February 15, 2017 | Author: Swagat R Pyakurel | Category: N/A
Student Registration Number: 0892684
-TERM PAPER-
2009
Business Plan: Parbat Redolence Limited
Hand-in date:
11.12.2009 Campus:
BI Oslo Exam code and name:
GRA 3136 New Venture Creation Programme:
Master of Science in Innovation and Entrepreneurship
Term Paper (Business Plan), GRA 3136 New Venture Creation
11.12.2009
CONTENTS
CONTENTS EXECUTIVE SUMMARY________________________________________ iii
1. BUSINESS OVERVIEW ________________________________________ 1 1.1. DESCRIPTION OF THE BUSINESS _________________________ 1 1.1.1.
MAJOR DEMOGRAPHIC, ECONOMIC, SOCIAL AND CULTURAL
FACTORS ___ 1 1.1.2.
MAJOR PLAYERS (suppliers, distributors, clients) __________________ 2
1.1.3.
NATURE OF THE INDUSTRY ___________________________________ 3
1.1.4.
TRENDS IN THE INDUSTRY____________________________________3
1.1.5.
GOVERNMENT REGULATIONS _________________________________3
1.2. THE MARKET ____________________________________________ 4 1.2.1.
MARKET SEGMENT ___________________________________________ 4
1.2.2.
PRODUCTS & SERVICES _______________________________________ 4
1.2.3.
MARKET TRENDS _____________________________________________ 5
1.2.4.
IMPLICATIONS OR RISK FACTORS ____________________________ 6
1.2.5.
PLANNED RESPONSE __________________________________________ 6
1.3. COMPETITION___________________________________________6 1.3.1.
COMPETITORS AND TYPE OF COMPETITION __________________ 6
1.3.2.
COMPETITORS' STRENGTHS AND WEAKNESSES _______________6
1.3.3.
COMPETITIVE ADVANTAGE __________________________________7
2. SALES & MARKETING PLAN _________________________________8 2.1 CUSTOMERS _____________________________________________8 2.2 SUPPLIERS ______________________________________________ 8 2.3 ADVERTISING & PROMOTION ____________________________ 8 2.4 PRICING AND DISTRIBUTION ____________________________ 9 2.5 CUSTOMER SERVICE POLICY ____________________________ 9
3.
OPERATING PLAN __________________________________________10 3.1. LOCATION______________________________________________ 10 3.2. ADVANTAGES OR DISADVANTAGES _____________________ 10 3.3. LEASE OR OWNERSHIP DETAILS ________________________ 10 Page i
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3.4. PLANTS AND MACHINERIES ____________________________ 10 3.5. FUTURE EXPENDITURES /TECHNOLOGY REQUIREMENTS 11 3.6. RESERACH AND DEVELOPMENT ________________________ 11 3.7. ENVIRONMENTAL COMPLIANCE________________________ 11 3.8. PRODUCTION___________________________________________ 11
4. MANAGEMENT AND OWNERSHIP___________________________ 13 4.1. BOARD OF DIRECTORS (BOD) AND ADVISORS____________ 13 4.2. HUMAN RESOURCES PLAN ______________________________ 14 4.3. PERFORMANCE ASSESSMENT___________________________ 14 4.4. REMUNERATION AND BENEFITS ________________________ 14
5. ACTION PLAN______________________________________________ 15
6. FUNDS REQUIRED AND THEIR USES _________________________ 16 6.1. CURRENT FUNDING REQUIREMENTS ___________________ 16 6.2. FUNDING REQUIREMENTS OVER THE NEXT FOUR YEARS 16
7. FINANCIAL DATA __________________________________ 17 7.1. IMPORTANT ASSUMPTIONS_____________________________ 17 7.2. PROJECTED ANNUAL STATEMENTS _____________________ 17 7.3. PROJECTED RATIOS ____________________________________ 17
List of Figures Fig i: Incremental Earnings Forecast for first 5 years of operation __________ vi Fig 1.1: Sales of over-the-counter herbal medicines in Europe (in USD) _____ 4 Fig. 1.2: World Leading Importers of essential oils in 2008 _______________ 5 Fig. 1.3: Trade Data (Value in USD millions) on essential oils, France_______ 5 Fig. 1.4: Trade Data (Value in USD thousand) on essential oils, Norway _____ 5 Fig 3.1: Operation sequence ________________________________________ 10 Fig 3.2: Production Growth Projection for first 5 years ___________________ 12 Fig 7.1: Projected after-tax earning for 5 years __________________________ 17
List of Tables Table 3.1: Chamomile oil production estimate for 1st year of operations ____ 11 Page ii
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Table 3.2: Spikenard oil production estimate for 1st year of operations ______ 12 Table 6.1: Funding requirements for year 2 to 5 ________________________ 16 Table 7.1: Projected Initial Five Years Income Statement _________________ 17 Table 7.2: Projected Initial Five Years Balance Sheet ____________________ 18 Table 7.3: Projected Initial Five Year Cash Flow Statement _______________19 Table 7.4: Different Ratios for the project _____________________________ 20
REFERENCES APPENDICES Appendix 1: Production Calculations ___________________________________22
Appendix 2: List of Community forest to be cultivated in five years _____23 Appendix 3: The Target Markets, Import and Export Figure __________25 Appendix 4: Some Facts and Figures _______________________________26
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EXECUTIVE SUMMARY OBJECTIVES / DESCRIPTION OF THE PROJECT
To be a leading producer of high quality organic essential oils in Nepal profitably and with considerable focus on corporate social responsibility.
To be a renowned supplier of high quality organic essential oils to the world’s reputed markets with focus on aroma therapy sector.
NATURE OF OPERATIONS The company will be registered in Dec 2011 as a private limited company with four shareholders. The company will be established with the objective to produce and supply high quality essential oils to the world’s reputed markets and focus on aromatherapy as its niche market. It will be ISO 9001:2008 certified and USDA organic certified. It will collaborate with the Community Forest Users Groups (CFUGs) of Nepal and promote farming of essential oil yielding plants in the community forests. The plants will be processed at the processing facility of Parbat Redolence Limited and the farmers will be paid a fair price depending on the oil yield of their produce. It will share a portion of its profits with the CFUGs for carrying out social development programs beneficial to the community.
PRODUCTS AND SERVICES Parbat Redolence Limited will produce high quality organic essential oils adhering to strict high quality norms, focusing initially on two products: 1. Chamomile essential oils, used extensively in flavoring, fragrance and aroma therapy. 2. Spikenard essential oils, used extensively in herbal medicines, fragrance and aroma therapy. Product diversification will be made as and when good market opportunity arises.
MARKET ANALYSIS The value of world import of essential oils in 2008 stood at around USD 29 billion, an increment of 13.45% from 2007 and 30.28% from 2006. The world leading importing country was the USA followed by France, UK and Germany. Parbat Redolence will therefore focus on these markets as they are mature markets with quality consciousness and growing demands. Parbat Redolence will also focus on Norway as it is a growing market with about 35% increment in values of Page iv
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import in 2008 from that in 2006. Its clients will be existing importers and aromatherapy practitioners with focus on building good networks with the practitioners to exploit the market further.
MARKETING AND SALES Marketing will be carried out through postings on reputed online B2B business portals like www.alibaba.com, networking and interacting with aroma therapy practitioners’ associations and essential oils traders associations, and participating in different international expositions and trade shows. Personal contacts will also be made with leading aroma therapists and alternative medicine parctitioners through e-mail, telephone and visits.
ORGANIZATION AND PERSONNEL Parbat Redolence Limited will have four directors. Mrs. Lata Pyakurel, president of Federation of Nepal Cottage and Small Industires (FNCSI) with over 20 years of experinece in industries will handle business planning and networking with stakeholders in coordination with Suyesh Pyakurel, Member, Industrial Promotion Board, Ministry of Industries, Nepal who will also provide policy guidance. Mr. Siraj Pyakurel, an affiliate of Chartered Certified Accountants (ACCA), UK will handle financial operations. Mr. Swagat R. Pyakurel with his technical expertise will be responsible for processing, administration and customer support.
Parbat Redolence will also appoint two advisors, Mr. Guru Baral, chairperson, Madan Bhandari Memorial Academy who will assist with manpower development with focused training development, and Mr. Kamal Belbase with over 20 years experience in essential oils will assist with cultivation and processing.
FINANCIAL SYNOPSIS FINANCIAL REQUIRMENT Parbat Redolence Limited will require an initial investment of USD 1.1 million in its first year of operations, of which about USD 422,000 will be capital expenditure and USD 739,000 will be working capital requirement. 40% of the initial investment will be raised through equity investment by the directors and the remaining 60% will be through bank finance via soft loan. Page v
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PROSPECTIVE FINANCIAL PERFORMANCE Promoting cultivation in four community forests, two each for chamomile and spikenard in the first year of operations, the expected sales is estimated to be USD 1.08 million and a operating loss of USD 79,000. The estimated sales for the second year of operations is expected to be around USD 2.05 millions as the cultivation will be expanded to four other community forests, two each for chamomile and spikenard. The net after tax income for this period is estimated to be USD 497,000. In the fifth year of operations, the estimated sales will be around USD 8.3 millions with around USD 3.3 millions in net after tax income. 3,500,000 3,000,000 2,500,000
Income from Spikenard (USD)
2,000,000 1,500,000
Income from Chamomile (USD)
1,000,000 500,000 0 Yr 1
Yr 2
Yr 3
Yr 4
Yr 5
Fig i: Incremental Earnings Forecast for first 5 years of operation
PRODUCT CYCLE: Total Cycle
: 150 days
Harvesting: 90 days from plantation
Processing : 15-20 days from harvest
Testing and Packaging: Immediate
In-Stock: 15 days
Receivables: Irrevocable Sight LC, Advance Bank Transfer
RISK ASSESSMENT & CONTINGENCY PLAN The risk is assessed to arise mainly from financial slowdown, in which case the market tends to lower consumption of such products. However, as evident from the rise in import by 13.5% from 2007 to 2008 instead of the financial crisis, a devastating effect is unlikely.
Parbat Redolence will however divert a small portion of its production to the market in India to maintain contact with the Indian market which, although not as profitable as the targeted markets, is a huge and stable market.
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1. BUSINESS OVERVIEW LEGAL NAME:
PARBAT REDOLENCE LIMITED
BUSINESS ADDRESS:
MECHINAGAR MUNICIPALITY JHAPA DISTRICT NEPAL
TEL:
+977-23-XXXXXX
FAX:
+977-23-XXXXXX
E-MAIL:
[email protected]
1.1. DESCRIPTION OF THE BUSINESS Parbat Redolence Limited will promote cultivation of herbs and extract essential oil in the community forests of eastern region of Nepal. It will operate in two districts, namely Taplejung in the upper hills and Jhapa in the plains. Initially it will concentrate on Spikenard (Jatamansi) in Taplejung and German Chamomile in Jhapa.
Parbat Redolence Limited will be an ISO 9001:2008 certified and USDA organic certified company.
1.1.1. MAJOR
DEMOGRAPHIC,
ECONOMIC,
SOCIAL
AND
CULTURAL FACTORS Parbat Redolence Limited’s products fit well into overall current social and economic trends. The targeted market is growing rapidly with increasing concentration on quality of products. Parbat Redolence will be able to provide high quality essential oils because of its strict adherence to international standards (ISO 9001:2008, USDA organic) and at a good price because of its low cost of production. It will be fairly easy to acquire the organic certification as the herbs will be cultivated on the community forest’s land which has never been cultivated before.
It will start with two community forests in Taplejung with combined holding of 227.7 acres of land and two Forest User Groups in Jhapa with a combined land holding of 666.11 acres. The reason for choosing Taplejung is that Spikenard grows in the wild here which reduces the risk of environment and soil Page 1
Term Paper (Business Plan), GRA 3136 New Venture Creation
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incompatibility. The total area occupied by the community forests in Taplejung alone is 4,472.10 acres. The reason for choosing Jhapa is its compatibility to German Chamomile farming and good road connectivity. The total area covered by community forests in Jhapa is 7,685.48 acres. So, there is great possibility for expansion and diversification.
There is good possibility of product diversification as Taplejung is also suited for Rosemary and Lavender cultivation. Jhapa has good potential for mentha and french basil. Since Chamomile is a seasonal crop, the same fields can be used for farming of mentha and french basil. And also perennial crops like lemon-grass and palma rosa can be cultivated in Jhapa.
Parbat Redolence will collaborate with the Community Forest Users Groups (CFUGs) of Nepal and promote farming of essential oil yielding plants in the community forests. The plants will be processed at the processing facility of Parbat Redolence Limited and the farmers will be paid a fair price depending on the oil yield of their produce. This will improve the living standards of the community. Parbat Redolence will also share a portion of its profits with the CFUGs for carrying out social development programs beneficial to the community. Using the community forest’s land for herbs cultivation ensures low cost to the farmers (community) and hence low product cost for Parbat Redolence Limited. The cultivation will cover only 40% (maximum) of the community forest area and thus will play a positive role in its conservation (financial incentive for the community to protect the forest and clearing unfavorable vegetation growth).
1.1.2.
MAJOR PLAYERS (suppliers, distributors, clients)
The processing unit will be procured from an internationally reputed ISO certified manufacturer in India. The lab equipments will be procured from a world renowned Australian company. The packaging containers will be procured from an ISO certified company in India.
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Impoters from the targeted markets will initially distribute the products. Within two years, Parbat Redolence’s international office, in coordination with aroma therapy practitioners and the importers will be the main distributors. Parbat Redolence’s initial clients’ base will be dominated by existing importers and distributors in the target market. Within two years, the clients’ base will include at least an equal percentage of aroma therapy practitioners and home users.
1.1.3.
NATURE OF THE INDUSTRY
Essential oils use is not a modern phenomena but it has gained much impetus now. They are being extensively used as flavoring agents, fragrance in the modern industries, constituent of herbal medicines, and in aroma therapy. However, the sector is very much fragmented with many small producers and very little sharing of trade data.
1.1.4.
TRENDS IN THE INDUSTRY
The essential oils market is a rapidly growing market with increasing world trade. Some countries are now using aromatherapy as a complimentary therapy to the modern medicine. So, the demand for high quality essential oils is on the rise worldwide.
1.1.5.
GOVERNMENT REGULATIONS
The government of Nepal has announced encouraging measures to promote local industries by removing restrictive regulation hassles that previously existed. The government has passed legislation allowing only herbs cultivation in the community forests, duty free export of extracted essential oils, soft loans for industries working in the sector. At the same time, the government has banned the export of raw and dried spikenard.
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1.2. THE MARKET 1.2.1. MARKET SEGMENT The flavoring, fragrance, herbal medicine industries, and the aroma therapy sector constitute the major market segments for the essential oils to be produced by Parbat Redolence Limited. From medicines to dog biscuits and child care to deodorants, herbal essential oils are being used in a wide variety of consumer products.
1.2.2. PRODUCTS & SERVICES Parbat Redolence Limited will produce high quality organic essential oils adhering to strict high quality norms, focusing initially on two products: 1. Chamomile essential oils: Chamomile essential oil is used extensively in flavoring, fragrance and aroma therapy. The products having chamomile essential oil range from balm (organic babies balm etc.) to tea (Yogi Chamomile tea, Twinings Chamomile tea etc.) to dog biscuits (Bark Wheats).
2. Spikenard essential oils: Spikenard essential oil is used in herbal medicines (Himalaya Herbal Healthcare Limited, Novartis Consumer Health Limited), fragrance and aroma therapy. The sales of herbal medicines over the counter in Europe stood at USD 4.96 Billion in 2003. The sales distribution is as shown below.
Fig 1.1: Sales of over-the-counter herbal medicines in Europe (in USD) Product diversification will be made as and when good market opportunity arises. Page 4
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1.2.3. MARKET TRENDS The value of world import of essential oils in 2008 stood at around USD 29 billion, an increment of 13.45% from 2007 and 30.28% from 2006. The world leading importing country was the USA followed by France, UK and Germany. Parbat Redolence will therefore focus on these markets as they are mature markets with quality consciousness and growing demands. Parbat Redolence will also focus on Norway as it is a growing market with about 35% increment in values of import in 2008 from that in 2006.
Fig. 1.2: World Leading Importers of essential oils in 2008 250 200
2002
150
2003
100
2004
50
2005
0
2006
Export (USD, Mil.)
Import (USD, Mil.)
Fig. 1.3: Trade Data (Value in USD millions) on essential oils, France 2000 2002
1500
2003
1000
2004
500
2005
0 Export (USD, Thou.)
Import (USD, Thou.)
2006
Fig. 1.4: Trade Data (Value in USD thousand) on essential oils, Norway Page 5
Term Paper (Business Plan), GRA 3136 New Venture Creation
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Its clients will be existing importers and aromatherapy practitioners with focus on building good networks with the practitioners to exploit the market further.
1.2.4. IMPLICATIONS OR RISK FACTORS Parbat Redolence will rely heavily on sales to the Europena and American markets. So, there might be a situation of plummeting sales owing to extreme financial conditions or some unexpected situations. But, there is very less chance of complete annihilation of the market as evident of the increase in the trade value of essential oils from 2006 to 2008 inspite of the financial crisis starting at 2007.
1.2.5. PLANNED RESPONSE Parbat Redolence will rely on its basic strengths, which are:
superior quality products
affordable prices compared to competitors
excellent service
strategic location
Parbat Redolence will establish and maintain contact with the Indian market by exporting a small portion of its production to India. This will provide an alternative and secure market for Parbat Redolence’s product. Although not as profitable as the targeted markets, India is a huge and stable market.
1.3. COMPETITION 1.3.1. COMPETITORS AND TYPE OF COMPETITION Parbat Redolence will face competition from the small scale producers in Nepal and the established producers from Europe and USA.
The small scale producers will have pricing advantage over Parbat Redolence, and the European and American companies will enjoy better market experience.
1.3.2. COMPETITORS' STRENGTHS AND WEAKNESSES There are several companies working in this sector in Nepal but they are of smaller scale and operate individually without much collaboration with the
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community. This might provide them a slight price advantage. Trade is dominated by export to the Indian market. However, lack of proper testing and high quality processing equipments has cast doub over the quality of their products.
The companies in Europe and the USA have higher production costs but good quality adherence. Other low cost producers face the issue of lower grade of products.
1.3.3. COMPETITIVE ADVANTAGE Parbat Redolence will have lower production costs and quality will be maintained by following strict quality norms of ISO 9001:2008 standards and USDA organic certification requirements. So, Parbat Redolence will be able to compete with both the national and international competition.
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2. 2.1.
11.12.2009
SALES & MARKETING PLAN CUSTOMERS
Parbat Redolence’s initial clients’ base will be dominated by existing importers and distributors in the target markets (the USA, UK, France, Germany and Norway). Within two years, the clients’ base will include at least an equal percentage of aroma therapy practitioners and home users.
2.2.
SUPPLIERS
Processing Machineries will be procured from an ISO certified internationally renowned company in India. Importing the equipments from India will provide the advantage of lesser delivery period and faster technical support.
Lab equipments will be procured from a world renowned Australian company with four decades of experience.
High quality two layered alumunium containers will be imported from an ISO certified producer in India.
2.3. ADVERTISING & PROMOTION Marketing will be carried out through postings on reputed online B2B (Business to Business) portals, networking and interacting with aroma therapy practitioners and essential oils traders, and participating in different international expositions and trade shows. Parbat Redolence Limited will be a Gold Certified (endorsed by alibaba.com)
member
of
www.alibaba.com,
paid
member
of
www.globalsources.com and www.1stworldtradeportal.com, and post its profile on other relevant B2B portals. Parbat Redolence will network with the alternative medicine practitioners through their associations like Aromatherapy and Allied Practitioners' Association (AAPA), International Federation of Professional Aroma therapists (IFPA), ALTERNATIVopplysningen and so on. Parbat Redolence Limigted will participate in World Congress of Medicinal and Aromatic Plants, Asian Essential Oil Congress, Fragrance and Flavors Expo and so on. Personal contacts will also be made with leading aroma therapists and alternative medicine practitioners through e-mail, telephone and visits.
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2.4. PRICING AND DISTRIBUTION Parbat Redolence Limited will enjoy pricing advantage because of low cost of production due to utilization of community forests land, and duty free export and soft loan facilities by the government. It’s pricing advantage will be enhanced further by the quality certifications it will have acquired (ISO 9001: 2008 and USDA organic certification). The ex-stock rate for both chamomile and spikenard essentials oils will be USD 500 per KG for the first three years of operation after which it will be increased to USD 700 per KG.
Distribution of the product will be handled by Parbat Redolence initially as the clients will mainly be the importers in the target markets. Afterwards, Parbat Redolence will carry out distribution through its international office with coordination with aroma therapy practitioners and through the importers. Parbat Redolence will open its first international office in the UK within 2 years of its operations and will have at least an office in each of the target markets. Contacts have already been established with some of the most reputed aroma therapy practitioners in Norway and France.
2.5. CUSTOMER SERVICE POLICY Customer service is going to be enhanced by a dedicated support team, regular meetings with users, effective technical support and appropriate product packaging.
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3.
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OPERATING PLAN
Fig 3.1: Operation sequence 3.1. LOCATION Parbat Redolence Limited will have processing units in Jhapa and Taplejung. The contact office will be established in the nearest city of Mechinagar Municipality in Jhapa district.
3.2. ADVANTAGES OR DISADVANTAGES The processing units will be located close to the community forests (the source of raw materials) which will ensure quick transportation, low transportation cost and better quality control. Due to relative remoteness of the location from the major cities, a contact office will have to be established in the nearest city.
3.3. LEASE OR OWNERSHIP DETAILS The land for the processing unit will be acquired through purchase of land adjoining the community forests.
3.4. PLANTS AND MACHINERIES The plant shed will be constructed with high quality construction materials. Processing machineries will consist of distillation units with boilers, vessels and condensers made from the highest grade stainless steel.
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Testing equipments will be Gas Chromatography and Mass Spectrometry (GCMS) machines which is the world standard for quality testing of essential oils
3.5. FUTURE EXPENDITURES /TECHNOLOGY REQUIREMENTS Further additions of suitable processing plants, tesing equipmenst and packaging machineries will be undertaken to facilitate the planned processing units. One set of processing machinery for each processing unit will be added every year till year five.
3.6. RESERACH AND DEVELOPMENT R & D efforts will be centered on market studies and consumers, determining changes in their requirements and responding to them. It will involve trial cultivation of herbs like lavender, geranium, basil, mentha and so on.
3.7. ENVIRONMENTAL COMPLIANCE The processing unit will consist of proper smoke filters and water recycling equipments to minimize the environmental impact of the unit. The residues remaining after distillation will be used to make incense sticks and as manure which apart from providing additional income will reduce the solid waste to virtually non-existent. Only natural cleaners will be used for cleaning the units.
Tree plantation in adjoining area and forest conservation will be on priority list of Parbat Redolence’s corporate social responsibility (CSR) program.
3.8. PRODUCTION Cultivation of the essential oil yielding plants will take place in only 30% of the total area of the selected community forests. Total Area, Hectares Cultivated Area, Hectares Estimated cultivation/Hectare, KG Total estimated cultivation Oil Extraction
1st season 666 266 800 213,155 532.89
2nd season Annual 666 1,332 266 532 800 213,155 532.89
1,600 426,310 1,065.78 @ 0.25%
Table 3.1: Chamomile oil production estimate for 1st year of operations Page 11
Term Paper (Business Plan), GRA 3136 New Venture Creation
Total Area, Hectares Cultivated Area, Hectares Estimated cultivation/Hectare, KG Total estimated cultivation, KG Oil Extraction, KG
Annual 227.70 68.31 800.00 54,648.00 1,092.96
11.12.2009
@30%
@2%
Table 3.2: Spikenard oil production estimate for 1st year of operations
Production Growth Projection 12,000 10,000 8,000 6,000 4,000 2,000 0 Yr 1
Yr 2
Yr 3
Chamomile Oil (Kg)
Yr 4
Yr 5
Spikenard Oil (Kg)
Fig 3.2: Production Growth Projection for first 5 years
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4. MANAGEMENT AND OWNERSHIP 4.1. BOARD OF DIRECTORS (BOD) AND ADVISORS The BOD will have four directors, each holding 25% equity in the company.
Director 1: Mrs Lata Pyakurel (25% Ownership), Chairman President, Federation of Nepalese Cottage and Small Industries (FNCSI) Over 20 years experience in industries. Main responsibilities: business planning, and networking.
Director 2: Mr Swagat R Pyakurel (25% Ownership), Managing Director Experienced in establishing essential oil processing unit. Technical expertise in processing machinery and testing equipments. Main responsibilities: operations, administration, and customer support.
Director 3: Mr Suyesh Pyakurel (25% Ownership) Member - Industrial Promotion Board, Ministry of Industries, Nepal Executive Member, Chamber of Industries, Morang, Nepal President, Nepalese Young Entrepreneurs Forum, Biratnagar Chp., Nepal 10 years experience in processing industry and international trading Main responsibilities: business planning, networking, and policy guidance.
Director 4: Mr Siraj R. Pyakurel, Managing Director (25% Ownership) Member, Association of Chartered Certified Accountants (ACCA), UK. Over 5 years experience in international trading. Main responsibilities: marketing, business planning & financial operations.
Advisor 1: Mr Kamal Belbase Over 20 years of experience in cultivation, harvesting and processing. Extensive linkages with experts from India. Main responsibilities: nursery development, cultivation and processing support.
Advisor 2: Mr Guru Baral President, Madan Memorial Trust (Madan Bhandari Memorial Academy) Main responsibilities: trainings, and policy guidance. Page 13
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4.2. HUMAN RESOURCES PLAN 1
2
General Manager Administration, book-
Highly experienced and
(2)
keeping, support
qualified manager
Accountant
Book-keeping
Technical knowledge,
(2) 3
Office Assistant
Experience, reliability Asministration, support
Office / organizational skills
Consultant,
Cultivation & harvesting
Technical knowledge,
Farming (1)
support to farmers
experience, reliability
Consultant,
Quality control through
Technical knowledge,
Testing (1)
lab tesing.
experience, reliability
Supervisor
Operations supervision
Technical knowledge,
(2) 4
5
6
(2) 7
Operators
reliability Processing units operation Technical knowledge,
(6)
reliability
8
Helpers (42)
Operation assistance
Reliability
9
Drivers (4)
Transportation
Reliability
10 Caretaker, nursery Nursery development & (2)
management
Technical knowledge, experience, reliability
ADDITIONAL INFORMATION More operators and helpers will be recruited as production capacity increases.
4.3. PERFORMANCE ASSESSMENT Initially most of the company's training will be done in-house with company employees. Management employees will undergo total quality management training. ISO 9000 certification and more training are planned for assured quality control.
4.4. REMUNERATION AND BENEFITS Benefits and salaries are comparable to those in the industry and overtime hours are sometimes required. A profit sharing incentive plan is planned for the future.
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5. ACTION PLAN
ACTION
BY WHEN
1
Site selection and construction
September 2011
2
Place an order for Machinery and lab equipments
September 2011
3
Seeds handover to CFUGs
4
Seeds distribution to the farmers by CFUGs
5
Implement ISO 9001:2008 standards & obtain USDA
October 2011 November 2011 January 2012
organic certification. 6
Start oil processing, testing and packaging
7
Start export
March 2012 May 2012
The plantation has to be completed by December first week so site will be finalized by Septermber and construction work immediately begins. Processing units are also ordered immediately to avoid any possible wastage of raw materials due to inability to process.
Seeds and saplings of the plants will be handed over to the CFUG member who will then distribute it among the farmers within October. Plantation should be started within Novemer. In the mean time, necessary actions will be taken to obtain ISO certification and USDA organic certification.
First batch of oil will be extracted in March.
Oils thus produced will then be exported to the target markets of the USA, UK, France, Gemany and Norway from May, 2011.
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6. FUNDS REQUIRED AND THEIR USES 6.1. CURRENT FUNDING REQUIREMENTS Initial investement for Parbat Redolence Limited will be around USD 1.2 millions, of which around USD 739,000 will be required for working capital and around USD 422,000 for capital expenditure for the initial year (Yr. 1). The amount for capital expenditure will be required at the start, Sep 2011, for purchase of machinery and equipments and plant set up. Of the working capital, around USD 450,000 will be required by March, 2012 for payment to farmers. The rest will be imbursed in equal installments starting form September, 2011.
Required funds will be raised through equity and bank loan, of which 40% will be equity and the remaining 60% bank loan. Parbat Redolence Limited will try to secure soft loans from banks as per the legislation of the government of Nepal.
6.2. FUNDING REQUIREMENTS OVER THE NEXT FOUR YEARS Details Yr. 2 Yr. 3 Yr. 4 Yr. 5 Working Capital 1,462,505 2,549,486 3,698,174 5,116,719 Capital Expenditure 159,359 292,949 153,462 305,897 Total 1,621,864 2,842,435 3,851,635 5,422,617 Table 6.1: Funding requirements for year 2 to 5 From second year onwards most of the required funds will be generated from the net income earned by Parbat Redolence Limited.
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7. FINANCIAL DATA 7.1. IMPORTANT ASSUMPTIONS Bank Interest rate (soft loan) : 12.5%; Selling Price: Chamomile essential oil: USD 500 / KG (USD 700 / KG from the 4th year) Spikenard essential oil: USD 500 / KG (USD 700 / KG from the 4th year) Depreciation: 20% straight line Corporate Tax: 20% (Department of Inland Revenue, Government of Nepal, www.ird.gov.np)
Parbat Redolence Limited will incur a loss of around USD 1.3 millions in the first year of operations. However, it will be profitable from the second year onwards with after tax earnings of around USD 497,000.
The NPV of the project from the forecast for first five years of operation is calculated to be around USD 4.3 millions.
Earnings after Tax, USD 4,000,000 3,000,000 2,000,000
1,000,000 -1,000,000
Yr. 1
Yr. 2
Yr. 3
Yr. 4
Yr. 5
Fig 7.1: Projected after-tax earning for 5 years
7.2. PROJECTED ANNUAL STATEMENTS Turnover Product Revenue
Year 1
Year 2
Year 3
1,079,368 2,055,144 3,283,400
Year 4
Year 5
6,328,179 8,327,682
Cost of Sales
452,348 925,726
1,641,821
2,443,457 3,440,440
Contribution
627,020 1,129,418 1,641,579
3,884,722 4,887,241
Cost of Sales (%)
42%
45%
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50%
39%
41%
Term Paper (Business Plan), GRA 3136 New Venture Creation
11.12.2009
705,849 596,497
969,616
1,009,616 1,455,878
75,205 107,077
165,667
196,359
257,538
Capital Expenditures
422,179 159,359
292,949
153,462
305,897
Selling, General & Admin. Cost
155,692 257,369
401,690
531,301
725,711
52,772 72,692
109,311
128,494
166,731
Operating Profit
-78,829 532,921
671,963
2,875,107 3,431,364
PBIT
-78,829 532,921
671,963
2,875,107 3,431,364
52,772 34,423
53,854
63,446
-131,601 498,498
618,109
2,811,661 3,348,800
Expenses Depreciation
Cost of Capital
Financing Costs PBT
-158
Taxation Earnings after Tax
1,066
-131,444 497,432
1,236 616,872
5,623
82,564
6,698
2,806,038 3,342,102
Table 7.1: Projected Initial Five Years Income Statement
Assets
Y/E 1
Y/E 2
Y/E 3
Y/E 4
Y/E 5
Fixed Assets
346,974
399,256
526,538
483,641
532,000
Assets Purchased
422,179
159,359
292,949
153,462
305,897
Depreciation Current Assets:
75,205
182,282
347,949
544,308
801,846
Stock
18,848
38,572
68,409
101,811
143,352
-
-
-
-
-
365,111
1,407,600
1,581,936
4,597,878
8,099,326
730,933 Equity & Liabilities
1,845,429
2,176,883
5,183,330
8,774,678
452,894
1,069,766
3,875,804
7,217,906
Debtors Cash
Share Capital Retained Profit Total Equity Non-Current Liabilites: Loans
78,816 78,816
464,441
917,335
1,069,766
3,875,804
7,217,906
696,662
696,662
696,662
696,662
696,662
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11.12.2009
Current Liabilities: Creditors
113,087
231,431
410,455
610,864
860,110
730,933
1,845,429
2,176,883
5,183,330
8,774,678
Table 7.2: Projected Initial Five Years Balance Sheet
Year 1
Year 2
Year 3
Year 4
Year 5
Operating Profit
-78,829
532,921
671,963
2,875,107
3,431,364
Depreciation Cash Flow from Trading Changes in W.C. Balances
75,205
107,077
165,667
196,359
257,538
-3,624
639,998
837,629
3,071,466
3,688,902
94,239
98,620
149,186
167,008
207,705
Stock
-18,848
-19,724
-29,837
-33,402
-41,541
-
-
-
-
-
113,087
118,345
179,024
200,409
249,246
90,615
738,618
986,816
3,238,473
3,896,607
-422,179
-159,359
-292,949
-153,462
-305,897
-422,179
-159,359
-292,949
-153,462
-305,897
643,890
430,018
-518,296
-63,446
-82,564
-
464,441
-464,441
-
-
696,662
-
-
-
-
-52,772
-34,423
-53,854
-63,446
-82,564
158
-1,066
-1,236
-5,623
-6,698
312,483
1,008,212
174,335
3,015,943
3,501,448
Nil
312,483
1,320,695
1,495,030
4,510,973
312,483
1,320,695
1,495,030
4,510,973
8,012,421
Debtors Creditors Cash Flow from Operations Investing Activity Purchase of Fixed Assets Financing Activities New Share Issues Debt Taken On (Repaid) Finance Costs Taxation Cash Flow for the Period Opening Cash Position Closing Cash Position
Table 7.3: Projected Initial Five Year Cash Flow Statement
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Term Paper (Business Plan), GRA 3136 New Venture Creation
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7.3. PROJECT RATIOS: Measure
Year 1
Year 2
Year 3
Year 4
Year 5
Return on Equity
Percentage
166.8%
54.2%
57.7%
72.4%
46.3%
Return on Assets
Percentage
-10.8%
28.9%
30.9%
55.5%
39.1%
Gross Profit %
Percentage
58.1%
55.0%
50.0%
61.4%
58.7%
Operating Profit % Earnings after Tax %
Percentage
-7.3%
25.9%
20.5%
45.4%
41.2%
Percentage
-12.2%
24.2%
18.8%
44.3%
40.1%
3.1
5.1
6.2
13.1
15.7
1.5
1.1
1.5
1.2
0.9
Performance Ratios
Profitability Ratios
Asset Efficiency Ratios Fixed Asset Turnover Rate Total Asset Turnover Rate
Turnover/ time cover Turnover/ time cover
Stock Days
Avg Days
15.0
15.0
15.0
15.0
15.0
Creditor Days
Avg Days
90.0
90.0
90.0
90.0
90.0
-883.9%
75.9%
65.1%
18.0%
9.7%
-0.7
0.1
0.1
0.0
0.0
3.4
6.2
4.0
7.7
9.6
0.2
0.2
0.2
0.2
0.2
Captial Structure Ratios Debt % of Equity Interest Cover
Percentage Turnover/ time cover
Liquidity Ratios Current Ratio Acid Test
Turnover/ time cover Turnover/ time cover
Table 7.4: Different Ratios for the project
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Term Paper (Business Plan), GRA 3136 New Venture Creation
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References: Book references Philip A. Wickham, Strategic Entrepreneurship(Harlow: Pearson Education Limited, 2006)
Ben-Erik van Wyk, Food Plants of the World: An Illustrtaed Guide (Portland, Or.: Timber press, 2005)
Articles and analysis S. Nautiyal*, K. S. Rajan and R. Shibasaki, “Interaction of Biodiversity and Economic Welfare – A Case Study from the Himalayas of India”. Journal of Environmental Informatics 6, no. 2 (2005), http://www.iseis.org/JEI/pdfstart.asp?no=200500061
Website List of Community Forests in Nepal, Federation of Community Forestry Users, Nepal, www.fecofun.org
Trade statistics for international business development, International Trade Centre, www.trademap.com 316 Imports and exports, by countries and commodity group1. 2008. NOK million, Statistics Norway, http://www.ssb.no/english/yearbook/tab/tab-316.html
Federation of Nepalese Chambers of Commerce and Industry, www.fncci.org
Population Census of Nepal, Central Bureau of Statistics, National Planning Commission of Nepal, www.cbs.gov.np
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Term Paper (Business Plan), GRA 3136 New Venture Creation
11.12.2009
Appendix 1: Production Calculations 1. Chamomile Oil. (data is for twice a year) Year Total Area, Hectares Cultivated Area, Hectares Estimated cultivation/Hectare, KG Total estimated cultivation Oil Extraction 2. Spikenard Oil Year Total Area, Hectares Cultivated Area, Hectares Estimated cultivation/Hectare Total estimated cultivation Oil Extraction
Yr. 1 1,332
Yr.2 2,522
Yr. 3 4,675
Yr. 4 6,638
Yr. 5 8,301
533
1,009
1,870
2,655
3,321
1,600
1,600
1,600
1,600
1,600
426,310 1,066
807,130 2,018
1,495,974 3,740
2,124,013 5,310
2,656,410 6,641
Yr. 3
Yr. 4
228
Yr.2 436
68
Yr. 1
589
777
Yr. 5 1,095
131
177
233
328
800
800
800
800
800
54,648 1,093
104,623 2,092
141,343 2,827
186,511 3,730
262,783 5,256
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@30% of total area
@0.25%
@30% of total area
@2%
Term Paper (Business Plan), GRA 3136 New Venture Creation
Appendix 2: List of Community forest to be cultivated in five years 1. Chamomile cultivation SN 1 2 6 7 8 9 10 11 13 14
FUG_NAME Bahu Ban Talpani Hanse-dumse Namuna Juke Khadi Shanti Haluwagadh Hachumasa Jamun Bari Prajapati
Area Hectares 308.87 357.24 498.28 96.75 729.60 346.72 250.11 731.20 401.25 430.62 4,150.64
DISTRICT NAME Jhapa Jhapa Jhapa Jhapa Jhapa Jhapa Jhapa Jhapa Jhapa Jhapa
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Region Eastern Eastern Eastern Eastern Eastern Eastern Eastern Eastern Eastern Eastern
11.12.2009
Term Paper (Business Plan), GRA 3136 New Venture Creation
11.12.2009
2. Spikenard cultivation SN 1 2 3 4 5 6 7 8 9 10 11
Area Hectares 88.20 139.50
FUG_NAME Gyasipemba Bhedichauk Batasedamli Bhita Aiekha Lambayak Phungphunge Manabhara Shibu Mechi Community Banpale Isera Phurumba Kha? Mayampatal Pokhari Sypatri
72.11 29.12 107.00 153.00 31.55 3.90 102.75 50.00 317.80 1,094.93
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District Taplejung Taplejung
Region Eastern Eastern
Taplejung Taplejung Taplejung Taplejung Taplejung Taplejung Taplejung Taplejung Taplejung
Eastern Eastern Eastern Eastern Eastern Eastern Eastern Eastern Eastern
Term Paper (Business Plan), GRA 3136 New Venture Creation
Appendix 3: The Target Markets, Import and Export Figures
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11.12.2009
Term Paper (Business Plan), GRA 3136 New Venture Creation
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Appendix 4: Some Facts and Figures Some facts and figures Norway 9281.3 millions
4.19%
4.95%
252
6
UK 17
50
Value of essential oils and perfume materials imported into Norway in NOK, 2007 Increase in Imports of essential oils and perfume materials into Norway (in terms of NOK millions) Decrease in Exports of essential oils and perfume materials from Norway (in terms of NOK millions) Number of centres offering Aroma therapy treatment in Norway No. of institutions offering Aromatherapy courses in Norway
No. of institutions accredited by AAPA offering Aromatherapy courses in UK No. of institutions accredited by IPF offering Aromatherapy courses in UK
Statistic Norway
www.ssb.no
Statistic Norway
www.ssb.no
Statistic Norway
www.ssb.no
Norge Online
www.nol.no
ALTERNATIVopplysnin gen
www.alternativ. no
Norsk Prana Institutt
www.norskpranainstitutt.no
Aromatherapy and Allied Practitioners' Association (AAPA)
www.aapa.org.u k
International Federation of Professional Aroma therapists (IFPA)
www.ifparoma.o rg
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122
48
4
Nepal 0% duty on imports of equipments required for processing essential oils. 0% duty on export of essential oils
Registered practitioners in UK at Aromatherapy and Allied Practitioners' Association (AAPA) Certified members of the Aromtherapy Trade Council of UK No. of companies waiting for certification from the Aromtherapy Trade Council of UK
Aromatherapy and Allied Practitioners' Association (AAPA)
www.aapa.org.u k
Aromatherapy Trade Council
www.a-tc.org.uk
Aromatherapy Trade Council
www.a-tc.org.uk
No Duty levied on raw materials and auxiliaries imported by industries in EPZ./SEZ. Industries exporting more than 40 percent of the production to be granted similar facilities as given to industries in EPZ.
Federation of Nepalese Chambers of Commerce and Industry
www.fncci.org
Central Bureau of Statistics, National Planning Commission of Nepal
www.cbs.gov.np
Central Bureau of Statistics, National
www.cbs.gov.np
Jhapa District Profile Population 688,109
Area (Sq. Km) Area (Ha.)
11.12.2009
1,606 160,600
Taplejung District Profile Population 134,698
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Term Paper (Business Plan), GRA 3136 New Venture Creation
Planning Commission of Nepal Area (Sq. Km) Area (Ha.)
3,646 160,600
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11.12.2009
