MGNT1010 Business Justification (Group Project)
Group: 2
Business Justification Items
1.Initial Investment (HK$)
Company set-up cost
1. Store Rental deposit: $50,000
2. Store Rental cost(1 yr): $180,000
3. Hiking kits: $125,000
4. Camping kits: $100,000
5. Camping car (big in size): $500,000
6. Car park rental cost: $57,500
7. Green food: $150,000
8. Equipment in store: $100,000
Total: $1,337,500
Marketing cost
1. Ads in FB and IG: $50,000
2. AI: $300,000
3. Apps: $200,000
Total: $550,000
Employees:
1. App Designers (6-8 people)
2. Marketing officer (3-5 people)
MGNT1010 Business Justification Template
Project Name: Online camping store
Assumptions (Explanations)
- Assume we have to rent an office for
inventory, choose an industrial building to
save cost $15000 per month.
- Usually the owner required the tenant to
sign a 1-year fixed contract and also a
rental deposit, so total $230000 is paid.
- We have to invest in purchasing camping
supplies for instance from Taobao and
Decathlon for beginners and SnowPeak or
Coleman for senior renters. We reserve
$300,000 for buying camping and hiking
kits. We will not be manufacturing any of
our own products.
- We provide camping car rental service, we
need to invest in importing camping cars
from the United Kingdom or United States.
The estimated price is $100,000 per car, 5
cars will be purchased.
- Car park is required as the cars have to
park when no one is renting it. The
monthly rental cost for 5 cars’ car parks in
rural area with cheaper cost is
approximately $9500.
- We also plan to diversify our business to
Green food. We use $150,000 to import or
purchase from wholesale and resell it.
- Equipment in store, e.g. computers, wifi
router, stationery, chairs, table, estimating
$100,000 in total.
- Total company set-up cost is
approximately $2,745,000.
3. Customer service (20-30 people)
4. Food coordinator (3-5 ppl)
5. Administrator (3-5 ppl)
Insurance
Total required capital: $1,887,500
2.Payback Period (months)
Payback period = initial investment/cash flow per
month
, where initial investment = $3,295,000,
cash flow per month =10,755,000/12= $896,250,
where minimum yearly operating profit =
10,755,000
Payback period = 3.68 month
MGNT1010 Business Justification Template
- Advertisements posted on FB and IG
( largest social media in Hong Kong). For
1000 Ad exposure, it costs $20. We want
to achieve 25,000,00 exposure to gain
more eyeballs. It costs:
$(25,000,00/1000)*20= $50000
- We also make our company different from
other companies. AI and Apps are
invented to gain competitiveness.
Estimated costs respectively are $300,000
and $200,000
- Total marketing cost = $( 50000+
300,000,200,000) = $55,0000.
- Total required capital = $2,645,000+
550,000 = $319500
- Payback period is calculating the number
of months to recover the costs of initial
investment.
- Initial investment according to part 1 =
$3,295,000.
- cash flow per month extracts from the
minimum profit calculated in lean canvas.
- Divide initial investment by cash flow per
month, the payback period is 3.68months.
3.Estimated Monthly Revenue (HK$) YY - Estimated customers per month is around
415.

- However, not every customer will buy all

- Estimated 5000 customers in first year our products, therefore revenue is
- Estimated customers per month: 415 calculated based on product popularity

- Basic hiking and meal plans are estimated

to be the most popular products,
Revenue: therefore we predict that most customers
will purchase these items, hence 350-400
customers.
- Basic Camping Kit
- Meal plans are the easiest to purchase and
- $ 350 ×200=$ 70,000 most likely to be the most useful product,
- Basic Hiking Kit therefore we estimate that around 65% of
- $ 350 ×250=$ 87,500 customers will buy our meal plans per
- Car Rental Plan (including meals) month (note that customers that purchase
- $ 2250 ×14=$ 31,500 hiking/camping sets are likely to purchase
- Meal Plans meal plans too, so they overlap). Hence,
- $ 175× 300=$ 52,500 the number of 300.

Average monthly revenue: 241,500
- We estimate that the car rental plan
will be the least popular product
because of the price and accessibility.
Therefore, we estimate that only 20%
of customers will purchase this per
year, which translates to 84 people, 14
groups of people (6-8) per month.
- Basic camping kit and car rental plans may
not be as popular, therefore we predict
100-200 customers per month for these
products.

- I took the average prices of each product

and multiplied it by number of estimated
customers.

4.Estimated Monthly Expense (HK$) Charleen - Annual advertising fee is $50,000, so

monthly fee is $50,000/12=$4,166.
- Advertisement in Fb and Ig:
$50,000/12=$4,166 - Replenishment of food and drink per set
costs $15. Monthly estimated camping

MGNT1010 Business Justification Template

 - Replenishment of food and drink for kits:
- camping kit:
$15*(2250/12)=$2812.5
- hiking kit: $15*(3000/12)=$3750
- Green food: $200*(3250/12)=$54200
- Meal plan for car camping:
$500*(1000/12)=$41500
- Car maintenance: ($5600/12)*5=$2333
- Rent: $15,000
- AI: $300,000/12=$25,000
- Database of multi feature App:
$200,000/12=$16,666
- Car park rental fee:
($11,500/12)*5=$4791.5
Total estimated monthly expense:
$4,166+$2812.5+$3750+$54200+$41500+$2333+
$15,000+$25,000+$16,666+$4791.5=$170,219
5.Estimated Monthly Operating Profit (HK$)
Revenues – Operating costs = Operating Profit
Revenue: 487,500
Operating costs: 379,247
Operating profit: 108,253
MGNT1010 Business Justification Template
customers is 2250/12=187.5. So monthly
replenishment is $15*(2250/12)=$2812.5.
- Green food per person is $200. Monthly
estimated customers is 3250/12=271. So
monthly green food cost is
$200*(3250/12)=$54200.
- Annual maintenance fee per car is $5600,
so monthly fee is $5600/12, multiplied by
5 cars: ($5600/12)*5=$2333.
- Monthly rent of a flat in an industrial
building is around $15,000.
- The total cost of AI is $300,000. The fee
will be paid in a 12-month interest-free
installment. The database is paid in the
same way.
- The annual car park rental fee is $11,500
per car, so monthly fee is
$11,500/12=958.3, multiplied by 5 cars is
$958.3*10=$4791.5
- Operating include operating expenses (eg:
store rental) and cost of goods sold (which
were calculated as shown above)
6.Projected Yearly Revenue (HK$) Katherine - Revenue can be calculated through the
formula price x qts sold
Source of revenue: (Price x Qts Sold)
- Assuming that the number of early
Total number of customers: 5000 adopters: 5000 in 1st year and the
- Hiking: 60% = 3,000 frequency of camping/hiking: 2-3
times/month
- Camping: 45% = 2,250
- Sources of revenue include → basic
- Meal: 65% =3,250 camping kit, basic hiking kit, car rental plan
and meal plans.
- Car (5 cars): 20% = 1,000

- Basic Camping Kit - Potentially the total revenue should be

- $ 300 ×2250=$ 675,000 between $4,212,500 and $5,562,500
- $ 400 ×2250=$900,000 assuming that there are no seasonal
- Basic Hiking Kit fluctuations
- $ 350 ×3000=$ 1,050,000
- $ 450 ×3000=$ 1,350,000
- Car Rental Plan (includes meal)
- $ 2,000 ×1000=$ 2,000,000
- $ 2,500 ×1000=$ 2,500,000
- Meal Plan
- $ 150× 3250=$ 487,500
- $ 250 ×3250=$ 812,500

Total Revenue Calculation

Lower :

675,000 + 1,050,000+2,000,000+487,500

= $4,212,500

Upper:

900,000+1,350,000+2,500,000+812,500

= $5,562,500

7. Projected Profit Margin (%) Wing Yee Sze Rough Estimation only

Profit/total revenue x 100%

The projected profit margin is mainly determined

by the yearly revenue and yearly expense which is
multiply 12 monthly expense from the previous

MGNT1010 Business Justification Template

Best: parts.

revenue: $5,562,500 The margin is calculated with the best revenue.

yearly expense: 379,247*12

= $4,550,964

Profit: $5,562,500 - 4,550,964

= $1,011,536

Projected Profit margin:

$1,011,536/5,562,500

= 18.2%

MGNT1010 Business Justification Template