;

International Islamic University, Islamabad

Entrepreneurship Business Plan

Submitted to:

Prof. AMIR BASHIR

Submitted by:

ABDULLAH LATIF

Registration No. 8196-FMS/MBA/S19

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Entrepreneurship
Business Plan
For a new business
venture
“AB Leathers”

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 AB LEATHERS
RAWAT INDUSTRIAL AREA RAWALPINDI
Phone: 051 00000, Email: ableathers@gmail.com
WEBSITE: www.ABLEATHERS.com

INTRODUCTION

CEO

ABDULLAH LATIF.

Nature of the business:

It is manufacturing business of leather garments including jacket,

ladies hand bags, key chain, shoes, skirts, belts and wallet. We shall
purchase finished leather from different suppliers then make different
products mentioned above according to the customers demand. At early
stage of business we will focus on jacket, skirts and handbags, with the
passage of time we will expand our product line. In other words we have
defined wallet, belts and shoes as expansion of business.

Financing: Initial financing will be Rs.5million loan which will be paid in

20years. This finance will cover startup products and marketing

Confidential: This report is confidential & is the property of company listed

above. It is intended for use only by the person to whom it is transmitted, & any
reproduction of any of its content without the prior written consent of the company
is prohibited.
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Section I Executive summary:
The entrepreneurial venture we are going to practice is to step in, in the
leather business. This venture will help to stand up on our own feet. World leather
industry is huge and never ever going to be closed down although could face ups
and downs as the history of leather products is as old as human beings are, and
leather products are need more than a want of us, so the scope of leather products
could never die although it might face difficulties, which is the part of business

Pakistan is always considered as important contributor of this ground since after

its independence, Leather industries contribution towards exports is always
essential part of the exports share, but importantly for last 9 years there is marginal
contribution in exports. This may have some certain reasons important are the
intense competition, new players like Bangladesh, China, Turkey’s strong position
gained in last decade. Importantly electricity shortfall, raw materials prices and
very importantly War against Terrorism put negative effects on leather industry.
As said by, former chairman of Pakistan Tanners Association, Agha Saidain in a
presentation given to the Ministry of Commerce, It was pointed out that the
livestock sector was badly damaged in the war-affected areas of Fata, North
Waziristan and Swat. Transportation of hides and animal skins has completely
stopped from the war-affected areas. Despite low exports, the price of hides and
skins are showing an upward trend due to scarcity created by the war on terror in
the areas which were previously rich in livestock. The negative perception of the
country in the world community has adversely affected business and we are getting
20 per cent less price for the same product manufactured in other countries. Price is
the only attraction to the buyers who have created fences against Pakistani goods.
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So it shows that there are lots of problems in the industry but still is attractive one
as history could repeat itself, and we believe we can get some thing positive out of
it.

Industrial Analysis

Competition with in the market of Pakistan is not intense but facing difficulties as
told by Agha Saidan. Many Companies like Bata shifted their manufacturing
operations in country like China and Bangladesh where advantage of cheap labor is
attractive. So with in the geographic boundaries of Pakistan competition in
manufacturing may not intense, but in selling there is competition lies and we
believe our business strategy of dealing customer according to his demand could
give us an edge, as we can say, We are the Leather Tailor. At the same time we
will focus on bulk quality productions for our business clients. We believe our two
dimensional strategy give us competitive edge over our competitors.

We divided the market into two segments one is local, our national market where
we will focus on change of trends and needs and wants and will supply according
to that, national market may give essential share in respect of Leather Shoes so
mainly we decide to concentrate on shoes manufacturing for Pakistan market, other
categories like jackets, gloves will also there but we consider that we will focus
more on shoes manufacturing for local market. International market is attractive
ones earnings in dollar contribute a lot in ones pocket. We will contact our
international clients through websites and also planned to participate in exhibitions
around the globe, although its is difficult one and our limited resources may create
hurdle but it is essential for business development to have direct access to your
clients, so Future plans are there for expansion with increasing our products
demand in market.
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Future Trend shows that there will be no shortage of raw materials as demand and
supply of our live stock will increase, and at the same time leather industry could
get the advantage by utilize this opportunity, at the same time market demand is
gradually increasing in international market specially and a bit in national market,
Demand is there and we are ready to supply.

We are ready to run in the field of entrepreneur, ready to take the risk,
not ready to freeze our feet in the slavery of job.

Section II Description of Venture

A. General description of the business:

It is manufacturing business of leather garments including jacket,

ladies hand bags, key chain, shoes, skirts, belts and wallet.

Product
We are dealing in leather garments including
• Leather jacket
• Ladies handbags
• Leather shoes
• Leather belts
• Leather skirts
• Leather wallet
• Leather gloves

B. Industry Background:

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 The leather industry in Pakistan is a fast developing industrial sector
of the country both in terms of its qualitative as well as export growth. Over
the years this industry has achieved such a remarkable position in the
economic development of the country that it now ranks the second biggest
export-oriented industry of the country. This industry has always been
positioned on its commodity status in its quality both the home and abroad.
There are about 350 leather garment manufacturing units in the organized
sector in the country. Total annual installed capacity of these units is
estimated to be 15 Million leather garments (of all kinds) per annum.

Leather product is a fashion symbol for teenager and young generation in the
western world like USA, Canada, Germany, France and Italy. Now in these
days every business is facing decline due to the global crisis but in future it
is predicted that the winter season period is increasing as compare to the
summer. Leather products are treated as fashion symbol and to protect the
bodies against cold. So we have forecast that the future need/trend is bright
due to the above two reasons.

C. Goals and potential of the business and milestones

Firstly we have domestic goals which include being in the top 15

leather garments producers by the next 6 to 7 years and then we intend to set
a milestone of competing with the international competitors in international
market. Company will focus on domestic market initially and then later after
being established as a strong business entity we also will focus the markets
including Canada, USA, Germany, France, Italy and UK. Local demand is
very small as compare to international market but the leather shoes demand
is high. Company will give online sale services for its customers to access
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 the global market. Customers can order through company website for
customize their products. We are also giving shipping facility or service for
the delivery of goods on behalf of customers.

D. Uniqueness of product or service (USP)

The unique selling proposition of the company is that we intend to

give our 1 percent of the profit in charity every year and then gradually
increase this ratio with the passage of the time after getting established as a
business entity. We also intend to give away a free carton of a particular
product to the customers who buy in a bulk in order to attract the customers
towards our business.

Section III: Marketing

A. Research and analysis:

i. Target market (customers) identified:

Our target market and customers will be the local youngsters the boys and
girls who have a fashion sense and really find the leather garments and other
products very attractive and also the local customers all across the country
wherever we can reach. Export market is also a primary market for a leather
garment-manufacturing unit. In the export market, major customers include
chain stores and major garment brands in Europe and USA. Major customers
of Pakistani leather garments are Germany, USA, United Kingdom, and

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 UAE & France. The business is done either directly to the buyers or through
middlemen.

ii. Market size and trends:

95% of the leather garments manufactured in the country are targeted

towards exports. In 2003, an estimated 8 million pieces of leather garments
were exported from the country. Local consumption of leather garments is
minimal and is estimated to be less than 90,000 pieces per annum. Leather
product is a fashion symbol for teenager and youth generation in the western
world like USA, Canada, Germany, France and Italy. Now in these days
every business is facing decline due to the global crisis of CORONA Virus
and Economic instabilities but in future it is predicted that the winter season
period is increasing as compare to the summer. Leather products are treated
as fashion symbol and to protect the bodies against cold. So we have
forecast that the future need/trend is bright due to the above two reasons.

iii. Competitors:

It is very important to analyze the competition environment of the

industry in order to compete successfully. It is good for strategy making to
identify the strengths and weakness of competitors and try to differentiate
itself from them. Our main focus to export our garments (goods) in western
world, Indian garments products are our rivals because they have high
market share in leather garments. Indian designers are innovator in
garments. In our business customers are the main innovators and designer of
the products, they can customize their products through our website and can
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send their order along their own designs. We shall also target the South
African market where quality is not issue because they are price conscious.
It means that we are dealing two kinds of customers as price and quality
conscious.

Direct Competitors:

It includes the following local and international competitors. In our

area there are many small and larger producers who are competing our
products as

• Tambara leather pvt.ltd.

• Rasa international leather company.

• Leather gold pvt.ltd.

We have international competition as

• China

• Bangladesh

• India

• Turkey

Indirect Competitors:

The ‘Thiz International’ is also a main competitor in the national

market and international market.

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iv. Estimated Market share:

We estimate our market share of at least 3 to 4 percent in next five

years.

B. Marketing Plan:

i. Market strategy: Sales and distribution

For sales purposes we will initiate an outlet of our brand where the
customers can directly contact and can easily visit and get whatever they
want from our product line. We will also launch an online website or some
other sort of an app where the customers can order their desired product
online and we will deliver the order to the customer on the door step. We
will also focus on direct distribution through any courier/logistic company to
provide products delivery at given time.

ii. Pricing
We have two type of customers individual and business, so different
pricing strategy for both.
We are offering customize products for individual consumer so we will
charge premium price but business partner we will charge standard price
that will exist in the market.
Our pricing strategies would be of following types:
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 Value based price
According to the customization in products, customers can add new
attributes and their favorite design so we can charge value based price at
every customize product.
Cost based price
It’s another pricing option for us in which certain percentage of profit
is charged at cost. We will charge 20 percentage profits at any cost.

iii. Advertising and promotions

We are focusing youth/teenagers (who like fashion) biker jacket,

wallet, belts and gloves are our main products so we will promote our
products in showbiz /fashion magazine.

Section IV: Operations

A. Identify location advantages

Right now we are going to pick the location of RAWAT and if we

find some success we have a plan to expand this location range. We are
selecting these locations because these locations are well renowned
industrial production and we will not need to struggle hard to get the raw
materials for our products.

B. Specific operational procedures

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 As discussed above that the location for the business we are thinking
of is Rawat industrial area. Due to this location we will be having a
benefit that we will be able to get skilled labor on very reasonable rates
that really will help us to ensure the quality and enhance the production
at the same time. The area we are selecting is also wide open for the new
ventures as the population is growing at a faster rate so the demand will
also rise in near future.
We are having the following departments in order to smoothly operate in
the area:
i. HRM department.
ii. Finance department.
iii. Operations department.
iv. Marketing department.
v. IT. Department.

i. HRM department
We have categorized the functions of human resource into
selected field as requirements

✓ Recruitment & selection

✓ Compensation

✓ Training

✓ Performance appraisal

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ii. Finance department
Finance department will perform all those functions
according to the need of the business including

✓ Budgeting

✓ Payrolls

✓ Financing

✓ Preparing statements

✓ To issue the credit to other departments after documents

✓ To put check and balance on capital

iii. Operations department

Our operation activities are based on supply chain management

system for our product, name & number of suppliers which are
concerned in our project and process of manufacturing as a whole.
The connection with customers is also a major function of our
operation plan. Here we make a proper direct to our suppliers as well
as our customers. The overall activities regarding product
manufacturing to supply toward customer is associated with this
function.

✓ To select the appropriate suppliers

✓ To check the performance of current suppliers

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iv. Marketing department
It is very critical department of our business because
production/manufacturing is not a big task but it is very important
how to reach the customers, so marketing department will perform the
following functions.

✓ Pricing

✓ Promotion

✓ Distribution

✓ Demand forecasting

v. IT department

We are also giving online shopping so it is necessary for us to

focus on the information technology as well as its importance. It will
perform the following functions.

✓ Update the website

✓ Promotion through e-marketing and different website

✓ Invoicing of bills

✓ Make query

✓ Customers & suppliers contact via email

We will focus on information technology plan as first

preference because our customers can access throughout the world via

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 internet, so it is necessary for company to focus on internet marketing
and its applications.

Flow of order for goods

It is a process it starts from customer order ends at customer
delivery of product. We can explain it with the help of diagram. It
represents our online business model.
Suppliers of Receiving & Matching &
leather & Storing of cutting of
material leather and jacket/handb
material ag

Stitching of
Customer Website /
products and
order/ phone Head
finishing
office of
Receiving of /packing
company
goods

Shipment of
goods via
transport

Technology utilization
Technology is an essential part of every business similar case with leather
products in every step technology is used for different purpose like wear housing,
leather dying, processing, and transport, stitching, cutting and packing. Now we
have explained it in different processes to know its importance.

Leather tanning

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 Leather tanning consists of two meta-processes: wet blue production and
finishing. The former involves removing unwanted substances (salt, flesh, hair, and
grease) from a rawhide, trimming it, treating it to impart the desired grain and
stretch, and finally soaking it in a chrome bath to prevent decomposition. Finishing
involves splitting, shaving, re-tanning, and dying the wet blue.

Five clean technologies are considered here: two associated with dehairing and two
associated with chrome tanning.

High exhaustion:

Using special inputs and procedures to ensure that more of the chrome in the
tanning bath actually affixes to the hide and less ends up in waste streams.

Enzymes in the dehairing bath:

In this process biodegradable enzymes for lime and sodium sulfide are used
to remove the hairs.

Precipitation of chrome:

By using alkalis to precipitate out the chrome in the tanning bath, then
collecting the resultant sludge and processing it with sulfuric acid to recover the
chrome.

Recycling the dehairing bath:

This simple technology requires only fixed investments in a holding tank, a

pump, and a filtering system to remove suspended solids (usually a simple wire
mesh screen). Because the chemical inputs into the dehairing bath are relatively
inexpensive, only minor cost savings accompany the environmental benefits.

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Recycling the chrome tanning bath:

These reusing contents of the tanning bath instead of discharging them into
the sewer after a single use. Like recycling the dehairing bath, this simple
technology requires only fixed investments in a holding tank, a pump, and a simple
filter. It can reduce chrome use by up to 20%.

Finishing of raw leather

In this process different technology is used to finalize the leather into good
and colorful shape. It includes pressing, cutting and dying.

Storing in manufacturing unit

To store the finished leather it is necessary that store room must be protected
from moisturizer, water and other chemical that can damage it.

Pattern

In which jacket’s pattern is made by board, basically design is made by this

board that helps the cutter to cut easily.

Cutting

In which different cutters are used to cut the leather into different parts
according to the pattern. It is a special kind of cutter that is used in leather cutting.

Stitching machine

After cutting the leather it is stitched by the stitchers with special machine
shown below. It is different from ordinary sewing machine that is used in home.

Fusing or finishing
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 After stitching the jacket button and extra thread is clipped off by the clip
cutter then it is moved to the ironing person where jacket is ironed that gives it
some extra shining and soft surface.

Packing

In which jacket is packed also tagged with company logo and stickers. To
look nice it is decorated by well looking material.

C. Personnel needs and uses

The personnel needs will be met by hiring the local personnel and that
will also generate the jobs and this will ultimately benefit the economy as
well. We will need professionals in every department and for that
purpose we will advertise for hiring through different mediums such as
newspapers, social media, TV advertisements, etc.

D. Proximity to suppliers

As we will be operating in a area which is surrounded by the leather

producers all around it so we will be very close to our suppliers. If we say
that we will be at the door step of the suppliers it will not be wrong
anyway.

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Section V: Management

A. Management team-key personnel

Our management team is based on five key personnels that are:

i. CEO.

ii. HR. manager

iii. Finance manager.

iv. Marketing manager.

v. Operations manager.

vi. IT manager.

Where the CEO will be the key personnel and the other five managers
will act according to the instructions of the CEO and the rules of the business.

B. Legal Structure

Our business is a partnership form of a business. The legal

structure is consisted of five partners with one having a principal

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 authority of CEO with the consent of other four partners and he
acts on behalf of all of the partners as the CEO of the business.

C. Board of directors, advisors, consultants

The board of directors will be consisted of a manager from each

department of the business and the decisions will be made on
majority rule basis whereas each member will have a veto power in
case of any disagreement and a consultancy board will also be
prepared for tackling the conflicts if any.

Section VI: Financial

A. Financial forecast

1. Profit and loss

AB LEATHER MANUFACTURING
Income Statement (SAMPLE)
For the year ended on
Year 1 Year 2 Year 3 Year 4 Year 5
Rs Rs Rs Rs Rs
Revenues 10130400 12,256,860 13,482,546 14,830,800 16,313,880
Revenue 10,130,400 12,256,860 13,482,546 14,830,800 16,313,880

Cost of Goods Sold 8442000 10,214,820 11,236,303 12,359,933 13,595,926

Gross Profit 1,688,400 2,042,040 2,246,243 2,470,867 2,717,954
Less Operating Expenses
Marketing Expenses 75000 75,000 75,000 75,000 75,000
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Building rental expense 5000 5,500 6,050 6,655 7,321
Telephone expense 2000 2,200 2,420 2,662 2,928
Miscellaneous expense 500 550 605 666 733
Depreciation expense(office
equipment) (equipment) 18,200 18,200 18,200 18,200 18,200
Fixed Electricity 4000 4,400 4,840 5,324 5,856
Repairs & Maintenance 1000 1,100 1,210 1,331 1,464
Office supplies expense 500 550 605 666 732
Total Operation Expenses 106,200 107,500 108,930 110,504 112,234

Net Profit 1,582,200 1,934,540 2,137,313 2,360,364 2,605,720

Retained Earnings 72,725 72,725 72,725 72,725 72,725
Profit Turn Forward to B/S 1,509,475 1,861,815 2,064,588 2,287,639 2,532,995

2-Cash Flow

AB Leather
Cash Flow Statement (Sample)
For the year ended on

Year 1 Year 2 Year 3 Year 4 Year 5

Rs Rs Rs Rs Rs
Operating Cash Balance 500,000 600,000 650,000 700000 775000
Profit 1,509,475 1,861,815 2,064,588 2287639 2532995
2,009,475 2,461,815 2,714,588 2987639 3307995

Add Depreciation 18,200 18,200 18,200 18200 18200

Total 2,027,675 2,480,015 2,732,788 3005839 3326195

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 Balance Sheet

AB Leather
Balance Sheet
As on………..
Year 1 Year 2 Year 3 Year 4 Year 5
Liabilities Rs Rs Rs Rs Rs
Current Liabilities

Capital 1,200,000 1,260,000 1,323,000 1,389,150 1,458,607

Retain Earnings 0 72,725 72,725 72,725 72,725
Total Liabilities 1,200,000 1,332,725 1,395,725 1,461,875 1,531,332

Current Assets
rent
Prepaid Rent (Office) (building) 30,000 33,000 36,300 39,930 43,923
office supply 23,000 22,450 21,845 21,179 20,447
Cash/Bank 500000 600000 650000 700,000 775000
Total Current Assets 553,000 655,450 708,145 761,109 839,370
Fix Assets

Inventory 460000 527,675 575,380 625,966 654,562

Machinery 96,000 76,800 57,600 38,400 19,200
Equipments 91,000 72,800 54,600 36,400 18,200
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Total Fix assets 647,000 677,275 687,580 700,766 691,962

Total Assets 1,200,000 13,327,725 1,395,725 1,461,875 1,531,332

3. Break-even Analysis

We have done this analysis on monthly basis it means that initial fixed
cost and variable cost is considered in this analysis as

Total Costs = Total Revenue

TC = TR
TFC + TVC = P × X
TFC + (V × X) = P × X

X = TFC / (P - V)

X = 200000/ (2430- 2025)

X = 494 units

Breakeven Point = Fixed Costs/ (Unit Selling Price - Variable

Costs)

= 200000/ (2430-2025)

= 200000/ 405

= 494 units

4. Cost Controls

The cost controls are very crucial in maximizing the revenues and
profits of a business that’s why we have given it a great importance and we
already have been very careful and conscious about costs to be incurred. For
example due to our proximity to the suppliers we are saving the

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 transportation cost to a great extent which we could have incurred in case of
having a supplier away from you, so in this way we really controlled our
costs and we are thinking over many other ways of controlling the costs.

5. Budgeting plans

First of all we have decided our capacity of units per month that is 350
pieces.

Initial/fixed cost Rs. 0.2 million

Operating cost/expense Rs. 0.5 million

Reserve Rs. 0.5 million

Total investment Rs. 1.2 million

Section VII: Assessment of Risk

A. Potential problems

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 i. Absence of advanced technology, shortage of human power
ii. High Cost of production.
iii. Leather tanning tends to be very polluting as compared to other
manufacturing industries.
iv. Chrome issues.
B. Obstacles and risks

i. Shortage created in local market due to exports of raw and

finished leather
ii. Requirement of high working capital
iii. High cost of electricity
iv. Economies of scale is a important factor, as most of units in
Pakistan have small capacity, which means higher cost, and this
results in decreasing competitiveness in the international
markets.
v. Wastage due to unskilled labor
C. Alternative course of action
To tackle the above mentioned risks and obstacles we will
switch the market to tackle the market related issues, and to tackle the unskilled
labor we will try our best to enhance the skills of the labour and make them
equipped with the skills through different training programs and sessions.

Section VIII: Milestone Schedule and Appendix

A. Timing and objectives

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 Our objective is to be among the top ten leather products
producers by the next five years and we aim to be amongst the top 15 leather
producers of the Pakistan by the next 6 to 8 years.

B. Deadlines and milestones

We have set a milestone of improving our sales and profits by

at least 3 to 4 percent by next one year and we also have set a deadline of 18
months for ourselves to increase the customers range to a reasonable number such
as 12 to 15 percent at least.

Some basic milestones that we have set for ourselves are:

i. Incorporation of the venture.

ii. Completion of design and development.

iii. Hiring of sales representative.

iv. Product display at trade shows.

v. Signing up distributors and dealers.

vi. Ordering production quantities of materials.

vii. Receipt of first orders.

viii. First sales and first deliveries.

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ix. Payment of first account receivable (cash in).

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