Kamyab Jawan

Youth Entrepreneurship Scheme

Pre-Feasibility Study
Beauty Salon

Small and Medium Enterprises Development Authority

Ministry of Industries & Production
Government of Pakistan
www.smeda.ork.pk

HEAD OFFICE
4th Floor, Building No. 3, Aiwan-e-Iqbal Complex, Egerton Road,
Lahore
Tel: (92 42) 111 111 456, Fax: (92 42) 36304926-7
helpdesk@smeda.org.pk

REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE

Punjab Sindh Khyber Pakhtunkhwa Balochistan
3rd Floor, Building No. 3, 5th Floor, Bahria Ground Floor Bungalow No. 15-A
Aiwan-e-Iqbal Complex, Complex II, M.T. Khan Road, State Life Building Chaman Housing Scheme
Egerton Road Lahore, Karachi. The Mall, Peshawar. Airport Road, Quetta.
Tel: (042) 111-111-456 Tel: (021) 111-111-456 Tel: (091) 111-111-456 Tel: (081) 2831623, 2831702
Fax: (042) 36304926-7 Fax: (021) 35610572 Fax: (091) 5286908 Fax: (081) 2831922
helpdesk.punjab@smeda.org.pk helpdesk-khi@smeda.org.pk helpdesk-pew@smeda.org.pk helpdesk-qta@smeda.org.pk
Pre-feasibility Study Beauty Salon

TABLE OF CONTENTS
1 DISCLAIMER........................................................................................................................................... 2
2 PURPOSE OF THE DOCUMENT......................................................................................................... 3
3 INTRODUCTION TO SMEDA .............................................................................................................. 3
4 INTRODUCTION TO SCHEME ........................................................................................................... 4
5 EXECUTIVE SUMMARY ....................................................................................................................... 4
6 BRIEF DESCRITION OF THE PROJECT & PRODUCT .................................................................. 5
7 CRITICAL FACTORS ............................................................................................................................. 5
8 INSTALLED & OPERATIONAL CAPACITIES ................................................................................. 6
9 POTENTIAL TARGET MARKET / CITIES ....................................................................................... 7
10 PROJECT COST SUMMARY................................................................................................................. 7
10.1 PROJECT ECONOMICS ..................................................................................................................... 7
10.2 PROJECT FINANCING ...................................................................................................................... 8
10.3 PROJECT COST ................................................................................................................................ 8
10.4 SPACE REQUIREMENT .................................................................................................................... 8
10.5 MACHINERY AND EQUIPMENT REQUIREMENT ............................................................................ 9
10.6 FURNITURE, FIXTURES AND INTERIOR DECORATION .............................................................. 10
10.7 OFFICE EQUIPMENT .................................................................................................................... 11
10.8 RAW MATERIAL REQUIREMENTS .............................................................................................. 11
10.9 HUMAN RESOURCE REQUIREMENT ........................................................................................... 12
10.10 REVENUE GENERATION .............................................................................................................. 13
10.11 RAW MATERIAL COST CALCULATION ....................................................................................... 13
10.12 OTHER COSTS .............................................................................................................................. 14
11 CONTACT DETAILS OF EXPERTS & CONSULTANTS .............................................................. 15
12 ANNEXURES ........................................................................................................................................ 16
12.1 INCOME STATEMENT .................................................................................................................. 16
12.2 BALANCE SHEET .......................................................................................................................... 17
12.3 CASH FLOW STATEMENT ............................................................................................................ 18
12.4 USEFUL PROJECT MANAGEMENT TIPS ...................................................................................... 19
12.5 USEFUL LINKS ............................................................................................................................. 20
13 KEY ASSUMPTIONS........................................................................................................................... 21
Pre-feasibility Study Beauty Salon

1 DISCLAIMER
This information memorandum is to introduce the subject matter and provide a
general idea and information on the subject. Although, the material included in
this document is based on data / information gathered from various reliable
sources; however, it is based upon certain assumptions which may differ from
case to case. The information has been provided on ‘as is where is’ basis without
any warranties or assertions as to the correctness or soundness thereof.
Although, due care and diligence has been taken to compile this document, the
contained information may vary due to any change in any of the concerned
factors, and the actual results may differ substantially from the presented
information. SMEDA, its employees or agents do not assume any liability for any
financial or other loss resulting from this memorandum in consequence of
undertaking this activity. The contained information does not preclude any further
professional advice. The prospective user of this memorandum is encouraged to
carry out additional diligence and gather any information which is necessary for
making an informed decision; including taking professional advice from a
qualified consultant / technical expert before taking any decision to act upon the
information.
In case the document is intended to be used for loan application under any
specified loan scheme, respective scheme parameters are to be incorporated
accordingly. In doing so, financial results may vary from results shown in this
document.
For more information on services offered by SMEDA, please contact our website:
www.smeda.org.pk

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2 PURPOSE OF THE DOCUMENT

The objective of the pre-feasibility study is primarily to facilitate potential
entrepreneurs in project identification for investment. The project pre-feasibility
may form the basis of an important investment decision and in order to serve this
objective, the document / study covers various aspects of project concept
development, start-up, production, marketing, finance and business
management.
The purpose of this document is to facilitate potential investors in Beauty Salon
Business by providing them a general understanding of the business with the
intention of supporting potential investors in crucial investment decisions.
The need to come up with pre-feasibility reports for undocumented or minimally
documented sectors attains greater imminence as the research that precedes
such reports reveal certain thumb rules; best practices developed by existing
enterprises by trial and error, and certain industrial norms that become a guiding
source regarding various aspects of business set-up and it’s successful
management.
Apart from carefully studying the whole document one must consider critical
aspects provided later on, which form the basis of any investment decision.

3 INTRODUCTION TO SMEDA
The Small and Medium Enterprises Development Authority (SMEDA) was
established in October 1998 with an objective to provide fresh impetus to the
economy through development of Small and Medium Enterprises (SMEs).
With a mission "to assist in employment generation and value addition to the
national income, through development of the SME sector, by helping increase
the number, scale and competitiveness of SMEs" , SMEDA has carried out
‘sectoral research’ to identify policy, access to finance, business development
services, strategic initiatives and institutional collaboration and networking
initiatives.
Preparation and dissemination of prefeasibility studies in key areas of investment
has been a hallmark of SME facilitation by SMEDA.
Concurrent to the prefeasibility studies, a broad spectrum of business
development services is also offered to the SMEs by SMEDA. These services
include identification of experts and consultants and delivery of need based

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capacity building programs of different types in addition to business guidance

through help desk services.

4 INTRODUCTION TO SCHEME
Prime Minister’s ‘Kamyab Jawan – Youth Entrepreneurship Scheme’, for young
entrepreneurs between the age group of 21 - 45 years, is designed to provide
subsidized financing through the National Bank of Pakistan, Bank of Punjab and
Bank of Khyber under the guidance and supervision of the State Bank of
Pakistan.
The loans will be disbursed to SME beneficiaries across Pakistan, covering;
Punjab, Sindh, Khyber Pakhtunkhwa, Balochistan, Gilgit Baltistan and Azad
Jammu & Kashmir. The Program aims to provide 25% of the loans to women
entrepreneurs.
Loans provided through Kamyab Jawan Program are segregated in two tiers:
Tier 1 loans fall in the range of Rs. 100,000 to Rs. 500,000, with Debt:Equity
90:10 and 6% markup to borrower, and, Tier 2 loans are from Rs. 500,000 to Rs.
5 Million, with Debt:Equity 80:20 and 8% markup to borrower. Both loans are for
a period of upto 8 years with a grace period of 1 year.
Application forms are available both in branches and dedicated websites of
National Bank of Pakistan, Bank of Punjab and Bank of Khyber.

5 EXECUTIVE SUMMARY
This particular pre-feasibility is for establishing a “Beauty Salon”. The important
aspects that should be taken into account while making investment decisions are
efficient marketing, induction of qualified beauticians and provision of quality
services at reasonable prices.
The total project cost is Rs. 2.79 million out of which Rs. 2.12 million is the capital
cost and Rs. 0.67 million for working capital. The debt and equity ratio is 80%
and 20%. The project NPV is around Rs. 9.22 million, with an IRR of 43%, and
payback period of 3.09 years.
The project is proposed to be set up in a suitable locality of any of the urban
centers of Pakistan. The proposed venture will provide direct employment to 05
individuals in year 1, however, Junior Stylist and Trainee Beautician will be hired
as the clients increases in later years. The total capacity of the salon will be to
handle 2,124 clients in year 1. It is assumed in this Pre-feasibility study that the
clients will be increased at the rate 10% each year. The services to be extended

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by the beauty salon shall include a wide range of face and body treatments
including make-up, manicures / pedicures and hairdressing services.
The proposed potential location for the project is in urban cities across Pakistan
such as Lahore, Karachi, Islamabad, Quetta, Multan, Peshawar and other cities.

6 BRIEF DESCRITION OF THE PROJECT & PRODUCT

This specific project pertains to setting up a beauty salon as there is an
increasing demand for beauty care services. The salon will be established in a
rented premise having a covered area of 900 sq ft.
Party and bridal makeup, facial, body treatment and hairdressing are the major
service categories. The range of services mainly entails the following;
Table 1: Details of Services Offered
Types of Services Particulars of Services
Application of body scrubs, face
masks and body masks
Massaging
Body treatment Manicure – hands washing &
massaging
Pedicure – feet washing & massaging

Nail extension and extrusion

Facial
Bleaching of body hair
Waxing of body hair
Beauty treatment
Makeup (bridal and party)
Threading of body hair
Skin consultations
Hair cut
Hair dressing
Hair treatment
Hair coloring
Hair streaking
The salon will have 5 employees including the owner / manager. The beauty
salon is proposed to operate as a “Sole Proprietorship”.

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7 CRITICAL FACTORS
 The entrepreneur should have basic knowledge and experience in the
requisite field.
 Efficient sourcing of quality inputs / materials to maintain price and quality
relationship.
 Induction of qualified beauticians and support staff and their regular training.
 Effective marketing would be the key element in the initial and subsequent
success of the beauty salon.
 Location of the business addressing accessibility considerations of the target
market.

8 INSTALLED & OPERATIONAL CAPACITIES

The project will engage 05 permanent staff including owner / manager and 03
beauticians providing beauty care services. The salon will function 8 hours daily
and the total capacity of the beauty salon will be to entertain 2,124 customers
annually. This capacity is assumed for year 1, whereas 10% increase in clients is
expected in subsequent years.
Table 2: Operational Capacity Year 1
No. of Clients No. of Clients Per
Description of Service
Per Month Year
Facial 18 216
Waxing and Threading (Face and Body) 18 216
Bridal Make Ups 2 24
Party Make Ups 16 192
Manicure / Pedicure 22 264
Body Treatments (Body Scrubs, Body
15 180
Mask and Massaging)
Hair Cuts 15 180
Hair Dying (Half and Full) 15 180
Hair Styling (Straitening, Rebounding,
12 144
Curling and etc)
Hair Highlights 18 216
Blow Dry 18 216
Acrylic Nails / Nail Art 8 96
Total 177 2,124

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9 POTENTIAL TARGET MARKET / CITIES

The said project can be started in any suitable area of urban centres because of
the changing lifestyle of people across Pakistan.

10 PROJECT COST SUMMARY

A detailed financial model has been developed to analyze the commercial
viability of the project under the Prime Minister’s ‘Kamyab Jawan – Youth
Entrepreneurship Scheme’. 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 annexures.

10.1 Project Economics

All the figures in this financial model have been calculated for a target of handling
2,124 clients in year 1 with 10% increase in subsequent years. The project
economics are based on the portfolio of services offered to clients as mentioned
in Table 2 above.
The following table shows internal rate of return, payback period and net present
value.
Table 3: Project Economics
Description Details

Internal Rate of Return (IRR) 43%

Payback Period (Years) 3.09

Net Present Value (NPV) Rs. 9,227,524

Returns on the scheme are based on the services rendered to the clients and
estimated margin on consumed raw materials.

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10.2 Project Financing

Following table provides details of the equity required and variables related to
bank loan;
Table 4: Project Finance
Description Details
Total Equity (20%) Rs. 557,282
Bank Loan (80%.) Rs. 2,229,126
Markup to the Borrower (%age/annum) 8%
Tenure of the Loan (Years) 8
Grace Period (Year) 1

10.3 Project Cost

Following requirements have been identified for operations of the proposed
business.
Table 5: Capital Invetsment for the Project
Capital Investment Amount Rs.
Machinery and Equipment 527,000
Furniture and Fixtures 1,374,200
Office Equipment 145,000
Pre-operating Costs 75,000
Total Capital Cost 2,121,200
Working Capital
Raw Material Inventory 147,780
Upfront Building Rent* 150,000
Cash 367,428
Total Working Capital 665,208
Total Investment 2,786,408

*3 months advance rent @ Rs. 50,000 per month

10.4 Space Requirement

Approximately 900 square feet covered area is required for the proposed Beauty
Salon. The covered area includes following sections:

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Main Sections
Hair Dressing Area
Manicure/Pedicure Area
Makeup Area
Massage Area
Facial Area
Threading/Polishing Area
Waiting Area
Reception
Store
Office
Wash Rooms

It is recommended to take a house or commercial space on rent to start this

project. Starting the beauty salon in a rented building would significantly reduce
the initial capital cost of the project. The estimate rent of house or space of 900
sq. ft. area in an upper middle-class locality of large cities is assumed at Rs.
50,000 per month.

10.5 Machinery and Equipment Requirement

Following table provides the list of machinery and equipment required for the
proposed services of beauty salon.
Table 6: List of Machinery and Equipment
Sr. Unit Cost Total Cost
Description Quantity
No (Rs.) (Rs.)
1 Electric Facial Unit 3 60,000 180,000
2 Steamer for Hair 2 20,000 40,000
3 Pedicure Machine 2 30,000 60,000
Back Wash for Washing
4 2 30,000 60,000
Hair
5 Warmer for hot Wax/Cold 2 8,000 16,000

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Wax
6 Magnifying Glass 1 3,000 3,000
7 Hair Dryer 4 12,000 48,000
8 Hair Straightener 2 10,000 20,000
9 Accessories 1 100,000 100,000
Total 527,000

Machinery & Equipment can be purchased from local whole sale market.

10.6 Furniture, Fixtures and Interior Decoration

The major expenses of beauty salon mainly comprised of the furniture, fixtures
and interior decoration. The details of furniture, fixtures and interior decoration
requirement for the proposed venture are as follows:
Table 7: Furniture, Fixtures and Interior Decorations
Total
Sr. Quantity Cost/Rate
Description Amount
No / Area (Rs.)
(Rs.)
1 Beds (for Facial and Waxing) 4 50,000 200,000
Hair Dressing/Threading (Chair and
2 5 36,000 180,000
Mirror)
3 Make-up Chair 2 40,000 80,000
Chairs (for Waiting Area and
4 8 3,000 24,000
Manicure / Pedicure)
5 Waiting Area Sofa Set 1 35,000 35,000
6 Back Rack 100 100 10,000
7 Reception and Cash Counter 1 25,000 25,000
8 Display Counter 3 10,000 30,000
Main Door Renovation and Sign
9 1 15,000 15,000
Board
10 False Ceiling 760 70 53,200
11 Lighting 1 70,000 70,000
12 Mirrors 10 5,000 50,000
13 UPS and Batteries 1 35,000 35,000
14 Generator 1 130,000 130,000

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15 LED TV 2 25,000 50,000

16 Fans 8 4,500 36,000
17 Geyser (Instant) 1 11,000 11,000
18 Trollies 5 5,000 25,000
19 Towel Warmer 1 20,000 20,000
20 Sterilizer 1 20,000 20,000
21 Air conditioners (1.5 ton Split) 3 75,000 225,000
22 Miscellaneous 1 50,000 50,000
Total 1,374,200

10.7 Office Equipment

Following table provides the list of office equipment required for the proposed
project:
Table 8: Office Equipment
Sr. No Description Quantity Unit Cost (Rs.) Total (Rs.)
1 Laptop (Used) 1 40,000 40,000
2 Printer 1 20,000 20,000
3 Telephone Sets 2 2,500 5,000
4 Refrigerator 1 40,000 40,000
5 Microwave 1 15,000 15,000
6 Water Dispenser 1 15,000 15,000
7 Music System 1 10,000 10,000
Total 145,000

10.8 Raw Material Requirements

As mentioned above the proposed venture mainly provides the beauty and hair
treatment services to the women clients. A large number of cosmetics and other
beauty products are used in a beauty salon. A brief list of these products is
provided in the table below. For this project it is assumed that cost of beauty
products will be around 30% of the sales value.

Table 9: Raw Materials (Beauty Products)*

Beauty Products Used In

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Foundation, eye shadows, face powders,

Makeup – bridal &
lipsticks, lip pencils, blushers, hina (black, red),
party
eye lash extensions, and etc.
Manicure / pedicure,
Scrubs, Massage Creams/Oils, Polishers/Bleach
facial, Polisher, body
Creams, Masks, Cleansers, etc.
scrubs/massage
Hot wax and Cold Wax Waxing
Hair dyes, cutting scissors, combs, brushes,
Hair coloring, cutting/
rollers, clips, foil papers, hair caps, hair
styling
extensions, etc
Manicure/pedicure kits, nail paints, nail
Manicure / pedicure
extensions, nail polish & remover, etc
* Beauty care products can be purchased from main suppliers or from the local
whole sale market.

10.9 Human Resource Requirement

The required HR for successfully operating the proposed project mainly includes:
Table 10: Human Resource Requirement
Salary per
No of
Sr. No Description Month /
Persons
Person (Rs.)
1 Owner/ Manager 1 35,000
2 Senior Beautician 1 40,000
3 Junior Beautician** 1 20,000
4 Trainee Beautician** 1 17,500
5 Guard 1 18,000
Total 5
** Junior and Trainee Beauticians will be further hired in later years as the clients
increases.
The Owner / Manager shall formulate the policies and take strategic decisions.
Whereas rest of the team shall be engaged in order to manage the operational
affairs of this project under the supervision of Manager. The appropriate
experience along with high level of skill set would be required for the key
professionals.

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10.10 Revenue Generation

Table 11: Sales Revenue estimated during First Year of Operations
Service
No. of Clients Revenue
Description of Service Charges
(Year 1) Year 1 (Rs.)
(Rs.)
Facial 216 1,800 388,800
Waxing and Threading (Face
216 2,800 604,800
and Body)
Bridal Make Ups 24 25,000 600,000
Party Make Ups 192 3,000 576,000
Manicure / Pedicure 264 1,500 396,000
Body Treatments (Body Scrubs,
180 3,000 540,000
Body Mask and Massaging)
Hair Cuts 180 1,000 180,000
Hair Dying (Half and Full) 180 1,500 270,000
Hair Styling (Straitening,
144 5,000 720,000
Rebounding, Curling and etc)
Hair Highlights 216 6,000 1,296,000
Blow Dry 216 350 75,600
Acrylic Nails / Nail Art 96 2,000 192,000
Total 2,124 5,839,200
The profitability of the project is highly dependent on quality of services and
extensive marketing and promotion of the project to attract the clients.

10.11 Raw Material Cost Calculation

Raw material cost during the first year of operation is calculated as under;
Table 12: Raw Material Cost during First Year of Operations
No. of Avg. Cost of Raw Material
Description of Service Clients Product / Cost Year 1
(Year 1) Client (Rs.) (Rs.)
Facial 216 325 70,200
Waxing and Threading (Face
216 800 172,800
and Body)
Bridal Make Ups 24 5,000 120,000
Party Make Ups 192 1,400 268,800
Manicure / Pedicure 264 400 105,600

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Body Treatments (Body Scrubs,

180 800 144,000
Body Mask and Massaging)
Hair Cuts 180 - -
Hair Dying (Half and Full) 180 750 135,000
Hair Styling (Straighting,
144 1,800 259,200
Rebounding, Curling and etc)
Hair Highlights 216 2,000 432,000
Blow Dry 216 60 12,960
Acrylic Nails / Nail Art 96 550 52,800
Total 2,124 1,773,360

10.12 Other Costs

This service-oriented project requires heavy marketing and promotion activities,
for which approximately 2.5% of total sales revenue (i.e. Rs. 145,980 in year 1)
will be consumed on marketing and promotion expenses annually. Similarly,
electricity expenses are estimated to be around Rs. 17,000 per month with an
annual increase of 10% in electricity price. Moreover, expenses on fuel of
generator and miscellaneous will also be the part of other related costs.

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11 CONTACT DETAILS OF EXPERTS & CONSULTANTS

Principal Qasr -e- Behbood School
M – Block, Model Town Extension, Lahore
042-99230852
Pakistan Hairdressers and Beauticians Association
22, Qazi Court, Bhadurabad Roundabout, Karachi
021-4559191
www.phaba.com.pk
All Pakistan Hair Dressers & Beautician Federation
16-F, Hameed Nizami (Temple Road), Saffa Wala Chowk, Lahore
042-36373183

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12 ANNEXURES

12.1 Income Statement

Calculations SMEDA
Income Statement

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Revenue 5,839,200 6,904,854 8,164,990 9,655,101 11,417,156 13,500,787 15,964,681 18,878,235 22,323,513 26,397,555
Cost of sales
Raw Material Cost 1,773,360 2,048,231 2,365,707 2,732,391 3,155,912 3,645,078 4,210,065 4,862,625 5,616,332 6,486,864
Operation costs 1 (direct labor) 930,000 1,069,500 1,825,050 2,098,808 2,413,629 2,775,673 3,192,024 3,670,827 4,221,452 6,437,714
Beauty Salon Renovation / Maintenance 145,980 172,621 204,125 241,378 285,429 337,520 399,117 471,956 558,088 659,939
Operating Cost Electricity 203,567 246,316 298,042 360,631 436,364 528,000 638,880 773,045 935,384 1,131,815
Operating Expenses Water 24,000 26,400 29,040 31,944 35,138 38,652 42,517 46,769 51,446 56,591
Operating Expenses Gas 12,000 13,200 14,520 15,972 17,569 19,326 21,259 23,385 25,723 28,295
Total cost of sales 3,088,907 3,576,268 4,736,484 5,481,123 6,344,040 7,344,249 8,503,862 9,848,607 11,408,425 14,801,217
Gross Profit 2,750,293 3,328,586 3,428,506 4,173,977 5,073,116 6,156,538 7,460,819 9,029,628 10,915,088 11,596,337

General administration & selling expenses

Administration expense 636,000 731,400 841,110 967,277 1,112,368 1,279,223 1,471,107 1,691,773 1,945,539 2,237,369
Administration benefits expense 95,400 109,710 126,167 145,091 166,855 191,883 220,666 253,766 291,831 335,605
Building rental expense 600,000 660,000 726,000 798,600 878,460 966,306 1,062,937 1,169,230 1,286,153 1,414,769
Pick and Drop Expense for Staff 240,000 264,000 290,400 319,440 351,384 386,522 425,175 467,692 514,461 565,907
Communications expense (phone, fax, mail, internet, etc.) 95,400 109,710 126,167 145,091 166,855 191,883 220,666 253,766 291,831 335,605
Office expenses (stationary, entertainment, janitorial services, etc.) 63,600 73,140 84,111 96,728 111,237 127,922 147,111 169,177 194,554 223,737
Promotional expense 145,980 172,621 204,125 241,378 285,429 337,520 399,117 471,956 558,088 659,939
Professional fees (legal, audit, consultants, etc.) 58,392 69,049 81,650 96,551 114,172 135,008 159,647 188,782 223,235 263,976
Depreciation expense 219,120 219,120 219,120 219,120 219,120 294,392 294,392 294,392 294,392 294,392
Subtotal 2,161,392 2,416,250 2,706,349 3,036,776 3,413,380 3,918,161 4,408,317 4,968,035 5,607,584 6,338,800
Operating Income 588,901 912,336 722,158 1,137,202 1,659,736 2,238,378 3,052,502 4,061,594 5,307,505 5,257,538

Gain / (loss) on sale of machinery & equipment - - - - 210,800 - - - -

Gain / (loss) on sale of office equipment - - - - 58,000 - - - -
Earnings Before Interest & Taxes 588,901 912,336 722,158 1,137,202 1,928,536 2,238,378 3,052,502 4,061,594 5,307,505 5,257,538

Interest expense on long term debt (Project Loan) 185,016 169,384 148,839 126,588 102,490 76,392 48,128 17,518 - -
Subtotal 185,016 169,384 148,839 126,588 102,490 76,392 48,128 17,518 - -
Earnings Before Tax 403,885 742,952 573,319 1,010,614 1,826,046 2,161,986 3,004,374 4,044,075 5,307,505 5,257,538

Tax 194 24,295 8,666 51,061 163,907 214,298 371,093 633,222 1,012,251 997,261
NET PROFIT/(LOSS) AFTER TAX 403,691 718,657 564,653 959,553 1,662,139 1,947,688 2,633,281 3,410,853 4,295,254 4,260,277

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12.2 Balance Sheet

Calculations SMEDA
Balance Sheet

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Assets
Current assets
Cash & Bank 367,428 974,803 1,598,627 2,026,417 2,798,542 4,211,782 5,910,351 8,200,902 11,151,891 15,272,044 22,071,749
Raw material inventory 147,780 196,289 260,721 346,302 459,976 610,963 811,511 1,077,890 1,431,707 1,901,665 -
Pre-paid building rent 150,000 165,000 181,500 199,650 219,615 241,577 265,734 292,308 321,538 353,692 -
Total Current Assets 665,208 1,336,092 2,040,847 2,572,370 3,478,133 5,064,322 6,987,597 9,571,099 12,905,137 17,527,402 22,071,749

Fixed assets
Machinery & equipment 527,000 474,300 421,600 368,900 316,200 936,100 816,140 696,180 576,220 456,260 336,300
Furniture & fixtures 1,374,200 1,236,780 1,099,360 961,940 824,520 687,100 549,680 412,260 274,840 137,420 -
Office equipment 145,000 116,000 87,000 58,000 29,000 185,061 148,049 111,036 74,024 37,012 -
Total Fixed Assets 2,046,200 1,827,080 1,607,960 1,388,840 1,169,720 1,808,261 1,513,869 1,219,477 925,085 630,692 336,300

Intangible assets
Total Intangible Assets 75,000 67,500 60,000 52,500 45,000 37,500 30,000 22,500 15,000 7,500 -
TOTAL ASSETS 2,786,408 3,230,672 3,708,807 4,013,710 4,692,853 6,910,083 8,531,466 10,813,076 13,845,221 18,165,594 22,408,049

Liabilities & Shareholders' Equity

Current liabilities
Accounts payable 40,574 47,592 55,926 65,853 77,715 91,942 109,067 129,764 154,884 137,062
Other liabilities
Total Current Liabilities - 40,574 47,592 55,926 65,853 77,715 91,942 109,067 129,764 154,884 137,062

Other liabilities
Long term debt (Project Loan) 2,229,126 2,229,126 1,981,587 1,713,502 1,423,166 1,108,732 768,201 399,405 - - -
Total Long Term Liabilities 2,229,126 2,229,126 1,981,587 1,713,502 1,423,166 1,108,732 768,201 399,405 - - -

Shareholders' equity
Paid-up capital 557,282 557,282 557,282 557,282 557,282 1,414,943 1,414,943 1,414,943 1,414,943 1,414,943 1,414,943
Retained earnings 403,691 1,122,347 1,687,000 2,646,553 4,308,692 6,256,380 8,889,661 12,300,514 16,595,768 20,856,044
Total Equity 557,282 960,972 1,679,629 2,244,282 3,203,834 5,723,635 7,671,323 10,304,604 13,715,457 18,010,710 22,270,987
TOTAL CAPITAL AND LIABILITIES 2,786,408 3,230,672 3,708,807 4,013,710 4,692,853 6,910,083 8,531,466 10,813,076 13,845,221 18,165,594 22,408,049

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Pre-feasibility Study Beauty Salon

12.3 Cash flow Statement

Calculations SMEDA
Cash Flow Statement

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Operating activities
Net profit 403,691 718,657 564,653 959,553 1,662,139 1,947,688 2,633,281 3,410,853 4,295,254 4,260,277
Add: depreciation expense 219,120 219,120 219,120 219,120 219,120 294,392 294,392 294,392 294,392 294,392
Raw material inventory (147,780) (48,509) (64,432) (85,582) (113,674) (150,987) (200,549) (266,379) (353,817) (469,958) 1,901,665
Pre-paid building rent (150,000) (15,000) (16,500) (18,150) (19,965) (21,962) (24,158) (26,573) (29,231) (32,154) 353,692
Accounts payable 40,574 7,018 8,334 9,927 11,863 14,226 17,125 20,697 25,119 (17,822)
Cash provided by operations (297,780) 607,375 871,363 695,876 1,062,461 1,727,674 2,039,100 2,659,346 3,350,394 4,120,153 6,799,704

Financing activities
Project Loan - principal repayment - (247,539) (268,085) (290,336) (314,434) (340,532) (368,795) (399,405) - -
Additions to Project Loan 2,229,126 - - - - - - - - - -
Issuance of shares 557,282 - - - - 857,661 - - - - -
Purchase of (treasury) shares
Cash provided by / (used for) financing activities 2,786,408 - (247,539) (268,085) (290,336) 543,228 (340,532) (368,795) (399,405) - -

Investing activities
Capital expenditure (2,121,200) - - - - (857,661) - - - - -
Acquisitions
Cash (used for) / provided by investing activities (2,121,200) - - - - (857,661) - - - - -

NET CASH 367,428 607,375 623,824 427,791 772,125 1,413,240 1,698,569 2,290,551 2,950,989 4,120,153 6,799,704

Small and Medium Enterprises Development (SMEDA) 18

Pre-feasibility Study Beauty Salon

12.4 Useful Project Management Tips

Marketing
 Ads & Point of Sales Promotion: Business promotion and dissemination
through banners and launch events is highly recommended.
 Price - Bulk Discounts, Cost plus Introductory Discounts: Price should
never be allowed to compromise quality of services. Price during introductory
phase may be lower and used as promotional tool. Product cost estimates
should be carefully documented before price setting.

Human Resources
 Adequacy & Competencies: Skilled and experienced beautician should be
considered an asset for the business.
 Performance Based Remuneration: Attempt to manage human resource
cost should be focused through performance measurement and performance
based compensation.
 Training & Skill Development: Encouraging training and skill of self &
employees through experts and exposure of best practices is the route to
success.

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Pre-feasibility Study Beauty Salon

12.5 Useful Links

 Prime Minister’s Office, www.pmo.gov.pk
 Prime Minister’s Kamyab Jawan Program, www.kamyabjawan.gov.pk
 Small and Medium Enterprise Development Authority, www.smeda.org.pk
 National Bank of Pakistan (NBP), www.nbp.com.pk
 Bank of Punjab (BoP), www.bop.com.pk
 Bank of Khyber (BoK), www.bok.com.pk
 Government of Pakistan, www.pakistan.gov.pk
 Ministry of Industries & Production, www.moip.gov.pk
 Ministry of Federal Education and Professional Training,
http://moent.gov.pk
 Government of Punjab, www.punjab.gov.pk
 Government of Sindh, www.sindh.gov.pk
 Government of Khyber Pakhtunkhwa, www.khyberpakhtunkhwa.gov.pk
 Government of Balochistan, www.balochistan.gov.pk
 Government of Gilgit Baltistan, www.gilgitbaltistan.gov.pk
 Government of Azad Jamu Kashmir, www.ajk.gov.pk
 Securities & Exchange Commission of Pakistan (SECP),
www.secp.gov.pk
 Federation of Pakistan Chambers of Commerce and Industry (FPCCI)
www.fpcci.org.pk
 State Bank of Pakistan (SBP), www.sbp.org.pk
 Technical Education & Vocational Training Authority (TEVTA),
www.tevta.gop.pk
 Punjab Vocational Training Council (PVTC), www.pvtc.gop.pk

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Pre-feasibility Study Beauty Salon

13 KEY ASSUMPTIONS
Table 12: Key Assumptions
Description Details
15% of Administrative
Employee Benefit Expense
Cost
Pick and Drop Expense of Employee Rs. 20,000 per month
Annual Renovation of Salon 2.5% of Revenue
15% of Administrative
Communication Expense
Cost
10% of Administrative
Office Expenses
Cost
Promotional Expenses 2.5% of Revenue
Raw Material Cost Growth Rate 5%
Sale Price Growth Rate 7.5%
Electricity and Fuel Price Growth Rate 10%
Depreciation Rate (Straight Line)
Machinery & Equipment, Furniture & Fixtures 10%
Office Equipment 20%
Hours Operational per Day (Days) 8

Small and Medium Enterprises Development Authority (SMEDA) 21