Project - Laundry Business

Business Plan: Establishing a Laundry Business in North Campus, New Delhi

20112012

Business Plan: Establishing a Laundry Business in North Campus, New Delhi Post Graduate Program in Business Administration 2010-2012

Indo German Training Centre (IGTC), Bangalore Prepared by Akshat Mehrotra – IGTC, Bangalore

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

20112012

Business Plan: Establishing a Laundry Business in North Campus, New Delhi Report submitted to IGTC In Partial Fulfillment of the requirements for the Degree of PGPBA By Akshat Mehrotra Roll no: B1002

Indo-German Training Centre, Bangalore Prepared by Akshat Mehrotra – IGTC, Bangalore

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

20112012

Table of Contents Acknowledgement ......................................................................................................................................4 1.0 Executive Summary ...............................................................................................................................5 2.0 Objectives ..............................................................................................................................................9 3.0 Aim ………………..................................................................................................................................... 9 4.0 Mission ................................................................................................................................................ 9 5 Keys to Success ...................................................................................................................................... 9 6.0CompanySummary................................................................................................................................10 7.0 Company Ownership............................................................................................................................10 8.0 Start Up Summary ................................................................................................................................11 9.0 Services ................................................................................................................................................12 10. Market analysis .................................................................................................................................. 13 11.Market Segmentation ...........................................................................................................................14 12 Target Market Segment Strategy...........................................................................................................15 13. Market Needs .....................................................................................................................................15 14 Service Business Analysis.....................................................................................................................16 15 Competition and buying patterns .......................................................................................................16 16 Strategy and implementation ...............................................................................................................17 17 Difficulties and risks ..............................................................................................................................18 18 Competitive Edge...................................................................................................................................19 19 SWOT ....................................................................................................................................................20 20 Porter’s Analysis ...................................................................................................................................21 21 Marketing Strategy…………………………………………………………………………………………………………………………..23 22 Sales Strategy…………………………………………………………………………………………………………………………………..25 23. Sales Forecast…………………………………………………………………………………………………………………………………26 24.Management Summary……………………………………………………………………………………………………………………28 25. Personnel Plan………………………………………………………………………………………………………………………………..28 26. Number of staff and salary……………………………………………………………………………………………………………..29 27. Financial Plan………………………………………………………………………………………………………………………………….30 28. Break Even Analysis………………………………………………………………………………………………………………………..32 29. Projected Profit and loss…………………………………………………………………………………………………………………33 30.Projected Balance Sheet…………………………………………………………………………………………………………………36 31.Business Ratio…………………………………………………………………………………………………………………………………38 32 Bibliography……………………………………………………………………………………………………………………………………42

Prepared by Akshat Mehrotra – IGTC, Bangalore

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

20112012

Acknowledgement I take this opportunity to thank Ms. Rosa Homburg, Academic Program Coordinator, Indo-German Training Centre, and Bangalore for her kind support and cooperation rendered throughout the study. I express a deep sense of my gratitude to Mrs. Audrey D’Souza of IGTC for their precious guidance and for being source of inspiration throughout the course of this study. My sincere gratitude to each and every individual who gave their valuable inputs and information towards this project

DATE: 29th Feb 2012 PLACE: Bangalore Prepared by Akshat Mehrotra – IGTC, Bangalore

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

20112012

1. Executive Summary

A - Cleaners will be a start-up company to be established in New Delhi in the North Campus region, as a limited liability company which will be privately owned. The company will provide laundry and folding, offered with regular home pick-up and delivery services. The company will have a production area, but will not require a retail shop because of our pick-up and delivery service. However, we will need delivery vans, and trained drivers for world class customer service.

Customers can choose payment either at the time of each delivery, or by monthly credit or debit card billing. At the end of every thirty days we will send statements to each contract customer, itemizing service fees and the charge for the service to their credit or debit cards for payment.

The business will provides a new door-to-door, laundry and folding service in North Campus region of New Delhi also nearby area that will surely attract customer attention. Students staying in hostels and paying guest may find this service to be convenient for them and would like to try it. If the customers are satisfied with the service quality they will likely become repeat customers. When the support and convenience comes continuously at affordable price, they become loyal customers of the service. These customers will recommend A - Cleaners to their friends and coworkers. As more and more customers use this service, A – Cleaners image is likely enhanced and we will gain more and more market share.

Sales forecast is expected to increase gradually over the first year and comprise total sales of Rs. 864,000. We project modest net loss in the first year. Our second and third year sales are expected to grow 20% and 25% respectively resulting in a modest net profit of Rs. 63000 in the third year. Prepared by Akshat Mehrotra – IGTC, Bangalore

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

20112012

In Rs. Lacs 14 12 10 8 6 4 2 0 -2 -4 -6

2012-13

2013-14

2014-15

Sales

8.64

10.37

12.96

Net Profit

-3.6

-1.83

0.63

Sales

Prepared by Akshat Mehrotra – IGTC, Bangalore

Net Profit

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

20112012

Indian laundry industry still an untapped market (Source: Economic Times)

NEW DELHI: It's laundry time and seems like organised players are giving the friendly neighbourhood dhobis a run for their money. With the entry of global companies into India and a firm positioning of domestic players, the laundry industry is just getting bigger and more quality-conscious. And to add to the upbeat mood, the global laundry industry has, to some extent, braved the recession. India being the second fastest growing major economy after China and growing at 6.1% year-on-year during the first quarter of April-June, organised players are cashing in on this unique opportunity to enter the unorgansied laundry market in a big way. And even as global and domestic laundry bigwigs make their presence felt, there is still a large unorganized sector waiting to be tapped. One laundry owner felt that the dry cleaning and laundry business has been least affected by the downturn and sees significant activity in the organised laundry market in India. "India has a huge unorganized sector which needs to be professionally handled. The way markets have developed in the US has not happened in India. However, India is going to grow in this business and there is a need for organised players to provide world-class services and educate the unorganized sector", he said. He further added that his business is growing at around 20% every month. "Connectivity and brand building is crucial for us to be a success story in India." White Tiger, which started its business in 2008 with an initial investment of 150 cr and plans to open 100 high-end fabricare stores throughout India by end of this year. According to market research agency, The Nielsen Company, the market size of fabric cleaning which includes detergents, powders, pre-post wash, soap cakes is Rs.12,118 crore & 2,877,587 tonnes respectively. Spanish multinational express dry-cleaning chain, Pressto, came to India in early 2008 and since then there has been no looking back. "Globally, the dry cleaning and laundry industry has evolved into a much more customer friendly entity. In hard times, people may buy fewer garments but they like to keep the existing ones clean and fresh so that their usage is optimum. And, our stores in India have shown positive trend even in these tough times", said Deepak Chitale, general manager, Pressto adding that the Indian market is large enough to accommodate more organised players. Prepared by Akshat Mehrotra – IGTC, Bangalore

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

20112012

In fact, the organised players are specifically catering to the growing middle-class with high disposable incomes, HNIs, busy working couples and singles who are earning well. The larger demand for organised laundry comes from the metros and tier II cities says the owner of another laundry that around 65% of demand is driven by metros and 35% accrues from tier II cities like Chandigarh, Ludhiana, Bhopal, Pune to name a few. Domestic laundry player White Tiger is eyeing the huge potential once the organised market becomes more stabilized as there is a huge scope for the laundry business to prosper. "Laundry is a necessary evil. During recession, consumers can stop buying clothes but they would want to keep their existing garments clean. This is an industry, which has been least hit by the downturn and promises a brighter future for the dry cleaning and laundry sector in India. As a result of which we have grown by 25-30% every year and in future, we could grow at a modest rate of 22-25%," said Rajeev Sekhri, vicepresident, White Tiger.

Prepared by Akshat Mehrotra – IGTC, Bangalore

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

20112012

2. Objectives To provide low cost and covienient laundry, ironing, folding services for students residing in the North Campus area of New Delhi.

3. A - Cleaners aim 

Is to establish a sustainable business by the end of the third year



Have first year total sales in excess of Rs. 8 Lacs



Provide convenience and world class laundry service to students at an affordable price

4. Mission We will offer laundry, ironing, folding services with free home pickup and delivery. Our high quality and convenience will save time for students.

5. Keys to Success 1. The business will enter the first year of operation in 2013; therefore, a comprehensive marketing strategy will be the key to success of the business.

2. It is important to remember that our target customers are students who are cost sensitive and hence we propose to offer them high quality laundry service at a lower rate than the existing market players.

3. Also, operation hours must be convenient and service completion must be timely in order that customers are not harried after a long day working. 4. The service has to be world class. E – Cleaners will have to make sure no clothing is spoiled in the whole process from pick up to delivery. Prepared by Akshat Mehrotra – IGTC, Bangalore

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

20112012

6. Company Summary

A - Cleaners is a start-up company to be established as a limited liability company in New Delhi. The company will offer laundry, ironing and folding service, offered with regular home pick-up and delivery services. The company will have a production area, but will not need store front because of our pick-up and delivery service. However, we will need delivery vans and trained drivers to ensure timely pickup and delivery and world class customer service. Initially, the production facility will be rented. Cleaning equipment i.e. washing machines will be bought with accompanying maintenance contracts. Iron will be bought with maintenance contract. Initial financing will be through owner equity and bank loans.

7. Company Ownership The proposed form of company is a limited liability company, will be privately owned by its founder Akshat Mehrotra. Since it is a small business it need not publicly disclose its finances. The registration process is quite simple and the business can start by the starting of 2013. The owner will be the director and will initially handle the book-keeping responsibilities.

Prepared by Akshat Mehrotra – IGTC, Bangalore

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

20112012

8. Start-up Summary Startup expenses, funded through a combination of owner's equity capital and a commercial loan, are summarized in the table below. Start- Up Expenditure Rs. 5.46 Lacs. Owners’ Equity

Rs. 1.82 Lacs

Bank Loan

Rs. 3.64 Lacs

Debt Equity Ratio

2:1

Equipment Purchase Buying new machines costs approximately Rs. 1.25 Lacs excluding maintenance however to keep high the probability of smooth running of business we will be purchasing new washing and ironing equipments. 

2 Washer – 70 Kg capacity each, high spin, microprocessor control, electric heat.



4 Steam Iron



3 Ironing table



Buying a second hand delivery trucks.



Office equipment

Prepared by Akshat Mehrotra – IGTC, Bangalore

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

20112012

Loan Lending plan has to be completed and submitted to the bank 6 months before starting the business. Loan for a period of 5 years will be needed two months in advance. Annual interest of 14% has to be paid on the long-term loans secured with fixed assets.

9. Services

A - Cleaners is going to provide the following services for customers with free home pick-up and delivery in the New Delhi NCR area 

Laundry for personal clothes and large items such as blankets, curtains, etc.



Folding

All accompanied with pick up and drop facility

Operations plan

There are a couple of ways for customers to take part in the service. Customers can enter into contracts with A - Cleaners to get regularly scheduled service, or, if it is more convenient, they can order over the telephone or via e-mail. Customers can choose payment as per their conveinience at the time of each delivery, or by monthly credit card or debit card billing. A - Cleaners will send statements to each customer, itemizing service fees and the charge for the service to their credit or debit cards for payment, at the end of each month. Retail shop will not be rented in order to bring down the operation cost. An operations area for installing machines and equipment, washing and cleaning activities, and storing not yet cleaned and cleaned garments and items is needed. The operations facility will require about 1200 square feet divided into four main sections as following

Prepared by Akshat Mehrotra – IGTC, Bangalore

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

20112012

1. Machine installation and cleaning activities 2. Sorting and storage of dirty garments received 3. Storing cleaned garments after finishing prior to delivery 4. Office space The whole operation process will be controlled and monitored by a laundry expert employee, and generally managed by the business owner.

10. Market Analysis Summary

It is important to establish the reasons for choosing the laundry service before doing the market research and making the marketing plan. Laundries rated in the top ten enterprises with the lowest failure rate. 

Payment for the service is by cash, debit card, net banking and credit card.



No capital stagnancy, receive payment every month, easy to get instant profit.



Capital requirement for purchasing commercial laundry equipment is minimal; therefore the risk of this business is low.



This service only requires a few staff.



Supplies a needed service for customers’ frequent demand.



Customers use this service as this is a low priced service.



The demand for using service is increasing due to changing life styles, incomes, and the increase in clothing expenditure.

Prepared by Akshat Mehrotra – IGTC, Bangalore

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

20112012

11. Market Segmentation A - Cleaners will be primarily targeting students in the North campus area of New Delhi. We will start off by offering services to the students and residents of New Delhi NCR but will also aim at extending our service offering to other student centric cities like Pune, Bangalore, Kota and Kanpur. We will be targeting primarily students however getting business full-time, part-time employed customers who would value the convenience of our service will be added advantage. According to the 2011 census North Delhi has a population of 883,418, also independent demographic research shows that the approximate student population in the North Campus area of New Delhi is 80,000, of which about 50,000 are outstation students.

Demographics of North Delhi 1% 3%

5% Local students in North Campus Students staying in college hostel

91%

Students staying in PG and other hostels Other population

Prepared by Akshat Mehrotra – IGTC, Bangalore

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

20112012

12. Target Market Segment Strategy The table in the previous topic shows actual percentages of students in North Campus of New Delhi students 2012. There has been a change in the lifestyle of students who want to engage their time in useful activities rather than in unproductive activities like doing laundry etc. also students are involved in part time jobs to earn extra income. The Indian economy shows that employment, income, and GDP trends show an increase over the past several years as well. This results in improved standard of living, which leaves people having little time to do their housework. They are often exhausted after the whole day of working and tend to spend money to hire someone to do the housework for them. Also, the demand on clothes of these working class people generally increases proportionately with their income. Buying more expensive clothes, makes them pay more attention to them and take care and cleaning of those clothes. With profound research, this business focuses primarily on students and also working professional class customers as a target segment market.

13. Market Needs Research shows that two of the key factors in choosing a personal service, such as laundry by the target segment is affordable price and the convenience of the service. As stated above, with more students opting for part time jobs for additional income and increasing burden of studies they tend to choose services based on how much time and effort the service will save them. Although there are several conventional drop-off /laundry service providers in the area, A - Cleaners will primarily market its convenient pickup/delivery service to those busy students who are willing to appreciate such service, as it saves them time for other endeavors.

Prepared by Akshat Mehrotra – IGTC, Bangalore

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

20112012

14. Service Business Analysis The personal service industry is quite a bit fragmented. The North Campus area of New Delhi is no exception to that, with numerous small providers servicing the community's needs for laundry. In the North Campus area of New Delhi NCR there are about dozen dry cleaners, some of which also provide laundry and also garment alteration services out of which 3 provide pick-up and delivery services but their target maret is completely different and the price they charge each customer per cloth is averaging around Rs. 25. In the light of the above facts we will provide laundry service along with free pick up and delivery service to a specific customer segment primarily students at a nominal average price of Rs. 15 per cloth.

15. Competition and Buying Patterns Competition in North Campus area of New Delhi is not fierce. Research shows that there are twelve dry cleaners in the North Campus area in the city of New Delhi, only 3 of them offering the pick-up and drop-off service. The 3 competitor offering the convenience of the door-to-door service are White Tiger, Four Seasons Dry Cleaners and Laundry Express. We believe that initially these will be our major local competitor however their target segment is different from our target segment. We also believe that we will be able to win customers from our regular, drop-off competitors by enhancing the clients' peace of mind by providing them the same service at a much lower cost.

Prepared by Akshat Mehrotra – IGTC, Bangalore

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

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16. Strategy and Implementation Summary Following areas will be monitored to evaluate the business performance



Monthly and annual sales



Monthly and annual profit



Repeat business



New business



Customer satisfaction



Customers’ needs

The business success will depend on price, quality and convenience of the service we offer to our customer, customer opinions, and competitor response.

16.1 Optimism The business provides a new door-to-door, laundry service at an affordable price in the North Campus area in New Delhi that will surely attract customer attention. Outstation students may find this service is convenient for them and want to try it. If the customers are satisfied with our service quality they will become repeat customers. When the patronage occurs regularly, they become loyal customers of our service. These customers will recommend A - Cleaners to their friends and colleques. As more and more customers use our service, A - Cleaners' image is enhanced and we will gain more and more market share.

Prepared by Akshat Mehrotra – IGTC, Bangalore

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

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If we attain monthly and annual sales at least as forecasted, total costs and expenses, including any unanticipated charges, will not exceed our estimates and we will be in line with our forecasts.

17. Difficulties and Risks A - Cleaners is a start-up company and has less experience and begins its business with no market share at all. Hence assertive, effective initial marketing efforts and strategies will be necessary to gain a customer base. If existing competitors see us as a major threat and they resort to overtly aggressive actions it will be very difficult for us to become an established player in the marketplace. Risks caused by competitors are possible, therefore the business has to monitor and evaluate its performance frequently, and collect customer evaluations and suggestions in order to improve continually.

17.1 Worst Case Risks The worst case scenario would be that the business cannot support itself on an ongoing basis. The costs of doing business may be under-estimated or sales and profit may be less than expected, making the business difficult in finance. Moreover, in case of social economic recession, political changes, or inflation, the business may perform even worse than has been forecasted.

Prepared by Akshat Mehrotra – IGTC, Bangalore

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

20112012

18. Competitive Edge As the Indian economy is a developing one and quality of life is increases, people tend to spend more time and money in leisure activities rather than doing their house work. They prefer that someone else does the cleaning work for them. North Delhi has a population of more than 8,83,000 served by twelve laundry shops. Most of these existing shops wait for customers to bring their garments in and pick them up later. Customers have to drive cars to town, find parking places, carry their clothes or large items, such as curtains, blankets, etc. to the shop, and wait to be served. Then they must repeat this boring process when they come to collect their items. Moreover, these shops are only open from 10am - 7pm, and close on Sunday, which are almost the same working hours of colleges and offices which is most inconvenient for customers especially

those

students

who

are

also

involved

in

part

time

jobs.

By understanding and addressing this need, our new, laundry service will be established, providing door to door service free of delivery charge. We make our customers' lives simpler by saving them time, and eliminating waiting in queues, parking problems, forgetting to collect clothes, missing meals, and going home late.

Prepared by Akshat Mehrotra – IGTC, Bangalore

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

20112012

19. SWOT

Strengths 

Relatively new, door-to-door laundry service, providing another choice for customers.



Fast, reliable and convenient service in order to save customer’s time.



Low cost. Weaknesses



Competition from already established competitors in New Delhi NCR.



We are starting at no market share at all.



Less experience than our competitors in the same area. Opportunities



Expenditures on clothing are increasing, including expensive clothes; therefore the demand for taking care of clothes also increases.



There are more and more women – who traditionally have done the laundry and cleaning work in the family – going to outside the home. The target market of this business is college going students and later on professional class customers.



Average income and spending of New Delhi citizens is increasing.



People nowadays tend to spend more time on leisure activities rather than doing the house work.



There is a high likelihood of repeat business due to customer satisfaction.



Increase in business due to spread of word of mouth and other marketing strategy.



The ability to decrease the fixed costs as the sales volume increases.

Prepared by Akshat Mehrotra – IGTC, Bangalore

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

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Threats 

If the business is successful, there will be new competitors who supply the same kind of service.



New technology changes may bring out new family washing machines for.



Existing players who are already there in the market may react by lowering their prices.

20. Porter’s Analysis

Prepared by Akshat Mehrotra – IGTC, Bangalore

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

20112012

Bargaining Power of Suppliers The suppliers would be the detergent and allied products manufacturers from whom we will be buying products like washing powder, starch, bleach etc. in bulk hence we will be able to quote a lower price for our business which means the bargaining power of supplier will be lower as there are other detergent manufacturers in the market.

Bargaining Power of Buyers E- Cleaners is starting in the laundry business with no prior experience or market share. Hence getting customers to avail the service will initially be difficult. However, the low price strategy and aggressive marketing will help reach out to the student population. Bulk orders and festival orders will also receive discounts and hence we will be able to secure a strong customer base. Since our prices are already considerably lower than our competitors the bargaining power of buyers will be low.

Threat of New Entrants Other players might also see an opportunity to enter the laundry business since it is not very capital intensive. They might also target the student population and offer a lower price to capture our market but we will have first mover advantage. However the threat of new entrants can be mitigated by offering weekend discount of 10% for a month on lot of 15 clothes or more.

Prepared by Akshat Mehrotra – IGTC, Bangalore

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

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Substitutes The threat of substitute for a laundry business is clothes being washed at hostel by the students themselves however there is always a constraints that where will they dry their

clothes after washing. Another substitute are the local dhobhi ( people who wash clothes) however the local dhobi use low quality detergents and used water for washing the clothes which spoils the clothes and also risk of clothes being lost by the local dhobi is more. Also the students are pressed for time with increasing study load hence there are not many alternative to a low cost world class laundry business like E- Cleaners.

Competitive Rivalry There are already existing established laundry providers in the North Delhi. Twelve of them are reputed with strong customer base. Out of the twelve only three offer pick up and drop facility. However our strategy to enter the market is to target the college population of North Campus area by offering them convienient laundry service at an affordable price.

21. Marketing Strategy Place Dealing directly with customers, conveniently in the customers' houses in the North Campus area of New Delhi. A - Cleaners will receive clothes from and return them to customers' houses. Requests for urgent situation pickups, laundry and deliveries service will be accommodated, and a nominal fee charged. We will be located in the North Campus area of New Delhi so as to be within close proximity of our customers. Prepared by Akshat Mehrotra – IGTC, Bangalore

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

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Product Laundry service at price which is affordable to the students accompanied with free home pickup and delivery service. We will be going to customers' houses between 6 am - 11 pm three times per week. We provide convenience and high quality laundry service.

Price Since we are new in the laundry businesses and our target segment is also cost sensitive we will set the initial prices lower than their competitors. We will set our prices lower than those of our competitors. The pricing scheme is based on per cloth basis. Moreover, the business targets students who have burden of studies and are also cost sensitive so we will offer the quality and convenience of service at a price lower than other players in the market.

Promotion 

Advertise our new service in the college bulletins, famous hangout points, Internet café, public areas such as bus stops.



Distribute advertising fliers to the students in colleges, salons etc. and also drop into families' mailboxes.



Offer 10% discount as an incentive for customers who sign one-year contracts.



Issue coupons with lower price for loyal customers.



Festive discount offers.

Prepared by Akshat Mehrotra – IGTC, Bangalore

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

20112012

22. Sales Strategy We will start off by pricing our service lower than our main competitor's prices and we will be closely monitoring our financials to make sure that we develop a sustainable business without heavily discounting our services to win customers. All sales inquiries will be handled by the business owner. We will also train our employees, particularly those facing the customers, in customer service to make sure that our customers are fully satisfied, as such customers will not only stay longer with us but will also refer other Customers’ to us. We will offer discounts to our customers with frequent large orders and also provide other incentives for new customer referrals.

Prepared by Akshat Mehrotra – IGTC, Bangalore

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

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23. Sales Forecast The sales forecast gradually increases over the year 2012-13 is Rs. 864000. The sales forecast has been arrived at as follows .  5 clothes each customer per week.  Hence 20 clothes per customer per month  Average price per cloth is Rs. 15 Month

No. of Customers

Amount in Rs.

Month 1

100

30000

Month 2

120

36000

Month 3

150

45000

Month 4

170

54000

Month 5

200

60000

Month 6

220

66000

Month 7

250

75000

Month 8

280

84000

Month 9

300

90000

Month 10

330

99000

Month 11

350

105000

Month 12

400

120000

Prepared by Akshat Mehrotra – IGTC, Bangalore

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

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First Year monthly sales forecasts are summarized in the table below.

Sales 140000 120000 100000 80000 60000

Sales

40000 20000 0 Month Month Month Month Month Month Month Month Month Month Month Month 1 2 3 4 5 6 7 8 9 10 11 12

We have projected an increase in the sales by 20% for second year (2013-14) over the first year (2012-13) and 25% for the third year (2014-15) over the second year (201314) as a result of aggressive marketing, spread of positive word of mouth by providing quality laundry service at an affordable price.

Prepared by Akshat Mehrotra – IGTC, Bangalore

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

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24. Management Summary The owner of the A - Cleaners will be director and accountant, working full time. A laundry expert will be employed along with 2 helpers and will be in charge of the operation and the quality of garment cleaning. Moreover a driver for the pick-up and delivery vehicle along with a helper will be in charge of pick-up and delivery service. Workers will report the laundry expert who reports to the director.

25. Personnel Plan Through research plan to get a laundry expert, driver and helper is prepared. Employment news will be advertised in local newspapers. The laundry expert and two helpers who have experience in laundry work will be employed. The laundry expert will make sure that the operation is alright and the quality of garment cleaning is world class. Workers will bear the responsibity of cleaning and classifying work and will have a duty to report daily work to the laundry expert. The expert then will have to report their working results and problems to the director. A driver and a helper for picking up and delivering clothes work from 6 am -11 pm three times a week.

The staff should be able to carry out working conditions and requirements: 

Thoroughly understand and apply and washing processes.



Meet set standards.



Work in hot and humid conditions.



Perform the same work over and over again.



Overtime during peak seasons.

Prepared by Akshat Mehrotra – IGTC, Bangalore

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

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26. Number of staff and salary Description

Number

Salary Per Month (in Rs.)

Laundry Expert

1

8000

Laundry Helper 1

1

5000

Laundry Helper 2

1

5000

Driver

1

6000

Delivery Helper

1

6000

Prepared by Akshat Mehrotra – IGTC, Bangalore

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

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27. Financial Plan The following topics, profit and loss account, and balance sheet have been built using forecasted information which is as accurate and realistic as possible. Sales slowly and gradually increase over the 12 months showing the positive trend of sales. A - Cleaners is steadily gaining market share. The financial statements show that the business runs in loss for the first two years and achieves profit in the third year.

Start-up Funding Startup expenses, funded through a combination of owner's equity capital and a commercial loan, are summarized in the table below.

Start- Up Expenditure Rs. 5.46 Lacs.

Owners’ Equity

Rs. 1.82 Lacs

Bank Loan

Rs. 3.64 Lacs

Debt Equity Ratio

2 :1

Prepared by Akshat Mehrotra – IGTC, Bangalore

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

20112012

Equipment Purchase Buying new machines costs approximately Rs. 1.25 Lacs excluding maintenance however to keep high the probability of smooth running of business we will be purchasing new washing and ironing equipments. 

2 Washer – 70 Kg capacity each.



4 Steam Iron



3 Ironing table



Buying a second hand delivery trucks.



Office equipment

Loan Lending plan has to be completed and submitted to the bank 6 months before starting the business. Loan for a period of 5 years will be needed two months in advance. Annual interest of 14% has to be paid on the long-term loans secured with fixed assets.

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

20112012

28. Break-even Analysis The break-even point of the business is calculated and shown below. As revenue becomes more than break-even point, the business starts to earn the profit. As forecasted, the total demand on and laundry service continues to flourish in the following years therefore, if the business satisfies its customers, increases its customers base and retains customer loyalty, the profit will continue to rise.

2014-15 SALES

12.96

VC

4

FC

8.35

CONTRIBUTION

8.96

Break Even

93.19%

Break EvenSales

12.08

Prepared by Akshat Mehrotra – IGTC, Bangalore

Page 32

Business Plan: Establishing a Laundry Business in North Campus, New Delhi

20112012

29. Projected Profit and Loss The table projects our profit and loss statements for the first three years of operation. In general, the business might meet some difficulties in the beginning two years but after that the business grows as expected and produces a small profit at the end of the third year. Since our strategy is to enter the market at a much lower price than the existing competitors so as to gain a a larger share of the market, so the initial two years of operation will be at a loss. However from the third year we will be able to generate positive profits backed by a strong customer base and the trend is likely to continue in future.

P/L for the year Income

2012-13 8.64

2013-14 10.37

In Rs. Lacs 2014-15 12.96

Expenses Raw Material SPARES Repair & Maintenanace Depreciation Rent & Electricity Fuel Direct Labour Other manufacturing Exp

0.5 0.3 0.25 0.81 4.8 0.50 3.6 0.1

0.6 0.35 0.25 0.7 4.8 0.60 3.6 0.1

0.75 0.4 0.25 0.6 4.8 0.70 3.6 0.1

Cost of Production

10.86

11.00

11.20

0.75

0.6

0.6

11.61

11.60

11.80

Selling adm & dist expenses

Cost of Sales

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

20112012

Operating Profit before int

2.97

1.23

1.16

Int

0.65

0.62

0.55

Operating profit after interest

3.62

1.85

0.61

Other Income

0.02

0.02

0.02

Other Exp& amortisation

0.00

0.00

0.00

PBT

3.60

1.83

0.63

Tax

0

0

0

PAT

3.60

1.83

0.63

Retained Profit

3.60

1.83

0.63

Monthly Operating Profit

Operating Profit Operating Profit 0.3 0.2 0.1 0 -0.1 -0.2 -0.3 -0.4 -0.5 -0.6 -0.7 -0.8

0.23 0.02

-0.13

0.08

-0.07

-0.22 -0.43

-0.37

-0.31

-0.52 -0.67

-0.61

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

20112012

Yearly Operating Profit

Yearly Operating Profit 1.50

1.16

1.00 0.50 0.00 0.50

2012-13

2013-14

2014-15

1.00 1.50

1.23

2.00 2.50 3.00 3.50

2.97 Yearly Operating Profit

Yearly Profit

Net Profit 1.00

0.63

0.50 0.00 0.50

2012-13

2013-14

2014-15

1.00 1.50 2.00

1.83

2.50 3.00 3.50 4.00

3.60 Net Profit

Prepared by Akshat Mehrotra – IGTC, Bangalore

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

20112012

30. Projected Balance Sheet Balance Sheet

2012-13

2013-14

2014-15

Sources of funds

Equity Capital

1.82

2.82

2.82

Term Loan

3.64

2.91

2.18

Cash Creddit

1.00

1.50

1.75

Unsecured loan

0.75

1.00

1.00

Total Loan amount

5.39

5.41

4.93

Profit

3.60

5.43

4.80

0.36

0.40

0.44

Advances from customers

0.30

0.38

0.40

TL INSTALLMENT due in 1 year

0.73

0.73

0.73

Total Curent liability

1.39

1.51

1.57

Loan Secured Loan

Current Liability Creditors Loans and advances

Prepared by Akshat Mehrotra – IGTC, Bangalore

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

Total Liability

20112012

5.00

4.31

4.52

Gross Block

5.64

5.64

5.64

Depreciation (@15%)

0.81

1.51

2.11

Net Block

4.83

4.13

3.53

0.00

0.00

0.25

Inventory

0.07

0.08

0.09

Debtors

0.10

0.10

0.10

Others

0.00

0.00

0.17

Cash & Bank

0.00

0.00

0.38

Misc.Exp

0.00

0.00

0.00

Total Current Asstes

0.17

0.18

0.74

Total Assets

5.00

4.31

4.52

Uses of funds Fixed Assests

Investment in fixed deposit Current Assets

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

20112012

31. Business Ratios Business ratios for the years of this plan are shown below.

2012-13

2013-14

2014-15

0.00% 20.02% Percent of Total Assets

24.98%

Inventory

1.40%

1.86%

1.99%

Other Current Assets

0.00%

0.00%

0.00%

Total Current Assets

3.40%

4.18%

16.37%

Long-term Assets

96.60%

95.82%

78.10%

Total Assets

100.00%

100.00%

100.00%

Sales Growth

As a percentage of total liability

Current Liabilities

47.80%

69.84%

73.45%

Long-term Liabilities

87.80%

90.72%

70.35%

Net Worth

-35.60%

-60.56%

-43.81%

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Business Plan: Establishing a Laundry Business in North Campus, New Delhi

20112012

Percent of Sales

Sales

100.00%

100.00%

100.00%

Gross Margin

-41.90%

-17.84%

4.71%

Selling, General & Administrative Expenses

8.68%

5.79%

4.63%

Profit Before Interest and Taxes

-32.29%

-10.90%

9.49%

Current

0.07

0.06

0.22

Quick

0.04

0.03

0.20

Total Debt to Total Assets

107.80%

125.52%

109.07%

Pre-tax Return on Assets

-72.00%

-42.46%

13.94%

Additional Ratios

Year 1

Year 2

Year 3

Net Profit Margin

-41.67%

-17.65%

4.86%

Return on Equity

-197.80%

-64.89%

22.34%

Main Ratio

Prepared by Akshat Mehrotra – IGTC, Bangalore

Page 39

Business Plan: Establishing a Laundry Business in North Campus, New Delhi

20112012

Activity Ratio

Inventory Turnover

123.43

129.63

144.00

Accounts Payable Turnover

86.4

103.7

129.6

Total Asset Turnover

1.73

2.41

2.87

Debt to Net Worth

-3.03

-2.07

-2.49

Current Liab. to Liab.

0.28

0.35

0.35

-3.29

-0.82

3.24

Debt Ratio

Liquidity Ratio

Interest Coverage

Prepared by Akshat Mehrotra – IGTC, Bangalore

Page 40

Business Plan: Establishing a Laundry Business in North Campus, New Delhi

20112012

Bibliography      

Marketing Management by Philip Kotler www.economicstimes.com www.indiatimes.com www.du.ac.in www.allindiaforums.com www.finance.thinkanddone.com

Prepared by Akshat Mehrotra – IGTC, Bangalore

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