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May, 2014
Pre-feasibility Study Day Care Center (Rs.1.12 Million)
TABLE OF CONTENTS
1. DISCLAIMER ......................................................................................................................... 2
2. PURPOSE OF THE DOCUMENT ......................................................................................... 3
3. INTRODUCTION TO SMEDA .............................................................................................. 3
4. INTRODUCTION TO SCHEME ............................................................................................ 3
5. EXECUTIVE SUMMARY ..................................................................................................... 4
6. BRIEF DESCRIPTION OF PROJECT & PRODUCT ........................................................... 4
7. CRITICAL FACTORS ............................................................................................................ 5
8. INSTALLED & OPERATIONAL CAPACITIES .................................................................. 5
9. GEOGRAPHICAL POTENTIAL FOR INVESTMENT ........................................................ 6
10. POTENTIAL TARGET MARKETS & CITIES ..................................................................... 6
11. PROJECT COST SUMMARY ................................................................................................ 6
11.1 PROJECT ECONOMICS ............................................................................................ 6
11.2 PROJECT FINANCING .............................................................................................. 7
11.3 PROJECT COST ........................................................................................................ 7
11.4 SPACE REQUIREMENT ............................................................................................ 7
11.5 EQUIPMENT REQUIREMENT ................................................................................... 8
11.6 FURNITURE & FIXTURES REQUIREMENT .............................................................. 8
11.7 HUMAN RESOURCE REQUIREMENT ...................................................................... 9
11.8 REVENUE GENERATION .........................................................................................10
11.9 OTHER COSTS.........................................................................................................10
12. CONTACT DETAILS OF DAY CARE CENTRE EQUIPMENT SUPPLIERS ................. 10
13. ANNEXURE.......................................................................................................................... 12
13.1 INCOME STATEMENT ..............................................................................................12
13.2 BALANCE SHEET .....................................................................................................13
13.3 CASH FLOW STATEMENT .......................................................................................14
13.4 USEFUL PROJECT MANAGEMENT TIPS................................................................15
13.5 USEFUL LINKS .........................................................................................................15
14. KEY ASSUMPTIONS........................................................................................................... 17
Pre-feasibility Study Day Care Center (Rs.1.12 Million)
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
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Pre-feasibility Study Day Care Center (Rs.1.12 Million)
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, for young entrepreneurs, with an allocated
budget of Rs. 5.0 Billion for the year 2013-14, is designed to provide subsidised
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Pre-feasibility Study Day Care Center (Rs.1.12 Million)
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 Limited. (FWBL).
Small business loans from Rs. 0.1 million to Rs. 2.0 million with tenure up to 8 years,
inclusive of grace period of 1 year, 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
Life, today, is characterized by independent family system, need for improved living
standards, quality education for children, etc., resulting in increased pressure on
working women to efficiently manage both their professional and domestic
responsibilities. The demand for day care centers is on the rise, specifically by working
mothers (doctors, business women, government servants, corporate employees,
teachers, etc), and the service is deemed as a profitable entrepreneurship opportunity.
Day Care Center is proposed to be located in major cities such as Islamabad, Lahore,
Karachi, Peshawar, Multan, Gujranwala, Sialkot and Quetta etc.
The project features a facility and its ancillary services for children aged 6 months to 5
years in a hygienic and activity based educational environment, facilitated through
trained and educated staff.
The project can be used for a maximum of 30 enrolments, however, keeping in view the
rationale and demand; calculations have been made on the assumption of 23
enrolments for the first year of operations.
Total cost estimate of the project is Rs. 1.12 million with fixed investment of Rs. 0.77
million and working capital of Rs. 0.35 million. Given the cost assumptions, IRR,
payback period and NPV are 47%, 2.39 years and Rs. 2.37 million respectively.
The project will generate direct employment opportunity for 7 persons. Higher return on
investment and a steady growth of business is expected with the entrepreneur
(especially women) having some prior experience in the related field of business.
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Pre-feasibility Study Day Care Center (Rs.1.12 Million)
This pre-feasibility study provides basic information for setting-up a day care centre with
modern learning techniques and extracurricular activities. The proposed centre will offer
a hygienic and efficiently managed care facility for children aged 6 months to 5 years.
The centre would have the maximum capacity of providing service to 30 children;
however, it assumed that 23 enrolments would be made during first year of its
operation.
The proposed centre is recommended to be established in a rented building/house
having around 3,000 sq.ft., covered area with a reasonable front / back yard.
The total project cost for setting up this centre is estimated at Rs. 1.12 million, out of
which, the capital cost is estimated at Rs. 0.77 million and working capital of Rs. 0.35
million. The project is financed through 90% debt and 10% equity. The project NPV is
around Rs. 2.37 million with an IRR of 47% and payback period of 2.39 years.
7. CRITICAL FACTORS
The proposed project has following factors critical to success;
Secured, hazard free, and kids friendly environment is provided at center.
Interior of Center should be designed to attract kids attention and promote
learning. Like colorful walls with educational material, pasting theme oriented
chart papers, and any other cost effective mode deem appropriate.
Developing plan of daily activities of enrolled kids.
Extra care should be given to keep the place hygienic, and clean.
Location of the center in a commercial area.
Opening of center with proper launch and promotional material.
Hiring of a well-trained / experienced care provider for kids.
Establishment of the Center in a rented building to reduce the project cost.
Parents are informed immediately in case of strike, kid is unwell (fever, flue,
diarrhea, etc.), diaper rash and any other observation important for child
development.
Frequent interaction between care provider and parent.
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Pre-feasibility Study Day Care Center (Rs.1.12 Million)
(i.e. 23 kids would be enrolled). This initial capacity is assumed to grow at a constant
rate of 5% in subsequent years.
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Pre-feasibility Study Day Care Center (Rs.1.12 Million)
Returns on the scheme and its profitability are highly dependent on the efficiency of
operations, location, staff, hygienic environment, safety, curricular and extracurricular
activities, etc.
11.2 Project Financing
Following table provides details of the equity required and variables related to bank
loan;
Table 2: Project Financing
Description Details
Total Equity (10%) Rs.112,385
Bank Loan (90%) Rs.1,011,466
Markup to the Borrower 8%
Tenure of the Loan (Years) 8
Grace period (year) 1
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Pre-feasibility Study Day Care Center (Rs.1.12 Million)
and attached bath, one drawing / dining room, one kitchen and a reasonable front /
back yard. The rent for the building is estimated at Rs. 40,000 per month.
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Pre-feasibility Study Day Care Center (Rs.1.12 Million)
It is highly recommended that nannies should be qualified females so that parents can
be assured of about their childs proper care and safety. The nannies should be at least
intermediate pass with good communication skills and empathy for children, and
preferably trained for childcare. Moreover, the owner/manager should develop a daily
plan for kids activities including:
1
It is assumed that 1 nanny is required for 5-6 children.
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Pre-feasibility Study Day Care Center (Rs.1.12 Million)
One hour circle time daily full of action, music and fun for kids (covering nursery
rhymes, alphabets/colors/number recognition songs and physical moves acted
together kids and caregivers)
Colouring, pasting, and painting activities
Share with kids concept of different festivals of Pakistan (Pakistan day, Eid, Iqbal
Day, Quaid-e-Azam Day, etc)
Also give them other basic ideas regarding family, places, senses, body parts,
manners, greetings, sharing, seasons, days, transport, animals, etc.
Play time (indoor & outdoor)
Nap time
Dinning (Breakfast, lunch, tea time, and for infants feed every 2 hours)
Diaper change every 3-4 hours or as desired.
Each child Parent be asked to send a daily diary to record daily report of their child. This
will include recording child meal times and quantity eaten, milk/ water intake time and
ounces consumed, theme of the week, diaper changes, any unusual occurrence (fever,
vomit, fight, etc).
11.8 Revenue Generation
It is proposed that infants of more than 6 months of ages to children of 5 years of ages
be enrolled in the center. The project would have a total capacity of 30 enrollments.
However, keeping in view market research and analysis, it is assumed that project
capacity would be 23 enrolments in year 01 of its operation.
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Pre-feasibility Study Day Care Center (Rs.1.12 Million)
Other local wholesale market in different cities maybe contacted for the said purpose.
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Pre-feasibility Study Day Care Center (Rs.1.12 Million)
13. ANNEXURE
Income Statement
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Revenue 2,208,000 2,534,400 3,020,160 3,449,952 3,794,947 4,174,442 4,591,886 5,051,075 5,556,182 6,111,800
Cost of sales
Operation costs 1 (direct labor) 828,000 910,800 1,001,880 1,277,760 1,405,536 1,546,090 1,700,699 1,870,768 2,057,845 2,263,630
Total cost of sales 828,000 910,800 1,001,880 1,277,760 1,405,536 1,546,090 1,700,699 1,870,768 2,057,845 2,263,630
Gross Profit 1,380,000 1,623,600 2,018,280 2,172,192 2,389,411 2,628,352 2,891,188 3,180,306 3,498,337 3,848,171
Earnings Before Interest & Taxes 291,079 428,959 701,011 725,259 918,237 787,066 885,049 992,831 1,111,391 1,241,807
Interest expense on long term debt (Project Loan) 57,881 52,991 46,563 39,602 32,063 23,899 15,057 5,481 - -
Interest expense on long term debt (Working Capital Loan) 26,070 23,867 20,972 17,837 14,441 10,764 6,782 2,468 - -
Subtotal 83,951 76,858 67,536 57,439 46,505 34,663 21,838 7,949 - -
Earnings Before Tax 207,128 352,101 633,475 667,820 871,733 752,403 863,211 984,882 1,111,391 1,241,807
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Pre-feasibility Study Day Care Center (Rs.1.12 Million)
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Assets
Current assets
Cash & Bank 108,996 376,645 674,546 1,218,511 1,780,386 1,326,674 2,043,317 2,837,456 3,716,875 4,880,380 6,772,092
Pre-paid building rent 240,000 264,000 290,400 319,440 351,384 386,522 425,175 467,692 514,461 565,907 -
Total Current Assets 348,996 640,645 964,946 1,537,951 2,131,770 1,713,196 2,468,491 3,305,148 4,231,336 5,446,287 6,772,092
Fixed assets
Machinery & equipment 252,500 227,250 202,000 176,750 151,500 532,904 466,988 401,073 335,158 269,242 203,327
Furniture & fixtures 452,000 406,800 361,600 316,400 271,200 953,951 835,955 717,960 599,965 481,970 363,975
Office equipment 27,500 22,000 16,500 11,000 5,500 44,289 35,431 26,573 17,716 8,858 -
Total Fixed Assets 732,000 656,050 580,100 504,150 428,200 1,531,143 1,338,375 1,145,607 952,839 760,070 567,302
Intangible assets
Pre-operation costs 42,855 34,284 25,713 17,142 8,571 - - - - - -
Total Intangible Assets 42,855 34,284 25,713 17,142 8,571 - - - - - -
TOTAL ASSETS 1,123,851 1,330,979 1,570,759 2,059,243 2,568,541 3,244,340 3,806,866 4,450,755 5,184,175 6,206,358 7,339,394
Shareholders' equity
Paid-up capital 112,385 112,385 112,385 112,385 112,385 112,385 112,385 112,385 112,385 112,385 112,385
Retained earnings 207,128 559,229 1,169,356 1,810,394 2,628,867 3,345,910 4,157,140 5,071,790 6,093,973 7,227,009
Total Equity 112,385 319,513 671,614 1,281,741 1,922,780 2,741,252 3,458,295 4,269,525 5,184,175 6,206,358 7,339,394
TOTAL CAPITAL AND LIABILITIES 1,123,851 1,330,979 1,570,759 2,059,243 2,568,541 3,244,340 3,806,866 4,450,755 5,184,175 6,206,358 7,339,394
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Pre-feasibility Study Day Care Center (Rs.1.12 Million)
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Operating activities
Net profit 207,128 352,101 610,128 641,038 818,473 717,043 811,230 914,650 1,022,183 1,133,036
Add: depreciation expense 75,950 75,950 75,950 75,950 75,950 192,768 192,768 192,768 192,768 192,768
amortization of pre-operating costs 8,571 8,571 8,571 8,571 8,571 - - - - -
Deferred income tax - - - - - - - - - -
Pre-paid building rent (240,000) (24,000) (26,400) (29,040) (31,944) (35,138) (38,652) (42,517) (46,769) (51,446) 565,907
Cash provided by operations (240,000) 267,649 410,222 665,609 693,615 867,855 871,159 961,481 1,060,649 1,163,505 1,891,712
Financing activities
Project Loan - principal repayment - (77,441) (83,869) (90,830) (98,369) (106,533) (115,376) (124,952) - -
Working Capital Loan - principal repayment - (34,880) (37,775) (40,910) (44,305) (47,983) (51,965) (56,278) - -
Additions to Project Loan 697,370 - - - - - - - - - -
Additions to Working Capital Loan 314,096 - - - - - - - - - -
Issuance of shares 112,385 - - - - - - - - - -
Cash provided by / (used for) financing activities 1,123,851 - (112,321) (121,644) (131,740) (142,674) (154,516) (167,341) (181,230) - -
Investing activities
Capital expenditure (774,855) - - - - (1,178,893) - - - - -
Acquisitions
Cash (used for) / provided by investing activities (774,855) - - - - (1,178,893) - - - - -
NET CASH 108,996 267,649 297,901 543,965 561,875 (453,712) 716,643 794,140 879,419 1,163,505 1,891,712
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Pre-feasibility Study Day Care Center (Rs.1.12 Million)
Human Resources
Marketing
Ads & P.O.S. Promotion: Business promotion and dissemination through banners, and
launch events is highly recommended. Product brochures from good quality service
providers. Also, have facebook page which is updated regularly.
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Pre-feasibility Study Day Care Center (Rs.1.12 Million)
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Pre-feasibility Study Day Care Center (Rs.1.12 Million)
Particular Assumptions
Depreciation Rate
Enrolment Capacity 30
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