INSABA BW Fresh Fruit Juice Business - 20070809

8/17/2019 INSABA BW Fresh Fruit Juice Business - 20070809

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Fresh Fruit Juice Business Proposal

Business DescriptionFresh fruit juice business

ProponentArnold Tshwaranang Moleofi is a young motivated entrepreneur who is interested in running afresh fruit juice business. He has done a Business Studies course and has started a Car Washfinanced through own resources, which is run by family members. He does not have a bankaccount but is considering opening one. Mr Moleofi has no experience with formal loans but iswell acquainted with cost calculations and marketing since this was part of his professionaltraining.

LocationThe fresh fruit juice business is mobile and can be located at shopping malls, bus ranks, trainstations, public and sporting events and other locations where there is a likely market for selling

fresh fruit juice.

Business FactorsIn Botswana there are a great number of street hawkers operational, which are informalbusinesses selling a range of goods from sunglasses, hot lunches, soft drinks to ice cream.However, fresh fruit juice can only be obtained in up-market restaurants. A hawker’s license isrequired to operate in public places, which can be obtained from City and Town Councils.

The proposed fresh fruit juice business will sell a rangeof juices and non-alcoholic cocktails that are prepared

on the spot using an electric juicer or blender. Bottledwater, lime, milk or cream can be added depending ontaste.

Cooling of the drink is achieved by adding ice cubes orshaved ice from a cooler box. There is no provision forelectrical cooling. Also, ice cream is not sold sincethere is already a lot of competition for this product.

The mobile unit will be similar asshown in the pictures. Theelectric juicer operates from abattery and inverter that arelocated at the bottom of thecontainer. There will be a 10Wlight provided so that the unitalso can operate in the evening.The battery is charged through a50Wp solar panel. In thecontainer is also a 20 litre waterbottle with a small pumpproviding clean water.Fresh fruits, disposable cups,

straws, ingredients and a coolerbox are also stored in the unit.

Draft: 9 August 2007

Examples of Juices and Cocktails

Orange, Guava, Granadilla, Apricot,Peach, Mango, Peach and Orange,Mango and Orange, Papaya, TropicalPunch, Pineapple, Strawberry, WaterMelon, Apple, Grape, Paw-Paw,Banana, Lime, Tomato, Litchi, Carrot


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Pre-AssessmentThe general feasibility of the business idea is established in a pre-feasibility assessment. Anestimation is given of business requirements and costs.

Equipment: Inventory: P1,600 Stall on wheels, chair, umbrella, stand, water containers,

wash basin, radio with loudspeaker Equipment: P500 Juicer, small pump Solar system: P3,200 50Wp solar panel, battery, regulator, inverter Advertising: P1,200 Advertising displays, price list, business cards

Total equipment cost is P6,500. Furthermore disposable items such as cups, drinking straws, etcare required during production.

Production:A quick estimation of the required production is based on the following parameters.

The highlighted parameters are variables. The expense per glass is an estimate. Based on theabove figures, the operator has to sell 64 glasses of fresh juice per day (300 days per year) tocover expenses and pay back the investment.

Operational expenses: Disposables that are accounted for in the unit cost. Storage space is rented for the equipment. Estimated costs P50/month. The salary of the operator is P1000/month.

Investment live span is taken as 5 years. The solar panels have an estimated life span of 20years but there is a risk that they may get stolen.Table1 (pre-assessment) contains all above data. Sensitivity analysis with Table 1 shows the

impact of the various cost factors. Most sensitive elements are price per unit and cost per unit. Asensitivity analysis has been carried out using the goal seek function in excel. When selling 65glasses of fresh fruit per day, the payback period is 1 year with ROI of 80%, whereas selling 87glasses per day gives a payback period of ½ year and ROI of 180%. It can be concluded that theproposed business has the potential of being profitable.

Market AssessmentThere are currently no mobile fresh fruit juice vendors operating in the country. The only placeswhere fresh fruit juice may be obtained are up-market restaurants. It is believed that with theincreased awareness of fitness and health there is a market for fresh juice.

Operator income 1,000 P/month

Payback 600 P/monthIncome to be generated 1,600 P/month

Days working per month 25 days/month

Profit to be made per day 64 P/day

Selling price per glass 4 P/glass

Expense per glass 3 P/glass

Profit per glass 1 P

Glasses of juice per day to sell 64 glasses/day


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Fresh fruits can be obtained from a number of supermarket outlets such as Fruit and Veg City,Payless, Choppies, and others. When purchased fresh, fruits will hold for a number of days.Table 2 shows a comparison between the fresh fruit juice business using a RE system and thesame business recharging the battery from grid electricity through a commercial operator. Thecost of charging the battery, including transportation is estimated at P10 per charge. Thecomparison shows that it is more cost effective to charge the battery with solar energy.

Operational PlanThe business strategy relies on the special appeal of fresh fruit consumption to the customers, asa healthy product. It is important to generate a brand for the fresh fruit business. The businessshould be run in a professional manner in order to succeed. The operator should wear a uniformand cleanliness of the stall and personal hygiene would be critical.

Table 3 gives the cash flow during the first three years of operation. The cash flow analysisindicates clearly, how much financing would be required. Under the prevalent conditions, capitalinfusion of P6500 would be sufficient. The graphs visualize this business development for thefirst year, and for three years, respectively.

Finally, Table 4 gives the profitability forecast and balance for the business start-up.

From the Sensitivity Analysis below it becomes clear that he selling cost of a glass of juice aswell as the variable cost -being the cost of ingredients- are two critical success/failure factors.Since the maximum selling price is determined by competing soft drinks, it is of essence tocontrol the costs of the ingredients to make the business a success.

Sensitivity Analysis

-400%

-300%

-200%

-100%

0%

100%

200%

300%

400%

-20% -10% 0% 10% 20%

percentage change of parameter

p e r c e n t a g e c h a n g e o f R O I

Capital Investment

Investment Lifespan

Units/annum

Price/unit

Variable cost of sale/unit

Cost of energy/unit

total fixed costs


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Table 1: Pre-Assessment of the fresh fruit juice business described above

INSABA Preassessment of Project Proposals

Country: Botswana

Pilot Region: Gaborone / Main Mall

RE Technology: Solar PV Electricity

Business Idea:

Proponent name, contact Mr. Arnold Tshwaranang Moleofi

Years of experience as owner of business 1

Number of employees w/contract 1

Proponent uses bank acount (yes=5, No=0) 0

Experience with formal loan (received=5, applied=3, no=0) 0

Experience in cost calculations, business (no=0, several=5) 5

Practice in maintaining/operating equipment (RET) (none yet=0, regularly=5) 3

Total 10

Calculation of ROIDetermination of parameters Definitions

Investment Capital Inventory

Stall on wheels, chair, umbrella, stand, water

containers, wash basin, radio with loudspeaker

Investment Capital Equipment Blender, small pump

Investment Capital PV solar system 50Wp solar panel, battery, regulator, inverter

Investment Capital Advertising Advertising displays, price list, business cards

Investment Capital Total of shop, inventory, equipment and PV Total cost of investment

Investment

LifespanConservative average life

Life of the investment - i.e. period before it must

be replaced

Production Glasses sold per day

Production Glasses sold per year 300 days per year

Price/unit Average sales price per glass

Revenue BWP This is net revenueVariable cost/unit Average cost per glass Cost of fruit, ice, disposable cups, straw, etc.

Cost of energy/unit No other energy Costs of power, fuel added to variable cost

Fixed cost Rent for storage space to store equipment Rent per year

Fixed cost Hawker license

Fixed cost Replacement of the battery 3 yrs of battery lifetime

Fixed cost Annual salary for operator Wages

Fixed cost Salary for owner Wages

Total fixed costsAnnual indirect costs such as rent, telephones,

salaries

Amortization/unit: 0.07 1,300Amount needed per unit to cover investment in

lifetime

Direct costs per

unit:3.07 59,800

Variable costs plus amortization plus cost of

energy

Gross Margin/unit 0.93 Sales price per unit less the direct costs per unit

Fixed costs/unit 0.66Total fixed costs divided by the number of units

produced

Total costs 3.73 72,750 Direct costs plus fixed costs

Net Margin 0.27 5,250 Revenue less total costs

ROIReturn on Investment = net margin divided by

capital investment

Payback period

years

Capital investment divided by cash flow until intial

expenses are compensated by the net margin

Fresh Fruit Juice Stall using PV Solar Electricity

3,200

100

81%

12,950

600

0

250

4.00

78,000

Using the goal seek function it can be

established that when selling 66 glasses of

fresh fruit juice per day, the payback period is 1

year and ROI is 80% When 86 glasses per day

are sold the payback period is half a year and

the ROI is 180%

Fresh Fruit Juice

6,500

5

19500

1,600

500

65

1,200

3.00

0

12,000

0.99


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Table 2: Competitive Analysis: Comparison between the fresh fruit juice business using solar PVelectricity and the same business recharging the battery grid electricity

INSABA Verification & Market-Assessment of Project Proposals

Country: Botswana

Pilot Region: Gaborone

RE Technology: Solar PV ElectricityBusiness Idea:

Market Context : describeMarket Size & Potential

Market Need, Risk

Competitor

Competing Technology

Appropriateness of RET

Market Segment

Main Differentiator

Sustainable Production

Fresh Fruit Stall with solar PV electricity

Calculation of Competitiveness Compared to battery charged from gridDescription of Alternative

Investment Capital Battery charged with grid electricity instead ofsolar PV electricity

Investment

LifespanEquipment lifetime

Production Energy source does not effect turnover

Price/unit Energy source does not effect sales price

Revenue BWP

Variable cost/unit

Cost of energy/unit

Battery is charged at a commercial charging

centre once every day at a cost of P10 per

charge including transport

Fixed costs Fixed costs are not effected by how the batteryis charged

Total fixed costs Total fixed costs

Amortization/unit: 0.07 1,300 0.04 780

Direct costs per

unit:3.07 59,800 3.19 62,280

Gross Margin/unit 0.93 0.81

Fixed costs/unit 0.66 0.66

Total costs 3.73 72,750 3.86 75,230

Net Margin 0.27 5,250 0.14 2,770

ROI

Payback period

years

Solar Pv Grid electricity

Fresh Fruit Juice Stall using PV Solar Electricity

Presently there are no mobile fresh fruit juice vendors operating. The only places where

fresh fruit juice may be obtained are up-market restaurants. It is believed that with the

increased awareness of fitness and health there is a market for fresh juice. Probably

little to no market available in villages. The same business model is replicable for

different parts of the country.

The idea of buying a fresh and healthy drink may not catch on. Many people see a can

still as a fashionable drink.

See above

Charging the battery with grid electricity. Hand press for orange juice.

Using RE a radio can be operated attracking customers and light, so that working

hours are extended.

Using RE creates a business opportunity that previously did not exist.

Fresh fruit juice is healthier and more tasteful than juice from cans.

Battery needs recycling but thsi also applies to system that does not use RE

6,500

5

3,900

5

19,500

12,950

81%

0.99

12,950

71%

1.10

19,500

12,950 12,950

4.00

78,000

3.00

0.1538

4.00

78,000

3.00

0


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T a b l e 3 : C a s h F l o w

A n a l y s i s

M o n t h - 1

M o n t h - 2

M o n t h - 3

M o n t h - 4

M o

n t h - 5

M o n t h - 6

M o n t h - 7

M o n t h - 8

M o n t h - 9

M o n t h - 1 0

M o n t h - 1 1

M o n t h - 1 2

Y e a r 1

Y

e a r 1

Y e a r 1

Y e a r 1

Y e a r 1

Y e a r 1

Y e a r 1

Y e

a r 1

Y e a r 1

Y e a r 1

Y e a

r 1

Y e a r 1

P r o d u c t s

S a l e s

F r e s h F r u i t J u i c e

1 9 5 0 0

1 , 6 2 5

1 , 6 2 5

1 , 6 2 5

1 , 6 2 5

1 , 6 2 5

1 , 6 2 5

1 , 6 2 5

1 , 6 2 5

1 , 6 2 5

1 , 6 2 5

1

, 6 2 5

1 , 6 2 5

P r o d u c t 2

0

0

0

0

0

0

0

0

0

0

0

0

P r o d u c t 3

0

0

0

0

0

0

0

0

0

0

0

0

C a s h I n f l o w

T u r n o v e r

P r i c e


4 . 0 0

6 , 5 0 0

6 , 5 0 0

6 , 5 0 0

6 , 5 0 0

6 , 5 0 0

6 , 5 0 0

6 , 5 0 0

6 , 5 0 0

6 , 5 0 0

6 , 5 0 0

6 , 5 0 0

6 , 5 0 0

P r o d u c t 2

0

0

0

0

0

0

0

0

0

0

0

0

P r o d u c t 3

0

0

0

0

0

0

0

0

0

0

0

0

T O T A L T u r n o v e r

6 , 5 0 0

6 , 5 0 0

6 , 5 0 0

6 , 5 0 0

6 , 5 0 0

6 , 5 0 0

6 , 5 0 0

6 , 5 0 0

6 , 5 0 0

6 , 5 0 0

6 , 5 0 0

6 , 5 0 0

T O T A L C a s h I n f l o w

6 , 5 0 0

6 , 5 0 0

6 , 5 0 0

6 , 5 0 0

6 , 5 0 0

6 , 5 0 0

6 , 5 0 0

6 , 5 0 0

6 , 5 0 0

6 , 5 0 0

6 , 5 0 0

6 , 5 0 0

C a s h O u t f l o

w

M a t e r i a l

C o s t


3 . 0 0

4 , 8 7 5

4 , 8 7 5

4 , 8 7 5

4 , 8 7 5

4 , 8 7 5

4 , 8 7 5

4 , 8 7 5

4 , 8 7 5

4 , 8 7 5

4 , 8 7 5

4 , 8 7 5

4 , 8 7 5

P r o d u c t 2

0

0

0

0

0

0

0

0

0

0

0

0

P r o d u c t 3

0

0

0

0

0

0

0

0

0

0

0

0

T O T A L M a t e r i a l

4 , 8 7 5

4 , 8 7 5

4 , 8 7 5

4 , 8 7 5

4 , 8 7 5

4 , 8 7 5

4 , 8 7 5

4 , 8 7 5

4 , 8 7 5

4 , 8 7 5

4 , 8 7 5

4 , 8 7 5

O v e r h e a d C o s t

A n n u a l

S t a f f A s h a r e

1 2 , 0 0 0

1 , 0 0 0

1 , 0 0 0

1 , 0 0 0

1 , 0 0 0

1 , 0 0 0

1 , 0 0 0

1 , 0 0 0

1 , 0 0 0

1 , 0 0 0

1 , 0 0 0

1

, 0 0 0

1 , 0 0 0

S t a f f B s h a r e

0

0

0

0

0

0

0

0

0

0

0

0

S t o r a g e r e n t

6 0 0 . 0 0

5 0 . 0 0

5 0 . 0 0

5 0 . 0 0

5 0 . 0 0

5 0 . 0 0

5 0 . 0 0

5 0 . 0 0

5 0 . 0 0

5 0 . 0 0

5 0 . 0 0

5

0 . 0 0

5 0 . 0 0

H a w k e r L i c e n s

e

1 0 0 . 0 0

8 . 3 3

8 . 3 3

8 . 3 3

8 . 3 3

8 . 3 3

8 . 3 3

8 . 3 3

8 . 3 3

8 . 3 3

8 . 3 3

8 . 3 3

8 . 3 3

R e p a i r s & r e p l a

c e m e n t

2 5 0 . 0 0

2 0 . 8 3

2 0 . 8 3

2 0 . 8 3

2 0 . 8 3

2 0 . 8 3

2 0 . 8 3

2 0 . 8 3

2 0 . 8 3

2 0 . 8 3

2 0 . 8 3

2

0 . 8 3

2 0 . 8 3

V e h i c l e

0

0

0

0

0

0

0

0

0

0

0

0

M a r k e t i n g

0

0

0

0

0

0

0

0

0

0

0

0

I n v e s t m e n t

6 , 5 0 0

0

I n v e s t m e n t L i f e s p

a n

5

T O T A L O v e r h e a

d

7 , 5 7 9

1 , 0 7 9

1 , 0 7 9

1 , 0 7 9

1 , 0 7 9

1 , 0 7 9

1 , 0 7 9

1 , 0 7 9

1 , 0 7 9

1 , 0 7 9

1 , 0 7 9

1 , 0 7 9

C a p i t a l c o s t

i n t e r e s t , r e d e m

p t i o n

1 6 %

2 2 6

2 2 6

2 2 6

2 2 6

2 2 6

2 2 6

2 2 6

2 2 6

2 2 6

2 2 6

2 2 6

2 2 6

T O T A L c a p i t a l

2 2 6

2 2 6

2 2 6

2 2 6

2 2 6

2 2 6

2 2 6

2 2 6

2 2 6

2 2 6

2 2 6

2 2 6

a s

u

o w

1

,

, 1

, 1

, 1

, 1

, 1

, 1

, 1

, 1

, 1

, 1

, 1

O p e r a t i n g R e s u l t

- 6 , 1 8 0

3 2 0

3 2 0

3 2 0

3 2 0

3 2 0

3 2 0

3 2 0

3 2 0

3 2 0

3 2 0

3 2 0

/ a c c u m u l a t e d

- 6 , 1 8 0

- 5 , 8 5 9

- 5 , 5 3 9

- 5 , 2 1 9

- 4 , 8 9 8

- 4 , 5 7 8

- 4 , 2 5 8

- 3 , 9 3 7

- 3 , 6 1 7

- 3 , 2 9 7

- 2 , 9 7 6

- 2 , 6 5 6

C a p i t a l i n p u t

6 , 5 0 0

C a s h F l o w

3 2 0

6 4 1

9 6 1

1 , 2 8 1

1 , 6 0 2

1 , 9 2 2

2 , 2 4 2

2 , 5 6 3

2 , 8 8 3

3 , 2 0 3

3

, 5 2 4

3 , 8 4 4

C a s h F l o

w

A n a l y s i s


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C a s h F l o w A n a l y s i s : F i r s t Y e a r

0

1 0 , 0 0 0

2 0 , 0 0 0

3 0 , 0 0 0

4 0 , 0 0 0

5 0 , 0 0 0

6 0 , 0 0 0

7 0 , 0 0 0

8 0 , 0 0 0

9 0 , 0 0 0

M o n t h - 1

M o n t h - 2

M o n t h - 3

M o n t h - 4

M o n t h - 5

M o n t h -

6

M o n t h - 7

M o n t h - 8

M o n t h

- 9

M o n t h - 1 0

M o n t h - 1 1

M o n t

h - 1 2

- 8 , 0 0 0

- 6 , 0 0 0

- 4 , 0 0 0

- 2 , 0 0 0

0 2 , 0 0 0

4 , 0 0 0

6 , 0 0 0

T O T A L C a s h I n f l o w , a c c

T O T A L C a s h O u t f l o w , a c c


O

p e r a t i n g R e s u l t , a c c

C a s h F

l o w


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C a s h F l o w

A n a

l y s i s : 1 s t - 3 r d Y e

a r

7 0 , 0

0 0

7 2 , 0

0 0

7 4 , 0

0 0

7 6 , 0

0 0

7 8 , 0

0 0

8 0 , 0

0 0

8 2 , 0

0 0

Y e a r 1

Y e a r 2

Y e a r 3

- 4 , 0 0 0

- 2 , 0 0 0

0 2 , 0 0 0

4 , 0 0 0

6 , 0 0 0

8 , 0 0 0

1 0 , 0 0 0

1 2 , 0 0 0

1 4 , 0 0 0

T O T A L C a s h I n f l o w

T O T A L C a s h O u t f l o w


O

p e r a t i n g R e s u l t , a c c

C a s h F

l o w


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9

T a b l e 4 : P r o f i t a b

i l i t y a n d B a l a n c e F o r e c a s t

P r o f i t a b i l i t y P r e v i e w

B a l a n c e

Y e a r 1

Y e a r 2

Y e a r

3

Y e a r 1

7 8 , 0 0 0

7 8 , 0 0 0

7 8 , 0 0 0

A s s e t s

L i a b i l i t i e s

5 8 , 5 0 0

5 8 , 5 0 0

5 8 , 5 0 0

f i x e d a s s e t s

5 , 2 0 0 s h a r e h o l d e r s e q u i t y

4 , 8 1 1

1 9 , 5 0 0

1 9 , 5 0 0

1 9 , 5 0 0

c u r r e n t a s s e t s

3 , 8 4 4 l i a b i l i t i e s

4 , 3 3 3

0

0

0

S

9 , 0 4 4 S

9 , 1 4 4

1 2 , 0 0 0

1 2 , 0 0 0

1 2 , 0 0 0

0

0

0

Y e a r 2

2 5 0

2 5 0

2 5 0

A s s e t s


0

0

0



9 , 6 2 1

0

0

0


7 , 6 8 8 l i a b i l i t i e s

2 , 1 6 7

6 0 0

6 0 0

6 0 0

S

1 1 , 5 8 8 S

1 1 , 7 8 8

5 3 9

5 3 9

5 3 9

1 , 3 0 0

1 , 3 0 0

1 , 3 0 0

Y e a r 3

0

0

0

A s s e t s


1 4 , 6 8 9

1 4 , 6 8 9

1 4 , 6 8 9



1 4 , 4 3 2

4 , 8 1 1

4 , 8 1 1

4 , 8 1 1


1 1 , 5 3 2 l i a b i l i t i e s

0

/ a c c u m

u l a t e d

4 8 1 0 . 5 0

9 6 2 1 . 0 0

1 4 4 3 1 . 5 0

S

1 4 , 1 3 2 S

1 4 , 4 3 2

S a l e s

C o s t o f S a l e s

G r o s s p r o f i t

o t h e r o p e r a t i n g i n c

o m e

p e r s o n n e l c o s t s

h i r e c h a r g e s

c o m m u n i c a t i o n

v e h i c l e

m a r k e t i n g

o f f i c e

a n n u a l s u r p l u s / d e f i c i t

i n t e r e s t

d e p r e c i a t i o n

o t h e r e x p e n s e s

T O T A L E x

e n s e s

Documents

INSABA BW Fresh Fruit Juice Business - 20070809