Académique Documents
Professionnel Documents
Culture Documents
(Direct Marketing)
helpdesk@smeda.org.pk
REGIONAL OFFICE
Punjab
REGIONAL OFFICE
Sindh
REGIONAL OFFICE
Khyber Pakhtunkhwa
REGIONAL OFFICE
Balochistan
Ground Floor
State Life Building
The Mall, Peshawar.
Tel: (091) 111-111-456
Fax: (091) 5286908
helpdesk-pew@smeda.org.pk
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Table of Contents
1. DISCLAIMER .......................................................................................................................................... 2
2. PURPOSE OF THE DOCUMENT ......................................................................................................... 3
3. INTRODUCTION TO SMEDA .............................................................................................................. 3
4. INTRODUCTION TO SCHEME ........................................................................................................... 4
5. EXECUTIVE SUMMARY ...................................................................................................................... 4
6. BRIEF DESCRIPTION OF THE PROJECT & PRODUCT ............................................................... 5
7. CRITICAL FACTORS ............................................................................................................................ 6
8. INSTALLED AND OPERATIONAL CAPACITIES ........................................................................... 6
9. GEOGRAPHICIAL POTENTIAL FOR INVESTMENT .................................................................... 7
10.
11.
11.1
11.2
11.3
11.4
11.5
11.6
11.7
11.8
11.9
12.
13.
ANNEXURES ................................................................................................................................... 16
13.1
13.2
13.3
13.4
13.5
14.
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1. DISCLAIMER
This information memorandum is to introduce the subject matter and provide a
general idea and information on the subject. Although, the material included in
this document is based on data / information gathered from various reliable
sources; however, it is based upon certain assumptions which may differ from
case to case. The information has been provided on as is where is basis
without any warranties or assertions as to the correctness or soundness thereof.
Although, due care and diligence has been exercised to compile this document,
the contained information may vary due to any change in any of the concerned
factors, and the actual results may differ substantially from the presented
information. SMEDA, its employees or agents do not assume any liability for any
financial or other loss resulting from this memorandum in consequence of
undertaking this activity. The contained information does not preclude any further
professional advice. The prospective user of this memorandum is encouraged to
carry out additional diligence and gather any information which is necessary for
making an informed decision including taking professional advice from a qualified
consultant / technical expert before taking any decision to act upon the
information.
For more information on services offered by SMEDA, please contact our website:
www.smeda.org.pk
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3.
INTRODUCTION TO SMEDA
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4.
INTRODUCTION TO SCHEME
5. EXECUTIVE SUMMARY
A direct marketing company is characterized by creative strategies and ideas
with efficient execution in a given period of time. The services offered through the
business include:
Brand Activation
Event Management
Direct Marketing
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Brand Activation
Event Management
Direct Marketing
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7. CRITICAL FACTORS
Following principles are of critical importance in setting up / running a Direct
Marketing services company.
Service Costing & Delivery: The most important factor in direct marketing
business is development of service portfolio and the corresponding cost. It
involves designing a competitive service mix, selection of good quality human
resources at competitive cost, so as to offer your targeted customers a good
price / value relationship.
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Direct
Marketing
Event
Management
Exhibitions
Seminars
Conferences
Musical
concerts
Brand
Activation
Brand
Launch
Store & Mall
Interception
Road Shows
Float
Operations
Kiosk
Placement
Direct
Marketing
Direct Mail
Shots
Brochure
Distribution
Personal
Selling
Delivery of
premiums
The rent-paying capacity of your business. If you have done a salesand-profit projection for your first year of operation, you will know
approximately how much revenue you can expect to generate, and you
can use that information to decide how much rent you can afford to pay.
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The following table shows internal rate of return and payback period for BTL
marketing company operating at 50% capacity.
Table 1 - Project Economics
Description
Internal Rate of Return (IRR)
Payback Period (yrs)
Net Present Value (NPV)
Details
23%
3 yrs & 5 months
844,509
Returns on the scheme and its profitability are highly dependent on the efficiency
of the sales team, service delivery, interest of the owner / manager and linkages
within the business community.
11.2 Project Financing
Following table provides details of the equity required and variables related to
bank loan;
Table 2 - Project Financing
Description
Total Equity (10%)
Bank Loan (90%)
Markup to the Borrower (%age/annum)
Tenure of the Loan (Years)
Grace Period (Year)
Amount (Rs.)
110,780
997,020
8%
8
1
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The estimated office requirement is 1,500 sq. feet in commercial areas or any
area where prospective clients are in close proximity and all utilities and facilities
are adequately available. It is recommended that the BTL marketing company is
established in an already built premise where free space is available. Close
proximity of the company in relation to the commercial area(s) and main roads is
better for the overall business potential.
The floor space needs to be carefully allocated to allow adequate working space
for employees during office hours. The allocation of space between working area
includes space to be occupied for different departments, meeting and briefing
rooms and storage area, etc.
The area has been calculated on the basis of space requirement for office,
meeting room and stores. Following table shows calculations for project space
requirement.
Sq.ft.
1,050
300
30
120
1,500
Construction &
Renovation
Amount (Rs.)
200,000
50,000
10,000
40,000
300,000
The proposed premises will be acquired on a rental basis with 6 months deposit
and rent will be payable on a monthly basis. The monthly rent is Rs. 25,000/- per
month for the proposed marketing company. It has been assumed that it would
be a developed premise with basic infrastructure available. However, for the
necessary construction, renovation and customization of the facility, Rs.
300,000/- will be required, which has been assumed to depreciate at 10% per
annum using diminishing balance method.
11.5 Office Equipment
The marketing company is expected to execute a minimum of 7 floats, 6
stalls/KIOSK, 6 events and 6 other projects in a year with a total of 3 permanent
staff members including the owner manager. This would require good seating
layout to maintain flow of work, provide maximum ease and comfort to
employees. A lump sum provision of Rs. 254,300/- for procurement of office /
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factory furniture is assumed. This would include computer, printer, fax, table,
desk, chairs etc. The breakup of Factory Office Furniture & Fixtures is as
follows:
Table 5: Office Equipment Costs
Quantity
Computer
Printer
Telephone
Fax
Multimedia
Scanner
Cubicle Rectangular
Office Tables Rectangular
Office Chairs (Standard 14)
Air Conditioner Split Unit (1.5 Ton)
Water Dispenser
Wall Lights (Large)
Portable Emergency Light
Generator (2.5 KVA)
Reception Counter
Waiting Chairs/Sofa at Reception
Total
1
1
2
1
1
1
2
2
6
1
1
5
2
1
1
1
Cost
(Rs.)
15,000
15,000
1,000
10,000
50,000
8,000
10,000
3,000
3,000
40,000
5,000
1,000
2,650
30,000
15,000
10,000
Amount (Rs.)
15,000
15,000
2,000
10,000
50,000
8,000
20,000
6,000
18,000
40,000
5,000
5,000
5,300
30,000
15,000
10,000
254,300
Total Monthly
Salary (Rs.)
240,000
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Office Assistants
Peon
Total
1
1
3
14,000
10,000
44,000
168,000
120,000
528,000
Stall
Operations
DtD
Selling
Event
Mgt.
18,000
25,000
43,000
750,000
750,000
15,000
50,000
25,000
75,000
7,500
22,500
15,000
10,000
10,000
15,000
10,000
10,000
35,000
Human resource
Supervisor
1 Promoter / Team Leader
1 technician
Marketing staff
Total
15,000
40,000
10,000
35,000
15,000
10,000
100,000
125,000
19,500
1,300
1,300
2,600
24,700
4,000
1,300
1,300
2,600
9,200
13,000
1,300
1,300
1,300
16,900
26,000
1,300
1,300
2,600
31,200
134,700
66,700
184,900
846,200
65,000
Table 8: Costs
Events
Float Operations
Stall Operations
Event Management
Unit
7
6
6
Cost
(Rs./Unit)
134,700
66,700
846,200
Total Cost
(Rs.)
942,900
400,200
5,077,200
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6
25
184,900
1,109,400
7,529,700
Events
Float Operations
Stall Operations
Event Management
Door to door Marketing
Total Sales Revenue
7
6
6
6
25
Sales
Price
(Rs./Unit)
161,640
80,040
1,015,440
221,880
First Year
Sales
Revenue
(Rs.)
1,131,480
480,240
6,092,640
1,331,280
9,035,640
Total
Monthly Cost
(Rs.)
15,000
2,500
2,000
Total
Annual
Cost
(Rs.)
180,000
30,000
24,000
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4 Telephone
5 Office Rent
Total
5,000
25,000
49,000
60,000
300,000
594,000
As presented in the above table, most of the BTL marketing companies require
considerable fixed and mobile phone lines during the project owing to the nature
of work. It is assumed that utilities expenses will increase by 10% every year.
The provision for pre-operating costs is assumed to be Rs. 50,000/- that will be
amortized equally over a 5 year period.
Considering the industry norms, it has been assumed that 75% of the total sale
will be on cash while remaining 25% sales will be on credit. A collection period of
30 days has been assumed.
A provision for bad debts has been assumed equivalent to 2% of the annual
credit sales.
Long-term loan for 8 years will be obtained in order to finance the venture. This
facility would be acquired at a rate of 8% per annum with year 1 as grace period.
The installments are assumed to be paid at the end of every month.
Miscellaneous expenses of running the business are assumed to be Rs. 10,000
per month. These expenses include various items like office stationery, daily
consumables, traveling allowances etc. and are assumed to increase at a
nominal rate of 10% per annum.
The business is assumed to be run as a sole proprietorship; therefore, tax rates
applicable on the income of a non-salaried individual taxpayer are used for
income tax calculation of the business.
The cost of capital is explained in the following table:
Table 11: WACC
Particulars
Required return on equity
Cost of finance
Weighted Average Cost of Capital
Rate
20%
8%
9.2%
The weighted average cost of capital is based on the debt/equity ratio of 90:10
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Below are the contact details of Marketing Association of Pakistan who can guide
and mentor new entrants in this business.
Karachi
Lahore
Model Town
Karachi 74400
Lahore
Email: khi@map.org.pk,
mapmail@cyber.net.pk
Email: info@maplahore.org.pk
Website: www.maplahore.org.pk
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13. ANNEXURES
13.1 INCOME STATEMENT
DIRECT MARKETING SERVICES COMPANY
Projected Income Statement (Rs.)
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
Gross Revenue
Sales on Credit
Sales on Cash
Bed Debt Expenses
Net (Adjusted Sales)
9,035,640
2,258,910
6,776,730
45,178
8,990,462
9,939,204
2,484,801
7,454,403
49,696
9,889,508
10,933,124
2,733,281
8,199,843
54,666
10,878,459
12,026,437
3,006,609
9,019,828
60,132
11,966,305
13,229,081
3,307,270
9,921,810
66,145
13,162,935
14,551,989
3,637,997
10,913,991
72,760
14,479,229
16,007,187
4,001,797
12,005,391
80,036
15,927,151
17,607,906
4,401,977
13,205,930
88,040
17,519,867
19,368,697
4,842,174
14,526,523
96,843
19,271,853
21,305,566
5,326,392
15,979,175
106,528
21,199,039
Cost of Sales
7,823,700
8,606,070
9,466,677
10,413,345
11,454,679
12,600,147
13,860,162
15,246,178
16,770,796
18,447,875
Project Cos t
Other Utilities
7,529,700
294,000
8,282,670
323,400
9,110,937
355,740
10,022,031
391,314
11,024,234
430,445
12,126,657
473,490
13,339,323
520,839
14,673,255
572,923
16,140,581
630,215
17,754,639
693,237
Gross Profit
1,166,762
1,283,438
1,411,782
1,552,960
1,708,256
1,879,082
2,066,990
2,273,689
2,501,058
2,751,163
528,000
120,000
10,000
55,430
300,000
580,800
132,000
10,000
49,887
330,000
638,880
145,200
10,000
44,898
363,000
702,768
159,720
10,000
40,408
399,300
773,045
175,692
10,000
36,368
439,230
850,349
193,261
32,731
483,153
935,384
212,587
29,458
531,468
1,028,923
233,846
26,512
584,615
1,131,815
257,231
23,861
643,077
1,244,996
282,954
21,475
707,384
1,013,430
153,332
1,102,687
180,751
1,201,978
209,803
1,312,196
240,763
1,434,334
273,922
1,559,494
319,587
1,708,898
358,092
1,873,896
399,793
2,055,983
445,075
2,256,809
494,354
75,760
66,571
56,619
45,841
34,168
21,526
7,835
73,570
73,570
104,991
104,991
143,232
143,232
184,145
184,145
228,081
228,081
285,419
285,419
336,566
336,566
391,957
391,957
445,075
44,507
400,567
494,354
49,435
444,919
6,131
8,749
11,936
15,345
19,007
23,785
28,047
32,663
33,381
37,077
Operating Expenses
Salaries
Office Mis cellaneous Expens es
Am ortization of Prelim inary Expens es
Depreciation Expens e
Rent Expens e
Subtotal
Operating Income
Financial Charges (8% Per Annum )
Earnings Before Taxes
Tax
Net Profit
Monthly Profit After Tax
79,762
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Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
Assets
Current Assets
Cash & Bank Balance
Accounts Receivable
Advance Rent
Total Current Assets
353,500
0
150,000
503,500
304,258
188,243
150,000
642,500
339,594
207,067
150,000
696,661
397,112
227,773
150,000
774,886
479,030
250,551
150,000
879,580
587,786
275,606
150,000
1,013,392
726,067
303,166
150,000
1,179,233
896,823
333,483
150,000
1,380,306
1,103,302
366,831
150,000
1,620,133
1,491,047
403,515
150,000
2,044,561
1,917,089
443,866
150,000
2,510,955
300,000
254,300
554,300
270,000
228,870
0
498,870
243,000
205,983
0
448,983
218,700
185,385
0
404,085
196,830
166,846
0
363,676
177,147
150,162
0
327,309
159,432
135,145
0
294,578
143,489
121,631
0
265,120
129,140
109,468
0
238,608
116,226
98,521
0
214,747
104,604
88,669
0
193,272
50,000
40,000
30,000
20,000
10,000
1,107,800
1,181,370
1,175,644
1,198,970
1,253,257
1,340,701
1,473,811
1,645,426
1,858,741
2,259,308
2,704,227
Owner's Equity
110,780
184,350
289,341
432,573
616,718
844,799
1,130,218
1,466,784
1,858,741
2,259,308
2,704,227
997,020
997,020
886,303
766,397
636,539
495,902
343,593
178,642
1,107,800
1,181,370
1,175,644
1,198,970
1,253,257
1,340,701
1,473,811
1,645,426
1,858,741
2,259,308
2,704,227
Fixed Assets
Construction & Renovation
Furniture & Fixtures
Vehicle
Total Fixed Assets
Intangible Assets
Preliminary Expenses
Total Assets
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Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
0
0
0
0
73,570
55,430
10,000
(188,243)
(49,242)
104,991
49,887
10,000
(18,824)
146,053
143,232
44,898
10,000
(20,707)
177,424
184,145
40,408
10,000
(22,777)
211,776
228,081
36,368
10,000
(25,055)
249,393
285,419
32,731
(27,561)
290,590
336,566
29,458
(30,317)
335,707
391,957
26,512
(33,348)
385,121
400,567
23,861
(36,683)
387,745
444,919
21,475
(40,351)
426,042
(110,717)
(119,906)
(129,858)
(140,637)
(152,309)
(164,951)
(178,642)
(110,717)
(119,906)
(129,858)
(140,637)
(152,309)
(164,951)
(178,642)
997,020
110,780
1,107,800
(300,000)
(254,300)
(150,000)
(50,000)
(754,300)
353,500
(49,242)
35,337
57,518
81,917
108,757
138,280
170,756
206,479
387,745
426,042
0
353,500
353,500
304,258
304,258
339,594
339,594
397,112
397,112
479,030
479,030
587,786
587,786
726,067
726,067
896,823
896,823
1,103,302
1,103,302
1,491,047
1,491,047
1,917,089
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Marketing
Human Resources
Training & Skill Development: Encouraging training and skill of self &
employees through experts and exposure of best practices is a route to
success. Least cost options for Training and Skill Development (T&SD) may be
linked with compensation benefits and awards.
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Government of Pakistan
www.pakistan.gov.pk
Government of Sindh
www.sindh.gov.pk
Government of Balochistan
www.balochistan.gov.pk
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www.sbp.org.pk
Item
Sales Volume Increase
Sales Price Increase
Increase in Cost of Sales
Increase in Staff Salaries
Increase in Utilities
Increase in Rent
Increase in Office Expenses
Debt / Equity Ratio
Depreciation: Premises Renovation
Furniture
Loan Period
Loan Installments
Financial Charges (Loan Rate)
Bad Debts
Assumption(s)
5%
5%
10 %
10 % per year
10 % per year
10 % per year
10 % per year
90 : 10
10 % per annum (Diminishing Balance)
10 % per annum (Diminishing Balance)
8 Years
Monthly
8 % per annum
2% of Sales
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