A Business Plan preparation of Wood Industry, Dang

1.   Introduction

The name of an enterprise is Everest Wood Industry which is located in Dang. Everest Wood Industry is a production type of enterprise, registered under the enterprise act, which has started its production since 2070 B.S. Everest Wood Industry produces sawn timber and firewood of different sizes as the primary product from round timber. The total capital investment Nrs. 4,595,000, with fixed investment of 2,640,000 and variable Investment of 1,955,000. The product is consumed in the local market.

 The main objectives of this enterprise are:

v    To earn profit from the enterprise

v    To produce sawn timber and firewood

v     To fulfill the need for wood products for local people

 

Business plan of this enterprise is a document that summarizes the operational and financial objectives of a business. It is a business's road map to success with detailed plans and budgets that show how the objectives will be realized. The exact details of a business plan will depend on the intended audience and the nature of the business.

Since the business plan contains detailed financial projections, it is easy to forecast the performance of Mount Everest Wood Industry with its marketing plan. So it's an incredibly useful tool for everyday business planning. To be as effective as possible, it should be reviewed regularly and updated as required.

It helps an enterprise in,

• clarifying business idea
•  spotting potential problems
•  setting out goals
•  measuring the progress of an enterprise
• to secure investment or a loan from a bank

 

 

2.   Enterprise Management

 

a. Vision, Mission and Values

 Vision:

·      The vision of Mount Everest Wood Industry is to become a leading wood industry of this district. 

Mission:

·     To discover, develop and successfully market the wood products.

·     To provide qualitative and quantitative service to the people.   

       Values:

·     Gain the trust of the product consumers

·     Hard work, dedication, and performance of employees

·     Believe in team-work

·     Mutual respect and dignity at work to all employees

·     Effective communication

 

 

b. Record Keeping System

Proper business record-keeping provides the business a real advantage over the competition in different ways. It helps to manage accounts, interests, taxes, and working costs effectively and act as a resource for new strategies. In this enterprise, a manual record-keeping system is in use.

The records are kept by an accountant, through these steps.

·       Capture the information

·       Check to make sure the information is complete and correct

·       Record the information to check it

·       Consolidate and review the information

·       Act accordingly

 

c. SWOT analysis

The strengths, weaknesses, opportunities and threats of enterprise are as follows:

v    Strengths:

·       Production and distribution network

·       Technological development and change

·       High product and material variety

·       Quality control supply

v Weakness:

·       Shortage of qualified labor

·       High cost of raw materials

·       Weak cooperation with local government

·       Lack of capital to run enterprise in full capacity

    v Opportunities:

·       Increase production of furniture

·       Located near city with local market access

·       Provision of microfinance facilities

·       People are more attracted towards wood products

v Threats:

·       Establishment in the number of  competitive industry

·       Unfavorable legal provisions

·       Over harvesting practices in the forest

·       Unsupportive government regulations regarding tree felling and transportation

 

d. Enterprise Structure

The enterprise formed of Chief Executive Officer, who is also the owner of the enterprise. CEO has a major responsibility of making the big decisions and managing the overall operations and decisions of the enterprise. There is one manager, who plans and promotes the daily schedule of employees. An accountant prepares and examines financial records. An office assistant is unskilled labor, which helps the business.

Machine operator operates the machines in the industry, whereas three unskilled workers perform sawing, storing, transporting activity.

 

 

Figure 1: Enterprise Structure

 

 

 

 

3

c. Market analysis

The market analysis will reveal whether there is sufficient demand for the product or service in target market. If the market is already saturated, business model will need to be changed.

v Market coverage area: At present the enterprise covers the local market and expanding its service to the district costumers.

v Prospective customers: The prospective customers are people of Dang district and readymade wooden product consumers.

v Close substitute goods/ products: The close substitute goods are aluminum readymade products, which are alternatives of wood.

d. Present consumption volume and its trend

At present, annual 6000cft sawn timber is produced and total product is consumed. The trend is being increasing every year.

e. Existing sources of supply

The enterprise bought raw materials from the community forests.

f. Gap identification between available quantity and volume

There is high demand of the wooden products, in the industry. The industry is being unable to provide the demanded products.

 

 

4.   Marketing Strategy

a. Target consumers

The targeted costumers are people of Dang district.

b. Target market

 The targeted market is Tulsipur city area and Dang district.

c. Pricing

 The pricing of sawn timber is 4200-4500/cft. The fire wood is sold in Nrs. 10/kg

d. Distribution strategy

The products are sold directly from the industry to the costumers and to the furniture industry.

e. Promotion and advertising

 Certain annual amount is separated for promotion and advertising.

f. Competitive situation

 Competition is high among wood industries. Due to high number of industries, there is difficulty to establish the market. There is also competition with alternatives of wooden products such as aluminum.

g. Product positioning

 Positioning is one of the most powerful marketing concepts. The product of the enterprise is being positioned through advertising and product pricing.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

h. Brand establishment

The enterprise has not been established as the brand yet.

 

 

 

 

 

5.   Technical Analysis

a. Plant production

 The annual production is 6000cft, which produces sawn timber of various sizes.

Annual capacity                    10000  cft      

Output ratio              3:5 sawn timber/round timber       

Annual production               6000    cft      

b. Manufacturing process & production schedule

 Round timber, is used as the raw material of industry. It uses 10,000 cft of timber to produce sawn timber in the ratio of 3:5 i.e. 60%. The remaining wood is used as firewood. The production plant runs 340 days a year and 12 hours a day.

c. Site selection and infrastructure facilities

 The enterprise lies near the city area with all facilities needed to run the industry. There is easy access with market and enough infrastructural facilities.

d. Machinery equipment & capacity utilization

 There are machinery equipment such as bench, trolley and motor for sawing purpose. There is a provision of generator. These machinery equipment are fully utilized for their use.

Machinery Goods	No.			790,000
a. Bench & trolley	1	400,000	400,000
b. Motor	1	50,000	50,000
c. Computer	1	40,000	40,000
d. Generator	1		150,000
e. Safety kits			50,000
f. Other tools			100,000

 

e. Structure and civil work

The industry consists of office room, factory room and store room with different areas, as shown in the table.

Building and civil works		Area (sq. ft.)	Rate		560,000
a.	Office room	50	2,000	100,000
b.	Factory room	150	2,000	300,000
c	Store room	80	2,000	160,000
d.	Refreshment room	0		-
e.	Guard room	0	-	-

 

Raw material requirement: Round timber is used as primary raw material for the production of sawn timber. Lubricant are also used in machines, as raw materials.

Raw materials		Amount	Rate		20,160,000
a.	Raw materials	10,000 cft.	2,000/cft	20,000,000
b.	Bag	-	-	-
c.	Lubricants			60,000
d.	Packing materials			-
e.	Other raw materials			100,000

 

f. Manpower requirement and their skills

The enterprise formed of Chief Executive Officer, who is also the owner of the enterprise. CEO has a major responsibility of making the big decisions and managing the overall operations and decisions of the enterprise. There is one manager, who plans and promotes the daily schedule of employees. An accountant prepares and examines financial records. An office assistant is an unskilled labor, which helps the business.

Machine operator operates the machines in the industry, whereas three unskilled workers perform sawing, storing, transporting activity.

 

Indirect Worker's Salary							840,000
a.	Manager	1	Nos.	@	30,000	360,000
b.	Accountant	1	Nos.	@	25,000	300,000
c.	Office assistant	1	Nos.	@	15,000	180,000
d.	Allowance

 

g. Scope of product diversification

 The main products are sawn timber and firewood. Timber of different sizes are produced, from which industry obtains a large income.

h. Product quality

 High quality wood products are being produced. Product quality are tested to satisfy the costumers need.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6.   Financial Analysis

a. Total capital requirement

The total capital requirement of Mount Everest according to financial analysis is NRs. 4,595,000.

·     Fixed capital: The fixed capital is Nrs. 2,640,000

FIXED CAPITAL
A.	Land and Land development								50,000
	a.		Land	7.0	Kattha	@		On lease
	b.		Land Development		Total			50,000
.
B.	Building and civil works								560,000
	a.		Office room	50	Sq. Ft.	@	2,000	100,000
	b.		Factory room	150	Sq. Ft.	@	2,000	300,000
	c		Store room	80	Sq. Ft.	@	2,000	160,000
	d.		Refreshment room	0	Sq. Ft.	@		-
	e.		Guard room	0	Sq. Ft.	@	-	-
			Building made by frame Structure,	0
			Rcc piller Cement making,
			Brick wall, Rcc Roofing, sal wood
			Chouchot, Cement Plaster, Paints
	f.		Garden, parking & Others		total
C.	Machinery Goods								790,000
	a.		Bench & trolley	1	Nos.	@	400,000	400,000
	b.		Motor	1	Nos.	@	50,000	50,000
	c.		Computer	1	Set	@	40,000	40,000
	d.		Generator	1	total			150,000
	e.		Safety kits		total			50,000
	f.		Other tools		total			100,000
D.	Interior Decoration								-
	a		Carpet Setting in office		Rooms	@
	b.		Store and factory improvement		total
	c.		Others		total

 

E.	Furniture and Fixtures								240,000
	a.		Office furniture (Chair  &table)	2	Set	@	30,000	60,000
	b.		Factory furniture			@	-	150,000
	c.		Store furniture	2	Set	@	15,000	30,000
	d.		Other furniture		total
F.	Vehicle								300,000
	a.		Delivery van	0	Nos.	@	-	-
	b		Motor bike	2	Nos.	@	150,000	300,000
G.	Pre operating Cost
	Feasibility study, survey, consultancy, registration				total				700,000
			Total Fixed Capital						2,640,000

 

v Working capital: The working capital is Nrs. 1,955,000

A.	Raw materials		1	months				1,680,000
B.	Direct workers salary		1	months				65,000
C.	Indirect workers salary		1	months				70,000
D.	Operation cost		1	months				27,500
E.	Office overhead		1	months				12,500
F.	Credit facility		1	day				-
H.	Cash and cheque in hands			total				100,000
	Total Variable Capital							1,955,000

 

	Total Capital Investment							4,595,000
	Fixed Capital   Variable Capital						2,640,000
							1,955,000

                                          

b. Means of finance

The means of finance are bank investment (9%) and equity investment (91%).

Description	Equity	Bank	Total
Land and land development	50,000	-	50,000
Building and civil works	360,000	200,000	560,000
Machinery	590,000	200,000	790,000
Interior Decoration	-	-	-
Furniture	240,000	-	240,000
Vehicle	300,000	-	300,000
Pre operating cost	700,000	-	700,000
Working Capital	1,955,000	-	1,955,000
Total Investment	4,195,000	400,000	4,595,000
Percentage	91%	9%	100%

 

 

c. Sales revenue

The net sale when operated at 100% is Nrs. 25,600,000.

	Wood Products	Production	Rate	Total
a.	Sawn Timber	6,000 cft	4,200/cft	25,200,000
b.	Firewood	40,000 kg	10/kg	400,000
	Other income
		-		25,600,000

 

d. Operational expenses

 The total cost of an enterprise is Nrs. 22,660,000                                                                                                              

·     Fixed Cost: Nrs. 1,390,000                                                              

·     Variable Cost: Nrs. 21,270,000

v FIXED COST
A.	Depreciation																200,000
	a.	On Building				560,000			5%				28,000
	b.	On Machine				790,000			10%				79,000
	c.	On Interior Decoration				-			15%				-
	d.	On Vehicle				300,000			15%				45,000
	e.	On Furniture				240,000			20%				48,000
B.	Office Overheads																150,000
	a.	Stationery								50,000
	b.	Ticket and Telephone								40,000
	c.	Advertisement								30,000
	d.	Entertainment								-
	e.	Traveling								-
	f.	Others								30,000
C.	Indirect Worker's Salary					No.											840,000
	a.	Manager				1				30,000			360,000
	b.	Accountant				1				25,000			300,000
	c.	Office assistant				1				15,000			180,000
	d.	Allowance - for a Year
D.	Insurance and Auditing Fees									total							200,000
	Total Fixed Cost																	1,354,000
v VARIABLE COST
				Bases:

 

-

Annual Working days

340

days

Daily Working Hours

12

hours

Operation capacity

-

Daily operation

-

Annual capacity

10000

cft

Output ratio

3:5 round/ sawn timber

-

Annual production

6000

cft

-

A.

Raw materials

Amount

Rate

20,160,000

a.

Raw materials

10,000 cft

2,000

20,000,000

b.

Bag

-

-

-

c.

Lubricant

60,000

d.

Packing materials

-

e.

Other raw materials

100,000

B.

Operation Cost

330,000

a.

Electricity

total

150,000

b.

Water

total

30,000

c.

Repair and maintenance

total

50,000

d.

Transportation cost / fuel expenses

total

100,000

e.

Others

total

-

C.

Direct Workers' salary

No.

Rate

780,000

b.

Machine operator

1

20,000

240,000

c.

Unskilled workers

3

15,000

540,000

d.

Allowance for a Year

 

 

Profitability and BEP analysis: The profit before tax is Nrs. 2940000. The BEP is Nrs. 8,218,014 i.e. 32%.

Annual Sales Income							25,600,000
a.	Sawn Timber	6,000	cft/annum	@	4,200/cft	25,200,000
b.	Firewood	40,000	kg/annum		10 /kg	400,000
c	Other income	total				-

 

Profit (Profit Before Tax)

2,940,000

a.

Income

25,600,000

b.

Cost

22,660,000

Rate of Return

a.

On Total

64%

b.

On Equity

70%

Break Even Point

a.

On Value

8,218,014

b.

On Percentage

32%

 

 

7.   Conclusion

Everest Wood Industry is a medium-sized enterprise running in |Dang district. At present, the enterprise covers the local market and expanding its service to the local customers. The enterprise lies near the city area with all facilities needed to run the industry. There is easy access to the market and enough infrastructural facilities. The prospective customers are people of the Dang district and readymade wooden product consumers.

At present, annual 10,000cft round timber is used as raw material brought from the community forests to produce sawn timber in the ratio of 3:5 i.e. 60%. The remaining wood is used as firewood. The production plant runs 340 days a year and 12 hours a day. The trend is being increased every year. There is a high demand for wooden products, in the industry. The industry is being unable to provide service to all consumers, due to the high demand of products. The pricing of sawn timber is 4200-4500/cft. The firewood is sold at Nrs. 10/kg. The final products are sold directly from the industry to the customers and to the furniture industry. Competition is high among wood industries. Due to a high number of industries, there is difficult to establish the market. There is also competition with alternatives of wooden products such as aluminum.

The total capital requirement for that enterprise, according to financial analysis is NRs. 4,595,000.

·     Fixed capital: The fixed capital is Nrs. 2,640,000

·     Working capital: The working capital is Nrs. 1,955,000

The means of finance are bank investment (9%) and equity investment (91%). The net sale revenue when operated at 100% is Nrs. 25,600,000. The total cost of an enterprise is Nrs. 22,660,000, where fixed cost is Nrs. 1,390,000 and variable cost is Nrs. 21,270,000. The annual profit with 10% tax is Nrs. 2,646,000 and break-even point (BEP) is Nrs.               8,218,014 i.e. 32%.