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Pre-Feasibility Study: (Catering & Decorating Services)
Pre-Feasibility Study: (Catering & Decorating Services)
Pre-Feasibility Study: (Catering & Decorating Services)
Note: All SMEDA Services / information related to PM's Youth Business Loan are Free of Cost
December, 2013
Table of Contents
1. DISCLAIMER......................................................................................................................... 2
2. PURPOSE OF THE DOCUMENT ......................................................................................... 3
3. INTRODUCTION TO SMEDA ............................................................................................. 3
4. INTRODUCTION TO SCHEME ........................................................................................... 4
5. EXECUTIVE SUMMARY ..................................................................................................... 4
6. BRIEF DESCRIPTION OF PROJECT ................................................................................... 4
7. CRITICAL FACTORS............................................................................................................ 5
8. INSTALLED AND OPERATIONAL CAPACITIES ............................................................ 5
9. GEOGRAPHICAL POTENTIAL FOR INVESTMENT........................................................ 6
10. POTENTIAL TARGET MARKETS ...................................................................................... 6
11. PROCESS FLOW ................................................................................................................... 6
12. PROJECT COST SUMMARY ............................................................................................... 6
12.1 Project Economics ......................................................................................................7
12.2 Project Financing ........................................................................................................7
12.3 Project Cost .................................................................................................................7
12.4 Space Requirement ....................................................................................................8
12.5 Machinery and Equipment .........................................................................................8
12.6 Human Resource Requirement ................................................................................9
12.7 Revenue Generation ..................................................................................................9
12.8 Other Costs ..................................................................................................................9
13. CONTACTS - SUPPLIERS .................................................................................................. 10
14. ANNEXURES ....................................................................................................................... 11
14.1 Annexure 1 – Income Statement ............................................................................11
14.2 Annexure 2 – Balance Sheet ..................................................................................12
14.3 Annexure 3 – Cash Flow Statement ......................................................................12
14.4 Useful Project Management Tips ..........................................................................14
14.5 Useful Links ..............................................................................................................15
15. KEY ASSUMPTIONS .......................................................................................................... 16
1. DISCLAIMER
This information memorandum is to introduce the subject matter and provide a general
idea and information on the subject. Although, the material included in this document is
based on data / information gathered from various reliable sources; however, it is based
upon certain assumptions which may differ from case to case. The information has been
provided on as is where is basis without any warranties or assertions as to the
correctness or soundness thereof. Although, due care and diligence has been exercised
to compile this document, the contained information may vary due to any change in any
of the concerned factors, and the actual results may differ substantially from the
presented information. SMEDA, its employees or agents do not assume any liability for
any financial or other loss resulting from this memorandum in consequence of
undertaking this activity. The contained information does not preclude any further
professional advice. The prospective user of this memorandum is encouraged to carry
out additional diligence and gather any information which is necessary for making an
informed decision, including taking professional advice from a qualified consultant /
technical expert before taking any decision to act upon the information.
For more information on services offered by SMEDA, please contact our website:
www.smeda.org.pk
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2. PURPOSE OF THE DOCUMENT
The objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs
in project identification for investment. The project pre-feasibility may form the basis of
an important investment decision and in order to serve this objective, the document /
study covers various aspects of project concept development, start-up, production,
marketing, finance and business management.
The purpose of this document is to facilitate potential investors in Catering and
Decorating Services by providing them with a general understanding of the business
with the intention of supporting potential investors in crucial investment decisions.
The need to come up with pre-feasibility reports for undocumented or minimally
documented sectors attains greater imminence as the research that precedes such
reports reveal certain thumb rules; best practices developed by existing enterprises by
trial and error, and certain industrial norms that become a guiding source regarding
various aspects of business set-up and it’s successful management.
Apart from carefully studying the whole document one must consider critical aspects
provided later on, which shall form the basis of any investment decision.
3. INTRODUCTION TO SMEDA
The Small and Medium Enterprises Development Authority (SMEDA) was established in
October 1998 with an objective to provide fresh impetus to the economy through
development of Small and Medium Enterprises (SMEs).
With a mission "to assist in employment generation and value addition to the national
income, through development of the SME sector, by helping increase the number, scale
and competitiveness of SMEs" , SMEDA has carried out sectoral research to identify
policy, access to finance, business development services, strategic initiatives, and
institutional collaboration and networking initiatives.
Preparation and dissemination of prefeasibility studies in key areas of investment has
been a hallmark of SME facilitation by SMEDA.
Concurrent to the prefeasibility studies, a broad spectrum of business development
services is also offered to the SMEs by SMEDA. These services include identification of
experts and consultants and delivery of need based capacity building programs of
different types in addition to business guidance through help desk services.
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4. INTRODUCTION TO SCHEME
‘Prime Minister’s Youth Business Loan’ program, for young entrepreneurs, with an
allocated budget of Rs. 5.0 Billion for the year 2013-14, is designed to provide
subsidised financing at 8% mark-up per annum for one hundred thousand (100,000)
beneficiaries, through designated financial institutions, initially by the National Bank of
Pakistan (NBP) and the First Women Bank Ltd. (FWBL).
Loans from Rs. 0.1 million to Rs. 2.0 million with tenure up to 8 years inclusive of 01
year grace period and a debt: equity of 90: 10 will be disbursed to SME beneficiaries
across Pakistan, covering; Punjab, Sindh, Khyber Pakhtunkhwah, Balochistan, Gilgit
Baltistan, Azad Jammu & Kashmir and Federally Administered Tribal Areas (FATA).
5. EXECUTIVE SUMMARY
Catering and Decoration Services Business is proposed to be located in a middle
income area in cities like Karachi, Lahore, Rawalpindi, Hyderabad, Faisalabad, Multan
etc.
Services include catering of food & services to events such as weddings, mehndi &
mayun, corporate Events etc and decoration of event site (this service is to be
outsourced).
Capacity: Maximum 150 events per year and initial utilization upto 67%
Total Cost Estimates is Rs. 2.10 million with fixed investment of Rs. 1.37 million and
working capital of Rs. 0.74 million
Given the cost assumptions IRR and payback are 39 % and 3 years respectively
The most critical considerations or factors for success of the project are:
1. Procurement of Raw material
2. Location- proximity to marriage halls, business hubs etc
3. Quality Food
Location: The recommended area for the proposed catering and decorating
service business is the middle income locality in cities like Karachi, Lahore,
Rawalpindi, Hyderabad, Faisalabad, Multan, Peshawar and Quetta etc. This
business can also be undertaken in all small 2nd tier towns in addition to
suburban towns of large cities.
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Product: The proposed project will offer high quality food & catering services to
events such as weddings, anniversaries and corporate events etc.
Target Market: Target customer for catering business would be event
management companies, corporate and individual clients, marriage hall & lawns
etc.
Employment Generation: The proposed project will provide direct employment
to 09 people. Financial analysis shows that the business shall be profitable from
the very first year of operation
7. CRITICAL FACTORS
For the proposed project, it is assumed that on an average 100 events will be catered
during a year with an average of 400 guests per event. The proposed business can also
serve up to 1,000 or more guests per event. Marquee and other decorative arrangement
for big events can be outsourced to multiple decorators.
Table 1: Project Economics
Events No. of Events in a Year %
Weddings 30 30
Mehndi & Mayun 30 30
Anniversaries 10 10
Corporate Events 07 07
Others 23 23
Total 100 100
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9. GEOGRAPHICAL POTENTIAL FOR INVESTMENT
The Pakistani economy is becoming increasingly service-oriented and over the past
several decades the food service industry is growing substantially. There has been a
mushroom growth of marriage halls, event management complexes in the past decade
across all major cities and towns therefore there is a potential for proposed catering and
decorative service business to be established in cities like Karachi, Lahore, Rawalpindi,
Hyderabad, Faisalabad, Multan, Peshawar and Quetta etc.
The recommended areas for the proposed business will be cities like Karachi, Lahore,
Rawalpindi, Hyderabad, Faisalabad, Multan etc. This business can also be done in all
small 2nd tier towns in addition to suburban towns of large cities. Target customers for
the said business would be Corporate and Individual clients, Event Management
Companies, Marriage Halls & Lawns etc.
A detailed financial model has been developed to analyze the commercial viability of
Catering & Decoration Service Business under the ‘Prime Minister’s Youth Business
Loan’ program. Various cost and revenue related assumptions along with results of the
analysis are outlined in this section.
The projected Income Statement, Cash Flow Statement and Balance Sheet are
attached as appendix
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12.1 Project Economics
All the figures in this financial model have been calculated for catering of 100 events in
a year, whereas decoration service for such events will be outsourced in order to control
the capital expenditure at initial stage. Revenue generated through such events are
based on given assumptions and are calculated to be Rs. 19.20 million.
The following table shows Internal Rate of Return, Net Present Value and Payback
Period.
Table 2: Project Economics
Description Details
Internal Rate of Return (IRR) 39%
Payback Period (years) 3.0
Net Present Value (NPV) Rs. 3,855,365
Returns and profitability are highly dependent on regular occurrence of events, good
marketing practices, quality of services and more importantly good quality and taste of
food.
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Total Capital Cost 1,369,000
Initial Working Capital 735,000
Total Project Cost 2,104,000
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12.6 Human Resource Requirement
Table 8: Human Resource Requirement
Description Nos. Salary per Total monthly
employee per Salary (Rs.)
month (Rs.)
Owner 1 25,000 25,000
Head Cook 1 20,000 20,000
Cooks / Karigars 2 15,000 30,000
Helpers 4 10,000 40,000
Driver 1 10,000 10,000
Total Staff 9 125,000
The table above provides details of human resource required to run a Catering and
Decoration Services Business. Salaries of all employees are estimated to increase at
10% annually.
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Table 10 – Working Capital Requirement
Month Monthly Charges (Rs.)
Utilities 04 285,000
Salaries 04 375,000
Rent 04 75,000
Total 735,000
KITCHEN CARE
# 103, Golden Plaza F-7, Blue Area, Islamabad, Capital, Pakistan
Phone: +92-51-32875226
Fax: +92-51-32277176
PRESTIGE KITCHENS
Kehkashan Shopping Arcade Block-7, Clifton, Karachi 75600, Sindh, Pakistan
Phone: +92-21-35862978 / 35862839
Fax: +92-21-5871814
KITCHEN EQUIPMENTS
Syed Qaiser Imam
554 Buffer Zone, Karachi
Phone: 03333045358
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14. ANNEXURES
14.1 Annexure 1 – Income Statement
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14.2 Annexure 2 – Balance Sheet
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SMEDA Services / Information related to PM’s Youth Business Loan are FREE OF COST - 13
14.4 Useful Project Management Tips
Technology
List of Equipment
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Adequacy & Competencies: Skilled and experienced staff should be
considered an investment even to the extent of offering share in business profit.
Performance Based Remuneration: Attempt to manage human resource
cost should be focused through performance measurement and performance based
compensation.
Training & Skill Development: Encouraging training and skill of self &
employees through experts and exposure of best practices is route to success.
Least cost options for Training and Skill Development (T&SD) may be linked with
compensation benefits and awards.
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Government of Balochistan
www.balochistan.gov.pk
Government of Gilgit Baltistan
www.gilgitbaltistan.gov.pk
Government of Azad Jamu Kashmir
www.ajk.gov.pk
Trade Development Authority of Pakistan (TDAP)
www.tdap.gov.pk
Securities & Exchange Commission of Pakistan (SECP)
www.secp.gov.pk
Federation of Pakistan Chambers of Commerce and Industry (FPCCI)
www.fpcci.com.pk
State Bank of Pakistan (SBP)
www.sbp.org.pk
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