BUSINESS DEVELOPMENT PLAN

ON

Adaa Ethnic Wears and Dresses

Submitted by:

Melisha Pant

Examination Roll no: 19220115

Submitted to:

Mr. Kishore Dhungana

Course Instructor of Business Development Plan

Apex College

Pokhara University

In partial fulfillment of the requirements for the degree of

Master of Business Administration

September,2020

 
 
 ACKNOWLEDGEMENTS

The successful completion of the business development plan on “Adaa Ethnic Wears and
Dresses” would not have been possible without the support and cooperation from different
personnel’s who provided their valuable comments and made other significant contributions. I am
very grateful to Mr. Kishore Dhungana, our Business Development Plan course instructor, for
entrusting me this substantial assignment and extending his support and guidance in
accomplishment of this report.

I am glad who helped me in completing this report and providing me the relevant materials and all
my friends of MBA semester IV who were always ready for the consultation.

I 
 
 DECLARATION

I, student of MBA, hereby declare that the project entitled “BUSINESS DEVELOPMENT
PLAN on Adaa Ethnic Wear and Dresses” For the subject BUSINESS DEVELOPMENT
PLAN submitted by me for 4th trimester is based on the actual work carried out by me under the
guidance and supervision of course instructor Mr. Kishore Dhungana. I further state that this work
is original and not submitted anywhere else for any examination.

Devkota marg, Baneshwor, Kathmandu, Nepal

Date: 30/09/2020

Melisha Pant

……………………..

Signature of the student

II 
 EXECUTIVE SUMMARY
Adaa Ethnic Wear and Dresses is a retail trading store which will be registered under Company
Act and the company would be a partnership firm with two founders for the start up. Three other
fulltime staffs will be working in the store. Adaa Ethnic Wear and Dresses will be located in
Maharajgunj, Kathmandu. Kathmandu is the capital city of Nepal.
Today, clothing culture of Nepalese have heavily been influenced by South Asia, especially India.
People have started to accept Kurta Pajama and Lehenga as a traditional wear in Nepal. Nepalese
have accepted many foreign clothing with time. They have been feeling good and comfortable
with the Indian ethnic dresses available in the market. The traditional shops around Kathmandu
valley also priorities in Lehenga and Kurta. The wedding and Dashain/ Tihar is packed with orders
of Lehenga and Kurta. People have accepted these kinds of clothes as traditional wear as well.
Therefore, many demands of different types of South Asian traditional wear is in rise by the youths.
Considering the growing needs of people and in order to match their mindset towards the ethnic
dresses the concept of establishing the business was generated.
Adaa Ethnic Wear and Dresses is a retail industry selling fashionable women’s ethnic wear and
dresses. The product that are available in the store are mainly focused for age group between 20-
54 and for the women. The product that are available in the store are Gowns, Dresses, Kurtha and
Suruwal, Saree, Lehenga, Plazo, Tops, Cotton Pants, Panjabi Suruwal, Leggins. The store will be
selling selected brand such as Saachi, Aurelia, W, Anouk. The society has been modernized over
a period of time so considering the existing customer the store will be selling product which will
range from basic to trendy western style. The business will be purchasing through wholesalers in
a variety of sizes, colors and styles. for generating and maintaining high value customer business
will be focusing on the quality of product and services or the environment. The gross margin goal
will be set at 60%. Thus, products in the store will retail for a little more than double the wholesale
price with discount policy. With the exception of just a few items on special occasions. The price
point at Adaa Ethnic Wear and Dresses will be between three number figures to four number
figures. For quality assurance and control it needs constant change to meet customer expectations.
If the business is aware about customer dissatisfaction from the quality of the product, it will be
ready to switch with some other top brands. For these the store will constantly monitor the
customer feedback and suggestions that will be receiving. The store will be bringing the products
from different Indian wholesale market. The store will be in contact with them as per our need.
The business will be focusing on brands, designs, quality and services. As well as the business will
try to bring differentiation in the product than the existing competitors. The business will keep the
track on choices of customers on products. The marketing and communicational skills will be used
to make customers feel good about shopping at the store. The business will make sure to offer
range of product categories. Similarly, each year the amount will be spend for advertising and
promotion. On the other hand, the competition of this business in Nepal is very high. The local
ethnic clothing stores as well as the boutique are the major competitors for us. But it is also seen
that most of the local stores are selling product at low cost without any brands. Similarly, the
location will itself attract a lot of customer who need readymade as well as designer clothes
because these area does not have any boutique.

III 
The core business strategy is to combine exceptional and knowledgeable customer service with
quality stylish merchandise. And provide an enjoyable shopping experience for our customers.
Adaa Ethnic Wear and Dresses mission is to offer women a wide selection of fashionable, figure-
flattering clothing. The business expects the strategy to draw consumers into Ethnic Wear and
Dresses from the very beginning. Moreover, the store will hire a local PR firm to help us develop
and implement a strategic marketing plan and guide our publicity efforts in a cost-effective
manner. The store will also implement a referral program rewarding customers who refer new
customers with discount coupons. Following our grand opening, the store makes a phone calls for
their family and friends. The store will offer promotional discounts and seasonal and clearance
sales throughout the year. Also, other tools used for promotion is the use of social networking sites
like Facebook and Instagram. These free websites are great ways to keep customers updated on
new products. Similarly, unique and attractive store displays will be an essential promotional tool
for attracting passerby.
The two owners will have the 60:40 ratio contribution on equity capital. The total start-up expenses
will be of Rs.  2,641,486.111. The total equity of Rs. 807706.1111 will be contributed by two
owners based on their capital contribution percentage. The sales are assumed to be of Rs. 6500000
in the first year and the annual sales are assumed to increase per year. The Net Income after tax is
projected of Rs. 377501.2 at the end of first year and Rs. 6120101 at the end of 5th year.
The Net Present Value (NPV) of cash inflows is Rs. 7076890. And the Internal Rate of Return
(IRR) is calculated as 77%. The Payback Period (PBP) is 1.92 years that means the initial
investment will be covered within the second year of the business operation.

IV 
 Table of Contents
Chapter One: Introduction ........................................................................................................................ 1 
1.1  Background ................................................................................................................................. 1 
1.2  Company Overview..................................................................................................................... 1 
1.2.1  Vision .................................................................................................................................... 2 
1.2.2  Mission ................................................................................................................................. 2 
1.2.3 Objectives .................................................................................................................................... 2 
1.2.4 Key to Success ............................................................................................................................ 2 
Chapter Two: Organizations and Management Team ............................................................................ 3 
2.1 Organization Details ......................................................................................................................... 3 
2.2 Background of Management Team ................................................................................................. 3 
2.3 Capacity Building Activities ............................................................................................................. 3 
2.4 Managerial and Technical Competency ......................................................................................... 3 
2.4 Organizational Chart and Implementation Plan ........................................................................... 3 
2.4.1 Organizational Chart ................................................................................................................. 3 
2.4.2 Implementation Chart ............................................................................................................... 4 
Chapter Three: Product and Services ....................................................................................................... 5 
3.1 Product Description and History ..................................................................................................... 5 
3.2 Product Attributes ............................................................................................................................ 5 
3.3 Customer Value ................................................................................................................................. 5 
3.4 Costing and Pricing ........................................................................................................................... 6 
3.5 Quality Assurance and Control ....................................................................................................... 6 
3.6 Sourcing ............................................................................................................................................. 6 
Chapter Four: Market and Competitions ................................................................................................ 7 
4.1 Industry and Business Analysis ....................................................................................................... 7 
4.2 Market Size ........................................................................................................................................ 7 
4.3 Market Segmentation and Targeting .............................................................................................. 7 
4.3.1 Market Needs ............................................................................................................................. 8 
4.3.2 Market Trends ........................................................................................................................... 8 
4.4 Positioning ......................................................................................................................................... 8 
4.5 Market Characteristics ..................................................................................................................... 8 
4.4 Competition ....................................................................................................................................... 8 

V 
Chapter Five: Marketing and Sales Plan .................................................................................................. 9 
5.1 Introductory Remarks ...................................................................................................................... 9 
5.2 Marketing and Sales Strategies ....................................................................................................... 9 
5.2.1 Product ........................................................................................................................................ 9 
5.2.2 Price ............................................................................................................................................. 9 
5.2.3 Place .......................................................................................................................................... 10 
5.2.4 Promotion ................................................................................................................................. 10 
Chapter Six: Legal Frameworks, Environmental and Social Factors ................................................. 11 
6.1 Approval and Licensing Requirements ......................................................................................... 11 
6.2 Social compliance issues ................................................................................................................. 11 
6.3 PEST Analysis ................................................................................................................................. 12 
Chapter Plan: Financial Plan .................................................................................................................. 13 
7.1 Start-up Cost ................................................................................................................................... 13 
7.2 Assumptions ..................................................................................................................................... 13 
7.3 Projected Balance Sheet ................................................................................................................. 14 
7.4 Projected Income Statement .......................................................................................................... 14 
7.5 Projected Cash Flow Statement ..................................................................................................... 14 
7.6 Business Financial Ratio ................................................................................................................. 14 
7.6.1 Liquidity Ratios ........................................................................................................................ 15 
7.6.2 Efficiency Ratios ....................................................................................................................... 15 
7.6.3 Profitability Ratios ................................................................................................................... 16 
7.6.4 Solvency Ratios ......................................................................................................................... 16 
7.6.5 Other Important Indicators .................................................................................................... 17 
Chapter Eight: Exit Strategy ................................................................................................................... 18 
8.1 Exit Strategy .................................................................................................................................... 18 
ANNEXES ................................................................................................................................................... 0 
 

VI 
 Chapter One: Introduction
1.1 Background
Nepal is a harmonious multicultural state. It has its own culture and identity that is different from
any part around the world. Out of many identities, the state reconciles and respect traditional
clothes of different ethnic communities.
The most common and the national dress is the Daura Surwal which is complemented by Gunyo
Cholo. However various communities including Tamang, Gurung, Magar, Newar, Kirat, Rai,
Limbu, Tharu, Madhesi and many more have their own ethnic wear that defines their culture.
However, in recent days, clothing culture of Nepalese have heavily been influenced by South Asia,
especially India. People have started to accept Kurta Pajama and Lehenga as a traditional wear in
Nepal. Nepalese have accepted many foreign clothing with time. For example, western clothing
such as jeans, t-shirts, suits, official shirt/pants and casual wears are easily accepted by the society.
They have been feeling good and comfortable with the Indian ethnic dresses available in the
market. This is a globalized world so exchange of culture is not a bad thing. One does not insult
their traditional dress by wearing other culture’s dress.
The traditional shops around Kathmandu valley also priorities in Lehenga and Kurta. The wedding
and Dashain/ Tihar is packed with orders of Lehenga and Kurta. People have accepted these kinds
of clothes as traditional wear as well. The influence of Indian pop culture is in rise, especially in
urban areas. Therefore, many demands of different types of South Asian traditional wear is in rise
by the youths. South Asian culture is very similar to each other and dress such as Sari and Kurta
Surwal is worn by the females of the region.
Clothing is simply a fashion statement. People wear clothes to look good. It will not impact the
traditional thoughts on people. Similarly, it is not bad for to accept foreign clothes and wear them.
The Business will be selling stitched branded designer ethnic wears. The business will be focusing
on providing different option in product.
1.2 Company Overview
Adaa Ethnic Wear and Dresses is a start-up enterprise will be located in Maharajgunj, Kathmandu.
The business will be offering wide range of ready-made designer ethnic wears such as Lehenga,
Kurtha Suruwal, Leggins, Gowns, Dresses etc. The store will ensure that all customers will be
given first class treatment whenever they visit our store.
Adaa Ethnic Wear and Dresses will be registered under Company Act. The company would be a
partnership firm consisting two founders for the start up. The store will be having a management
team to run the store. The company has other three staff in the management team. They will be
responsible for maintaining inventory, dealing with customer and maintaining books of account.
It will operate in the retail industry, and more especially in Women’s wear Industry. We project
modest net profits the first year. Our second and third-year net profits are expected to grow
substantially.

I 
 
1.2.1 Vision
Adaa ethnic wear and dresses will provide different readymade designer ethnic wears to outfit
females in styles that will make her feel confident and unique. This will be achieved first through
the setup of brick-and-mortar establishment and later through the addition of an online store.
1.2.2 Mission
Adaa ethnic wear and dresses will be a leader in Kathmandu retail sector by offering unique and
stylish women’s ethnic wears at affordable prices. The store will provide a relaxed atmosphere to
its customers.
1.2.3 Objectives
 Create jobs
 Provide quality clothing and customer service at a reasonable price
 Achieve the largest market share in the city for ethnic wear
 Achieve a profit within the first year
 Continually and consistently increase total number of customers per year
 Increase average length of customer relationships and decrease customer turnover.

1.2.4 Key to Success

 Maintain enough money on hand each month to pay the cash obligations the following
month.
 Identify and eliminate deficiencies or surpluses in cash.
 Clearly understand the ethnic wear market, competition, and continually adjust accordingly.
 Keep enough cash, as needed cushion for security, on hand to cover expenses.
 Provide qualitative product and services to the customer.
 Focusing on creating a different product and service than competitors.

2 
 Chapter Two: Organizations and Management Team
2.1 Organization Details
Adaa Ethnic Wear and Dresses is a retail industry selling fashionable women’s ethnic wear and
dresses. The business will be registered under Company Act and the company would be a
partnership firm with two founders for the start up. Adaa Ethnic Wear and Dresses will be located
in Maharajgunj, Kathmandu.
2.2 Background of Management Team
Adaa Ethnic Wear and Dresses will be run and operated by only two owners as it is a small trading
business. Mrs. Neelam Pant has around 7 years of experience in retail sales and 5 years of
managerial experience. She will oversee the store on a daily basis along with her co-owner Ms.
Melisha Pant. Ms. Melisha Pant is an MBA graduate and has around 3 years of experience in retail
business sector. There will be three other full-time staff among which one will be accountant and
the other two of them will be responsible for customer service and inventory control.
2.3 Capacity Building Activities
The store will be hiring right attitude people to train. For these there will be an open space to learn
how to maintain good relationship with the customer. On the job training will also be focused on
to teach and make aware about the individuals the importance of protecting and delivering the
inventory. If necessary, the store can also create a role-play activity with our employees.
2.4 Managerial and Technical Competency
Some of the technical and managerial competencies are:
The manager of the business has around 3 years of managerial experience so she will be act upon
the situation quickly and make the right decision i.e. decision what is fruitful and what is not.
Similarly, the team of the business are highly self-motivated so they will be more focused towards
their goal which will result long term success of the business. The skill that our manager and staff
are hired only if they have effective communication skills as they have to deal and satisfy their
customer on day to day basis.
2.4 Organizational Chart and Implementation Plan
2.4.1 Organizational Chart
 

  Managing Director
 

    

  Manager

  Accountant Staff 1 Staff 2

3 
The organizational chart above shows the management team of the store. As there are two owners
in the store one will be appointed as a Managing Director and the other as Manager. Similarly,
there will be one person handling the accounts. The other two staffs will be engaging with customer
and maintaining the inventory.
2.4.2 Implementation Chart
The implementation plan of the company is present below. We assume a prior time of 6 months
for starting up this firm.

Implementation Chart (in months)

Particulars 1 2 3 4 5 6
Planning
Choose suitable location
Registration
Decorating Store
Contact Wholesalers
Place Inventory
Manpower Recruitment
Advertising and
Promotion
Store Opening
Full operation

The above implementation plan is for approx. 6 months. Planning is a continuous process in any
business so it will start from the beginning and will still continue until the business is in operation.
Within 2- and 3-month business location will be chosen. The company will apply for registration
and get registered within 4 months. Decoration and setup begin once the office location is fixed,
i.e. from third month. Similarly, the store will contact wholesalers for the product, place inventory,
start manpower recruitment and start investing in promotion and advertising after third month.
Finally, the store operation and full operation begins from sixth month.

4 
 Chapter Three: Product and Services
3.1 Product Description and History
Nepal is a diverse country having wide range of cultural settlements. We can find various
traditional dresses based on caste and ethnicity. Daura Suruwal for men and Gunyu Cholo for
women are the national dress of Nepal and get worn by Nepalese of all class, and ethnicity.
However, ‘Gunyo Cholo,’ has lost its relevance in modern times as other ethnic wears are favorite
among the ladies.
Ethnic wears and Dresses are very popular in Nepalese Society. These are also traditional wears
not only on day to day basis but also necessary in some festivals and ceremonies. The product that
are available in the store are mainly focused for age group between 20-54 and for the women. It
will provide selected brand such as Saachi, Aurelia, W, Anouk. The society has been modernized
over a period of time so considering the existing customer the store will be selling product which
will range from basic to trendy western style. The business will be purchasing through wholesalers
in a variety of sizes, colors and styles. The business will also rely on customer feedback,
suggestions and sales reports to introduce or eliminate certain brand styles and sizes.
The favorite ethnic wears of people in modern times that will be available in the stores are listed
below:
 Gowns
 Dresses
 Kurtha and Suruwal
 Saree
 Lehenga
 Plazo
 Tops
 Cotton Pants
 Panjabi Suruwal
 Leggins
3.2 Product Attributes
The products are based on Woman’s Indian Ethnic wears. Some of the attributes of the product
that will be available in the stores are listed below:
 Handcrafted Designs
 Mesmerizing Styles
 Variety of materials
 The western touch of fashion
 Availability in different sizes and colors
3.3 Customer Value
Though the society is modernized but still high value is placed for ethnic dresses in case of Nepal.
In order for generating and maintaining high value customer business will be focusing on the
quality of product and services or the environment. Similarly, the store will be focusing on the

5 
brands, sizes, colors choices and exchange policy for the loyal customers so that they remain
satisfied with the store.
3.4 Costing and Pricing
The business will be focusing on unique designs, brands, quality and varieties of ethnic dresses in
the store so the gross margin goal will be set at 60%. Thus, products in the store will retail for a
little more than double the wholesale price with discount policy. With the exception of just a few
items on special occasions. The price point at Adaa Ethnic Wear and Dresses will be between three
number figures to four number figures.
3.5 Quality Assurance and Control
Retail business differs from other businesses. These businesses buy the product that they have
already produced using different kinds of materials. So, for quality assurance and control it needs
constant change to meet customer expectations. If the business is aware about customer
dissatisfaction from the quality of the product, it will be ready to switch with some other top
brands. For these the store will constantly monitor the customer feedback and suggestions that will
be receiving.
3.6 Sourcing
The business will be bringing the products from different Indian wholesale market. They will be
supplying us a range of product as per the need of customer. The store will be in contact with
them as per our need and will try to maintain good relationship with them.

6 
 Chapter Four: Market and Competitions
 

4.1 Industry and Business Analysis

Today, ethnic wear is not only occasional wear; it has become part of our everyday wear as well,
especially in womenswear. Because brands came up with the concept of fusion wear and everyday
ethnic wear like kurta, pants and leggings, which is also easy to wear. With an upcoming concept
of comfortable clothing at the workplace, many companies have started to accept ethnic wear like
Kurtha as part of Formal wear. Also, in recent years there has been an increase in the number of
working women which has impacted the acceptance of ethnic wear at workplaces around the
country. Similarly, other ethnic wears such as lehenga, gowns and dresses are specially preferred
in festivals and special occasions. Similarly, increased buying capacity of youth and they being
brand and fashion conscious has led to an overall increase in their spending on apparel, thus
increasing their spending on ethnic wear. The inclination of Nepalese youth has increased towards
ethnic wear, as it has become comfortable and more fashionable.
4.2 Market Size
Kathmandu accommodates a large number of retail market. It is the capital city of the country
Nepal. Similarly, due to the large number of facilities and opportunities available in the city large
number of people resides in Kathmandu. Also, the cloth being a basic need of people they have
been investing in this clothing industry from the beginning of the era. In addition, Nepal has a
history on ethnic wear. The people are wearing and feeling good on these dresses from the
beginning. It is just only the designs and brands have taken places.
4.3 Market Segmentation and Targeting
The target market segmentation will be done on the below mentioned aspects:
 Geo/Demographics
 Resides in Kathmandu Valley
 20-54 years old female
 Income > or = 50000

 Psychographics
 Finds excitement in trying new designs of products
 Brand conscious
 Middle Class Family

 Behavioral aspects
 The closet of customers which reflects balance over quality and quantity
 Customer who seeks versatile products
 Few customers who seeks shopping as a past time
 Spends around on clothes monthly
 Keeps with latest trends
 Customer who are actually willing to buy the product
 Customer who remain loyal to the product

7 
4.3.1 Market Needs
Adaa Ethnic Wear and Dresses is located at Maharajgunj, Kathmandu. It is the residential area as
well as various local businesses are run in this area. Nowadays, females are comfortable wearing
ethnic dresses even on day to day basis. Similarly, people are becoming very conscious about their
personality so they just don’t want to look presentable but also seek comfort. On the other hand,
cloth is one of the basic needs of the people and ethnic wears in Nepal are in existence since long
time even though various western apparels are available. Therefore, the market needs for ethnic
wear is high and is increasing even among youngsters. So, if the business is able to do marketing
well and remain focused on the quality and services that will be providing to the customer the
business will surely be successful.
4.3.2 Market Trends
The Nepalese ethnic wear market has grown rapidly over the years with wider acceptance.
Additionally, the religious and cultural diversity of Nepal, where a wide range of occasions are
celebrated, is among the considerable drivers of women ethnic wear market. The transformation
of traditional clothing to modern design represents a fusion of ethnic wear with western wear to
associate with young population. The rising female population and increasing female workforce
cites a huge opportunity for players in the industry to tap the increasing demand of the ethnic wear
in the country.
4.4 Positioning
As the business will be focusing on brands, designs, quality and services the business will try to
bring differentiation in the product than the existing competitors. The business will keep the track
on choices of customers on products. The marketing and communicational skills will be used to
make customers feel good about shopping at the store. The business will make sure to offer range
of product categories. Similarly, each year the amount will be spend for advertising and promotion.
Occasionally, advertising special price reduction to bring in shoppers might build traffic to buy
other items as well.
4.5 Market Characteristics
Adaa Ethnic wear and dresses is located at area where residential people live and as well as many
local businesses are run. So, we can attract large number of customers. Our business will
intercourse among the dealers, i.e., buyers and sellers. We will be in touch with one another, so
that they are aware of the prices offered or accepted by other buyers and sellers. We as a seller
must have perfect knowledge of the market regarding the demand of the customers, regarding their
habits, tastes, fashions etc.
4.4 Competition
The competition of this business in Nepal is very high. The local ethnic clothing stores as well as
the boutique are the major competitors for us. But it is also seen that most of the local stores are
selling product at low cost without any brands. Similarly, the location will itself attract a lot of
customer who need readymade as well as designer clothes because these area does not have any
boutique. In order to compete with the local business, we will remain loyal to customer and will
try to bring differentiation in product than similar other local businesses which will suit their
personality.

8 
 Chapter Five: Marketing and Sales Plan
5.1 Introductory Remarks
The core business strategy is to combine exceptional and knowledgeable customer service with
quality stylish merchandise. And provide an enjoyable shopping experience for our customers.
Adaa Ethnic Wear and Dresses mission is to offer women a wide selection of fashionable, figure-
flattering clothing.
5.2 Marketing and Sales Strategies
Both co-owners have strong marketing backgrounds and recognize the significance of effective
marketing. The business expects the strategy to draw consumers into Ethnic Wear and Dresses
from the very beginning. Moreover, the store will hire a local PR firm to help us develop and
implement a strategic marketing plan and guide our publicity efforts in a cost-effective manner.
Adaa Ethnic Wear and Dresses plans to generate sales via strategic marketing efforts. These
concentrated efforts will be targeting new and returning customers. The store will also implement
a referral program rewarding customers who refer new customers with discount coupons.
Following our grand opening, the store makes a phone calls for their family and friends. The store
will offer promotional discounts and seasonal and clearance sales throughout the year.
5.2.1 Product
Adaa Ethnic wear and dresses will sell ready-to-wear ethnic dresses for woman. Mostly branded
clothes will be sold. Some of the brands that will be sold are:
 W
 Aurelia
 Saachi
 Anouk
Similarly, the products that will be available in the store are:
 Gowns
 Dresses
 Kurtha and Suruwal
 Saree
 Lehenga
 Plazo
 Tops
 Cotton Pants
 Panjabi Suruwal
 Leggins
5.2.2 Price
Pricing is one of the crucial parts of marketing strategies. The company will follow value-based
pricing method which means that the customer will be paying as per the quality of products
available at store which may be high, medium and low. Similarly, there is also discount policy.

9 
5.2.3 Place
The store will be located in Maharajgunj, Kathmandu. The area is surrounded by different local
business houses and as residential people. The store will have enough parking space.
5.2.4 Promotion
The initial goal of Adaa Ethnic Wear and Dresses promotions will simply be to create awareness.
Therefore, the business will be heavily reliant on word of mouth for the first year or so. Part of the
job of Adaa Ethnic Wear and Dresses associates will be to tell all of their friends and family about
the store. Another major asset that will be used for promotion is the use of social networking sites
like Facebook and Instagram. These free websites are great ways to keep customers updated on
new products. Similarly, unique and attractive store displays will be an essential promotional tool
for attracting passerby. Minor costs will be incurred through the purchase of display accessories.
Similarly, every year the money will be invested for the purpose of advertising through magazines.
Discount cards will be issued for loyal customers.

10 
 Chapter Six: Legal Frameworks, Environmental and Social Factors
6.1 Approval and Licensing Requirements
Nepal has some legal framework required for registration of company, private firm and partnership
firm. Public companies, private companies are registered according to Company Act 2063 by
Office of Company Registrar. Adaa Ethnic Wears and Dresses will be established under the
Company Act 2063. The registered business will be opened at Maharajgunj, Kathmandu. After
getting approval form Company Registrar Office, it will take license from Metropolitan city office.
The firm should present the following documents in the office of the company registrar:

 An application forms.
 Two copies of Article of Association.
 Two Copies of Article of Memorandum.

The process of registration can be done online from the website of Ministry of industry- Office of
company registrar http://www.ocr.gov.np.

6.2 Social compliance issues

Organizations are to respect its employees and to strive to improve conditions whenever possible
 Wages & Benefits
The business shall provide wages, overtime compensation and benefits at not less than the
minimum levels required by applicable laws and regulations or which are consistent with the
prevailing local industry levels, whichever is higher.
 Working Hours
The business shall maintain employee work hours in compliance with local standards and
applicable laws of the jurisdictions in which they are doing business.
 Child Labor
Exploitation of child labor or any vulnerable group (illegal immigrants for example) is totally
unacceptable. No person shall be employed at an age younger than the legal minimum age for
working in the country. All children under the age of 18 are not considered for the store.
 Forced Labor
The use of forced or involuntary labor is unacceptable. Store shall maintain employment on a
voluntary basis. They are not to directly or indirectly use in any forced labor or prison labor.

11 
  Nondiscrimination / Human Rights
Cultural differences exist and different practices apply in various jurisdictions. However, all terms
and conditions of employment should be based on an individual’s ability to do the job, not on the
basis of physical characteristics or beliefs. Employees will not be exposed to physical punishment,
threats of violence or physical, sexual, psychological or verbal harassment.
6.3 PEST Analysis
 Political and Legal Environment
Political and legal environment has a great effect in any business. Political instabilities can hamper
the operation of business. Moreover, the changes in plans and policies have a significant impact
on such business. The changes in plans and policies will impact the profit and operation of the
business. If there is stability in the political situations in country, the business can operate in full
scale and there will be predictability in the environment. The tax policy also affects the profitability
of the business.
 Economic Environment
Economic environment of a country comprises of country's economic system, market size,
economic growth rate, inflation/deflation, trade policies, and economic policies and so on.
Economic factors like inflation, economic stability, market size etc. does affect clothing business.
This also determines about the growth of the business in the near future.
 Socio-cultural Environment
Socio-cultural factors that affect business are the group influence of the customers who want to
purchase the ethnic wears. People are influenced for purchase of designer ethnic wears because of
the tradition of Nepal as well as acceptance of people due to its comfortability on daily basis.
 Technological Environment:
Technology now plays an important role in any business. The advance type of technology has
resulted to keep updated about the new trendy clothes available in the market. Similarly, as
businesses are going to the online platform, we should also focus on that. Initially, using social
sites and websites, we can conduct the marketing activities on those platforms. So, coping with the
technological advancements, we should be updated with new opportunities in the technology field
regarding our business.

12 
 Chapter Plan: Financial Plan
7.1 Start-up Cost
Total start-up expenses are Rs.  2,641,486.111. Startup assets required Rs. 650000 in inventory.
With the owners' investment of Rs. 807,706.1111, the amount of additional start-up funds needed
are Rs. 1,833,780. The details are included in the table disclose in Annex 1.

Ownership Structure

Sources of Investment Proportion Amount

Debt 78% 1833780
Equity 22% 807706.1111
Total 100% 2641486.111
The above table shows 78% of start-up expenses will be covered by debt and remaining 22% will
be invested from the equity.

7.2 Assumptions
 Total Capital is comprised of 78% loan and 22% equity.
 Tax rate is 25% on earning.
 Preliminary expenses will be written off in 5 years.
 Accounts Receivable & Payable Assumptions:
 The days sales outstanding is assumed to be 20 days.
 The payable period is assumed to be 90 days.
 Receivable and Payable are 20% and 50% respectively.
 Loan Amortization Assumptions:
 Interest on capital loan is assumed to be 15% p.a. on quarterly basis.
 Depreciation Rate Assumptions:
 Laptop 25%
 Equipment 25%
 Furniture 25%
 Fixtures 25%
 Dummy 25%
 Hangers 25%

13 
  Salary Assumptions:
 Salary will be increased by 10% in every two years.
 Sales Assumptions
 Sales are assumed to increase by 25% for year 2, 35% for year 3, 32% for year 4
and 37% for year 5.
 Rent is projected to increase by 10% in every two years.
 Utility expenses are projected to increase by 5 % annually.
 Price of the product shall be increased.
 Advertising and promotion shall increase by 5% annually.
 Miscellaneous expenses shall be increased by 5% annually.
 Maintenance cost shall be increased by 10% annually.

7.3 Projected Balance Sheet

Balance Sheet of any business portraits the picture of business’s assets, liabilities and equity at a
specific point in time. The opening balance sheet of Adaa Ethnic Wears and Dresses shows Rs.
2,641,486.1 of total assets with same level of liabilities and equity and the total balance at the end
of year 5 is Rs. 4076740.7. The overall detail balance sheet of Adaa Ethnic wear and Dresses for
five years is disclosed in Annex 8.
7.4 Projected Income Statement
Income statements are one of the important tools for planning future business operations. If the
projections show a profitability, we can make operational changes such as increasing prices or
decreasing costs to have profit in business. The income statement of Adaa Ethnic Wears and
Dresses shows appropriate profit as well as increasing profit for the period of projection. The detail
of the projected income statement is shown in Annex 6.

7.5 Projected Cash Flow Statement

A cash flow statement forecasts the total net cash inflow or outflow at a specific point of time. It
shows the cash generated from operating, investing and financing activities. The opening cash
flow of Adaa Ethnic Wears and Dresses shows the net cash balance of Rs.  290,486.1111 at the
beginning year and balance of Rs. 1474200 at the end of year 5. The cash flow statement of Adaa
Ethnic Wears and Dresses is disclosed in Annex 9.
7.6 Business Financial Ratio
Financial ratios are created with the use of numerical values taken from financial statements to
gain meaningful information about a company. The numbers found on a company’s financial
statements – balance sheet, income statement, and cash flow statement – are used to perform

14 
quantitative analysis and assess a company’s liquidity, leverage, growth, margins, profitability,
rates of return, valuation, and more.
7.6.1 Liquidity Ratios
Liquidity ratios measure a company's ability to pay debt obligations and its margin of safety
through the calculation of metrics including the current ratio, quick ratio. Current liabilities are
analyzed in relation to liquid assets to evaluate the coverage of short-term debts in an emergency.
 Current Ratio
The current ratio started with 3.14 in the first year and increased to 3.47 within 5 years.
The ratio is quite favorable with no sharp increase showing Adaa Ethnic Wear and Dresses
has used its cash effectively as having too much cash is also not favorable.
 Quick Ratio
The quick ratio of the company is quite similar to current ratio as there is minimal inventory
of the firm. The Quick ratio at the beginning year is 1.43 and expected to grow up to 1.6.
This is one of the benefits of the firm as it requires low inventory for its operation.

7.6.2 Efficiency Ratios

The efficiency ratio is typically used to analyze how well a company uses its assets and liabilities
internally. An efficiency ratio can calculate the turnover of receivables, the repayment of liabilities,
the quantity and usage of equity, and the general use of inventory and machinery.
 Inventory Turnover
The inventory turnover ratio is 4 every year which means that the store sells and restock
the inventory in every 3 months period.
 Accounts receivable turnover
The account receivable turnover ratio is 18 every year which means that the store is
efficient enough to collect its credit sales from customer.
 Accounts payable Turnover
The accounts payable turnover is 4 is every year this means that the store is making slow
payments to the suppliers.
 Fixed Assets Turnover
The fixed assets turnover ratio is 3.87 times in first year and has become 37.3273 at the
end of fifth year.

15 
  Total assets Turnover
The total assets turnover ratio in the first year is 2.46 and has reached to 5.42 in the fifth
year. As the time period is increasing the store is becoming more efficient at generating
revenue from its assets.

7.6.3 Profitability Ratios

Profitability ratios are metrics that assess a company's ability to generate income relative to its
revenue, operating costs, balance sheet assets, or shareholders' equity. Profitability ratios show
how efficiently a company generates profit and value for shareholders.
 Gross Profit Margin
The gross profit margin of the store is 60% which interprets that the store can make a
reasonable profit on sales, as long as the store keeps overhead costs in control.
 Net Profit Margin
At the initial phase the store net profit margin is only 6% but at the end of the period it 31%
which indicates that the store is becoming more efficient day by day for converting sales
into actual profit.
 Operating Profit margin
At the end of fifth year the operating profit margin is 41% which was only 12% in the first
year so this indicates that the financial risk of the store is declining.

7.6.4 Solvency Ratios

The solvency ratio is a key metric used to measure an enterprise’s ability to meet its debt
obligations and is used often by prospective business lenders. The solvency ratio indicates whether
a company’s cash flow is sufficient to meet its short-and long-term liabilities.
 Debt to equity ratio
The debt equity ratio is 2.27 in the first year and has decreased in the next 5 years up to
0.20, as the debt has decreased in the next 5 years and equity has not changed in next 5
years as well.
 Interest Coverage ratio
The interest coverage ratio is 2.93 times in the first year. It has increased to 178.377 times
in the next 5 years due to decrease in interest and increase in income for the next 5 years.

16 
  Debt Service Coverage Ratio
The debt service coverage ratio is 2.85 times in the beginning and has increased to 17.03
times in the next 5 years. It is due to decrease in debt in the next 5 years and increase in
revenue in the next 5 years.

7.6.5 Other Important Indicators

 Break Even Analysis
 Payback Period
The pay-back period of Adaa Ethnic Wears and Dresses is 1.92 years. It means that the
initial investment will be recovered in the second year of operation. The calculation of
these periods is shown in the Annex .
 Net Present Value
Net Present Value (NPV) is described as the difference in amount between cash inflows
and cash outflows. It makes the comparison between the money worth today with the
present value of money in the future, taking inflation and returns into account. The
projected NPV shows the total value of Rs. 7076890. The calculation is shown in Annex.
 Internal Rate of Return
Internal Rate of Return (IRR) is the discount rate at which the present value of all future
cash flow is equal to the initial investment or in other words the rate at which an investment
break even. The IRR is 77%. The calculation is shown in Annex.

17 
 Chapter Eight: Exit Strategy
8.1 Exit Strategy
The co-owners intend to launch and grow Adaa Ethnic Wear and Dresses for many years into the
future. In the event that our investors require repayment of their initial investments, plus a large
return on their investments, we will seek a partner to buyout the investors’ shares. Another
alternative is a management buyout, which will be agreed upon in advance. Similarly, family
succession or selling to employees might also be considered as an alternative. Leaving the business
to family members will have a great way to remove yourself from the day-to-day operations while
still having some involvement. It’s also an opportunity to groom your successor from within the
company, ensuring a continuity of leadership. In the long-term, the management team will
position Adaa Ethnic Wear and Dresses as a profitable business that will be an appealing
acquisition for any number of retail chains.

18 
 ANNEXES
ANNEX 1: START-UP COST

Particulars Quantity Rate Amount

Fixed Assets:
Laptop 1 50000 50000
Equipment 190000
Fixtures 900000
Furniture 430000
1050
Dummy 7 15000 00
Hangers 30 150 4500

Total 1679500

Preliminary Expenses Qty Rate Amount

Rent(Shop+Godown) 3 80000 240000
Registration Fee 10000
Advertising 30000
Miscellaneous Expenses 30000
Logo Design 5000
Visiting Cards 4500
Utilities Expenses 7000
Store Decoration 345000

Total 671500
2351000
Initial Working Capital 290486.1
Total Projected Cost 2641486

ANNEX 2: SALES REVENUE AND COST OF GOODS SOLD

Particulars Year 0 Year 1 Year 2 Year 3 Year 4 Year 5

Growth Rate 25% 35% 32% 37%
Sales 6500000 8125000 10968750 14478750 19835887.5
COGS @ 40% 2600000 3250000 4387500 5791500 7934355

 
 
ANNEX 3: WORKING CAPITAL ASSESMENT

Current Assets Daily Sales Days Amount

Inventory 650000
Receivables 72222.22222
Cash(Operating Cash) 265000

Total 987222.2222
Current Liabilities Daily Sales Days Amount
Account Payable 406250
0
Total 406250
Net working Capital 580972.2222

Particulars Amount
Short Term Loan 290486.1111
Equity 290486.1111

Working Note:

Period
Operating Cash Rate (Months/Years) Amount
Rent 90000 12 1080000
Salary Expenses 80000 13 1040000
Insurance 160000 5 800000
Utilities Expense 6000 12 72000
Advertising and Promotion
expense 5000 4 20000
Miscellaneous Expenses 5000 12 60000
Maintenance Cost 150000
Total 3222000
268500

 
ANNEX 4: LOAN REPAYMENT SCHEDULE

Beginning Ending
Year Quarter (n) Amount Pmt Interest Principal Balance
0 0 1833780 1833780
1 1 1833780 131962.65 68766.75 63195.90 1770584.10
2 1770584.10 131962.65 66396.904 65565.75 1705018.34
3 1705018.34 131962.65 63938.188 68024.47 1636993.88
4 1636993.88 131962.65 61387.27 70575.38 1566418.49
Total 260489.11 267361.51
2 5 1566418.49 131962.65 58740.693 73221.96 1493196.53
6 1493196.53 131962.65 55994.87 75967.78 1417228.75
7 1417228.75 131962.65 53146.078 78816.58 1338412.17
8 1338412.17 131962.65 50190.456 81772.20 1256639.97
Total 218072.1 309778.52
3 9 1256639.97 131962.65 47123.999 84838.66 1171801.31
10 1171801.31 131962.65 43942.549 88020.11 1083781.21
11 1083781.21 131962.65 40641.795 91320.86 992460.35
12 992460.35 131962.65 37217.263 94745.39 897714.96
Total 168925.61 358925.01
4 13 897714.96 131962.65 33664.311 98298.34 799416.61
14 799416.61 131962.65 29978.123 101984.53 697432.08
15 697432.08 131962.65 26153.703 105808.95 591623.13
16 591623.13 131962.65 22185.867 109776.79 481846.34
Total 111982 415868.61
5 17 481846.34 131962.65 18069.238 113893.42 367952.93
18 367952.93 131962.65 13798.235 118164.42 249788.51
19 249788.51 131962.65 9367.069 122595.59 127192.92
20 127192.92 131962.65 4769.7345 127192.92 0.00
Total 46004.276 481846.34

ANNEX 5: PRELIMINARY EXPENSES

Particular Year 1 Year 2 Year 3 Year 4 Year 5

Beginning Preliminary Expenses 671500 537200 402900 268600 134300
Less: Written off @ 20% 134300 134300 134300 134300 134300
Ending Preliminary Expenses 537200 402900 268600 134300 0

 
ANNEX 6: PROJECTED INCOME STATEMENT

Projected Income Statement

Particulars Year 1 Year 2 Year 3 Year 4 Year 5

Revenue
Gross revenue 6500000 8125000 10968750 14478750 19835888
Less: Cost of goods sold @ 40% 2600000 3250000 4387500 5791500 7934355
Gross margin 3900000 4875000 6581250 8687250 11901533
Less: Operating Expenses
Operating expenses 2582001 2604602 2841080 3110713 3428243
Preliminary Expenses 134300 134300 134300 134300 134300
Depreciation 419875 314906.3 236179.7 177134.8 132851.1
Total Operating Expenses 3136176 3053808 3211560 3422148 3695394
EBIT 763824 1821192 3369690 5265102 8206139
Less: Interest
Long -Term Loan(15%) 260489.1 218072.1 168925.6 111982 46004.28
Short-Term Loan(10%) 29048.61 0 0 0
Total Interest 260489.1 247120.7 168925.6 111982 46004.28
EBT 503334.9 1574071 3200765 5153120 8160134
Less: Tax @25% 125833.7 393517.8 800191.2 1288280 2040034
Net income after tax 377501.2 1180553 2400574 3864840 6120101

ANNEX 7: PROJECTED RETAINED EARNING

Particulars
Net Income
Add: Opening retained earning
Total Retained Earnings
Less: Dividend
Closing retained earning
Retained Earning
Year 1 Year 2 Year 3 Year 4 Year 5
377501.2 1180553 2400574 3864840 6120101
0 377501.2 731667.2 1211782 1598266
377501.2 1558054 3132241 5076622 7718367
826387.3 1920459 3478356 5508091
377501.2 731667.2 1211782 1598266 2210276

 
ANNEX 8: PROJECTED BALANCE SHEET

Balance Sheet Projections

Particulars Year 0 Year1 Year 2 Year 3 Year 4 Year 5
Current Assets
Cash and Bank 290486.11 929314.66 972179.2 1305298.2 1381176.5 1474199.9
Account Receivable 72222.222 90277.778 121875 160875 220398.75
Total Inventory 650000 812500 1096875 1447875 1983588.8
Preliminary Expenses 671500 537200 402900 268600 134300 0
Total Current Assets 961986.11 2188736.9 2277857 2792648.2 3124226.5 3678187.4
Fixed Assets
Laptop 50000 37500 28125 21093.75 15820.313 11865.234
Equipment 190000 142500 106875 80156.25 60117.188 45087.891
Furniture 430000 322500 241875 181406.25 136054.69 102041.02
Fixtures 900000 675000 506250 379687.5 284765.63 213574.22
Dummy 105000 78750 59062.5 44296.875 33222.656 24916.992
Hangers 4500 3375 2531.25 1898.4375 1423.8281 1067.8711
Net Fixed Assets 1679500 1259625 944718.75 708539.06 531404.3 398553.22
Total Assets 2641486.1 3448361.9 3222575.7 3501187.3 3655630.8 4076740.7

Equity and Liabilities

Current Liabilities
Accounts Payable 406250 426562.5 583984.38 767812.5 1058758.6
Short-Term Debt 290486.11 0 0 0 0
Total Current Liabilities 0 696736.11 426562.5 583984.38 767812.5 1058758.6
Long-Term Liabilities
Long-Term Debt 1833780 1566418.49 1256639.97 897714.96 481846.34 0.00
Total Debt 1833780 1566418.5 1256640 897714.96 481846.34 0.00
Total Liabilities 1833780 2263154.6 1683202.5 1481699.3 1249658.8 1058758.6
Equity
Owner's equity(Common) 807706.11 807706.11 807706.11 807706.11 807706.11 807706.11
Retained Earnings 377501.17 731667.15 1211781.9 1598265.9 2210275.9
Total Equity 807706.11 1185207.3 1539373.3 2019488 2405972 3017982.1
Total Liabilities and
equity 2641486.1 3448361.9 3222575.7 3501187.3 3655630.8 4076740.7
Difference 0 0 0 0 0 0

 
ANNEX 9: PROJECTED CASH FLOW STATEMENT
Particulars Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
A)Cash Flow from Operating Activities
Net Profit/(Loss) before Tax 377501 1180553.281 2400573.5 3864840 6120101
Add: Adjustments
Depreciation 419875 314906.25 236179.69 177134.8 132851.1
Preliminary written-off 134300 134300 134300 134300 134300
Inventory -650000 -162500 -284375 -351000 -535714
Account Receivable -72222 -18055.55556 -31597.22 -39000 -59523.8
Account Payable 406250 20312.5 157421.88 183828.1 290946.1
Net Cash flow from Operating Activities 0 615704 1469516.475 2612502.9 3970103 6082960

B)Cash Flow from Investing Activities

Decrease/(Increase) in fixed Assets -1679500
Decrease/(Increase) in preliminary expenses -671500
Net Cash flow from Investing Activities -2351000 0 0 0 0 0

C)Cash flow from Financing Activties

Increase/(Decrease) in Share Capital 807706.1
Increase/(Decrease) in Long Term Loans 1833780 -267362 -309778.5216 -358925 -415869 -481846
Payment of Dividend 0 -826387.2966 -1920459 -3478356 -5508091
Short-term loan 290486 -290486.1111
Net Cash Flow from Financing Activities 2641486 23124.6 -1426651.929 -2279384 -3894225 -5989937

Net change in cash (1+2+3) 290486.1 638829 42864.54595 333119.03 75878.29 93023.4
Add: Opening balance 0 290486 929314.6586 972179.2 1305298 1381177
Ending balance 290486.1 929315 972179.2046 1305298.2 1381177 1474200

 
ANNEX 10: RATIO ANALYSIS

Ratios
Particulars Year 1 Year 2 Year 3 Year 4 Year 5
Liquidity Ratios
Current ratio 3.141414 5.340031 4.78206 4.068997 3.474057
Quick ratio 1.437469 2.490742 2.443855 2.00837 1.600552

Efficiency Ratios
Inventory Turnover 4 4 4 4 4
Account Receivable Turnover 18 18 18 18 18
Account Payable Turnover 4 4 4 4 4
Fixed Assets Turnover 3.870199 6.450332 11.6106 20.43465 37.3273
Total Assets Turnover 2.460736 2.356191 3.403721 4.135383 5.426119

Profitability Ratios
Gross Profit Margin 60% 60% 60% 60% 60%
Net Profit Margin 6% 15% 22% 27% 31%
Operating Profit Margin 12% 22% 31% 36% 41%
Return on Assets 14% 34% 74% 110% 167%
Return on Equity 47% 146% 297% 478% 758%
Dividend Pay-out 0% 70% 80% 90% 90%

Solvency Ratios
Debt Equity Ratio 2.270355 1.321641 0.816332 0.444526 0.200271
Total Assets to Equity Ratio 3.270355 4.269327 3.989787 4.334729 4.525942
Interest Coverage Ratio 2.932268 7.369644 19.94778 47.0174 178.3777
Debt Service Coverage Ratio 2.856896 5.879012 9.388285 12.66049 17.03061

Other important indicators

Payback Period 1.929419 1.929419 1.929419 1.929419 1.929419

Net Present Value 810153.2 1232332 1822012 2387799 3175593
Internal Rate of Return 77% 77% 77% 77% 77%

 
ANNEX 11: CAPITAL BUDGETING

Calculation of Cash Flows

Year 1 2 3 4 5
EAT 377501.1661 1180553.281 2400574 3864840 6120101
Add: Depreciation 419875 314906.25 236180 177135 132851
Add: Preliminary Expenses 134300 134300 134300 134300 134300
CFAT 931676.1661 1629759.531 2771053 4176275 6387252

Calculation of Net Cash Outlay

Particulars Amount
Initial Investment 2641486.111
Less: Working Capital 290486.1111
NCO 2351000

Calculation of Weighted Average Cost of Capital

Source of Capital Cost of Capital Weight W*K
Debt 0.1 0.78 0.078
Equity 0.1 0.22 0.022
WACC 1 0.1

Calculation of Net Present Value

PV Factor @
Year CFAT 15% PV
-
0 -2351000 1 2351000
1 931676.1661 0.869565217 810153
2 1629759.531 0.756143667 1232332
3 2771053.217 0.657516232 1822012
4 4176274.938 0.571753246 2387799
5 6387251.818 0.497176735 3175593
NPV 7076890

 
Calculation of Payback Period
Cumulative Cash
Year Cash Flow Flow
0 -2351000 -2351000
1 931676.1661 -1419323.834
2 1629759.531 210435.697
3 2771053.217 2981488.914
4 4176274.938 7157763.852
5 6387251.818 13545015.67

Payback Period 1.929419259

Calculation of Internal Rate of Return

Year Cash flow
0 -2351000
1 931676.1661
2 1629759.531
3 2771053.217
4 4176274.938
5 6387251.818

IRR 77%

Calculation of Profitability Index

Year CFAT PV Factor @ 15% PV
1 931676.1661 0.869565217 810153.1879
2 1629759.531 0.756143667 1232332.348
3 2771053.217 0.657516232 1822012.471
4 4176274.938 0.571753246 2387798.75
5 6387251.818 0.497176735 3175593.006
TPV 9427889.764

NCO TPV Profitability Index

2351000 9427889.764 4.010161533