Loan Proposal Final

7/22/2019 Loan Proposal Final

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Business proposal

For

Distribution Agency of

Shezan International


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ContentsEXECUTIVE SUMMARY .................................................................................................................................. 3

BRIEF DESCRIPTION OF PROJECT .................................................................................................................. 3

CRITICAL FACTORS ........................................................................................................................................ 4

Products and Brand ................................................................................................................................... 4

Background Experience............................................................................................................................. 4

SWOT ANALYSIS ............................................................................................................................................ 4

MARKETING STRATEGIES .............................................................................................................................. 5

Tools used for Integrated Marketing Communication: ............................................................................ 5

Skilled & Experienced Manpower ............................................................................................................. 6

INSTALLED AND OPERATIONAL CAPACITIES ................................................................................................. 6

GEOGRAPHICAL POTENTIAL FOR INVESTMENT ............................................................................................ 7

POTENTIAL TARGET MARKETS ...................................................................................................................... 7

DISTRIBUTION PROCESS FLOW ..................................................................................................................... 7

MANAGEMENT STRATEGIES ......................................................................................................................... 8

Human Resources ..................................................................................................................................... 8

Hierarchy: .................................................................................................................................................. 9

PROJECT COST SUMMARY ............................................................................................................................ 9

Project Financing ....................................................................................................................................... 9

Project Cost ............................................................................................................................................. 10

Space Requirement ................................................................................................................................. 10

Human Resource Requirement ............................................................................................................... 11

Revenue Generation ............................................................................................................................... 11

Other Costs ............................................................................................................................................. 11

KEY ASSUMPTIONS ...................................................................................................................................... 12


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EXECUTIVE SUMMARY

Distribution Agency of Shezan is proposed to be located at Malikwal city to distribute Fast

Moving Consumer Goods (FMCG) such as Fruit Juices Syrups & Squashes, Fruits & Vegetables

Processed/Canned, Tomato Ketchup, Sauces & Pickles Etc. to the Local market.

This proposed distribution agency will distribute around (quantity purchased terms) to the

retailers. The assumed sales force has the capacity to distribute around (optimum capability) of

products and initially they will be utilizing 67% of proposed capacity.

Total Cost Estimate of the project is Rs. 3.35 million with Fixed Investment of Rs. 0.83million

and Working Capital of Rs. 1.33 million and 1.19 million as security deposit for shezan.

The most critical considerations or factors for success of the project are

Product and Brands to be distributed Negotiation and Marketing Skills Credit Recovery

BRIEF DESCRIPTION OF PROJECT

Product: It has been suggested that for the proposed distribution business, the company would

act as a main institutional distributor for Fast Moving Consumer Goods (FMCG) products. The

business would distribute; Fruit Juices Syrups & Squashes , Fruits & Vegetables

Processed/Canned, Tomato Ketchup, Sauces & Pickles Etc. to the Local market.

Location:Distribution Agency in Malikwal city, District Mandi baha ud din. This distribution can

also be expanded in all small second tier towns in addition to suburban towns of Malikwal.

Target Market: The demand of distribution service providers is increasing which is directly

proportionate to the increase in FMCG manufacturing companies which are expanding

substantially with the current economic growth and consumerism. Therefore the potential

target market for the shezan distribution agency setup is retail stores in Malikwal and all second

and third tier towns of Malikwal.

Employment Generation:The proposed project will provide direct employment to 15 people.

Financial analysis shows the unit shall be profitable from the very first year of operation.


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CRITICAL FACTORS

Critical success factors that affect the decision to invest in the proposed business are:

Products and Brand

Product and Brands to be distributed would act as a key

success factor for the proposed distribution business.

Greater the brand awareness in the market, higher

would be the chances of business success. So I have

chosen Shezan International because it has complete

awareness in the market and demand is there as well. There is not even a single distributor in

the area where the retailer could get shezan products, so they have to pay extra money and

lose their profit by purchasing the products from Mandi baha ud din.

Background Experience

Background experience plays an important role in operating a small to medium scale

Distribution Agency, especially when dealing with customers, deciding the business

development activities to be carried out and negotiating on commercial terms and conditions.

Experience is already inhouse for Me because my father is already running a distribution agency

of COCA COLA very efficiently and successfully. Human force will be generated very easilythrough that source. Letter of shezan and coca colas distribution experience has been

attached in annexure.

SWOTANALYSIS

Strengths:

Shezan has a strong brand image so as a distributor of shezan our image will be strongas well.

Customer loyalty graph is higher for shezan Efficient work force Owned vehicles High reputation and credibility in the area already because of distribution of coca cola Credit control


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No direct competitor of shezan distribution who has all the three divisions ofdistribution

Weaknesses:

Insufficient funds availability Sometimes over-reliance

Opportunities:

Increased sales to existing customers, or new leads gained through them. Improved supply arrangements, such as just-in-time supply or outsourcing non-core

activities.

Minimum reliance over customer. Economic trends.

o For example, falling interest rates reducing the cost of capital. Social developments.

o For example, demographic changes or changing consumer requirements leadingto an increase in demand for your products.

New technology.o For example, new materials, processes and information technology.

Threats:

Easy entrance for the competitors Loss of a significant customer. Price rises from Shezan. Shezan reducing credit lines or increasing charges.

MARKETING STRATEGIES

The entrepreneur must have effective PR & marketing skills. These marketing skills should

enable the entrepreneur to carryout business development activities to target potential

customers and also to maintain existing client base.

Tools used for Integrated Marketing Communication:

Advertising Public relations Personal selling Sales promotion


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Sales & Distribution Network: Expert's advice and distribution agreements are required with

distributors & retailers.

Price - Bulk Discounts, Cost plus Introductory Discounts: Price should never be allowed to

compromise quality. Price during introductory phase may be lower and used as a promotional

tool. Service cost estimates should be carefully documented before price setting. Government

controlled prices should be displayed, where applicable.

Skilled & Experienced Manpower

The knowledge and experience of the entrepreneur is not sufficient to run the business

smoothly. A major proportion of business development activities and accounts receivables are

managed by sales personnel employed by the agency. Therefore, it is crucial for the distribution

agency to hire experienced and skilled sales staff that can bring in new business and retain

existing customer base. This part of the business will also be very easily for me because as

described earlier I have the experience of my father who is already running the distributionagency of Coca Cola in malikwal since last 10 days.

INSTALLED AND OPERATIONAL CAPACITIES

For the proposed project it is assumed that various consumer goods of worth RS.

10,000,000/annum will be distributed across the city where the distribution company is set-up

with 7% sales volume growth assumption. For this purpose a staff of total 15 persons will be

justifying their job description in various capacities.

It has been suggested that for the proposed distribution business, the company would act as amain institutional distributor for Fast Moving Consumer Goods (FMCG) products. The business

would distribute; Fruit Juices Syrups & Squashes , Fruits & Vegetables Processed/Canned,

Tomato Ketchup, Sauces & Pickles Etc. to the Local market.

Products for distribution have been selected for the proposed business by foreseeing their high

potential and anticipated expansion in the manufacturing of these products. However, as these

products are perishable, efficient distribution operations would be necessary. In order to

leverage the opportunity for further business expansion, intensive distributionpractice would

be followed which means that the business would place its products and services to as many

retailers as possible, employing the First in First Out method. It is proposed that all perishable

items cannot be stored for long period, so it is suggested that time for a product to leave the

warehouse and be distributed should be as minimum as possible.


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GEOGRAPHICAL POTENTIAL FOR INVESTMENT

The growing trend of consumerism and increase in population has increased opportunities for

the FMCG distribution business in Pakistan. So I have decided to start this distribution agency of

shezan in malikwal city with proposed initial investment of 2 million estimated. No of retailers

in malikwal and its suburbans are more than 500 so it s very mind catching where you donthave even any competitor.

POTENTIAL TARGET MARKETS

Pakistan has a domestic market of above 185 million consumers with growing incomes &

changing consumption habits. Population growth, increase in per capita income, and

urbanization have led to demand of distribution agencies. Consumerism and introduction of

new products have fuelled demand. The target market for the proposed set-up is retail stores in

Malikwal city and its suburbans. Number of retailer (our customers) is more than 500 to whom

we can provide with the distribution of shezan products at their door step.

DISTRIBUTION PROCESS FLOW

Shezan international dealing in consumer goods when interested in appointing a distributor for

their products, advertise in newspapers and call for expression of interest from local companies

interested in the distribution. Companies evaluate following capabilities of the interested

distributors

Location of distributors business premises. Financial position and credit standing of the distributor. Knowledge and experience of the distributor. Storage and showroom facilities of the distributor. Ability of the distributor to secure adequate business and to cover the market. Capacity of the distributor to provide after sale service. General reputation of the distributor and his sales force. Willingness of the distributor to handle the entrepreneurs products. Degree of co-operation and promotion service he is willing to provide. Nature of other products, if any handled by the distributor.

In a country like Pakistan one needs an effective distribution system that provides market

coverage and is economical. The choice of a channel by traders or manufacturers depends upon

the nature of the product e.g. for low priced consumer products like soap, a vast network is

needed and manufacturers prefer to hire the services of a independent distributor rather than

having their own distribution set-up, which is a high cost option. For industrial goods, a direct


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Hierarchy:

PROJECT COST SUMMARY

A detailed financial model has been developed to analyze the commercial viability of

Distribution Agency under the Prime Ministers Youth Business Loan. Various cost and revenue

related assumptions along with results of the analysis are outlined in this section.

The projected Income Statement, Cash Flow Statement and Balance Sheet are attached as

appendix.

Project Financing

Following table provides details of the equity required and variables related to bank loan:

Table 1 - Project Financing

Description Details

Total Equity (67%) 3.35 million

Reserve Equity (33%) 1.65 million

Owner

Sales Man Sales Man Sales Man

DistributionManager


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Project Cost

Following requirements have been identified for operations of the proposed business:

Table 2: Capital Investment for the Project

Capital Investment Amount (Rs.)

Furniture 50,000

Delivery Vehicles02 Nos. (Used) 700,000

Office Equipment 82,000

Total Capital Costs 832,000

Working Capital 1,338,200

Total Project Cost 2,170,200

Space Requirement

Space required for Distribution Agency is 2,000 Sq. ft. where 200 Sq. ft. will be used for

Management Office and 1,800 Sq. ft. will be used as Godown.

Table 3: Space Requirement

Table 4: Office Equipment & Furniture Costs


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Working Capital Requirements:It is estimated that an additional amount of approximately Rs.

688,200 will be required as cash in hand to meet the initial working capital requirements during

operations. The requirement is based on the utilities, salaries, fuel, office rent, insurance

expense, maintenance and miscellaneous expense for at least three months. The following

table gives the break up.

Table 7Working Capital Requirement

KEY ASSUMPTIONS

Sales Volume Increase 5% Sales Price Increase 10%

Increase in Cost of Sales 10 % Increase in Staff Salaries 10 % per year Increase in Utilities 10 % per year Increase in Rent 10 % per year Increase in Office Expenses 10 % per year Debt / Equity Ratio 54 : 46 Depreciation: Premises Renovation 10 % per annum (Diminishing Balance) Furniture 10 % per annum (Diminishing Balance) Loa Period 8 Years, inclusive of 1 year grace period Loan Installments Monthly Financial Charges (Lease Rate) 8 % per annum Bad Debts 3% of Sales

Documents

Loan Proposal Final