Pre-Feasibility Study

Introduction
This feasibility study analyzes the market dynamics and
financials,whichisproposedforKarachicould be some of the good locations to start
thisbusiness.
The proposed business is to start a pick and drop service by registering myself with Ride
hailing apps like Careem and Uber to Target the general public and working classes who
travel on daily basis to their work places and schools. The potential markets include the
middleclass and upper-middle class population who need better substitute for substandard
public transport or an alternative where the public transport is totally unavailable.

Some of the most significant considerations for the success of business are following:

 Goodmarketingtoreachouttopeoplewhoareseekingsuchservices.Forexample,
marketingthroughpamphlets,wordofmouth,magazineads,socialmedia,displayof
contact number on vehiclesetc.
 Beconsistentlypunctualandtobuildarelationshipoftrustwiththecustomers.
 Driverswithsmoothdrivingskills,professionalandcourteousattitude.
 Getting feedback from the customers to further improve the service.
Equally importantfactors:
 In cases of some unforeseen vehicle breakdown, there must be prior arrangement
dealwithsomeonewithacar/vantoprovideemergencyservice.
 Propermaintenanceofvehiclestoavoidfailuresandbreakdowns.

BRIEF DESCRIPTION OF PROJECT & PRODUCT

There is scarcity of proper mass transit in major city of Pakistan. Also, A primary research
was carried out to investigate the different aspects of the business. It was found that the
biggest consumers for the service are students and the working-class people, especially
women who go to offices on daily basis. With increasing urbanization, the pressure on the
public transport is increasing. A vast majority of peopledo not have personal transport.
Public transport is either unavailable on their route or is too inconvenient. Thus, a lot of
people, especially women, prefer pick and drop service and ride hailing apps like
Careem/uber instead of using public transport. Therefore, a number of people have
adopted this business for its sure returns with relatively small investment. Besides the main
revenue from regular customers, the vehicles are used on weekends and
atnight,forpicnicsanddifferenteventstogenerateadditionalrevenues.

Some of the related details of the proposed business are following:

 Technology: The technology infrastructure of the business includes the cars/vans. The
feasible moderate start requires mini car. car can cater to one of the two segments.
Proprietor will make use of latest ride hailing apps like Cream and Uber for its daily
business and also for pick and drop of office andschools.
 Target Market: Themaincustomerswouldbeoffice-goingpeople,studentsandwoman for
daily commuting in city. Furthermore, being registered with Careem/Uber service,
customer turnover will increase as they already have large customer market on their
panel for commuting in city.
CRITICAL FACTORS

The main critical success factors that contribute towards the successful execution of
business are following:

 Good marketing to be known among people who are seeking such service. For
example,marketingthroughpamphlets,wordofmouth,magazineads,socialmedia,
display of contact number on vehiclesetc.
 Tobepunctualandtobuildarelationshipoftrustwiththecustomersisimportant.
 Driverswithsmoothdrivingskillsandprofessionalandcourteousattitude.
 Listeningtocustomer’sfeedbacktoimprovetheservicefurther.
 In cases of some unforeseen vehicle breakdown, there must be some prior
arrangementdealwithsomeonewithavantoprovidetheserviceundisrupted.
 Propermaintenanceof vehiclestoavoidfailuresandbreakdowns.

7 GEOGRAPHICAL POTENTIAL FORINVESTMENT

The service is well suited all population residing in city, as most of such people use their
own vehicles. Whereas relatively middle-income population residing in city like, Karachi,
make use of pick and drop service and thus these are suitable locations to start such
business.

POTENTIAL TARGET CUSTOMERS

The target market for this service would be divided into following categories:

Office Employees: The largest segment is the office-going people. They are alsopotential
target customers, where demand for pick and drop services is generally high. The office-
going people are generally charged at higher rate and thus serve as premium customers in
thebusiness.
Uber/Careem: Additionally, being registered with Uber/Careem, passenger’s inflow will
increase by manifold and driver will be using the apps for earning on daily basis.
Shuttle Service: Since proprietor has rented a shop in Faizabad, wherein a small officefor
pick and drop will be made. There are number of hotels and bus stops in the area onwhich
thousands of passengers are arriving on daily basis. Proprietor will make use of thisvicinity
for providing shuttle service to the people staying in hotels and coming to bus stops for
onwardcommuting.
Prefeasibility Study

PROJECT COST SUMMARY

A detailed financial model has been developed to analyze the commercial viability of this
project. Various costs and revenue related assumptions along with results of the analysis
are outlined in this section.

Project Economics

All the figures in this financial model have been calculated for estimated sales of Rs.
1,250,000inthefirstyear.Therevenuestreamisexpectedtoincreaseby20%eachyearin
subsequent years.
Project Financing

Followingtableprovidesdetailsoftheequityrequiredandvariablesrelatedtobankloanfor the initial

investment of projectcost.

Table 9.2: Project Financing

Description Details
Total Equity Rs.164,800
Bank Financing Rs.1,483,200
Total Cost Rs. 1,648,000

9.1 FuelCost:

The most significant cost in business operations is the cost of fuel for cars. With a mix fuel
prices, petrol equal to Rs. 7.46/km and, the average fuel cost comes to be around Rs. 7.46-
10.00 per km. The combined cost of fuel for cars in first year is projected to be Rs.
166,507. A year over year price increase of 10% is projected in oil prices.
Anessentialcostisthemaintenancecostofcars.Thespendingensuresundisruptedservice which
is about Rs. 8,000 per month.

9.2 Revenue Generation

Based on full capacity utilization, Rs. 1,250,000 will be earned in first year. The revenue
will increase at 10% yearly because of the increased charges.
Table 9.10: Revenue Generation – Year 1
Description Charges Number of Shifts Revenue Working
per person passengers in per month months in
Yearly
per ride Car (Rs.) year
revenue
(Rs.) (Rs.)

Careem/Uber 300-1000 4 All Day 80,000 12 960,000

Other activities 500-1500 4 All 24,000 12 288,000

Day
(Private Pick
and Drop,
Hotel Shuttle
Services
 Prefeasibility Study

10 ANNEXURES

10.1 IncomeStatement
AR PICK & Drop
Projected Income
Year 1 Year 2 Year 3 Year 4 Year 5
Statement (Rs.)
Revenue
1,250,000 1,375,000 1,512,500 1,663,750 1,830,125
Net Sales 1,375,000
1,250,000 1,512,500 1,663,750 1,830,125
Fuel Cost
166,507 183,157 201,473 224,620 243,782
Gross Profit
1,083,493 1,191,843 1,311,027 1,439,130 1,586,343
General Administrative
& Selling Expenses 96,000 105,600 116,160 127,776 140,553
Finance Cost
296,640 296,640 296,640 296,640 296,640
Depreciation
329,600 263,680 210,964 168,751 135,000

Subtotal
722,240 665,920 623,764 593,167 572,193
Operating Income
361,253 525,923 687,293 845,963 1,014,150

- - - - -

Tax @ 2% on Transport 9,091 10,000 11,000 12,100 13,310

Net Profit 352,162 515,923 676,293 833,863 1,000,840

10.2 BalanceSheet
Projected Balance
Sheet (Rs.) Year 0 Year 1 Year 2 Year 3 Year 4 Year 5

Assets

Current Assets
Cash & Bank Balance 0 352,162 515,923 676,293 833,863 1,000,840
Other Receivables
Total Current
Assets 0 352,162 515,923 676,293 833,863 1,000,840

Fixed Assets
Suzuki Alto VXL
0 1,318,400 1,054,720 843,776 675,020 540,016
Addition Ofvehicles

Total Fixed Assets 0 1,670,562 1,570,643 1,520,069 1,508,883 1,540,856

 11 KEYASSUMPTIONS

11.1 Operating Cost Assumptions

Description Details

Maintenance cost per vehicle Rs. 8,000 per month

Maintenance increase year over year 10%

Depreciation on Car 20%

11.2 Production Cost Assumptions

Description Details

Petrol cost per liter Rs. 112

Mileage per liter petrol 15-18km

Distance traveled per day 45-60 km

11.3 Revenue Assumptions

Description Details

Number of Trips Per Day (Minimum) 7

Average Revenue Per Trip
480-600

Total working Days In a month 30-31

11.4 Financial Assumptions

Description Details

Equity 10 %

Bank Financing 90 %