BUSINESS PLAN Prepared For Ultimate Einheit Ltd Real Estate Development, Import & Export, General Merchant Goods and Advertising [email protected]www.ultimateeinheit.com GHANA P. O. Box GP 13787 Chartfield Avenue, Opposite Adabraka Fish Market Accra-Ghana West Africa +233(0)267111132 GERMANY Kaiserstrass 41 76131 Karisruhe +49(0)176 27 29 20 88 Prepared by The West African Dimension Ltd Konadu shopping complex, Tema community 4 P.O. Box 95 Abeka, Accra - Ghana. Cell: + 233 (0) 244 234 699 Cell: + 233 (0) 209 303 384 www.twadconsultancy.com
Transcript
BUSINESS PLAN
Prepared For
Ultimate Einheit Ltd
Real Estate Development, Import & Export, General Merchant Goods and Advertising
Business Description ................................................................................................................................. 5 The Market................................................................................................................................................. 5 Management Team ................................................................................................................................... 5 Risk Management ...................................................................................................................................... 5 Financial Summary .................................................................................................................................... 5 Capital Requirements and Usage: ............................................................................................................ 6
1. Business Description ............................................................................................................................. 7 1.1 Business Overview .............................................................................................................................. 7 1.2 Ultimate Einheit Ltd overview .............................................................................................................. 7 1.3 History and Current Status .................................................................................................................. 7 1.4 Goals and Objectives .......................................................................................................................... 7 1.5 Critical Success Factors ...................................................................................................................... 7 1.6 The management team ....................................................................................................................... 7
2. Products ................................................................................................................................................... 8 2.1 Our Products description ..................................................................................................................... 8 2.3 Research and Development ................................................................................................................ 8
3. The Market in General ............................................................................................................................. 9 3.1 Retail Industry Analysis ....................................................................................................................... 9 3.3 SWOT Analysis ................................................................................................................................. 11
9. Project description and Capital requirement ..................................................................................... 22 9.1 Project description ............................................................................................................................. 22 9.2 Capital Requirements ........................................................................................................................ 22 9.3 Valuation of Business ........................................................................................................................ 23
Statement of Confidentiality & Non-Disclosure This document contains proprietary and confidential information. All data submitted is provided in reliance upon its consent not to use or disclose any information contained herein except in the context of its business dealings with Ultimate Einheit Ltd. The recipient of this document agrees to inform its present and future employees and partners who view or have access to the document's content of its confidential nature. The recipient agrees to instruct each employee that they must not disclose any information concerning this document to others except to the extent those matters are generally known to, and are available for use by, the public. The recipient also agrees not to duplicate or distribute or permit others to duplicate or distribute any material contained herein without Ultimate Einheit Ltd's express written consent. Ultimate Einheit Ltd retains all title, ownership and intellectual property rights to the material and trademarks contained herein, including all supporting documentation, files, marketing material, and multimedia. BY ACCEPTANCE OF THIS DOCUMENT, THE RECIPIENT AGREES TO BE BOUND BY THE AFOREMENTIONED STATEMENT.
Ultimate Einheit Ltd is a new company in the process of registration, with an objective to be a difference in the FMCG distribution industry. We are, presently located at Tema, Greater Accra of the republic of Ghana, we will employ a staff of 10 well specialized employees and managers in the 5 years to come;
The Market
As mentioned in the business description, the market is underserved, for the demand is very high and the supply is not to the standard and the gap between the supply and demand in the Ghanaian set up is so high, with a positive trend on the medium and the long term.
Management Team
Our management team is organized as follow:
� Managing Director
� Management
Operations
Sales and Marketing
� Operations
Human resource Accounting and audit Logistics
Risk Management
Our business concept including the expansion project has exposure to the following risks:
The market is underserved, for the demand is very high and the supply is not to the standard; the gap between the supply and demand in the Ghanaian set up is so high, with a positive trend on the medium and the long term.
1.2 Ultimate Einheit Ltd overview
The Ultimate Einheit Ltd is a new company with a new concept in the FMCG industry; we have an objective to be a difference in the distribution industry.
1.3 History and Current Status
We are, presently located at Tema, Greater Accra of the republic of Ghana, we are in the process of employing a staff of 5 well specialized employees and managers;
1.4 Goals and Objectives
Ultimate Einheit Ltd intends to take advantage of the huge present demand, in the FMCG market; with a quality and durability as our brand.
1.5 Critical Success Factors
The following are the critical success factors that we have identify and which needs to be in place and well managed in order to accomplish our objectives:
Financial Stability: - Permanent positive cash flow as possible - Not less than 10% net profit margin for the first 5 year - EVA (Economic Value Added) Ratio to be applied to measure the financial add value of the
company. The management & market share:
- By the end of the 5 year of the expansion we should reach 5% of the market share in the Tema sub region
- Acquiring new customers by the yearly rate of 25% - Improvement in after sales relationship
Working Process: - Acquiring the state of the art of logistic equipments - Yearly risk control management review - 15% yearly reduction in rework process
Working Environment: - A safe and healthy environment and application of safety measures - The introduction of a work manual by the end of 2014
1.6 The management team
Ultimate Einheit Ltd is a 100% Ghanaian entity, with Mr. Lali Domee as its managing director and a team of 2 executive managers.
Name Title
Mr. Lali Domee Managing Director
Mr. Hope Domee Non Executive Director
Mrs. Abigail D. Sahlani Sales & Marketing Executive
Body Milk Body Spray Strawberry Shower Gel Kiwi Shower Gel Coco Nut Shower Gel Body Spray Shampoo Family size Deodorant Vaseline
2.3 Research and Development
We at Ultimate Einheit Ltd our aim is to accomplish our short term objective of securing a primary stage of a respectable brand image, and maintaining our proceeds received from sales. In the long term after the first five years, we will seek to develop and increase research and development for new products and to improve existing ones.
3. The Market in General The Ghanaian economy is in a state of flux with the discovery of oil. The challenges of the economy will create business opportunities for local and foreign investors. The role of the government is crucial to facilitating the growth of the private sector, by continuing to create the enabling environment. Ghana should nurture and enhance the democratic dispensation and build a free and responsible media. Infrastructure in roads, railways, health, water and sanitation, power generation should be provided in partnership with the private sector. It is also important to develop an education infrastructure with requisite skilled manpower with a strong research development base. The country has to provide transparent, accountable and corrupt free governance. There is the need for a rigorous homegrown development plan with a strong indigenous partnership and participation in all sectors of the economy. These measures should facilitate rapid growth and development in the Ghanaian economy.
3.1 Retail Industry Analysis
The expansion of the middle class bodes well for growth prospects: The local retail market is thriving, albeit somewhat lopsided. The great majority of retail business – some estimates put it at 90-95% - takes place on a very small scale. Most Ghanaians do the bulk of their shopping at small corner stores and roadside stalls. Like many of its neighbors in the region and throughout the continent, however, in the past few years Ghana has seen formal retail start to expand among a certain subset of the population. This is largely function of the nation’s overall growth. Over the past decade Ghana has posted annual GDP growth of around 5%, resulting in rising incomes across the board and the emergence of young, middle –class and urban consumer set. As this group continues to expand, demand for international brands, luxury items and high-tech products are expected to continue grow. The country’s changing demographic situation represents a major opportunity for local and international retailers alike. Currently a handful of companies dominate the international –standard retail segment in Ghana. These businesses will face a number of challenges in the coming years. Despite a booming service sector, human resources are somewhat underdeveloped compared to mature markets in Europe and North America. Similarly, the country’s physical infrastructure presents a wide variety of challenges for importers and traders. Despite these issues, the local retail sector is a potentially lucrative one for investors, as evidenced by growing levels of disposable income among middle- class Ghanaians and the number of new projects currently under way. Oversight: A number of government organizations are involved in the retail sector. The Ministry of Trade and Industry (MoTI) oversees the state’s trade policy, which has a direct effect on formal retailers, who import the majority of the products they sell in Ghana. In late 2010 MoTI rolled out the second phase of the Private sector development strategy, which covers the period 2010-15. Under the new initiative, the state plans to improve the local business environment by addressing institutional inefficiencies, removing bureaucratic barriers and tackling many other challenges that private firms face. This bodes well for retail sector, which is populated almost exclusively by private players. In addition to MoTI, food-related retailers interact regularly with the food and Drugs Board, which oversees food safety in Ghana and works closely with supermarket and other retail establishments that deal in foodstuff. White goods, small appliances and household items are regulated by the standards Board, which ensures that production certification requirements. Distributors and retailers also interact regularly with customs, Excise and Preventive Services, Ghana’s Customs agency.
Geography: The retail market in Ghana is centered in Accra, which, a urban population of 4m-4.5m and around 6m in the greater Accra area, is the largest city in the country by a substantial margin. Smaller formal retail sectors exist in Kumasi, the capital of the wealthy Ashanti region. Other cities in Ghana rely entirely on small-scale and informal retailers. As of mind-2011, supermarket items and automobiles were the largest retail segments in the country. Mall Madness: The vast majority of retail outlets are street- front stores but a small but growing percentage of Accra’s population purchases groceries, fast-moving consumer goods (FMCGs) and other consumer retail items at Accra mall, Ghana’s sole international standard shopping complex. Opened in 2008 after two years of construction, the $34m project was developed as a joint venture between Joseph Owusu-Akyaw, a private Ghanaian investor, and Actis, a UK based private equity firm that oversees investments of around $3.1bn in developing markets around the world. Located on 12.5 –acre plot near the airport, the mall boasts an 800-car parking lot and 22,900sq meters of leasable space. As of mid- 2011 occupancy stood at 100% with 69 retailers offering a wide variety of goods and services. The mall has two anchor stores: Shoprite, a major South African supermarket chain that occupies 3500 sq meters of space, and Game, a South African household goods retailer, with 5000 sq meters. Additional tenants in the mall include banks, department stores and a cinema, plus a number of specialized shops. In 2008 retailers in the mall generated $4.3m in sales taxes for the government. Forecasts for the first decade of operation estimate total sales taxes in excess of $ 60m. Annual turnover at the mall is estimated at around $4.7m, with annual profits of about $2.2m. Launching an international-standard mall in West African presents a number of challenges, given the relative newness of the concept in the market. Accra Mall, which was designed by South Africa- based Bentel Associates international, has its own sewage treatment plant and a full- capacity backup power supply system, for example, to ensure constant service due to inefficiencies in the national power and sewage networks. Accra mall’s immediate success has encouraged local developers to plan a number of new international standard mall projects in the country. “These are more malls on the way, for sure,” said Andy Shaw, the manager of the Game store at Accra mall. Major Players: A number of major local and international retailers are active in Ghana. Growth on the wholesale side is increasing by 10 – 15% due to all of the upcoming new hotels, restaurants and even franchises in the food industry. Game is one of the largest discount retailers in African, with over 100 stores throughout the continent. The firm is a subsidiary of Massmart Holdings, the leading distributor of general merchandise, liquor, household goods and basic foods in Africa. As of mid – 2011 Massmart was negotiating an acquisition by US giant Wal-Mart, the world’s largest public corporation. Currently game sources most of it products from Massmart’s corporate headquarters in South Africa or directly from major markets around the world. Around 5% of products on sale in the store are sourced from within Ghana. In an effort to reduce import costs in the future, the company is working to increase the number of locally sourced products on sale in the store to 10-15%. Melcom, a local firm that was founded in 1989, operates 24 shops in the country, including a 90,000-sq –ft Melcom plus in Kaneshie, a wide variety of home and office products, is one of Ghana’s largest retailers. In addition to Koala, Game and Melcom, a number of other international-standard retailers are active. MaxMart, a local company that specializes in general merchandise, small appliances, and food and beverages, began operations in 2001 and currently operates three stores in the capital. Shoprite, as previously noted, is a South African supermarket chain that operates one of the two anchor stores at Accra Mall. The company has been active in Ghana since 2003.
Challenges &Opportunities: While incomes are rising, Ghana is still a developing country, and much of the population is extremely price sensitive. “Inflation is a consumer,” said Hesham motan, the director- general of L’Oreal West African, the regional arm of the French cosmetics brand. “To deal with inflation or price hikes inputs, for example can adjust slowly”. Melcom has also been faced with inflation-related pricing issues. Ramesh M Sadhwani, the firm’s joint group managing director, told OBG, “Retailers have to be creative to stay ahead of the inflation curve. Negotiating discounts through volume purchases is one way to do this.” While it presents a number of challenges, this massive low- income market represents a major opportunity for retailers who can tap into it. Many firms are moving in this direction. Game’s plan to source more products locally, for example, is expected to result in falling import costs and, potentially, lower price throughout the store. Car importers are also hoping to get a foothold in this new market. “We are working with Nissan to bring in lower-priced automobiles, said Accad. Outlook: Most local retailers seem to agree that the potential for growth and future profits in the retail market far outweigh the risks and challenges. Ghana’s newly affluent middle class in small but growing steadily, as is their appetite for international- standard shopping environments and products. The nation is English speaking, has a large population and boats a number of major ports. Ghana might be ideally situated to serve as a retail gateway for Africa, attracting firms looking to break into the regional market. “We’re only scratching the surface here,” said empowered middle class will continue to present new opportunities for retailers.” Strategic Opportunities Our strategic positioning in the local market is essentially our lower cost comparing to the competitors, and on that we are building our short and medium term targets. From our point of view we are also well positioned to build upon the huge potential that await this industry, we are very confident that this project will bring a sustainable add value for the investors as well the industry in general.
3.3 SWOT Analysis
Strengths
• Our know how • Access to distribution channels • Market availability • Lower operational cost vs. competition • Long term focus operations
Weaknesses
• Access to cash facilities • Cost of credit • Delayed payments • Competition awareness
Opportunities
• Governmental bodies backing the industry sector
• Increase in demand in the industry • Comparatively low man power cost
Threats
• Open market and foreign investors • Access to standardized quality • The absence of regulations • Higher inflation rate • Low consumer patronage
After reviewing our marketing strategy, we have come to the conclusion that it’s imperative for us to engineer our way of taking our marketing issues, to put it in the scoop of our long term objectives.
4.2 Market Segmentation
Target Market The profile of your local target market is as follow: Demographics Gender: 65% Women, 35% Men Education: 75% with higher education level Consumption and use patterns
Income Status % Weekly
Frequencies
Low income 10% 80% Middle income 25% 70% High income 65% 50%
Potential customers Body Milk 24% Shower Gel 11% Body Spray 22% Shampoo 5% Deodorant 27% Vaseline 11%
4.3 Targeting Strategy
We have identified two main targeting strategies:
� Differentiated Marketing: that is to go after several market segments with offers tailored to each � Target (Niche) Marketing: that is to go after a small segment or sub-segment with a tailored offer
After one year of operations we are going to invest Mass Marketing strategy to promote higher sales and higher profit, in this strategy we will study, the opportunity of going after the market as a whole with one offer that answers common needs.
4.4 Positioning Strategy
The management will use, to position our product vis-à-vis competitors, by applying the following strategies.
� Positioning in relation to a product class. � Positioning in relation to target markets that are not covered by the competition. � Positioning by price and quality (high-quality, low-price)
By investing in a research and development unit, we intend to be always in fuse with the market needs and we will make sure to design and tailor products to meet the needs of our targeted customers.
Simultaneously for the sake of our product strategy, we will focus on:
� The specification of our products, to meet the needs of our customers � The strengths of our products. � Providing the best after sales services for our customers
4.6 Pricing Strategy
Because the pricing strategy is a marketing technique that is part of the overall marketing/positioning strategy, the management will adopted the following strategies to counter the effect of the competitors in the market. Our pricing strategies are:
How to advertise and promote our products is crucial to gaining acceptance in the market and successfully generating a profitable sales volume. Having a good product and poor advertising is like not having a business at all. Advertising and promotions is the lifeline of a business and should be treated as such. Our purpose as management is to introduce, promote, and support our products. We have set our priority to give a higher attention to this aspect. For this reason we are willing to use all the marketing tools available to reach our objectives, below and above the line vehicles. We will begin by setting 3 different strategies regarding the promotion and advertisement our product as follow:
Strategy 1 To promote our products the way we have to emphasis on building the awareness about our intentions, in expanding our business with the aim of building a better image for our business by the use of the following Marketing Vehicles:
1- Doo to Door Promotion and coupon distribution 2- Trade shows, networking
Strategy 2 To build a follow up strategy, by the use of the following Marketing Vehicles:
1- Print media – newspapers, magazines, specialty publications, Yellow Pages 2- Direct mail, (e)mailing lists 3- Signs – billboards.
Strategy 3 At this stage our strategy consist of combining the former ones, this will bring the necessity the use of broadcast media/electronic, radio, Internet.
4.8 Promotional Budget
We have set an initial budget regarding the mentioned marketing and promotion plan, it will be premature to predict the outcome of any budget but by applying these strategies we are confident to be able to deliver a very positive massage for our customers and the market as well.
Our budget is as follow:
2014 2015 2016 2017 2018
Total amount in GHC 5,664 6,092 6,536 7,105 7,848
4.9 Sales Forecasts
Our calculation are based on the expected case scenario,
For this section, please refer to the Sales Forecast in the appendix. (7)
5. Risk Management The idea of a managed risk framework became a necessity, especially in the scoop of the new concept of management that we are aiming for; for that purpose, the board of directors has taken the overall responsibility for the establishment and oversight of the risk management framework. Through these standards and procedures, we aim to develop a disciplined and constructive control environment, in which all stakeholders and employees understand their roles and obligations. Our business concept including the expansion project has exposure to the following risks:
The first part of the measurement exercise, is the establishment of the expected return on each asset class. The second part comprises the assessment of the risk characteristics of each asset. The risk of the individual assets is measured in the context of the effect of their returns. Provisions are raised where necessary based on the results of independent asset reviews, economic conditions as well as local knowledge and experiences.
5.2 Credit risk management
Credit risk is the risk that the clients or counterparties will not be able or willing to pay their contractual obligations under loan. Credit monitoring As a policy, all customers are subject to a review on at least an annual basis, even when they are performing satisfactorily. The probability of default increases with the number of contractual payments missed, thus raising the associated impairment requirement. Credit risk management They enable the application of consistent risk measurement across all credit exposures. Credit rating contains the best estimate of credit risk for a counterparty based on current economic conditions. Management purposes, defined as all customers overdue by 90 days or more, and or individually impaired or restructured.
5.3 Liquidity risk management
Sources of liquidity are regularly reviewed to maintain a wide currency provider, product and term. Monitoring and reporting takes the form of cash flow measurement and projections for the next day, week and month. There also exist annual funding plans which are reviewed on a monthly basis in addition to cash flow management. The assets held for managing liquidity risk comprise:
• Cash and Bank • Government bonds and other securities • Loan repayment • Interest payment and coverage
Market risk is the risk that the earnings or the ability to meet business objectives will be adversely affected by changes in the level or volatility of market rates or prices such as interest rates and foreign exchange rates. The measurement techniques used to measure and control market risk include:
• Foreign exchange value at risk
• Inventory prices and fluctuations
• Interest rate
• Inflation rate
5.5 Operational risk management
Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the processes, personnel, technology and infrastructure, and from external factors other than assets, credit, market and liquidity risks; such as those arising from legal and regulatory requirements. The primary responsibility for the development and implementation of controls to address operational risk is assigned to senior management. This responsibility is operational risk in the following areas:
• Requirements for appropriate segregation of duties
• Compliance with regulatory and other legal requirements, like the fare trade and organic
fare trade certificates requirements
• Documentation of controls and procedures
• Requirements for the periodic assessment of operational risks faced, and the adequacy
of controls and procedures to address the risks identified
• Requirements for the reporting of operational losses and proposed remedial action
development of contingency plans
• Training and professional development
• Ethical and business standards
• Risk mitigation, including insurance where this is effective.
At Ultimate Einheit Ltd, our management is built on the Total Quality Management concept, which reduces cost and enhances the work process to be very efficient.
6.3 Team
Name Title
Mr. Lali Domee Managing Director
Mr. Hope Domee Non Executive Director
Mrs. Abigail D. Sahlani Sales & Marketing Executive
6.4 Professional and Advisory Support
Here is the list of service providers that our business may consult or from whom we will obtain additional services, who are not a part of our internal staff:
� Bankers: UBA Bank � Consultant: The West African Dimension Ltd
The right mix of personnel is the most valuable asset any business has. Employees and staff play an important role in the overall operation. It is one of our priorities to know what skills we possess and the ones we lack since we will have to hire personnel to supply the skills we lack. Furthermore, we will take practical measures to keep the personnel informed of changes and be sure to get their feedback. Employees can often be a great source of excellent ideas, of innovations to existing products, and inspiration for new product lines and markets to enter, so we will be take the time to listen to the suggestions they may provide. After conducting a thorough personnel analysis, our need in human resource is situated around 10 new employees in the 5 coming years. For that we have begun receiving CV’s for future recruitment, as well as we are in the process to train new personnel in preparation for the new project; Our needs in HR can be summarized as follow:
2014 2015 2016 2017 2018
Total Number of employee 4 7 7 9 10
Total Salary & Wages 9.600 17.880 18.774 19.713 20.698
Total Benefits 2.304 4.291 4.506 4.731 4.968
Total Compensation 16.517 31.858 33.451 45.803 53.700
(See appendix for more detail) (10)
7.2 Operations Expenses
The production is backed by a procurement system based on a one month stock holding principle; we have a list of 2 foreign suppliers that we deal with. Our cost is divided in 2 segments: - Cost of Revenue - Operational cost Our calculation are based on the reality that the price of Imported materials as well as the quantity purchased annually will increase year by year, to cope with the growth in sales as well as the demand and supply factor. The following are the increment rate in operations tends to be stable on the long run, with a trend slightly to the up:
Allocation of Cost of Revenue 2014 2015 2016 2017 2018
Variable 82.613 93.960 107.031 127.905 161.216
Fixed 3.000 8.952 9.250 9.562 9.890
Allocation of Operating Expenses 2014 2015 2016 2017 2018
Variable 1.200 1.405 1.614 1.937 2.421
Fixed 20.104 24.624 25.644 28.819 30.197 (See appendix for more detail) (12)
9. Project description and Capital requirement There is a big prospect for FMCG in Ghana; we at Ultimate Einheit Ltd are well positioned and we intend to take advantage of the vacancy in this type of market.
9.1 Project description
The project is divided into 3 phases: Phase 1: Set up of the premises, adjustment and décor. The building operations are indented to begin the first quarter of 2014. The construction cost is estimated at 10.000 GHC The new construction will be ready at the most, the 30
th of April 2014.
This phase includes: 1- Recruitment of new sales reps 2- Training Phase 2: Set up of the premises, adjustment décor, buying distribution vehicles. These operations are indented to begin the first quarter of 2014. This Phase is estimated to cost 50.000 GHC This Phase will be ready at the most the 30
th of May 2014.
This phase includes:
1- Licenses and permits 2- Building adjustment works 3- The reception of the equipments 4- Adjustment building works
Phase 3: is to order the items to import: To order the items and products to be imported: This Phase is estimated to cost 20.000 GHC This Phase will be ready at the most the 30
th of June 2014.
9.2 Capital Requirements
The capital needed to start our business is: 80,000 GHC and this is based on how much money we will need to operate the new project for the first 6 Months to come. From the perspective ahead of us we are confident that we will be able to begin the payback the first 2 years of operation that is 2014.
