Feasibility Report to Start Up a New Business - Essay Example

Topic: FEASIBILITY REPORT TO START UP A NEW BUSINESS Insert Insert Insert Table of Contents Introduction3 Project Environment...4 Project Description..5 Demand Supply Conditions.7 Market Structure & Pricing Strategy8 Expected Budgeted Cost and Return on other alternative..10 Study Conclusion.13 References.14 INTRODUCTION: 1. PROJECT OWNERSHIP: 1.1Type of Business: Basically the feasibility report we are preparing for the business is WEDDING PLANNER in Pakistan. The concept is unique in its kind as Pakistan is underdeveloped country and there is huge potential to run this business as people over there spend heavily on wedding then other things in their life. Not even that the season of weddings remains throughout the year and the people want to spend heavily to make their events memorable and unique in their own way. The location we choose initially to set up our office is Lahore, the heart of the country. We will offer the wedding services from cards till final arrangements of the events under one roof. We have huge opportunities to capture the market as no such proper wedding planners exist in the country which gives all matrimonial services under one roof. And that's makes us different from others. 1.2 Type of Ownership: We prefer to choose the ownership as partnership instead of any company. There are many reasons for it. As initially the investment we require is not huge as it would be a service based company instead of manufacturers. So initially, huge capital is not required to start up the business. 1.3 Resources: As mentioned earlier, we are not in need of huge capital to start up this business as it is a service based industry. Instead of having land, the company can lease or rent the building at any posh area of Lahore. The labor or manpower we need for this business is relatively cheap. The Human resource is skilled and has a strong traditional background. All we need is a good team to start with which is not only talented and capable but has a strong passion of their work. So the main focus should be on hiring the good team and establishing an office at a good area with little publicity. The capital can be bringing into business through two options. One from personal savings and secondly to have a loan from any reputed bank in the company. 2. PROJECT ENVIORMENT: 2.1 EXPECTED BENEFITS FROM THE BUSINESS: Our project will start in Lahore, Pakistan. Lahore is thickly populated city, and a capital of province Punjab. The rate of pollution is high but it has nothing to do with our business as we are not specializing in manufacturing concern. We are a service based industry. The GDP of the country is not very high but overall communities are rich and wealthy. The expected benefits we can achieve from the business are unbelievable. Pakistan is the country where people spend million every year on weddings. It is cultural and tradition of people to celebrate weddings with so much enthusiasm. But unfortunately there is no proper wedding planners who provide such kind of services in one package under one roof. In this fast moving life, people wants to spend more and have wedding planners who will fix up everything for them. Our company can not only earn high yields, but can create monopoly in the industry. And this can bring high rewards for the company. 2.2 COMPETITIVE ENVIRONMENT: The environment is not that much competitive as we think of. There are few competitors in the industry but they don't provide the whole range of service. There is as such no major competitor and the company can excel well. 2.3 POLITICAL ENVIORMENT: The political environment to start up this business is very well. The country is stable and has as such no major issues to be resolved. The country is developing rapidly and over all political environments is favorable. 2.4 TECHNOLOGICAL ENVIORMENT: The over all environments towards technology are favorable. The Country adopts every new technology to excel the growth of the economy. As such the company will face no constraints to adopt latest technology to promote its business. To import the latest technology, the government gives subsidies so that the economy of the country gets strong. 2.5 SOCIAL & CULTURAL ENVIORMENT: The social and cultural environment is favorable and highly suitable for us. The people are looking for professionals who makes their events memorable one in their unique way. And for that, people are willing to pay heavily as it's the culture and traditions to celebrate weddings with so much fun and enthusiasm. So our business project will be highly supported by the social and cultural environment of the country. 3. PROJECT DESCRIPTION: 3.1 PROJECT OBJECTIONS: Our project is about the introduction of wedding planners in an underdeveloped country. The basic theme is to create a monopoly by providing all wedding services a family wants at economical rate. The basic objectives of our project are: To capture the market of wedding planners by giving the wedding services at economical rates. To create a kind of monopoly as we provide all wedding services under on roof this is not happening previously. To bring high yields for the company by providing best designed services for our clients. To earn a good repute for the company to attract new customers and to experience more with each passing day. To make our clients events memorable in our own unique way. 3.2 PROJECT CONTENTS: The contents of our project are to provide all matrimonial services to our valuable clients under one roof so that client gets maximum satisfaction and feels like family being with us. The ranges of services we offer are broadly classified in four steps: Selection. Management. Decoration. Consultancy. 1. Selection: The first and foremost part of our service would be helping the client in selection of different essentials he/she wants for his wedding. It starts from selection of cards till final selection of his dress and accessories. We will serve them in every phase on their important days. 2. Management: Second part of our service is to manage each and everything of our client. It includes event management, venue, catering etc. We serve them at our best to make them feel a part of us. 3. Decoration: Furthermore a part from selection and management, we serve dcor service to our clients with our floral and interior designer specialists. They give them dcor of venue, room, home and accessories to make their days memorable. 4. Consultancy: Apart from all above service, clients also need consultancy service on various issues. These may be given to bride or groom including relief therapy as well as to the families of the bride or groom on various issues. 4 DEMAND & SUPPLY CONDITION: 4.1. ELASTICITY OF DEMAND: As our company specialize in these kinds of services, and there is no proper company which gives all these services to our clients, so the demand of that thing is increasingly high. The demand is higher then the price we actually offer and it means that we can earn high profits from such market situation. Furthermore during wedding season, even the demand gets double. So there is huge potential that by increasing the demand we can capture a high percentage of market. The product becomes a necessity, as it becomes a cultural and social symbol to celebrate wedding in a perfect and special ways. 4.2 AVAILABILITY OF SUBSITUTES: As such there is no available proper substitute for this product, there are some competitors in the market, but they still don't cater all these services to the market as we do. The income level of people is very high and every person can afford to hire a wedding planner and can make his wedding special. The price of the product varies with different packages and services the clients wants. The normal range of services starts from Rs 500,000 and so on. 4.3 ELASTICITY OF SUPPLY: As the demand of our product is increasingly higher, so the supply will be higher too. For this purpose, company has to establish its offices to other cities as well with the passage of time. In order to cope with the increase demand, the company should have to hire skilled workers so that company can saves time, and serve more clients in a short span of time. 4.4 AVAILABILITY OF RESOURCES: As such the company is not in need of raw material and other stuff. The company should focus on hiring interior designers, managers, event managers, florists and should have a good contact with catering, designers, florists, jewelers, Photographers and movie makers so that company can serve best to its precious clients. 5. MARKET STRUCTURE & PRICING STRATEGY: 5.1 MARKET STRUCTURE: The structure of the market is monopolistic. The company can create a monopoly in the industry as no such brand is working with services our company will provide. People are willing to spend more so that the can get best from such services. But unfortunately no proper company is there to provide all these service to the clients. There is a huge demand but no supply. 5.2 PRICING STRATEGY: Initially when we start our business, our pricing strategy should be such to attract more and more customers. Therefore the company should give reasonable packages and prices so that we can cover masses broadly. And a person from every class can afford it. After the establishment of the business, when we retain our loyal customers, the company can switch to charge higher with exclusive packages so that the company can cover up its initial costs. The pricing strategy of our business can vary in high season of weddings. In order to get more and more profit and to increase sales the company can bring exciting packages along with reasonable rates so that company can do well in the peak season of wedding. 5.3 OPTIMIMUM UTILIZATION OF RESOURCES & PROFIT MAXIMIZATION: We can utilize our limited resources at optimum level and can earn maximum profit by making a good market strategy. We first of all focus on organization chart, how to do things, when to do things, needs to recognize our strengths and weaknesses and what are the risk involve in all such things. Then after formulating a good business strategy we should ensure that we get maximum from our workforce and pay them accordingly. When the company can utilize its limited resources properly and stream line its given tasks then the company can earn maximum profit. 5.4 COST REDUCTION TECHNIQUES: We can curtail our costs by various techniques. Basically we have some fixed costs and some variable costs. Our fixed costs includes rental costs, depreciation, and our variable costs includes staff salaries, utilities, advertisement, office supplies, printing & stationery, marketing, and other marketing & administrative expenses. So the main focus is to curtail the costs through variable expenses. In order to get maximum from the staff, job description should be given to them along with targets. In this way the staff can perform its duties efficiently and effectively. Secondly budget should be prepared for every department so that a pre defined costs should be allocated and then after a quarter there should be comparison between actual and budgeted. Calculate the variances and in this way our company can get the reasons how and where the cost has raised and how to curtail it. 5.5. SCALE IN CASE OF EXPANSION OF BUSINESS: The scale of expansion of our business is quiet large. The company can spend economically to expand its business through outlet and branches at all the major cities of the country. This not only brings high yields for the company but help our company to flourish and to it help them company to gain a good repute as well. Further more, our expansion, helps the company to advertisement as our work speaks itself. By delivering quality of services with economical packages, the company can target a larger portion of market and it helps them to establish the business very well. The start up cost of any branch or outlet in any city of our business can be easily recovered with in six months of its operations. There is huge potential to expand our business as the company can capture the market and create a monopoly. 6. BUDGETED EXPECTED COSTS & RETURN: 6.1 ESTIMNATED EXPECTED COSTS & REVENUE: As we have discussed earlier there is huge potential to bring high yields for the company. And in case the company target 20 clients in a month, the monthly income statement of the company can be as follows: EXPECTED REVENUE: Rupees Sales from service 100,000,000 Sales of wedding accessories 25, 00,000 Total Revenue 102,500,000 COST OF SALES: Raw material for samples 500,000 Labor costs for samples 200,000 Factory overhead costs 225,000 Total cost of sales 925,000 Gross Profit 101575,000 Other Administrative & Marketing Expenses: Staff Salaries 25,00,000 Rental Expense 300,000 Utilities 100,000 Office Supplies 200,000 Printing & Stationery 120,000 Advertisement 500,000 Marketing Expense 200,000 Depreciation Expense 245,000 Total Expenses 4165,000 Net Profit 97410,000 6.2 ESTIMATED SALES FOR BREAK EVEN POINT: The break even point is when the company can have no profit no loss and the company can recover its costs. The basic formula for break even point is Break Even Point: Contribution Margin/Fixed Cost *100 BEP= 97955, 000/ 545,000 * 100 = Rs 17,973 Here Contribution Margin is: CM= Revenue - Variable Costs = 102,500,000- 4,545,000 =97,955,000 As shown from the above mentioned calculations the break even point of our company is 17,973 Rupees. We can easily recover the costs by doing our first order effectively and efficiently. 6.3 EXPECTED REVENUE FROM THE BUSINESS: There is a huge potential that our company can bring high yields from the expected business plan. The expected revenue the company can gain is Cost of services Rs 500,000 * No of orders 20 Total Revenue earned is Rs 100,000,000 If the company does 20 order in a month the minimum expected profit the company can earn is Rs 100,000,000. And in my opinion company can do well as there is huge potential for our business in such a new industry in under developed country. 7. CONCLUSION: 7.1 ALTERNATIVE BUSINESS SCENARIO: The company can have another option of alternative business and that is a company can run successfully the restaurant business in the town and can earn high yields as well. We offer in our restaurant all types of cuisines at one place. The other alternative, our company can have is this restaurant option. Though the company can run this business successfully but the market is large with perfect competition. 7.2. COMPARISON & CONTRAST OF ALTERNATIVE BUSINESS: Our company can run these two businesses successfully, however the wedding planner options brings higher reward for the company. The reason being is it is new in the country and our company can achieve high target market. The company can flourish well in such circumstances and there is an opportunity that the company can create monopoly in this particular industry. However though the restaurant business can do well but the company has certain risks and threats as a tough competition in the market prevails. So the best option is to choose is wedding business plan as it has lots of potential to go with it. 7.3 CRITERIA OF DECISION MAKING: The criteria of decision making are on different factors. But the basic factor which is common above all is maximum profit and earning of good repute. Other factors which we have to consider are the environment and social and cultural factors which supports or discourage any business. We are of the opinion that wedding business plan suits well as it has high margin of productivity, environment is feasible and the background to start up this business is strongly supported by social and cultural environment of the country. Furthermore the company can gain a good repute with chances to flourish in its best capacity. Moreover the cost factor is minimum as it is service based industry. REFRENCES: Gerald J. Alred, Charles T. Brusaw, Walter E. Oliu, 2006,"The Business writer's Handbook', Publishers: Martin's Press. John Walker Mullins 2006, "The new business road test "Published By: Princeton hall/ financial times. Sandra E. Belanger 2005, "Business and technical communication" Published by: Green wood publishing group. Jason Westland 2007," Project management life cycle" Published By: Kogan Page Publisher. Zenas Block, Ian C. MacMillan 1995, "Corporate venturing, creating new businesses" Published by: Harvard Business Press. David S. Clifton, David E. Fyffe, 1977" Project Feasibility Analysis "Published by Wiley. Robert J. Barro 1997," Macro Economics" Published By: MIT Press. Rudiger Dornbusch, Stanley Fischer 1984. " Macro Economics" Published by: McGraw-H http://www.feasibleproject.com/ http://www.io.com/hcexres/textbook/feas.html Read More