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LAUNDRY SERVICE 2017
1 Complied by: iBEST Consultancy, 2017
1 Executive Summary
This report is a detailed feasibility study on the Laundry services in Bhutan. People of today are
very particular about their dress material, furnishing, and linen, especially during public
appearances. People prefer to wear and use expensive, well cleaned and ironed dress materials.
Expenditure in clothing is increasing, including expensive clothes; therefore, the demand of
taking care of clothes also increases. With that it has opened the scope for laundry services and
dry Cleaning units. Initially the business will be located at Olakha where there are hotels and
colonies in need of laundry services.
A laundry service will help in Cleaning including any kind of laundry that are brought to the
laundry business be it from shirts to suits to evening dresses, and even curtains, carpets and bed
linens. Laundry services will do the necessary washing, ironing, dyeing, bleaching, patch
repairing, polishing and dry cleaning. For laundry services, you do not even have to go and
collect it, but they will deliver it right up to your doorstep.
The main reasons for selecting the location are as follows:
There is continuous flow of water
Numbers of hotels, shops and resident around that particular area
Have the advantage of monopoly
There is water shortage at Changjiji colony which is a scope for the business
The location has all the necessary prerequisites.
The report presents in detail the justification of the project, market analysis of Laundry Services
resources required, and technology used, Service location, cost presentation and financial
analysis.
(i) Justification of the Project: With the growth of Urbanization, washing of cloths has turned
out to be a commercial proposition and led to the establishment of modern laundry services
with dry cleaning units in the cities as well in big towns. The services of these units are very
prompt and efficient.
(ii) Market Analysis: The hotels those are located at Olakha is currently availing the laundry
services located at the main town as there is no nearby laundry business. Therefore, they are
ready to avail the laundry services from the proposed business where the costs are
comparatively low than the other laundry business.
(iii)Resources required: The main raw material for laundry services is water. Apart from this, the
unit requires electricity, laundry detergent which is also easily available in Bhutan.
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(iv) Technology required: Laundry Services is committed in preserving the earth’s resources
which will only use high-efficiency equipment to reduce water and energy use.However
technical details have been provided along with necessary financial analysis.
(v) Service Location: The proposed business will be established in and around Olakha.
(vi) Cost Presentation and Financial Analysis:
Table 1: Project Summary
Fixed cost 563,800
Working capital 92,100
Total investment 655,900
Break Even Point (BEP) 13426
Return On Investment (ROI) 22%
Pay Back Period 0 Year and 6 Months
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TABLE OF CONTENTS
1 Executive Summary ...................................................................................................................................... 1
1.1 Business Model Canvassing ............................................................................................................... 5
2 Justification of the Project ........................................................................................................................... 6
2.1 The need for the project ....................................................................................................................... 6
2.2 Benefits of hiring Laundry services ................................................................................................. 7
2.3 Competition Analysis ........................................................................................................................... 8
3 Market Analysis .............................................................................................................................................. 8
3.1 Demand vs. Supply ............................................................................................................................... 8
3.2 Pricing & Marketing Strategies ......................................................................................................... 9
3.3 Competitiveness of the project ....................................................................................................... 10
3.4 SWOT Analysis .................................................................................................................................. 10
3.5 Special attributes desired by target customers ........................................................................... 11
3.6 Assessment of Comparative Advantage ...................................................................................... 11
3.7 Determine potential for marketing collaboration ...................................................................... 11
4 Resources ....................................................................................................................................................... 11
4.1 Sources of inputs including water ................................................................................................. 11
4.2 Comparative analysis of critical inputs ........................................................................................ 12
4.3 Sources of raw Material .................................................................................................................... 12
4.4 Assess the availability of manpower & skills ............................................................................ 12
5 The Plant ........................................................................................................................................................ 12
5.1 Choice of technology ........................................................................................................................ 12
5.2 Source of technology ......................................................................................................................... 13
5.3 Rate of Consumption of power, fuel, utilities & consumables ............................................. 14
5.4 Raw Material Consumption ............................................................................................................. 14
5.5 Man power requirement and organization chart ........................................................................ 15
6 Project Implementation Schedule ........................................................................................................... 16
7 Financial Analysis ....................................................................................................................................... 17
7.1 Total Project Capital Costs .............................................................................................................. 17
7.2 Working Capital Costs ...................................................................................................................... 18
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7.3 Cost of Production per unit .............................................................................................................. 18
7.4 Human Resource cost ........................................................................................................................ 18
7.5 Project Profit and Loss Statement ................................................................................................. 19
7.6 Projected Cash Flow Statement ...................................................................................................... 19
7.7 Projected Balance sheet statement ................................................................................................. 20
7.8 Financial Ratio Analysis .................................................................................................................. 21
7.8.1 Interest on Loan .......................................................................................................................... 21
7.8.2 Break Even Point ....................................................................................................................... 21
7.8.3 Return on Investment ............................................................................................................... 22
7.8.4 Net Present Value and Internal Rate of Return ................................................................. 22
Project Viability: .................................................................................................................................................. 24
References .............................................................................................................................................................. 24
Annexure ................................................................................................................................................................ 25
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1.1 Business Model Canvassing
Key Partners
Loden
Foundation
Banks
Self-Funding
Key Activities
Washing of any
types of items
(Garments and
carpets), Drying,
Ironing and
Collection and
delivery of items
at door steps.
Value
Propositions
Provide
laundry
services to the
customers at a
reasonable
price
Customer
Relationship
Provide
door step
services of
reaching
customers
wears
Customer
Segments
All level of
customers (i.e.,
low, medium
and high income
earners)
specially
targeting to
those who are
office workers
and changiji
colony people
Key resource
Detergent
Continuous
flow of water
Washing
machine
Machine
operators
Channels
Offline: word-of-
mouth, Online:
web and social
medias, Personal
relationship
Cost structure
Workers salary
Delivering services
Cost of washing machine
Revenue Streams
Rendering of laundry services to the
customers
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2 Justification of the Project
2.1 The need for the project
General Scenario: According to the records of CSI 2014, there are thirteen Dry cleaning and
Laundry services within Thimphu region. But yet there are no Laundry services in an around
Olakha, Thimphu. Olakha is also one of the busy areas of Thimphu where most of the people
have resided; there are shops, hotels, schools and workshops established there. With the rapid
development of the country, the living standards of people have changed and they are becoming
more health conscious with cleanliness.
Figure 1 Total Laundry Services in Bhutan
(Source: Department Cottage and Small Industries, MoEA)
According to the Kuensel dated July 25, 2015, Phub Thinley, tenant said that the issue of water
shortage in Changjiji is serious. It has been there for a very long time now. Currently, the
housing complex gets water from a source in Jungshina through the two water tanks located in
Changjiji. There are 746 units of the complex share water from the two tanks with 48 shops and
25 private houses in Changjiji. In charge of Changjiji’s NHDCL branch office, Rinchen Drukpa,
said that after receiving complaints from the residents, the office inquired the thromde but there
has been no clear answer yet. He said that unless thromde supplies enough water from Jungshina,
they can’t do anything about the situation. Therefore, the proposed business was found to be
feasible and successful to start in an around Olakha benefiting Changjiji, Olakha and Babesa area.
133
2
3
1
3
3
2
3
Thimphu
Paro
Wangdue
Chukha
Samtse
Mongar
Sarpang
Tsirang
Samdrupjongkhar
Dzo
ng
kh
ag
s
No. of Laundry Services
Thimphu Paro Wangdue Chukha Samtse Mongar Sarpang TsirangSamdrupjo
ngkhar
No. 13 3 2 3 1 3 3 2 3
No. of Laundry services in Bhutan
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2.2 Benefits of hiring Laundry services
The primary purpose of Laundry Service is to do cleaning, dyeing, bleaching, patch repairing,
polishing and dry cleaning. Laundry services have various needs and benefits and some of them
are:
It saves time. - Instead of facing own laundry and waste valuable hours you can rest after a
hard day and laundry business can do this job. So as not to hassle your schedule, you can
simply drop your laundry off at shop and they will surely be done by the time you get out of
the office. Then you can have fresh and clean clothes in your closet.
Protect the quality of clothes and preserve fabric quality-If the laundry is done by self at
home there are chances of doing it in a wrong way because of not knowing to take care of
specific fabrics. Dry cleaning services are experts at this field. They know what cleaning
agents to use and the proper way to apply them to avoid damaging of clothes.
Helps you look clean and presentable- The clothes you wear say a lot about you. Dry
cleaning services are experts at cleaning all kinds of stain from your clothes and they make
sure that all your clothes are crisp and wrinkle-free once they release them to you.
Eco-friendly laundry practices - Laundry Services is committed in preserving the earth’s
resources which will only use high-efficiency equipment to reduce water and energy use.
Offer a variety of services- A mark of good laundry service is that they can clean not only
different types of clothes, but also different items. They can also provide their services to a
variety of clients, including offices, public houses, nurseries, salons, restaurants, hoteliers
and businesses of different types.
Affordable service- After all the great benefits from hiring a dry cleaning service, it is
surprising to know that it will only cost a little. This is due to the growing competition
between dry cleaning companies. Lower the price charges, the more customers will avail the
services.
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2.3 Competition Analysis
There are around thirteen Laundry services within Thimphu region as per CSI, 2014.
Table 2: Laundry services as per CSI, 2014
Thimphu 13
Paro 3
Wangdue 2
Chukha 3
Samtse 1
Monger 3
Sarpang 3
Tsirang 2
Samdrupjonjkhar 3
Some of the competitors of laundry services at Thimphu are:
1. Tip Top Dry Cleaners
2. Thimphu Homecare
3. DP Laundry and dry cleaners
4. Deepak Dry Cleaners
5. New Light dry Cleaners
6. Jana dry Cleaners- Jungshina
7. Spotless
8. Dry and Wash Service
These are some of the competitors who are providing laundry services in and around Thimphu
but these businesses are rendering their services in town areas.
3 Market Analysis
3.1 Demand vs. Supply
With the change in the living standards of people in the country, people are becoming more
health conscious with cleanliness. People of today are very particular about their dress material,
furnishing, and linen, especially during public appearances. People prefer to wear and use
expensive, well cleaned and ironed dress materials. Expenditure in clothing is increasing,
including expensive clothes; therefore, the demand of taking care of clothes also increases.
Although there are various laundry services in the country, but they were not able to provide
satisfactory services.
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This has opened the scope for laundry services and dry Cleaning units. The market still is in need
of Laundry businesses in Thimphu. They have become more health conscious, cleanness and are
always looking for fashion oriented in the market. There are around twenty laundry businesses
till date in Thimphu but yet there is no laundry business around Olakha.
3.2 Pricing & Marketing Strategies
To attract the customer, the proposed business will determine its selling price by following
penetration pricing method. After comparing the price at which the competitor provides its
services in the market, the proposed business will price its service at:
Table 3: Charges per Unit
Sl. No. Service Charges per Unit
1 Carpet 300
2 Blanket 300
3 Gho 200
4 Kira 200
5 Jacket 150
6 T-shirt 50
7 Pant 150
8 Bed sheet 50
9 Pillow Cover 50
10 Curtain 200
11 Others 400
This marketing effort will call for a strategy based on segmenting. The Laundry services in
Bhutan are primarily an urban phenomenon. It can be classified in to Individual consumers
and Institutional consumers
Further classifications can be done – Individual consumers can be broken down to
High Income
Middle Income
Low income groups
Similarly, Institutional users can be split into the following groups
Hotels & Restaurants
Hospitals
Armed forces
Residential schools & college
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3.3 Competitiveness of the project
The area where the proposed businesses have projected to set up its business needs laundry
services. People residing at that particular location avails the service from the laundry services
located at town area. Moreover, price for the service is comparatively low compared to the price
of other laundry services.
The business aspires to deliver quality services at a reasonable price compare to the current
market price. It is therefore expected that there would be a demand pull at the customer end
which can be further strengthened through innovative promotional strategies. The demand pull is
estimated to be significant ensuring lowering of costs through economies of scale.
3.4 SWOT Analysis
STRENGTH
Door-to-door service
Quick and convenient
Reasonable prices with attractive
discount program
WEAKNESS
Small form of business
No experiences
Limited exposure and advertising
New in the area
OPPORTUNITY
Opportunity from busy people
Increasing number of medium and small
hotels, spa, shops.
THREAT
Changes in their living standard
Existing, well- recognized competition
in the marketplace
SWOT Analysis for the Laundry Services:
The offering of door to door service for dry cleaning and laundry provides another choice for
customers with give the quality or state of being strong business. The quick and convenient
service in order to save a customer’s time and offering a special discount for valuable and regular
customer’s is the strength for the business. Many people have a tight schedule so they consider it
a waste of time doing their laundry. The state or quality of being weak, lack of strength is that a
business is a small form of business and if the location of the service isn’t a good place it will not
be convenient for people to come and serve our service. The competition from already
established business and having less experience than competitors gives weakness to the business.
The threat from well-established competitors. There is a threat from new entrants as there are
relatively low barriers of entry. There is a threat from customers as a majority prefers to do their
own laundry. Laundry price is cheaper than others which help to attract more customers. The
increasing number of medium and small hotels, spa shop which is good for our market and
increasing of disposable income and changing the daily lifestyles. It also just required minimal
time and labor participation in a steadily growing country.
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3.5 Special attributes desired by target customers
In general customers would prefer:
1. High Quality of Fabric used while Washing clothes
2. They would prefer an affordable price: some may prefer to have a credit period
3. Some would look forward to promotional offer
4. Timely delivery in good condition
5. Ready availability
3.6 Assessment of Comparative Advantage
Availability of Water: The reason for establishing laundry service in and around Olakha is
due to the continue flow of water. The main resource for the business is water.
Ready Availability of Laundry detergents: The required laundry detergents is available in
nearby market in Bhutan which is also most important factors that must be taken into
account for service provider.
3.7 Determine potential for marketing collaboration
There is a tremendous potential for marketing collaborations at the customer end of the supply
chain. The unit can think of appointing independent agents or exclusive tie ups with certain
schools, hotels, residents or outlet.
Moreover, the laundry service can collaborate in providing its services with the hospitals, people
of changiji, Olakha and Babesa area.
4 Resources
4.1 Sources of inputs including water
Utilities required by the plant consist of electricity, water and Laundry detergents.
Electricity is required to run the automatic heavy washing machine and to provide lighting for
the business.
Water is required to clean and to wash up the items brought for the services. There is continue
flow of water at the located area.
Laundry Detergents: itis used for cleaning, softening and maintaining the fabric balance. This
Laundry detergent is available in nearby market but it is not manufactured in Bhutan and would
have to be imported.
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4.2 Comparative analysis of critical inputs
Electricity: It plays an important role for the function of heavy washing machine for laundry.
But it would certainly be more cost effective to source power from the grid. Keeping a small
generator as a part of redundancy may be considered to take care of the lighting load.
Water: It is also one of the vital inputs for the success of the business if there is continue flow of
water for the cleaning and washing of items brought for the laundry services.
4.3 Sources of raw Material
The raw material required for the proposed business is laundry detergents which include
detergent powder, detergent liquid, soap, Fabric softener and other raw materials. The laundry
detergents are easily available in nearby town of Bhutan that is from Karma Tshongkhang.
4.4 Assess the availability of manpower & skills
As per the Labor Force Survey Report 2013finds that a total of 335,870 individuals were
employed and 9,916 were found to be unemployed out of a total projected population of 745,939
in 2013, making unemployment rate at the national level by 2.9%.
For this proposed business it required less number of manpower and it doesn’t require high
qualification to do laundry service. The Manager or Accountant should have Diploma in
Account and for skilled worker qualification is not required but they should know the basic
cleaning and should have the knowledge of laundry services.
5 The Plant
5.1 Choice of technology
The major operations involved in the Laundry service are: cleaning, pressing, dyeing, bleaching,
dry cleaning, patch repairing and polishing and home service delivery for all types of clothes and
carpets.
The Laundry service process is given below:
Table 4: Process of Laundry Service
Step 1: Receiving from customers or collecting from customers from their doorsteps.
Step 2: Weighing or counting pieces for normal wash and dry cleaning
Step 3: Washing
Step 4: Drying
Step 5: stretch , if any
Step 6: Ironing ( upon request )
Step 7: Folding
step 8: Packaging
Step 9: Delivery at door steps / Self pick
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5.2 Source of technology
1. Sintex Water Tank
Capacity: 2500L
Supplier’s Details: Goyum Screw Press, India
2. Heavy Duty Washing Machine
Model Number: GL-25F
Brand Name: GLEAD
Place of Origin: Guangdong, China (Mainland)
Voltage: 220/380V
Size: 1000X900X1450mm
Power: 1.5KW
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3. Dry Cleaning Machine with Motor
Model Number: GX
Brand Name: Jinzhilai
Place of Origin: CN;SHG,Shanghai, China
Product name: high speed motor fast dry automatic laundry dry-cleaing machine
Material: stainless steel
Certificate: ISO, CE
4. Sweing machine
Model Number: MQ 3800
Overall Dimensions: 625*250*560mm
Stitch Formation: Chain Stitch
Feed Mechanism: Walking Foot
Brand Name: MIQI
Type: Industrial Sewing Machine
5.3 Rate of Consumption of power, fuel, utilities & consumables
Power Consumption
For this project about 225 KVA (2.5KW) connections will be required. Depending on the
requirements of equipment to be installed in the company. A backup power supply should be
available to ensure that operations can continue during a power interruption.
Water Consumption
The water requirement for cleaning and washing will be approximately 10,000 liters per day
based on the processing capacity of the machine. Water is mostly required for washing. Apart
from it, water will also be required for domestic consumption purpose. The water should be
clean and treated well for hardness before use. Since water is in direct contact with the Laundry
services, it should be continued flow and clean.
5.4 Raw Material Consumption
The raw material required for Laundry Service would be the laundry detergent which could be
directly procured from nearby market.
The table below shows the annual requirement of raw materials:
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Table 5: Annual Requirement of Raw Materials
Sl. No. Description Quantity
1 Detergent Powder (bag) 3,450
2 Detergent Liquid (Litre) 3,705
3 Soap ( Dozen) 750
4 Plastic bag ( bag) 6,000
5.5 Man power requirement and organization chart
The table below shows the manpower requirement:
Table 6: Manpower Requirement
Serial Number Job Title Required No.
1 Manager 1
2 Accountant 1
3 Salesperson 1
4 Cleaner 4
5 Driver 2
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6 Project Implementation Schedule
Implementation Schedule
The table given below shows the project schedule:
Table 7: Project Timeline
PROJECT TIMELINE
Activities 2017
1st Month 2nd Month 3rd Month 4th Month
Feasibility study and
development of the project
proposal
If the project is going to be
funded:
Purchase of the Machineries
and Installation
Purchase of Inventories and
Start of the Service
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7 Financial Analysis
7.1 Total Project Capital Costs
Table 8: Total Project Costs
COMPONENTS OF PROJECT COST
Amount in Nu.
PARTICULARS Forex
Component
Domestic
Component
Total Cost Remarks
Laundry space (security
deposit )
30,000 30,000
Plant & Machinery
Sintex Water Tank (2,500L) 25,000
Heavy Duty Washing Machine 125,000
Dry Cleaning Machine with
Motor
132500
Sewing machine 25,000
Total 307,500 307,500
Vehicle (Delivery van) 140,000 140,000
Miscellaneous Fixed Assets:
Computer 30,000
Office Furniture 17,250
Stationary 3,500
Workers Uniforms 1,350
Laundry Utensils 9,700
Electrical Fittings 7,000
Signboard 2,500
Total Cost 71,300 71,300
Preliminary Expenses 15,000 15,000
Total Project Startup Cost 563,800
Note:
The cost breakdown details of the miscellaneous fixed assets are attached in the
annexure.
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7.2 Working Capital Costs
Table 9: Working Capital Cost
Particulars Monthly Yearly
Advertising 500 6,000
Delivery Expenses 1,500 18,000
Inventory Purchases 39,600 475,200
Miscellaneous 2,000 24,000
Payroll 33,500 402,000
Rent or Lease 15,000 180,000
Utilities & Telephone 500 6,000
Total 92,600 1,111,200
7.3 Cost of Production per unit
Table 10: CPU
Particulars Year 1 Year 2 Year 3 Year 4 Year 5
Total Units 6,240 6,552 7,207 7,928 8,721
Cost of Production 636,000 667,800 701,190 736,250 773,062
Unit Cost of Production 101.92 101.92 97.29 92.87 88.65
7.4 Human Resource cost
Table 11: HRC
Particulars Monthly Year 1 Year 2 Year 3 Year 4 Year 5
Salary &
Allowances 33,500 402,000 422,100 443,205 465,365 488,634
Total 33,500 402,000 422,100 443,205 465,365 488,634
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7.5 Project Profit and Loss Statement
Table 12: P&L Statement
INCOME STATETMENT PROJECTION FOR 5 YEARS
Year 1 Year 2 Year 3 Year 4 Year 5
Revenue 1,344,000 1,411,200 1,552,320 1,707,552 1,878,307
Cost of Goods Sold 493,200 517,860 543,753 570,941 599,488
Gross Profit / (Loss) 850,800 893,340 1,008,567 1,136,611 1,278,820
Expenses 713,070 744,870 778,260 813,320 850,132
Net Operating Income / (Loss) 137,730 148,470 230,307 323,292 428,688
30% BIT On NOI 41,319 44,541 69,092 96,988 128,606
Net Income / (Loss) after BIT 96,411 103,929 161,215 226,304 300,081
Additional Information:
Depreciation Expenses 77,070 77,070 77,070 77,070 77,070
% of Net Income / (Loss) - 7.80 55.12 40.37 32.60
% of Average Net Income / (Loss) 19.41
7.6 Projected Cash Flow Statement
Table 13: Cash Flow Statement
Projected Cash Flow Statement
Year 1 Year 2 Year 3 Year 4 Year 5
Beginning Cash
Balance
325,400 569,840 709,574 1,130,773
Accts. Rec.
Collections 134,400 141,120 155,232 170,755 187,831
Loan Proceeds 656,400
Sales & Receipts 1,209,600 1,270,080 1,209,600 1,536,797 1,690,476
Other:
Total Cash
Inflows 2,000,400 1,411,200 1,364,832 1,707,552 1,878,307
Available Cash
Balance
2,000,400 1,736,600 1,934,672 2,417,126 3,009,080
Advertising 6,000 6,300 6,615 6,946 7,293
Delivery 18,000 18,900 19,845 20,837 21,879
Inventory
Purchases 475,200 498,960 523,908 550,103 577,609
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Miscellaneous 24,000 25,200 26,460 27,783 29,172
Payroll 402,000 422,100 443,205 465,365 488,634
Rent or Lease 180,000 189,000 198,450 208,373 218,791
Utilities &
Telephone 6,000 6,300 6,615 6,946 7,293
Subtotal 1,111,200 1,166,760 1,225,098 1,286,353 1,350,671
Other Cash Out
Flows:
Capital
Purchases 563,800
Subtotal 563,800 - - - -
Total Cash
Outflows 1,675,000 1,166,760 1,225,098 1,286,353 1,350,671
Ending Cash
Balance
325,400 569,840 709,574 1,130,773 1,658,410
7.7 Projected Balance sheet statement
Table 14: Balancesheet
Projected Balance Sheet For 5 Years
Year 1 Year 2 Year 3 Year 4 Year 5
Assets
Cash & Bank 325,400 569,840 709,574 1,130,773 1,658,410
Accounts Receivable 134,400 141,120 155,232 170,755 187,831
Prepaid Expenses 50,000
Total Current Assets 509,800 710,960 864,806 1,301,528 1,846,240
Net Fixed Assets 436,730 408,035 379,340 350,645 309,450
Total Assets 946,530 1,118,995 1,244,146 1,652,173 2,155,690
Liabilities & Capital
Accounts Payable 324,999 621,226 820,371 1,294,589 1,855,609
Total Current Liabilities 324,999 621,226 820,371 1,294,589 1,855,609
Long-Term Notes Payable 525,120 393,840 262,560 131,280 -
Total Long-Term Liabilities 525,120 393,840 262,560 131,280 -
Total Liabilities 850,119 1,015,066 1,082,931 1,425,869 1,855,609
Net Profit 96,411 103,929 161,215 226,304 300,081
Total Capital 96,411 103,929 161,215 226,304 300,081
Total Liabilities & Capital 946,530 1,118,995 1,244,146 1,652,173 2,155,690
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7.8 Financial Ratio Analysis
7.8.1 Interest on Loan
The table below shows the Interest on Loan@ 12%
Table 15: Interest on Loan
Year 1 Year 2 Year 3 Year 4 Year 5
Interest 73,283 60,355 45,788 29,373 10,877
Loan Principle 101,933 114,860 129,427 145,842 164,338
Loan Balance 554,467 439,607 310,180 164,338 0
EMI 175,215 175,215 175,215 175,215 175,215
7.8.2 Break Even Point
The table below shows the Break Even Point
Table 16: BEP
Time Unit Start Unit
Increment
Unit Price Unit Cost Variable Total Fixed Costs
Month - 3,000 215 178 513,800
BREAK EVEN X BREAK EVEN Y LABEL
13,772 2,966,277 break even unit =13772
-
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
- 5,000 10,000 15,000 20,000 25,000 30,000 35,000
Units
BREAK EVEN ANALYSIS
Sales Fixed Total Cost break even unit =13772
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7.8.3 Return on Investment
Table 17: RoI
RETURN ON INVESTMENT
Service Year 1 Year 2 Year 3 Year 4 Year 5
Carpet 14% 29% 32% 35% 38%
Blanket 11% 23% 25% 28% 31%
Gho 7% 15% 17% 19% 20%
Kira 13% 27% 30% 33% 36%
Jacket 3% 6% 6% 7% 8%
T-shirt 1% 2% 3% 3% 3%
Pant 4% 7% 8% 9% 10%
Bed sheet 2% 5% 5% 6% 6%
Pillow Cover 2% 5% 5% 6% 6%
Curtain 9% 19% 21% 23% 26%
Others 37% 77% 84% 93% 102%
Total ROI 105% 215% 236% 260% 286%
7.8.4 Net Present Value and Internal Rate of Return
Table 18: NPV & IRR
Cost Data Entry Table
Sl.
No
Cost Element Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
1 Machinery and
Plant Cost
563,800
2 Startup Cost 92,600
3 Total
Expenditures
1,111,200 1,166,760 1,225,098 1,286,353 1,350,671
Total Cost by
Year
656,400 1,111,200 1,166,760 1,225,098 1,286,353 1,350,671
Grand Total Cost 6,796,481
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Table 19: Benefit Entry Data
Sl. No Benefit Sources Year 1 Year 2 Year 3 Year 4 Year 5
1 Carpet 180,000 189,000 207,900 228,690 251,559
2 Blanket 144,000 151,200 166,320 182,952 201,247
3 Gho 96,000 100,800 110,880 121,968 134,165
4 Kira 168,000 176,400 194,040 213,444 234,788
5 Jacket 36,000 37,800 41,580 45,738 50,312
6 T-shirt 15,000 15,750 17,325 19,058 20,963
7 Pant 45,000 47,250 51,975 57,173 62,890
8 Bed sheet 30,000 31,500 34,650 38,115 41,927
9 Pillow Cover 30,000 31,500 34,650 38,115 41,927
10 Curtain 120,000 126,000 138,600 152,460 167,706
11 Others 480,000 504,000 554,400 609,840 670,824
Total Benefit per
Year 1,344,000 1,411,200 1,552,320 1,707,552 1,878,307
Table 20: Cost Benefit Analysis
Cost Benefit Analysis
Result Calculation Table
Sl.
No
.
Undiscounted
Flows
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
1 Cost (656,400) (1,111,200) (1,166,760) (1,225,098) (1,286,353) (1,350,671)
2 Benefit - 1,344,000 1,411,200 1,552,320 1,707,552 1,878,307
3 Net Cash
Flows (656,400) 232,800 244,440 327,222 421,199 527,637
Table 21: NPV & IRR
Net Present Value (NPV) 618,405
Internal Rate of Return (IRR) 37%
LAUNDRY SERVICE 2017
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Project Viability:
The Internal Rate of Return of the project is 37%, which is significantly higher than the bank
return rate of 12%. Hence, the project is financially viable. The NPV of the project is positive
(Nu. 618,405).
This project is financially viable which could be operated with less investment. Moreover, the
water problem at Changiji colony has been still a rising issue which could be opportunity to the
proposed business located at Olakha. On the other hand, it has been seen till date in and around
changij and Olakha there is no laundry services which gives advantage for the business to enjoy
the monopoly.
References
Department of Cottage and Small Industry Report. (2014). Ministry of Economic Affairs
of the Royal Government of Bhutan
Changjiji residents face severe water shortage,(July 25, 2015). Retrieved from
www.kuenselonline.com on 3 march, 2017
www.alibaba.com
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Annexure
Total Operational Expenditures
Particulars Monthl
y Year 1 Year 2 Year 3 Year 4 Year 5
Cost of Goods Sold:
Purchases (inventory &
others) 39,600 475,200 498,960 523,908 550,103 577,609
Freight-in -
- - - -
Direct labor
Indirect Expenses
(electricity) 1,500 18,000 18,900 19,845 20,837 21,879
Less: -
Ending Inventory -
Total Cost of Goods
Sold 41,100 493,200 517,860 543,753 570,941 599,488
Expenses:
Advertising 500 6,000 6,300 6,615 6,946 7,293
Salary & Allowances 33,000 396,000 415,800 436,590 458,420 481,340
Commissions -
Contract labor charges -
Credit card fees -
Delivery expenses 1,500 18,000 18,900 19,845 20,837 21,879
Depreciation 6,423 77,070 77,070 77,070 77,070 77,070
Dues and subscriptions - - - - - -
Insurance - - - - - -
Interest - - - - - -
Maintenance - - -
- -
Miscellaneous 2,000 24,000 25,200 26,460 27,783 29,172
Rent 15,000 180,000 189,000 198,450 208,373 218,791
Repairs -
-
Telephone 500 6,000 6,300 6,615 6,946 7,293
Travel -
-
Utilities -
- - - -
Vehicle expenses -
- - - -
Wages
Total Expenses 58,923 707,070 738,570 771,645 806,374 842,839
Total 100,023 1,200,270 1,256,430 1,315,398 1,377,314 1,442,327
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Inventory Projection
Particulars
Daily
Requireme
nt (units)
Per
Unit
Cost
Daily Monthly Year 1 Year 2 Year 3 Year 4 Year 5
Detergent Powder
(bag) 5 250 1,250 30,000 360,000 378,000 396,900 416,745 437,582
Detergent Liquid
(Litre) 2 200 400 9,600 115,200 120,960 127,008 133,358 140,026
Soap ( Dozen) 6 10 60 1,440 17,280 18,144 19,051 20,004 21,004
Plastic bag ( bag) 2 10 20 480 5,760 6,048 6,350 6,668 7,001
Threads ( piece) 3 2 6 144 1,728 1,814 1,905 2,000 2,100
Fabric Softner (
Litre) 3 200 600 14,400 172,800 181,440 190,512 200,038 210,039
Total
1,650 39,600 475,200 498,960 523,908 550,103 577,609
Note:
Local retail price has been considered for the inventories.
5% inflation rate has been considered throughout all the financial years.
Miscellaneous Fixed Assets
Misc. Fixed Assets
Sl. No. Particulars Units Cost Amount
1 Office Furniture
A Writing Table 1 3,500 3,500
B Wooden Chair 3 2,500 7,500
C File Rack 1 3,000 3,000
D Telephone 1 3,250 3,250
Total 17,250
2 Workers Uniforms
A Apron 3 350 1,050
B Primeway Rubber Hand Gloves 3 100 300
Total 1,350
3 Laundry Utensils
A Laundry Bucket (big) 5 550 2,750
B Laundry Baskets ( big) 5 200 1,000
C Mesh Bags 20 30 600
D Hangers 25 25 625
E Drying racks 2 700 1,400
F Hand Iron 2 1,200 2,400
G Ironing Board 2 450 900
H Needle 5 5 25
Total 9,700
Grand Total 28,300
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