Feasabilitysoap Factory

Feasibility Study-Soap Factory 1/3/07

Etudes et Consultations Economiques s.a.r.l. 1

TABLE OF CONTENTS

1 EXECUTIVE SUMMARY .............................................................................. 2 2 PROJECT DESCRIPTION............................................................................ 3

2.1 FACILITIES AND BEGINNING INVENTORIES.................................................... 3 2.2 STAFFING STRUCTURE .............................................................................. 3

3 PRODUCT STRATEGY................................................................................ 3 3.1 FORMS AND SCENTS ................................................................................. 3 3.2 PRODUCTION PROCESS ............................................................................ 3

4 MARKET ANALYSIS.................................................................................... 3 4.1 SOAP MARKET OVERVIEW.......................................................................... 3 4.2 MAIN COMPETITION................................................................................... 3 4.3 TARGET MARKET ...................................................................................... 3 4.4 SWOT ANALYSIS ..................................................................................... 3

4.4.1 Strengths ........................................................................................ 3 4.4.2 Weaknesses ................................................................................... 3 4.4.3 Opportunities .................................................................................. 3 4.4.4 Threats............................................................................................ 3

5 MARKETING PLAN...................................................................................... 3 6 FINANCIAL PLAN........................................................................................ 3

6.1 INITIAL INVESTMENT.................................................................................. 3 6.2 MAJOR ASSUMPTIONS............................................................................... 3 6.3 PROJECTED INCOME STATEMENT .............................................................. 3 6.4 PROJECTED BALANCE SHEET .................................................................... 3 6.5 PROJECTED CASH FLOWS......................................................................... 3 6.6 RATIO ANALYSIS ....................................................................................... 3 6.7 BREAK-EVEN ANALYSIS ............................................................................. 3 6.8 SENSITIVITY ANALYSIS .............................................................................. 3

7 RECOMMENDATIONS AND KEY SUCCESS FACTORS ........................... 3 8 ECONOMIC IMPACT EVALUATION ........................................................... 3



1 Executive Summary The proposed project consists in establishing a soap factory in Bint Jbeil caza. The factory will produce both laurel and natural soaps. The initial investment is at $60,164, which includes $38,600 in equipment, and $21,564 in working capital needs (including beginning inventories). The main assumptions are conservative and consider an average yearly sale of 31.2 tons of natural soaps per year and 31.2 tons of laurel soaps per year, which is equivalent to a total of 1 ton per week (500 Kg of each type). The projections are taken over a period of 5 years. The soap factory is expected to provide an average annual net profit of $31,793. It will be able to distribute dividends of $30,000 starting in year 3. The soap factory will provide an internal rate of return (IRR) of 50% and a payback period of almost 4 years. These results show that the project is feasible. A worse case scenario was developed with the assumption that the factory would produce an average of 800Kg per week instead of 1 ton per week. These assumptions gave an IRR of 34% and a payback period of 4.8 years. A best-case scenario was based on the production of 1.4 tons per week. This scenario provided an IRR of 75% and a payback period of 2.11 years. In order to achieve satisfactory results, the plant should be well managed with intensive marketing efforts, high quality soaps, excellent service, as well as tight control over receivables. The soap factory will offer 5 job opportunities and will contribute to the development of the economic and social environment in the region.



2 Project description The project aims at creating a soap factory in Bint Jbeil. The factory will be mainly specialized in producing natural soaps as well as laurel soaps 2.1 Facilities and beginning inventories The warehouse area is assumed to be 400 m2. It is assumed that the warehouse would be rented out at a rate of $6/m2 per year for a total annual rent of $2,400. The following table shows the projected equipment and initial investment requirements. The total investment required includes the cost of equipment, transport vehicle as well as working capital requirements.

Source: Les Fils De Chamel Nasr, Savonnerie Orientale 2.2 Staffing structure The plant will have 5 employees distributed as follows: • General manager: 1 • Sales representative / driver: 1 • Labors: 3

EQUIPMENT OF SOAP FACTORYCost Items Quantity Unit cost Total costInsulated pan with coils 1 4,000 4,000Reservoirs for caustic soda, salt, water 3 700 2,100Boiler for steam generation 1 7,000 7,000Installation 1 4,000 4,000Generator incl. connections 1 6,500 6,500Van 1 10,000 10,000Office Equipment (computer, phone, fax…) 1 3,000 3,000Office Furniture 1 2,000 2,000Total equipment 38,600Working capital needs 21,564Total initial investment 60,164



3 Product strategy The Bint Jbeil soap factory will seek to deliver high quality natural soaps. In simple words, soap is a salt produced by mixing an acid (fatty acids of the oils) with an alkali solution (sodium hydroxide). Every oil has different fatty acids in its structure and therefore, their benefits to human skin are different. Also, every oil needs different amount of alkali solution to have a complete saponification.

There are many different kinds of soaps in the market today. The majority is the commercial “beauty" or " toilet" soaps. Having different brands, shape, color, scent and packaging, they are sometimes called "detergents" due to their content of various chemicals, artificial colorants, scents and other artificial preservatives. They have no curing effect on human skin and they are used mainly for cleaning purposes. Besides, some studies have proven that such chemicals are absorbed by the body cells and transferred into the blood circulation system, causing some health problems in the long run. For this reason, the trend towards the consumption of "cold process" natural soaps is increasing day by day. 3.1 Shapes and scents Natural soaps can have different shapes and scents.

The rounds

The ovals



The squares

The bath bars As for the scents, we have: CEDAR OF LEBANON: the scent of cedar wood is famous for its calming, restful effect on the mind and the body.

Rose of Damascus:



Lavender: the lavender is known for its soothing and calming effect.

Tea Tree: Thanks to its medicinal properties that encourage the natural healing action of the epidermis; it is particularly effective for problematic skin. This soap is also a welcome remedy for insect bites.

Amber: it has a light musky scent.

Olive: This soap is well known to nourish the skin with vitamins, minerals and proteins.

Mastic: It is made with the aromatic resin of the pistacia lentiscus , this soap is known for its antibacterial and astringent properties.



Tuberose:

Orange Blossom:

Honey: this kind of soap seems to be very powerful in removing impurities from the skin's surface. It fortifies the skin against environmental aggression.

Almond Exfoliant: This soap is rich in protein and vitamin E. It is composed of oat grain and wheat germ that are known for their energizing and healing action as well as removing impurities. Pure almond essential oil is also a component of this soap.

Laurel: The laurus nobilis is a plant typical of the Mediterranean region that has been celebrated since antiquity for its renowned healing virtues.



Alghar is a member of the Laurel family of evergreen trees, also known as Bay trees. Laurel has been used as a symbol of power and victory throughout history; Julius Caesar wore a crown of laurel.

Cleopatra was also known to use laurel in her beauty regimen. Laurel botanicals have been used in soaps and beauty enhancers for centuries and the tradition of using laurel extracts in shampoos, soaps and cosmetics continues to this day.

Laurel soap is considered an effective antiseptic; laurel relieves tired muscles and stimulates the circulation, easing arthritis pains. Often, theses types of soaps are sold in pharmacies for their healing effects.

3.2 Production Process

1. The soap maker will empty the oils directly in the pan, which already is

filled with a little bit of water 2. Water and caustic are added and the pan is brought to a boil 3. Diluted salt is added every day for 3 days 4. On the 4th day, the bottom of the pan is opened and the nigger (black

soap) is thrown away. The remainder is clean soap and is left to dry

5. Hand cutting is feasible and we obtain crude shaped soaps If we need a properly shaped soap, then a plodder is needed as well as a stamper.



4 Market Analysis 4.1 Soap market overview

The total toilet soaps market size in Lebanon is estimated at 4,000 tons.

The soap market in Lebanon is worth 21,097,000,000 LL; Thus USD 14,064,667.

Natural soaps are becoming very trendy in the most distinguished regions

of Beirut, where some stores are becoming specialized in the sale of these items.

Moreover, the well-known Tripoli Souk as well as Saida’s soap museum

are an important destination for all those seeking natural soaps.

4.2 Main competition The most serious competitors for natural and laurel soaps remain the commercial soaps that have a strong presence in the market. In general, the known brands represent 76% of the market. The following table presents the pricing of the commercial soaps found in

Boiler

Vapor Coil

Caustic Salt Water



Lebanese supermarkets:

The natural soaps present on the Lebanese market are not very numerous, among them:

Brand Price (in LL) Weight (in grams)Le Chat 946 125Lux 633 115Camay 528 115Zest 930 125Palmolive 820 125Fa 836 125Dove Cream 1161 100Yasmine 611 125Sopa (3) 930 225

Persavon (savon crème) 1540 100

Persavon (bar) 693 100

Dettol (antibacterial) 1001 75

Dettol (fragrance) 1183 75

Lifebuoy 550 90

Johnson's Lotion Soap 1436 125

Duru 671 200

Al Wazir 1859 90

Brand Price (in LL) Weight (in grams)Al Koura 2398 1000Baalbeck scented natural soap 2970 1000Al Sayyah 2519 900Al Baydar 6958 200



4.3 Target market The soap factory will produce natural soaps that can be sold to Bint Jbeil families but also everywhere in Lebanon. Natural soaps were mainly used by conservative families. However, nowadays, it is increasingly gaining in popularity among the trendiest people. Women seem to be more sensitive to the importance of natural soaps for an esthetic use. On the other hand, laurel Soaps are used for medicinal reasons as they can cure some illnesses such as rheumatism. 4.4 SWOT Analysis

4.4.1 Strengths

Natural soaps are generally preferred in most villages. Olive oil soaps are witnessing an increasing demand in Lebanon for

esthetic and beauty care reasons.

Laurel soaps are highly demanded for their medical virtues.

Laurel trees are widely available in Bint Jbeil.

Some Bint Jbeil residents already have the necessary know-how for the natural soaps production.

4.4.2 Weaknesses

Soap production can be a seasonal activity that increases mainly in summer as the demand for soap increases at this period of the year.

The commercial soaps represent today the largest share of the market

and are present everywhere.

Laurel soaps are more expensive than others, so additional marketing efforts will be needed focusing on the numerous advantages of this soap in order to justify their elevated price.



4.4.3 Opportunities

There is no soap factory in Bint Jbeil. The nearest soap factory is situated in Saida and Houla (not yet operational).

The natural soaps are witnessing a growing demand in Lebanon,

especially sophisticated natural soaps with exotic scents such as orange blossom, laurel, lavender, jasmine…

The production process of the soap can offer job opportunities to

women who can participate actively in soap making.

Branding and attractive packaging along with successful marketing strategies can help in promoting Bint Jbeil soaps that could gain a decent reputation.

4.4.4 Threats

The bigger share gained by commercial soaps can represent a threat to the sale of natural and laurel soaps.

The political situation is still relatively unstable in this region.

5 Marketing Plan The soap factory’s main marketing objectives involve: • Intensive public relations efforts, through direct contacts with the

supermarkets and mini markets of the region, to build a reputation of reliable and quality supplier of natural and laurel soap not only in the caza but also all over Lebanon.

• Building a loyal clientele by offering good reliable services (delivery on time)

and quality products. • Pricing the products according to market levels, while offering discounts (2 to

5%) for cash payments. • Preparing attractive packaging and labeling to give at the same time a

natural and modern look as It is important to develop sales on a wide-scale basis.

• Developing contacts with expatriates for the possibility of exporting the

soaps.



6 Financial Plan This section details the calculations, assumptions and methodology used as a basis for the projections of the expected financial performance of the soap factory. 6.1 Initial Investment

Source: Les Fils De Chamel Nasr, Savonnerie Orientale The above table shows the various equipments needed in the soap factory. The insulated pan with coils is the equipment where all the raw materials will be added. This machine has a cost of $4,000. 3 reservoirs will contain respectively caustic soda, salt and water. Each one of these reservoirs will have a cost of $700. Moreover, a boiler whose cost is approximately $7,000 is a necessary equipment for the production process. Moreover, a generator will have to be provided in case of electricity power failure. It is expected to have a cost of $6,500. Installations and piping will cost approximately $ 4,000. In order to market its products and ensure their distribution all over the Lebanese market, a van, with a cost of $ 10,000, will be needed. Finally, we can consider a budget of $ 3,000 for the office equipment such as a computer, a phone line and fax, and a budget of $2,000 for the office furniture. The total equipment cost is $ 38,600 while the total investment is evaluated at USD 60,164. This last figure includes, besides the cost of equipments, the working capital needs at the start of operations. Working capital needs are calculated by adding beginning inventories to expected receivables over a period of 4 months and deducting the expected payables over a period of 1 month.

EQUIPMENT OF SOAP FACTORYCost Items Quantity Unit cost Total costInsulated pan with coils 1 4,000 4,000Reservoirs for caustic soda, salt, water 3 700 2,100Boiler for steam generation 1 7,000 7,000Installation 1 4,000 4,000Generator incl. connections 1 6,500 6,500Van 1 10,000 10,000Office Equipment (computer, phone, fax…) 1 3,000 3,000Office Furniture 1 2,000 2,000Total equipment 38,600Working capital needs 21,564Total initial investment 60,164



Source: Les Fils De Chamel Nasr, Savonnerie Orientale. Soap factory-Houla The above table shows the beginning inventory needed to start the business. 6.2 Major assumptions The assumptions are conservative and are based on market achievable levels. The prices of natural and laurel soaps are shown in the following table:

Source: soap factory-Houla The production costs are figured out in the table below:

Source: Les Fils De Chamel Nasr, Savonnerie Orientale, S.A.R.L.

Beginning inventory Tons Unit cost Total costOlive kernel oil 5 750 3,750 Laurel 1 7,407 7,407 Salt 1 250 250 Caustic soda (concentration 100%) 1 500 500 Packaging (nylon bags) 300 300 Total beginning inventory 12,207

Production of 1 ton of Laurel soap Kgs needed Cost of 1 Kg (in $) Total Cost (in $)Olive oil kernel 720 0.75 540Laurel 160 7.41 1,185 Salt (16%) 128 0.25 32Caustic soda (concentration 100%) 120 0.5 60Total 1,817

Production of 1 ton of Natural soap Kgs needed Cost of 1 Kg (in $) Total Cost (in $)Olive oil kernel 720 0.5 360Laurel 0 7.41 - Salt (16%) 128 0.25 32Caustic soda 120 0.5 60Total 452

pricesPrice of 1Kg of Laurel Soap $4Price of 1 ton (1000Kg) of Laurel Soap $4,000Price of 1 Kg of Natural Soap $1Price of 1 ton (1000 Kg) of Natural Soap $1,000



Sales assumptions

The above assumptions consider that 0.5 ton of laurel and natural soaps are produced every 5 days. It is assumed that all the production will be sold. It is assumed that laurel and natural soaps revenues will grow by 5% in year 2, by 5% in year 3, by 3% in year 4, and 2% in year 5. The daily sales of laurel soaps and natural soaps will grow as follow:

Other assumptions The following table shows the main assumptions for the income statement. The marketing expenses are assumed to be 2% of annual revenues. An annual increase in general expenses of 2% is taken into account for inflation factors. The maintenance expenses are taken as 3% of total fixed assets while the annual increase in salaries is assumed o be of 2% annually. The increase in rental expenses is estimated to be of 10% every 3 years. Other assumptions include the cost of packing, which is of $ 50 for every ton of soap, as well as the energy cost estimated at $ 30 for every ton of soap produced.

Laurel Soaps ProductionDaily production of Laurel Soaps (in tons) 0.1Monthly production of Laurel Soaps (in tons) 2.6Yearly Production of Laurel Soaps (in tons) 31.2Yearly production of Laurel Soaps (in Kgs) 31,200

Natural Soaps ProductionDaily production of Natural Soaps (in tons) 0.1Monthly production of Natural Soaps (in tons) 2.6Yearly Production of Natural Soaps (in tons) 31.2Yearly Production of Natural Soaps (in Kgs) 31,200

Year 1 Year 2 Year 3 Year 4 Year 5Forecasted growth per year 5% 5% 3% 2%Sales of Laurel Soap / day 400 420 441 454.23 463.31 Sales of Natural Soap / day 100 105 110 114 116



The following table shows the balance sheet assumptions:

The following table shows the depreciation rates, which follow international accounting standards:

The cost of the warehouse to be rented is figured out below:

In order to ensure the proper distribution of soap all over the Lebanese territory, the soap factory should take into account the transport expenses.

In the above table, we considered that the sales representative/driver would need to undertake approximately 18 trips every month. The trip is expected to be

Income Statement AssumptionsPackaging cost 50 per ton of soapEnergy cost (electricity) 30 per ton of soapMarketing expenses 2% of revenuesAnnual increase in general expenses 2%Maintenance expenses 3% of fixed assetsAnnual increase in salaries 2% annuallyIncrease in rental expenses 10% every 3 yearsIncome Tax Rate 15%

Balance Sheet AssumptionsAccounts Receivable 3 months of salesInventories 2 months of cost of salesAccounts payable 1 months of cost of salesExpenses payable 20% of general expenses

DEPRECIATION RATESEquipment 10%Office Equipment 15%Vehicles 12%Furniture 7.5%

Warehouse to be rentedWarehouse area 400Rental per square meter in USD 6Annual rent 2,400

Transport expenses (gas) $617.14 per month Maintenance on vehicle $50.00 per month



of 300 Km and the price of one tank of gasoline is $16, taking into consideration that one tank of gasoline allows him to undertake a trip of 140 Km. Staff structure The soap factory will create 5 job opportunities.

The General Manager’s tasks consist in directing the production team, developing new marketing strategies and establishing contacts with clients. The General Manager will have a monthly salary of $ 700.The sales representative will handle sales and delivery. He is expected to have frequent trips in order to promote the soap products over all the Lebanese territory. His salary will be around $400 per month. Moreover, the soap factory will need three workers with a monthly salary of $300 for each. Thus, the total monthly salaries are around $ 2,445, including transport and NSSF. 6.3 Projected Income Statement The following income statement is based on conservative assumptions of revenues as well as costs.

STAFF STRUCTURENumber of Monthly Total Total Monthlyemployees Salaries salaries NSSF Transport Transport Total

Management & Sales General manager 1 700 700 151 104 104 955 Sale Representative 1 400 400 86 104 104 590 Labor 3 300 900 - 900 TOTAL 5 1,400 2,000 237 208 2,445



The income statement shows satisfactory income levels with an average net profit margin of 19%.

SOAPProjected Income Statement Year 1 Year 2 Year 3 Year 4 Year 5

Forecasted growth per year 5% 5% 3% 2%Sales laurel soaps 124,800 131,040 137,592 141,720 144,554 Sales natural soaps 31,200 32,760 34,398 35,430 36,139 Total Revenues 156,000 163,800 171,990 177,150 180,693 COGS (laurel soaps) 56,696 59,531 62,508 64,383 65,670 COGS (Natural soaps) 14,102 14,808 15,548 16,014 16,335 Cost of Packaging of soap 3,120 3,276 3,440 3,543 3,614 Utilities:Electricity 1,872 1,966 2,064 2,126 2,168 Salaries-production 10,800 11,016 11,236 11,461 11,690 Transport and vehicle -expenses 8,006 8,166 8,329 8,496 8,666 Total cost of sales 94,596 98,762 103,125 106,023 108,143 Gross margin 61,404 65,038 68,865 71,127 72,550

Gross profit margin% 39% 40% 40% 40% 40%ExpensesRental of center 2,400 2,400 2,400 2640 2640Marketing expenses 3,120 3,276 3,440 3,543 3,614 Maintenance 1,158 1,181 1,205 1,229 1,253 Salaries-Administrative 13,200 13,464 13,733 14,008 14,288 Social Security Charges 2,838 2,895 2,953 3,012 3,072 Transport-staff 2,496 2,496 2,496 2,496 2,496 Supplies 600 630 662 681 695 Other expenses 1,200 1,260 1,323 1,363 1,390 Total General & Administrative Exp 27,012 25,202 25,811 26,332 26,808 EBITDA 34,392 39,836 43,054 44,795 45,741 Depreciation expenses 4,160 4,160 4,160 4,160 4,160 Tax expenses 4,535 5,351 5,834 6,095 6,237 Net Income 25,697 30,325 33,060 34,540 35,344

Net profit Margin 16% 19% 19% 19% 20%



6.4 Projected Balance Sheet The balance sheet shows the projected assets and liabilities of the company.

The company is expected to start distributing dividends of $30,000 annually starting in year 3.

SOAPProjected Balance Sheet Year 1 Year 2 Year 3 Year 4 Year 5

Cash & Equivalents 13,098 45,035 50,081 57,439 66,046Accounts Receivable 39,000 40,950 42,998 44,287 45,173Inventory 9,449 9,922 10,418 10,730 10,945Current Assets 61,548 95,907 103,497 112,457 122,164Equipment 23,600 23,600 23,600 23,600 23,600Vehicle 10,000 10,000 10,000 10,000 10,000Office Equipment 3,000 3,000 3,000 3,000 3,000Office Furniture 2,000 2,000 2,000 2,000 2,000Accumulated Depreciation 4,160 8,320 12,480 16,640 20,800Net Fixed Assets 34,440 30,280 26,120 21,960 17,800Total Assets 95,988 126,187 129,617 134,417 139,964Accounts payable 4,725 4,961 5,209 5,365 5,473Expenses payables 5,402 5,040 5,162 5,266 5,362Total Liabilities 10,127 10,001 10,371 10,632 10,834Invested Capital 60,164 60,164 60,164 60,164 60,164Retained Earnings 25,697 56,022 59,082 63,622 68,966Shareholders Equity 85,861 116,185 119,246 123,786 129,130Total Liab. & Shrholders Equity 95,988 126,187 129,617 134,417 139,964

Stat. Of Retained Earnings Year 1 Year 2 Year 3 Year 4 Year 5Begin. Retained Earnings - 25,697 56,022 59,082 63,622 Net income 25,697 30,325 33,060 34,540 35,344 Dividends Paid 30,000 30,000 30,000

Ending Retained Earnings 25,697 56,022 59,082 63,622 68,966



6.5 Projected Cash Flows The following table shows the projected cash flows of the hotel.

The projected cash flows show the initial net investment in fixed assets. It also shows the net invested capital by the owners. The distributed dividends are shown starting in year 3. 6.6 Ratio analysis The following table shows the main financial ratios for the soap factory. The current ratio, which is equal to current assets divided by current liabilities, shows satisfactory levels in all years (above 2). The return on average assets has acceptable levels in all years.

SOAPSTATEMENT OF CASH FLOWS Year 1 Year 2 Year 3 Year 4 Year 5

Net income 25,697 30,325 33,060 34,540 35,344 Adjustments to reconcile net incometo cash provided by operating activitiesDepreciation 4,160 4,160 4,160 4,160 4,160 Changes in Working Capital (38,322) (2,548) (2,174) (1,342) (898) Total Adjustments (34,162) 1,612 1,986 2,818 3,262 Cash provided by operating activities (8,465) 31,936 35,047 37,358 38,606

Cash Flow from Investing ActivitiesCapital expendituresInvestment in fixed assets (38,600) - - - - Net cash used in investing activities (38,600) - - - -

Cash flow from financing activitiesNet Investment by owners 60,164 Net borrowings & repayments of loansDividends distributed - (30,000) (30,000) (30,000) Cash provided by financing activities 60,164 0 (30,000) (30,000) (30,000)

Cash at beginning of year - 13,098 45,035 50,081 57,439 Changes in cash 13,098 31,936 5,047 7,358 8,606 Cash at end of year 13,098 45,035 50,081 57,439 66,046



The total assets turnover, which is sales over total assets, is very high in all the years. The main reason is that the total sales are high in comparison to the limited assets structure of the plant. The profitability margins are satisfactory over the years. The return on average equity is around 28.9%. The return on investment is around 52.8%. These are considered high levels. The internal rate of return is 50% and the payback period, which is the period necessary to pay back the investment, is of 4 years. These results confirm the feasibility of the project. 6.7 Break-even analysis The following table shows the annual revenue levels needed for the plant to break even. Thus, an average of $76,214 per year is a minimum level of revenues for the soap factory.

Ratio Analysis Year 1 Year 2 Year 3 Year 4 Year 5Current Ratio 6.08 9.59 9.98 10.58 11.28Return on Average Assets 26.8% 27.3% 25.8% 26.2% 25.8%Total Assets Turnover: Sales / total assets 163% 130% 133% 132% 129%

Gross Profit Margin 39% 40% 40% 40% 40%Operating Profit Margin 22% 24% 25% 25% 25%Net Profit Margin 16% 19% 19% 19% 20%

Return On Average Equity=ROE 30% 30% 28% 28% 28%Return on Investment = ROI 43% 50% 55% 57% 59%

SOAPBREAK-EVEN ANALYSIS Year 1 Year 2 Year 3 Year 4 Year 5

Total Revenues 156,000 163,800 171,990 177,150 180,693Total Variable Costs 94,596 98,762 103,125 106,023 108,143Total Fixed Costs 31,172 29,362 29,971 30,492 30,968

Break-even revenues 79,194 73,949 74,852 75,943 77,130



6.8 Sensitivity analysis A worse case scenario is taken by assuming that the daily production of natural soaps and laurel soaps is of 800Kg/week, thus the yearly production is of 24.96 tons for each type of soaps. In this case, the soap factory has an average profitability of $ 17,518 annually. The internal rate of return is 34%. The payback period is 4.8 years. A best-case scenario is developed considering that 104 tons will be produced weekly. These assumptions will give as a result a yearly production of 43.68 tons for each type of soap. This scenario gives an average profitability of $ 60,344 annually. The internal rate of return is 75% and the payback period is 2.11 years.

These results confirm the viability of the project, especially if it is well-managed providing quality soaps at affordable prices. 7 Recommendations and key success factors In order to achieve satisfactory results, there are some key success factors that should be highlighted:

• The soap factory should focus on delivering quality soap products. • Intensive marketing efforts should be deployed in order to gain market

share. It is also necessary to develop public relations and direct contacts with supermarkets, mini-markets, specialized retailers for natural soaps, etc… Also, advertising in local cooperatives could be a good tool to attract

Worse-case Most likely Best-caseYearly Production Laurel Soap (in tons) 24.96 31.20 43.68Yearly Production Natural Soap (in tons) 24.96 31.20 43.68

Average net income 17,518 31,793 60,344 Average net profit margin 13% 19% 25%

Internal rate of return 34% 50% 75%Payback period in years 4.8 years 4 years 2.11 years



new clients. • Prices should be equal or less than the competition. In fact, discounts

should be applied for cash payments, in order to manage cash flows. Discounts of 2% to 5% could be provided to those customers that pay in cash.

• Eventually, the soap factory should develop contacts with expatriates to

try to open up new markets abroad. 8 Economic Impact Evaluation The soap factory is expected to deliver very satisfactory results, contributing in promoting the Bint Jbeil soap production into other markets. Moreover, it will create 5 new jobs, thereby contributing positively to society by offering new opportunities to young Bint Jbeil citizens and preventing them from emigrating. Also, the soap factory can offer job opportunities for women as they can contribute effectively in this kind of production. On the other hand, it will help in revitalizing the industrial sector of Bint Jbeil. The soap factory will contribute in propping up the soap production as well as the demand for the local soap. This will pave the way for further new developments in Bint Jbeil as the success of the soap industry can encourage other investments in new industries. It can promote also the export of Bint Jbeil soaps to Arab countries and some European countries in the long run. Besides its expected business performance, the soap factory will be seen as an organization that is contributing to enhance the social good of Bint Jbeil.

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