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BUSINESS PLAN
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Executive Summary
Potato Fritter proudly presents its first product named as ‘Potato Fritter’. It is a snack made of
circle shaped potato slices coated in our special batter of spices, served with tempting dips. At
the introduction stage the dips are available in four different flavors and our consumer will be
able to enjoy two different dips at a time in our one serving. The targeted location gives strength
to target all age group segments throughout the year in all seasons. We have selected two stall to
place at Par tower shopping Mall and Forum. The location has advantages that we can easily ca-
ter all the age group and the target audience has the affordability level for our product as well as
there is a high acceptability of this sort of snacks. We designed our business strategy based on
differentiation because we are offering a new product in the Pakistan’s snack industry with our
own invented recipe. We have product and service differentiation in this way we are giving our
customer more benefit in slightly high prices as compared similar product. We foresee with the
time our concept can be adopted and imitated by many others, we aim and challenge to maintain
the recipe as our sustainable competitive advantage. We prepare all the semi-prepared ingre-
dients ourselves such our own prepared bread crumbs and other coating dips and sauces with our
own innovative recipes to maintain a sustainable competitive advantage. Our strength supports
us with our innovative product, process, customer, and targeted segment. We will have opportun-
ities to grow in a view that end user positive response towards innovation, high profitability,
market development, continues innovation (product development). Project does not require an
aggressive advertisement because the location gives us the advantage to make aware our custom-
er about our product. So, that marketing expense is constant throughout the year. We have the
spare production capacity as well as we will try practice best human resources policy as we tar-
get 10% and 15% increment regardless of any extra ordinary sales performance. Moreover, our
profitability is increasing on yearly base with the high cash inflows. Financial success can be
analyze from the present value of the project which positive at rate of 60%. The project implicit
rate of return is 62.56% and on the profitability scale it has the value 1.016.
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PRODUCT
Concept
We are introducing “Potato Fritters” exclusively offering potato fritters as a snack made of circle
shaped potato slices coated in our special batter of spices, served with tempting dips. Potato frit-
ters is purely a new and original concept in snack meals with a variety of four different dips to
enhance its taste.
Potato fritters are made from thin slices of potatoes which are marinated in the batter of baking
powder, corn flour, mustard powder, black pepper, white pepper, and salt. Then they are coated
with hand made fresh bread crumbs. These well marinated and coated potato slices are then deep
fried in oil to get crispy and golden color. We serve Potato Fritters with any of two dips of our
customer’s choice from a range of four mouth watering dips. Dips include deep mints which are
made of Tamarind, mint, and coriander, Mustard dip, Chili Mayo Dip, and Garlic Mayo Dip.
Potato Fritters is nutritious and healthy as its made in highly hygiene conditions and cooking
process. We take special care of our customers to serve them in disposable and easy-to-carry
plates to help them easily revolve and enjoy their food while shopping as we have our stalls out-
let at renowned food courts of shopping malls.
Potato Fritters are served hot and crispy with any of two dips in our designed plates with our
unique logo embossed on it. We serve 12 slices of fritters in each plate. Order time takes 3 to 5
minutes to serve.
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Location
STRATEGY
We have the strategy of ‘product differentiation’. As our product is a different concept in snacks
we have emphasized on its differentiation. On the basis of product differentiation, we can charge
the premium price by following the differentiation product strategy. Also adopting the psycho-
logical pricing we sell each pallet for Rs. 95 to keep the price in two-digit figure. As our product
is at introduction stage so we cannot charge high prices however we plan to focus on cost recov-
er strategy with maintaining our unique selling preposition as well.
Moreover, Karachi has a developed and fast growing food market with dynamic competition
among the different food chains. But market has great potential for new entrants for their innova-
tive ideas. So we can differentiate our product based on:
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Innovation in snacks: we have unique and innovative idea in snacks as fries have been
very common snacks for decades so we have come up with a new idea for potato lovers.
Snacks have limited range in Pakistan as in fries, pasta, desi chats etc.
Quality food: we provide quality in food as well as serving our customers in hygienic
pallets made from quality paper. We use high quality oil and fresh spices to enhance the
taste and maintain quality. We aim to deliver high quality and delicious taste within rea-
sonable price.
New taste in snacks: we differentiate our product with its different taste. We have our
own invented recipe with aromatic blend of spices and we have expertise and cooking
tactics to develop new taste for our customers.
In all way, we are trying to serve our customer with better product with slightly high price that
more for more as compared to our similar product competitors:
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We believe and challenge our recipe is our sustainable competitive advantage. Firstly it’s the
first time ever Potato Fritters are being launched in the market but as we foresee with the time
our concept can be adopted and imitated by many others, we aim and challenge to maintain the
recipe as our sustainable competitive advantage.
We use a number of different tips to create unique taste through our recipe. We use homemade
bread crumbs from bakery bread which are used partly soaked rather than dry bread crumbs as
commonly used by others.
We use double coating for potatoes, firstly a powder coating of mustard powder, black pepper,
white pepper, and baking powder. Then again potato slices are coated with the same ingredients
as batter.
For our deep mints dip, we heat the Deep Mint-mint paste for few minutes as it would never af-
fect the throat and gets less tangy.
From time to time, we will be introducing new flavors of dips to provide our customers with a
broader choice of dips to enjoy with potato fritters.
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SWOT Analysis
Strengths Weaknesses
Opportunities Threats
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Marketing Plan
Product
Potato fritters a snack made of potatoes coated in our special batter of spices, served with tempt-
ing dips. Potato fritters is purely a new & original concept in snack meal with a variety of four
dips to enhance its taste. There are many varieties in dips to give the maximum varieties in taste
which includes Deep Mint, mayo, Garlic and Mustard etc.
Place
Price
The fritters is only available in 250gms disposable paper box with two different dip just for
Rs.95. the price is slightly high as compared to other snacks which are available in our targeted
segments. But we have come up with absolute new idea with our differentiated taste and product
recipe so in this sense we are giving our consumer “more for more.”
Promotion
We market our brand with sensational opening ceremony in which we make trail of our products
in the whole mall and we will place standees and buntings. We will play games with kids and
make aware all the age group about our snacks and we will also take their suggestion to enhance
or customize our dip taste.
Then, on quarterly basis we will introduce some discount offers against our marketing budget or
as per the sales performance.
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Here, we have allocated salaries over the period of the 12 months and every year our employees
getting the increment regardless of the extra ordinary performance. In case of good performance
they get the one month salary as bonus at the end of semi-annually period. In year 2010 and 2011
the increment will be 10% and 15% respectively.
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Production Capacity
Potato Fritter Pvt Ltd
Production Capacity Planning
Per 12 Hrs Shift Per Year
Normal Capacity Units 1400 511000
In year 2009, we allocate fixed cost over the utilize capacity which will remain same until our
normal capacity. So, in the next years we will have the favorable capacity variance that indirectly
lower per unit cost of the product.
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Financial Plan
As Potato Fritters is a food business therefore its main factor of cost is material costing in overall
the product analysis. Product cost is slightly high but as the capacity utilization will increase the
cost of overhead will also decrease. The profitability of the business solely depends upon the
turnover of the business. It has direct relationship with turnover because the profitability is being
played a significant role through per unit profit. Since, the turnover start increasing we will have
more contribution margin to cover operating expense. In year 2009, sales is 21900 units which is
contributing Rs. 3,066, 727 in volume (Rs. 14 per unit), in year 2010 and 2011 contributions are
Rs. 4,258,754 in volume (Rs. 15 per unit) and Rs. 6,333,310 in volume (Rs. 16 per unit) respec-
tively. It is expected that at 95% capacity utilization this contribution margin will be contributed
Rs 22 per unit.
Operating expense is based on the cycle of the business which is not related sales in a sense they
are showing a fixed behavior. So that, these a very rare probability in increase of operating ex-
pense until the attainment of the 95% capacity.
Financial charges affected a significant burden in the starting years but after the 3 years we will
pay off loan amount than we will have high profitability with dual affect. From one side our sales
volume and on second the expenses like financial charge and other operating expense will be
lower.
We will have the flawless operating cycle due to our efficient process; we will have 100% ability
to pay off our short term debt and to maintain inventory level on cash basis. Our cash flows are
very good throughout the year.
Annual profits are Rs. 1,024,873 in year 2009, Rs. 1,810,586 in 2010, and Rs. 3,149,205 in 2011
respectively.
Ongoing economic condition does not support the bad cash flows that further lower the Implicit
Rate of Return. So, our cash Inflows are Rs, 2,158,682 in year 2009, Rs. 2,063,919, and Rs.
3,652,577 in years 2011. If we discount our cash inflows @60% still we are getting positive Net
Present value against the Investment of Rs. 3,000,000. It shows the viability of the project and its
current implicit rate of return is 62.56% and on the profitability index it has the 0.984.
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Conclusion
The project idea has a great potential in terms of profitability and growth. There is definite
chance to build an industry in hard snacks. On the base of the product idea and its strong pillar in
a form of:
Product USP
Highly sustainable competitive advantage
Increasing returns
Growing business opportunity
Itself sustainable financial support
Targeted segment (Consumer Need)
Continues product development and new market expansion
We can conclude the 100% percent viability of the project in all the way around.
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Appendixes
Sale price
The introductory price of the fritters packet is Rs 95 which is available in four delicious
dips.
Inventory level
The level of stock is to be maintained for the 30 days normally which is consist 20 days
normal consumption; 5 days lead time and 5 days safety stock. Stock would order 20th day
of every month that will be receive by the 25 th day of the same month.
Payment Mode
The payment of the stock will be made in 30 days credit period from the date of the order to
the next order. All other manufacturing and operating expenses will be made on 30 days
credit period. However, the labor cost and salaries will be paid until the 10 th of the next
month which includes:
Labor wages
Salesperson and staff salaries
Receipt Mode
The revenue collection is totally based on the cash basis as per the nature of the business.
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B: Product Costing
Cost/unit
Packing Material Costing Cost/box (PKR) No. of pcs
(PKR)
Butter Papers 200 1000 0.2
Paper box 2000 1000 2 2.2
75.45
Monthly salary
Labor Costing Volume Cost/unit
(PKR)
16000 192,000
Labor per platter 0.8767
Prime Cost 76.3234
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Fixed
69,288 831,452
FOH per unit 3.797
Miscellaneous 0.000
Cost per unit 80.120
Sale Price 95
W-1
10 hrs Shift
Variable FOH Rates (PKR) Daily Units Per Unit
Supplies 200 1400 0.143
Heat & power 400 1400 0.286
Maintenance 300 1400 0.214
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Serving Dips
Deep Mint Dip Cost
Ingredients Cost/kg or ltr Recipe/Platter PKR
5.224
6.08
4.16
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4.16
Weight Average Dip Cost
19.624
Weight Average per unit Dip Cost 4.906
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C: Sales Forecasting
Jan 31 600 18,600 1,767,000 780 24,180 2,297,100 1,092 33,852 3,215,940
Feb 28 600 16,800 1,596,000 780 21,840 2,074,800 1,092 30,576 2,904,720
March 31 600 18,600 1,767,000 780 24,180 2,297,100 1,092 33,852 3,215,940
April 30 600 18,000 1,710,000 780 23,400 2,223,000 1,092 32,760 3,112,200
May 31 600 18,600 1,767,000 780 24,180 2,297,100 1,092 33,852 3,215,940
June 30 600 18,000 1,710,000 780 23,400 2,223,000 1,092 32,760 3,112,200
July 31 600 18,600 1,767,000 780 24,180 2,297,100 1,092 33,852 3,215,940
Aug 31 600 18,600 1,767,000 780 24,180 2,297,100 1,092 33,852 3,215,940
Sep 30 600 18,000 1,710,000 780 23,400 2,223,000 1,092 32,760 3,112,200
Oct 31 600 18,600 1,767,000 780 24,180 2,297,100 1,092 33,852 3,215,940
Nov 30 600 18,000 1,710,000 780 23,400 2,223,000 1,092 32,760 3,112,200
Dec 31 600 18,600 1,767,000 780 24,180 2,297,100 1,092 33,852 3,215,940
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Continue
Monthly
Book Value 31, Book Value 31, Book Value 31, Manufacturing De- Operating Depre-
Dec,09 Dec,10 Dec,11 preciation ciation
124,000.00 98,000.00 72,000.00 2,166.67
80,000.00 40,000.00 - 3,333.33
92,000.00 84,000.00 76,000.00 666.67
33,333.33 16,666.67 - 1,388.89
330,000.00 260,000.00 190,000.00 5,833.33
600,000 600,000 600,000
500,000 500000 500000
1759333.333 1598666.667 1438000.000 7556 5833
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Marketing Expense
50,000 600,000
Supplies
10,000 120,000
Miscellaneous
10,000 120,000
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Continue...
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Balance Sheet
Potato Fritter Pvt Ltd
Balance Sheet As on 31,Dec,2009
Fixed Assets PKR Equity & Liability PKR
Net 1,759,333 25.79% Share Capital 2,000,000 29.32%
Stall Advance Retained Earning 1,024,873 15.02%
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Year 2010
Potato Fritter (Pvt)Ltd
Profit and Loss Account
For the Period ended 31, Dec, 09
Units
PKR per Units Sold
Balance Sheet
Potato Fritter Pvt Ltd
Balance Sheet As on 31,Dec,2010
Fixed Assets PKR Equity & Liability PKR
Net 1,598,667 16.91% Share Capital 2,000,000 21.15%
Retain Earning 2,826,459 29.89%
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Year 2011
Potato Fritter (Pvt)Ltd
Profit and Loss Account
For the Period ended 31, Dec, 09
Units
PKR per Units Sold
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IRR 62.56%
PI @ 60% 1.016
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Cash Budget
Potato Fritters (Pvt) Ltd
Cash Budget For the Year 2009
Jan Feb Mar Apr May Jun
Less :
Payments (1,403,308) (1,468,792) (1,604,596) (1,559,328) (1,604,596) (1,559,328)
Continue
Potato Fritters (Pvt) Ltd
Cash Budget For the Year 2009
Jul Aug Sep Oct Nov Dec
Receipts
1,767,000 1,767,000 1,710,000 1,767,000 1,710,000 1,767,000
Less :Payments
(1,604,596) (1,604,596) (1,559,328) (1,604,596) (1,559,328) (1,604,596)
Cash balance
162,404 162,404 150,672 162,404 150,672 162,404
Add : Opening Cash Bal-
ance 2,242,387 2,412,347 2,582,307 2,740,534 2,910,494 3,068,722
Add: Depreciation
7,556 7,556 7,556 7,556 7,556 7,556
Net Cash Balance
2,412,347 2,582,307 2,740,534 2,910,494 3,068,722 3,238,682
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Net Cash
Balance 5,302,834 8,957,586
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Payments
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2010 Total
Sales 27,046,500
Payments
Material 21,467,014
Labor 434,400
FOH 873,688
Salaries 416,400
Operating expense 840,000
Taxes 551,855
Installment 489,658
Total Payments 25,073,014
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2011 Total
Sales 37,865,100
Payments
Material 30,050,935
Labor 513,360
FOH 946,897
Salaries 490,080
Operating expense 840,000
Taxes 970,085
Installments 489,658
Total Payments 34,301,015
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I: Scenario Analysis
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Units
Best Case by 10% PKR per Units Sold
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Units
Best Case by 10% PKR per Units Sold
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J: Ratios Analysis
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Loan
Amount 1,000,000
Tenure 3 years
Interest rate 22%
Installment 489,658.07
Principle Principle
Date Installment Interest
Repayment Outstanding
1-Jan-09 1,000,000
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L: Operating Cycle
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