Essential Oils Business Plan PDF

Student Registration Number: 0892684
-TERM PAPER- 2009
Business Plan: Parbat Redolence Limited
Hand-in date:
11.12.2009
Campus:
BI Oslo
Exam code and name:

GRA 3136 New Venture Creation
Programme:
Master of Science in Innovation and Entrepreneurship
Term Paper (Business Plan), GRA 3136 New Venture Creation 11.12.2009
CONTENTS
CONTENTS
EXECUTIVE SUMMARY________________________________________ iii
1. BUSINESS OVERVIEW ________________________________________ 1

1.1. DESCRIPTION OF THE BUSINESS _________________________ 1
1.1.1. MAJOR DEMOGRAPHIC, ECONOMIC, SOCIAL AND CULTURAL
FACTORS ___ 1
1.1.2. MAJOR PLAYERS (suppliers, distributors, clients) __________________ 2
1.1.3. NATURE OF THE INDUSTRY ___________________________________ 3
1.1.4. TRENDS IN THE INDUSTRY____________________________________3
1.1.5. GOVERNMENT REGULATIONS _________________________________3
1.2. THE MARKET ____________________________________________ 4

1.2.1. MARKET SEGMENT ___________________________________________ 4
1.2.2. PRODUCTS & SERVICES _______________________________________ 4
1.2.3. MARKET TRENDS _____________________________________________ 5
1.2.4. IMPLICATIONS OR RISK FACTORS ____________________________ 6
1.2.5. PLANNED RESPONSE __________________________________________ 6
1.3. COMPETITION___________________________________________6
1.3.1. COMPETITORS AND TYPE OF COMPETITION __________________ 6
1.3.2. COMPETITORS' STRENGTHS AND WEAKNESSES _______________6
1.3.3. COMPETITIVE ADVANTAGE __________________________________7
2. SALES & MARKETING PLAN _________________________________8

2.1 CUSTOMERS _____________________________________________8
2.2 SUPPLIERS ______________________________________________ 8
2.3 ADVERTISING & PROMOTION ____________________________ 8
2.4 PRICING AND DISTRIBUTION ____________________________ 9
2.5 CUSTOMER SERVICE POLICY ____________________________ 9
3. OPERATING PLAN __________________________________________10

3.1. LOCATION______________________________________________ 10
3.2. ADVANTAGES OR DISADVANTAGES _____________________ 10
3.3. LEASE OR OWNERSHIP DETAILS ________________________ 10
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3.4. PLANTS AND MACHINERIES ____________________________ 10

3.5. FUTURE EXPENDITURES /TECHNOLOGY REQUIREMENTS 11
3.6. RESERACH AND DEVELOPMENT ________________________ 11
3.7. ENVIRONMENTAL COMPLIANCE________________________ 11
3.8. PRODUCTION___________________________________________ 11
4. MANAGEMENT AND OWNERSHIP___________________________ 13

4.1. BOARD OF DIRECTORS (BOD) AND ADVISORS____________ 13
4.2. HUMAN RESOURCES PLAN ______________________________ 14
4.3. PERFORMANCE ASSESSMENT___________________________ 14
4.4. REMUNERATION AND BENEFITS ________________________ 14
5. ACTION PLAN______________________________________________ 15
6. FUNDS REQUIRED AND THEIR USES _________________________ 16

6.1. CURRENT FUNDING REQUIREMENTS ___________________ 16
6.2. FUNDING REQUIREMENTS OVER THE NEXT FOUR YEARS 16
7. FINANCIAL DATA __________________________________ 17

7.1. IMPORTANT ASSUMPTIONS_____________________________ 17
7.2. PROJECTED ANNUAL STATEMENTS _____________________ 17
7.3. PROJECTED RATIOS ____________________________________ 17
List of Figures
Fig i: Incremental Earnings Forecast for first 5 years of operation __________ vi
Fig 1.1: Sales of over-the-counter herbal medicines in Europe (in USD) _____ 4
Fig. 1.2: World Leading Importers of essential oils in 2008 _______________ 5
Fig. 1.3: Trade Data (Value in USD millions) on essential oils, France_______ 5
Fig. 1.4: Trade Data (Value in USD thousand) on essential oils, Norway _____ 5
Fig 3.1: Operation sequence ________________________________________ 10
Fig 3.2: Production Growth Projection for first 5 years ___________________ 12
Fig 7.1: Projected after-tax earning for 5 years __________________________ 17
List of Tables
Table 3.1: Chamomile oil production estimate for 1st year of operations ____ 11
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Table 3.2: Spikenard oil production estimate for 1st year of operations ______ 12
Table 6.1: Funding requirements for year 2 to 5 ________________________ 16
Table 7.1: Projected Initial Five Years Income Statement _________________ 17
Table 7.2: Projected Initial Five Years Balance Sheet ____________________ 18
Table 7.3: Projected Initial Five Year Cash Flow Statement _______________19
Table 7.4: Different Ratios for the project _____________________________ 20
REFERENCES
APPENDICES
Appendix 1: Production Calculations ___________________________________22
Appendix 2: List of Community forest to be cultivated in five years _____23
Appendix 3: The Target Markets, Import and Export Figure __________25
Appendix 4: Some Facts and Figures _______________________________26
Page iii
EXECUTIVE SUMMARY
OBJECTIVES / DESCRIPTION OF THE PROJECT
 To be a leading producer of high quality organic essential oils in Nepal
profitably and with considerable focus on corporate social responsibility.
 To be a renowned supplier of high quality organic essential oils to the
world’s reputed markets with focus on aroma therapy sector.
NATURE OF OPERATIONS
The company will be registered in Dec 2011 as a private limited company with
four shareholders. The company will be established with the objective to produce
and supply high quality essential oils to the world’s reputed markets and focus on
aromatherapy as its niche market. It will be ISO 9001:2008 certified and USDA
organic certified. It will collaborate with the Community Forest Users Groups
(CFUGs) of Nepal and promote farming of essential oil yielding plants in the
community forests. The plants will be processed at the processing facility of
Parbat Redolence Limited and the farmers will be paid a fair price depending on
the oil yield of their produce. It will share a portion of its profits with the CFUGs
for carrying out social development programs beneficial to the community.
PRODUCTS AND SERVICES

Parbat Redolence Limited will produce high quality organic essential oils
adhering to strict high quality norms, focusing initially on two products:
1. Chamomile essential oils, used extensively in flavoring, fragrance and
aroma therapy.
2. Spikenard essential oils, used extensively in herbal medicines, fragrance
and aroma therapy.
Product diversification will be made as and when good market opportunity arises.
MARKET ANALYSIS
The value of world import of essential oils in 2008 stood at around USD 29
billion, an increment of 13.45% from 2007 and 30.28% from 2006. The world
leading importing country was the USA followed by France, UK and Germany.
Parbat Redolence will therefore focus on these markets as they are mature markets
with quality consciousness and growing demands. Parbat Redolence will also
focus on Norway as it is a growing market with about 35% increment in values of
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import in 2008 from that in 2006. Its clients will be existing importers and
aromatherapy practitioners with focus on building good networks with the
practitioners to exploit the market further.
MARKETING AND SALES

Marketing will be carried out through postings on reputed online B2B business
portals like www.alibaba.com, networking and interacting with aroma therapy
practitioners’ associations and essential oils traders associations, and participating
in different international expositions and trade shows. Personal contacts will also
be made with leading aroma therapists and alternative medicine parctitioners
through e-mail, telephone and visits.
ORGANIZATION AND PERSONNEL

Parbat Redolence Limited will have four directors. Mrs. Lata Pyakurel, president
of Federation of Nepal Cottage and Small Industires (FNCSI) with over 20 years
of experinece in industries will handle business planning and networking with
stakeholders in coordination with Suyesh Pyakurel, Member, Industrial Promotion
Board, Ministry of Industries, Nepal who will also provide policy guidance. Mr.
Siraj Pyakurel, an affiliate of Chartered Certified Accountants (ACCA), UK will
handle financial operations. Mr. Swagat R. Pyakurel with his technical expertise
will be responsible for processing, administration and customer support.
Parbat Redolence will also appoint two advisors, Mr. Guru Baral, chairperson,
Madan Bhandari Memorial Academy who will assist with manpower
development with focused training development, and Mr. Kamal Belbase with
over 20 years experience in essential oils will assist with cultivation and
processing.
FINANCIAL SYNOPSIS
FINANCIAL REQUIRMENT
Parbat Redolence Limited will require an initial investment of USD 1.1 million in
its first year of operations, of which about USD 422,000 will be capital
expenditure and USD 739,000 will be working capital requirement. 40% of the
initial investment will be raised through equity investment by the directors and the
remaining 60% will be through bank finance via soft loan.
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PROSPECTIVE FINANCIAL PERFORMANCE

Promoting cultivation in four community forests, two each for chamomile and
spikenard in the first year of operations, the expected sales is estimated to be USD
1.08 million and a operating loss of USD 79,000. The estimated sales for the
second year of operations is expected to be around USD 2.05 millions as the
cultivation will be expanded to four other community forests, two each for
chamomile and spikenard. The net after tax income for this period is estimated to
be USD 497,000. In the fifth year of operations, the estimated sales will be around
USD 8.3 millions with around USD 3.3 millions in net after tax income.
3,500,000
3,000,000
2,500,000 Income from Spikenard
2,000,000 (USD)
1,500,000 Income from Chamomile
1,000,000 (USD)
500,000
0
Yr 1 Yr 2 Yr 3 Yr 4 Yr 5
Fig i: Incremental Earnings Forecast for first 5 years of operation
PRODUCT CYCLE:
Total Cycle : 150 days
Harvesting: 90 days from plantation Processing : 15-20 days from harvest
Testing and Packaging: Immediate In-Stock: 15 days
Receivables: Irrevocable Sight LC, Advance Bank Transfer
RISK ASSESSMENT & CONTINGENCY PLAN

The risk is assessed to arise mainly from financial slowdown, in which case the
market tends to lower consumption of such products. However, as evident from
the rise in import by 13.5% from 2007 to 2008 instead of the financial crisis, a
devastating effect is unlikely.
Parbat Redolence will however divert a small portion of its production to the
market in India to maintain contact with the Indian market which, although not as
profitable as the targeted markets, is a huge and stable market.
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1. BUSINESS OVERVIEW
LEGAL NAME: PARBAT REDOLENCE LIMITED
BUSINESS ADDRESS: MECHINAGAR MUNICIPALITY
JHAPA DISTRICT
NEPAL
TEL: +977-23-XXXXXX
FAX: +977-23-XXXXXX
E-MAIL: office@parbatredolence.com
1.1. DESCRIPTION OF THE BUSINESS

Parbat Redolence Limited will promote cultivation of herbs and extract essential
oil in the community forests of eastern region of Nepal. It will operate in two
districts, namely Taplejung in the upper hills and Jhapa in the plains. Initially it
will concentrate on Spikenard (Jatamansi) in Taplejung and German Chamomile
in Jhapa.
Parbat Redolence Limited will be an ISO 9001:2008 certified and USDA organic
certified company.
1.1.1. MAJOR DEMOGRAPHIC, ECONOMIC, SOCIAL AND

CULTURAL FACTORS
Parbat Redolence Limited’s products fit well into overall current social and
economic trends. The targeted market is growing rapidly with increasing
concentration on quality of products. Parbat Redolence will be able to provide
high quality essential oils because of its strict adherence to international standards
(ISO 9001:2008, USDA organic) and at a good price because of its low cost of
production. It will be fairly easy to acquire the organic certification as the herbs
will be cultivated on the community forest’s land which has never been cultivated
before.
It will start with two community forests in Taplejung with combined holding of
227.7 acres of land and two Forest User Groups in Jhapa with a combined land
holding of 666.11 acres. The reason for choosing Taplejung is that Spikenard
grows in the wild here which reduces the risk of environment and soil
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incompatibility. The total area occupied by the community forests in Taplejung

alone is 4,472.10 acres. The reason for choosing Jhapa is its compatibility to
German Chamomile farming and good road connectivity. The total area covered
by community forests in Jhapa is 7,685.48 acres. So, there is great possibility for
expansion and diversification.
There is good possibility of product diversification as Taplejung is also suited for

Rosemary and Lavender cultivation. Jhapa has good potential for mentha and
french basil. Since Chamomile is a seasonal crop, the same fields can be used for
farming of mentha and french basil. And also perennial crops like lemon-grass
and palma rosa can be cultivated in Jhapa.
Parbat Redolence will collaborate with the Community Forest Users Groups
(CFUGs) of Nepal and promote farming of essential oil yielding plants in the
community forests. The plants will be processed at the processing facility of
Parbat Redolence Limited and the farmers will be paid a fair price depending on
the oil yield of their produce. This will improve the living standards of the
community. Parbat Redolence will also share a portion of its profits with the
CFUGs for carrying out social development programs beneficial to the
community.
Using the community forest’s land for herbs cultivation ensures low cost to the
farmers (community) and hence low product cost for Parbat Redolence Limited.
The cultivation will cover only 40% (maximum) of the community forest area and
thus will play a positive role in its conservation (financial incentive for the
community to protect the forest and clearing unfavorable vegetation growth).
1.1.2. MAJOR PLAYERS (suppliers, distributors, clients)

The processing unit will be procured from an internationally reputed ISO certified
manufacturer in India. The lab equipments will be procured from a world
renowned Australian company. The packaging containers will be procured from
an ISO certified company in India.
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Impoters from the targeted markets will initially distribute the products. Within
two years, Parbat Redolence’s international office, in coordination with aroma
therapy practitioners and the importers will be the main distributors.
Parbat Redolence’s initial clients’ base will be dominated by existing importers

and distributors in the target market. Within two years, the clients’ base will
include at least an equal percentage of aroma therapy practitioners and home
users.
1.1.3. NATURE OF THE INDUSTRY

Essential oils use is not a modern phenomena but it has gained much impetus
now. They are being extensively used as flavoring agents, fragrance in the modern
industries, constituent of herbal medicines, and in aroma therapy. However, the
sector is very much fragmented with many small producers and very little sharing
of trade data.
1.1.4. TRENDS IN THE INDUSTRY

The essential oils market is a rapidly growing market with increasing world trade.
Some countries are now using aromatherapy as a complimentary therapy to the
modern medicine. So, the demand for high quality essential oils is on the rise
worldwide.
1.1.5. GOVERNMENT REGULATIONS

The government of Nepal has announced encouraging measures to promote local
industries by removing restrictive regulation hassles that previously existed. The
government has passed legislation allowing only herbs cultivation in the
community forests, duty free export of extracted essential oils, soft loans for
industries working in the sector. At the same time, the government has banned the
export of raw and dried spikenard.
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1.2. THE MARKET

1.2.1. MARKET SEGMENT
The flavoring, fragrance, herbal medicine industries, and the aroma therapy sector
constitute the major market segments for the essential oils to be produced by
Parbat Redolence Limited. From medicines to dog biscuits and child care to
deodorants, herbal essential oils are being used in a wide variety of consumer
products.
1.2.2. PRODUCTS & SERVICES

Parbat Redolence Limited will produce high quality organic essential oils
adhering to strict high quality norms, focusing initially on two products:
1. Chamomile essential oils:
Chamomile essential oil is used extensively in flavoring, fragrance and
aroma therapy. The products having chamomile essential oil range from
balm (organic babies balm etc.) to tea (Yogi Chamomile tea, Twinings
Chamomile tea etc.) to dog biscuits (Bark Wheats).
2. Spikenard essential oils:

Spikenard essential oil is used in herbal medicines (Himalaya Herbal
Healthcare Limited, Novartis Consumer Health Limited), fragrance and
aroma therapy. The sales of herbal medicines over the counter in Europe
stood at USD 4.96 Billion in 2003. The sales distribution is as shown
below.
Fig 1.1: Sales of over-the-counter herbal medicines in Europe (in USD)

Product diversification will be made as and when good market opportunity arises.
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1.2.3. MARKET TRENDS

The value of world import of essential oils in 2008 stood at around USD 29
billion, an increment of 13.45% from 2007 and 30.28% from 2006. The world
leading importing country was the USA followed by France, UK and Germany.
Parbat Redolence will therefore focus on these markets as they are mature markets
with quality consciousness and growing demands. Parbat Redolence will also
focus on Norway as it is a growing market with about 35% increment in values of
import in 2008 from that in 2006.
Fig. 1.2: World Leading Importers of essential oils in 2008
250
200 2002
150 2003
100 2004
50 2005
0 2006
Export (USD, Mil.) Import (USD, Mil.)
Fig. 1.3: Trade Data (Value in USD millions) on essential oils, France
2000
2002
1500
2003
1000
2004
500
2005
0
2006
Export (USD, Thou.) Import (USD, Thou.)
Fig. 1.4: Trade Data (Value in USD thousand) on essential oils, Norway
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Its clients will be existing importers and aromatherapy practitioners with focus on
building good networks with the practitioners to exploit the market further.
1.2.4. IMPLICATIONS OR RISK FACTORS

Parbat Redolence will rely heavily on sales to the Europena and American
markets. So, there might be a situation of plummeting sales owing to extreme
financial conditions or some unexpected situations. But, there is very less chance
of complete annihilation of the market as evident of the increase in the trade value
of essential oils from 2006 to 2008 inspite of the financial crisis starting at 2007.
1.2.5. PLANNED RESPONSE

Parbat Redolence will rely on its basic strengths, which are:
 superior quality products
 affordable prices compared to competitors
 excellent service
 strategic location
Parbat Redolence will establish and maintain contact with the Indian market by
exporting a small portion of its production to India. This will provide an
alternative and secure market for Parbat Redolence’s product. Although not as
profitable as the targeted markets, India is a huge and stable market.
1.3. COMPETITION
1.3.1. COMPETITORS AND TYPE OF COMPETITION
Parbat Redolence will face competition from the small scale producers in Nepal
and the established producers from Europe and USA.
The small scale producers will have pricing advantage over Parbat Redolence, and
the European and American companies will enjoy better market experience.
1.3.2. COMPETITORS' STRENGTHS AND WEAKNESSES

There are several companies working in this sector in Nepal but they are of
smaller scale and operate individually without much collaboration with the
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community. This might provide them a slight price advantage. Trade is dominated
by export to the Indian market. However, lack of proper testing and high quality
processing equipments has cast doub over the quality of their products.
The companies in Europe and the USA have higher production costs but good
quality adherence. Other low cost producers face the issue of lower grade of
products.
1.3.3. COMPETITIVE ADVANTAGE

Parbat Redolence will have lower production costs and quality will be maintained
by following strict quality norms of ISO 9001:2008 standards and USDA organic
certification requirements. So, Parbat Redolence will be able to compete with both
the national and international competition.
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2. SALES & MARKETING PLAN

2.1. CUSTOMERS
Parbat Redolence’s initial clients’ base will be dominated by existing importers
and distributors in the target markets (the USA, UK, France, Germany and
Norway). Within two years, the clients’ base will include at least an equal
percentage of aroma therapy practitioners and home users.
2.2. SUPPLIERS
Processing Machineries will be procured from an ISO certified internationally
renowned company in India. Importing the equipments from India will provide
the advantage of lesser delivery period and faster technical support.
Lab equipments will be procured from a world renowned Australian company

with four decades of experience.
High quality two layered alumunium containers will be imported from an ISO
certified producer in India.
2.3. ADVERTISING & PROMOTION

Marketing will be carried out through postings on reputed online B2B (Business
to Business) portals, networking and interacting with aroma therapy practitioners
and essential oils traders, and participating in different international expositions
and trade shows. Parbat Redolence Limited will be a Gold Certified (endorsed by
alibaba.com) member of www.alibaba.com, paid member of
www.globalsources.com and www.1stworldtradeportal.com, and post its profile
on other relevant B2B portals. Parbat Redolence will network with the alternative
medicine practitioners through their associations like Aromatherapy and Allied
Practitioners' Association (AAPA), International Federation of Professional
Aroma therapists (IFPA), ALTERNATIVopplysningen and so on. Parbat
Redolence Limigted will participate in World Congress of Medicinal and
Aromatic Plants, Asian Essential Oil Congress, Fragrance and Flavors Expo and
so on. Personal contacts will also be made with leading aroma therapists and
alternative medicine practitioners through e-mail, telephone and visits.
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2.4. PRICING AND DISTRIBUTION

Parbat Redolence Limited will enjoy pricing advantage because of low cost of
production due to utilization of community forests land, and duty free export and
soft loan facilities by the government. It’s pricing advantage will be enhanced
further by the quality certifications it will have acquired (ISO 9001: 2008 and
USDA organic certification). The ex-stock rate for both chamomile and spikenard
essentials oils will be USD 500 per KG for the first three years of operation after
which it will be increased to USD 700 per KG.
Distribution of the product will be handled by Parbat Redolence initially as the

clients will mainly be the importers in the target markets. Afterwards, Parbat
Redolence will carry out distribution through its international office with
coordination with aroma therapy practitioners and through the importers. Parbat
Redolence will open its first international office in the UK within 2 years of its
operations and will have at least an office in each of the target markets. Contacts
have already been established with some of the most reputed aroma therapy
practitioners in Norway and France.
2.5. CUSTOMER SERVICE POLICY

Customer service is going to be enhanced by a dedicated support team, regular
meetings with users, effective technical support and appropriate product
packaging.
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3. OPERATING PLAN
Fig 3.1: Operation sequence

3.1. LOCATION
Parbat Redolence Limited will have processing units in Jhapa and Taplejung. The
contact office will be established in the nearest city of Mechinagar Municipality in
Jhapa district.
3.2. ADVANTAGES OR DISADVANTAGES

The processing units will be located close to the community forests (the source of
raw materials) which will ensure quick transportation, low transportation cost and
better quality control. Due to relative remoteness of the location from the major
cities, a contact office will have to be established in the nearest city.
3.3. LEASE OR OWNERSHIP DETAILS

The land for the processing unit will be acquired through purchase of land
adjoining the community forests.
3.4. PLANTS AND MACHINERIES

The plant shed will be constructed with high quality construction materials.
Processing machineries will consist of distillation units with boilers, vessels and
condensers made from the highest grade stainless steel.
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Testing equipments will be Gas Chromatography and Mass Spectrometry

(GCMS) machines which is the world standard for quality testing of essential oils
3.5. FUTURE EXPENDITURES /TECHNOLOGY REQUIREMENTS

Further additions of suitable processing plants, tesing equipmenst and packaging
machineries will be undertaken to facilitate the planned processing units. One set
of processing machinery for each processing unit will be added every year till year
five.
3.6. RESERACH AND DEVELOPMENT

R & D efforts will be centered on market studies and consumers, determining
changes in their requirements and responding to them. It will involve trial
cultivation of herbs like lavender, geranium, basil, mentha and so on.
3.7. ENVIRONMENTAL COMPLIANCE

The processing unit will consist of proper smoke filters and water recycling
equipments to minimize the environmental impact of the unit. The residues
remaining after distillation will be used to make incense sticks and as manure
which apart from providing additional income will reduce the solid waste to
virtually non-existent. Only natural cleaners will be used for cleaning the units.
Tree plantation in adjoining area and forest conservation will be on priority list of
Parbat Redolence’s corporate social responsibility (CSR) program.
3.8. PRODUCTION
Cultivation of the essential oil yielding plants will take place in only 30% of the
total area of the selected community forests.
1st season 2nd season Annual
Total Area, Hectares 666 666 1,332
Cultivated Area, Hectares 266 266 532
Estimated
cultivation/Hectare, KG 800 800 1,600
Total estimated cultivation 213,155 213,155 426,310
Oil Extraction 532.89 532.89 1,065.78 @ 0.25%
Table 3.1: Chamomile oil production estimate for 1st year of operations
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Annual
Total Area, Hectares 227.70
Cultivated Area, Hectares 68.31 @30%
Estimated cultivation/Hectare, KG 800.00
Total estimated cultivation, KG 54,648.00
Oil Extraction, KG 1,092.96 @2%
Table 3.2: Spikenard oil production estimate for 1st year of operations
Production Growth Projection
12,000
10,000
8,000
6,000
4,000
2,000
0
Yr 1 Yr 2 Yr 3 Yr 4 Yr 5
Chamomile Oil (Kg) Spikenard Oil (Kg)
Fig 3.2: Production Growth Projection for first 5 years
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4. MANAGEMENT AND OWNERSHIP

4.1. BOARD OF DIRECTORS (BOD) AND ADVISORS
The BOD will have four directors, each holding 25% equity in the company.
Director 1: Mrs Lata Pyakurel (25% Ownership), Chairman

 President, Federation of Nepalese Cottage and Small Industries (FNCSI)
 Over 20 years experience in industries.
Main responsibilities: business planning, and networking.
Director 2: Mr Swagat R Pyakurel (25% Ownership), Managing Director

 Experienced in establishing essential oil processing unit.
 Technical expertise in processing machinery and testing equipments.
Main responsibilities: operations, administration, and customer support.
Director 3: Mr Suyesh Pyakurel (25% Ownership)

 Member - Industrial Promotion Board, Ministry of Industries, Nepal
 Executive Member, Chamber of Industries, Morang, Nepal
 President, Nepalese Young Entrepreneurs Forum, Biratnagar Chp., Nepal
 10 years experience in processing industry and international trading
Main responsibilities: business planning, networking, and policy guidance.
Director 4: Mr Siraj R. Pyakurel, Managing Director (25% Ownership)

 Member, Association of Chartered Certified Accountants (ACCA), UK.
 Over 5 years experience in international trading.
Main responsibilities: marketing, business planning & financial operations.
Advisor 1: Mr Kamal Belbase

 Over 20 years of experience in cultivation, harvesting and processing.
 Extensive linkages with experts from India.
Main responsibilities: nursery development, cultivation and processing support.
Advisor 2: Mr Guru Baral

 President, Madan Memorial Trust (Madan Bhandari Memorial Academy)
Main responsibilities: trainings, and policy guidance.
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4.2. HUMAN RESOURCES PLAN

1 General Manager Administration, book- Highly experienced and
(2) keeping, support qualified manager
2 Accountant Book-keeping Technical knowledge,
(2) Experience, reliability
3 Office Assistant Asministration, support Office / organizational skills
(2)
4 Consultant, Cultivation & harvesting Technical knowledge,
Farming (1) support to farmers experience, reliability
5 Consultant, Quality control through Technical knowledge,
Testing (1) lab tesing. experience, reliability
6 Supervisor Operations supervision Technical knowledge,
(2) reliability
7 Operators Processing units operation Technical knowledge,
(6) reliability
8 Helpers (42) Operation assistance Reliability
9 Drivers (4) Transportation Reliability
10 Caretaker, nursery Nursery development & Technical knowledge,
(2) management experience, reliability
ADDITIONAL INFORMATION
More operators and helpers will be recruited as production capacity increases.
4.3. PERFORMANCE ASSESSMENT

Initially most of the company's training will be done in-house with company
employees. Management employees will undergo total quality management
training. ISO 9000 certification and more training are planned for assured quality
control.
4.4. REMUNERATION AND BENEFITS

Benefits and salaries are comparable to those in the industry and overtime hours
are sometimes required. A profit sharing incentive plan is planned for the future.
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5. ACTION PLAN
ACTION BY WHEN
1 Site selection and construction September 2011
2 Place an order for Machinery and lab equipments September 2011
3 Seeds handover to CFUGs October 2011
4 Seeds distribution to the farmers by CFUGs November 2011
5 Implement ISO 9001:2008 standards & obtain USDA January 2012
organic certification.
6 Start oil processing, testing and packaging March 2012
7 Start export May 2012
The plantation has to be completed by December first week so site will be

finalized by Septermber and construction work immediately begins. Processing
units are also ordered immediately to avoid any possible wastage of raw materials
due to inability to process.
Seeds and saplings of the plants will be handed over to the CFUG member who
will then distribute it among the farmers within October. Plantation should be
started within Novemer. In the mean time, necessary actions will be taken to
obtain ISO certification and USDA organic certification.
First batch of oil will be extracted in March.
Oils thus produced will then be exported to the target markets of the USA, UK,
France, Gemany and Norway from May, 2011.
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6. FUNDS REQUIRED AND THEIR USES

6.1. CURRENT FUNDING REQUIREMENTS
Initial investement for Parbat Redolence Limited will be around USD 1.2
millions, of which around USD 739,000 will be required for working capital and
around USD 422,000 for capital expenditure for the initial year (Yr. 1). The
amount for capital expenditure will be required at the start, Sep 2011, for purchase
of machinery and equipments and plant set up. Of the working capital, around
USD 450,000 will be required by March, 2012 for payment to farmers. The rest
will be imbursed in equal installments starting form September, 2011.
Required funds will be raised through equity and bank loan, of which 40% will be
equity and the remaining 60% bank loan. Parbat Redolence Limited will try to
secure soft loans from banks as per the legislation of the government of Nepal.
6.2. FUNDING REQUIREMENTS OVER THE NEXT FOUR YEARS

Details Yr. 2 Yr. 3 Yr. 4 Yr. 5
Working Capital 1,462,505 2,549,486 3,698,174 5,116,719
Capital Expenditure 159,359 292,949 153,462 305,897
Total 1,621,864 2,842,435 3,851,635 5,422,617
Table 6.1: Funding requirements for year 2 to 5
From second year onwards most of the required funds will be generated from the
net income earned by Parbat Redolence Limited.
Page 16
7. FINANCIAL DATA
7.1. IMPORTANT ASSUMPTIONS
Bank Interest rate (soft loan) : 12.5%;
Selling Price:
Chamomile essential oil: USD 500 / KG (USD 700 / KG from the 4th year)
Spikenard essential oil: USD 500 / KG (USD 700 / KG from the 4th year)
Depreciation: 20% straight line
Corporate Tax: 20%
(Department of Inland Revenue, Government of Nepal, www.ird.gov.np)
Parbat Redolence Limited will incur a loss of around USD 1.3 millions in the first
year of operations. However, it will be profitable from the second year onwards
with after tax earnings of around USD 497,000.
The NPV of the project from the forecast for first five years of operation is
calculated to be around USD 4.3 millions.
Earnings after Tax, USD

4,000,000
3,000,000
2,000,000
1,000,000
-
Yr. 1 Yr. 2 Yr. 3 Yr. 4 Yr. 5
-1,000,000
Fig 7.1: Projected after-tax earning for 5 years
7.2. PROJECTED ANNUAL STATEMENTS
Turnover Year 1 Year 2 Year 3 Year 4 Year 5
Product Revenue 1,079,368 2,055,144 3,283,400 6,328,179 8,327,682
Cost of Sales 452,348 925,726 1,641,821 2,443,457 3,440,440
Contribution 627,020 1,129,418 1,641,579 3,884,722 4,887,241

Cost of Sales (%) 42% 45% 50% 39% 41%
Page 17
Expenses 705,849 596,497 969,616 1,009,616 1,455,878
Depreciation 75,205 107,077 165,667 196,359 257,538
Capital Expenditures 422,179 159,359 292,949 153,462 305,897

Selling, General &
Admin. Cost 155,692 257,369 401,690 531,301 725,711
Cost of Capital 52,772 72,692 109,311 128,494 166,731
Operating Profit -78,829 532,921 671,963 2,875,107 3,431,364
PBIT -78,829 532,921 671,963 2,875,107 3,431,364
Financing Costs 52,772 34,423 53,854 63,446 82,564
PBT -131,601 498,498 618,109 2,811,661 3,348,800
Taxation -158 1,066 1,236 5,623 6,698
Earnings after Tax -131,444 497,432 616,872 2,806,038 3,342,102

Table 7.1: Projected Initial Five Years Income Statement
Assets Y/E 1 Y/E 2 Y/E 3 Y/E 4 Y/E 5
Fixed Assets 346,974 399,256 526,538 483,641 532,000
Assets Purchased 422,179 159,359 292,949 153,462 305,897
Depreciation 75,205 182,282 347,949 544,308 801,846

Current Assets:
Stock 18,848 38,572 68,409 101,811 143,352
Debtors - - - - -
Cash 365,111 1,407,600 1,581,936 4,597,878 8,099,326
730,933 1,845,429 2,176,883 5,183,330 8,774,678

Equity & Liabilities
Share Capital - 464,441

-
Retained Profit 78,816 452,894 1,069,766 3,875,804 7,217,906
-
Total Equity 78,816 917,335 1,069,766 3,875,804 7,217,906
Non-Current
Liabilites:
Loans 696,662 696,662 696,662 696,662 696,662
Page 18
Current
Liabilities:
Creditors 113,087 231,431 410,455 610,864 860,110
730,933 1,845,429 2,176,883 5,183,330 8,774,678

Table 7.2: Projected Initial Five Years Balance Sheet
Year 1 Year 2 Year 3 Year 4 Year 5
Operating Profit -78,829 532,921 671,963 2,875,107 3,431,364

Depreciation 75,205 107,077 165,667 196,359 257,538
Cash Flow from
Trading -3,624 639,998 837,629 3,071,466 3,688,902
Changes in W.C.
Balances 94,239 98,620 149,186 167,008 207,705
Stock -18,848 -19,724 -29,837 -33,402 -41,541
Debtors - - - - -
Creditors 113,087 118,345 179,024 200,409 249,246
Cash Flow from
Operations 90,615 738,618 986,816 3,238,473 3,896,607
Investing
Activity -422,179 -159,359 -292,949 -153,462 -305,897
Purchase of
Fixed Assets -422,179 -159,359 -292,949 -153,462 -305,897
Financing
Activities 643,890 430,018 -518,296 -63,446 -82,564
New Share
Issues - 464,441 -464,441 - -
Debt Taken
On (Repaid) 696,662 - - - -
Finance
Costs -52,772 -34,423 -53,854 -63,446 -82,564
Taxation 158 -1,066 -1,236 -5,623 -6,698
Cash Flow for

the Period 312,483 1,008,212 174,335 3,015,943 3,501,448
Opening Cash
Position Nil 312,483 1,320,695 1,495,030 4,510,973
Closing Cash
Position 312,483 1,320,695 1,495,030 4,510,973 8,012,421
Table 7.3: Projected Initial Five Year Cash Flow Statement
Page 19
7.3. PROJECT RATIOS:

Year Year Year Year
Performance Ratios Measure Year 1 2 3 4 5
Return on Equity Percentage 166.8% 54.2% 57.7% 72.4% 46.3%
Return on Assets Percentage -10.8% 28.9% 30.9% 55.5% 39.1%
Profitability Ratios
Gross Profit % Percentage 58.1% 55.0% 50.0% 61.4% 58.7%
Operating Profit % Percentage -7.3% 25.9% 20.5% 45.4% 41.2%

Earnings after Tax
% Percentage -12.2% 24.2% 18.8% 44.3% 40.1%
Asset Efficiency
Ratios
Fixed Asset Turnover/
Turnover Rate time cover 3.1 5.1 6.2 13.1 15.7
Total Asset Turnover/
Turnover Rate time cover 1.5 1.1 1.5 1.2 0.9
Stock Days Avg Days 15.0 15.0 15.0 15.0 15.0
Creditor Days Avg Days 90.0 90.0 90.0 90.0 90.0
Captial Structure
Ratios
Debt % of Equity Percentage -883.9% 75.9% 65.1% 18.0% 9.7%

Turnover/
Interest Cover time cover -0.7 0.1 0.1 0.0 0.0
Liquidity Ratios
Turnover/
Current Ratio time cover 3.4 6.2 4.0 7.7 9.6
Turnover/
Acid Test time cover 0.2 0.2 0.2 0.2 0.2
Table 7.4: Different Ratios for the project
Page 20
References:
Book references
Philip A. Wickham, Strategic Entrepreneurship(Harlow: Pearson Education
Limited, 2006)
Ben-Erik van Wyk, Food Plants of the World: An Illustrtaed Guide (Portland, Or.:
Timber press, 2005)
Articles and analysis

S. Nautiyal*, K. S. Rajan and R. Shibasaki, “Interaction of Biodiversity and
Economic Welfare – A Case Study from the Himalayas of India”. Journal of
Environmental Informatics 6, no. 2 (2005),
http://www.iseis.org/JEI/pdfstart.asp?no=200500061
Website
List of Community Forests in Nepal, Federation of Community Forestry Users,
Nepal, www.fecofun.org
Trade statistics for international business development, International Trade

Centre, www.trademap.com
316 Imports and exports, by countries and commodity group1. 2008. NOK
million, Statistics Norway, http://www.ssb.no/english/yearbook/tab/tab-316.html
Federation of Nepalese Chambers of Commerce and Industry, www.fncci.org
Population Census of Nepal, Central Bureau of Statistics, National Planning

Commission of Nepal, www.cbs.gov.np
Page 21
Appendix 1: Production Calculations

1. Chamomile Oil. (data is for twice a year)
Year Yr. 1 Yr.2 Yr. 3 Yr. 4 Yr. 5
Total Area, Hectares 1,332 2,522 4,675 6,638 8,301
Cultivated Area, @30% of
Hectares 533 1,009 1,870 2,655 3,321 total area
Estimated
cultivation/Hectare, KG 1,600 1,600 1,600 1,600 1,600
Total estimated
cultivation 426,310 807,130 1,495,974 2,124,013 2,656,410
Oil Extraction 1,066 2,018 3,740 5,310 6,641 @0.25%
2. Spikenard Oil
Year Yr. 1 Yr.2 Yr. 3 Yr. 4 Yr. 5
Total Area, Hectares 228 436 589 777 1,095
Cultivated Area, @30% of
Hectares 68 131 177 233 328 total area
Estimated
cultivation/Hectare 800 800 800 800 800
Total estimated
cultivation 54,648 104,623 141,343 186,511 262,783
Oil Extraction 1,093 2,092 2,827 3,730 5,256 @2%
Page 22
Appendix 2: List of Community forest to be cultivated in five years

1. Chamomile cultivation
Area DISTRICT
SN FUG_NAME Hectares NAME Region
1 Bahu Ban 308.87 Jhapa Eastern
2 Talpani 357.24 Jhapa Eastern
6 Hanse-dumse 498.28 Jhapa Eastern
7 Namuna 96.75 Jhapa Eastern
8 Juke Khadi 729.60 Jhapa Eastern
9 Shanti 346.72 Jhapa Eastern
10 Haluwagadh 250.11 Jhapa Eastern
11 Hachumasa 731.20 Jhapa Eastern
13 Jamun Bari 401.25 Jhapa Eastern
14 Prajapati 430.62 Jhapa Eastern
4,150.64
Page 23
2. Spikenard cultivation
Area
SN FUG_NAME Hectares District Region
1 Gyasipemba Bhedichauk 88.20 Taplejung Eastern
2 Batasedamli Bhita 139.50 Taplejung Eastern
3 Aiekha Lambayak Phungphunge 72.11 Taplejung Eastern
4 Manabhara 29.12 Taplejung Eastern
5 Shibu 107.00 Taplejung Eastern
6 Mechi Community 153.00 Taplejung Eastern
7 Banpale 31.55 Taplejung Eastern
8 Isera 3.90 Taplejung Eastern
9 Phurumba Kha? 102.75 Taplejung Eastern
10 Mayampatal 50.00 Taplejung Eastern
11 Pokhari Sypatri 317.80 Taplejung Eastern
1,094.93
Page 24
Appendix 3: The Target Markets, Import and Export Figures
Page 25
Appendix 4: Some Facts and Figures

Some facts and figures
Norway
9281.3 Value of essential Statistic Norway www.ssb.no
millions oils and perfume
materials imported
into Norway in
NOK, 2007
4.19% Increase in Statistic Norway www.ssb.no
Imports of
essential oils and
perfume materials
into Norway (in
terms of NOK
millions)
4.95% Decrease in Statistic Norway www.ssb.no
Exports of
essential oils and
perfume materials
from Norway (in
terms of NOK
millions)
252 Number of centres Norge Online www.nol.no
offering Aroma
therapy treatment
in Norway
6 No. of institutions ALTERNATIVopplysnin www.alternativ.
offering gen no
Aromatherapy
courses in Norway
Norsk Prana Institutt www.norsk-
prana-
institutt.no
UK
17 Aromatherapy and Allied www.aapa.org.u
No. of institutions Practitioners' Association k
accredited by (AAPA)
AAPA offering
Aromatherapy
courses in UK
50 International Federation www.ifparoma.o
No. of institutions of Professional Aroma rg
accredited by IPF therapists (IFPA)
offering
Aromatherapy
courses in UK
Page 26
122 Registered Aromatherapy and Allied www.aapa.org.u

practitioners in Practitioners' Association k
UK at (AAPA)
Aromatherapy and
Allied
Practitioners'
Association
(AAPA)
48 Certified members Aromatherapy Trade www.a-t-
of the Council c.org.uk
Aromtherapy
Trade Council of
UK
4 No. of companies Aromatherapy Trade www.a-t-
waiting for Council c.org.uk
certification from
the Aromtherapy
Trade Council of
UK
Nepal
0% duty on No Duty levied on Federation of Nepalese www.fncci.org
imports of raw materials and Chambers of Commerce
equipments auxiliaries and Industry
required for imported by
processing industries in
essential EPZ./SEZ.
oils. 0% Industries
duty on exporting more
export of than 40 percent of
essential the production to
oils be granted similar
facilities as given
to industries in
EPZ.
Jhapa District Profile

Population 688,109 Central Bureau of www.cbs.gov.np
Statistics, National
Planning Commission of
Nepal
Area (Sq.
Km) 1,606
Area (Ha.) 160,600
Taplejung District Profile

Population 134,698 Central Bureau of www.cbs.gov.np
Statistics, National
Page 27
Planning Commission of
Nepal
Area (Sq. 3,646
Km)
Area (Ha.) 160,600
Page 28

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Student Registration Number: 0892684

-TERM PAPER- 2009

Business Plan: Parbat Redolence Limited

Exam code and name:

1. BUSINESS OVERVIEW ________________________________________ 1

1.2. THE MARKET ____________________________________________ 4

2. SALES & MARKETING PLAN _________________________________8

3. OPERATING PLAN __________________________________________10

3.4. PLANTS AND MACHINERIES ____________________________ 10

4. MANAGEMENT AND OWNERSHIP___________________________ 13

6. FUNDS REQUIRED AND THEIR USES _________________________ 16

7. FINANCIAL DATA __________________________________ 17

PRODUCTS AND SERVICES

MARKETING AND SALES

ORGANIZATION AND PERSONNEL

PROSPECTIVE FINANCIAL PERFORMANCE

Fig i: Incremental Earnings Forecast for first 5 years of operation

RISK ASSESSMENT & CONTINGENCY PLAN

1.1. DESCRIPTION OF THE BUSINESS

1.1.1. MAJOR DEMOGRAPHIC, ECONOMIC, SOCIAL AND

incompatibility. The total area occupied by the community forests in Taplejung

There is good possibility of product diversification as Taplejung is also suited for

1.1.2. MAJOR PLAYERS (suppliers, distributors, clients)

Parbat Redolence’s initial clients’ base will be dominated by existing importers

1.1.3. NATURE OF THE INDUSTRY

1.1.4. TRENDS IN THE INDUSTRY

1.1.5. GOVERNMENT REGULATIONS

1.2. THE MARKET

1.2.2. PRODUCTS & SERVICES

2. Spikenard essential oils:

Fig 1.1: Sales of over-the-counter herbal medicines in Europe (in USD)

1.2.3. MARKET TRENDS

Fig. 1.2: World Leading Importers of essential oils in 2008

1.2.4. IMPLICATIONS OR RISK FACTORS

1.2.5. PLANNED RESPONSE

1.3.2. COMPETITORS' STRENGTHS AND WEAKNESSES

1.3.3. COMPETITIVE ADVANTAGE

2. SALES & MARKETING PLAN

Lab equipments will be procured from a world renowned Australian company

2.3. ADVERTISING & PROMOTION

2.4. PRICING AND DISTRIBUTION

Distribution of the product will be handled by Parbat Redolence initially as the

2.5. CUSTOMER SERVICE POLICY

Fig 3.1: Operation sequence

3.2. ADVANTAGES OR DISADVANTAGES

3.3. LEASE OR OWNERSHIP DETAILS

3.4. PLANTS AND MACHINERIES

Testing equipments will be Gas Chromatography and Mass Spectrometry

3.5. FUTURE EXPENDITURES /TECHNOLOGY REQUIREMENTS

3.6. RESERACH AND DEVELOPMENT

3.7. ENVIRONMENTAL COMPLIANCE

Production Growth Projection

Chamomile Oil (Kg) Spikenard Oil (Kg)

Fig 3.2: Production Growth Projection for first 5 years

4. MANAGEMENT AND OWNERSHIP

Director 1: Mrs Lata Pyakurel (25% Ownership), Chairman

Director 2: Mr Swagat R Pyakurel (25% Ownership), Managing Director

Director 3: Mr Suyesh Pyakurel (25% Ownership)

Director 4: Mr Siraj R. Pyakurel, Managing Director (25% Ownership)

Advisor 1: Mr Kamal Belbase

Advisor 2: Mr Guru Baral

4.2. HUMAN RESOURCES PLAN