Business Plan

Scent of the Orient
Perfumery Cologne Collection

Polytechnic University of the Philippines
Masters in Business Administration
Philippine Business Environment
OFELIA M. CARAGUE Ph.D

MARIA ROSELA S. AZNAR

Table of Contents

I. Table of Contents........................................................................
II. Executive Summary .....................................................................
III. Marketing Plan .............................................................................
IV. Production Plan ...........................................................................
V. Organization and Management Plan ...........................................
VI. Financial Plan ……………………..................................................

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EXECUTIVE SUMMARY
We all know that there are already many kinds of perfume that is being produced by different local manufacturers. Now days, many consumers are becoming conscious on how they smell and they are very choosy of the kind of perfume that they buy and use at a very reasonable price. This kind of perfume is made from various oils that is blended to come up an enchanted perfume that every body will surely love.
The plan in putting up this business started, when the proponent compose of the 4 girls of Lumabas-Sibbaluca Family who love to try various perfume scents and they are very fond of using colognes. They cannot go out of their house without spraying cologne so they decided to put up a business which is close to their heart and that is manufacturing perfume.

Brief Description of the Project
The SCENT of the ORIENT is a company that manufactures perfume which is extracted from various flowers that can be found in our country. This product is chemically proven to be hypo-allergenic so that it can be used by every Filipino and even those who are sensitive to some chemicals.
The proponents decide to manufacture this product because every Filipino specially women who love to put perfume whenever they go out or even at home to feel fresh and fragrant all day.

Mission The company is drive by its mission by providing competitive, low cost, hypo-allergenic, good quality perfumery products to every Filipino who wanted to have a positive effect to everyone they will encounter by their capturing scent.
Objectives
The company aims to expand its market not only in the country but other parts of the world. The company wanted to promote their product internationally to prove the ingenuity and talent of every Filipino. The company also aims to give jobs to Filipino to be able to help in the unemployment problem of the country.
Brief Profile of the Entrepreneur
The Scent of the Orient is a corporation owned by Maria Rosela Aznar, Maureen Marie Doctora, Mary Rose De Leon and Cleta Sibbaluca. The eldest daugther Ms. Rosela Aznar, is a trainor on Perfume making which had initiated to put up the corporation. The other owners would like to have an additional source of income which will eventually be the major source of income on the success of the business.
Project’s Contributions to the Economy
The Scent of the Orient deals how the corporation can help uplift the economy of the country by providing income generating activities that will increase number employment as well as the contribution it will do to the government.

SECTION 1
MARKETING PLAN
1.1 Description of the Product
Since the beginning of recorded history, humans have attempted to mask or enhance their own odor by using perfume, which emulates nature's pleasant smells. Many natural and man-made materials have been used to make perfume to apply to the skin and clothing, to put in cleaners and cosmetics, or to scent the air. Because of differences in body chemistry, temperature, and body odors, no perfume will smell exactly the same on any two people.
Natural ingredients flowers, grasses, spices, fruit, wood, roots, resins, balsams, leaves, gums, and animal secretions as well as resources like alcohol, petrochemicals, coal, and coal tars are used in the manufacture of perfumes. Some plants, such as lily of the valley, do not produce oils naturally. In fact, only about 2,000 of the 250,000 known flowering plant species contain these essential oils. Therefore, synthetic chemicals must be used to re-create the smells of non-oily substances. Synthetics also create original scents not found in nature
From the name of the product, the consumers will know that this perfume that acquire sweet and mild scent that is very pleasing to the nose. The product label has been design in a creative logo and that is a beautiful sensuous ans care free spirited young lady. This product which is one kind of perfume, is basically made by the proponent as perfumes that can be used even in day time and that it scent last for a long time even if you sweat due to strenuous activities like working out in a gym, doing households chores or just do malling with your friends.
1.2 Comparison of the Product with Its Competitors
The advantage of our product against our competitor is that this type of perfume which will use locally scented oils unlike the other perfumes that scent come from other countries e.g. France, Germany, Spain. The perfume is could get the same quality as compared to existing competitors at a lower cost.
Competitors Product

Competitors
Price

Afficionado
Php 39.00 60 ml.

Prescripto
Php 46.00 60 ml.

Zen Zest
Php 69.00 60 ml.

Scent of the Orient
Php 35.00 60 ml.
1.3 Location The proponents will locate the production center in Pasig, the proponents choose the place because of its viability and accessibility to its market target area. The plant location will be put up in Ortigas, Pasig. This is the chosen location so the place is accessible to department stores and mall that we targeting to be the place where we can supply our product.

1.4 Market Area
The market area those who have high population of young professionals and students which are located in primarily in Pasig eventually the municipalities of Metro Manila e.g. Makati, Manila, Muntinlupa, Taguig, Caloocan, Paraήaque, Marikina, Mandaluyong, and Quezon City and nearby provinces e.g. Rizal, Bulacan and Laguna. The major concentration for the distribution will be the place of Pasig and to its towns. Delivery will be made at least three times a week or depending on the customer’s requirements.
1.5 Main Customers
The target market of the business are students and young professionals who loves sweet and mild scent that they can use all day. The product is suitable for all teenagers especially young teenagers who always wanted to smell fresh all day.
1.6 Total Demand
Table 1
Total no. of population in selected towns of Pasig For the last five years
Year
Ugong
Sta. Lucia
Santolan
San Antonio
2003
283,087
288,850
312,594
400,606
2004
297,241
307,683
326,317
420,723
2005
312,103
327,744
340,642
439,193
2006
327,708
349,113
355,596
458,474
2007
344,093
371,875
371,207
478,601

Measurement of Demand and Supply Quantum
Historical Demand Analysis

Table 2
Total Historical Demand of Perfume for the past 5 years

Year
Total no. of population
Actual # of Customers 89%
Average Weekly Consumption (1Bottle)
Average Monthly Consumption
Total historical demand
2003
1,454,179
1,294,219
1
5,176,877
62.122,527
2004
1,523,207
1,355,654
1
5,422,617
65,071,403
2005
1,598,433
1,422,605
1
5,690,421
68,285,058
2006
1,677,500
1,492,975
1
5,971,900
71,662,800
2007
1,760,577
1,566,914
1
6,267,654
75,211,849 Historical demand was based on target population in Ugong, Sta. Lucia, Santolan and San Antoio. The total percent of actual number of customer was derived through the use of questionnaire. The demand of perfume is rampantly growing because of the increasing number of population

Projected Demand Analysis

yc = a + yi – 1

Where:

a = yn – yc n-1

a = 75,211,849 - 62.122,527 5 – 1

= 3,272,331 (Average Increase)

yc = Initial value In 2007 = 3,272,331 + 75,211,849

= 78,484,180 yn = final value

n = number of years

yi = value for the year past

Table 3
Total projected demand analysis of perfumes in selected city of
Pasig for the next 5 years

Year
Average Increase
Past Demand
Total Projected Demand
2008
3,272,331
75,211,849
78,484,180
2009
3,272,331
78,484,180
81,756,511
2010
3,272,331
81,756,511
85,028,822
2011
3,272,331
85,028,822
88,301,153
2012
3,272,331
88,301,153
91,573,484

Projected Demand Analysis was made through the arithmetic straight-line method.

Projected Supply Analysis

a= 1,085,111-840,859 = 244,252

5.1 4

=61, -63 (average increase) In 2008= 61, 063 + 1,085.111 = 1,146,174

Table 4
Total projected supply analysis of perfume in selected towns of
Pasig for the next 5 years

Year
Average Increase
Past Demand
Total Projected Demand
2008
61,063
1,085,111
1,146,174
2009
61,063
1,146,174
1,207,237
200
61, 063
1,20,237
1,268,300
2011
61,063
1,268,300
1,329.363
2012
61,063
1,329,363
1,390,426

Table shows the projected supply figure for the next five years of operation which derived through the use of arithmetic straight line method. Through that formula, the proponents gets the projected supply which is 61.063 and to be added to the next 5 years of operation from 2008 the population is 1,146, 147 and the year 2012 is 1,390,426 clearly shows that the projected increases.

1.7 Market Share
Market share is the proportion of total sales of a product during a stated time in a specific market that is captured by a single company. With the increasing demand of the population to perfumery products, perfume products registered a 4% current value increase in the Philippines in 2012. The category remained driven by population growth and increasing purchasing power amongst middle-income families. It should be noted that the rising number of income-generating individuals in the country enabled working people to purchase these products not only to themselves but to whoever they would like to give. By the end of 2012, overall value sales products hit Ps7.2 Million.

1.8 Selling Price
The proponent decided to make the product affordable even to young students who always wears perfume in school. They agreed to sell the product in Php 35.00 for 60 ml while Php60.00 for 120 ml.
1.9 Sales Forecast SALES FORECAST IN PESO

2013 54,432.00
2014
133,056.00
2015
133,056.00
2016
278,208.00
2017
331,776.00

1.10 Promotional Measures
Since the proponents have a limited capital budget, they will resort to flyers, leaflets, banners and streamers to introduce their product in the market. They will hire a van and some people who are going to distribute this to the target area, which is the nearest municipality to them which are Mandaluyong and Quezon City. They are going to roam in this area, using a van with the jingle of the product being aired to attract the attention of every people in the area. Aside from this, the product is place in a small bottle for free test so that they will know the smell. Outdoor streamers are place in every store and they will get an additional give away item for the first 50 buyers of their product. A credit terms for 15-30 days will be given a privilege clients in order to establish a good relationship.

1.11 Marketing Strategy
There are many marketing possible strategies that are applicable for this new product but the proponents have agreed to distribute the product to leading supermarket and department stores. The proponent of this product opted to be a distributor to the small and big stores in the chosen area to avoid any additional budget of renting many stores and hiring many people to sell the product. They also wanted to refrain from any VAT for additional profit of the company. The nature of the business is manufacturing of perfume. They are going to distribute their product to various stores and malls.
Allocation

Marketing Budget
Marketing the product will not be costly. It will only require small size of capital or budget that can be allocated for marketing expenses such as labor before the actual delivery of supply to the distributors and dealers. Related transportation during the marketing activity is also minimal for it will cater nearby municipalities in the Metro Manila.
SECTION 2
PRODUCTION PLAN
2.1 Production Process
Collection
1 Before the manufacturing process begins, the initial ingredients must be brought to the manufacturing center. Plant substances are harvested from around the world, often hand-picked for their fragrance. Animal products are obtained by extracting the fatty substances directly from the animal. Aromatic chemicals used in synthetic perfumes are created in the laboratory by perfume chemists.
Extraction
Oils are extracted from plant substances by several methods: steam distillation, solvent extraction, enfleurage, maceration, and expression.
2 In steam distillation, steam is passed through plant material held in a still, whereby the essential oil turns to gas. This gas is then passed through tubes, cooled, and liquified. Oils can also be extracted by boiling plant substances like flower petals in water instead of steaming them.
3 Under solvent extraction, flowers are put into large rotating tanks or drums and benzene or a petroleum ether is poured over the flowers, extracting the essential oils. The flower parts dissolve in the solvents and leave a waxy material that contains the oil, which is then placed in ethyl alcohol. The oil dissolves in the alcohol and rises. Heat is used to evaporate the alcohol, which once fully burned off, leaves a higher concentration of the perfume oil on the bottom.

Oils are extracted from plant substances by steam disfillation, solvent extraction, enfleurage, maceration, or expression.
4 During enfleurage, flowers are spread on glass sheets coated with grease. The glass sheets are placed between wooden frames in tiers. Then the flowers are removed by hand and changed until the grease has absorbed their fragrance.
5 Maceration is similar to enfleurage except that warmed fats are used to soak up the flower smell. As in solvent extraction, the grease and fats are dissolved in alcohol to obtain the essential oils.
6 Expression is the oldest and least complex method of extraction. By this process, now used in obtaining citrus oils from the rind, the fruit or plant is manually or mechanically pressed until all the oil is squeezed out.

It is the ratio of alcohol to scent that determines perfume, eau de toilette, and cologne.
Blending
7 Once the perfume oils are collected, they are ready to be blended together according to a formula determined by a master in the field, known as a "nose." It may take as many as 800 different ingredients and several years to develop the special formula for a scent.
After the scent has been created, it is mixed with alcohol. The amount of alcohol in a scent can vary greatly. Most full perfumes are made of about 10-20% perfume oils dissolved in alcohol and a trace of water. Colognes contain approximately 3-5% oil diluted in 80-90% alcohol, with water making up about 10%. Toilet water has the least amount—2% oil in 60-80% alcohol and 20% water.

Aging a Fine perfume is often aged for several months or even years after it is blended. Following this, a "nose" will once again test the perfume to ensure that the correct scent has been achieved. Each essential oil and perfume has three notes: "Notes de tete," or top notes, "notes de coeur," central or heart notes, and "notes de fond," base notes. Top notes have tangy or citrus-like smells; central notes (aromatic flowers like rose and jasmine) provide body, and base notes (woody fragrances) provide an enduring fragrance. More "notes," of various smells, may be further blended.
Filtration
To get rid of the precipitates or cloudiness after aging. Filtration has to be done. For smaller quantities, a tight filter paper, a filter aid and a glass funnel can be used. For larger batches, the traditional filter press can be used.
Bottling
In bottling, the thermal expansion of the contents has to be considered. There should be space left in the neck of the bottle for if not, bottles might break when the final fragrance mixture expands. To avoid bursting, filling should be done at 25OC (room temperature).
Most plastic bottles are not usually used in bottling because they are permeable to certain components of the fragrance product. For colognes bottles can be used as well as glazed ceramics though the latter can be costly.

Quality Control
Because perfumes depend heavily on harvests of plant substances and the availability of animal products, perfumery can often turn risky. Thousands of flowers are needed to obtain just one pound of essential oils, and if the season's crop is destroyed by disease or adverse weather, perfumeries could be in jeopardy. In addition, consistency is hard to maintain in natural oils. The same species of plant raised in several different areas with slightly different growing conditions may not yield oils with exactly the same scent.
Problems are also encountered in collecting natural animal oils. Many animals once killed for the value of their oils are on the endangered species list and now cannot be hunted. For example, sperm whale products like ambergris have been outlawed since 1977. Also, most animal oils in general are difficult and expensive to extract. Deer musk must come from deer found in Tibet and China; civet cats, bred in Ethiopia, are kept for their fatty gland secretions; beavers from Canada and the former Soviet Union are harvested for their castor.
Synthetic perfumes have allowed perfumers more freedom and stability in their craft, even though natural ingredients are considered more desirable in the very finest perfumes. The use of synthetic perfumes and oils eliminates the need to extract oils from animals and removes the risk of a bad plant harvest, saving much expense and the lives of many animals.

2.2 Fixed Capital
Summary below are the capital contribution of each partners.
Amount of Capital
P 200,000.00
Partner 1 50,000.00
Partner 2 50,000.00
Partner 3
50,000.00
Partner 4
50,000.00

2.3 Life of Fixed Capital
The continuity of capital will be used as entrepreneurs desire to continue the business as long as they want. The business expansion will depend on the result experienced from actual five years of operations.
2.4 Maintenance and Repairs
The maintenance and repairs are estimated on the basis of assumptions of usage rates for utilities – water, electricity and equipment breakage expenses on daily basis.
2.5 Sources of Equipment
The sources of equipment will be bought from the Chemworld Fragrance company which is a one-stop shop supplier for perfumery.
2.6 Planned Capacity
The planned capacity of the production area is up to 10,000 at 5,000 for 30ml and 60ml respectively per month. Desired capacity of the number colognes to be occupied by the space of the house will continue to maintain for the next 2 years.

2.7 Future Capacity
The future capacity of the production area is aimed to double up on the next three years of succeeding operations.
2.8 Terms and Conditions of Purchase of Equipment The factory will be located in Pasig City
2.9 Factory Location and Layout
The production center will be in Pasig City, the proponents chose the place because of its viability and accessibility to its market target area.
The Plant Layout

2.10 Raw Materials and Supplies

Chamomile Flower Oil Extract Ethyl Alcohol

Bottles Label Boxes
2.11 Cost of Raw Materials
The following are the estimated cost of raw materials used for the perfumery business:
Components
Description
Unit Cost (P)
Fragrance
30 ml
200.00
Fixative
30 ml
120.00
Ethyl Alcohol
1 gallon
560.00
Distilled Water
1 liter
25.00
Dipropylene Glycol
120 ml
60.00
Bottle
60 ml
10.00
Box
60 ml
3.00

2.12 Raw Materials Availability There materials are ready available for there are increasing number of suppliers of perfume raw materials. They are available from raw materials to packaging.
2.13 Labour and Cost of Labour
The manpower resources contribute to the operation of the business. The production area will require renovation of existing facilities. In addition, there will only be 6 personnel of the company which will be shown in the table below. The managers will have designated responsibilities. They will also help in the production since the process in perfumer is very simple and not tiresome. The expertise of an bookkeeper/accountant will be contract out every end of the year.
Employee Compensation Scheme
Job Name
No. of Employee
Monthly
13th Month
Pay
Annual
General Manager
1
P 10,000.00
P 10,000.00
P 130,000.00
Production Manager
1
P 10,000.00
P 10,000.00
P 130,000.00
Operations Manager
1
P 10,000.00
P 10,000.00
P 130,000.00
Marketing Manager
1
P 10,000.00
P 10,000.00
P 130,000.00
Production Worker
2
P 3,000.00
P 3,000.00
P39,000.00
Total:
6

P 559,000.00

2.14 Labour Availability In the beginning, the owner will be the ones who will do the production of colognes. The additional personnel will be hired after the on the job training.

2.15 Labour Productivity
The labor productivity of the business will depend on the period of time and cycle of the business. There is one managing staff to manage the entire production cycle.
2.16 Factory Overhead Expenses
The overhead expenses that will be incurred for first year of operations are only related to travel expenses from the time of importing raw materials from the supplier to the production area and selling the product to the distirbutors selling in the malls, etc..
2.17 Production Cost
The production costs depend on the cost of the raw materials, labor, maintenance and the cost to be incurred in selling the of colognes. The production cost are Php 50,000.00 for 60 ml. bottle and Php 35,000.00 for 120 ml. bottle

SECTION 3
ORGANIZATION AND MANAGEMENT PLAN

3.1 Form of Business
The business form to be formed in the organization is partnership. It will be composed of three partners who are jointly and equally liable.
Definition of Partnership
Partnership law provides the definition of a partnership. It state that “by contract of partnership”, two or more persons bind themselves to contribute money, property or industry to a common fund with the intentions of dividing the profits among themselves.
Capital Contribution
The partners will contribute P 25,000.00 each to start the operation of the business.
Division of Profits and Losses
The partners will distribute any losses or profits equally. Same agreement will apply to the personnel who is assigned in rearing and managing the poultry business.
Withdrawal or Retirement of Partner
In case one of the partners decides to withdraw/retire from the partnership, he may withdraw his capital contribution and the remaining partners will pay the interest or share made by the withdrawing partner.

3.2 Organizational Structure
An organizational structure is the framework by which the activities of an enterprise, as determined by the managers, are performed. It is the arrangement of the functions performed by the various personnel in the different units, usually classified into divisions, departments, sections, and the rank and file workers. It is the process of binding the parts together into a unified whole that can operate effectively, thus accomplishing the desired objectives. Such a structure consists of levels or ranks of managers, supervisors, and employees held together by means of precise policies, orders, and instructions for doing their respective jobs. The functions activities of the enterprise are logically arranged for effective coordination.

General Manager is the head of the partnership who will take control of the supervising the management system and will be in charge in giving orders to other partners. Other partners will assist the general manager in meeting the needs and requirements of the production like cost control, proper recording and bookkeeping, time and money management and all other aspects to make the work efficient.
The chemist con production worker will handle all the necessary tasks in production of colognes such as mixing, bottling to packaging. Additional one staff will be recruited on 2016 due to expansion.
3.3 Business Experience and Qualifications of the Entrepreneurs The owners are newbie to business operation. One of the owners is a trainor for perfume making and a graduate of bachelor while pursuing master degree in business and administration. Others have trading and sales skills and capability. They have the enough capital to put up the business.
3.4 Pre-Operating Activities The preparation of the proposed project is two months long, from August to September because of conducting a research, gathering information’s and idea to make it successful in operating this business. Before anybody can engage in any business, they are require applying for business requirements, permits and pay other government dues to operate legally. The business needs renovation to become convenient and comfortable to the employee as to the customer. The acquiring of machineries and equipment is started on the month of November to December. It is very important because it is used in production processes.

3.5 Pre-Operating Expenses
Renovation Cost Php 100,000.00
Working Capital Php 100,000.00
Total Cost Php 200,000.00
3.6 Office Equipment
There is no office equipment to be purchased by the partnerhip since it is only a fragmented type of business. Only a small capital is required and it does not need to maintain a required office and equipments to maintain formal place suit for meetings and discussions for financial planning, strategic decision making, and formulating marketing strategies and innovations.
3.7 Administrative Expenses
The administrative expenses are those that will be related in buying and ensuring feeds and materials, utilities requirements. Hence, all expenses not related to selling will be classified under administrative to be shown on the financial plan section.

SECTION 4
FINANCIAL PLAN
4.2 Project Cost The initial investment of the proposed business in P200,000,00
PARTICULARS
Amount
Laboratory Equipment and utensils 40,000.00
Raw Materials 60,000.00
Cost related for renovation: materials and labor 100,000.00
Total
200,00.00

4.2 Financing Plan and Loan Requirement
The business capital requirement will be provided by the partners through cash investment. The partnership does not need to loan for any lending institutions since the fund for investing is affordable and easy to put up.
4.3 Security for Loan
No need for partnership to have security for loan. The fund capitalized is sufficient and the business is not requiring large expenditures to meet the target goal and collection within the desired period.
4.4 Profit and Loss Statement
Scent of the Orient
Income Statement
For Year Ended December 31

2013
2014
2015
2016
2017
TOTAL
Sales 56,952.00 138,936.00 139,181.00 284,578.00 339,056.00 958,703.00
Cost of Sales: 9,900.00 23,100.00 23,100.00 52,500.00 64,800.00 173,400.00
Gross Profit 47,052.00 115,836.00 116,081.00 232,078.00 274,256.00 785,303.00
Operating Expenses:
38,934.00
90,846.00 89,690.13 198,755.47 235,189.36 654,039.96
Net Income
8,118.00
24,990.00 26,390.87

33,322.53

39,066.64

131,263.04

4.5 Cash Flow Statement
Scent of the Orient
Statement of Cash Flows
For Year Ended December 31

2013
2014
2015
2016
2017
Net Income after salaries to the managing personnel 6,088.50

18,742.50

19,324.40

19,993.52

23,439.98

Cash Flow from Operating Activities
(5,625.00)
4,375.00
625.00
9,300.00

14,400.00

Depreciation 1,875.00 4,375.00 625.00 13,500.00

15,000.00

Increase in Merchanside Inventory

(4,200.00) (600.00)

Construction of Housing

(7,500.00)

Cash Flow from Financing Activities 24,000.00 - - - -

Cash Flow from Investing Activities - - - - -
Cash Beginning - 24,463.50

47,581.00

67,999.15

97,292.67

Cash end

24,463.50

47,581.00

67,999.15

67,999.15
67,999.15

97,292.67

135,132.65

4.6 Balance Sheet
Scent of the Orient
Balance Sheet
For Year Ended December 31

2013
2014
2015
2016
2017
Assets

Current Assets:

Cash 24,463.50

47,581.00

68,155.40

97,448.92

135,288.90

Merchandise Inventory 3,300.00

3,300.00

3,300.00

7,500.00

8,100.00

Total Non-Current Assets
27,763.50

50,881.00

71,455.40

104,948.92

143,388.90

Non-Current Asset:

Delivery Equipment,net

22,500.00

12,500.00

Housing Equipment

5,625.00

1,250.00

6,000.00

Total Non-Current Assets 5,625.00

1,250.00

28,500.00

12,500.00

Total Assets

33,388.50

52,131.00 71,455.40 133,448.92 155,888.90 Liabilities and Equity

Current Liabilities - - - - -
Non Current Liabilities - - - - -
Total Liabilities - - - - -
Equity

Rosela Capital 11,129.50

17,377.00

23,818.47

44,482.97

51,962.97

Maureen Capital

11,129.50

17,377.00

23,818.47

44,482.97

51,962.97

Cleta Capital

11,129.50

17,377.00

23,818.47

44,482.97

51,962.9

Mary Rose Capital

11,129.50

17,377.00

23,818.47

44,482.97

51,962.9

Total Equity 33,388.50

52,131.00

71,455.40

133,448.92

155,888.90

4.7 Loan Repayment Schedule
The entity has no obligation to pay. Thus, will not require in the future preparing loan repayment schedule
4.8 Break-even Point (BEP)

2013
2014
2015
2016
2017
Sales
56,952.00 138,936.00 139,181.00 284,578.00 339,056.00
Variable Cost 47,863.50

115,818.50

118,762.85 259,586.10 309,756.02
Variable Cost of sales 9,900.00 23,100.00 23,100.00 52,500.00 64,800.00
Variable Operating Expenses 37,059.00 86,471.00 89,065.13 198,755.47 235,189.36
Variable Salaries 2,029.50 6,247.50

6,597.72 8,330.63 9,766.66
Contribution Margin

7,963.50

23,117.50

20,418.15

24,991.90

29,299.98

Contribution Margin Percentage
14%
17%
15%
9%
9%
Fixed Cost

Depreciation 1,875.00 4,375.00 625.00 13,500.00 15,000.00
Break Even Sales

13,409.30

26,293.72
4,260.33
153,721.94

173,578.27

4.9 Return on Investment (ROI)

2013
2014
2015
2016
2017

Net Income 6,088.50 18,742.50 19,793.15 19,993.52 23,439.98
Beginning Capital 24,000.00 24,000.00 24,000.00 24,000.00 24,000.00
ROI
25%
78%
82%
83%
98%

Analysis:

Return on investment will be more feasible on the next four years of the operation. First three production cycle of 2013 is a trial and error and developing learning curve in the encountered and learned experiences from time to time.

4.10 Financial Analysis
A . Test of Liquidity
Ratios
2013
2014
2015
2016
2017
Analysis
1. Current Ratio
0%
0%
0%
0%
0%
The business plan is liquid. No current liabilities to pay.

Current Assets 27,763.50 50,881.00 71,299.15 104,792.67 143,232.65

Current Liabilities - - - - -

2. Acid Test Ratio
0%
0%
0%
0%
0%
No available marketable securities,acccount receivables to add for current assets and no current liabilities

Quick Asets 27,763.50 50,881.00 71,299.15 104,792.67 143,232.65

Current Liabilities - - - - -

3. Turnovers

Inventory Turnover
6
7
7
10
8
The inventory can be replaced few days after the merchandise is sold
Cost of Goods Sold 9,900.00 23,100.00 23,100.00 52,500.00 64,800.00

Average Merchandise Inventory 1,650.00 3,300.00 3,300.00 5,400.00 7,800.00

Average Merchandise Inventory

Beginning Balance +Ending Balance 1,650.00 3,300.00 3,300.00 5,400.00 7,800.00 2

Average Age Of Inventory
60
51
51
37
43
Short average of inventory is desirable and the business will keep to maintain customers
Number of Working Days/Inventory Turnover
360
360
360
360
360

6
7
7
10
8

A . Test of Profitability
Ratios
2013
2014
2015
2016
2017
Analysis
1. Return on Sales
14%
18%
19%
12%
12%
The business plan is feasible and indicates positive return on sales

Income 8,118.00 24,990.00 26,390.87 33,322.53 39,066.64

Net Sales 56,952.00 138,936.00 139,181.00 284,578.00 339,056.00

2. Gross Profit Ratio
83%
83%
83%
82%
81%
The ratios show that pricing policy does not change.

Gross Profit 47,052.00 115,836.00 116,081.00 232,078.00 274,256.00

Net Sales 56,952.00 138,936.00 139,181.00 284,578.00 339,056.00

3. Net Profit Ratio
11%
13%
14%
7%
7%
The business will give high profitabilty.
Net Profit 6,088.50 18,742.50 19,793.15 19,993.52 23,439.98

Net Sales 56,952.00 138,936.00 139,181.00 284,578.00 339,056.00