Professional Documents
Culture Documents
MVELEDZANDIVHO MULTI-PURPOSE
CO-OPERATIVE LIMITED
Company Information
Issued Date:..........................
Legal Name: Mveledzandivho Multi-Purpose Co-Operative Limited
Trading Name: Mveledzandivho Multi-Purpose Co-Operative Limited
CK Number: 2012/017322/24
CONTACT PERSON:
Mrs Lorraine Mashudu Khangale
Cell: 082 967 0652
POSTAL ADDRESS:
P.O Box 1
Mukula
0978
BANK DETAILS:
Name of Bank:
Account Number:
Account Type: Cheque Account
Confidential Agreement
_________________________
______________________________
Signature
Name:
____________________
Date
2. To give the owner who wants to start the clothing production business a much better idea of whether the owner should really get involved in this type of business at all, through determining the commercial, technical and financial viability.
3. To serve as a useful guide for the business to check continuously how
the business is getting-on in achieving its goals
5. To serve as a very good document for outsiders, like banks or suppliers of credit, to see whether they are interested in getting involved
in the affairs of the business or not.
2.
Keys to success.....8
3.
Financial Summary.....9
4.
5.
Section 1
MARKETING PLAN
1.1
1.2
1.3
Competitors.11
1.4
1.5
Location..12
1.6
Market Area12
1.7
Targeted Customers.12
1.8
1.9
Total Demand.13
1.10
Market Share...14
1.11
Selling Price14
1.12
Sales Forecast...15
1.13
Marketing Strategy15
1.14
Marketing Budget..16
Section 2
MANUFACTURING PLAN
2.1
2.3
2.4
2.5
Labour....18
2.6
Overhead Expenses....18
Section 3
ORGANISATION & MANAGEMENT PLAN
3.1
Form of Business.19
3.2
Organisational Structure.21
3.3
3.5
Pre-Operating Expenses.....24
3.6
Administrative Expenses.24
Section 4
FINANCIAL PLAN
4.1
Capital Required....25
4.2
4.3
4.4
4.5
Balance Sheet....30
4.6
4.8
4.9
Exit Plan...32
EXECUTIVE
SUMMARY
1.
This business started with 35 people. Due to lack of infrastructure, equipment and
materials to produce stock, other people decided to leave. The business has now been
left with 9 dedicated individuals. They are currently operating in one mud hut made of
soil and grass. This building is in bad condition and is too small and as such it cannot
accommodate all staff. In 2012 the members decided legalise this business and
register it as a co-operative.
The main objective of this business plan is to obtain funding that will be used to
improve the business so that it can produce more products and make more profit. The
directors intend to increase products range by focusing on different products range than
only on the traditional attire and beads. The new products range will be school
uniforms, hospital uniform, cleaners uniforms or gowns, services workers work-suite,
safety and protective clothing including embroidery services. With this products range
management believe that this business will make a good profit.
With this new products the business has targeted the following, schools, cleaning
companies, construction companies, hospitals, university, and security companies with
uniform and protective clothing. The business has targeted this type of customers
because they purchase their products in bulk.
The market survey conducted has indicated that there are few companies that
manufacture these types of products around Thulamela municipality. The products
such as protective clothing, school uniforms and hospital gowns are essential to most
institution and this products are used daily. This means that they need to be replaced
every time. As essential products the demand of these products will never stop. This
cooperative is therefore positioning itself well in order to capitalise on the available
opportunities.
Another opportunity in this business is that the government strategy or BEE act
emphasise that the local black manufacturing companies be given preferences by all
government institutions.
2.
Keys to success
Keeping cost lower than all local suppliers by producing in higher volumes
3.
Financial Summary
The table below is a brief summary of the profit and Loss statement.
Particulars
1
Sales
434 400
Net profit
20 548
Net Cash flow
105 791
Break-even Point %
92.5%
**Rate of Return in total investment is 9 years *
4.
Year
2
477 840
24 230
146 289
3
525 624
28 280
190 836
5.
Particulars
Building and Fencing
Furniture and Equipment
Electricity Installation
Materials for 2 Month
One Month operating expenses
Total amount needed from outside source
Amoutnt
(Rand)
113 000
167 175
21 800
26 064
21 493
349 532
Section 1
MARKETING PLAN
1.1
1.2
These products are selected because they meet the requirements for the majority of
institutions and are used daily. Most of the companies or institutions purchase these
10
products in bulk. These products are made from a high quality materials. The
advantage is that the cooperative will also be doing embroidery in house.
1.3
Competitors
1.4
Competitive Advantage
Mveledzandivho Multi-Purpose Co-Operative Limited will distinguishe itself from its
competitors through providing high quality products at reasonable prices. The advantage is that Mveledzandivho Multi-purpose cooperative is black owned. The new
BEE act requirements give preferences to local black own companies. Competitors do
not provide safety clothing whereas this cooperative will provide safety clothing.
Members of the cooperative will do personal visit to all institutions and companies. It will
build relationships and find out what customers need. Because of few competitors the
current suppliers put their prices very high. This cooperative will mark its prices slightly
below the competitors price. It will also offer bulk discount. By keeping the overhead
11
low, the business will be able to channel the profits back into operations thus avoiding
high debt ratios or lost sales opportunities. Consideration will also be given to attending
trade shows around the country for selling traditional garments.
1.5
Location
The business will is located at Mukula Village within Thulamela Municipality, Vhembe
District, Limpopo Province, South Africa. This location has been selected because of
the following reasons:
1.6
Market Area
Although the factory is located at Mukula village, the business will distribute its products
to Vhembe district as a whole. e.g Hospital, universities, colleges, municipalities
Members will visit all hospital procurement to be listed in a database in the whole area.
The cooperative has targeted area such as Mukula and surrounding villages.
Mveledzandivho Multi-Purpose Co-Operative Limited plans to initially supply its
products in Vhembe District. Our future plan is to supply the whole country and other
African countries.
1.7
Targeted Customers
12
The business main targeted customers are schools and Venda women who like
wearing traditional clothes. It will supply school uniforms and embroidery of name and
logos on the garments. The other customers will be cleaning companies, constructions,
electrical companies, municipality, university and mining companies who need worksuit with their emblem. This people they use this products almost every day as uniform
for their general workers.
The other Customer group are current customers who are currently purchasing
traditional clothing and beads from the cooperative. These people purchase products
when they attend traditional wedding ceremony and others during their social clubs
such as Tshisevhesevhe. They like wearing traditional clothes when dancing to
traditional songs and sounds.
1.8
The market outlook for the selected products in Limpopo Province and elsewhere is
positive. This type of products are used almost every day. Protective and safety
clothing is mandatory in majority of work such as mining, electrical, construction and
cleaning. School uniforms are also mandatory in all South African public schools. With
this reason this industries will remain strong forever. The demand will always increase
due to the population growth. These days people prefer to be identified through their
traditional clothes. This create a huge demand for both the traditional clothes and
beads.
1.9
Total Demand
The market survey indicated that the demand for traditional clothes is higher than supply. Some competitors indicated that they sometimes reject orders of people due to the
high load of work. The survey also indicates that half of our targeted market prefers
company name or logo engraved into their garments. The problem is that they are fail-
13
ing to get them because of shortage of companies with the right equipment and machinery.
1.10
Market Share
There is a strong belief in occupying a greater market share because of the following
factors:
4
6
10
15
16
24
40
60
The research indicates that there is high a necessity for extra, African and traditional
clothing production companies in Vhembe District area and South Africa as a whole.
14
1.11
Selling Price
The prices of the products are based on the cost plus margin and combining with what
the customers are willing to pay method. These costs take into consideration all
material, overheads costs, direct labour costs and other production costs. The
production cost increase per size and type of products but it is still very low.
1.12
Particulars
Average
Price/item
R
R
R
R
400
150
280
250
Sales Forecast
The sales forecast is calculated by multiplying market share per prices and is indicated
this the table below:
Particulars
1.13
Monthly
Sales
Year
2
6 400
76 800
84 480
92 928
3 600
43 200
47 520
52 272
11 200
134 400
147 840
162 624
School Uniform
15 000
180 000
198 000
217 800
Total
36 200
434 400
477 840
525 624
Marketing Strategy
Mveledzandivho Multi-Purpose Co-Operative Limited will have very modest cost to
promote and advertise its product it will rely mostly on word of mouth promotion by
satisfied customers who would have received high quality products at affordable prices.
15
Catalogue Sales.
The business will keep a catalogue with photos of all the products that are available. In
the catalogues there will be descriptions of all products and their features.
1.14
Marketing Budget
The marketing budget will consist of travelling cost, roadshows, which can be done
three times every year. The monthly budget will be budgeted for the travelling cost to
market new customers.
Particulars
Traveling to customers
Total
Month
300
300
1
3 600
3 600
YEAR
2
3 960
3 960
3
4 356
4 356
16
Section 2
MANUFACTURING PLAN
2.1
98 000
15 000
113 000
113 000
39 000
3 800
7 000
5 000
101 078
7 900
3 397
2 700
6 000
167 175
167 175
2.3
Rental
280 175
17
The lifespan of the fixed assets are as follows; this is based on supplier information.
Our depreciation will be on a straight line method.
Fixed Assets
Lifespan (years)
10
5
Annual
Depreciation
10%
20%
The annual depreciation cost, assuming no scrap value, will therefore be:
Depreciation
10% Furniture & Equipment
Annual Depreciation
Monthly Deprecation
Cost
167175.2
Particulars
Year
Monthly
Cost
Materials
Total
13 032
156 384
172 022
189 225
13 032
156 384
172 022
189 225
The increase is estimated at 10% in all products and Services for the entire years.
2.5
Labour
Direct Labour
2.6
Particulars
Labour
x R 1 800
= R
R
Amount R's
16 200 R
16 200
16 200 R
16 200
Overhead Expenses
18
Overhead costs are monthly indirect cost of the business. The table below shows the
breakdown of categories of expenses.
Particulars
Electricity
Transport
Depreciation for Fixed assets
Total
Month
1 200
1 800
1 393
4 393
1
14 400
21 600
16 718
52 718
YEAR
2
15 840
23 760
18 389
57 989
3
17 424
26 136
20 228
63 788
Section 2
MANAGEMENT PLAN
3.1
Form of Business
The business has been established and registered as a co-operative. The following
are members of the cooperative: Mashudu Khangale Lorraine, Ndidzulafhi Eunice
Mudau, Tondani Mavis Tshinyani, Virginia Netshivhera and Takalani Florance Mulaudzi. The Legal name of the business is Mveledzandivho Multi-Purpose Cooperative Limited. The Management team is highly motivated, experienced and well qualified.
3.2
Organisational Structure
Mashudu Lorraine Khangale will serve as the General Manager (Chairperson) and will
be responsible for the day-to-day running of the business.
Ndidzulafhi Eunice Mudau as the Finance Manager will be responsible for the
following:
19
accounting,
collection procedures,
Investment activities,
Operating systems,
Budgets,
Ndidzulafhi Eunice Mudau as the Marketing Manager and will be responsible for:
20
increasing profitability,
General Manager
(Mashudu Lorraine
Khangale)
)
Bookkeeper
secretary
(Outsourced)
Financial Manager
(Ndidzulafhi Eunice
Mudau)
Production
Manager
(Virginia Netshifhera
Shonisani)
Marketing Manager
(Ndidzulafhi Eunice
Mudau)
21
3.3
Pre-Operating Activities
Owners have listed down the following activities to be undertaken before they can
operate the business:
1.
4 weeks
2.
8 weeks
3.
1 week
4.
6 weeks
5.
Hiring labour
1 days
5.
1 days
6.
1 days
The owner aims to implement her operation approximately two months after the grant
application, or six weeks after release of his grant.
These pre-operating activities with their corresponding timetable appear in Table 3.4 in
a Gantt chart.
22
Table 3.4
Gantt chart
10
11
23
12
13
14
15
16
17
18
3.4
Pre-Operating Expenses
Particulars
Market research
Supplier and Communication
Business Plan Preparation
Electricity Installation
Total
3.5
Amount
4 000
750
6 800
21 800
33 350
Administrative Expenses
The owner wants to keep their cost as low as possible in order to be competitive.
The only cost they will incurred is the cost of communicating with supplier during
ordering stock or raw materials and during the need of repair.
Particulars
Telephone
Accounting/Bookkeeping Fees
Stationery
Total
Month
100
400
100
600
1
1 200
4 800
1 200
7 200
YEAR
2
1 320
5 280
1 320
7 920
3
1 452
5 808
1 452
8 712
The increase is estimated at 10% in all products and services for the entire years.
24
Section 4
FINANCIAL PLAN
4.1
Particulars
Amount R's
(R)
113 000
167 175
280 175
280 175
33 350
Working Capital
Value of 2 month of raw material (RM) & stocks (step 2.4)
Value of cash needed for operation. This will be the cost of 2
month of labour (step 2.5), overheads (step 2.6), marketing
budget (step 1.14) and administrative expenses (Step 3.5).
Less: Depreciation
Total Working Capital
Total Capital Requirement
26 064
21 493
47 557
47 557
361 082
Owners
Equity
11 550
11 550
3%
Grant
(in R)
113 000
167 175
21 800
47 557
349 532
97%
Total
113 000
167 175
33 350
47 557
361 082
100%
25
Particulars
Amount R's
Sales:
36 200 x
434 400
403 502
13 032 x
16 200 x
156 384
194 400
4 393 x
12 Month (Step.2.6)
52 718
Gross Profit
30 898
10 800
3 600
7 200
Operating Profit
Less: Interest on Loan
Profit before Tax
Less: Tax of
Net Profit After Tax
20 098
20 098
20 098 @
28%
20 098
26
Particulars
Years
2
SALES
434 400
477 840
525 624
Less: PRODUCTION
403 502
442 180
484 726
Raw materials
Labour
Overheads
156 384
194 400
52 718
172 022
213 840
56 318
189 225
235 224
60 278
GROSS PROFIT
30 898
35 660
40 898
10 800
3 600
7 200
11 880
3 960
7 920
13 068
4 356
8 712
OPERATING PROFIT
Less: Interest
20 098
23 780
27 830
20 098
23 780
27 830
20 098
20 098
23 780
43 879
27 830
71 708
27
Particulars
CASH INFLOW
Equity
Borrowings
Cash Sales
Other Income
Total Cash Inflow
CASH OUTFLOW
Pre-operating expenses
Purchase of fixed assets
Direct materials
Direct Labour
Factory/operational overheads**
Marketing
Administrative Cost
Interest expenses
Tax paid
Loan amortisation
Total Cash Outflow
NET CASH INFLOW (OUTFLOW)
CASH BALANCE BEGINNING
CASH BALANCE ENDING
PreOperatin
Period
11 550
349 532
361 082
YEAR
1
434 400
434 400
477 840
477 840
525 624
525 624
156 384
194 400
36 000
3 600
7 200
172 022
213 840
39 600
3 960
7 920
313 525
47 557
0
0
397 584
36 816
0
0
437 342
40 498
189 225
235 224
43 560
4 356
8 712
0
0
0
481 077
44 547
47 557
47 557
84 373
84 373
124 871
124 871
169 418
33 350
280 175
28
PreOperatin
Period
MONTH
1
11 550
349 532
361 082
36 200
36 200
33 350
280 175
2
36 200
36 200
-
3
36 200
36 200
-
4
36 200
36 200
-
5
36 200
36 200
-
6
36 200
36 200
-
36 200
36 200
36 200
36 200
9
36 200
36 200
-
10
11
12
36 200
36 200
36 200
36 200
36 200
36 200
13 032
16 200
3 000
13 032
16 200
3 000
13 032
16 200
3 000
13 032
16 200
3 000
13 032
16 200
3 000
13 032
16 200
3 000
13 032
16 200
3 000
13 032
16 200
3 000
13 032
16 200
3 000
13 032
16 200
3 000
13 032
16 200
3 000
13 032
16 200
3 000
313 525
47 557
300
600
33 132
3 068
47 557
300
600
33 132
3 068
50 625
300
600
33 132
3 068
53 693
300
600
33 132
3 068
56 761
300
600
33 132
3 068
59 829
300
600
33 132
3 068
62 897
300
600
33 132
3 068
65 965
300
600
33 132
3 068
69 033
300
600
33 132
3 068
72 101
300
600
33 132
3 068
75 169
300
600
33 132
3 068
78 237
300
600
33 132
3 068
81 305
47 557
50 625
53 693
56 761
59 829
62 897
65 965
69 033
72 101
75 169
78 237
81 305
84 373
Excludes depreciation expenses and amortisation of pre-operating expenses which are non-cash items.*
29
4.6
Particulars
ASSETS
Current Assets
Cash
Raw Materials Inventory
Accounts Receivable
Total Current Assets
Fixed Assets
Land and Buildings
Furniture and Equipment
Less: Accumulated
Total Fixed Assets
Other Assets
Pre-operating expenses
Goodwill
Patents
TOTAL ASSETS
Liabilities
Current Liabilities
Accounts Payable
Loans Payable
Total Current Liabilities
Long Term Liabilities
Loans Payable
Total Long Term Liabilities
OWNERS EQUITY
Capital Beginning
Grant Fund
Accumulated Capital
Add: Net Profit after Tax
Less: Withdrawal/Dividends
Total Owners Equity & Fund
TOTAL LIABILITIES AND
EQUITY
PreOperatin
Period
47 557
Year
1
84 373
-
124 871
-
169 418
-
84 373
124 871
169 418
280 175
113 000
167 175
-16 718
263 458
113 000
167 175
-33 435
246 740
113 000
167 175
-50 153
230 023
33 350
33 350
33 350
33 350
361 082
381 181
404 961
432 791
11 550
349 532
20 098
11 550
349 532
20 098
23 780
11 550
349 532
43 879
27 830
381 181
381 181
404 961
404 961
432 791
432 791
47 557
113 000
167 175
11 550
349 532
361 082
361 082
30
4.7
Amount (R's)
434 400
52 718
194 400
7 200
254 318
254 318
156 384
3 600
159 984
159 984
434 400
254 318
434 400
159 984
402 584
31
BEP (Percentage)
254 318 x
434 400 -
100
Annual Variable Costs:
100
R
159 984.00
93%
4.8
In business planning, much is based on anticipation the business exit strategy has been
decided after careful considerations just like any other aspect of the business. Should
the partners wish to sell their equity; the growth of the business will make the following
exit strategy possible.
Return capital to financers / investors through dividend or borrowed funds for a
management buyout or seek financial partners for the exchange of shares (investor
companies, private investors). It is asked that the shareholders retain their capital
investment for a minimum period of 3 years after the business launch.
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