MINI PROJECT

ON

"SUGARCANE INDUSTRY"

Submitted By
Prashant Pandey

Under The Guidance of

Dr. Akhilesh Verma

in partial fulfillment of the requirements

for the award of the Degree of

MASTER OF BUSINESS ADMINISTRATION

Of
A P J Abdul Kalam Technological University

Jeevandeep Institute of Management & Technology

BADALALPUR, VARANASI, 221007.
Session-(2022-2024)

1
 DECLARATION

I undersigned, hereby declare that the project titled "SUGARCANE INDUSTRY” submitted in partial

fulfilment for the award of Degree of Master of Business Administration of A P J Abdul Kalam

Technological University is a bonafide record of work done by me under the guidance of Dr. Akhilesh

Verma, MASTER OF BUSINESS ADMINISTRATIONS OF JEEVANDEP INSTITUTE &

TECHNOLOGY. This report has not previously formed the basis for the award of any degree,

diploma, or similar title of any University.

<Signature>

Prashant Pandey

2
 MASTER OF BUSINESS ADMINISTRATION
Of
Jeevandeep Institute of Management & Technology

CERTIFICATE

This is to certify that the report titled “SUGARCANE INDUSTRY” being submitted by Prashant

Pandey, Roll No. 028 , in partial fulfilment of the requirements for the award of the Degree of

Master of Business Administration, is a bonafide record of the project work done by Prashant

Pandey of Jeevandeep Institute of Management & Technology.

Dr. Akhilesh Verma <Name> <Designation> <Director>

3
 Acknowledgements

Many have contributed to the successful completion of this mini project, I would like

to place on record my grateful thanks to each of them, and report would be incomplete

without giving due credit to them.I feel extremely exhilarated to have completed this mini

project under the able and inspiring guidance of Dr. Shirish Srivastava her guidance and

timely encouragement has infused courage in me to complete the work successfully.

In the end I sincerely thank the entire respondent, friends and all others who helped me

in completion of this MINI PROJECT.

Ashish Kumar

MBA Ist Semester

Roll No. MBA/03/000

 TABLE OF CONTENT
Front Page

1)Plag certificate

2)Certificate(forwarded by faculty)

3)Declaration

4)Acknowledgement

5)Table of content

6)List of Table and figures

7)Executive summary
8)Enterprise description

9)Products/services description
10)Industry analysis
11)SWOT analysis
12)Marketing sub plan

13)Operations sub plan

14)Human resources sub-plan
15)The budget
16) Liquidity

17) Financial sub-plan

18)Milestone schedule

19)Appendix

5
 EXECUTIVE SUMMARY

Sugarcane Juice is a Marketing idea that we are coming up with. Fresh sugarcane
juice obtained from mature cane is sweet and tasty. It is not only a thirst quenching
drink but also nutritious due to the presence of several minerals like phosphorus,
calcium, magnesium, vitamins, amino acids etc.

It has medicinal properties also particularly for the cure of jaundice. Cane juice mixed with
the extracts of lemon, mint etc., adds to the taste, helps in better digestion and improved
bowel movement.

Our product is sugarcane juice in tetra pack packaging. Sugarcane juice is widely used in
summer season because it is good in taste and low in cost. But problem with this is that it
can't be preserved for long time. In India no company has launched sugar cane juice till
now in tetra pack. The methodology used in India is quite old and so many people don't
go for this sector because the risk of the low shelf life. So we

It have decided to launch a sugar cane juice & we would be using sodium benzoate as
a preservative which would increase the shelf life of our product without harming its
colour and taste. Because sugar cane juice is naturally sweet.

it can be sold with a little additional processing too. Fresh sugar cane juice has no
preservatives, however its tendency to turn black from oxidation soon after pressing is very
high, so to secure from oxidation we should pack in tetra pack packaging.

The sugar cane juice has several health benefits and medicinal properties most of
which remains unknown to the masses. It has direct effect on digestive system and it
contains nutrients which are healthful for life.

It strengthens the stomach, kidneys, heart, eyes, and brain and sex organs. The juice
sucked from the sugarcane can prove highly valuable in case of weak teeth due to
lack of proper exercise resulting from excessive use of soft foods.

It gives a form of exercise to the teeth and makes them strong. It also keeps the teeth clean
and increase their life.

The target market would include almost all the adults, young & health conscience
people & we would initiate our project initially in Pathakot in SITE area.

6
4.5

Series 1
3.5 Series 2 1.5

2018 2019 2020

 7
Introduction

Sugarcane juice is used as a delicious drink in both urban and rural areas in many
countries. Fresh juice cannot be stored normally for more than six hours due to the
presence of simple sugars through Sugar cane juice extractor, which spoils the juice
quickly. Fresh sugarcane juice obtained from mature cane is sweet and tasty.

Consumption of sugar cane juice has a human history spanning at least the pastfive
thousand years made in Fresh sugarcane juicer machine. This juice is as natural as
it gets, and the sugar contained in the product does not turn into fat but leaves your
body without creating any fat.

The truth is that sugar cane is the healthiest food for a healthier you. Sugarcane
Juice machine, before it is mutilated into white sugar, is highly beneticial to Human
health.

It contains protein, iron, phosphorus, vitamins A, B1, B2, B3, and C, calcium,
and chromium. The sugar-cane juice and honey help prevent tooth decay because
they contain more minerals and other nutrients another beauty of Commercial
sugarcane extractor is that when you chew the fibre.

8
it brightens your teeth and strengthens your gums. But due to its seasonal availability and
fast deterioration by microbial decomposition, the possibility of its use as fresh juice is very
much limited.
In order to make the availability of cane juice at all times as a soft drink prepared
under electric motorized Sugarcane Crushers hygienic conditions, a simple method
of bottling the cane juice has been developed.

My project is preserved sugarcane juice Sugarcane juice is used as a delicious drink in both
urban and rural areas in many countries. Fresh juice cannot be stored normally for more than
six hours due to the presence of simple sugars through Sugar cane juice extractor, which
spoils the juice quickly. The technology developed can preserve sugarcane juice in bottles
which can be stored for a period up to six months at room temperature
There has been increasing demand for soft drinks and fruit based beverages. Sugarcane juices
can be one such drink which can be available for consumers in tetra pack or glass bottles or
plastic bottles. Sugarcane is widely used in variety of products such as making gur and
khandsari. India is among top five producers of Sugarcane. Sugarcane itself has lot of
medicinal and curative properties.

9
INNOVATION

10
The innovation that we have come up with is sodium benzoate. It is a preservative that helps
sugar cane juice last longer with no effect on its colour and taste. The maximum duration for
sugar cane juice to maintain its colour, taste and freshness is upto six

months. Unlike the other sugarcane juice that can only last up minimum six hours. They are
going to add 0.25 ppm od sodium benzoate to preserve the juice.

The fresh juice would then be bottled and would have the ability to remain hygienic in room
temperature upto mentioned duration.

11

MISSION
The mission is to provide fresh, clean sugarcane juice and sure that is make keeping in mind
the hygiene factor. They want to be the first one to make available to make the fresh
sugarcane juice to the sugarcane juice lovers.

2. PRODUCT & ITS APPLICATION: Bottled or Tetra-Packed sugarcane juices can be very
useful to consumers as it can be carried, store anywhere easily. 200 ml package can be useful
for single person to consume easily and s/he can get good amount of nutrition compared to

12
other beverages. It contains natural sugars, minerals like iron, magnesium, phosphorous,
calcium and organic acids e.g. malic acid, succinic acid, acotinic acid, amino acid, protein,
starch, gums, waxes, non-sugar phosphatides. 3. DESIRED QUALIFICATIONS FOR
PROMOTER: Successful running this project does not require any specific qualification. 4.
INDUSTRY LOOKOUT AND TRENDS Sugarcane juice is traditionally sold in India by
roadside vendors, often in unhygienic conditions. That’s why a few entrepreneurs have taken
the initiative venturing into the marketing of branded sugarcane juice through a chain of
franchised outlets. Initial indications are that this model is headed for success. Pune,
Kolhapur, more known for its leather chappals, has also been blessed with an abundance of
milk, water and sugar, which has made the region the nation's kitchen for many years. The
Warana milk producers' cooperative located here has lived up to this reputation. It has been a
contract manufacturer for products such as Cadbury's Bourn vita, butter for Britannia
Industries and Soya milk for Ruchi Soya. Now, the cooperative is preparing to assert its own
identity through the launch of Warana Joy, its national brand. Among its new products is
sugarcane juice in aseptic packs (Tetra Pak). This article outlines the development of this
business; the opportunities and threats faced and also offer suggestions for the growth in this
market.

13

SWOT
 ANALYSIS 1. STRENGTHS

INCREASED HEALTH CONSCIOUSNESS

Fresh sugarcane juice is obtained from mature cane and is sugary and tasty. It is not only
a thirst quenching drink but also nutritious due to the presence of several minerals like
phosphorus, calcium, magnesium, vitamins, amino acids etc., and has therapeutic and
medicinal properties. It is completely pasteurized i.e. we place it over shelves after proper
sanitization of sugarcane juice with six months guarantee.

14
FIRST MOVER’S ADVANTAGE

They are the first one to introduce sugarcane juice in tetra pack, so they are having an
advantage over market as at initiation we will face no other direct competitors, and up
to the time any competitor enters, they ill increase the brand loyalty.
 PRODUCT INNOVATION:

The product that they are launching is a good quality product and innovative as well.

NUTRITIOUS DRINK WITH SEVERAL HEALTH BENEFITS:

1. Sugarcane juice is a wholesome in many aspects,Sugarcane juice is a great

preventive and healing source for sore throat, cold and flu.
2. It has a low glycemic index which keeps the body healthy.
3. This is one sweet drink even the diabetic can enjoy without fear. It is because it
has no simple sugars.
4. Due to its alkaline nature, it helps to fight cancer. Studies indicate that it has
positive activity against prostate and breast cancer cells
5. It hydrates the body quickly when exposed to prolong heat and physical activity.
6. They are excellent substitutes for aerated drinks and cola.
7. It refreshes and energizes the body instantly as it is rich in carbohydrates. 8. It
helps in better digestion and improve bowl movement. It can hastenrecovery from
jaundice.

15
WEAKNESS
LACK OF BRAND AWARENESS:

16
As they are pioneer in sugarcane juice industry, there is lack of famliarity, so in order
to overcome this weakness we will initially invest heavily on advertisements and
promotion.

They are new to business world, so initially they might have difficulty to understand
the ins and outs of today's aggressive market and for that they require a lot of research
and exposure.

LIMITED SHELF LIFE:

Sugarcane juice actually is served fresh, people perceive it to have fresh otherwise the
colour and odour will be affected due to oxidation, but they are adding sodium
benzoate, a preservative in it which would increase its shelf life over to six months.
OPPORTUNITIES

17
 LOCALLY AVAILABLE RAW MATERIAL:

As Asia grabbed a huge proportion of sugarcane market, India and Pakistan are one of the
main producers of sugarcane, so there will be an ease of availability by
contracting with local manufacturers.

CHANGING SOCIAL TRENDS:

Fresh cane will set a new trend i.e. a trend of health consciousness and purification
and to remain fresh and healthy forever.

18
CAN BE MIXED WITH SEVERAL OTHER FLAVORSTOO

Soon, after market penetration, we will focus to introduce "Fresh Sugar Cane Juice"
in other flavours as well, which include: mint, lemon, etc.

THREATS
POLITICAL SITUATION (GOVERNMENTAL UNCERTAINTY)

19
They will face problem if government employ extra taxes on us which in future will
force us to raise the price of their product. We can have adverse impact, if cost of
labour doing work increase.

LACK OF RESOURCES [SHORTAGE OF ENERGY

One of the connect problem which india is facing ,this can be adversely impact us
Inflation rate is another threat which we can face .
COMPETITION OVERVIEW

20
DIRECT COMPETITORS

The direct competitors of our Product are:

➢ Shezan AII Pure (Orange, Mango, Pineapple nectar, Apple, Grape and
Tropical)

21
➢ Nestle Fruit Vitals (Orange, Chounsa nectar, Apple nectar, Red grape
nectar, Pineapple nectar, Peach nectar, Orange and mango drink andGuava
nectar)

➢ Olfrute (Orange, Mango, Apple and Red grape)

➢ Coca cola (pulpy orange)

➢ Rani, slice and All other juices avalilable in the market.

 ➢ The road side vendors that are selling sugarcane juice.

But they are not competing our product with them because they are the competitors of the
Juice market and they are only providing the different flavour juices but not the sugar
cane juice.

INDIRECT COMPETITORS

As the Sugarcane juice is the symbol of the refreshment and nutrition and it is also a
substitute for the other soft drinks. So we have compared it with other soft drinks. So in
the soft drink market we have the competitors like

22
• Coca col
• Pepsi
• Other instant drinks
MARKETING STRATEGIES
23
1.Positioning strategy

Brand strategy is at the heart of marketing strategy. It is the act of designing the
company offer and image so that it occupies a distinct and valued place in the target
customer mind. Sugarcane juice is very beneficial for health and provides
refreshment. As we are launching sugar cane juice in tetra pack, so we want to create
positive and long lasting image in the minds of customers that we are providing
hygienic juice because we are also introducing new flavours like mint and ginger etc.

Point of parity
Different flavour
Tetra packing

24
Product strategy

Core benefit

Core benefit means the services and benefits the customer is really buying. The
customer fulfils its need of thrust and refreshment by buying our

Basic product

It's mean what specifically the actual product is. Our actual product is

juice Augmented product

Products that include deign, features and packaging that go beyond consumer
expectations and differentiate the product from competitors. The juice taste and
flavour is according to the customer expectations because we provide 100% pure
juice. They will have no compromise with quality Following things include in the sale
of product.

Design

The design of sugarcane juice that it will be in attractive and stylish tetra pack in
following size:

➢ 250ML
➢ 500ML
➢ 750ML

Features

The features of the product are

➢ Use full for healthy life
25
➢ Good in taste
 26
➢ Help to digest food
Packaging

The product will be in tetra packaging which will be attractive and eye caching.

1. PRICING STRATEGY

The price of the product can also influence the buying behaviour of the consumers
because in Pakistan there is different level of classes based on the income difference
so price.

One of the important factor , some of the consumer can afford the price and other
cant, So must set the price of the product that afforded by all the social classes of the
region.
So they use penetration pricing strategy.

PRICE STRUCTURE

[CONSUMER PRICE]250ml

Rs.35

2. CHANNEL OF DISTRIBUTION

The place of the distribution and availlabilty of the product also influence the

Buying behaviour because if the product is in reach of the consumer he will

Prefere it and if it is hard to find the product in the market he will never buy

27
That product. So they provided our product to all the all the distributors and
 They will provided it to famous retailers of Islamabad, Lahore, and Karachi .

Because of this the product will be available at the more shopes and the Sale

will increase.

They will provided it to famous retailers of Islamabad, Lahore, and Karachi Because
of this the product will be available at the more scopes and the Sales will increase

ADVERTISING AND PROMOTION

28
Our total advertisement and promotional budget limits to 1 crore, at the very start,
they will act as an aggressive promoter, i.e. they will invest heavily on promotion in
order to create brand awareness. Secondly, the taste of the product is new so they
will develop certain market strategies to attract customers towards new taste.

PROMOTION

29
The promotion of the product i.e. the advertisement, sales promotion and other
promotional tools can change the buying behaviour because some of the individuals
highly influenced by the advertisement of the product. They have decided to use
integrated marketing communication in which there will be blend of different
marketing promotional tools that will convey clear and consistent message of our
product to the customers. These Promotional tools are given below:

BILLBOARDS

Billboards will be placed at busy thoroughfares in big cities. Billboards will be the most
permanent and long lasting form of advertisement. The total Billboards they will place
are in number.

SALES PERSON

Around 200 sales people will be appointed which will introduce the product to
customers in all the three cities.

DAY CELEBRATION
They will start the very first day with Day Celebration in order to introduce the
brand in an effective manner, plus they can also have an idea about people's
interest towards sugarcane juice.

POSTERS

30
They will put 75 posters in different places in order to grab a large portion of
thethree cities.

TVC
Tele commercials will be aired on sports channels and news channels as the
viewer ship of these channels is highly common among the targeted
market.

INTERNET ADS

Lastly, they will use internet ads to market the product.

PRODUCTION AND FINANCIAL ASPECTS

31
BUDGET

The total budget of 3.5 crore rupee is establishing for this plan. Allocating ofthe
budget is discussed further.

Sugar cane 200 tons/annum

Approx 200,000-litres annum

PRODUCTION CAPACITY OF PLANT

Projected Quantity 200,000-litres annum Installed capacity

250,000-litres annum Working days 250 annum Manpower 100
workers

PROJECTED SALES

From the market demand analysis and other financial analysis we found it feasible to
produce and sale around 200000 litres each year.

COST ALLOCATION:

32
Fixed cost

Land 2000 sq.m. : 8,000,000 Built up Area 1000 sq.m.:

2,000,000

Total cost of Land and Building: 10,000,000

Machinery and Equipment 15,000,000 Office furniture and

fixtures: 5,000,000 Vehicle: 8,000,000

Total: 28,000,000
 Working Capital for two months:

Salary :
Department Managers (5) 20,000*5 Supervisor (5)

10,000*5 Office Assistant (3) 5,000*3 IT Manager (2)

7500*2

Skilled workers (15) 6000*15 Unskilled workers (70)

4000*70 Total Salary 1,100,000

Raw Material including packaging materials

Sugar cane 40 tones 70,000 Packaging 600,000

33
Labels 80,000

Utilities Amount

Power 500,000

Water 100,000

Coal 95,000

Other Contingent Expenses Amount Repairs

And maintainance 500,000 Others 200,000 Insurance 420,000 Total

Capital Investment Amount 31,665,000

Cash Reserves: 3,335,000

PRICE OF ONE UNIT

Total Raw Material cost 5
Total packaging cost 4
Production cost includind tax 11
Cost 20
Profit 10
Retailer Commission 5
MRP 35

Our per unit price is Rs. 35. We are making the unit at Rs. 30 which includes the
price of raw material, packaging cost and production cost and our profits. We are

34
selling it to our distributors at the price of 30. While the our consumer is getting our
250 ml at the price of 35.

MARKETING BUDGET

The marketing plan of Sugarcane juice in tetra pack, have a budget of 1.5 crore rupee
to establish our plan. Now we allocate different amount in different parts.

Method Of Allocation:
Creating an annual budget involves 1.5 cror on building and plant and other budget
we will use in following manner

Allocati New Marketi Advertisi Sale Direct Public

ng of product ng ng expense marketing relation
the research research expense
budget
on
other
uses

1.5 crore 20 lac 10 lac 80 lac 20 lac 10 lac 10 lac

35
MARKETING SUB PLAN

The Indian retail industry has developed as one of the most unique and relentless ventures
because of the section of a few new players. Complete utilization consumption is required to
reach almost US$ 3,600 billion by 2020 from US$ 1,824 billion out of 2017. It represents
more than 10 percent of the nation's Gross Domestic Product (GDP) and around eight percent
of the business. India is the world's fifth-biggest worldwide objective in the retail space.

India is the world's fifth biggest worldwide objective in the retail space. In FDI Confidence
Index, India positions sixteenth (after U.S., Canada, Germany, United Kingdom, China,
Japan, France, Australia, Switzerland and Italy).

36
The Indian retail industry is one of the quickest developing on the planet. Retail industry
came to Rs 66.39 lakh crore (US$ 950 billion) in 2018 at CAGR of 13 percent and expected
to arrive at Rs 76.87 lakh crore (US$ 1.1 trillion) by 2020. India positioned 63rd in World
Bank's Doing Business 2019.

India is the fifth biggest favored retail objective internationally. India positioned 77th in
World Bank's Doing Business 2019.

Income created from online retail is extended to develop to Rs 4.19 lakh crore (US$ 60
billion) by 2020. Composed retail infiltration is required to increment to 18 percent in 2021
from an expected nine percent in 2017. India is required to turn into the world's third-biggest
customer economy, arriving at Rs 27.95 lakh crore (US$ 400 billion) in utilization by 2025.
Expanding support from unfamiliar and private players has given a lift to Indian retail
industry.

India's value seriousness draws in huge retail players to utilize it as a sourcing base.
Worldwide retailers, for example, Walmart, GAP, Tesco and JC Penney are expanding their
sourcing from India and are moving from outsider purchasing workplaces to building up their
own completely claimed/entirely oversaw sourcing and purchasing workplaces. India's retail
area speculations multiplied to arrive at Rs 1,300 crore (US$ 180.18 million) in 2018. Income
of India's disconnected retailers, otherwise called physical retailers, is relied upon to
increment by Rs 10,000-12,000 crore (US$ 1.39-2.77 billion) in FY20.
 37
HUMAN RESOURCES SUB-PLAN

1) PRODUCT & ITS APPLICATION.

2) Bottled or Tetra-Packed sugarcane juices can be very useful to consumers as it can be

 carried, store anywhere easily. 200 ml package can be useful for single person to
consume easily and s/he can get good amount of nutrition compared to other
beverages. It contains natural sugars, minerals like iron, magnesium, phosphorous,
calcium and organic acids e.g. malic acid, succinic acid, acotinic.

3) Acid, amino acid, protein, starch, gums, waxes, non-sugar phosphatides.

38
4) DESIRED QUALIFICATIONS FOR PROMOTER: Successful running this project
does not require any specific qualification.

5) INDUSTRY LOOKOUT AND TRENDS Sugarcane juice is traditionally sold in India

by roadside vendors, often in unhygienic conditions. That’s why a few entrepreneurs
have taken the initiative venturing into the marketing of branded sugarcane juice
through a chain of franchised outlets. Initial indications are that this model is headed
for success. Pune, Kolhapur, more known for its leather chappals, has also been
blessed with an abundance of milk, water and sugar, which has made the region the
nation's kitchen for many years. The Warana milk producers' cooperative located here
has lived up to this reputation. It has been a contract manufacturer for products such
as Cadbury's Bourn vita, butter for Britannia Industries and Soya milk for Ruchi Soya.
Now, the cooperative is preparing to assert its own identity through the launch of
Warana Joy, its national brand. Among its new products is sugarcane juice in aseptic
packs (Tetra Pak). This article outlines the development of this business; the
opportunities and threats faced and also offer suggestions for the growth in this
market.

6) MARKET POTENTIAL AND MARKETING ISSUES, IF ANY: Currently, street

vendors crush sugarcane and prepare juice and serve in unhygienic way. There is
great market potential for bottled or tetra-packed sugarcane juice like any other fruit
based beverages or soft drink.

7) RAW MATERIAL REQUIREMENTS: Sugarcane is the basic raw materialrequired.

For packaging, business owner can use glass bottles or tetra-pack as per customer’s
preference and acceptance in market.
8) MANUFACTURING PROCESS: Fresh, juicy and fully mature sugarcane, which is
free from insect and fungal attack or any other blemish, is taken for extracting the
juice. The juice so obtained is clarified and filtered to get a clear solution. Required
quantities of permitted preservatives, additives and flavours are added. The process
should be carried out under hygienic conditions. The sugarcane juice beverage is

39
stored in 200 mL bottles and crown corked. The bottles and crown cork closures
should conform to ISI standards. Typical Process Flow: → Filtering → Crushing
→ Washing → Soaking → Cleaning →Sugarcane Storage→ Cooling →
Pasteurization → Bottling →Homogenization

9) MANPOWER REQUIREMENT: The enterprise requires 10 employees as detailed

below: Sr. No. Designation of Employees Salary Per Person Monthly Salary ₹
Number of employees required Year1 Year2 Year3 Year4 Year5 Variable Labour:
Workers 1 Operator ₹ 10,000.00 ₹ 20,000.00

10) Un Skilled Workers ₹ 8,000.00 ₹ 48,000.00

11) sub-total ₹ 68,000.00

12) Fixed Staff

13) Accountant ₹ 12,000.00 ₹ 12,000.00

14) Store Keeper ₹ 8,000.00 ₹ 8,000.00

15) Sales Staff ₹ 12,000.00 ₹ 36,000.00 3 3 3 4 4 sub-total ₹

56,000.00 Total ₹ 1,24,000.00

16) IMPLEMENTATION SCHEDULE

17) The project can be implemented in 8 months’ time as detailed below Sr. No.
Activity Time Required (in months) 1 Acquisition of premises 1.00 2 Construction
 (if applicable) 2.00 3 Procurement & installation of Plant &Machinery 2.00 4
Arrangement of Finance 1.50 5 Recruitment of required manpower 1.50 Total time
required (some activities shall run concurrently) 8.00

18) COST OF PROJECT: The project shall cost ₹ 79.64 lacs as detailed below
40
S. No Particulars ₹ in Lacs 1 Land 2.00 2 Building 2.00 3 Plant & Machinery 10.35
4 Furniture, other Misc Equipments 0.50 5 Other Assets including Preliminary /
Preoperative expenses 1.04 6 Margin for Working Capital 63.75 Total 79.64

18) MEANS OF FINANCE: Bank term loans are assumed @ 60% of fixed assets.
The proposed funding pattern is as under: Sr. No. Particulars ₹ in Lakhs
Promoter's contribution 19.91 2 Bank Finance 59.73 Total 79.64

19) WORKING CAPITAL CALCULATION

The project requires working capital of ₹ 63.75 lacs as detailed below: Sr. No.
Particulars Gross Amt Margin % Margin Amt Bank Finance 1 Inventories 31.88 0.25
7.97 23.91 2 Receivables 15.94 0.25 3.98 11.95 3 Overheads 15.94 100% 15.94 0.00
4 Creditors - 0.00 0.00 Total 63.75 27.89 35.86

20) LIST OF MACHINERYREQUIRED

A detail of important machinery is given below: Sr. No. Particulars UOM Qtt y Rate
(₹ in Lacs) Value (₹ in Lacs) Plant & Machinery / equipments a) Main Machinery 1
Sugarcane juice making machine includes cutting, peeling, crushing and juice making
Nos 1 ₹ 7.50 ₹ 7.50 2 Bottle/Tetra pack Filling Nos 1 ₹ 2.00 ₹ 2.00 3 Material
Handling Equipments Nos 1 ₹ 0.50 ₹ 0.50 4 Weighing Scale Nos 1 ₹ 0.20 ₹ 0.20 5
Misc Tools LS ₹ 0.15 ₹ 0.15 sub-total Plant & Machinery ₹ 10.35 Furniture /
Electrical installations Sr. No. Particulars UOM Qtt y Rate (₹ in Lacs) Value (₹ in
Lacs) 1 Office furniture and Electrification LS 1 ₹ 0.50 ₹ 0.50 sub total ₹ 0.50 Other
Assets 1 preliminary and preoperative LS 1.04 ₹ 1.04 sub-total Other Assets ₹ 1.04
Total ₹ 11.89 All the machines and equipments are available from local
manufacturers. The entrepreneur needs to ensure proper selection of product mix and
proper type of machines and tooling to have modern and flexible designs. It may be
worthwhile to look at reconditioned imported machines, dies and tooling. Some of the
machinery and dies and tooling suppliers are listed here below
 i. Fry-Tech Food Equipments Private Limited S. No. 4, Raviraj Industrial
Estate, Bhikhubhai Mukhi Ka Kuwa Bharwadvash, Ramol,
Ahmedabad - 380024, Gujarat, India

41
ii. Hindustan Vibrotech Pvt. Ltd. Office No. 2, Ground Floor,Vrindavan
Building, Vile Parle East, Mumbai – 400057, Maharashtra, India

iii. Electrons cooling systems Pvt. Ltd. S-27, SIDCO Industrial Estate
Kakkalur Industrial Estate Tiruvallur – 602003, Tamil Nadu, India

iv. Springboard Enterprises India Ltd. 1st, 2nd & 3rd Floor, Plot No. 7, 8
& 9 Garg
v. Shopping Mall, Service Centre, Rohini Sector 2 New Delhi – 110085,
Delhi,India

vi. Flour Tech Engineers Private Limited Plot No. 182, Sector 24,
Faridabad - 121005, Haryana, India

vii. P Square Technologies 3, Swami Mahal, Gurunanak Nagar, Off.

Shankarsheth Road Bhavani Peth, Pune - 411002, Maharashtra,
India

viii. Ricon Engineers 10 To 13, Bhagwati Estate, Near Amraiwadi Torrent

Power, Behind Uttam Dairy, Rakhial, Ahmedabad - 380023, Gujarat,
India

ix. Kamdhenu Agro Machinery Plot No. 6, Near Power House, Wathoda
Road Wathoda, Nagpur - 440035, Maharashtra, India

21) PROFITABILITY CALCULATIONS

Sr. No. Particulars UOM Year1 Year2 Year3 Year4 Year5 1 Capacity Utilization %
60% 70% 80% 90% 100% 2 Sales ₹. In Lacs 180.0 0 210.0 0 240.0 0 270.0 0 300.0 0
3 Raw Materials & Other direct inputs ₹. In Lacs 160.4 5 187.1 9 213.9 3 240.6 7
267.4 1 4 Gross Margin ₹. In Lacs 19.55 22.81 26.07 29.33 32.59 5 Overheads
 except interest ₹. In Lacs 15.94 16.94 18.93 19.53 19.93 6 Interest @ 10 % ₹. In
Lacs 5.97 5.97 3.98 2.99 2.39 7 Depreciation @ 30 % ₹. In Lacs 7.25 5.18 3.62 2.59
2.33 8 Net Profit before tax ₹. In Lacs -9.61 -5.28 -0.47 4.23 7.94 The basis of
profitability calculation: This unit will have capacity of 6 Lacs - Bottles/Packs per
Annum. The growth of selling capacity will be increased 10% per year. (This is
assumed by

42
various analysis and study, it can be increased according to the selling strategy.)
Energy Costs are considered at Rs 7 per Kwh and fuel cost is considered at Rs. 65 per
litre. The depreciation of plant is taken at 10-12 % and Interest costs are taken at 14 -
15 % depending on type of industry.

22) BREAKEVEN ANALYSIS

The project shall reach cash break-even at 68.48 % of projected capacity as detailed
below: Sr. No. Particulars UOM Value 1 Sales at full capacity ₹. In Lacs 300.00 2
Variable costs ₹. In Lacs 267.41 3 Fixed costs incl. interest ₹. In Lacs 22.32 4 BEP
= FC/(SR-VC) x 100 = % of capacity 68.48%

23) STATUTORY / GOVERNMENT APPROVALS

The Ministry of Food Processing Industries has been operating several plan schemes
for the development of processed food sector in the country during the 10th Plan. One
of the schemes relates to the Technology Up-gradation/ Establishment/ Modernization
of food processing industries. The Indian food processing industry is regulated by
several laws which govern the aspects of sanitation, licensing and other necessary
permits that are required to start up and run a food business. The legislation that dealt
with food safety in India was the Prevention of Food Adulteration Act, 1954
(hereinafter referred to as "PFA"). The PFA had been in place for over five decades
and there was a need for change due to varied reasons which include the changing
requirements of our food industry. The act brought into force in place of the PFA is
the Food Safety and Standards Act, 2006 (hereinafter referred to as "FSSA") that
overrides all other food related laws. FSSA initiates harmonization of India's food
regulations as per international standards. It establishes a new national regulatory
body, the Food Safety and Standards Authority of India (hereinafter referred to as
"FSSAI"), to develop science based standards for food and to regulate and monitor the
manufacture, processing, storage, distribution, sale and import of food so as to ensure
the availability of safe and wholesome food for human consumption. Entrepreneur
 may contact State Pollution Control Board where ever it is applicable. All food
imports will therefore be subject to the provisions of the FSSA and rules and
regulations which as notified by the Government on 5th of August 2011 will be
applicable. Key Regulations of FSSA A. Packaging and Labeling B. Signage and
Customer Notices C. Licensing Registration and Health and Sanitary Permits

43
24) BACKWARD AND FORWARD INTEGRATIONS
The objective of the scheme is to provide effective and seamless backward and
forward integration for processed food industry by plugging the gaps in supply chain
in terms of availability of raw material and linkages with the market. Under the
scheme, financial assistance is provided for setting up of primary processing centres/
collection centres at farm gate and modern retail outlets at the front end along with
connectivity through insulated/ refrigerated transport. The Scheme is applicable to
perishable horticulture and non-horticulture produce such as, fruits, vegetables, dairy
products, meat, poultry, fish, Ready to Cook Food Products, Honey, Coconut, Spices,
Mushroom, Retails Shops for Perishable Food Products etc. The Scheme would
enable linking of farmers to processors and the market for ensuring remunerative
prices for agri produce. The scheme is implemented by agencies/ organizations such
as Govt. / PSUs/ Joint Ventures/ NGOs/ Cooperatives/ SHGs / FPOs / Private Sector /
individuals etc. Backward Linkage: Integrated Pack-house(s) (with mechanized
sorting & grading line/ packing line/ waxing line/ staging cold rooms/cold storage,
etc.) Pre Cooling Unit(s)/ Chillers Reefer boats Machinery & equipment for minimal
processing and/or value addition such as cutting, dicing, slicing, pickling, drying,
pulping, canning, waxing, etc. Machinery & equipment for packing/ packaging.
Forward Linkage: Retail chain of outlets including facilities such as frozen storage/
deep freezers/ refrigerated display cabinets/cold room/ chillers/ packing/ packaging,
etc. Distribution center associated with the retail chain of outlets with facilities like
cold room/ cold storage/ ripening chamber.

25) TRAINING CENTERS AND COURSES

There are few specialized Institutes provide degree certification in Food Technology,
few most famous and authenticate Institutions are as follows: 1. Indian Institute of
Food Science & Technology, Plot No.1, Near Maa-Baap ki Dargah,Opp to Nath
Seeds, Paithan Road Aurangabad Aurangabad - 431005 Maharashtra, India 2. MIT
College of Food Technology, Pune Gate.No.140, Raj Baugh Educational Complex,
Pune Solapur Highway, Loni Kalbhor, Pune – 412201 Maharashtra, India 3. CSIR -
Central Food Technological Research Institute (CFTRI) Cheluvamba Mansion, Opp.
Railway Museum, Devaraja Mohalla, CFTRI Campus, Kajjihundi, Mysuru Karnataka
– 570020 Udyamimitra portal ( link : www.udyamimitra.in ) can also be accessed for
44
handholding services viz. application filling / project report preparation, EDP,
financial Training, Skill Development, mentoring etc. Entrepreneurship program
helps to run business successfully is also available from Institutes like
Entrepreneurship Development Institute of India (EDII) and its affiliates all over
India. Disclaimer: Only few machine manufacturers are mentioned in the profile,
although many machine manufacturers are available in the market. The addresses
given for machinery manufacturers have been taken from reliable sources, to the best
of knowledge and contacts. However, no responsibility is admitted, in case any
inadvertent error or incorrectness is noticed therein. Further the same have been given
by way of information only and do not carry any recommendation
 45
Industry Analysis

Industry analysis is a market assessment tool used by businesses and analysts to understand
the competitive dynamics of an industry. It helps them get a sense of what is happening in an
industry, e.g., demand-supply statistics , degree of competition within the industry, state of
competition of the industry with other emerging industries, future prospects of the industry
taking into account technological changes, credit system within the industry, and theinfluence
of external factors on the industry.
46
Industry analysis, for an entrepreneur or a company, is a method that helps to understand a
company’s position relative to other participants in the industry. It helps them to identify both
the opportunities and threats coming their way and gives them a strong idea of the present
and future scenario of the industry. The key to surviving in this ever-changing business
environment is to understand the differences between yourself and your competitors in the
industry and use it to your full advantage.
Types of industry analysis

There are three commonly used and important methods of performing industry analysis. The
three methods are:

1. Competitive Forces Model (Porter’s 5 Forces)

2. Broad Factors Analysis (PEST Analysis)
3. SWOT Analysis

47
1 Competitive Forces Model (Porter’s 5 Forces)

One of the most famous models ever developed for industry analysis, famously known
as Porter’s 5 Forces, was introduced “Competitive Strategy: Techniques for Analyzing
Industries and Competitors.”

According to Porter, analysis of the five forces gives an accurate impression of the industry
and makes analysis easier. In our Corporate & Business Strategy course, we cover these five
forces and an additional force — power of complementary good/service providers.
(i) Intensity of industry rivalry

The number of participants in the industry and their respective market shares are a direct
representation of the competitiveness of the industry. These are directly affected by all the
factors mentioned above. Lack of differentiation in products tends to add to the intensity of
competition. High exit costs such as high fixed assets, government restrictions, labor
unions, etc. also make the competitors fight the battle a little harder.
48
(ii) Threat of potential entrants

This indicates the ease with which new firms can enter the market of a particular industry.
If it is easy to enter an industry, companies face the constant risk of new competitors. If
the entry is difficult, whichever company enjoys little competitive advantage reaps the
benefits for a longer period. Also, under difficult entry circumstances, companies face a
constant set of competitors.

(iii) Bargaining power of suppliers

This refers to the bargaining power of suppliers. If the industry relies on a small number
of suppliers, they enjoy a considerable amount of bargaining power. This can particularly
affect small businesses because it directly influences the quality and the price of the final
product.

(iv) Bargaining power of buyers

 The complete opposite happens when the bargaining power lies with the customers. If
consumers/buyers enjoy market power, they are in a position to negotiate lower prices,
better quality, or additional services and discounts. This is the case in an industry with
more competitors but with a single buyer constituting a large share of the industry’s
sales.

(v) Threat of substitute goods/services

The industry is always competing with another industry producing a similar substitute
product. Hence, all firms in an industry have potential competitors from other industries.
This takes a toll on their profitability because they are unable to charge exorbitant prices.
Substitutes can take two forms – products with the same function/quality but lesser price,
or products of the same price but of better quality or providing more utility.

2 Broad Factors Analysis (PEST Analysis)

It is commonly called the PEST Analysis stands for Political, Economic, Social and
Technological. PEST analysis is a useful framework for analyzing the external
environment.

49
To use PEST as a form of industry analysis, an analyst will analyze each of the 4 components
of the model. These components include:

1. Political

Political factors that impact an industry include specific policies and regulations related to
things like taxes, environmental regulation, tariffs, trade policies, labor laws, ease of doing
business, and overall political stability.

2. Economic

50
The economic forces that have an impact include inflation, exchange rates (FX), interest
rates, GDP growth rates, conditions in the capital markets (ability to access capital), etc.

3. Social
 The social impact on an industry refers to trends among people and includes things such as
population growth, demographics (age, gender, etc.), and trends in behavior such as health,
fashion, and social movements.

4. Technological

The technological aspect of PEST analysis incorporates factors such as advancements and
developments that change the way a business operates and the ways in which people live
their lives (e.g., the advent of the internet).

#3 SWOT Analysis

SWOT Analysis stands for Strengths, Weaknesses, Opportunities, and Threats. It can be a
great way of summarizing various industry forces and determining their implications for the
business in question.

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1. Internal

Internal factors that already exist and have contributed to the current position
and may continue to exist.

2. External

External factors are usually contingent events. Assess their importance based on the
likelihood of them happening and their potential impact on the company. Also, consider
whether management has the intention and ability to take advantage of the opportunity/avoid
the threat.

52
Importance of Industry Analysis

Industry analysis, as a form of market assessment, is crucial because it helps a business

understand market conditions. It helps them forecast demand and supply and, consequently,
financial returns from the business. It indicates the competitiveness of the industry and costs
associated with entering and exiting the industry. It is very important when planning a small
business. Analysis helps to identify which stage an industry is currently in; whether it is still
growing and there is scope to reap benefits, or has it reached its saturation point.

With a very detailed study of the industry, entrepreneurs can get a stronghold on the
operations of the industry and may discover untapped opportunities. It is also important to
understand that industry analysis is somewhat subjective and does not always guarantee
success. It may happen that incorrect interpretation of data leads entrepreneurs to a wrong
path or into making wrong decisions. Hence, it becomes important to collect data
carefully.

Profit and loss

Usually produced monthly, this is a summary of income and expenses for your business. The
P&L will inform you whether your business made or lost money for the month under review.

53
A Profit &Loss usually has five main components:
 ➢ revenue (sales/turnover)
➢ cost of goods sold (COGS)
➢ gross profit (revenue minus COGS)
➢ expenses
➢ net profit (gross profit minus expenses)

Formula: Sales – COGS = gross profit – expenses = net profit

The net profit will show whether your business has earned or lost money.

When reviewing your P&L it is useful to analyse four key benchmarks or performance
indicators (KPIs).
Gross profit is an indicator of efficiency. The higher the gross profit margin the better,
as your business keeps more from each dollar of sales. If your gross profit margin
decreases over time you will need to determine the reason and take action to address
the decline.

The net profit margin is an indicator of how much profit you make (before tax) from
every dollar you spend. A fall in net profit margin generally means you are paying more
in expenses, which needs to be monitored. More profitable businesses generally spend
less of their income on expenses.

Your business structure will determine how some expenses are calculated. Your
accountant can provide detailed advice regarding your structure.

Sole traders – drawings (money taken by the owner for personal use) are not an
expense. You pay tax on the net profit regardless of how much you have taken in
drawings.

54

Partne – if there is a partnership agreement, net

rs profit is allocated according to the

proportion set out in the agreement. If there is no agreement, net profit is shared equally
between the partners. Each partner pays tax on the amount of net profit they receive,
regardless of how much the partner may have taken out as drawings.

– salaries for working directors are treated as

Compani
an expense along with employees’
es

wages. Net profit is available for distribution to shareholders as dividends. Net profit and
taxable income can be different because for tax purposes some expenses may or may not be
allowable and some income may be assessable or not assessable.

55
Balance sheet

A balance sheet is a snapshot of what a business owns (assets) and owes (liabilities) at a
 specific point in time. A balance sheet is usually completed at the end of a month or financial
year and is an indicator of the financial health of your business.

A balance sheet is in three sections:

• assets – including cash, stock, equipment, money owed to business, goodwill •

liabilities – including loans, credit card debts, tax liabilities, money owed to suppliers •
owner’s equity – the amount left after liabilities are deducted from assets

Business Ratios for New Investors

Before you start investing in individual stocks, a key step is learning how to interpret and
calculate the most important financial ratios. Even if you usually get financial ratio figures
from your broker or a financial website, you still ought to know what they represent and what
they can tell you about a business in which you're considering investing. Otherwise, you
could make a mistake such as buying into a company with too much debt or paying too much
for a stock with meager earnings growth potential.

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Price-to-Cash-Flow Ratio

Some investors prefer to focus on a financial ratio known as the price-to-cash-flow ratio
instead of the more well-known price-to-earnings ratio. It's calculated by dividing a
company's market capitalization by its cash flow from operations or dividing its share price
by its cash flow from operations per share.
Price-to-Earnings Ratio

The price-to-earnings ratio, or P/E, is probably the most famous financial ratio in the world.
It's a quick and easy way to determine how cheap or expensive the stock is compared with its
peers.

The simplest definition of the P/E is the amount of money the market is willing to pay for
every $1 in earnings a company generates. You have to consider whether that amount is too
high, a bargain, or somewhere in between.

PEG Ratio

The PEG ratio goes one step further than the P/E. It factors in the projected rate of earnings
growth for a company and may be a better indicator of whether a stock is cheap or expensive
than the simpler ratio based on price alone.

Asset Turnover Ratio

The asset turnover ratio calculates the revenue generated by each dollar of assets a company
owns. It's a good way of comparing how efficiently a company has been using its assets in
relation to its peers.

Current Ratio

Like the price-to-earnings ratio, the current ratio is one of the most famous of all the financial
ratios. It serves as a test of a company's financial strength and can give you an idea of
whether a company has too much or too little cash on hand to meet its obligations. It's
calculated by dividing current assets by current liabilities.

Quick Ratio

The quick ratio is another way of helping you determine a company's financial strength. It's
also known as the acid test and, as the name suggests, is a more stringent measure of a
company's ability to meet its obligations. It subtracts out inventory from current assets
before
57
dividing by current liabilities because a company may need a good deal of time to liquidate
its inventory before the money can be used to cover liabilities.

Debt-to-Equity Ratio
 The debt-to-equity ratio enables investors to compare the total stockholders' equity of a
company (the amount stockholders have invested in the company plus retained earnings) to
its total liabilities. Stockholders' equity is sometimes viewed as the net worth of a company
from the perspective of its owners. Dividing a company's debt by its stockholders' equity—
and doing the same for the company's competitors—can tell you how highly leveraged a
company is in comparison with its peers.

Gross Profit Margin

The gross profit margin lets you know how much of a company's profit is available—as a
percentage of revenue—to meet the company's expenses. It's calculated by subtracting
the cost of goods sold from total sales and dividing the result by total sales.

Net Profit Margin

The net profit margin tells you how much money a company makes for every $1 in revenue.
For example, if a company's net profit margin is 0.14, the company makes 14 cents in profit
for every dollar of revenue.

Interest Coverage Ratio

The interest coverage ratio is an important financial ratio for firms that carry a lot of debt. It
lets you know how much money is available to cover the interest expense a company incurs
on the money it owes each year.

Operating Margin

Operating income—gross profit minus operating expenses—is the total pre-tax profit a
business generated from its operations. It can also be described as the money available to the
owners before a few items need to be paid, such as preferred stock dividends and income
taxes. The company's operating margin is its operating income divided by its revenue and is a
way of measuring a company's efficiency.

58
Accounts Receivable Turnover Ratio

The sooner a company's customers pay their bills, the sooner the company can put that cash
to use. The accounts receivable turnover ratio is a handy method of calculating the number of
times in a year a business collects its accounts receivable. If you divide that number into 365,
you'll have the average number of days a company takes to get paid.
Inventory Turnover Ratio

You can calculate how many times a business turns its inventory over during a period of time
by using the inventory turnover ratio. An extremely efficient retailer will have a higher
inventory turnover ratio than a less efficient competitor.

Return on Assets

Return on assets, or ROA, tells an investor how much profit a company generated for each
dollar in assets. This ratio, which is calculated by dividing net profits by total assets,
measures how efficiently a company's management is utilizing its physical assets to generate
profit and is most useful when comparing a company's ROA to that of its peers.

Return on Equity

One of the most important profitability metrics is return on equity, which is commonly
abbreviated as ROE. Return on equity reveals how much profit a company earned in
comparison to the total amount of stockholders' equity found on its

Advanced Return on Equity: The DuPont Model

The DuPont model, or DuPont analysis, enables you to break down return on equity further to
determine which variables are driving ROE. It can also give you important information about
a company's capital structure.

Working Capital Per Dollar of Sales

The working capital per dollar of sales financial ratio is important because it lets you know
how much money a company needs to keep on hand to conduct business. Generally speaking,
the more working capital a company needs, the less valuable it is because that's money the
owners can't take out of the business in the form of dividends.

59

Sales Forecasting
Prediction of future sales is what is known as sales forecasting. Every manufacturer makes an
estimation of the sales likely to take place in the near future. It gives focus to the activities of
a business enterprise. In the absence of sales forecast, a business has to work at random.
 A businessman who invests a large amount of capital in his business, cannot afford to work
haphazardly. He has to plan his production and sales activities. Forecasting helps the business
to work according to a plan, i.e., systematically.

Importance of Sales Forecasting

1. Sales forecasting enables a business organization to work systematically.

2. Forecast enables the production manager to set target for his workers.

3. It enables the sales department to fix responsibilities on every salesman.

4. In the absence of sales forecast, a business enterprise may work without any focus and this
may result in wastage of its resources.

5. It helps to cut down wasteful expenditure and as a result the goods can be offered at a fair
price.

6. Sales forecast enables all the departments of the business to work together in proper co
ordination and co-operation.

7. As target is set for each individual and department, it is easy to control

performance. 8. Sales forecasting is vital for preparing budget.

9. It helps to determine the production capacity that is actually required.

10.Sales forecast helps in product mix decisions as well. It enables the business to Decide

Methods of Sales Forecasting

There are for important methods of sales forecasting. They are

60
1. Jury of Executive opinion method,
2. Sales force opinion method,
3. Customers’ expectation method,
4. Statistical method.

They are explained as follows.

1. Jury of Executive Opinion Method:

This is a conventional approach to sales forecasting. Under the Jury of Executive opinion
method, sales forecasts are made based on the opinions of the top executives of the company.
 The executives will take into account the past performance of the business, the present market
conditions and the future trend before arriving at a conclusion. This is a very simple method
of sales forecast and the approach is mainly subjective.

Merits of executives opinion method

1. It is a very simple method.

2. Detailed analysis is not required to arrive at a conclusion.

3. Indirectly, the executives who have made the estimation become responsible for its
achievement also.

Demerits of executives opinion method

1. It is merely based on opinion rather than on facts and figures.

2. Objective analysis is not done.

3. It is a mere guess work and the approach is unscientific.

4. It is a general estimation of future sales and the prediction is not done area-wise, product
wise and customer-wise.

2.Sales Force OpinionMethod

In this case, the sales representatives of the business are asked to forecast sales for their
respective areas. Their views will be combined with those of the sales managers in arriving at
an estimate. The sales representatives have sound knowledge of the trend in their respective
sales territories and their views are important in sales forecast.

61
Merits of Sales force opinion method
1. It is a very practical approach.

2. Each sales territory getsfocus.

3. The sales representatives who have made the estimation also become responsible for
attaining the target.

Demerits of executives opinion method

1. It is merely based on opinion rather than on facts and figures.

2. Objective analysis is not done.

 3. It is a mere guess work and the approach is unscientific.

4. It is a general estimation of future sales and the prediction is not done area-wise, product
wise and customer-wise.

2.Sales Force OpinionMethod

In this case, the sales representatives of the business are asked to forecast sales for their
respective areas. Their views will be combined with those of the sales managers in arriving at
an estimate. The sales representatives have sound knowledge of the trend in their respective
sales territories and their views are important in sales forecast.

Merits of Sales force opinion method

1. It is a very practical approach.

2. Each sales territory getsfocus.

3. The sales representatives who have made the estimation also become responsible for
attaining the target.

Demerits of Sales force opinion method

1. The success of this approach depends on the efficiency of the sales people.

2. Some salesmen may be non-committal and may not give correct information.

62
3. Customers’ Expectation Method
Under this method, the customers are directly approached and their requirements in the near
future are ascertained. This approach is particularly suitable in the case of industrial goods
where the number of buyers is limited and can be personally contacted. In the caseof
consumer products, only sample approach is possible, as there are a large number of such
buyers.

Merits of Customers’ expectation method

1. Firsthand information can be obtained.

2. This approach will certainly work in the case of industrial goods marketing.

Demerits of Customers’ expectation method

1. It may not give reliable information in the case of consumer goods
 marketing. 2. The expectations of the buyer may change in future.

3. Such an approach is suitable only to prepare short-term plans.

Statistical Method
Trend Analysis, a statistical tool, helps to Predict future sales based on the past sales figures of
a business.

Merits of Statistical Method

1. It is an objective forecast.

2. No guess work is involved in it

3. It is simple to use.

Demerits of Statistical Method

1. It ignores market conditions.

2. It does not make provision for uncertainties.

63
Limitations of Sales Forecast
1. The tastes and preferences of the buyers do not remain constant. A sudden change in the
preference of the buyers may render the forecasts meaningless.
2. The economic conditions prevailing in every country also do not remain stable.Purchasing
power of money, desire to save and invest etc., are some of the important economic factors
having a bearing on sales forecast.
3. The political conditions in a State also influence sales forecast. The policies of the
Government regarding business change often. A sudden hike in excise duty or sales tax by the
Government may affect sales.
4. The entry of competitors may also affect sales. A firm enjoying monopoly status may lose
such a position if the buyers find the competitors’ products more superior.
5. Progress in science and technology may render the present technology obsolete. As a
result, products which are right now enjoying a good market may lose market and the demand
for products made using the latest technology will increase. This is particularly true in the
case of market for electronic goods, computer hardware, software and so on.
Features of a good forecasting method
There are various methods of forecasting demand of product in market. Of them, some are
very costly and a few are cheap. Some forecasting methods are flexible and some require skill
and sophistication. Therefore, there is a problem of choosing the best method for a particular
demand situation.
 They are:

1. Plausibility
The management should have good understanding of the technique chose and they should
have confidence in the technique adopted. Then only proper interpretation will be made.

According to Joel Dean, the plausibility requirements can often increase the accuracy of the
result. Accuracy entails the executives to accept the results. Experienced executives will have
a market feel and they can contribute effectively.

2. Simplicity
The method chosen should be of simple nature or ease of comprehension by the executives.
Elaborate mathematical and econometric procedures are less desirable, if the management
does not really understand what the forecaster is doing.

3. Economy
Cost is a primary consideration which should be weighed against the importance of the
forecasts to the business operation. There is no point in adopting very high levels of accuracy
at great expense, if the forecast has little importance in the business.

4. Availability
Immediate availability of data is a vital requirement in forecasting method. The technique
should yield quick and meaningful result. Delay in result will adversely affect the managerial
decision

64
Techniques of Sales Forecasting

There are several techniques or methods of sales forecasting, and a company may use one or
more of them. The important techniques of sales forecasting are briefly explained below.

1. Survey of buyers’intentions

Under this method ofsales forecasting, first, a list of all potential or prospective buyers is
drawn up. Then, a face to face interview with a selected group of potential buyers is
conducted. On the basis of the interview, the buyers’ intentions are ascertained and an
estimate of the sales of the products of the firm is made. This method is a practical method of
sales forecasting. This method or approach is, generally, adopted by industrial marketers, i.e.,
marketers of industrial goods.

2. Opinion poll of sales force

Under this method of sales forecasting, an opinion poll of the sales force is conducted. On the
basis of the opinion poll, an estimate of the sales of the firm is made. This method is a very
good method of sales forecasting, because the salesmen have a good idea of market
conditions. Further, it is less expensive. This method is, generally, used when it is not
possible to make use of the first method (i.e., the survey of buyers’ intentions).

3. Expert opinion

Under this method, the opinions of the experts are sought, and on that basis sales forecasts are
made. The experts may be outside experts or top executives of the firm itself, such as the
production executive, marketing executive, finance executive, etc.

4. Market test method

A company may conduct a direct market test, and on the basis of its outcome, sales forecast is
made. This method may be used either independently or as a supplement to other methods. It
is used more frequently by consumer goods marketers. It may also be used by industrialgoods
marketers. When this method is used by industrial goods marketers, it is called a market
probe.

5. Projection of pastsales

Under this approach of sales forecasting, the past year sales of the firm are studied, and by
making certain changes in the last year’s sales (i.e., by adding or deducting a certain
percentage to or from last year’s sales), salesforecasts are made. This approach is simple and
easy to adopt. It is also the most widely used approach. It is also a safe method for companies
engaged in
65
more or less stable industries. However, in many cases, this method is not reliable. Again, this
method cannot be adopted in the case of new products or by new companies.

6. Products in useanalysis

Under this method, a firm undertakes a census of a number of products or closely related
brands already in use in the market, and on the basis of such a census, makes the sales
forecast for its products. This method is based on two assumptions. First, it assumes that the
future market for a product will vary in direct proportion to the quantity already in use.
Secondly, it assumes that the present users of the product of a concern will continue to
patronize the same in future.

7. Industry forecast and share of the sales of the industry

Under this method, a company estimates its sales by applying a certain percentage (based on
past sales or expected sales) to the sales forecast of the whole industry. The sales forecast for
the whole industry can be obtained from the Government or trade associations or other outside
agencies. This method is very simple. Besides it is quick and less expensive.
8. Statistical demand analysis

Under this method, the important factors which are likely to cause variations in the sales,such
as the population, disposable income in the hands of the people, the prices of the products,
 advertising programmes, etc., are analyzed, and on the basis of such an analysis, salesforecast
is made by a firm for it products. This method has become quite popular with the introduction
of computers.

9. Time series analysis

Under this approach of sales forecasting, long-term trends, cyclical changes, seasonal
variations and irregular fluctuations in the sales of a concern are isolated (ignored), and the
sales forecast is made on the basis of normal trends. This approach is inexpensive. So, it is
widely used.

cash flow projection

Cash flow is the amount of money going in and out of your business. Healthy cash flow can
help lead your business on a path to success. But poor or negative cash flow can spell doom
for the future of your business.

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If you want to predict your business’s cash flow, create a cash flow projection. A cash flow
projection estimates the money you expect to flow in and out of your business, including all
of your income and expenses.

Typically, most businesses’ cash flow projections cover a 12-month period. However, your
business can create a weekly, monthly, or semi-annual cash flow projection.

Advantages of projecting cash flow

Projecting cash flows has many advantages. Some pros of creating a cash flow projection
include being able to:

➢ Predict cash shortages and surpluses

➢ See and compare business expenses and income for periods
➢ Estimate effects of business change (e.g., hiring an employee)
➢ Prove to lenders your ability to repay on time
➢ Determine if you need to make adjustments (e.g., cutting expenses)

Cash flow projection isn’t for every business. Your projected cash flow analysis can be time
consuming and costly if done wrong.
 Keep in mind that cash flow predictions will likely never be perfect. However, you can use
your projected cash flow as a tool to help manage cash flow.

How to calculate projected cash flow

If you’re ready to start calculating projected cash flow for your business, start gathering some
historical accounting data.

You need to get reports detailing your business’s income and expenses from your accountant,
books, or accounting software. Depending on the timeframe you want to predict, you might
need to gather additional information.

Want to learn how to calculate cash flow projections? Use the projected cash flows steps
below.

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Creating a projection of cash flow

If you want to create your own cash flow projection, start drafting out columns for your
future periods. Or, you can take advantage of a spreadsheet to organize your cash flow
statement projections.

You should include the following categories in your cash flow projection:

➢ Opening balance
➢ Cash in (e.g., sales)
➢ Cash out (e.g., expenses)
➢ Totals for cash in and cash out
➢ Uses of cash (e.g., materials)
➢ Total cash flow for the period
➢ Closing balance
➢ Periods (e.g., month of January)

Revisiting your cash flow projection

Cash flow projections are not set in stone. Revisit your projection from time to time to see
where you stand.

If you see major differences or flaws in your cash flow forecast, it may be time to crunch
more numbers and do some digging. Pinpointing issues with your projection early on can
prevent major inaccuracies in the future.

To ensure your projection stays as accurate as possible, consider variable expenses such as:

➢ Months with three paychecks

➢ Sales during peak seasons
➢ Months when premiums are due (e.g., insurance)
➢ Hiring additional workers

A good rule of thumb is to not project too far into the future. Too many variables can come
into play with your business (e.g., dip in the economy) and affect your future cash flow.

As mentioned, a standard time period for cash flow projection is 12 months. Try to limit your
cash flow projection time period to only a year in advance. That way, you can help prevent
unforeseen expenses and errors impacting your projection.

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1. Find your business’s cash for the beginning of the period

To calculate your cash from the beginning of the period, you need to subtract the
previousperiod’s expenses from income.

Cash at Beginning of Period = Previous Period’s Income – Previous Period’s Expenses

2. Estimate incoming cash for next period

Next, you need to predict how much cash will come into your business
during the nextperiod.

Incoming cash includes things like revenue, sales made on credit, loans, and more.

You can forecast future cash by looking at trends from previous periods. Be sure
to accountfor any changes or factors that differ from previous periods (e.g., new
products).

3. Estimate expenses for next period

Think about all the expenses you will pay next period. Consider things like raw
materials,rent, utilities, insurance, and other bills.

4. Subtract estimated expenses from income

To calculate your business’s cash flow, subtract your estimated expenses from your
estimatedincome.

Cash Flow = Estimated Income – Estimated Expenses

5. Add cash flow to opening balance

After you calculate cash flow, you need to add it to your opening balance. This will
also giveyou your closing balance. Your closing balance will carry over to act as
your starting balancefor the next period.

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