Professional Documents
Culture Documents
MEN FOOTWEAR
HEAD OFFICE
4th Floor, Building No. 3, Aiwan-e-Iqbal Complex, Egerton Road,
Lahore
Tel: (92 42) 111 111 456, Fax: (92 42) 36304926-7
helpdesk@smeda.org.pk
3rd Floor, Building No. 3, 5TH Floor, Bahria Ground Floor Bungalow No. 15-A
Aiwan-e-Iqbal Complex, Complex II, M.T. Khan Road, State Life Building Chaman Housing Scheme
Egerton Road Lahore, Karachi. The Mall, Peshawar. Airport Road, Quetta.
Tel: (042) 111-111-456 Tel: (021) 111-111-456 Tel: (091) 9213046-47 Tel: (081) 831623, 831702
Fax: (042) 36304926-7 Fax: (021) 5610572 Fax: (091) 286908 Fax: (081) 831922
helpdesk.punjab@smeda.org.pk helpdesk-khi@smeda.org.pk helpdesk-pew@smeda.org.pk helpdesk-qta@smeda.org.pk
December 2016
Pre-Feasibility Study Men Footwear
Table of Contents
1 DISCLAIMER.......................................................................................................................................... 3
2 EXECUTIVE SUMMARY ...................................................................................................................... 4
3 INTRODUCTION TO SMEDA ............................................................................................................. 4
4 PURPOSE OF THE DOCUMENT........................................................................................................ 5
5 BRIEF DESCRIPTION OF PROJECT & PRODUCT........................................................................ 5
5.1 PROPOSED PRODUCT MIX ......................................................................................................................... 6
5.2 INSTALLED AND OPERATIONAL CAPACITIES .......................................................................................... 6
6 CRITICAL FACTORS ............................................................................................................................ 6
7 GEOGRAPHICAL POTENTIAL FOR INVESTMENT ..................................................................... 6
8 POTENTIAL TARGET CUSTOMERS / MARKETS ........................................................................ 7
9 PROJECT COST SUMMARY................................................................................................................ 7
9.1 PROJECT ECONOMICS ................................................................................................................................. 7
9.2 PROJECT FINANCING................................................................................................................................... 7
9.3 PROJECT COST ............................................................................................................................................. 8
9.4 SPACE REQUIREMENT ................................................................................................................................ 8
9.5 FURNITURE & FIXTURES REQUIREMENT ................................................................................................ 9
9.6 OFFICE EQUIPMENT REQUIREMENT ..................................................................................................... 10
9.7 HUMAN RESOURCE REQUIREMENT ...................................................................................................... 11
9.8 UTILITIES AND OTHER COSTS ................................................................................................................ 11
9.9 REVENUE GENERATION .......................................................................................................................... 11
10 CONTACT DETAILS ........................................................................................................................... 13
11 USEFUL WEB LINKS .......................................................................................................................... 14
12 ANNEXURES ........................................................................................................................................ 15
12.1 INCOME STATEMENT ............................................................................................................................... 15
12.2 BALANCE SHEET....................................................................................................................................... 16
12.3 CASH FLOW STATEMENT ........................................................................................................................ 17
13 KEY ASSUMPTIONS........................................................................................................................... 18
13.1 OPERATING COST ASSUMPTIONS .......................................................................................................... 18
13.2 REVENUE ASSUMPTIONS ........................................................................................................................ 18
13.3 FINANCIAL ASSUMPTIONS ...................................................................................................................... 18
December, 2016 2
Pre-Feasibility Study Men Footwear
1 DISCLAIMER
For more information on services offered by SMEDA, please contact our website:
www.smeda.org.pk
December, 2016 3
Pre-Feasibility Study Men Footwear
2 EXECUTIVE SUMMARY
This SME venture entails setting up Men Footwear Retail outlets in Lahore, the
second largest city of Pakistan. The outlet is proposed to cater to the demand of
men footwear, belonging to middle to upper middle economic stratum. The focus
of the business would be to provide casual, semi-formal and formal, quality
footwear at affordable prices. Footwear retail outlet is a project of trading nature;
shoes are assumed to be purchased from different subcontract manufacturers and
sold at the retail outlet under a brand name.
The demand for footwear is constantly rising and there are a number of local
manufacturers in the industry producing quality footwear to cater to the demand of
the growing population. Some of these local manufacturers are now focusing on
retail side of the business adjusting to the shopping habits of consumers
nowadays. In this day and age consumers are becoming increasingly brand
conscious and seek value for money products. This trend has led to strong growth
in retail chains around Pakistan. Companies are now more aware of the
importance of retailing in business. Some of the successfully established men’s
brands of Pakistan are Hush Puppies, Metro Men, Bata, Borjan, English Boot
House (EBH), Servis, etc. Other relatively famous designer brands in Lahore and
Karachi are Epcot, Urban Sole, Arino Shoes and Exist Shoes. These and
numerous other local brands have developed a strong presence by opening up
multiple outlets in the same city or in various cities.
The total initial project cost for setting up a single outlet in first year is estimated at
Rs. 7.31 million. The project is proposed to be financed through 50% debt and
50% equity. The project NPV is projected around Rs. 29.91 million, with an IRR of
68% and payback period of 2.47 years. The legal business status of this project is
proposed as ‘Sole Proprietorship’.
It is proposed that the project start its operations with opening of one outlet in the
first year and would expand business by setting up one additional outlet in the third
year. The outlets are planned to be open 12 hours every day. The proposed
project assumes to sell around 6,854 pairs in the first year of operation and by
tenth year of operation the brand is projected to sell a total of 20,703 pairs through
both the outlets.
3 INTRODUCTION TO SMEDA
With a mission "to assist in employment generation and value addition to the
national income, through development of the SME sector, by helping increase the
number, scale and competitiveness of SMEs", SMEDA has carried out ‘sectoral
December, 2016 4
Pre-Feasibility Study Men Footwear
Apart from carefully studying the whole document one must consider critical
aspects provided later on, which form basis of any Investment Decision.
This document provides details for setting up a Footwear Retail Outlet selling
men’s shoes. A total of two outlets are proposed; the project would start with a
single outlet and opening of one additional outlet is proposed in third year.
The proposed business involves purchase of men’s shoes from a local
manufacturer and selling it through retail outlets, under a brand name, in any big
city of Pakistan. The shop is assumed to operate for 12 hours on weekdays.
December, 2016 5
Pre-Feasibility Study Men Footwear
6 CRITICAL FACTORS
The most critical considerations / factors for the success of this project are as
follows:
December, 2016 6
Pre-Feasibility Study Men Footwear
Target customer for the proposed project would be males of ages 14 years and
above, belonging to middle and upper middle economic stratum. The middle and
upper middle family income groups dominate the overall population in Pakistan.
This phenomenon provides an ample opportunity for the investment in this sector.
A detailed financial model has been developed to analyze the commercial viability
of Footwear Retail Outlet for Men. Various costs and revenue related assumptions
along with results of the analysis are outlined in this section.
The projected Income Statement, Cash Flow Statement and Balance Sheet are
also attached as Annexure.
December, 2016 7
Pre-Feasibility Study Men Footwear
Working Capital
Repair Material Inventory 2,897
Cash 1,182,194
December, 2016 8
Pre-Feasibility Study Men Footwear
December, 2016 9
Pre-Feasibility Study Men Footwear
December, 2016 10
Pre-Feasibility Study Men Footwear
December, 2016 11
Pre-Feasibility Study Men Footwear
Total 11,732,000
Total 16,076,500
Total 6,583,500
December, 2016 12
Pre-Feasibility Study Men Footwear
Total 9,028,250
10 CONTACT DETAILS
December, 2016 13
Pre-Feasibility Study Men Footwear
December, 2016 14
Pre-Feasibility Study Men Footwear
12 ANNEXURES
Income Statement
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Revenue 27,808,500 31,567,725 65,663,798 73,534,655 81,360,519 89,764,073 98,819,323 108,563,426 119,013,468 130,259,601
Cost of sales
Cost of purchasing shoes 15,611,750 17,381,306 36,494,983 40,488,311 44,790,068 49,420,430 54,395,219 59,758,253 65,513,883 71,696,107
Direct labor 1,224,000 1,346,400 2,962,080 3,258,288 3,584,117 3,942,528 4,336,781 4,770,459 5,247,505 5,772,256
Fixing and repair material 69,521 78,919 164,159 183,837 203,401 224,410 247,048 271,409 297,534 325,649
Direct Electricity 660,240 726,264 1,597,781 1,757,559 1,933,315 2,126,646 2,339,311 2,573,242 2,830,566 3,113,623
Transport rental expense 312,235 347,626 729,900 809,766 895,801 988,409 1,087,904 1,195,165 1,310,278 1,433,922
Generator expense 525,000 577,500 1,270,500 1,397,550 1,537,305 1,691,036 1,860,139 2,046,153 2,250,768 2,475,845
Total cost of sales 18,402,746 20,458,016 43,219,403 47,895,310 52,944,007 58,393,459 64,266,403 70,614,681 77,450,534 84,817,402
Gross Profit 9,405,754 11,109,709 22,444,395 25,639,345 28,416,511 31,370,614 34,552,920 37,948,745 41,562,934 45,442,198
Interest expense on long term debt (Project Loan) 171,492 142,393 108,949 109,113 58,384 24,524 15,872 5,927 - -
Interest expense on long term debt (Working Capital Loan) 194,746 - - - - - - - - -
Subtotal 366,238 142,393 108,949 109,113 58,384 24,524 15,872 5,927 - -
Earnings Before Tax 4,383,879 5,876,895 13,309,533 15,101,646 16,964,780 19,379,606 20,940,412 23,078,537 25,953,245 27,631,480
Tax 837,663 1,285,568 3,880,836 4,508,076 5,160,172 6,005,361 6,551,644 7,299,987 8,306,135 8,893,517
NET PROFIT/(LOSS) AFTER TAX 3,546,216 4,591,327 9,428,697 10,593,571 11,804,608 13,374,244 14,388,769 15,778,550 17,647,110 18,737,962
December, 2016 15
Pre-Feasibility Study Men Footwear
December, 2016 16
Pre-Feasibility Study Men Footwear
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Operating activities
Net profit 3,546,216 4,591,327 9,428,697 10,593,571 11,804,608 13,374,244 14,388,769 15,778,550 17,647,110 18,737,962
Add: depreciation expense 296,867 296,867 296,867 645,202 645,202 645,202 691,605 691,605 691,605 729,203
amortization of pre-operating costs 46,600 46,600 46,600 46,600 46,600 - - - - -
amortization of training costs 10,000 10,000 10,000 10,000 10,000 - - - - -
Deferred income tax - - - - - - - - - -
Closing stock (391,548) (35,164) (483,170) (89,052) (105,236) (113,588) (122,414) (132,321) (142,482) (153,548)
Equipment inventory (2,897) (556) (4,088) (1,326) (1,434) (1,632) (1,861) (2,118) (2,404) (2,733) 21,050
Opening inventory (2,601,958) (439,770) (3,664,224) (1,105,760) (1,262,055) (1,438,629) (1,636,735) (1,865,178) (2,117,997) (2,405,058) 18,537,366
Pre-paid building rent (900,000) (90,000) (1,188,000) (217,800) (239,580) (263,538) (289,892) (318,881) (350,769) (385,846) 4,244,306
Accounts payable 769,580 223,860 834,493 216,842 236,777 258,492 282,112 308,540 336,557 (507,455)
Cash provided by operations (3,504,855) 3,747,389 277,177 8,808,600 9,920,095 10,934,152 12,235,862 13,053,894 14,175,204 15,739,152 41,608,883
Financing activities
Project Loan - principal repayment (194,844) (223,942) (257,386) (339,684) (390,413) (57,938) (66,590) (76,535) - -
Working Capital Loan - principal repayment (2,343,525) - - - - - - - - -
Additions to Project Loan 1,312,000 - - 295,331 - - - - - - -
Additions to Working Capital Loan 2,343,525 - - - - - - - - - -
Issuance of shares 3,655,525 - - 295,331 - - - - - - -
Cash provided by / (used for) financing activities 7,311,049 (2,538,368) (223,942) 333,276 (339,684) (390,413) (57,938) (66,590) (76,535) - -
Investing activities
Capital expenditure (2,624,000) - - (3,035,111) - - (715,598) - - (828,394) -
Cash (used for) / provided by investing activities (2,624,000) - - (3,035,111) - - (715,598) - - (828,394) -
NET CASH 1,182,194 1,209,020 53,235 6,106,765 9,580,411 10,543,739 11,462,327 12,987,304 14,098,669 14,910,758 41,608,883
December, 2016 17
Pre-Feasibility Study Men Footwear
13 KEY ASSUMPTIONS
Description Details
Transport Rental Expense 2% of Purchasing Expense
Promotional Expenses Rs. 25,000 per Month
Purchase price growth rate 10%
Operating costs growth rate 10%
Communication expense Rs. 10,000 per Month
Sales Commission 2% of Revenue
Office expenses (stationary, entertainment, Rs. 20,000 per Month
janitorial services, etc.)
Professional fees (legal, audit, consultants, etc.) Rs. 50,000 per Annum
Furniture & fixtures deprecation 10%
Inflation Growth Rate 10%
Electricity Price Growth Rate 10%
Salaries Growth Rate 10%
Description Details
Description Details
Project Life (Years) 10
Debt: Equity 50:50
Interest rate on long term debt 14%
December, 2016 18