BUSINESS PLAN

MVELEDZANDIVHO MULTI-PURPOSE
CO-OPERATIVE LIMITED

Supported by: Small Enterprise Development Agency

MVELEDZANDIVHO MULTI-PURPOSE COOPERATIVE LIMITED

BUSINESS PLAN

Company Information
Issued Date:..........................
Legal Name: Mveledzandivho Multi-Purpose Co-Operative Limited
Trading Name: Mveledzandivho Multi-Purpose Co-Operative Limited

CK Number: 2012/017322/24
CONTACT PERSON:
Mrs Lorraine Mashudu Khangale
Cell: 082 967 0652
POSTAL ADDRESS:
P.O Box 1
Mukula
0978
BANK DETAILS:
Name of Bank:
Account Number:
Account Type: Cheque Account

Confidential Agreement

The information contained in this business plan is confidential and proprietary to

Mveledzandivho Multi-Purpose Co-Operative Limited and is intended only for the
persons to whom it is transmitted by the Company or its representatives. Any
reproduction of this document, in whole or in part, or the divulgence of any of its
contents without the prior written consent of the Company, is prohibited.

Mveledzandivho Multi-Purpose Co-Operative Limited

Mveledzandivho MultiPurpose Co-Operative Limited

Mveledzandivho Multi-Purpose CoOperative Limited

_________________________

______________________________

Signature

Name:
____________________
Date

Why was this Business Plan Written?

2

1. To obtain the grant financing of an amount of R349 532 from any

financial institutions.

2. To give the owner who wants to start the clothing production business a much better idea of whether the owner should really get involved in this type of business at all, through determining the commercial, technical and financial viability.
3. To serve as a useful guide for the business to check continuously how
the business is getting-on in achieving its goals

4. To serve as an operational plan document for Mveledzandivho Multi-Purpose Co-Operative Limited.

5. To serve as a very good document for outsiders, like banks or suppliers of credit, to see whether they are interested in getting involved
in the affairs of the business or not.

In a nutshell This business plan is a road map that tells

business owner where to go, and allows the owner to check if
the team is on the right road.

MVELEDZANDIVHO MULTI-PURPOSE COOPERATIVE LIMITED

Table of Contents
EXECUTIVE SUMMARY
1.

Brief Description of the Business..7-8

2.

Keys to success.....8

3.

Financial Summary.....9

4.

Business's Contributions to the Economy...9

5.

Purpose of Required Fund ...9

Section 1
MARKETING PLAN
1.1

Description of the Product and services.10

1.2

Reasons for choosing this Traditional Clothing as product .....10

1.3

Competitors.11

1.4

Competitive Advantage ...11

1.5

Location..12

1.6

Market Area12

1.7

Targeted Customers.12

1.8

The Industry Overview...13

1.9

Total Demand.13

1.10

Market Share...14

1.11

Selling Price14

1.12

Sales Forecast...15

1.13

Marketing Strategy15

1.14

Marketing Budget..16

Section 2
MANUFACTURING PLAN

2.1

Fixed Required Capital 17

2.3

Life of Fixed Capital..17

2.4

Cost of Stock and Raw Materials ..18

2.5

Labour....18

2.6

Overhead Expenses....18

Section 3
ORGANISATION & MANAGEMENT PLAN
3.1

Form of Business.19

3.2

Organisational Structure.21

3.3

Pre-Operating Activities and Gantt chart..21

3.5

Pre-Operating Expenses.....24

3.6

Administrative Expenses.24

Section 4
FINANCIAL PLAN
4.1

Capital Required....25

4.2

Financing Plan and Grant Requirement.....25

4.3

Profit and Loss Statement............26

4.4

Cash Flow Statement....28

4.5

Balance Sheet....30

4.6

Break-even Point (BEP) ...31

4.8

Return on Investment (ROI).32

4.9

Exit Plan...32

EXECUTIVE
SUMMARY

1.

Brief Description of the Business

Mveledzandivho Multi-Purpose Co-Operative Limited is an existing traditional clothing

manufacturing business. The business was established in 2009. It was started as a
community project. Its objective was to combine forces and individual sewing skills
around the village to come up with a commercially viable business. Its main purpose
was for job creation in Mukula village.

This business started with 35 people. Due to lack of infrastructure, equipment and
materials to produce stock, other people decided to leave. The business has now been
left with 9 dedicated individuals. They are currently operating in one mud hut made of
soil and grass. This building is in bad condition and is too small and as such it cannot
accommodate all staff. In 2012 the members decided legalise this business and
register it as a co-operative.

The main objective of this business plan is to obtain funding that will be used to
improve the business so that it can produce more products and make more profit. The
directors intend to increase products range by focusing on different products range than
only on the traditional attire and beads. The new products range will be school
uniforms, hospital uniform, cleaners uniforms or gowns, services workers work-suite,
safety and protective clothing including embroidery services. With this products range
management believe that this business will make a good profit.

With this new products the business has targeted the following, schools, cleaning
companies, construction companies, hospitals, university, and security companies with
uniform and protective clothing. The business has targeted this type of customers
because they purchase their products in bulk.

Mveledzandivho Multi-Purpose Co-Operative Limited is managed by highly motivated,

well qualified and experienced managers. The management team has experience in
clothing manufacturing having been working in this type of business for more than ten
years.

The market survey conducted has indicated that there are few companies that
manufacture these types of products around Thulamela municipality. The products
such as protective clothing, school uniforms and hospital gowns are essential to most
institution and this products are used daily. This means that they need to be replaced
every time. As essential products the demand of these products will never stop. This
cooperative is therefore positioning itself well in order to capitalise on the available
opportunities.

Another opportunity in this business is that the government strategy or BEE act
emphasise that the local black manufacturing companies be given preferences by all
government institutions.

2.

Keys to success

Providing products which are on demand.

Keeping cost lower than all local suppliers by producing in higher volumes

Using every means available to satisfy customers.

Personal visit to all school in the targeted market area.

Setting prices slightly below the competitors.

3.

Financial Summary

The table below is a brief summary of the profit and Loss statement.
Particulars

1
Sales
434 400
Net profit
20 548
Net Cash flow
105 791
Break-even Point %
92.5%
**Rate of Return in total investment is 9 years *

4.

Year
2
477 840
24 230
146 289

3
525 624
28 280
190 836

Business's Contributions to the Local Economy

Mveledzandivho Multi-Purpose Co-Operative Limited will contribute to local economy
through providing source of income to nine individuals and their families. It will also
result in healthy competition by forcing existing small individuals to join forces and to
improve their product and services quality. This will empower woman and encourage
other women to start their business.

5.

Purpose of Required Fund

To improve this business a total amount of R 361,082 is needed. The owners have
proposed to finance this capital requirement by a grant of R 349,532 or 97% and the
balance R 11550 or 3% will be financed by owners. This grant amount will be used as
follow:

Particulars
Building and Fencing
Furniture and Equipment
Electricity Installation
Materials for 2 Month
One Month operating expenses
Total amount needed from outside source

Amoutnt
(Rand)
113 000
167 175
21 800
26 064
21 493
349 532

Section 1
MARKETING PLAN

1.1

Description of Products and Services

Mveledzandivho Multi-Purpose Co-Operative Limited will produce the following
products: traditional attire and beads, school uniforms, protective clothing, services
workers clothing, doctors and nurses gowns, work-suit for cleaners, contractors and
general workers. Below are the pictures showing some of the type of products to be
produced.

1.2

Reasons for choosing these products

These products are selected because they meet the requirements for the majority of
institutions and are used daily. Most of the companies or institutions purchase these

10

products in bulk. These products are made from a high quality materials. The
advantage is that the cooperative will also be doing embroidery in house.

1.3

Competitors

Mveledzandivho Multi-Purpose Co-Operative Limited is facing competition from one

competitor, Chrystal Garments. Its factory location is in Shayandima Industrial Site and
it has two retail stores in Thohoyandou town. The company produces school uniforms,
shirts and general workers work-suits. The company is own by Philippians. The indirect
competitors is clothing shop around Thohoyandou town who buys and sell uniform and
general workers suite and gowns to customers who come and buy in the store.

On traditional attires the cooperative is competing with a number of small scale

producers. These are found in areas such as Thohoyandou, Sibasa, Khubvi and
Tshilamba. There are also a number of people who are sewing at home. Majority of
these are sewing minwenda, mikhasi, traditional shirts and other forms of traditional
clothes.

1.4

Competitive Advantage
Mveledzandivho Multi-Purpose Co-Operative Limited will distinguishe itself from its
competitors through providing high quality products at reasonable prices. The advantage is that Mveledzandivho Multi-purpose cooperative is black owned. The new
BEE act requirements give preferences to local black own companies. Competitors do
not provide safety clothing whereas this cooperative will provide safety clothing.

Members of the cooperative will do personal visit to all institutions and companies. It will
build relationships and find out what customers need. Because of few competitors the
current suppliers put their prices very high. This cooperative will mark its prices slightly
below the competitors price. It will also offer bulk discount. By keeping the overhead

11

low, the business will be able to channel the profits back into operations thus avoiding
high debt ratios or lost sales opportunities. Consideration will also be given to attending
trade shows around the country for selling traditional garments.

1.5

Location

The business will is located at Mukula Village within Thulamela Municipality, Vhembe
District, Limpopo Province, South Africa. This location has been selected because of
the following reasons:

1.6

It is far from its competitors

It is closer to its targeted customers

It is also near to the owners homes.

Market Area

Although the factory is located at Mukula village, the business will distribute its products
to Vhembe district as a whole. e.g Hospital, universities, colleges, municipalities
Members will visit all hospital procurement to be listed in a database in the whole area.
The cooperative has targeted area such as Mukula and surrounding villages.
Mveledzandivho Multi-Purpose Co-Operative Limited plans to initially supply its
products in Vhembe District. Our future plan is to supply the whole country and other
African countries.

1.7

Targeted Customers

12

The business main targeted customers are schools and Venda women who like
wearing traditional clothes. It will supply school uniforms and embroidery of name and
logos on the garments. The other customers will be cleaning companies, constructions,
electrical companies, municipality, university and mining companies who need worksuit with their emblem. This people they use this products almost every day as uniform
for their general workers.
The other Customer group are current customers who are currently purchasing
traditional clothing and beads from the cooperative. These people purchase products
when they attend traditional wedding ceremony and others during their social clubs
such as Tshisevhesevhe. They like wearing traditional clothes when dancing to
traditional songs and sounds.

1.8

The Industry Overview

The market outlook for the selected products in Limpopo Province and elsewhere is
positive. This type of products are used almost every day. Protective and safety
clothing is mandatory in majority of work such as mining, electrical, construction and
cleaning. School uniforms are also mandatory in all South African public schools. With
this reason this industries will remain strong forever. The demand will always increase
due to the population growth. These days people prefer to be identified through their
traditional clothes. This create a huge demand for both the traditional clothes and
beads.

1.9

Total Demand

The market survey indicated that the demand for traditional clothes is higher than supply. Some competitors indicated that they sometimes reject orders of people due to the
high load of work. The survey also indicates that half of our targeted market prefers
company name or logo engraved into their garments. The problem is that they are fail-

13

ing to get them because of shortage of companies with the right equipment and machinery.

1.10

Market Share

There is a strong belief in occupying a greater market share because of the following
factors:

The demand is higher than supply,

Competitors are few

Current manufacturing can only cover less than 15 percentage of potential

customers

Competitors do no specialise with products made from specialised materials

Our production is as follows:

Quantity Quantity
per Week per Month
Particulars

Venda Traditional Attire

Venda tradional beads
Protective Clothing and other related products
School Uniform

4
6
10
15

16
24
40
60

The research indicates that there is high a necessity for extra, African and traditional
clothing production companies in Vhembe District area and South Africa as a whole.

14

1.11

Selling Price

The prices of the products are based on the cost plus margin and combining with what
the customers are willing to pay method. These costs take into consideration all
material, overheads costs, direct labour costs and other production costs. The
production cost increase per size and type of products but it is still very low.

1.12

Particulars

Average
Price/item

Venda Traditional Attire

Venda trational beads
Protective Clothing and other related products
School Uniform

R
R
R
R

400
150
280
250

Sales Forecast
The sales forecast is calculated by multiplying market share per prices and is indicated
this the table below:

Particulars

1.13

Monthly
Sales

Year
2

Venda Traditional Attire

6 400

76 800

84 480

92 928

Venda trational beads

Protective Clothing

3 600

43 200

47 520

52 272

11 200

134 400

147 840

162 624

School Uniform

15 000

180 000

198 000

217 800

Total

36 200

434 400

477 840

525 624

Marketing Strategy
Mveledzandivho Multi-Purpose Co-Operative Limited will have very modest cost to
promote and advertise its product it will rely mostly on word of mouth promotion by
satisfied customers who would have received high quality products at affordable prices.

15

Catalogue Sales.
The business will keep a catalogue with photos of all the products that are available. In
the catalogues there will be descriptions of all products and their features.

Personal Visits to customers

Members of the cooperative will visit all targeted business and institution in their
premises and drop the brochures. The cooperative will also register with procurement
database for all government department and municipalities within the district.

1.14

Marketing Budget

The marketing budget will consist of travelling cost, roadshows, which can be done
three times every year. The monthly budget will be budgeted for the travelling cost to
market new customers.
Particulars
Traveling to customers
Total

Month
300
300

1
3 600
3 600

YEAR
2
3 960
3 960

3
4 356
4 356

16

Section 2
MANUFACTURING PLAN

2.1

Fixed Assets Required

Particulars
Land and buildings
Land - Available
Buildings
Fencing
Total Land and Buildings

98 000
15 000
113 000

113 000

Furniture and Equipment

5* Industrial Sewing Machines
2* Over-locker
1* ZicZac Machine
5* Cutting Table
1* One Head Embroidery M/C with Trimmer
1* Button Hole Cutting Machine
1* Steam Press
1* Round Cutting Machine
15* Chairs
Total Furniture and Equipment

39 000
3 800
7 000
5 000
101 078
7 900
3 397
2 700
6 000
167 175

167 175

Total Fixed Assets

2.3

Rental

280 175

Life of Fixed Capital and Depreciation

17

The lifespan of the fixed assets are as follows; this is based on supplier information.
Our depreciation will be on a straight line method.

Fixed Assets

Lifespan (years)

Furniture and Equipment

Vehicles

10
5

Annual
Depreciation
10%
20%

The annual depreciation cost, assuming no scrap value, will therefore be:

Depreciation
10% Furniture & Equipment
Annual Depreciation
Monthly Deprecation

Cost
167175.2

Accumulated Book Value

16717.52
150 458
16 718
1 393

2.4 Cost of Stock and Raw Materials (Rand Value)

Particulars

Year

Monthly
Cost

Materials
Total

13 032

156 384

172 022

189 225

13 032

156 384

172 022

189 225

The increase is estimated at 10% in all products and Services for the entire years.

2.5

Labour
Direct Labour

2.6

Particulars
Labour

Total for Direct Labour

x R 1 800

= R
R

Amount R's
16 200 R
16 200
16 200 R

16 200

Overhead Expenses

18

Overhead costs are monthly indirect cost of the business. The table below shows the
breakdown of categories of expenses.

Particulars
Electricity
Transport
Depreciation for Fixed assets
Total

Month
1 200
1 800
1 393
4 393

1
14 400
21 600
16 718
52 718

YEAR
2
15 840
23 760
18 389
57 989

3
17 424
26 136
20 228
63 788

Section 2
MANAGEMENT PLAN

3.1

Form of Business

The business has been established and registered as a co-operative. The following
are members of the cooperative: Mashudu Khangale Lorraine, Ndidzulafhi Eunice
Mudau, Tondani Mavis Tshinyani, Virginia Netshivhera and Takalani Florance Mulaudzi. The Legal name of the business is Mveledzandivho Multi-Purpose Cooperative Limited. The Management team is highly motivated, experienced and well qualified.

3.2

Organisational Structure

Mashudu Lorraine Khangale will serve as the General Manager (Chairperson) and will
be responsible for the day-to-day running of the business.

Ndidzulafhi Eunice Mudau as the Finance Manager will be responsible for the
following:

19

evaluation of data pertaining to costs in order to plan budgets

evaluate financial reporting systems,

accounting,

collection procedures,

Investment activities,

Making recommendations for changes to procedures,

Operating systems,

Budgets,

Other financial control functions

Prepare operational and risk reports for management analysis.

Virginia Netshivhera as the Manufacturing/ Production Manager will be responsible for:

overseeing the manufacturing process,

drawing up a manufacturing schedule,

ensuring that the manufacturing is cost effective,

coordinate, set up and implement standard operating procedure for all

manufacturing operations,

drafting a timescale for the job,

reviewing the performance of subordinates,

working with managers to implement the companys policies and goals

Ndidzulafhi Eunice Mudau as the Marketing Manager and will be responsible for:

20

studying competitors' products and services,

exploring ways of improving existing products and services,

increasing profitability,

identifying target markets and developing strategies to communicate with them.

General Manager
(Mashudu Lorraine
Khangale)

)
Bookkeeper
secretary
(Outsourced)

Financial Manager
(Ndidzulafhi Eunice
Mudau)

Production
Manager
(Virginia Netshifhera
Shonisani)

Marketing Manager
(Ndidzulafhi Eunice
Mudau)

Table 3.2 Organisation Chart

21

3.3

Pre-Operating Activities

Owners have listed down the following activities to be undertaken before they can
operate the business:
1.

Preparing the business plan

4 weeks

2.

Applying for a grant and approval

8 weeks

3.

Contacting equipment suppliers

1 week

4.

Construction the Factory

6 weeks

5.

Hiring labour

1 days

5.

Installing the equipment

1 days

6.

Purchasing raw materials

1 days

The owner aims to implement her operation approximately two months after the grant
application, or six weeks after release of his grant.
These pre-operating activities with their corresponding timetable appear in Table 3.4 in
a Gantt chart.

22

Table 3.4

Gantt chart

MVELEDZANDIVHO MULTI-PURPOSE CO-OPERATIVE LIMITED

Pre-Operating Activities
Timetable (in weeks)
Activities

10

11

1. Preparing the Business Plan

2. Applying/Approval of Grant
3. Contacting Equipment Suppliers
4. Constructing the Factory
5. Hiring Labour
6. Installing the Equipment
7. Purchasing Raw Material

23

12

13

14

15

16

17

18

3.4

Pre-Operating Expenses

Particulars
Market research
Supplier and Communication
Business Plan Preparation
Electricity Installation
Total

3.5

Amount
4 000
750
6 800
21 800
33 350

Administrative Expenses

The owner wants to keep their cost as low as possible in order to be competitive.
The only cost they will incurred is the cost of communicating with supplier during
ordering stock or raw materials and during the need of repair.

Particulars
Telephone
Accounting/Bookkeeping Fees
Stationery
Total

Month
100
400
100
600

1
1 200
4 800
1 200
7 200

YEAR
2
1 320
5 280
1 320
7 920

3
1 452
5 808
1 452
8 712

The increase is estimated at 10% in all products and services for the entire years.

24

Section 4
FINANCIAL PLAN

4.1

Capital Requirement (Business Cost)

Particulars

Amount R's
(R)

Fixed Assets (step 2.1)

Land and Buildings
Furniture and Equipment

113 000
167 175

Total Fixed Assets

280 175

Pre-Operating Expenses (step 3.4)

280 175
33 350

Working Capital
Value of 2 month of raw material (RM) & stocks (step 2.4)
Value of cash needed for operation. This will be the cost of 2
month of labour (step 2.5), overheads (step 2.6), marketing
budget (step 1.14) and administrative expenses (Step 3.5).
Less: Depreciation
Total Working Capital
Total Capital Requirement

26 064
21 493

47 557

47 557
361 082

4.2 Financing Plan and Grant Requirement

Particulars
Fixed Capital
Land and Buildings
Furniture and Equipment
Pre-Operating Expenses
Working Capital
Total
Percent

Owners
Equity

11 550
11 550
3%

Grant
(in R)
113 000
167 175
21 800
47 557
349 532
97%

Total

113 000
167 175
33 350
47 557
361 082
100%

25

4.3 Profit and Loss Statement (one year)

Particulars

Amount R's

Sales:

36 200 x

12 Month (Step. 1.2)

Less: Operational Cost

Raw Materials:
Labour
:
Overhead

434 400
403 502

13 032 x
16 200 x

12 Month (Step. 2.4)

12 Month (Step. 2.5)

156 384
194 400

4 393 x

12 Month (Step.2.6)

52 718

Gross Profit

30 898

Less: Operating Expenses

Marketing
300 x
Administrative Cost
600

10 800
3 600
7 200

12 Month (Step 1.14)

X 12 Month (Step 3.5)

Operating Profit
Less: Interest on Loan
Profit before Tax
Less: Tax of
Net Profit After Tax

20 098
20 098
20 098 @

28%
20 098

26

3 YEARS PROJECTED INCOME STATEMENTS

Particulars

Years
2

SALES

434 400

477 840

525 624

Less: PRODUCTION

403 502

442 180

484 726

Raw materials
Labour
Overheads

156 384
194 400
52 718

172 022
213 840
56 318

189 225
235 224
60 278

GROSS PROFIT

30 898

35 660

40 898

Less: Operating Expenses

Marketing
Administrative Cost

10 800
3 600
7 200

11 880
3 960
7 920

13 068
4 356
8 712

OPERATING PROFIT
Less: Interest

20 098

23 780

27 830

NET PROFIT BEFORE TAX

Tax@28%
NET PROFIT AFTER TAX
Accumulated Profit

20 098

23 780

27 830

20 098
20 098

23 780
43 879

27 830
71 708

27

4.4 PROJECTED CASH FLOW STATEMENT FOR 3 YAERS (Rand)

Particulars
CASH INFLOW
Equity
Borrowings
Cash Sales
Other Income
Total Cash Inflow
CASH OUTFLOW
Pre-operating expenses
Purchase of fixed assets
Direct materials
Direct Labour
Factory/operational overheads**
Marketing
Administrative Cost
Interest expenses
Tax paid
Loan amortisation
Total Cash Outflow
NET CASH INFLOW (OUTFLOW)
CASH BALANCE BEGINNING
CASH BALANCE ENDING

PreOperatin
Period
11 550
349 532
361 082

YEAR
1

434 400
434 400

477 840
477 840

525 624
525 624

156 384
194 400
36 000
3 600
7 200

172 022
213 840
39 600
3 960
7 920

313 525
47 557

0
0
397 584
36 816

0
0
437 342
40 498

189 225
235 224
43 560
4 356
8 712
0
0
0
481 077
44 547

47 557

47 557
84 373

84 373
124 871

124 871
169 418

33 350
280 175

28

PROJECTED MONTHLY CASH FLOW STATEMENT (RAND)

Particulars
CASH INFLOW
Equity (step 4.2)
Borrowings (step 4.2)
Cash Sales (step 1.10)
Other Income
Total Cash Inflow
CASH OUTFLOW
Pre-operating expenses
Purchase of fixed assets
Direct materials
Direct Labour
Factory/operational
overheads*
Marketing
Administrative Cost
Interest expenses
Tax paid
Loan amortisation
Total Cash Outflow
NET CASH INFLOW (-)
CASH BALANCE
BEGINNING
CLOSING BALANCE

PreOperatin
Period

MONTH
1

11 550
349 532
361 082

36 200
36 200

33 350
280 175

2
36 200
36 200
-

3
36 200
36 200
-

4
36 200
36 200
-

5
36 200
36 200
-

6
36 200
36 200
-

36 200
36 200

36 200
36 200

9
36 200
36 200
-

10

11

12

36 200
36 200

36 200
36 200

36 200
36 200

13 032
16 200
3 000

13 032
16 200
3 000

13 032
16 200
3 000

13 032
16 200
3 000

13 032
16 200
3 000

13 032
16 200
3 000

13 032
16 200
3 000

13 032
16 200
3 000

13 032
16 200
3 000

13 032
16 200
3 000

13 032
16 200
3 000

13 032
16 200
3 000

313 525
47 557

300
600
33 132
3 068
47 557

300
600
33 132
3 068
50 625

300
600
33 132
3 068
53 693

300
600
33 132
3 068
56 761

300
600
33 132
3 068
59 829

300
600
33 132
3 068
62 897

300
600
33 132
3 068
65 965

300
600
33 132
3 068
69 033

300
600
33 132
3 068
72 101

300
600
33 132
3 068
75 169

300
600
33 132
3 068
78 237

300
600
33 132
3 068
81 305

47 557

50 625

53 693

56 761

59 829

62 897

65 965

69 033

72 101

75 169

78 237

81 305

84 373

Excludes depreciation expenses and amortisation of pre-operating expenses which are non-cash items.*

Not equal to due to rounding.

29

4.6

3 YEARS PROJECTED BALANCE SHEET

Particulars
ASSETS
Current Assets
Cash
Raw Materials Inventory
Accounts Receivable
Total Current Assets
Fixed Assets
Land and Buildings
Furniture and Equipment
Less: Accumulated
Total Fixed Assets
Other Assets
Pre-operating expenses
Goodwill
Patents
TOTAL ASSETS
Liabilities
Current Liabilities
Accounts Payable
Loans Payable
Total Current Liabilities
Long Term Liabilities
Loans Payable
Total Long Term Liabilities
OWNERS EQUITY
Capital Beginning
Grant Fund
Accumulated Capital
Add: Net Profit after Tax
Less: Withdrawal/Dividends
Total Owners Equity & Fund
TOTAL LIABILITIES AND
EQUITY

PreOperatin
Period

47 557

Year
1

84 373
-

124 871
-

169 418
-

84 373

124 871

169 418

280 175

113 000
167 175
-16 718
263 458

113 000
167 175
-33 435
246 740

113 000
167 175
-50 153
230 023

33 350

33 350

33 350

33 350

361 082

381 181

404 961

432 791

11 550
349 532
20 098

11 550
349 532
20 098
23 780

11 550
349 532
43 879
27 830

381 181
381 181

404 961
404 961

432 791
432 791

47 557
113 000
167 175

11 550
349 532

361 082
361 082

30

4.7

Break-even Point (BEP)

The break-even point can be calculated as follows

Particulars

Amount (R's)

Annual Sales (step 4.4)

434 400

Annual Fixed Costs:

Factory Overheads Cost
Labour
Administrative Cost
Annual Interest

52 718
194 400
7 200

Annual Variable Costs:

Raw materials
Marketing

BEP (Annual Sales)

254 318

254 318

156 384
3 600
159 984

159 984

Annual Sales (step 4.4) X Annual Fixed Costs:

Annual Sales (step 4.4) Annual Variable Costs:

434 400

254 318

434 400

159 984

402 584

31

BEP (Percentage)

Annual Fixed Costs:

x
Annual Sales (step 4.4) R
R

254 318 x
434 400 -

100
Annual Variable Costs:

100
R

159 984.00

93%

4.8

What is the return on investment (ROI)?

The ROI for this business =

Annul Net profit

Total Capital Requirement
100 X

20 098 (Step 4.4)

R 361 082
(Step 4.1)
6%

4.9 Exit Strategy

In business planning, much is based on anticipation the business exit strategy has been
decided after careful considerations just like any other aspect of the business. Should
the partners wish to sell their equity; the growth of the business will make the following
exit strategy possible.
Return capital to financers / investors through dividend or borrowed funds for a
management buyout or seek financial partners for the exchange of shares (investor
companies, private investors). It is asked that the shareholders retain their capital
investment for a minimum period of 3 years after the business launch.

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