Project Report GMCS (1)
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Transcript of Project Report GMCS (1)
7/15/2019 Project Report GMCS (1)
http://slidepdf.com/reader/full/project-report-gmcs-1 1/17
Business Plan
7/15/2019 Project Report GMCS (1)
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Executive SummarySoapy Rides is a prominent hand car wash serving the Chennai & Banglore.. SoapyRides will be run by Team 4.
The Business Soapy Rides will be providing customers with three services: exterior car washing, ,interior cleaning, and detailing. Soapy Rides has no true competitors that are tryingto offer a high quality service for a reasonable rate. Most are trying to compete onprice alone. Soapy Rides' ability to provide a high quality service, both in regards tothe actual washing as well as customer service is all based on their ability to find the
best employees. Hiring the best employees is cost effective because it decreasesHR costs associated with turnover and other employee costs. Hiring the bestemployees and making sure that they are well taken care of ensures that they in turntake care of the customers. Study after study proves that a happy employee is far more likely to provide the highest level of customer service compared to anemployee who is not happy and feels that they are being taken advantage of.
The Customers Soapy Rides will target three main groups of customers: individual car owner andleasers, car dealerships, and local businesses. The surrounding area is quiteaffluent, 40% of the residents earn over Rs.70,00,000 a year. Consequently, theyhave nice cars and want them to look nice. There are five different car dealershipswithin a three-mile radius which will require car washing services for the variousfleets. Lastly, there are many different local businesses that have company cars andthat require clean appearances.
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1.1 ObjectivesThe objectives for Soapy Rides Car Wash and Detail Service are:
1. To be viewed as a premium car wash and detail service in Chennai.2. Maintain a very high gross profit margin.3. Maintain a modest, steadily growing net profit margin.4. Expand to two locations after third year of operation.
1.2 MissionThe mission of Soapy Ride is to provide top-quality washing and detail service for luxury car owners in Chennai. Soapy Rides will work to keep employees satisfied inorder to maintain impeccable customer service.
ServicesSoapy Rides will provide three services to its customers:
Car washing (exterior) Car cleaning (interior) Car detailing
Market Analysis SummaryThe car wash will be based in Chennai. This area has a number of benefits in termsof the market that it will provide for the business. Over 40% of households in theimmediate neighborhood earn over Rs.70,00,000 annually. Many people in theneighborhood own and/or lease new cars and place great value on their cars andhow they look. There are a large number of car dealerships in the area--five withinthree miles of the proposed location for Soapy Rides.4.1 Market SegmentationSoapy Rides segments its customers by type of car ownership. We believe that thetype of car that a person owns says volumes about their driving, and, therefore their
car washing and detailing requirements.
1. New car owners: Owners of newer cars are most likely to use a hand car washingservice. These owners take great pride in their cars and will bring them often to thewash and detail service. The goal with these customers is to promote regular use of the wash and detail service. The aim is to inform these customers that Soapy Rideswill keep their car looking as good as it did the day they drove it off the lot.
2. Older luxury car owners: These people have either owned their high-end luxurycars for several years or are unable to afford the expense of a new luxury car butwant the feel of relaxed driving. Both of these groups want to keep their cars in the
best shape possible. Those who have bought second-hand cars will often spend
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many hours in their cars and will place high importance on keeping their cars lookinggood. These owners will bring their cars in for regular washes and occasional details.
3. Sports car owners: These people are often younger or middle-aged men and willregard the look of their car as important. They will also pride themselves on the look
of their car and will have their car hand washed (at least) weekly. These drivers willhave an occasional detail, but will keep their cars so clean the detail will not benecessary very often.
4. Lifetime owners: Many of these people have owned their cars for more than five or six years, and are more likely to be women. They are attached to their cars asfriends and though it may be more sensible for them to purchase a new car, they willbring their car in for a wash occassionally, just when the car is dirty. They like their cars to look presentable, and want to keep it in good shape but are not tied up in the
look of their car. For this reason, they will not have a detail carried out on their car unless they are selling it.
5. Dealerships: There are five new and used car dealerships within three miles of theproposed location of Soapy Rides. These dealerships often use outside car washservices to detail their vehicles before they are put up for sale. In addition, there arefifteen other car dealerships within a seven mile radius of Soapy Rides.
6. Local businesses: Some local businesses have fleets of cars and small vans thatmust be kept clean to maintain their company image. These businesses will
be looking for a cost effective, efficient car washing service to perform this service,and will prefer to use a car wash service during the week rather than duringweekends, like the general public.
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4.2 Target Market Segment Strategy
The strategy behind Soapy Rides target segmentation is to attract customers whowill be repeat users and will frequent the business in the typically quiet times for acar wash business. It will not be difficult to attract customers during the summer months and on the weekends, the weekdays however, especially in the winter,people will not think about having their cars washed. For this reason, Soapy Rideswill target people who will tend not to be restricted to these busy times.
Business owners (new car owners) tend to be very busy people, but are often able tomake their own hours.
Retired people (older luxury car owners) are not restricted by typical work schedulesso will be able to frequent the car wash during the week.
Dealerships will need cars detailed and washed regardless of the time of the day andweek. This will supply a constant flow of traffic.
Businesses will need their fleet cars washed during the week during regular businesshours.
4.3 Service Business AnalysisThe hand car washing business in Chennai consists of many smallcompetitors. Everything from local children raising money for their youth group on aSaturday by cleaning cars, to the automatic car wash machines, are competition for Soapy Rides. However, these two alternatives aim to meet the needs of the price-conscious individuals who are choosing the service simply so they do not have toclean the car themselves. Soapy Rides on the other hand, targets the quality-conscious individuals who value their car enough to spend Rs.10-Rs.15 per week tomake it look good.
4.3.1 Competition and Buying Patterns
There is one other hand car wash shop in Chennai. It is quite new and is trying tocompete with automatic car washes by offering low prices. However, it is nottargeting the customers who seek quality cleaning.The customers who Soapy Rides is targeting have their cars washed based on thequality of the job. They do not mind spending a little more each week to have their car washed and waxed in order to keep the paint work in excellent shape. Thebusinesses that Soapy Rides targets will be more cost conscious, so prices will beapproximately 30% less for these customers to promote volume usage.
Strategy and Implementation Summary
The key differentiator for Soapy Rides Car Wash is Team 4 and his business andpersonal connections within the Chennai neighborhood. For this reason, the sales
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and marketing focus will be on a one-to-one basis, with the emphasis on gainingloyal and repeat customers as "friends" of the business. Soapy Rides, therefore, willdepend on word-of-mouth advertising for the immediate community.
5.1 Competitive Edge
Soapy Rides' competitive edge will be Team 4 and the quality of the family name inthe Chennai area. As mentioned, the family has been in the car business for over 30years, and has an excellent reputation and a myriad of both business and personalcontacts. In addition, Mark has put a great deal of emphasis on creating a systemthat is both fast and efficient, which will keep costs, in terms of time spent per car, toa minimum.
5.2 Sales StrategySales strategy is on a one-to-one basis. All customers will feel they are a valuedfriend of Soapy Rides, and that all employees care about the care and upkeep of
each vehicle. We must be aware that there are low switching costs in the car washing industry, so we have to work hard to develop and keep repeat customers.
5.2.1 Sales ForecastThe following chart forecasts sales based upon the Market Segmentation Strategy.Sales are seasonal in this industry, tending to be higher in the warmer summer months, and to drop off in the winter. However, we will aim to flatten sales across thesales cycle by targeting segments that will want to keep their cars clean and lookinggood year round.
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Sales Forecast ( Rs. In ’00)
Year 1 Year 2 Year 3
Unit Sales
Full Wash 1,760 2,288 2,974
Exterior Wash 2,050 2,665 3,465
Interior Clean 770 1,001 1,301
End User Detail 129 193 290
Business Fleet Washes 615 923 1,384
Car Dealership Details 494 642 963
Total Unit Sales 5,818 7,712 10,376
Unit Prices Year 1 Year 2 Year 3
Full Wash Rs.15.00 Rs.15.00 Rs.15.00
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Exterior Wash Rs.9.00 Rs.10.00 Rs.12.00
Interior Clean Rs.8.00 Rs.9.00 Rs.9.00
End User Detail Rs.140.00 Rs.145.00 Rs.150.00
Business Fleet Washes Rs.10.00 Rs.10.00 Rs.10.00
Car Dealership Details Rs.70.00 Rs.75.00 Rs.80.00
Sales
Full Wash Rs.26,400 Rs.34,320 Rs.44,616
Exterior Wash Rs.18,450 Rs.26,650 Rs.41,574
Interior Clean Rs.6,160 Rs.9,009 Rs.11,712
End User Detail Rs.18,060 Rs.27,985 Rs.43,425
Business Fleet Washes Rs.6,150 Rs.9,225 Rs.13,838
Car Dealership Details Rs.34,580 Rs.48,150 Rs.77,040
Total Sales Rs.109,800 Rs.155,339 Rs.232,204
Direct Unit Costs Year 1 Year 2 Year 3
Full Wash Rs.0.70 Rs.0.80 Rs.0.90
Exterior Wash Rs.0.40 Rs.0.45 Rs.0.50
Interior Clean Rs.0.30 Rs.0.35 Rs.0.40
End User Detail Rs.3.00 Rs.3.50 Rs.4.00
Business Fleet Washes Rs.0.70 Rs.0.75 Rs.0.80
Car Dealership Details Rs.3.00 Rs.3.50 Rs.4.00
Direct Cost of Sales
Full Wash Rs.1,232 Rs.1,830 Rs.2,677
Exterior Wash Rs.820 Rs.1,199 Rs.1,732
Interior Clean Rs.231 Rs.350 Rs.521
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End User Detail Rs.387 Rs.676 Rs.1,158
Business Fleet Washes Rs.431 Rs.692 Rs.1,107
Car Dealership Details Rs.1,482 Rs.2,247 Rs.3,852
Subtotal Direct Cost of Sales Rs.4,583 Rs.6,994 Rs.11,047
5.3 MilestonesThe following table outlines the important milestones in the planning andimplementation of Soapy Rides.
Milestones ( Rs. In ’00)
Milestone Start Date End Date Budget Manager Department
Complete Business
Plan 2/1/2001 5/1/2001 Rs.0 ABC Department
Sign Rental Contract 3/20/2001 3/20/2001 Rs.475 Mark Owner
Convert Premises 4/1/2001 4/30/2001 Rs.0 Contractors Contractors
Hire Car Wash Staff 4/20/2001 4/20/2001 Rs.200 Mark Owner
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Hire Admin Staff 4/20/2001 4/20/2001 Rs.200 Mark Owner
Open for Business 5/1/2001 5/1/2001 Rs.0 Staff Staff
Distribute Flyers 4/28/2001 5/5/2001 Rs.75 Friends Friends
Press Release 4/29/2001 4/29/2001 Rs.25 Mark Owner
Follow-up on Press
Release 4/30/2001 4/30/2001 Rs.0 Mark Owner
Totals Rs.975
6.1 Personnel PlanSince car washing is a seasonal business, with business increasing in the warmsummer months, and being busier on the weekends than during the week, SoapyRides will rely on both temporary and part-time help. The company will hire one full-time car wash/detail specialist and one full-time car wash specialist when it opens for business. Although it will rely on temporary and part-time help, quality will not becompromised, since all washers and detailers will receive thorough training. Thecompany will also hire an administrative assistant who will assist Mark withpaperwork and act as a receptionist.
Personnel Plan ( Rs. In ’00)
Year 1 Year 2 Year 3
Owner Rs.18,000 Rs.30,000 Rs.40,000
Car Washers Rs.30,240 Rs.43,312 Rs.51,174
Admin/Sales Rs.13,440 Rs.15,000 Rs.22,000
Total People 0 0 0
Total Payroll Rs.61,680 Rs.88,312 Rs.113,174
Financial PlanThe following plan outlines the financial development of Soapy Rides. The business
will be initially financed by a personal investment by Team 4 and will finance growththrough cash flow. This will mean that the company will grow more slowly than it
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could, but it will ensure that Mark retains control over the direction of the company. Inyear three, it is hoped that the company will be able to open a second location. It isenvisioned that an outside loan or equity funding will be sought at that time.7.1 Important AssumptionsThe financial projections for Soapy Rides are based on the following assumptions.
These assumptions are thought to be quite conservative, as are the financialforecasts.
General AssumptionsYear 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00%
Tax Rate 25.42% 25.00% 25.42%
Other 0 0 0
7.2 Break-even AnalysisThe table and chart below show the monthly break-even analysis calculations for Soapy Rides.
Break-even Analysis ( Rs. In ’00) Monthly Units Break-even 423
Monthly Revenue Break-even Rs.7,974
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Assumptions:
Average Per-Unit Revenue Rs.18.87
Average Per-Unit Variable Cost Rs.0.79
Estimated Monthly Fixed Cost Rs.7,641
7.3 Projected Profit and LossThe following Profit and Loss table illustrates income and expenses monthly for thefirst year, and annually for the next two years.
Pro Forma Profit and Loss ( Rs. In ’00)
Year 1 Year 2 Year 3
Sales Rs.109,800 Rs.155,339 Rs.232,204Direct Cost of Sales Rs.4,583 Rs.6,994 Rs.11,047
Other Rs.0 Rs.0 Rs.0
Total Cost of Sales Rs.4,583 Rs.6,994 Rs.11,047
Gross Margin Rs.105,218 Rs.148,345 Rs.221,157
Gross Margin % 95.83% 95.50% 95.24%
Expenses
Payroll Rs.61,680 Rs.88,312 Rs.113,174
Sales and Marketing and Other Expenses Rs.2,600 Rs.1,550 Rs.1,700
Depreciation Rs.2,070 Rs.2,070 Rs.2,070Leased Equipment Rs.0 Rs.0 Rs.0
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Utilities Rs.3,325 Rs.3,500 Rs.3,750
Insurance Rs.1,800 Rs.1,800 Rs.1,800
Rent Rs.4,800 Rs.5,500 Rs.6,000
Payroll Taxes Rs.15,420 Rs.22,078 Rs.28,294
Other Rs.0 Rs.0 Rs.0
Total Operating Expenses Rs.91,695 Rs.124,810 Rs.156,788
Profit Before Interest and Taxes Rs.13,523 Rs.23,535 Rs.64,370
EBITDA Rs.15,592 Rs.25,605 Rs.66,440
Interest Expense Rs.0 Rs.0 Rs.0
Taxes Incurred Rs.3,204 Rs.5,884 Rs.16,361
Net Profit Rs.10,318 Rs.17,651 Rs.48,009
Net Profit/Sales 9.40% 11.36% 20.68%
7.4 Projected Cash FlowThe following Cash Flow table illustrates that if Soapy Rides meets projected sales, it
will have positive cash flow after half a year of operations.
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Pro Forma Cash Flow ( Rs. In ’00)
Year 1 Year 2 Year 3Cash Received
Cash from Operations
Cash Sales Rs.93,330 Rs.132,038 Rs.197,374
Cash from Receivables Rs.13,097 Rs.21,902 Rs.32,470
Subtotal Cash from Operations Rs.106,427 Rs.153,940 Rs.229,843
Additional Cash Received
Sales Tax, VAT, HST/GST Received Rs.0 Rs.0 Rs.0
New Current Borrowing Rs.0 Rs.0 Rs.0
New Other Liabilities (interest-free) Rs.0 Rs.0 Rs.0
New Long-term Liabilities Rs.0 Rs.0 Rs.0
Sales of Other Current Assets Rs.0 Rs.0 Rs.0
Sales of Long-term Assets Rs.0 Rs.0 Rs.0
New Investment Received Rs.0 Rs.0 Rs.0
Subtotal Cash Received Rs.106,427 Rs.153,940 Rs.229,843
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending Rs.61,680 Rs.88,312 Rs.113,174
Bill Payments Rs.33,052 Rs.46,837 Rs.67,743
Subtotal Spent on Operations Rs.94,732 Rs.135,149 Rs.180,917Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out Rs.0 Rs.0 Rs.0
Principal Repayment of CurrentBorrowing Rs.0 Rs.0 Rs.0
Other Liabilities Principal Repayment Rs.0 Rs.0 Rs.0
Long-term Liabilities PrincipalRepayment Rs.0 Rs.0 Rs.0
Purchase Other Current Assets Rs.0 Rs.0 Rs.0
Purchase Long-term Assets Rs.0 Rs.0 Rs.0
Dividends Rs.0 Rs.0 Rs.0Subtotal Cash Spent Rs.94,732 Rs.135,149 Rs.180,917
Net Cash Flow Rs.11,695 Rs.18,791 Rs.48,927
Cash Balance Rs.20,395 Rs.39,186 Rs.88,112
7.5 Projected Balance Sheet
Soapy Rides' balance sheet illustrates a healthy financial position for this newcompany. The monthly estimates are included in the appendix.
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Pro Forma Balance Sheet
( Rs. In ’00) Year 1 Year 2 Year 3
Assets
Current Assets
Cash Rs.20,395 Rs.39,186 Rs.88,112
Accounts Receivable Rs.3,373 Rs.4,772 Rs.7,133
Inventory Rs.668 Rs.1,019 Rs.1,609
Other Current Assets Rs.1,000 Rs.1,000 Rs.1,000
Total Current Assets Rs.25,435 Rs.45,976 Rs.97,854
Long-term Assets
Long-term Assets Rs.10,000 Rs.10,000 Rs.10,000
Accumulated Depreciation Rs.2,070 Rs.4,140 Rs.6,210Total Long-term Assets Rs.7,930 Rs.5,860 Rs.3,790
Total Assets Rs.33,365 Rs.51,836 Rs.101,644
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable Rs.3,097 Rs.3,917 Rs.5,716
Current Borrowing Rs.0 Rs.0 Rs.0
Other Current Liabilities Rs.0 Rs.0 Rs.0
Subtotal Current Liabilities Rs.3,097 Rs.3,917 Rs.5,716
Long-term Liabilities Rs.0 Rs.0 Rs.0
Total Liabilities Rs.3,097 Rs.3,917 Rs.5,716
Paid-in Capital Rs.30,000 Rs.30,000 Rs.30,000
Retained Earnings (Rs.10,050) Rs.268 Rs.17,919
Earnings Rs.10,318 Rs.17,651 Rs.48,009
Total Capital Rs.30,268 Rs.47,919 Rs.95,929
Total Liabilities and Capital Rs.33,365 Rs.51,836 Rs.101,644
Net Worth Rs.30,268 Rs.47,919 Rs.95,929
7.6 Business Ratios
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The following table contains important ratios for the car wash industry, as determinedby the Standard Industry Classification (SIC) code, 7542.
Ratio Analysis
Year 1 Year 2 Year 3Industry
Profile
Sales Growth 0.00% 41.47% 49.48% 3.00%
Percent of Total Assets
Accounts Receivable 10.11% 9.21% 7.02% 8.70%
Inventory 2.00% 1.97% 1.58% 9.50%
Other Current Assets 3.00% 1.93% 0.98% 26.40%
Total Current Assets 76.23% 88.69% 96.27% 44.60%
Long-term Assets 23.77% 11.31% 3.73% 55.40%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 9.28% 7.56% 5.62% 29.30%Long-term Liabilities 0.00% 0.00% 0.00% 27.80%
Total Liabilities 9.28% 7.56% 5.62% 57.10%
Net Worth 90.72% 92.44% 94.38% 42.90%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 95.83% 95.50% 95.24% 0.00%
Selling, General & AdministrativeExpenses 86.59% 84.13% 74.45% 68.20%
Advertising Expenses 0.91% 0.74% 0.56% 1.50%
Profit Before Interest and Taxes 12.32% 15.15% 27.72% 2.70%
Main Ratios
Current 8.21 11.74 17.12 1.53
Quick 8.00 11.48 16.84 0.88
Total Debt to Total Assets 9.28% 7.56% 5.62% 57.10%
Pre-tax Return on Net Worth 44.68% 49.11% 67.10% 3.40%
Pre-tax Return on Assets 40.53% 45.40% 63.33% 8.00%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 9.40% 11.36% 20.68% n.a
Return on Equity 34.09% 36.83% 50.05% n.aActivity Ratios
Accounts Receivable Turnover 4.88 4.88 4.88 n.a
Collection Days 57 64 62 n.a
Inventory Turnover 5.45 8.30 8.41 n.a
Accounts Payable Turnover 11.67 12.17 12.17 n.a
Payment Days 27 27 25 n.a
Total Asset Turnover 3.29 3.00 2.28 n.a
Debt Ratios
Debt to Net Worth 0.10 0.08 0.06 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
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Liquidity Ratios
Net Working Capital Rs.22,338 Rs.42,059 Rs.92,139 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.30 0.33 0.44 n.a
Current Debt/Total Assets 9% 8% 6% n.a
Acid Test 6.91 10.26 15.59 n.a
Sales/Net Worth 3.63 3.24 2.42 n.a
Dividend Payout 0.00 0.00 0.00 n.a