Question

This week, after engaging in the exercises, viewing the materials and engaging in Constructive Actions, prepare a financial analysis of the preliminary start up costs of your venture and a preliminary cost benefit analysis.

Answer 1

I am assuming a kids retail clothing store as an example.

The tables below show the investment details and operating costs for the store:

Carpet (in square feet)	1200
Investment
Initial Stock Purchase	@ Rs 3000/sqft	3600000
Store Interior	@Rs 1500/sqft	1800000
Software		30000
Architect fees		30000
Andride Smart TV		30000
Building rent deposit advance		720000
	Total	6210000

Operating Cost	Particular	Monthly	Yearly
	Rent	120000	1440000
	Salary (4 sales man /1 manager)	80000	960000
	Electricity	18000	216000
	GST	160512	1926144
	Staff Incentive	33792	405504
	Misc	8448	101376
	Total	420752	5049024

There are some business assumptions shown below:

Assumption
Foot fall	44
Conversion	80%
No Of Bill	35.2
Item per Bill	4
Avg Item Value	400
Avg Bill Value	1600
Daily Sales	56320
Monthly Sales	1689600
Yearly sales	20275200
Rent/sq ft	100

The Net margin calculation is show below:

	Monthly	Yearly
Net Sales	1689600	20275200
Margin (@37.5%)	633600	7603200
Operating cost	420752	5049024
Net Margin	212848	2554176

1. Please note that the above numbers are preliminary model for a retail store. The net sales is assumed to be 100% of the expectation. However, in real time, when the cashflow projections are made, only a certain percentage of the expected net sales will be realised at first, and grows thereon.

2. This model assumes 100% equity investment. If the investor avails a bank loan, the repayment schedule should be included in the monthly cashflow.

3. In clothing business, seasonality plays an important role in driving the sales, and, also to market the products. This model doesnot assume any seasonality, but, the projections are held flat. The seasonal factors can be set either doing a market research, or, benchmarking to any market data.