Project - Laundry Business

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

2011-
2012

Prepared by Akshat Mehrotra IGTC, Bangalore Page 1

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
2011-
2012


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
2011-
2012


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 Porters Analysis ...................................................................................................................................21
21 Marketing Strategy..23
22 Sales Strategy..25
23. Sales Forecast26
24.Management Summary28
25. Personnel Plan..28
26. Number of staff and salary..29
27. Financial Plan.30
28. Break Even Analysis..32
29. Projected Profit and loss33
30.Projected Balance Sheet36
31.Business Ratio38
32 Bibliography42

2011-
2012


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 DSouza 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: 29
th
Feb 2012
PLACE: Bangalore
2011-
2012


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.
2011-
2012


2012-13 2013-14 2014-15
Sales 8.64 10.37 12.96
Net Profit -3.6 -1.83 0.63
-6
-4
-2
0
2
4
6
8
10
12
14
In Rs. Lacs
Sales Net Profit
2011-
2012


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.
2011-
2012


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, vice-
president, White Tiger.

2011-
2012


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.
2011-
2012


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.

2011-
2012


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

2011-
2012


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

2011-
2012


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.

2011-
2012


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.

3%
1%
5%
91%
Demographics of North Delhi
Local students in North Campus
Students staying in college hostel
Students staying in PG and other
hostels
Other population
2011-
2012


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.

2011-
2012


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.

2011-
2012


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.

2011-
2012


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.

2011-
2012


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.

2011-
2012


19. SWOT

Strengths

Relatively new, door-to-door laundry service, providing another choice for customers.
Fast, reliable and convenient service in order to save customers 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.

2011-
2012


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. Porters Analysis

2011-
2012


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.

2011-
2012


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.
2011-
2012


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 caf,
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.

2011-
2012


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.

2011-
2012


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

2011-
2012


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

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 (2013-
14) as a result of aggressive marketing, spread of positive word of mouth by providing
quality laundry service at an affordable price.

0
20000
40000
60000
80000
100000
120000
140000
Month
1
Month
2
Month
3
Month
4
Month
5
Month
6
Month
7
Month
8
Month
9
Month
10
Month
11
Month
12
Sales
Sales
2011-
2012


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.
2011-
2012


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

2011-
2012


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

2011-
2012


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.

2011-
2012


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

2011-
2012


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

In Rs. Lacs
2012-13 2013-14 2014-15
Income 8.64 10.37 12.96

Expenses
Raw Material 0.5 0.6 0.75
SPARES 0.3 0.35 0.4
Repair & Maintenanace 0.25 0.25 0.25
Depreciation 0.81 0.7 0.6
Rent & Electricity 4.8 4.8 4.8
Fuel 0.50 0.60 0.70
Direct Labour 3.6 3.6 3.6
Other manufacturing Exp 0.1 0.1 0.1

Cost of Production 10.86 11.00 11.20

Selling adm & dist expenses

0.75 0.6 0.6

Cost of Sales 11.61 11.60 11.80

2011-
2012


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

-0.67
-0.61
-0.52
-0.43
-0.37
-0.31
-0.22
-0.13
-0.07
0.02
0.08
0.23
-0.8
-0.7
-0.6
-0.5
-0.4
-0.3
-0.2
-0.1
0
0.1
0.2
0.3
Operating Profit
Operating Profit
2011-
2012


Yearly Operating Profit

Yearly Profit

2.97
1.23
1.16
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
0.50
1.00
1.50
2012-13 2013-14 2014-15
3.60
1.83
0.63
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
0.50
1.00
2012-13 2013-14 2014-15
Net Profit
Net Profit
2011-
2012


30. Projected Balance Sheet

Balance Sheet 2012-13 2013-14 2014-15

Sources of funds

Equity Capital 1.82 2.82 2.82

Loan
Secured Loan
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

Current Liability
Creditors 0.36 0.40 0.44
Loans and advances
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
2011-
2012


Total Liability 5.00 4.31 4.52

Uses of funds
Fixed Assests
Gross Block 5.64 5.64 5.64
Depreciation (@15%) 0.81 1.51 2.11
Net Block 4.83 4.13 3.53

Investment
in fixed deposit 0.00 0.00 0.25
Current Assets
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

2011-
2012


31. Business Ratios

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

2012-13 2013-14 2014-15
Sales Growth 0.00% 20.02% 24.98%
Percent of Total Assets

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%

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%

2011-
2012


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%

Main Ratio
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%

2011-
2012


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 Ratio
Debt to Net Worth -3.03 -2.07 -2.49
Current Liab. to Liab. 0.28 0.35 0.35

Liquidity Ratio
Interest Coverage -3.29 -0.82 3.24

2011-
2012


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

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Business Plan: Establishing a Laundry Business in

North Campus, New Delhi

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