Assignment

On
Business Plan on Paper Bag

MBA – II Section - A
Subject: New Business Development
Prepared By:
No. Name Roll No.
1 Dave Bhavesh G. 22
2 Kalathiya Ajay K. 39
3 Maniya Dilip B. 50

Submitted To:
Mr. Jaydeep Chaudhry
INDEX

SR No. PARTICULAR PAGE NO.

1 Executive summery
2 Business plan at a glance
3 Management setup
4 Vision
5 Mission
6 Justification of location
7 Raw materials
8 Machines
9 Product details
10 Market potential
11 Manufacturing process
12 Organization structure
13 SW OT analysis
14 Production capacity schedule
15 Staff and labour
16 Total fixed assets
17 Cost of production
18 W orking capital
19 Sources of finance
20 Interest of capital
21 Depreciation
22 Fixed and variable cost
23 Cost of capital
24 Break even analysis
25 Profitability analysis
26 Conclusion
1. EXECUTIVE SUMMARY

A business plan is an essential tool for anyone trying to obtain fundingfor an innovative project,
regardless of the type of funding, be it a grantapplication, approaching a bank for a loan, getting
in contact with a ventur ecapitalist.

The business plan should be well developed as this will be your wayof presenting the current
state of our company and detailed strategy of howyou plan to carry out your project. The
business plan will need to conveythe strength of your idea and how it can be implemented
successfully.

In this business plan to use totally eco-friendly papers. To make theproduct popular in every
place of Gujarat and gradually cover all nearbystates. To make the firm a medium scale industry
and then a large scale. Ifpossible I would expor t my product, as they are highly in demand in
foreigncountries. Let’s hope for the best and work hard to make all future planscome true.

W ith the expectation of high profitability it is assumed that it would bethe perfect product to be
manufactured in today’s environment. AFTER ALLIT’S AN ENVIRONMENTAL FRIENDLY
PRODUCT! !! Its Save-“E” paperbags.

Today market of paper bags is expanding; demand for the product isincreasing day by day. The
return on this business is also satisfactory.
2. . BUSINESS PLAN AT A GLANCE

Name of the Unit Paper Bags

Registered Office Plot No. 228, GIDC,Lodhika,

Kalawad Road,

Metoda,

Rajkot-360 005
Location of the Unit Plot No. 228, GIDC,

Lodhika,

Kalawad Road,

Metoda,

Rajkot-360 005.

Form of Organization Partnership firm

Name of Owner Dave Bhavesh

Kalathiya Ajay

Maniya Dilip
Name of Product Paper Bags
Size of the Unit Small Scale
SSI Registration Number Applied for
Subsidy Registration No Applied for
Cost of Project Rs. 40,00,000
Means of Finance SIDBI,

HDFC

Rs. 10, 00, 000 by each Partner

3. . MANAGEMENT SETUP

Partner’s Backgorund

1. Name Dave Bhavesh G.

Age 22 Years
Address At Varachha Area,
Surat.
Academic Qualification MBA (Finance)
Role in the Unit Finance
Financial Contribution Rs. 10, 00, 000.00

2. Name Ajay Kalathiya

Age 23 Years
Address At Katargam Area,
Surat.
Academic Qualification MBA (Marketing)
Role in the Unit Marketing
Financial Contribution Rs. 10, 00, 000.00

3. Name Dilip Maniya

Age 22 Years
Address At, Varachha Area,
Surat.
Academic Qualification MBA (Production)
Role in the Unit Production
Financial Contribution Rs. 10, 00, 000.00
ORGANIZATION STRUCTURE

The organization is establishing of effective authority relationship among selected works,

persons and work places in order for the group to work together efficiently. Organization is a
basic activity of any business firm.

owner

Production Personnel Marketing Finance

Manager Manager Salesman Accountant

Workers
4. VISION OF THE COMPNAY

Vision is a picture of what a firm want to be in broad terms what it come to altimetry achieve it
is what ultimately the firm or person would like to become. Therefore vision statement articulate
the ideal description of origination give shape to it interrelated future

“Vision is a description of something (an organization, corporate culture, a business, a

technology) in the future

“Following vision of paper bags

 To become a proactive, integral and responsible member of our environment and

community, making us a strong global supply base for world class products.
 To use totally eco friendly papers, which are made not from tree.
 To make the product popular in every place of Gujarat and gradually cover all nearby
states.
 To offer continuous value added product to our customer.
 To make the firm a medium scale industry and then a large scale.
 If possible, I would export my product, as they are highly in demand in foreign
countries.
5. MISSION

Mission is what an organization is and why it exists. Organization relates their existence to
satisfying particular need of the society. They do this in term of their mission. Thus,
Organization finds a role for its self to pay in the society in by playing this role organization
meet the requirement of so city. The role organization play whether it is producing a product or
services that role describe by strategic mission.

“Mission is a statement which defines the role that an organization plays in a society “

The Eco friendly paper bags manufacturing industry is poised for a higher growth with a bright
future.

To constantly grow the customers by designing superior and cost effective product through
contribution of ideas.

Now a day’s paper bags have become the way of the modern world. It is eco-friendly and
attractive as well. Paper bags are proffered more today because it makes a style statement and
adds to your appearance.

Due to the increasing awareness of the hazards of plastic bags to the environment among the
public and the ban imposed on plastic bags throughout India and abroad by the government,
there is a great demand for eco-friendly paper bags.

We prepared plan of own eco- friendly paper bags manufacturing unit at nominal investment,
and to provide employment opportunity to decrease unemployment in the country, to earn profit
and save the environment in our own respective way.
GENERAL INFORMATION

6. JUSTIFICATION OF LOCATION

Location plays an important role in starting industry. Before starting any industry entrepreneurs
have to take a decision about the location of industry. They have to select that location where all
the facilities must be available. They have to take right decision about the selection of location
because once a location selected it cannot be changed in the near future. The following should be
taken into consideration.

1. Availability of market
2. Availability of Labour
3. Availability of transport
4. Availability of Power & water.

Thus, all the above factors justify the selection of the location. So, the selection would definitely
contribute to the profitability. Metoda METODA Highway G.I.D.C Mani Dwip
Temple“SAV – EPaper bags”AtulMarblesPvt Ltd.

Map
PRODUCT DETAILS

PRODUCT

The people regularly use paper bag now a days. If we go to the shopping center & purchase
some goods the shopkeeper gives the good in the paper bag. The option is also to use a polythine
or plastic bag but they are harmful to use because we can produce the plastic bag but we can not
destroyed it.

PRODUCT’S FEATURS

There are many features of paper bag are as follows. .

1. It is very economical. :- Paper bags are very economic in nature. It is cheaply available in
the market.
2. It is eco-friendly in nature. : - It is very easy to produce a paper bags and we can also
easily destroyed it. So, it is less harmful to nature as compare to plastic bags.

PRODUCT’S USES

Paper bags are common packing material being used by bakers and confectioners, grocers, textile
and cloth merchant, dry cleaner, sweet shopkeeper etc. Due to lower price, paper bags be used
even by hawkers and vendors on the footpath for packing fruits and vegetables etc.

BRAND NAME

Brand also plays an important role in marketing. Good brand has to face less competition in the
increasing market.

MARKET POTENTIAL

Just consider the sheer size of the existing market for plastic carry bags. It amounts to 600 billion
bags. Many governments today are increasingly becoming environment-sensitive and at least
project themselves to be so. Big business too wants to be seen as eco-friendly. Several local
government bodies such as city municipal corporations and town-planning bodies have banned
usage of plastic bags. In fact in all hill stations in India, the use of plastic bags has been banned.
Also Before some time people are using plastic bags. But now a day’s people are realize that
plastic bags are harmful to the nature. Because we can produce plastic bags but we cannot
destroy it. So, now a day people are moving toward to use a paper bags rather than plastic bags.
So it is highly demanded and profitable product. The introduction of shopping complexes &
consumer stores in the semi-urban & rural areas are creating additional demand for paper bags,
paper bags manufacturer, therefore, may be taken up as a profitable manufacturing activity in
selected areas.
Paper bags can be used for

 Carrying household articles

 Garments, toys
 Stationary items
 Foods & vegetables
 Medicines
 Cosmetic items etc.

The introduction of shopping complexes & consumer stores in the semi-urban & rural areas are
creating additional demand for paper bags, paper bags manufacturer, therefore, may be taken up
as a profitable manufacturing activity in selected areas.

Before some time people are using plastic bags. But now a day’s people are realize that plastic
bags are harmful to the nature. Because we can produce plastic bags but we cannot destroy it. So,
now a day people are moving toward to use a paper bags rather than plastic bags. So it is highly
demanded and profitable product.

RAW MATERIALS

The raw material is the base for the production. The required raw material is paper in roll, gum,
printing ink, string and misc. chemicals.

The raw material of this unit is easily obtained from the market and from the paper mills. The
raw materials required in this unit are:

 Paper in roll
 Gum
 Printing ink
 Misc. chemical
 String

MACHINES

 Automatic paper bag machine - 3 Nos.

 Stereo Press - 2 Nos.
 Stereo Grinder - 2 Nos.
 Roll Slitter motorized with 2 HP packing machine - 2 Nos.
 Testing equipment - 1 no.
 Punching Machine - 1 No.
MANUFACTURING PROCESS

Raw Material (Paper Roll)

Cutting through Automatic Machine

Stereo pressing with the help of gum & chemical Grinding

Printing through ink

Punching

Packing

Testing

MANUFACTURING PROCESS IN DETAIL

The required raw material is in the form of roll, the cutting of roll is done through the automatic
paper bag machine according to the size, and then pressing of required size is done through
stereo pressing machine with the help of gum & chemical. Then side grinding of paper bag is
done. Then the process of printing is done and after that punching is done and after this string is
tied in these holes and at last they are tested for bursting pressure and packing is done.

PRODUCTION CAPACITY SCHEDULE

Production Capacity 1,06,20,000 Units

No. of Working Days in a month 25
No. of Working Days in a Year 300
No. of Shifts per day 1
No. of Working hours per shift 8
Production Capacity per month 8,85,000 Units
STAFF & LABOUR

No. Staff & Labour No.

1 Factory Staff
Skilled 4
Unskilled 6
2 Technical Supervisor 1
3 Clerk cum typist 1
4 Accountant 1
5 Peon cum Watchman 1
6 Salesman 2
7 Manager 1
SWOT ANALYSIS

Every existing firm has their own strength, weakness, opportunities and threat. There four
aspects have their importance in each and every existing business. It is possible that strength of
one unit may be weakness for another and opportunity for one becomes threat for another. As
every company, PAPER BAGS also have their own strength, weakness, opportunity and threats.

STRENGTHS

 It is eco-friendly in nature.
 Lower price
 Fewer competitors
 Quality of product.
 Use of modern technology.
 Current fashion trend

WEAKNESSES

 Plant capacity
 It is not useful in
 Monsoon season
 Less advertising effort

OPPORTUNITIES

 Increasing awareness of hazards of plastic

 Ban imposed on plastic bags in many states
 It is opportunity to in a normal market purchase comes with a packaging and a bag Form
a stall on the road to superstore in big malls, everywhere bags are provided.
 This is something which will never end packaging and visibility provides companies the
added advantage.

THREATS

 Government policies
 Introduce new product
 Similar to plastic bags.
 Increase raw material price.
COST OF PRODUCTION

Raw Material

Particulars Rate/kg. Req/day Req.per month Req.per year

Paper in roll 10 2,950 73,750 8,85,000
Total (Rs.) 29,500 7,37,500 88,50,000
Gum 8 35 875 10,500
Total (Rs.) 280 7,000 84,000
Printing Ink 65 20 500 6,000
Total (Rs.) 1,300 32,500 3,90,000
Misc. Chemical 4 40 1,000 12,000
Total (Rs.) 160 4,000 48,000
String 7 50 1,250 15,000
Total (Rs.) 350 8,750 1,05,000
Net Total 7,89,750 94,77,000

Staff & Labour

Particulars No. Rate P.M. P. A.

Factory Staff
Skilled 4 2,000 8,000 96,000
Unskilled 6 1,800 10,800 1,29,600
Technical 1 5,000 5,000 60,000
Supervisor
Salesman 2 3,000 6,000 72,000
Manager 1 7,000 7,000 84,000
Clerk cum typist 1 2,500 2,500 30,000
Accountant 1 3,500 3,500 42,000
Peon cum W 1 2,000 2,000 24,000
atchman
Total 44,800 5,37,600
OTHER EXPENSES & UTILITIES

Sr. Particulars P.M. P. A.

1. Electricity 17,000 2,04,000
2. Water Charges 1,500 18,000
3. Postage & Telegram 2,000 24,000
4. Stationery 1,200 14,400
5. Repairs 2,000 24,000
6. Telephone Expense 1,800 21,600
7. Transport
Inward 2,000 24,000
outward 2,000 24,000
8. Packing 3,000 36,000
9. Miscellaneous Exp 2,000 24,000
10. Audit Fees 21,500
11. Professional Tax 1,000
12. Legal Fees 15,000
13. Insurance 1,02,000
14. Selling Exp 16,750 2,01,000
Total 51,250 7,55,000

Sr. Particulars P.M. P. A.

1. Raw Material 7,89,750 94,77,000
2. Staff & Labour 44,800 5,37,600
3. Other Expenses 51,250 7,55,000
Total 8,85,800 1,07,69,600
 TOTAL WORKING CAPITAL REQUIREMENT

Working capital is very important for every business unit; either it might be small
scale or large scale. Working capital is capital which is invested for daily use of the firm.
Mainly working capital is used for salary purpose, rent, and repair work & for paying off
allowances.

Sr. Particulars P.M. P. A.

1. Raw Material 7,89,750 94,77,000
2. Staff & Labour 44,800 5,37,600
3. Other Expenses 51,250 7,55,000
Total 8,85,800 1,07,69,600

 TOTAL PROJECT FUND

Sr. Particulars Amount

1. Fixed Cost 43,65,000
2. W orking Capital (2 months) 16,75,550
Total 60,40,550

 SOURCES OF FINANCE

Sr. Particulars Rate Amount

1. Own Capital(40%) 30,00,050
2. Borrowed Capital (60%)
HDFC 12% 22,50,000
SIDBI 10% 22,50,000
Total 75,00,000

 INTEREST ON CAPITAL

Sr. Particulars Rate Amount

1. Own Capital(40%) 8% 2,40,000
2. Borrowed Capital (60%)
HDFC 12% 2,70,000
SIDBI 10% 2,25,000
Total 7,35,000
 DEPRECI ATION

Sr. Particulars Value Amount

1. Building (10%) 4,50,000 49,500
2. Plant & Machinery (25%) 30,80,000 7,70,000
3. Other Fixed Assets (15%) 3,10,000 46,500
4. Computer (40%) 40,000 16,000
Total 8,82,000

 ANNUAL COST OF PRODUCTION

Sr. Particulars Amount

1. Raw Material 94,77,000
2. Recurring Expenses 12,92,600
3. Depreciation 8,82,000
4. Interest on Investment 7,35,000
Total 1,23,86,600

 SALES FORECAST (NEXT 5 YEAR)

Year Units per Annum Rate per Unit Amount (Rs.)

1 1,04,50,000 1.25 1,30,62,500
2 1,18,40,000 1.25 1,48,00,000
3 1,39,50,000 1.25 1,74,37,500
4 1,42,00,000 1.50 2,13,00,000
5 1,45,50,000 1.50 2,18,25,000

 SCHEDULE OF FIXED & V ARI ABLE COST

Particulars Variable cost Fixed cost

Amount Amount
Depreciation -- 8,82,000
Int. on capital -- 7,35,000
Salary 3,22,560 2,15,000
Other expenses 4,53,000 3,02,000
Raw Materials 94,77,000 --
TOTAL 1,02,52,560 21,34,000
Fixed cost/unit = Total Fixed Cost/Total no. of units

= 21, 34,040/1, 06, 20,000

= 0.20 ps. /unit

Variable cost/unit = Total Variable Cost/ Total no. of units

= 1,02,52,560/1,06,20,000

= 0.96ps. /unit

Contribution/unit = S.P./unit -V.C./unit

= 1.25 -0.96

= 0.29 ps. /unit

 BREAK EVEN ANALYSIS

Break-even point is that point of achieving, where total revenue and total
expenses are equal. It is the point of zero profit. If the sales exceed BEP the business will
earn profit and if it decreases from BEP the business will incur loss. Thus, BEP may take,
as the minimum level of production and sales and company must attain in order to be
economically viable.

B.E.P. (%) = {Fixed Cost / (Fixed Cost + Profit)} * 75

= 21, 34,040/ (21, 34,040 + 12, 09,900) * 75

= 47.86%

B.E.P. (units) = Fixed Cost/ (Contribution/unit)

= 21, 34,040/0.29

= 73, 58,759 Bags

B.E.P. (Rs.) = B.E.P. * S.P./unit

= 73, 58,759 * 1.25

= Rs.91, 98,449

P. V. Ratio= Contribution per unit / Sales *100

= 0.29 / 1.25 * 100

= 23.2%

Gross Profit Ratio= Profit (EBIT) / Sales * 100

= 31,10,100/ 1,28,61,500 * 100

= 4.18%

Net Profit Ratio = Profit after Tax / Sales * 100

= 4, 44,770 /1,28,61,500 * 100

= 3.46 %
 Fixed Assets Ratio = Fixed Assets/ Sales * 100

= 43, 65,000/1, 28, 61,500 * 100

= 33.94% 26

 PROFITABILITY ANALYSIS

Particulars Amount
Sales 1,28,61,500

Less: Cost of Production 1,61,51,600

E.B.I.T. 12,09,900

Less: Interest on Capital 7,35,000

E.B.T. 4,74,900

Less: Tax 88,970

Net Profit after tax 3,85,930
  CONCLUSION

In the product project report on paper bags I have discussed all financial data and
other relevant information.

The market of paper bags is expanding; demand for the product is increasing day
by day. The return on this business is also satisfactory.

With the expectation of high profitability it is assumed that it would bethe perfect
product to be manufactured in today’s environment. AFTER ALL, IT’S AN
ENVIRONMENTAL FRIENDLY PRODUCT! !!

Its Save-“E” paper bags. At last it can be said that future of this product is very
bright.
LOAN REPAYMENT SCHEDULE

IDFC bank

Year Openingbalance Installment Closingbalance Interest

1 22,50,000 2,25,000 20,25,000 2,70,000
2 20,25,000 2,25,000 18,00,000 2,43,000
3 18,00,000 2,25,000 15,75,000 2,16,000
4 15,75,000 2,25,000 13,50,000 1,89,000
5 13,50,000 2,25,000 11,25,000 1,62,000
6 11,25,000 2,25,000 9,00,000 1,35,000
7 9,00,000 2,25,000 6,75,000 1,08,000
8 6,75,000 2,25,000 4,50,000 81,000
9 4,50,000 2,25,000 2,25,000 54,000
10 2,25,000 2,25,000 0 27,000

SHRINATHJI INVESTMENTS

Year Opening balance Installment Closing balance Interest

1 22,50,000 1,50,000 21,00,000 2,25,000
2 21,00,000 1,50,000 19,50,000 2,10,000
3 19,50,000 1,50,000 18,00,000 1,,000
4 18,00,000 1,50,000 16,50,000 1,80,000
5 16,50,000 1,50,000 15,00,000 1,65,000
6 15,00,000 1,50,000 13,50,000 1,50,000
7 13,50,000 1,50,000 12,00,000 1,35,000
8 12,00,000 1,50,000 10,50,000 1,20,000
9 10,50,000 1,50,000 9,00,000 1,05,000
10 9,00,000 1,50,000 7,50,000 90,000
11 7,50,000 1,50,000 6,00,000 75,000
12 6,00,000 1,50,000 4,50,000 60,000
13 4,50,000 1,50,000 3,00,000 45,000
14 3,00,000 1,50,000 1,50,000 30,000
15 1,50,000 1,50,000 0 15,000