ACKNOWLEDGEMENT

Completing the BDP by preparing and presenting in this form was neither an easy task nor
was completely possible by our sole effort. However, the report has been successfully
completed all because of the valuable suggestions, guidelines and cooperation from different
individuals.

I would like to express my deepest gratitude and special thanks to Instructor Mr. Anand
Tuladhar, for the guidance in order to complete this report. Also, I would like to expand my
deepest gratitude to the college management for providing support and other necessary
documents for business development plan.

Secondly, I would also like to thank all those who have directly and indirectly guided me in
writing this plan.

Puja Subedi
SAIM

MBA (Global Business) SPRING 2018

i
 EXECUTIVE SUMMARY
Nepalese increasingly live in crowded cities such as Kathmandu. And especially for job
holders, taking the time out to buy fresh produce is starting to become a hassle they would
rather not deal with. With the pace of time people wants to adopt easy and convenient way of
shopping. Online grocery shopping is considered as a new way of buying the desired grocery
products for household consumption. The concept of online grocery shopping was first
evolved in Nepal where local grocers begun to increase their presence through entering
online channel for grocery retailing. This business development plan is related opening an
online grocery business with name of new venture “Smart Grocery” in Nepal.

Smart Grocery Shop is an online shop where the user can easily find the goods of their
choices in a single page. User just needs to know what they want, and they just give us a call
or simply they can make their order online. Smart Grocery online store will provide high
quality, hygienic and fresh product to customer at their doorstep. All new products which are
present in the market will be available in online store. It basically sells all the items that are
frequently used in kitchen such as vegetables, species, eggs, oils, recipes, etc. it allows
private individuals and businesses to purchase groceries and grocery products online.
Customers don’t have to go and check every shop for the item they need. They can easily
whatever they want in a list in our web page.

Considering the fact, our business will initially operate in Kathmandu. office being setup in
Bhaneshwor. The location of the business office is Bhaneshwor which is one of the prime
locations of Kathmandu. The location is convent to carry out with delivery activities. Our
market at the initial phase of our business are colleges’ students, working students, people
who have high load, people who have disabilities, people who do have their own cars to go to
a supermarket for grocery shopping, offices as well as old people and housewives who want
to buy more goods in less time. We have also done the competitor analysis to get information
regarding our real-time competitors, potential competitors as well as the substitute of the
service we provide. We found our competitors to be other grocery stores, grocery stores that
provide home delivery of grocery items and others grocery shops which provides online
services like: Metrotarkari.com, Nepbay and Mero kirana.

The total investment for the establishment of Smart Grocery is Rs 1,814,375, out of which
30% is funded by two partners and remaining 70% will be financed through loan @ 15.5%
interest from Bank. The preliminary expenses are estimated to be Rs. 594,000and Pre
operating expenses to be Rs. 268,000. We have calculated our net income to be Rs. 5,331,055
in the first year which is good start for us, but it gradually increases to Rs. 6,009,311 in the
second year and so on which is calculate under the Pro forma income statement. The payback
period is 0.45 year. Our initial investment will be Rs. 1,814.375. We will be purchasing fixed
assets and it will cost us Rs.1,072.000.

Smart Grocery will communicate with its customers by adopting different promotional
strategies. The information about the business in addition the product range which it will
offer will be available via internet. The business will employ different tools such as
advertising on social media about the company and its products. It will advertise on
Facebook, Twitter and LinkedIn so that customers become aware of the business.
Additionally, business promotions will also be made via direct mailings during initial 6
months of its operation. Direct mails will be sending to customers via internet. In this way,
the promotional efforts of Smart Grocery seek to differentiate its products from those of its
competitors. The promotional strategy will also include public relations. Effective public
relations will be achieved through good customer service.

Smart Grocery operates with a belief that customers have their own taste and choice, it’s our
responsibility to pay them back with the satisfied service. It will come with a complete
solution for the people who are searching a new convenient way of dealing with hassle of
buying groceries. Smart Grocery will be working with the slogan, “Fresh. Fast. Convenient.”.
 CONTENTS
ACKNOWLEDGE......................................................................................................................i
EXECUTIVE SUMMARY.......................................................................................................ii
Chapter 1....................................................................................................................................9
Introduction................................................................................................................................9
1.1 Industry Introduction........................................................................................................9
1.2 Company Overview..........................................................................................................9
1.2.1 Vision.......................................................................................................................10
1.2.2 Mission.....................................................................................................................10
1.2.3 Objectives................................................................................................................10
1.3 Business Model Canvas..................................................................................................11
1.3.1 Business Model Canvas...........................................................................................11
1.3.2 Business Model Elements........................................................................................11
Chapter 2..................................................................................................................................15
Service Description..................................................................................................................15
2.1 Industry Size...................................................................................................................15
2.2. Industry Growth.............................................................................................................16
2.3 Industry Structure...........................................................................................................16
2.4 Key success factors.........................................................................................................16
2.5 PESTLE Analysis...........................................................................................................17
2.6 Current Status.................................................................................................................18
2.7 Legal startup and ownership...........................................................................................19
2.8 Key partners....................................................................................................................19
Chapter 3..................................................................................................................................20
Market Analysis.......................................................................................................................20
3.1. Market Segmentation.....................................................................................................20
3.2. Target Market................................................................................................................20
3.3. Area of Market..............................................................................................................21
3.4 Market size and Growth.................................................................................................21
3.5 Pricing method, distribution channel and Estimate sales...............................................22
3.6 Competitors Analysis.....................................................................................................22
Chapter 4..................................................................................................................................24
Marketing Plan.........................................................................................................................24
 4.1 Product Strategy..............................................................................................................24
4.2 Price Strategy..................................................................................................................24
4.3 Place Strategy.................................................................................................................25
4.4 Promotional Strategy......................................................................................................25
Chapter 5..................................................................................................................................26
Management Team...................................................................................................................26
5.1 Organizational Hierarchy...............................................................................................26
5.2 Duties and Responsibilities............................................................................................26
5.2.1 Board of Directors (BOD).......................................................................................26
5.2.2 Chief executive officer (CEO).................................................................................26
5.2.3 Role of Human Resource Department.....................................................................27
5.2.4 Role of Financial Department..................................................................................27
5.2.5 Roles of Marketing Department..............................................................................28
5.2.6 Role of Technology Department..............................................................................28
Chapter 6..................................................................................................................................29
Operations Plan........................................................................................................................29
6.1 Business Locations.........................................................................................................29
6.2 Work Schedule...............................................................................................................29
6.3 Operations Process.........................................................................................................29
6.3.1 Machineries &Equipment’s.....................................................................................29
6.3.2 Technology..............................................................................................................30
6.3.3 Skills Required.........................................................................................................30
6.4 Supply Chain Management............................................................................................31
6.4.1 Order Processing......................................................................................................31
6.4.2 Inventory Control.....................................................................................................32
6.5 Quality Control...............................................................................................................32
6.6 Research and Development............................................................................................33
Chapter 7..................................................................................................................................34
Assumption and critical Risk...................................................................................................34
7.1 Assumptions...................................................................................................................34
7.2. Key Risk in the business and risk management plan....................................................35
Chapter 8..................................................................................................................................38
Financial Plan...........................................................................................................................38
 8.1 Financial Assumptions...................................................................................................38
8.2 Total capital requirements..............................................................................................38
8.3 Pre operating expenses...................................................................................................39
8.4 Sources of Fund..............................................................................................................39
8.5 Proforma income statement............................................................................................39
8.6 Proforma Balance sheet..................................................................................................40
8.7 Proforma Cash flow statement.......................................................................................42
8.8 Retained Earnings...........................................................................................................42
8.9 Ratio Analysis................................................................................................................42
8.10 Breakeven point............................................................................................................43
8.11 Payback period.............................................................................................................43
Chapter 9..................................................................................................................................44
Milestones & Exit strategy.......................................................................................................44
9.1 Milestones.......................................................................................................................44
9.2 Contingency plan and exit plan......................................................................................44
Annex.......................................................................................................................................46
Annex 1.1.............................................................................................................................46
Annex 1.2.............................................................................................................................48
References................................................................................................................................51
 List of Tables
Table 1 Assumptions................................................................................................................38
Table 2 Start-up Cost...............................................................................................................38
Table 3 Financial Planning.......................................................................................................39
Table 4 proforma income statement........................................................................................39
Table 5 Balance sheet...............................................................................................................40
 List of Figures
Figure 1 Smart Grocery Business Canvas Mode.....................................................................11
Figure 2 SWOT Analysis of Smart Grocery............................................................................23
Figure 3 Organizational Hierarchy...........................................................................................26
Figure 4 Order processing........................................................................................................31
 Chapter 1
Introduction
1.1 Industry Introduction Online Business, also known as ebusiness or electronic
commerce, refers to conducting business transactions
over the Internet, which includes exchange of
information of value in the form of products and
services as well as payments, using web-based
technologies. - Fraser, Fraser & Macdonald (2000). An
online transaction can be 100% online for electronic
products such as music, video clips, e-books, air tickets,
cinema tickets, hotel booking, share trading, banking
service and more. The transaction can also be done in
mixed mode where order and payment are done online
while delivery is done offline.

An online grocery shop is a recent phenomenon that

has developed as a type of e-business. An online
Grocery Store permits a customer to submit online
orders for items and/or services from a store that serves
both walk-in customers and online customers. The
online Store system presents an online display of all the
items they want to sell. This web-based application
helps customers to choose their daily needs and add
products to their shopping cart. Customers provides
their complete detail of address and contact, and they
get their chosen products in their home. This Web
application saves lots of time of customers.

Among all the oldest online grocery shop is in USA

called “Peapod”. Increasing development of internet
many such online groceries are in market and running
their business successfully. Some includes: Net grocer,
big baskets and many more. In the context of Nepal
metrotarkari.com is the first online portal for such

9
online business. It want, and they just give us a call or simply they can
provides fresh make their order online. They can even look at our item
vegetables and fruits. list and can make
Others online shop in
Nepal includes
NepBay, kirana.

1.2 Company Overview

Coming in today’s era,
people are so busy that
they even do not have
time to buy the basic
needs that is needed in
their life. Time has
been the most valuable
part of the people’s
life. So people are
being more time
conscious. In order to
make their life easy
and prompt we
decided to establish
online grocery
business so that we
can provide grocery
facilities to people in
needed way.

Smart Grocery Shop is

an online shop where
the user can easily find
the goods of their
choices in a single
page. User just needs
to know what they
10
their kitchen enriched with various products. It will initially operate in Kathmandu. Our
online grocery shop has user friendly design and easily accessible to everyone in Kathmandu
valley. All they require is an internet connection and by lowest possible clicks one will get
everything he/she needs at doorstep.

Defining the Problem

Nepalese increasingly live in crowded cities such as Kathmandu. And especially for job
holders, taking the time out to buy fresh produce is starting to become a hassle they would
rather not deal with. With the pace of time people wants to adopt easy and convenient way of
shopping. People want to use their time in productive way rather than going to store for the
purchase of grocery items. As there is high demand for daily grocery item which have not
been fulfilled by one single store or shops.

Fixing the problem

Smart Grocery online store will provide high quality, hygienic and fresh product to customer
at their doorstep. All new products which are present in the market will be available in online
store. It basically sells all the items that are frequently used in kitchen such as vegetables,
species, eggs, oils, recipes, etc. it allows private individuals and businesses to purchase
groceries and grocery products online. Customers don’t have to go and check every shop for
the item they need. They can easily whatever they want in a list in our web page.

1.2.1 Vision
“To be the favorite local online grocer in Nepal that provides helpful and friendly service to
its customers by providing quality products and building strong presence by offering
competitive prices and to help people to live and eat better.”

1.2.2 Mission
The mission linking our product or service is “To bring the groceries right to people’s
doorstep and connect their daily needs with the best use of technology.”

1.2.3 Objectives

1.2.3.1 Short term objectives:

 Providing customers with fast delivery
 Utilizing technology in a way that enhances communication and the
company's profitability and services to customers.
  Displaying a larger number of products than traditional retailers at lower cost.
 Increasing web presence over competitors

1.2.3.2 Long term objectives:

 Making people life easier and enhancing their living standard
 Introducing new product portfolio
 To create value for enterprise, partners, suppliers as well as customers
 To increase employee opportunity.

1.3 Business Model Canvas

1.3.1 Business Model Canvas

Figure 1 Smart Grocery Business Canvas Mode

1.3.2 Business Model Elements

A business model provides the justification of how a firm creates, captures and delivers value
to its customers. The nine basic building blocks or elements of business model helps to
describe the overall concept and orientation of setting up an Grocer.com online grocery shop.
These elements are explained below:

1. Customer Segments: A customer segment is one of the important elements of business

model that describes who the business would target or to whom it wanted to target its
products. Smart Grocery will target mass market which would include colleges’ students,
working students, people who have high load, people who have disabilities, people who do
have their own cars to go to a supermarket for grocery shopping, offices as well as old people
and housewives who want to buy more goods in less time.

2. Key Resources: The key resources in any business model describe what resources Does
Company employs that assist to achieve goals or serve an important part in completion of any
business operation or activities. For Smart Grocery the key resources of business are its
suppliers who are reliable, storage place and physical warehouses to keep goods, facility of
transportation and development of web and application.

3. Value Propositions: A value proposition is an attractive statement of business that

convinces customers to buy a product or use a service. It is a promise of value of what the
company will deliver. The value proposition of Smart Grocery consists of four elements:

i. Time Saving: By shopping online for groceries, customers can save their time. Those
people who have shortage of time to buy for grocery items can save their time by
shopping through online.
ii. Free Home Delivery: Smart Grocery will provide free home delivery to its
customers. It serves as an important value proposition as a very few retailers have
been offering free delivery only in few cases, such as if the place at which goods to be
delivered is near, then they provide free delivery. However, Smart Grocery will
provide free delivery to all of its customers whether they live near or far of the
business warehouse.
iii. Convenience: Smart Grocery will provide customers to conveniently shop for their
groceries via internet. The customers would not have to carry big bags instead just a
click will make their life easy as Smart Grocery will deliver their goods at their
doorstep.
iv. Bulk Order Offering: Smart Grocery will also provide its customers with an
opportunity to order products in bulk quantity. This will add value to the company’s
offerings if customers order products in bulk quantity.
4. Customer Channels: Customer channels is defined as the channels by which company
offer its products or services to customers. The only channel of Smart Grocery through which
it will offer its products is its website as it is solely based on online retailing and do not have
any physical store or location.

5. Key Partners: The key partners in business model encompass the description of all those
individuals and parties that make the successful operations of company and help to achieve
end goals. With regard to Smart Grocery, its key partners are suppliers and manufacturers of
all products that the business would sell to its customers. An enlarged network of sellers is
also key partners they will deliver goods to customers. Lastly, the online media also serve as
a key partner as it would help the business to effectively conduct business promotions and
advertisements.

6. Cost Structure: The cost structure in business model describes the overall cost that the
business would incur at the course of its operations. Smart Grocery cost structure will
comprise of cost of website incorporation, cost of transportation, cost of initial capital
purchases, customer service personnel costs and cost of storage. All these costs will form the
major cost structure that will incur when Smart Grocery start its operations.

7. Customer Relationships: In a business model, customer relationship is very important

element that describes how a company would maintain relationships with its customers
through adopting different strategic tools and techniques. Smart Grocery business will
develop relationships with its customers through reminding them via email, providing
telephone service to customers to assist them. It will also use feedback forms that would help
to determine what the customers want, thus building strong relationships. Smart Grocery will
also provide discount plans for those customers that buy frequently so as to build
relationships with them.

8. Key Activities: For Smart Grocery business, key activities will include designing and
production of website, to provide goods via home delivery, online order and payment as well
as knowing the details about each and every product that it will sell. However, business key
activities would also include marketing and promotion of its business. All these activities
would help the grocery business to achieve its goals.

9. Revenue Streams: In a business model, the revenue streams describe the sources from
which the business will get profits or revenues. For Smart Grocery, there are four key
revenue streams that will help business to grow. The first is the transaction fee that different
product owners would pay if Smart Grocery brings more customers to them. Second is the
promotion and advertisement fee. This will be achieved through advertisements of brands
when they chose to advertise on Smart Grocery website. Another one is the profit margin
from sales of products through website. However, the main revenue stream for Smart
Grocery business would be prime annual subscriptions of customers. As it is offering free
home delivery, so annual subscriptions would better attract customers by paying a onetime
fee per year that will be the foundation of business revenues.
 Chapter 2
Service Description
Smart Grocery is online store which provide high quality, hygienic and fresh product to
customer at their doorstep. It basically sells all the items that are frequently used in kitchen
such as vegetables, species, eggs, oils, recipes, etc. simply customers can go through the list
in our web page and place the order.

Smart Grocery Shop is an online shop where the user can easily find the goods of their
choices in a single page. Smart Grocery shop is an online business that will have a complete
range of household and house usage products for its customers. simply customers can go
through the list in our web page and place the order. It will initially operate in Kathmandu.
Our online grocery shop has user friendly design and easily accessible to everyone in
Kathmandu valley.

Users can buy the items from the following categories:

● Fresh fruits and vegetables

● Pulse, seeds and grains
● Spices
● Snacks
● Frozen food
● Household (laundry, insecticide, household consumables, household cleaners, etc)
● Personal care
● Kitchen and dining room accessories
● Meat (fish, chicken, mutton).

2.1 Industry Size

There were 31 private ISPs in Nepal, with about 200,000 subscribers, and nearly 16.67
million internet users nationwide. Roughly 40 percent of these accounts are commercial,
with businesses promoting their products and services and communicating with foreign
businesses via the internet. Online activity is concentrated in Kathmandu and a half-dozen
other cities, with relatively little internet penetration in rural areas, although this is slowly
changing with most users accessing the internet via mobile phones. While relatively little
business activity is conducted online, the market is growing.
In our attempt to thoroughly analyze the industry, we identified the problems of people
dealing with stress and hassle of having to drive to the grocery store, circle around the
parking lot, dragging the screaming and restless kids to street etc. With the pace of time
people wants to adopt easy and convenient for shopping. Our online grocery store provides
that facilities to the customer. We provide high quality, hygienic and fresh product to our
customer that available in the present market. People want to use their time in productive way
rather than going to store for the purchase of grocery items and hence we are focusing to save
time of our customers.

2.2. Industry Growth

The online business has been growing at a rapid pace. People have been going online for
many reasons now. Where platforms to buy clothes, appliances, gadgets and beauty products
are common, online platforms for groceries are limited. The limited numbers of such
platforms show less investment and more possibility to approach this niche market. There is
only a niche population that have gotten used to online grocery shopping while others still
doubt the quality and credibility of such platforms and since have been reluctant to adapt the
new way of shopping. There is hope for growth opportunities.

2.3 Industry Structure

The nature of online business is mainly focused on starting with supply chain management,
inventory, shipping and returns, product catalog, customer service strategy, and marketing
etc. To run an online business, we need to trade under an appropriate business entity. If we
are starting our internet business, we should start trading without a proper business structure.
There are a handful of websites that offer eCommerce for consumers in the Kathmandu
Valley, although most of these are traditional retailers that offer delivery services for their
products ordered online.

2.4 Key success factors

1. Customer satisfaction: Improving customer satisfaction is the foundation objective of any
business whether the business is operating physical or online. Smart Grocery will increase
customer satisfaction by through its customer feedback, by conducting fast delivery,
providing quality products etc. The business will then focus on flaws so as to make its
customers more satisfied.
2. Affordability: One of the commonly stated benefits of online shopping is possibility of
price reductions due to reduction in operational costs. Price of the product will have
competitive pricing.

3. Regular availability: A centrally operation online system could provide a product range
that could be impossible for the physical retailers to implement. For example, the online store
can deliver the locally available products in a few hours. Additionally, it could provide
specialty products which could be delivered in one to three days.

4. Convenient: Electronic grocery stores could provide ease of shopping and save customer’s
time which could be one of the motivators for the customers to shop online. Another
convenience that could be provided is to server customers with specific diet. Since the
physical store would not sell groceries which are very specific and limited to a small
customer segment, the online grocery store could be a specialty store for such customer
segments.

2.5 PESTLE Analysis

1. Political Factors

Political factors are related to the policies of government that include the degree of
government intervention in the country’s economy. With regard to online business, political
decision can have major impact on the business such as quality of firm’s infrastructure of
website and other factors. Political instability may also impact business. Business stability is
very much important for any business especially when business is entering a new market.

2. Economic Factors

There are also many economic factors that can impact the operation of Smart Grocery
business in online retail industry. Such factors include the country’s interest rate, tax rate,
inflation rate as well as exchange rate. Other factors also impact the business such as rate of
unemployment in the country and intervention of government in the free market.

3. Social Factors

Social factors in a country include the demographics of people, structure of class, country’s
culture, education of people, and their attitudes towards a product leisure issue. Changes in
these factors can affect the products and services of business. Predominant religion in the
country is Hinduism, but rest of the people is also free to practice any religions. The
differences in culture mean that business that will enter the Nepalese market will need to
adapt the business practices and products that best suit the needs of population. Additionally,
most of the customers perceive buying groceries at lower prices as there is high competition
in this industry whether the company operates physically or online. This has an impact on
online business of Smart Grocery.

4. Technological Factors

For any new business, technological factor plays key role in determining the success or
failure of any business. This is because new technologies tend to create opportunities for
business as it enhances the operations of business. Technological factor is of significant
importance for Smart Grocery as it can improve the quality of operations, reduce costs and
ultimately lead to innovations in web designing. If Smart Grocery will adopt new technology
and align itself with existing technology, it can have increased presence in the new market.

5. Legal Factors

These factors are related to the legal environment of country in which the business operates.
There are many laws that are applied to the economy of Nepal such as the company
companies act (2006), Nepal Labour act (2074) and other laws. Smart Grocery will be liable
to follow this law formulated by Nepalese government.

6. Environmental Factors

In a grocery retail business, environmental factors play a key role as the grocery retailers
have to buy products in bulk to keep in warehouses. People in almost any country desire to
protect their environment as they will to buy those products that are environment friendly.
With regard to Smart Grocery business, will not have any environmental impact, but delivery
of products through transportation service might impact environment and thus impact the
business. So, Smart Grocery will use green vehicles by delivering products to customers
through energy efficient vehicles that can have minimum impact on environment.

2.6 Current Status

The history of online grocery is not very long in Nepal, but it is in the process in the
development. Most of the people in urban area use internet and mobile phone. Because of
easy access to internet, urban consumer may find it easier to buy products online. At present
all we need to do is make aware urban people that we are here to help you and we have to
help them change their habit of online buying. Even if 10% of the people of Kathmandu
valley do online shopping owns business can run smoothly without the fear of loss. All it
requires is investment, quality service and trust of the people which seems to have lost from
beginning when it comes to online shopping.

2.7 Legal startup and ownership

The company will be registered as private limited company as per the legal requirements and
under government rules and regulation. The initial startup capital will be collected from the
founding members. Each founding member will be recognized as a partner and will gain
return on investment (ROI) when the company starts earning profits. As each team member
has sound knowledge of the company, its service and goals, the chances of the success of the
company is magnified.

2.8 Key partners

The key partners in business all those individuals and parties that make the successful
operations of company and help to achieve end goals. Smart Grocery key partners are as
follows:

1. Shareholders and investors who would help us in funding capital.

2. Suppliers and manufacturers of all products that the business would sell to its
customers.
3. An enlarged network of sellers who will deliver goods to customers. For example:
Kalimati Fruits & Vegetable Market Development Board will supply us with fresh
vegetables and fruits.
4. The online media who would help the business to effectively conduct business
promotions and advertisements.
5. Online payment portal like e-SEWA, who will help us with effective payment system.
 Chapter 3
Market
Analysis
We have chosen Kathmandu cities are as our target for delivering our services. Nepalese
increasingly live in crowded cities such as Kathmandu for all the facilities of needed
infrastructure facilities. Kathmandu valley has the highest population density in the country;
it is growing by 4 percent per year with a population of 2.5 million people, (Muzzini and
Aparicio, 2013) and is one of the fastest growing metropolitan cities. Due to the fast growth,
new challenges are faced in the process of development.

Looking at the trend of Nepalese living in the cities, they have difficulties dealing with hassle
related to dealing with daily groceries due to busy life schedule. They rather don’t want to
deal with this hassle and instead spend their time in other beneficial activities. They are
searching for the convenient way of shopping to solve this problem. Expenditure on online
platform for shopping in Kathmandu valley gives a great positive vibe to all the entrepreneur
who wants to open online business here in Kathmandu. We can analyze in the current market
scenario; the online business is constantly increasing which reflect that the industry is
gradually improving and enhancing. The industry and market of online grocery is constantly
enhancing and growing as according to time need and situation of demand.

3.1. Market Segmentation

If one defines market segment, it is a subgroup of people who share one or more similar
characteristics that enable them to acquire similar products. In the process of market
segmentation, a company divides market into significant group of people that are relatively
identifiable and similar. However, the main purpose of segmenting market is to enable the
marketer to tailor the marketing mixes in order to meet the particular needs of specific market
segment.

3.2. Target Market

Targeting involves which selected segment the company wishes to target its products that is
the most attractive to the business and can provide it with maximum profit. As the business
will operate in online retail market, it will use a mass marketing targeting strategy. A strategy
of mass marketing defines such a business strategy that ignores differences in market
segment and target the whole market with one offer. The retail business require that
companies should provide a same offer to the all of its customers as there is increased
competition in this segment globally.

Smart Grocery will focus on targeting the common needs of consumers instead on what is
different. This means that Smart Grocery business will not differentiate its market segments.
The most attractive market segment for Smart Grocery Smart is colleges’ students, working
students, people who have high load, people who have disabilities, people who do have their
own cars to go to a supermarket for grocery shopping, offices as well as old people and
housewives who want to buy more goods in less time. is working professionals and
housewives. Working professionals seek time saving to buy grocery items, while housewives
also seek convenience and wide range of product selection under one roof.

3.3. Area of Market

Positioning is defined as the process of designing the offering and image of company in order
to occupy a distinctive place in the minds of customers who the company is targeting its
products. The major goal of positioning is to locate a brand in customer’s mind that would
maximize the potential benefits of firm. With regard to Smart Grocery, it will position itself
as a low-price grocery online retailer that provide free delivery of goods to all of its
customers regardless of the delivery location. Following is the positioning statement of Smart
Grocery business. “For World Wide Web users who want to purchase groceries more
conveniently, Smart Grocery is a retail online business solution that provides 24-hour
delivery of your goods on priority. Unlike other e-grocers, Smart Grocery provide free home
delivery with an extraordinary convenience of ordering your goods with comprehensive
selection and at low price” Other than that, Smart Grocery will also provide discount to its
regular users after a specific time period when the business will achieve its breakeven. When
customers frequently buy through the website, the business will offer discount coupons based
on the points that they get on the total amount they purchase. Smart Grocery will use this
strategy as its positioning strategy that enables the customers to keep shopping with the
website of company.

3.4 Market size and Growth

It is noted that 63% of total population uses internet service in Nepal. This status proves that
there is a good scope of E-Commerce in Nepal. The market is getting more and more
crowded every day, with the top few e-commerce shopping websites finding their pie being
eaten into by smaller players joining the game every month. Currently the e-commerce
market is rumored to be worth around $25 million, and the market is growing double and
triple fold every year.

3.5 Pricing method, distribution channel and Estimate sales

The company will adopt the cost-based pricing. The consumers are being deceived on the
prices of the product, so we intend to facilitate them with reliable prices just above the cost
price of the product.

In this company there will be direct distribution system as the customer is directly connected
to the company and there will be no middle-men. With no middle-men, the company will
search for the customers maintain relationship and directly deal with them.

One thing is certain when it comes to supermarkets and grocery stores, if our store is well
stocked and centrally positioned, we will always attract customers cum sales and that will
sure translate to increase in revenue generation for the business. We have been able to
critically examine the supermarket and grocery industry and we have analyzed our chances in
the industry, and we have been able to come up with the following sales forecast. The sales
projection is based on information gathered on the field and some assumptions that are
peculiar to startups in Kathmandu.

The sales will be increased by 5% in year 2 and 10% thereafter. This projection is done based
on what is obtainable in the industry and with the assumption that there won’t be any major
economic meltdown and there won’t be any major competitor offering same products and
customer care services as we do within same location. Please note that the above projection
might be lower and at the same time it might be higher

3.6 Competitors Analysis

The key task here is to identify major players in the industry and their distinctive
competencies. Based on this analysis, our job is to the build the plan in such a way that
provides us with competitive advantage to survive in the market. There are many competitors
available in the market of Kathmandu which is providing grocery services. Following are the
key competitors of Smart Grocery:

Indirect competitors: There are a number of grocery stores in the Kathmandu area. A few of
them provide home delivery of grocery items. The groceries ordered by the customer are not
delivered on the same day, but according to the convenience of the store owners. Most of the
stores do not have a website, so it’s not easy to know which goods are available in the shop
without visiting the shop. The sale offers provided by the store owners are not known to the
customers unless they visit the stores.

Direct competitors: There are few online grocery shops which provides online services. The
major competitors of Smart Grocery are:

 Metrotarkari.com
 Nepbay
 Kirana

There may exist future Competitors, businesses that could be anytime in the future. For
example: other online business with similar concept that may initiate business in the future.

Figure 2 SWOT Analysis of Smart Grocery

 Chapter 4
Marketing Plan
A marketing plan is a comprehensive document or blueprint that outlines business advertising
and marketing efforts for the coming year. It describes business activities involved in
accomplishing specific marketing objectives within a set time frame.

A combination of local media along with national media will be utilized. Local media
marketing is most effective, followed by print advertisement. As soon as a concentration of
cafe is established in a market, then broader media will be explored. By providing already
established product with unique experience in the town, with unbeatable quality at an
acceptable price in a clean and friendly outlet, we will be the talk of the town. Word of mouth
will also work for us as an effective marketing tool. Therefore, the execution of our concept
is the most critical element of our plan. We will actively build our brand, through various
forms of advertising like paper ad, online ad and promotional items and other marketing
gimmicks better than those of other restaurants.

4.1 Product Strategy

Smart Grocery will aim to offer best quality grocery items which include fruits, meat,
beverages, toiletries and all related grocer items. All these items will bear the logo and slogan
of brand. The business has researched the most popular colors for each category items and
also gives those names so that consumers will enjoy while shopping, such as cactus green for
vegetables and river red for meat and others. After one and a half year of its operations, the
business will expand itself into non-grocery items such as home appliances, electronic etc. at
the beginning, there would be new logos and slogans for each category product, however
business will also introduce new ones with the additional items. This would prevent the
business strategy to be diluted and will keep the concept fresh.

4.2 Price Strategy

As discussed before, Smart Grocery will provide its products at relatively low prices as
compared to its competitors in the online retail market. The business has taken into
consideration the existing competition in the online retail market in Nepal and then priced its
products. Additionally, the business is not concerned with setting high prices to signal the
prestige in the minds of customers. On the other hand, the business will not also attempt to
achieve goals of low pricing strategy by selling high quantities of products. To achieve this,
Smart Grocery will employ value pricing strategy so as to make customers feel comfortable
purchasing groceries at their doorstep.

4.3 Place Strategy

With regard to place, Smart Grocery will provide its products and services capital city
Kathmandu. It is a complete online business that has not any physical presence, regardless of
its storage locations. Over the initial three years, Smart Grocery will expand its business to
physical stores in different cities of Nepal if the business will get enough profit to set up a
physical store. On the other hand, Smart Grocery will also expand itself through online by
offering customized product line via internet.

4.4 Promotional Strategy

Smart Grocery will communicate with its customers by adopting different promotional
strategies. The information about the business in addition the product range which it will
offer will be available via internet. The business will employ different tools such as
advertising on social media about the company and its products. It will advertise on
Facebook, Twitter and LinkedIn so that customers become aware of the business.
Additionally, business promotions will also be made via direct mailings during initial 6
months of its operation. Direct mails will be sending to customers via internet. In this way,
the promotional efforts of Smart Grocery seek to differentiate its products from those of its
competitors. The promotional strategy will also include public relations. Effective public
relations will be achieved through good customer service.
 Chapter 5
Management Team
A management team is generally a team of individuals at the highest level of management of
organizations who have the day to day tasks of managing that organizations-sometime a
company or corporations.

5.1 Organizational Hierarchy

Figure 3 Organizational Hierarchy

5.2 Duties and Responsibilities

5.2.1 Board of Directors (BOD)
 To establish policies
 To make significant and strategic decisions
 to oversee the organization's activity.
 Policy making and Decision making
 Set strategy and structure
 Delegate to management

5.2.2 Chief executive officer (CEO)

1. Leader

 Advises the Board

  Advocates / promotes organization and stakeholder change related to organization
mission
 Supports motivation of employees in organization products/programs and operations

2. Visionary / Information Bearer

 Ensures staff and Board have enough and up-to-date information

 Looks to the future for change opportunities
 Interfaces between Board and employee

3. Decision Maker

 Formulates policies and planning recommendations to the Board

 Decides or guides courses of action in operations by staff

4. Manager

 Overseas operations of organization

 Implements plans
 Manages human resources of organization
 Manages financial and physical resources

5. Board Developer

 Assists in the selection and evaluation of board members

 Makes recommendations, supports Board during orientation and self-evaluation
 Supports Board's evaluation of Chief Executive

5.2.3 Role of Human Resource Department

 Consulting with senior managers to identify skill needs and qualifications
 Creating job and task descriptions for recruiting, hiring and training purposes
 Overseeing orientation and training of new hires
 Administering payroll
 Directing disciplinary actions and resolving disputes between employees or between
employees and management
 Deliver a customer-centric induction process

5.2.4 Role of Financial Department

● Bookkeeping and payables/receivables

 ● Financial reporting and control
● Tax and compliance
● Strategic planning and financial planning and analysis
● Treasury and working capital management
● Capital budgeting
● Risk management
● Corporate development and corporate strategy
● Inventory management and control

5.2.5 Roles of Marketing Department

● Listening to customer needs

● Track trends and monitor competition
● Work and transmit brand values
● Coordinate efforts with those of the marketing partners of the company
● Innovate
5.2.6 Role of Technology Department

● Business strategy development

● Network development
● Data supervision
● Information security management
● Training and support
● Communication channel development
● Customer relationship management
● Designing company website
● Electronic marketing system development
 Chapter 6
Operations Plan
An Operational Plan is a highly detailed plan that provides a clear picture of how a team,
section or department will contribute to the achievement of the organization’s goals. The
operational plan maps out the day-to-day tasks required to run a business and cover.

6.1 Business Locations

Smart Grocery is the store which sales grocery items through the internet. For this, we don’t
need large space to store the grocery items. We directly contact with the suppliers when the
orders are made by the customers. We will rent rooms at Baneshwor, Kathmandu for the
display purpose.

For now, we have chosen this premise because it will be easier for us to operate our business,
as many students, hostels, colleges are found in this area and use internet daily. This premise
is not adequate for our future needs if we are able to gain more profit constantly like we are
having now we will be going to expand our area and premises. So, we have planned to rent
more rooms to open our office in various locations like Bhaktapur and kirtipur as well.

6.2 Work Schedule

This business working hour work in shifts because this company intends to provide service
anytime the user demands. The shift will be of maximum 8 hours. Total working days in year
is 360 days.

6.3 Operations Process

6.3.1 Machineries &Equipment’s
Our inventory includes bakery items, rice, oils, sauces, cereals, breakfast food, soup &
canned juices, frozen foods, dairy, cheese and eggs, snacks, fruits &vegetables, drinks, bars,
soap, kitchen utilities and many more groceries and household items. To operate the online
grocery, we required some equipment for storage purposes we required food-grade shelving,
chest, freezers, standard- or blast freezers and processing equipment’s etc. Some materials are
needed for packaging purposes also. Other than that, we required laptops, printers, furniture
and other office equipment’s. We also required delivery van for food delivery.
6.3.2 Technology
In an online business technology is the most important thing. The whole system is dependent
on the technology that we will be using, therefore we will ensure that we take proper
decisions on the architecture on which our system will be developed, the hardware the
software that we will using and proper security measures to ensure that our clients can have
secure transactions.

The following are the technology features of Smart Grocery.

 user friendly web portal

 Secured money transaction
 Fast
 Robust
 Fault Tolerant
 Scalable
 Supports concurrency of 500 user

6.3.3 Skills Required

Our Company requires six skilled manpower and other semi-skilled manpower. The skills
required by the worker in the company are:

 CEO should have proper knowledge of finance, marketing and operation management
skills,
 Human resource manager should have polite way of handling the customer and
should be always ready for solving the queries of the customer,
 Finance manager should have proper knowledge about the record keeping and finance
management.
 IT manager should have proper knowledge related web development, application
development and handling technical problems.
 Marketing manager should have proper knowledge about the business marketing
strategy and be able come up with new innovating marketing plan for companies.
 Delivery person needs to have knowledge about with GPS and should also be efficient
driver.
6.4 Supply Chain Management
6.4.1 Order Processing
 Customer enters into our online channel or websites. They can also use Smart Grocery
application for order processing.
 Customers will go through the available list in our website for products and goods
related to their demand. Customer can add products and goods to their cart and place
order.
 After the customer place order, we will be notifying with the products and goods
ordered with their locations.
 We will manage their order from our store or warehouse. Then order product and
good will be packed.
 Then product invoicing is carried before making delivery.
 Customer are required for payment which can be through online payment or they can
also make the payment after delivery of product.
 Finally, the order of goods and products are delivered to the customers locations.
 We also do bulk and batch order processing to process high volume of orders.

Figure 4 Order processing

6.4.2 Inventory Control

This is a key term in terms of cost effectiveness. It is the direction and control of activities
with the

Purpose of getting the right inventory in the right place at the right time in the right quantity
in the

right form at the right cost. Inventory control in Smart Grocery will be done based on
following processes:

 The inventory will be carried on a day basis for fresh vegetables & fruits. And for
others goods inventory will be taken in a weekly basis.
 Fluctuation inventory will be done in our inventory management with a purpose of
preventing disruptions in deliveries to customers. We will have maintained a buffer
stock which will protect against fluctuations in supply and demand and lead time and
it will also remove stock out situation.
 Lot size inventory i.e we will purchase items in quantities greater than needed to take
advantage of quantity discounts, to reduce shipping and setup costs. This portion of
our inventory depletes gradually as customers ‘orders come in and is replenished
cyclically when new orders are received. Depletion is done according.
 We will be constantly refreshing our inventories through the received orders and
products coming from the distributors.
 Whole stock areas will be cleaned and organized properly before taking the inventory.
Besides each items and stocks will be updated regularly so that there is no any expired
product left in the store.
 Finally, each detail about products and goods relating to manufacturing dates, expiry
date, prices and results will be regularly updated and controlled on the proper
guidance.

6.5 Quality Control

Quality is one of the very essential aspects that will help Smart Grocery to sustain in the
market. Compromising in quality is purely compromising the business and leading it to
failure. Hygiene product and timely service will be given most important priority and will
never be compromised in any context.
6.6 Research and Development
Research and development will be kept in the critical part of the operation. As online grocery
business will be based on modern technology it will be necessary for effective testing and
understanding the working mechanism and continuous update of it so that business can reap
out maximum benefit from the latest technology.

Similarly, our company will be carrying online operations and transactions, hence it will be
necessary for business to work more properly on research and development to ensure it can
achieve in goal. For research and development one essential factor will be the customer
feedback which will be the given due priority.

Chapter 7
Assumption and critical Risk
7.1 Assumptions

Smart Grocery would be partnership company which will have unlimited liability. The
company location would be on Baneshwor area. The cost estimation is done based on
information available related to similar type of online business. The cost projections cover
service revenues, rent cost, operating expenditures, inventory, equipments etc. the
assumptions relating to individual cost and components are given as under:

1. Sources of Revenue: Company main source of revenue will be for sale of foods product,
personal care products and kitchen & household products. Sale is estimated to grow at every
year.1st year sale increases by 10% each year.

2. Salary of Employees: company will have six employee including CEO. All employee will
be paid on the monthly basis and salary will grow at rate of 10% each year.

3. Rent: company will open it offices by renting a flat with 5 rooms. The monthly rent
expenses will be Rs.60000. the rent expense as per the rental agreement will increase at rate
of 5% in 1st year and 2nd year onwards it will increase at rate of 10%.

4. Depreciation: depreciation will be calculated for all fixed assets, office equipment and
vehicle. Depreciation will be charged as per diminishing balance method. Depreciation on
Equipment and Furniture will be 25%

5. Printing and Stationery: since our business deal with online transactions, we need to
keep record of invoice and provide its copy to the customers. printing and stationery expenses
will be recorded on monthly basis. Printing and stationery cost are estimated to grow as our
sale increases.

6. Furniture’s and Equipment: To operate the online grocery, we required some equipment
for storage purposes we required freezers and processing equipment’s etc. Some materials are
needed for packaging purposes also. Other than that, we required laptops, printers, furniture
and other office equipment’s. We also required delivery van for food delivery. This needed
furniture’s and equipment will purchase on its initial phase of establishment.
7. Legal Expenditure: license cost & legal process charge company will be established as
per the partnership act of Nepal. The registration fee and legal charge will be Rs. 25000.

8. Tax Rate: Tax is compulsion that need to be paid as per the law. As per the law company
will pay tax at the rate of 25% of our net income. It will be paid on yearly basis.

9. Operating Expenditure: operating expenses refers to all expenses that are incurred while
carrying out our business day to day activities. This expense includes expenses like: rent
expenses, salary expenses, depreciation expenses, utility expenses etc. This operating expense
will be recorded on monthly basis and estimated to increase at rate of 5% in 2 nd year and 3rd
year on wards at rate of 10%.

10. Utility Expenses: Utilities expense is the cost incurred by using utilities such as
electricity, telephone, internet, water etc. The expenses are incurred over the course of the
reporting period, calculated, and payment is rendered.

11. Advertising: advertisement: Advertisement of Smart Grocery is necessary before it start

its operations to make people aware of the business. Initial advertisement cost will be
Rs.25000 and advertisement will mainly focus on online marketing activities.

12. Repair and Maintenance: Repair and maintenance is needed so that operation activities
are carried out without any hinderance. Our business carry business activities through online
so we need to maintain and update our websites to meet needed requirement of the customers.
repair and maintenance cost are estimate Rs.8000 per months.

7.2. Key Risk in the business and risk management plan

A contingency plan defines the businesses’ proposed implementation plan which is triggered
by some emergency or event. Such event may be liable to create notable business problems or
potential real liabilities if the business does not respond to it quickly. With regard to Smart
Grocery, it can experience many risks as operating an online business is not an easy task.
Such risks include financial risks, operational risks and technical risks as well as member
risk. There are some perceived risks with electronic shopping which affects the customers
buying behaviors. Mentioned below are some of the risks with electronic shopping.

1. Fraud and security concerns: In an online store, companies are at risk for fraudulent
purchases made using stolen credit cards.
2. Lack of total cost disclosure: One of the concerns of the online shopping is that the total
cost is not disclosed at the start. Comparing the base price may be easy, but the total cost
including seen only after the final step in the checkout process.

3. Privacy: Privacy of personal information is a very important issue. Most consumers wish
to avoid spam and would prefer that their personal information is not provided to others.

4. Hands on inspection: For an online store, the consumer is provided with only pictures and
description of the product. The consumer is not able to do hands on inspection. So if the
consumer does not have prior exposure to the product, then they may not have a full
understanding of the product they are buying. Generally, reviews made by other consumers
are available, but these reviews may be based on personal preferences.

5. Time Commitment: we will need to update our online profile regularly so that our
information is fresh and accurate. Be prepared for trolls, too, as your audience expands.
These activities require time, so decide now if you have enough time to handle an online
presence.

6. Search ability: Our website, blog and social media posts compete with thousands of other
voices for attention. If we don’t use the right keywords, no one will find us, and we will be
wasting our money.

It is important to manage related risks of the business to achieve the success of the business.
So after the identification of related risks the manager of Smart Grocery is required to
manage its related risks to achieve the success. In case of risk management, the following
steps should be taken:

 While write down the business plan, its related risks should be identified.
 List of risks should be prepared while recognizing related risks.
 We need be sure we have the right resources to maintain our company’s search ability
before we commit to go online.
 After the preparing this list, the probability of risks occurrence and their impact
should be assessed.
 Based on the assessment of probability and its impact, a risk management team would
be defined.
 This team will be related to the preparation of risk management plan to tackle the
related risks.
 Henceforth, entire people should be concerned about the business associated risks as
well as the goal achievement.
 It is required to motivate all of the employees in this way, which they can put their
best in this business in a proper way with a great zeal.
 After all, to lessen the divergence in the outcome of the business, it is required to
monitor every task of Smart Grocery properly.
 Chapter 8
Financial Plan
A sound financial plan serves as a key factor for successful start-up of business. Besides the
importance of financial needs of business, the plan also requires ensuring than business
remains liquor and profitable. The following part describes the financial plan of Smart
Grocery which consist of balance sheet and income statement based on five years forecast.
This part also discusses various assumptions, analysis justifications of the figures that
included in both income statement and balance sheet.

8.1 Financial Assumptions

Table 1 Assumptions

S.N. Particulars
1 Capital structure consists of 75% Debt and 25% Equity
2 Working Capital consist of 50% Debt and 50% Equity
3 Long term loan will be repaid in 5 years @ 15.5%, quarterly
4 Short term loan will be repaid in 2 years @ 16%
5 The sales will be increased by 10% annually.
6 All operating expenses will be increased by 5% in year 2 and 10% thereafter
7 Depreciation will be charged as per diminishing balance method
8 Depreciation on Equipment and Furniture will be 25%
9 Other utilities cost will be increased by 5% in year 2 and 10% thereafter
10 Dividend is will 15% in year 1 and will increased by 5% every year
11 40% of purchase will be credit purchase and will be paid in 1 month
12 Tax will be 25% of net income before tax.
Interest expenses of 2nd year will be long term loan interest + short term loan
13 interest
14 Reinvestment rate will be 10%

8.2 Total capital requirements

Total capital required for the business to start is Rs. 1,814,375.
Table 2 Start-up Cost

Particulars Amount
half of the NWC 148375
Capital investment (Fixed assets +
Preliminary Expenses) 1666000
Total Startup Capital 1814375
8.3 Pre operating expenses
Pre operating expense requires the amount of Rs. 268000. This pre operating expenses
include Salary, Advertisement, repair and maintenance, utility expenses, Rent and Printing
and stationary expenses. This pre operating expense calculation is detailly show in annex 1.1
under calculation of monthly operating expenses.

8.4 Sources of Fund

Capital will be fund from partners and bank loan; 30% i.e Rs. 544,313 will be collected from the
partner and 70% i.e Rs 1,270,063 will borrowed from the bank as Long-Term Loan .

Table 3 Financial Planning

Particulars Ratio Amount

Share Capital 30% 544313
Long Term Loan 70% 1270063
Total 1814375

8.5 Proforma income statement

The income statement is a profit and loss statement of business. It highlights the sales revenues, cost
incurred and net profit of business. The below table shows income statement of Smart Grocery for 5
years.

Table 4 proforma income statement

Particulars Year 1 Year 2 Year 3 Year 4 Year 5

Sales revenue 12,800,000 14,080,000 15,488,000 17,036,800 18,740,480

Less:cogs (15%) 1,920,000 2,112,000 2,323,200 2,555,520 2,811,072

Gross Profit 10,880,000 11,968,000 13,164,800 14,481,280 15,929,408

Less: operating expenses

Salary 1,800,000 1,980,000 2,178,000 2,395,800 2,635,380

Depreciation 237,250 183,938 142,753 110,905 86,251

 Preliminary Expenses 118,800 118,800 118,800 118,800 118,800

Rent 720,000 756,000 831,600 914,760 1,006,236

Advertisement 180,000 189,000 207,900 228,690 251,559

repair and maintenance 96,000 100,800 110,880 121,968 134,165

utility expenses 324,000 340,200 374,220 411,642 452,806

Printing and stationary expenses 96,000 100,800 110,880 121,968 134,165

Total operating cost 3,572,050 3,769,538 4,075,033 4,424,533 4,819,361

Net income before interest and tax 7,307,950 8,198,463 9,089,767 10,056,747 11,110,047

Less: Interest 186,552 174,872 121,454 80,683 33,215

Net Income Before Tax 7,121,398 8,023,591 8,968,313 9,976,065 11,076,831

Less: Tax 1,780,349 2,005,898 2,242,078 2,494,016 2,769,208

Net Income 5,341,048 6,017,693 6,726,235 7,482,048 8,307,624

8.6 Proforma Balance sheet

Balance sheet shows the financial condition of Smart Grocery with listed Assets, liabilities
and ownership as of projected for 5 years.

Table 5 Balance sheet

Particulars Year 0 Year 1 Year 2 Year 3 Year 4 Year 5

Assets

Furniture 73,000 54,750 41,063 30,797 23,098 17,323

vehicle 600,000 480,000 384,000 307,200 245,760 196,608
Office Equipment 396,000 297,000 222,750 167,063 125,297 93,973

Total Fixed Assets 1,069,000 831,750 647,813 505,059 394,155 307,904

Other Assets

Preliminary Expenses 594,000 475,200 356,400 237,600 118,800 -

Current Assets

Cash in hand 151,375 5,176,233 10,998,419 17,572,714 24,801,528 32,755,048

Accounts Receivables - - - - - -

Inventory - 575,000 603,750 633,938 665,634 698,916

Total Current Assets 151,375 5,751,233 11,602,169 18,206,651 25,467,162 33,453,964

Total Assets 1,814,375 7,058,183 12,606,382 18,949,311 25,980,117 33,761,868

Liabilities And Equity

Curent Liabilities

Account Payable - 19,167 20,125 21,131 22,188 23,297

short term loan 148,375 -

Interest payable -

Total Current Liabilities - 167,542 20,125 21,131 22,188 23,297

Long Term Liabilities

Long term bank loan 1,270,063 1,086,927 873,712 625,478 336,473 0

Equity 544,313 544,313 544,313 544,313 544,313 544,313
 Reserve and Surplus - 5,259,402 11,168,232 17,758,389 25,077,144 33,194,258

Common Stock 544,313 5,803,714 11,712,545 18,302,702 25,621,456 33,738,570

Total Liabilities And

Equity 1,814,375 7,058,183 12,606,382 18,949,311 25,980,117 33,761,868

8.7 Proforma Cash flow statement

A cash flow statement of Smart Grocery summarizes the amount of cash and cash equivalents
entering and leaving a company in projected 5 years. The cash flow statement measures how
well a smart grocery will how well the company generates cash to pay its debt obligations
and fund its operating expenses. The detail cash flow is on annex 1.2 under proforma cash
flow statement.

8.8 Retained Earnings

Retained earnings reflect the profits that Smart Grocery will able to earn in projected 5 years,
less any dividends or other distributions paid to investors. This amount will be adjusted
whenever there is an entry to the accounting records that impacts a revenue or expense
account. Retained earnings for 1st year is Rs.5,259,402, for 2nd year is Rs.11,168,232, for 3rd
year is Rs. 17,758,389, for 4th year is Rs. 25,077,144 and for 5th year is Rs.33,194,258.

8.9 Ratio Analysis

Ratio analysis is used to evaluate several issues with an entity, such as its liquidity, efficiency
of operations, and profitability.

Current ratio: Current ratio is a liquidity ratio that measures a company`s ability to pay off
its short-term liabilities within its current assets.

Current ratio = Total current assets/Total current liabilities

1st year current ratio is 34.33, 2nd year is 576.51, 3rd year is 861.60, 4th year is 1,147.80 and 5th
year is 1,435.96.

Debt- Equity ratio: The debt-equity ratio shows the percentage of company`s financing that
comes through the creditors and investors.

Debt-equity ratio = Long term debt/Total equity

1st year debt-equity ratio is 0.21, 2nd year is 0.07, 3rd year is 0.03, 4th year is 0.01 and 5th year
is 0.00.

Net profit ratio: It is a profitability ratio that measures the amount of net income earned with
each rupee of sales generated by comparing the net income and net sales of a company.

Net profit ratio = Net profit/Net sales

1st year net profit ratio is 41.73%, 2nd year is 42.74%, 3rd year is 43.43%, 4th year is 43.92%
and 5th year is 44.33%.

Return on Equity (ROE): ROE refers to the estimation of net profit in shareholder`s equity.

ROE = Net income/Equity

ROE in 1st year is 92.0%, 2nd year is 51.4%, 3rd year is 36.7%, 4th year is 29.2% and 5th year
is 24.6%.

Necessary ratios of Smart Grocery are calculated is shown in annex 1.2 under ratio analysis.

8.10 Breakeven point

A break-even analysis is a financial tool which helps us to determine at what stage your
company, or a new service or a product, will be profitable. As per Smart Grocery breakeven
point for 1st year is at RS. 48,719,667, 2 nd year at Rs.54,656,417, 3rd year at Rs. 60,598,446,
4th year at Rs.67,044,981 and 5th year at Rs. 74,066,977. Calculation of breakeven is shown in
annex 1.2 under break even analysis.

8.11 Payback period

The payback period is the taken to recover an investment. The time taken by the Smart
Grocery to Recover the investment is 0.45 yrs. Calculation of the payback period of Smart
Grocery is shown in annex 1.2 under payback period table.
 Chapter 9

Milestones & Exit strategy

9.1 Milestones
Setting up an online grocery store has its own challenges and competing with the existing
grocery stores in a small market is not easy. However, the Internet grocery store business
model has low operational cost compared to the traditional grocery stores. In addition to this,
good service provided to the customers can help to create a trustworthy image. Technology
can be used so as to make it easier for the customers to place the order on the fly. Setting up
the business is not as difficult as it seems. The online grocery shop has market opportunity
and the growth seems promising. The numbers of customers have been steadily increasing
which has resulted in a greater number of similar businesses.

The primary objectives of the Smart Grocery are to provide customers with fresh product by
fast delivery in a most convenient way. Smart Grocery will Utilize available technology to
increase web presence over competitors so that company can enhances communication and
the company's profitability and services to customers. company will focus on making people
life easier and enhancing their living standard. Company will focus on introducing new
product portfolio as per need of market and customers. company will target on increasing its
customer by retaining them and by promotional activities.

Smart Grocery will not only focus on creating value to its customers but also will create value
for its enterprise, partners, suppliers as well. In coming futures Smart Grocery will expand its
market to others cities area like: Bhaktapur, Patan, Pokhara, Butwal etc. As smart grocery
expands its market it will also create career opportunity for people.

9.2 Contingency plan and exit plan

As our main objective, is engaging more and more potential customers to us. Different risks
and consequences might see in coming future. Saying this statement, we can tackle different
situations with the stand ready policies. In the initial phase we are targeting only within the
Kathmandu cities area. But we are planning on expansion of cycle stations to various city
locations.

From the inception of business, it is wise to anticipate the failure. As Smart Grocery will start
its online business, it should have some idea about exit strategy. Smart Grocery, it is required
to sale the business on profit. In case of failure of the startup business, for our exit strategy,
we shall be merging with a similar company, or being bought by a larger company so we can
pay to different partnership.

Annex
Annex 1.1
Fixed Asset Calculation
Particulars Rate Unit Amount
Table 10000 2 20000
Chair 2000 4 8000
Cupboard 15000 1 15000
Sofa 30000 1 30000
Laptop 30000 4 120000
Telephone 3000 3 9000
Freezer 110000 2 220000
Scanning Machine 20000 1 20000
Inverter 30000 1 30000
Vehicle 600000 1 600000
Total 1072000

Preliminary Expenses
web design 50000
Registration Charges 25000
Rent for house 60000
purchase of goods 230000
Salary 150000
Miscellaneous expenses 4000
office repair and maintenance 10000
Utilities 25000
internet installation cost 15000
Advertisement 25000
Total 594000
Calculation of monthly operating expenses

Particulars Amount
Salary 150000
Advertisement 15000
repair and maintenance 8000
utility expenses 27000
Rent 60000
Printing and stationary
expenses 8000
Total operating expenses 268000

Utility Expenses
s.no Items Qty Price/unit Amount
1 electricity bill 6000
2 telephone bill 3000
3 internet bill 4000
4 Fuel 50 110 5500
5 water bill 2000
6 drinking water 50 30 1500
7 repair and maintenance 5000
Total utility expenses per months 27000

Salary Expenses
Employee Salary
Chief Executive Officer 35000
Marketing manager 25000
Finance Officer 25000
IT officer 30000
Human Resource Manager 20000
Driver & Delivery person 15000
Monthly Salary 150000
 Calculation of Depericaton

Annex 1.2
Statement of Retained Earnings
1 2 3 4 5
Beginning
Year 5115898.84 10487592.62 16396455.78 22896205.26
Add: Net
Income 5,341,048 6,017,693 6,726,235 7,482,048 8,307,624
Less:
Dividend 81,647 108,863 136,078 163,294 190,509
Retained
Earning 5,259,402 5,908,831 6,590,157 7,318,755 8,117,114

Ratios analysis
Year 1 2 3 4 5
Ratios
Liquidity Ratio

Current Ratio 34.33 576.51 861.60 1,147.80 1,435.96

Quick Ratio 30.90 546.51 831.60 1,117.80 1,405.96

Efficiency Ratio

Inventory Turnover Ratio 22.26 23.32 24.43 25.59 26.81

Account Receivable Turnover - - - - -

Account Payable Turnover 9.39 10.29 11.27 12.34 13.51

Total Assets Turnover Ratio 1.81 1.12 0.82 0.66 0.56

Fixed Assets Turnover Ratio 15.39 21.73 30.67 43.22 60.86

Profitability Ratio
Gross Profit Margin 85.00% 85.00% 85.00% 85.00% 85.00%
Net Profit Margin 41.73% 42.74% 43.43% 43.92% 44.33%
Operating Profit Ratio
Return on Assets 75.67% 47.74% 35.50% 28.80% 24.61%
Return on equity 92.0% 51.4% 36.7% 29.2% 24.6%
Dividend payout Ratio 1.5% 1.8% 2.0% 2.2% 2.3%
Solvency Ratio

Debt Equity Ratio 0.21 0.07 0.03 0.01 0.00

Total Asset to Equity Ratio 1.22 1.08 1.04 1.01 1.00

Net worth to total outside
liability
Interest Coverage Rate 39.17 46.88 74.84 124.65 334.49

Break even Analysis

Year 1 2 3 4 5

Fixed cost (7,307,950) (8,198,463) (9,089,767) (10,056,747) (11,110,047)

Contribution
Margin 15.00% 15.00% 15.00% 15.00% 15.00%

Break-even sales (48,719,667) (54,656,417) (60,598,446) (67,044,981) (74,066,977)

Payback Period
Year 0 1 2 3 4 5

Cashflow (1,814,375) 5,697,098 6,320,431 6,987,788 7,711,753 8,512,674

Cu.
Cashflow (1,814,375) 3,882,723 10,203,154 17,190,942 24,902,695 33,415,370
WACC 15.50%

NPV 18,065,857
IRR 324%

PBP 0.54 yrs

Proforma Cash flow statement

Year 0 1 2 3 4 5
Particulars Amount(Rs.) Amount(Rs.) Amount(Rs.) Amount(Rs.) Amount(Rs.) Amount(Rs.)
Cash Flow From Operating Activities
Net Income - 5,341,048 6,017,693 6,726,235 7,482,048 8,307,624
Preliminary Expenses (594,000) 118,800 118,800 118,800 118,800 118,800
Add: Depreciation - 237,250 183,938 142,753 110,905 86,251
Change in Working capital
Decrease(increase) in Current Assets:
Ending Inventory - (575,000) (28,750) (30,188) (31,697) (33,282)

Decrease (Increase) in Current liabilities

Account payable - 19,167 958 1,006 1,057 1,109
A) Net Cash From Operating Activities (594,000) 5,141,265 6,292,639 6,958,607 7,681,113 8,480,502

Cash Flow From Investing Activities:

Purchase of Fixed Assets (1,069,000) - - - - -
B) Net Cash From Investing Activities: (1,069,000) - - - - -

Cash flow from Financing Activities:

payment of Dividend - (81,647) (108,863) (136,078) (163,294) (190,509)
short term Loan - 148,375 (148,375)
long term Loan 1,270,063 (183,136) (213,215) (248,234) (289,005) (336,473)
increse in equity 544,313 - - - - -
C) Net Cash From Financing Activities: 1,814,375 (116,408) (470,452) (384,312) (452,299) (526,982)

D ) Net Change in Cash (A+B+C) 151,375 5,024,858 5,822,187 6,574,295 7,228,814 7,953,520
Add Beginning Cash - 151,375 5,176,233 10,998,419 17,572,714 24,801,528
Ending Cash 151,375 5,176,233 10,998,419 17,572,714 24,801,528 32,755,048
 References
 https://www.export.gov/article?id=Nepal-ecommerce
 https://cbs.gov.np/
 https://ictframe.com/ecommerce-business-practices-and-trend-in-nepal-2/
 http://blog.webcreationnepal.com/2018/09/scope-of-e-commerce-in-nepal.html