No.:-91-22-22875653, 91-22-22875652
E-mail id:-

III) Name of supplier:-Kay Pulp & Paper Mill Ltd.

Address:-Mai-fair Eleganza, B-7, NIBM Road, Kondhawa, Pune, Maharashtra.
Contact No.:-020- 26833754, 020 -26831787.
E-mail id:-

IV) Name of supplier:-Aerographic Papers Pvt. Ltd.

Address:-E-40, MIDC, Hingna Industries Area, Nagpur, Maharashtra.
Contact No.:-91-7104-234689, 919422146489.
E-mail id:-

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HUMAN RESOURCE PLAN

The most important asset of EFBPL is the workforce alleged in it. In our organisation,
the human asset will be considered as profit centre, not as cost centre.

Organisation structure of the company shows the line of authority and the work
function in the concerned organisation. The organisation structure of the company is
stated as below-

The employees in an organisation are differentiated as-

1. Administration workforce

2. Manufacturing workforce

a. Administrative workforce –

The administrative workforce will include the management which includes the people
which are not involved in production of the product directly but they play important
role in generating desired profit for company. The administrative workforce will deal
with the business policy and strategies required for the growth of the organisation.

The administrative workforce and their payment are stated as below-

1st year 2nd year 3rd year

Salary/ Salary/ Salary/
No. of head / No. of head / No. of head /
position month position month position month
Name of position (Rs.) (Rs.) (Rs.)

Finance Manager 1 12000 1 13000 1 14000

Sales Manager 1 12000 1 13000 1 14000

Clerk 1 4000 1 4500 1 5000
Salesman 7 8000 10 8000 12 8500
Guard 3 2500 3 2500 3 3000
Asst. sales
1 9000
manager

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b. Manufacturing workforce-

The manufacturing workforce will be the people who are actually working on the
machine and they are related to the plant level processes. They are the people who are
actually producing the desired product. It includes the plant-level employees and deals
with daily functions in company.

The manufacturing workforce and their payment are stated as below-

1st year 3rd year

nd
2 year

Salary/wages Salary/wages Salary/wages

No. of No. of No. of
per head per per head per per head per
position position position
Name of month (Rs.) month (Rs.) month (Rs.)
position
Supervision 1 8000 1 8500 2 9000
Skilled 1 6000 2 6500 2 7000
Unskilled 6 4000 8 4500 12 5000
Helper 1 2000 1 2500 2 3000

Various HR related issues-

 Bonus –

The bonus will be given as per the guidelines provided by the law. As the company is
stared newly, the rate of bonus will be minimum, i.e. 8.33% of the annual income. The
rate of bonus will be revised in coming years depending on the net profit of the
company.

 Attendance

Every employee is bound to present in the company premises during the working
hours. The employee is supposed to make an entry before entering in and leaving
company premises.

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 Annual leave with wages –

As per the factories Act, 1948 the employees are liable to annual leave with wages if
they complete 240 days in a calendar year. So the employee will be entitled for one
leave for 20 days actual working.

 Holidays-

Every employee will be entitled for holiday for 15 days (including National holidays).
It will be decided as per the list of holidays provided by Maharashtra state.

 Working hours-

The minimum hour of working is 8 hours per day. There will be six working days per
week. If required, the employee can do overtime but the total no of working hours
should not exceed than 14 hours in a day.

 Safety and health-

All the machinery will be properly fenced with safeguard. The machines which are
involved are so sophisticated and safe, that it reduced the probability of accidents in
company. The company will also pay attention to the guidelines for the safety and
health given in Factories Act, 1948.

 Benefits –

The employee will be entitled for the different benefits provided by the Employer‟s
State Insurance Act, 1948. Different benefits such as disability benefit, sickness
benefit, dependant benefits etc. will be provided by the company under the law.

 Record Maintenance

The record will be maintained related to the workforce such as time keeping and
attendance leaves, and other issues as well.

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Measures for motivating our employees-

As we stated before, the human workforce is the highly-ranked source for the
company. Hence we are paying proper attention to this area of concern. We will be
handling the issues related to employees with great care.

At initial stage, we are planning to schedule a small meeting every Saturday before
leaving the premises. The meeting would be conducted in presence of every
employee of the company. This session will be for open discussion. Here, the
workman can discuss any important point related to working condition and such
issues. This will help in enhancing the communication between different
departments of the organisation and help to reduce disputes.

Also we are bound to maintain proper working environment for our employees. The
employees will be provided by safe and excellent working condition, so the desired
productivity can be achieved.

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 FINANCIAL PLANNING

Assumptions

a) Inflation rate may vary between 4%-6%.

b) Sales target will be achieved according market research and production capacity.

c) Capital cost may vary but marginally

Financial policies

a) The rate of depreciation of fixed assets is 10% per annum

b) Purchases will be purchased on 45 days credit.

c) Sales will be made on one month credit.

d) Raw material will be in stock for 1 month for 1st year and for 15 days from 2nd year
onwards

e) Finished goods will be in stock for 15 days.

f) Extra cash will be invested in treasury bills and government bonds.

g) Profit margin will be 6 % on cost of capital

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Financial details

a) Capital requirement

i) Fixed assets

Particulars Amount Rs.

Furniture 50000
Land and building 1050000
Machinery 602000
Total 1702000
ii) Working capital requirement

Particulars Amount Rs.

Current assets
Closing stock 3611241
Loan and advances 400000
Sundry debtors 2666483
Cash in hand 20765
Investment (short term) 1800000
Current liabilities
Sundry creditors 4556000
Dividend 275000
Tax provision
Indirect tax 758851
Direct tax 637633
Net working capital 2271008

iii) Capital requirement

Particulars Amount Rs.

Fixed assets requirement 1702000
Working capital requirement 2271008
Total 3973008

b) Capital sources

Particulars Amount Rs.

Promoters contribution 2200000
Bank() Loan 1800000
Total 4000000

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c) Projected Cost Sheet

Particulars 1st year 2nd year 3rd year

Raw Material 27336000 41040000 64800000
Labour 480000 720000 1176000
Power 42000 84000 120000
Fuel & Others 30000 42000 66000
Direct cost 27888000 41886000 66162000
Administrative exp.
Electricity 18000 18000 24000
Repairs 12000 18000 24000
Postage 14400 24000 24000
Packaging & forwarding 60000 84000 108000
Telephone 54000 72000 84000
Legal charges 10000 10000 10000
Salary 1098000 1416000 1836000
Interest 216000 216000 216000
Stationary 24000 36000 48000
bonus & other 96000 120000 153000
Depreciation 120200 157180 141462
Insurance 36000 36000 36000
Administrative cost 1758600 2207180 2704462
Selling and distribution
Travelling & Conveyance 240000 360000 500000
Promotion 300000 500000 700000
Sales exp. 540000 860000 1200000
Selling overheads 2298600 3067180 3904462
Total Cost 30186600 44953180 70066462
Profit@6% 1811196 2697190.8 4203987.72
Sales 31997796 47650370.8 74270449.7
Price p.u 4.44 3.97 4.13
Excise 2559823.68 3812029.66 5941635.98
Total 34557619.7 51462400.5 80212085.7
VAT 4319702.46 6432800.06 10026510.7
Gross sales 38877322.1 57895200.5 90238596.4
Gross sales p.u 4.63 4.82 5.01

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d) Projected Trading & P&L A/c
For the year ended ……………
Year
Particulars 2009-10 2010-11 2011-12
Sales 38877322 57895200 90238594
(-)excise 2559823 3812029 5941635
(-)VAT 4319702 6432800 10026510
Net sales 31997796 47650371 74270448
closing stock 3611247 3576182 4389204
Total 35609043 51226553 78659652

Opening stock 3611247 3576182

Purchase 34597125 46170000 72900000
(-) VAT 3844125 5130000 8100000
Net Purchase 30753000 41040000 64800000
Labour 480000 720000 1176000
Power 42000 84000 120000
Fuel & Others 30000 42000 66000
G.P 4304043 5750696 8521470
Total 35609043 51226553 78659652

G.P 4304043 5750696 8521470

indirect income 37500 37500
Total 43040443 5788196 8558970

Electricity 18000 18000 24000

Repairs 12000 18000 24000
Postage 14400 24000 24000
Packaging & forwarding 60000 84000 108000
Telephone 54000 72000 84000
Legal charges 10000 10000 10000
Salary 1098000 1416000 1836000
Interest 216000 216000 216000
Stationary 24000 36000 48000
bonus & other 96000 120000 153000
Depreciation 120200 157180 141462
Insurance 36000 36000 36000
Travelling & Conveyance 240000 360000 500000
Promotion 300000 500000 700000
income tax 637630 889955 1398602
Net profit 1367808 1831061 3255906
Total 4304043 5788196 8558970

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e) Balance Sheet
As on …….

Liabilities Year
Share capital 2200000 2200000 2200000
Loan 1800000 1800000 1800000
Sundry creditors 4556000 3420000 4878000
Dividend 275000 825000 1100000
Tax provision
Indirect tax 758851 1272554 1967035
Direct tax 637633 889955 1056616
Profit and loss a/c 1092805 2098868 4254775
Total 11320289 12506377 17256426
Assets
Fixed assets
Furniture 50000 45000 40500
Land and building 1050000 1000000 955000
Machinery 602000 1076800 969120
New machinery 540000
(-) depreciation 120200 157180 141462
Net fixed assets 2121800 1964620 1823158
Investment (fixed assets) 700000 700000 2050000
Closing stock 3611241 3576182 4389205
Loan and advances 400000 400000 800000
Sundry debtors 2666483 3961324 5672735
Cash in hand 20765 104251 71328
Investment (short term) 1800000 1800000 2450000
Total 11320289 12506377 17256426

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f) Cash Flow Statement
Year
Particulars
2009-2010 2010-2011 2011-2012
Inflow
Share Capital 2200000
Loan from bank 1800000
Tax collected 6879526 21772922 28803927
Sales 29331313 43689047 68081244
Current assets received 9016483 12577793
Indirect Income 37500 37500
Total 40210839 74515952 109500464
Outflow
Fixed Assets 2942000 1350000
Current Assets 2200000 6350000 9550000
Purchase 26197000 37620000 59400000
Direct Expenses 552000 846000 1362000
Indirect Expenses 2178400 3547633 3763000
Current Liabilities Paid 6120675 26090219 34108387
Total 40190075 74453852 109533387

Net Cash Inflow 20764 62100 -32923

g) Ratio Analysis
Years
Particulars 2009-2010 2010-2011 2011-2012
Current Ratio 1.36 : 1 1.65 : 1 1.56 : 1
Quick Ratio 0.78 : 1 1.09 : 1 1.08 : 1
Debt Equity Ratio 0.60 : 1 0.52 : 1 0.37 : 1
Gross Profit Ratio 13.45% 12.07% 11.47%
Net Profit Ratio 4.27% 3.84% 4.38%
Working Capital Turnover 14.09 11.53 14.62
Inventory Turnover 8.86 13.32 16.92

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 h) Discounted cash flow Statement
Cash flow PV Factor (10%) Discounted Cash flow
1367808 0.909 1243337
1831061 0.826 1512456
3255906 0.751 2445185
4232678 0.683 2890919
5502481 0.621 3417041
7153225 0.564 4034419
9299193 0.513 4770486
12088951 0.466 5633451
15715636 0.404 6349117
20430327 0.385 7865676
Total Discounted Cash Flow 40162089
Discounted Cash Outflow 4490860
Net Present Value 35671229

i) Break Even Analysis

A break even analysis predicts the sales volume, at a given price, required to recover total costs. In
other words, it’s the sales level that is the dividing line between operating at a loss and operating at
a profit.

a) BEP IN UNITS = Fixed Cost / (Selling Price – Variable Cost)

= 3657200 / (4.45 – 3.91)

= 6416140 (units)

b) BEP IN RUPEES = BEP in Units × Selling Price per Unit

=6416140 × 4.45

= 28487662 (Rs.)

c) Break Even Point will be achieved in 10.6 Months

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Abbreviations

EFBPL– Eco Fashion Bags Pvt.Ltd.

GSM – Grams per Square Meter.

SWOT- Strength, Weakness, Opportunity, Threats

GM- Gram Per Meter.

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