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SUBMITTED TO:

Lecturer : Peter Millard

GROUP MEMBERS:

Sudip Paudel : 201801687

Niraj Gautam : 201801571

Chiranjibi Gyawali : 201801685

Jagdeep Kaur : 201801740

Shristi Sharma : 201801700

Group: Master of power

Everest Leathers Pty. ltd. | Sydney Westfield CBD, Sydney

Table of Contents

Executive Summary 0

Management & Ownership 2

Company Structure 2

Key Personnel 3

Products and services 3

Pictures of Sample Products 4

Business Analysis 5

Market position 5

Unique selling position 5

Innovation 5

Insurance 5

Risk Management 6

Legal Considerations 6

Operations 6

Sustainability plan 6

Corporate Social Responsibilities plan 7

The Future 8

Vision Statement 8

Mission Statement 8

Goals and Objectives 9

Action Plan 10

The Market 12

Market research 12

Market target 12

Market Positioning 13

Market Segmentation 13

Environment and Industry Analysis 13

PESTLE Analysis 14

Porter’s Five Force Model 15

SWOT analysis for Everest Leather 16

Competitors 16

Advertisement and Sales 17

The Finance 18

Key Financial Objectives 18

The Start-up Cost 19

Profit and loss statement for the first year 20

Assumptions 21

Breakeven Analysis 22

Projected Profit and Loss 22

Table of Pro forma Profit and Loss table 23

Projected Balance Sheet 24

Business Ratios 25

Formulas 25

References 28

Annexures 29

List of Figures:

Figure 1: Organisational Chart 2

Figure 2: Pictures of sample products 4

Figure 3: Business Canvas Model 29

List of Tables

Table 1: Current staffs and their details 3

Table 2: Products and services 3

Table 3: Risk Management 6

Table 4: Corporate Social Responsibilities Plans 7

Table 5: Action plan of Business 11

Table 6: Capital Structure of Business 18

Table 7: Company’s Shareholding Pattern 18

Table 8: Start-up cost of Business 19

Table 9: Profit and Loss Statement for first year (Monthly) 20

Table 10: First Three Years Financials Projection Summary 21

Table 11: Break Even Analysis 22

Table 12: Performa Profit and loss for first three years 24

Table 13: Projected Balance Sheet for three years 24

Table 14: Business Ratios 25

Executive Summary

Everest Leathers is an e-commerce leather retail private limited company. It offers quality and reasonable priced leather jackets, wallets, belts and shoes for men and women. The company operates from its corporate office based in Westfield Sydney CBD, Sydney. It imports its standard as well as customized products as requested by customers from Kathmandu, Nepal. Everest Leathers will have an agreement or tie up with leather product manufacturing company from Kathmandu, Nepal. Everest Leathers will hold all the international selling rights of that company.

Everest Leathers has target market of medium level of income people. The company will primarily serve the market of Australia, New Zealand, UK, USA and South Asian Countries as in these countries, people are loving the ideas of customizing their items and there is an increasing trending of online shopping. However, the market is competitive. The prime competitors for the company will be established companies like Oran Leather, Aussie Bush Leather, Will Leather etcetera and the other leather products retailers from EBAY and Amazon. However, Everest Leathers has key competitive advantage over others as it will have directly supplier from Kathmandu, Nepal which will manufacture and supply good quality of leather products for Everest Leathers in lower cost. Further, Everest Leathers is very confident about offering customized products. In addition, Everest Leathers will put intensive marketing and promotional activities like Facebook, Instagram marketing, biker gang marketing, physical office marketing.

Everest Leathers will kick-off its operation with paid equity capital of AUD $100,000. Each of five founding shareholders will contribute AUD $20,000 individually. The start-up cost will be AUD $79,553. It is expecting to have sales figure around AUD $453,045 in the first year of its inception and the sales are projected to grow at rate of 22.26% for second year and 32.85% increase in third year. The major cost for the company will be its cost of goods sold i.e. 41.07% of the revenue while the administration expenses is projected to drop in later years. Similarly, Everest Leathers projects for the first year of operation, it will have net profit margin between 17.53% for the first year and increased to 28.31% in third year.

The company is expected to stand out in the crowd with its genuine and reasonable priced products and its customized articles option. As more people are moving into online shopping due to its easiness, there seems an emerging market for this type of business. Further, the founding members are young, energetic and equipped with considerable amount of knowledge of management, so the company is expected to do very well and achieve its goals within stipulated time frame.

The Business

Business Name : Everest Leathers Pty. Ltd.

Trading name : Everest Leathers

Date Registered : 14^th March 2019

Location(s) registered : NSW

Business structure : Private limited company

ABN : 1234567

CAN : 9876543

GST : Registered completed on 20^th March 2019

Domain address : www.everestleathers.com

Email address : everestleathers@gmail.com

Phone Number : +61-123456789

Licenses & permits:

• Workplace health and safety (WHS)
• Export/ Import

Business Premises Lease:

Outlet leasing

• Lease: 85 sqmtr
• Price: AUD 1475 per month
• Address: Westfield Sydney CBD, Sydney.
• Period: 2 years

Warehouse leasing

• Lease: 1000 sqmtr
• Price: AUD 1645
• per month
• Period: 2 years

Management & Ownership

This company will consist of five founding members who will own and run the company. Each of the five shareholders will contribute equal amount of equity as well as take several roles across the firm to run it smoothly and effectively.

Company Structure

Figure 1: Organisational Chart

Key Personnel

Current staff

Job title	Name	Expected staff turnover	Skills or strength
Chief Executive Officer	Sudip Paudel	3 years	Master’s in Professional Accounting and more than 6 years of accounting and management experiences.
Chief Financial Officer	Chiranjibi Gyawali	3 years	Master’s in Accounting. More than 3 years of experience in operation and accounting. Internship in banking sector.
HR Chief	Niraj Gautam	3 years	Master’s in accounting and finance. Internship in banking sector.
IT & Online Marketing Chief	Jagdeep Kaur	3 years	Master’s in Information Technology.
Marketing & Logistics Manager	Shristi Sharma	3 years	Master’s degree in Marketing.

Table 1: Current staffs and their details

Products and services

Product/service	Description	Price
Leather Jackets & Coats	Raw materials used is pure Nepali Leather with several designs	$150-$600
Shoes	Raw materials used is pure Nepali Leather with several designs	$50-300
Belts & wallets	Raw materials used is pure Nepali Leather with several designs	$30-$200
Bags	Raw materials used is pure Nepali Leather with several designs	$45-$500

Table 2: Products and services

Pictures of Sample Products

Figure 2: Pictures of sample products

Business Analysis

Market position

The leather products as the primary product of the company has a very competitive niche market. However, the best quality leather, reasonable price, flexible payment process and fashionable products are the feature our products carry to beat the competitors in the market.

Unique selling position

In order to outrun the competitors, we have a unique selling quality like huge range of products available for buyers with competitive price, customization of the product for online customers, flexible payment process includes 80% payment before the delivery and rest after the delivery. We will follow a strategy where prices are set as per competitive market price plus discount on the first buy up to 15% and also quality of product. We will have a variety of products that will fall within both necessity and luxury goods.

Innovation

Research and development in any kind of business will lead to a successful venture. Hence, our company will hire a professional in R&D but in later part of the business. In the meantime, our company’s CEO Mr. Sudip Paudel himself is a great enthusiast in terms of new research and innovation. Meanwhile, all the employees will be trained in regard to the proper way of handling the leather products as well as chemicals involved which might lead to significant reduction in stock losses and higher savings

Insurance

Workers compensation:

It’s our responsibility as an employer to:

• maintain a safe workplace.
• maintain current and adequate workers’ compensation insurance.
• protect ourselves and our workers from financial hardship in the event of a workplace injury.
• protection on loss of property and public liability.

We have our workers compensation insurance with Bupa Insurance. They will provide workers compensation claim services and other services related to incidents.

Our insurance policy number: ACVD8954

Risk Management

Risk	Likelihood	Impact	Strategy
Environmental Risk	Highly likely	High	Must come out with innovative creation that would reduce environmental risk
Delivery time	Likely	Medium	Need to have contract with professional delivery company
Copyright issue	Likely	High	Need to ensure our product & services are under the copyrights frame

Table 3: Risk Management

Legal Considerations

The Environment Protection and Biodiversity Conservation Act 1999 (the EPBC Act) is the Australian Government’s central piece of environmental legislation. It provides a legal framework to protect and manage nationally and internationally important flora, fauna, ecological communities and heritage places — defined in the EPBC Act as matters of national environmental significance.

1. The Competition and Consumer Act 2010 (CCA) covers most areas of the market: the relationships between suppliers, wholesalers, retailers, and consumers. Its purpose is to enhance the welfare of Australians by promoting fair trading and competition, and through the provision of consumer protections.

Operations

We are going to import the raw leather from Kolkata, India (Bangla Quality Leather Pvt Ltd) to Nepal for manufacturing. Our manufacturing would be done by a third party or outsourced manufacturer who already are equipped and involved in similar kind of product manufacturing. Basically, Nepal leather Pvt Ltd will collaborate with us in terms of general manufacturing as well as customized manufacturing. After producing the goods, they will be shipping our products to Kokalta, India via road and to Australia via sea to our warehouse in Auburn, Sydney. After receiving the order, the online demand would be dispatched to the customer at their door step whereas remaining load would be slowly moved to the retail store as per the available space.

Sustainability plan

Environmental impacts

• During leather processing, various air pollutants including H2S, NH3, SO2, CO2, Cl2, fume of formic acid and volatile organic compounds are discharged into atmosphere (Das, 2000). H2S, NH3 and Cl2 are produced in liming, de-liming and pickling operations of leather finishing process.
• During tanning process a large number of chemicals are used that drains out into streams, ponds and rivers without treatment causes the ground water pollution. A single tannery can cause the ground water pollution in range of about 7-8km radius around it that has a devastating impact on aquatic life, birds, animals and human beings.
• Chromium and Cadmium Impact on water.
• Effluents impact on water.

Community impact & engagement:

Exposure to carcinogenic compounds resulting in a variety of cancers i.e. lung, bladder, kidney, pancreatic, oral cavity and nasal cancers, soft tissue sarcoma and skin with dermatitis, ulcer and respiratory illness. They can strictly follow the recommendations mentioned below to improve the conditions.

• Waste treatment technologies must be used in tanneries.
• Strictly implement the National Sanitation Policy.
• Enact the National Air Clean Act to save the atmosphere.
• Enact Water Conservation Act to conserve the water sources

Corporate Social Responsibilities plan

Milestone sustainability related to business	Target	Target date
Reduce plastic bags consumption	50% Reduction	July 2019
Tree Plantation	2200 Trees	October 2021
Reduction of use of toxic chemical	35% reduction	May 2021

Table 4: Corporate Social Responsibilities Plans

Technology

Company will use its official website, accounting and inventory management software will be used is MYOB.

Trading hours

Online trading: In this case the transaction can occur, or the customer can pay at any time of the day. The delivery would be done within 5 business days.

Retail trading: 9am – 6pm on weekdays, 10am – 5 pm on weekends

Communication channels

• Postbox,
• Telephone,
• Email,
• Social media page (Facebook, Instagram, WhatsApp and Google Advertisement)

Payment types

• Paypal,
• Credit cards,
• Cheque,
• Afterpay, etc.

The Future

The planning of business provides assistance in explaining vision statement, mission statement, goals/objectives and action plan. For Leathers, author has explained and illustrated future attributes as follows;

Vision Statement

A Project Vision Statement is an idealistic view of the desired outcomes to be produced for the business after successful project completion. It is a vivid description of what the business will be like to inspire the project beneficiaries to initiate the project. The vision statement document is an attempt to visualize the project results at the initiation phase in order to focus the business on those benefits it will gain after the project accomplishment. In certain, vision statement of company provides a road map that indicates company’s desires to become and guide transformational initiatives with the end goal of settling defined directions, which are accountable of strengthening company’s growth and prosperity (Armstrong, Kotler, Harker and Brennan, 2015). For the Everest Leathers (Quality never goes out of style) Vision Statement is to be a global name synonymous with high quality, genuine leather. The preferred choice of jackets, bags designers, tailors and end-users in India. Armed with the highest level of experience, knowledge and in-depth expertise, we are new company with the ambition and the resources to be the absolute best in our field. We challenge, implement and inspire all areas where the use of leather creates added value. The company’s first responsibility is to the men, women, and children who use its products.  As a customer-oriented business, Everest leather recognizes that customer satisfaction is the key to success and strives to deliver the highest quality customer service and superior products.  Everest leather supports the success of its employees, community, and investors, and will conduct its operations prudently to ensure adequate financing and resources necessary to achieve business objectives for future growth.  The company promotes a spirit of sharing and caring, where people eagerly contribute their time, knowledge, and experience towards a successful community.  As a socially responsible company, Everest leather contributes to the world’s obligation for the protection of the environment, contributes to the economic strength of society, and functions as a good corporate citizen on a local, regional, national, and global basis. Vision statements are addressed by the company due to several different reasons. For instance, visions are accountable of contributing towards the development of broader strategic plan and attempts to provide assistance in motivating existing workers as well as attracting potential employees (Fahy and Jobber, 2012). Overall, vision statements can facilitate companies in differentiating competitors of the business. For instance, profit sharing can also be determined in terms of common business goals and targets. The vision statements are typically described and explained in the ways in which company become profitable and successful for long term growth (Fahy and Jobber, 2012). The vision statement of the company is as follow:

“Our vision to be a million-dollar turnover company within seven years of operation along with building a strong customer base.”

Mission Statement

A mission statement is a communication of an organization’s purpose, usually expressed with public relations or marketing in mind. It should be brief and clearly articulated statements of the most important things potential customers or the general public should know about organization. Mainly, this statement is the answer of these questions: – What do you do, How do you do it and Why do you do it? Some organizations provide vision statements as a description of mid-term and long-term goals. The mission statement of a company can be explained as a short statement that reflects and represents company’s purpose. The mission statement of an organization plays a major role in communicating purpose through identifying goals, operations, products and services being provided (Gordon, 2012). Mission statement can be referred as a sentence that describes overall function of a company, competitive advantage and markets. In most cases, mission statement is referred and explained statement of purpose because it focuses on illustrating fundamental elements and matters of organizational values. Typically, mission statement is developed on the basis of key markets or targeted audience, contribution and distinction and it illustrates the product and service contribution for societal development. For the Everest Leathers our mission is to create an apparel company that can offer superior design, quality and value to the consumer. We will accomplish this by being committed to offering great service and real value to our business partners and consumers. We will provide a pleasant, fair and diverse environment, allowing our associates to grow in their careers and experience constant improvements in their lifestyle and to build our brand worldwide while creating stockholder value. We also try to maintain our core focus and roots while bringing our lifestyle message of independence, creativity and innovation to this global community. We believe our people are critical to the achievement of this goal, and their continuous development is essential. Increasing sales and profits from year to year, ensuring the security and growth of our company, and providing a reasonable return to our shareholders. The mission statement of an organization also reflects different facets of businesses that range from product nature being offered along with service, quality, pricing, positioning within market, growth potential and utilization of technology. Most likely, the mission statement plays a major role in communicating and explaining company’s relationships with customers, employees, competitors, suppliers and community (Fahy and Jobber, 2012). To be specific, mission statement is simple the way to direct business within right path. The clear purpose of the business can also be communicated via mission statement (Chaffey and Smith, 2013). The company’s mission statements are illustrated as: -Be competitive in the world and creative innovation.

• To provide opportunities for both employees and business.
• Be a leader in the market.
• To continue practicing and striving hard for developing satisfaction for customers via improvement of quality and innovation.
• Good Products with affordable prices.
• To meet expectation of our customers

Goals and Objectives

Goals and objectives are statements that describe what the project will accomplish or business value the project will achieve. Goals are high level statements that provide overall context for what the project is trying to achieve and should align to business goals. Objectives are lower statements that describe the specific, tangible products and driveable that the project will deliver. In every business, objective and goal setting indicate the encouragement of marketers against particular action. The goal setting process in a business plays a major role in explaining substantial efforts associated with the designing of planning and directions. Everest leather management recognizes that the company must establish concrete goals that assist management in determining whether the company is achieving corporate objectives.  Everest leather chance of implementing those goals depends upon management’s ability to track progress toward goals and to measure results in conjunction with those goals.  To ensure implementation of the company’s goals, management has established the following corporate objectives:

• Securing start-up funding and subsequent funding through a combination of investment and debt strategies.
• Establishing marketing and sales initiatives to expand the company’s clothing line and capture 10% of the branded urban apparel industry.
• Based upon market growth projections, generating very healthy sales revenues in Years 1, 2 and 3.

The achievements of business operations are accountable of addressing business objectives. Initially, operational objectives in an organization can be categorized as SMART objectives. Objectives for an organization should be analysed in accordance with timeframe illustrating the period required for its achievement (Fahy and Jobber, 2012). The objectives being develop for the case of Everest Leathers Business are illustrated as:

• To finish and finalize all the initial marketing and renovation.
• To ensure protection of interest of shareholders along with maximize wealth of the organizations.
• To finally fulfil and address responsibilities associated with nation relating to tax payments regularly.
• Increasing awareness on targeted consumer.
• To develop effective practicing opportunities for sphere of activities that can cover reported shareholders.
• More profit to be achieved.
• To ensure the maintenance and development of strong working environment.

Action Plan

An Action plan is a document that lists what steps must be taken in order to achieve a specific goal. The main purpose of an action plan is to clarify what resources are required to reach the goal, formulate a timeline for when main tasks need to be done and also determine what resources are required. Action plan is a component of business plan because it facilitates in analysing the tools, techniques and strategies that are considered or employed for executing business plan. Temporarily, development of action plan can facilitate in ensuring overall success of the company. The action plan for every business focuses on explaining resources, responsibility, progress tracking and the ways to achieve desired goals (Fahy and Jobber, 2012). The action plans are primarily effective for the management of overall internal and external attributes of management (Armstrong, Kotler, Harker and Brennan, 2015). The action plan for the proposed business is presented as:

S #	Objective	Action	Resources	Responsibility	Timeframe	Monitoring
1	To regulate expansion of our leather business within business via advanced technology.	Integration of Technology department	Investment and Technical personnel	Operational Management	1 year	Focused technology-based policies
2	To develop effective practicing opportunities for sphere of activities that can cover reported shareholders.	Designing suitable policies and arranging business operations.	Investment and Technical personnel	Operational Manager	1 year	Business operational efficacy.
3	To finally fulfill and address responsibilities associated with nation relating to tax payments regularly.	Development of strong legal image and reputation.	Hiring official company’s lawyer.	Legal advisors of the company.	1 year	Organized legal committee.
4	To ensure protection of interest of shareholders along with maximize wealth of the organization.	Investment in Research and development sector	Investment and Technical personnel	Operational Management	1 year	Improved research and development sector
5	To ensure the maintenance and development of strong working environment.	Improvement in compensation policies being offered for workers	Investment	Human resource management department	1 year	Review of employee performance and engagement

Table 5: Action plan of Business

The Market

Market research

Market research is an effective tool to assist business planning. It helps a business to collect information about its targeted customers and also help monitor the tracks of the competitors. Business should undertake market research on regular basis in order to-

• know potential and new customers
• sustain existing customers
• Understanding competitors
• Test new markets
• Identify performance, pricing and promotional opportunities

The main traits of this business consist of market segmentation, environmental analysis, target analysis, SWOT and competitor analysis also including advertising and sales. (Kenton, 2018)

There are three stages of target marketing used in this business which includes market targeting, market positioning and market segmentation.

Market target

Target market is the market where a company wants to sell its final products and services to a targeted set of customers. It is hard for a company to meet the correct requirements of each individual customer. Since, everyone doesn’t have identical preferences it is even harder to satisfy the needs of all the consumers. So, in order to set the market, the company adopts a strategy which is known as target marketing. This strategy involves dividing the market into segments and developing products or services to these segments. Basically, it is focused on the customer’s wants and needs (Anthony, 2017).

There are two markets that are targeted most in the business are

Target Market One

The first market in this business consist of working people, in less time they could add style in their closet by a good quality clothes with affordable prices. As in Everest Leather Pty Ltd., we offer best quality leather products with an affordable price.

Target Market Two

The second market in this business is focus on people who are intent in fashionable and stylish clothing. In Everest Leather Pty Ltd., we not only offer leather jackets but also other accessories like bag, belt, purse and shoes which are targeted to these types of customers.

Market Positioning

Market Positioning is a consumer’s perception of a product in relation to competing products. It is the process of establishing the image or identity of a product so that consumers perceive in a certain way. (Dye, 2018) In Everest Leathers Pty Ltd, we offer both types, the leather products that are high in quality with affordable price and offers luxury leather items or can be said branded leather goods.

Market Segmentation

Market segmentation is the research that determines how organization divides its customers into smaller groups based on characteristics such as age, income, personality traits or behaviour. These segments can later be used to augment products and advertising to different customers. By knowing market segments company can leverage in product, sales and marketing strategies (Dye, 2018). 

Different types of market segmentation adopted are-

Demographic

Its categories a market by demographic elements like age, education, income, family size, race, gender, occupation, nationality. In Everest Leathers Pty Ltd the targeted customer involves men and women especially it is targeted to the bikers.

Behavioural

It divides markets by behaviours and decision- making patterns which are purchase, consumption, lifestyle and usage. In Everest Leathers Pty Ltd we offer leather products from economic quality of products to luxurious leather accessories.

Psychographic

It is by dividing markets according to lifestyle, personality traits, values, opinions and interests of consumers. These categories involve people who are interested in fashion and comfort together.

Environment and Industry Analysis

Environmental analysis is a strategic tool, it identifies all the external and internal elements that affect an organization’s performance. Through which an organization can decide. Since market is changing every day. New things develop and the whole scenario can change in a few seconds. Some factors are beyond anyone’s control while some are controllable. Similarly, business is greatly influenced by their environment. All the situational factors which determine day to day circumstances impact firms. So, business must constantly analyse the trade environment and the market. There are many strategic analysis tools that can be used. (Pestle analysis, 2015)

In scenario of Everest Leathers the environmental analysis used is PESTLE analysis and explained in detail-

PESTLE Analysis

Political factors

Political factor is a country’s political situation and global political conditions effect on the country and business. Some political factors that include are government policies, tax laws and tariff, stability of government and entry mode regulation. In case of Everest Leathers since Australia have a stable political condition so this would not affect the company but other factors such as tax laws and tariff might be some obstacle for a company.

Economic factors

Economic factor involves all the determinants of the economy and its state. Which can conclude the direction in which the economy might move. So, this factor is based on the environment and set up strategies in line with changes. For Everest Leather some factors that can affect could be disposable income, inflation rate, interest rate, foreign exchange rate, unemployment rate and consumer sentiment.

Social factors

Social factors vary from country to country. Every country has a distinctive mindset which can impact on the business. Some of the social factors Everest Leather should act before its commencement are action against animal cruelty, move to sustainability by reducing waste, cultural implications, gender and connected demographics, social lifestyles, domestic structures and educational levels.

Technological factors

Technology is advancing continuously, this influence business. Environmental analysis on these factors help to stay up-to-date with the changes. Technological factors help a company to know how a consumer react to various trends. Everest Leather being a retail industry with the help of technological advancement by rapidly adopting new technology and using multiple social media platform the company can regulate effectively and efficiently. By various social media and generating a company application where consumers can shop virtually can help the organization sustain.

Legal factors

Legislative changes take place from time to time. These changes affect the business environment. Rules and regulations impact industries and business in that economy. So, business should analyse the legal developments in respective environments. Some legal factors of Everest Leather are product regulations and health and safety regulations.

Environmental factors

The location influences business trade. Climatic changes affect the trade. Everest Leather can be affected by some factors that include- Geographical location, waste disposal laws, energy consumption and people’s attitude towards the environment as it is a leather industry.

Similarly, for Everest Leather Porter’s Five Force Model is used and explained in detail-

Porter’s five force model was recognized because to let the organizations keep a close watch on their rivals also encouraging them to look beyond the actions of their competitors and examine what other factors could impact the business environment. Porter identified five forces that make up the competitive environment which can increase profitability. (Porter, 1979)

Porters Five Force Model for Everest Leather is-

Porter’s Five Force Model

• Competitive Rivalry– It is used to identify the number and strengths on the company’s competitors. Also allows the company to determine how many rivals, who they are and how does the quality of their product and services compares to other competitors. As we have established, there is a high demand of competition for leather goods in the market indicates a highly competitive risk for Everest Leathers.

• Buyer Power– It is used to know the bargaining power of buyers like how many buyers are there, how big is the order. For Everest Leathers, bargaining power of customers further seems to be high because customers are aware of product characteristics. It is easy for them to accept products being offered by companies. Typically, the bargaining power is high because Jackets are common products that are widely being used by the customers.

• Supplier Power– This is determined by how easy it is for buyers to drive the prices. For the proposed business, potential suppliers will include fabric or raw material providers. There will be supplier from India who will supply all the articles so in that case bargaining power of supplier will be high as that company will be our sole supplier.

• Threat of Substitution– This refers to the likelihood of customers finding a different way of doing what the company do. Threats of other substitute for the product is high as the leather jacket have other substitutes like jackets, jumper and not everyone likes leather product.

• Threat of New Entry– For Everest Leathers, the threat of new entrants seems to be high because market is drastically changing. The considerable changes and developments within markets have increased the chances of market entry for start-ups. The ability to enter market can facilitate people in acquiring desired products easily.

SWOT analysis for Everest Leather

• Strengths

• Authentic Leather Products
• High quality products with most economical price
• Encouraging and impressive customer service
• Customized products
• Comfortable availability of raw materials and other inputs

• Weakness

• New to Business
• Environmental problems
• Limited financial capacity
• Lack of modern finishing facilities for leather
• Difficulties in accessing to testing, designing and technical services

• Opportunities

• Growing fashion consciousness globally
• Growing demand of customised item
• Product diversification
• Growth of Online Shopping
• Rapid Delivery

• Threats

• Fast changing fashion trends are difficult to adapt
• Change in Government Trades and Policies
• Faces strong competition
• Less sale of luxury products due to higher price.

Competitors

Knowing who your competitors are, what they are offering, can help a company make their products, services and marketing stand one. It will enable a company to set their prices competitively and help respond to rival marketing campaigns with their own initiatives. The presence of competitors makes the market competitive, driving down the prices and margins on goods and services. Competitors attempt to gain a larger market share by competing on prices which is lowering its prices more than its rival. (Québec, 2009) The major competitors of Everest Leather are Zara, Denim, Coach, Oran Leather, Aussie Bush Leather, Will Leather and other retail leather product retailers including from eBay and Amazon. In this competitive market it is highly likely that competitors tend increase rapidly.

Advertisement and Sales

Sales and advertising are both functions of marketing, which involves getting products from the idea stage to consumers. Many small companies run advertising first to support the selling function. The advertising helps inform consumers and business customers about the company’s products and services. Advertising is impersonal communication of information about products, services or ideas through the various media, and it is usually persuasive by nature and paid by identified sponsors (Bovee, 1992). The advertisement in the company will incorporate social media because it is widespread, affordable and unique. Through employing advertisement strategies, marketers will be able to attract sales and improve business reputation and sales. The stated advertisement strategies are anticipated to be effective for overall sales growth.

The company uses a set of strategies in order to promote its products. In Everest Leathers we have used 4 P’s of marketing mix and is explained below-

• Product– The first of the four P’s in marketing mix is Product. Products that are sold in Everest Leathers are Leather Jacket, Luxury hand bags, shoes, belts, wallets and other accessories.
• Price– The second P’s in marketing mix is the price. Determination of price will impact profit margins, supply, demand and marketing strategy. Initially price set for the product is the standard price. We offer good quality product at all price ranges. We provide price modifications. For example: volume discounts, frequent buyers discount, promotional sales, etc.
• Place– The third P’s in marketing mix is the place. This is about putting the right product, at right place and at right time. The location that we have choose is Sydney CBD, as it is in a convenient location and it is highly likely that people would come and purchase our leather products. For online sales, our warehouse is not that far from CBD so we can deliver as fast as possible.
• Promotion– The fourth P’s in marketing mix is the promotion. This is all about promoting our finished products to the targeted customers. As Everest Leather is a newly set up business so advertisement is a very important process to let the consumers know about the products offered. The different modes of advertising our products are through- social media, online media like fashion websites, search engine marketing, and video marketing, sponsoring TV shows and advertising our products.

The Finance

Everest Leathers will be a private limited company registered in Australia. The company will be initially kick-off its operation with AUD $100,000, injected as equity capital by the founding members. The capital structure and shareholding pattern of the company will be as below:

Capital Structure

Capital Type	Amount	Percentage
Equity	100,000 AUD	100%
Debt	–	–
Total	100,000 AUD	100%

Table 6: Capital Structure of Business

Later, with the growth of the company, the company will consider whether to insert more equity capital or to request financial institution for line of credit.

Shareholding Pattern

Shareholder’s Name	Amount	Shareholding Percentage
Mr. Chiranjibi Gyawali	20,000 AUD	20%
Mr. Sudip Paudyal	20,000 AUD	20%
Mr. Niraj Gautam	20,000 AUD	20%
Ms. Shristi Sharma	20,000 AUD	20%
Ms. Jagdeep Kaur	20,000 AUD	20%
Total	100,000 AUD	100%

Table 7: Company’s Shareholding Pattern

Key Financial Objectives

The primary financial objective of the company is shareholders’ wealth maximization. Hence, instead of being guided only by profit margin, the company will focus on increasing sales gradually, keeping days stocks on hand to the reasonable low point, increasing net worth and earning brand reputation in the market. More specifically, the objectives can be presented as below:

• Increase sales by at least 20% each year and cross turnover of half a million within 5 years and a million within 8 years of operation.
• Keep day’s stock on hand period within 60 days which will enable the company to constantly purchase new inventory to fulfil the demand. It further helps in negotiating lower inventory price with supplier as well as lower holding cost.
• Do not exceed working capital cycle period more than 45 days so that there maintains an operating efficiency.
• Have net profit margin gradually increasing trend for first three years so that company can focus more on quality products, strong marketing activities and earn maximum volume of customer base in its initial years of operation.

The Start-up Cost

Everest Leather is an e-commerce retail business company so the major part of the capital will be used for working capital purpose. However, below projection has been made as the start-up cost:

Start-up Costs	Costs ($)
Registrations
Business name	$ 36.00
Licenses	$ 479.00
Raw materials and supplies	$12,470.00
Domain names	$ 430.00
Accountant fees	$ 200.00
Rental lease cost (Rent advance/deposit for 3 months)	$12,000.00
Electricity and appliances	$ 2,100.00
POS connection	$ 180.00
Internet connection	$ 70.00
Computer software	$ 540.00
Stock/Raw materials and manufacturing	$14,000.00
Business Insurance	$ 2,500.00
Stationery & office supplies	$ 200.00
Marketing cost on Facebook and YouTube ads.	$ 2,500.00
Plant & Equipment (Sewing Machines, Computers, pos and office equipment)	$ 8,600.00
Delivery vehicle	$ 8,000.00
Website and Mobile application	$ 9,000.00
Telecommunication	$ 640.00
Furniture & Fixtures	$ 5,608.00
Total Start-up Cost	$ 79,553.00

Table 8: Start-up cost of Business

Profit and loss statement for the first year

PROFIT & LOSS	July	August	September	October	November	December	January	February	March	April	May	June	First Year Total
Sales	$31,200	$42,650	$48,320	$50,320	$36,152	$21,360	$22,630	$28,560	$33,260	$56,320	$37,860	$44,413	$453,045
Less: cost of goods sold	$8,365	$12,456	$15,692	$24,569	$17,320	$6,329	$7,320	$9,658	$15,505	$25,632	$18,659	$24,565	$186,070
Retuned and Refund	$920	$840	$960	$1,245	$1,650	$335	$845	$360	$952	$1,136	$869	$1,088	$11,200
Gross profit/net sales	$21,915	$29,354	$31,668	$24,506	$17,182	$14,696	$14,465	$18,542	$16,803	$29,552	$18,332	$18,760	$255,775
Expenses
Shopping Delivery Cost	$520	$780	$860	$1,250	$650	$365	$569	$586	$893	$1,290	$1,186	$701	$9,650
Advertising & Promotion	$208	$209	$208	$209	$208	$209	$208	$209	$208	$209	$208	$207	$2,500
Depreciation and Amortization	$121	$121	$121	$121	$121	$121	$121	$121	$121	$121	$121	$121	$1,457
Insurance	$208	$208	$208	$208	$209	$209	$209	$208	$208	$209	$208	$208	$2,500
Maintenance	$96	$108	$160	$80	$256	$80	$25	$56	$120	$160	$25	$34	$1,200
Office Supplies	$805	$640	$956	$1,256	$450	$1,256	$860	$658	$789	$987	$356	$627	$9,640
Rent	$19,000	$5,000	$5,000	$5,000	$5,000	$5,000	$5,000	$5,000	$5,000	$5,000	$5,000	$5,000	$74,000
Salaries	$4,350	$4,350	$4,350	$4,350	$4,350	$4,350	$4,350	$4,350	$4,350	$4,350	$4,350	$4,350	$52,200
Telecommunications	$70	$70	$70	$70	$70	$70	$70	$70	$70	$70	$70	$70	$840
Travel	$240	$250	$240	$230	$260	$360	$180	$240	$196	$240	$160	$264	$2,860
Utilities	$103	$103	$102	$103	$102	$103	$102	$103	$102	$103	$102	$106	$1,234
Total expenses	$25,721	$11,839	$12,275	$12,877	$11,676	$12,123	$11,694	$11,601	$12,057	$12,739	$11,786	$11,688	$158,081
Net Income Before Tax	-$3,806	$17,515	$19,393	$11,629	$5,506	$2,573	$2,771	$6,941	$4,746	$16,813	$6,546	$7,072	$97,694
Income Tax			7,327			7,327			7,327			7,327	29,308.2
Net Income	-$3,806	$17,515	$12,066	$11,629	$5,506	-$4,754	$2,771	$6,941	-$2,581	$16,813	$6,546	-$255	$68,386

Table 9: Profit and Loss Statement for first year (Monthly)

First Three Years Financials Projection Summary

A/C HEAD	Year 1 Projection	Year 2 Projection	Year 3 Projection
Sales	$453,045	$553,896	$732,514
Increase in sales		22.26%	32.85%
Cost of Goods Sold	$186,070	$231,012.0	$276,352.0
Gross Profit	$255,775	$322,884	$441,147
Net Profit After Tax	$97,694	$124,802.7	$207,430.5
Net Working Capital	$20,187	$49,425	$129,255
Current Ratio	3.32	3.18	4.28
Quick Ratio	2.23	2.24	3.63
Days Stocks on hand (DSOH)	36.50	41.46	48.89
Days Debtors on hand (DDOH)	0.94	0.94	0.94
Days Creditors on hand (DCOH)	20.75	20.75	20.75
Net Working Capital Cycle Period	16.69	21.64	29.08
Interest coverage ratio	–	–	–
Return on Equity/Net Worth	15.89%	24.96%	41.48%
Gross Profit Margin	56.45%	58.29%	60.22%
Net Profit Margin	15.09%	22.53%	28.31%

Table 10: First Three Years Financials Projection Summary

Assumptions

• It has been assumed that on average 2000 units of jackets, 1600 units of wallets, purse and hand bags, 300 units of belts, 600 pairs of shoes result on average sales revenue of $453,045 for the first year of the operation.
• With customized articles offerings and intensive marketing plans, a growth rate has projected for second and third year of sales of 22.53% and 28.31% respectively.
• The cost of goods sold has been projected 41.07% of the revenue earned for all three years.
• With effective and efficient office management, it has been expected that administration expenses will gradually decrease in second and third year.
• Depreciation has been charged on diminishing balance at rate of 12% each year for all fixed assets.
• To keep the projection simple and understandable, it has been projected that company will pay all tax i.e. 30% on taxable amount by the end of each fiscal year.
• With controlling administrative expenses and decreasing depreciation amount each year, the net profit margin is expected to grow from 15.09% first year to 28.31% in third year.
• Due to the nature of trade Everest Leathers holds, i.e. payment before delivery, it is expected that the company will have bank balance at higher side all the time.
• Taking consideration of high liquidity, the company expects pay dividends to its shareholders from second year.

Breakeven Analysis

Break-even analysis is a technique widely used by production and finance accountants. It is based on categorizing production costs between those which are variable expenses which is expected for the first year as $253,280 and those that are fixed is expected as $129,695. As Everest Leather is expecting break-even point in sales estimated of $294,139.66.

Sales (A)	$453,045.00
Variable Expenses ($184,140+$69140) (B)	$253,280.00
Contribution (C=B-A)	$199,765.00
Contribution Margin % (D=C/A)	44.09%
Fixed Cost ($116,480+$13,215) (E)	$129,695.00
Break-even Point in Sales (F=E/D)	$294,139.66

Table 11: Break Even Analysis

From above calculation, it can be seemed that Everest Leathers will achieve break-even in sales figure of $294,139.66 which is projected to be achieved in around 12 months with average sales of $24,511.6 per month.

Conclusion

• Everest Leathers Leather is an e-commerce retail private limited company based in Sydney.
• Run by five shareholders with equity capital of AUD $100K.
• Offers leather products- Jackets, wallets, belts and shoes for men and women.
• Features- Customized products made of genuine leathers imported from Nepal and Bangladesh at low cost.
• Projects to have sales turnover of AUD $453,045 and net profit margin of 15.09% in first year of operation.

Projected Profit and Loss

The table below shows the profit and loss statement. The itemized costs for fixed technology, corporate and advertising are reflected in the sales and marketing row in the table:

• Fixed Technology Costs: Represents a percentage of revenues allocation for all fixed computer and Internet-related developments and charges.
• Fixed Corporate Costs: represent a percentage of revenues allocation for all fixed corporate cost associated with office related charges. Different costs are allocated for initial sales force hire, hiring and training expenses, and for the office setup and purchase/lease of necessary computer equipment and infrastructure.
• Advertising: Represents a percentage of revenues allocation for advertising in all media. Budget is allocated for the industrial marketing campaign. In the subsequent years, the much larger budgets include allocations for TV advertising.
• Sales & Marketing: Represents a cost allocation for marketing and promotional activities, including commissions paid on sales. Management allocated the budget for the initial sales and marketing related activities.
• Research and Development: Represents a percentage of revenues allocation for R&D activities. Leather quality and equipment and new technology for the refining of leather, the money will be allocated by the administration.
• General and Administrative: Represents a percentage of revenues allocation for expenses associated with running a corporation. In first year, $35000 is allocated for the office set-up and other general office expenses over the time.
• Depreciation: Represents depreciation on all capital investment. Everest Leather will use straight-line depreciation method for the shewing machines and other assets over the time period.

Table of Pro forma Profit and Loss table

Everest Leather is estimating the sales on first three years of $453,045 on the first year $553,896 on the second year and $732,514 on the third year of the business. We are expecting $255,775.00, $322,884.00 and $441,147.00 on the 1^st, 2^nd and 3^rd year respectively. Everest Leather is expecting Net Earnings of $79,455.3 for the first year, $124,802.7 for the 2^nd year and $207,430.5 for the third year of business.

As we are not considering taking the loan from bank for the additional capital for the business, we do not consider the interest expenses for the profit and loss table which is illustrated below.

The below table elaborate the expected profit and loss expenses of Everest Leather Pty. Ltd. for the first three year of business.

Performa Profit and Loss	Year 1	Year 2	Year3
Sales	453,045	553,896	732,514
Returns, Refunds, Discounts	(11,200.0)	(14300)	(15,015.0)
Total Net Revenue	441,845.0	553,896.0	717,499.0
Cost of Goods Sold	186,070.0	231,012.0	276,352.0
Gross Profit	255,775.0	322,884.0	441,147.0
Expenses
Shopping delivery cost	9,650.0	15,250.0	22,380.0
Advertising & Promotion	2500.6	3255.6	4250.7
Depreciation & Amortization	1,456.8	1,485.8	1,515.3
Insurance	2,500.0	2,500.0	2,800.0
Maintenance	1,200.0	1,200.0	1,200.0
Office Supplies	9,640.0	9,856.0	9,256.0
Rent	74,000.0	75,500.0	76,800.0
Salaries, Benefits & Wages	52,200.0	54,350.0	56,299.0
Telecommunication	840.0	840.0	840.0
Travel	2,860.0	3,450.0	4,820.0
Utilities	1,234.0	1,305.0	1,245.0
Total Expenses	158,081	150,742.4	155,036.0
Earnings Before Interest & Taxes	97,694	172,141.6	286,111.0
Interest Expense	0.0	0.0	0.0
Earnings Before Taxes	97,694	172,141.6	286,111.0
Income Taxes	29,308.2	47,338.9	78,680.5
Net Earnings	68,386.2	124,802.7	207,430.5

Table 12: Performa Profit and loss for first three years

Note: Everest Leathers will recruit two part time staff for the warehouse activities for the first year and estimated cost incurred will be AUD 52,200.

Projected Balance Sheet

The Balance Sheet shows solid growth in both sales and net worth.

Projected Balance Sheet	Year 1	Year 2	Year 3
Assets
Current assets:
Cash	79,455	124,802	207,430
Accounts Receivable	–	2,458	12,568
Prepaid expenses	12,470	16,323	13,650
Inventory	26,670	36,289	25,630
Total current assets	118,595	179,872	259,278
Property & Equipment	37,255	46,354	56,378
Total Assets	155,850	226,226	315,656
Liabilities
Current liabilities:
Accounts Payable	13,300	25,378	27,356
Accrued expenses	22,363	31,236	33,256
Total current liabilities	35,663	56,614	60,612
Long-term debt	–	–	–
Total Liabilities	35,663	56,614	60,612
Shareholder’s Equity
Equity Capital	100,000	100,000	100,000
Retained Earnings		20,187	25,789
Shareholder’s Equity	100,000	120,187	125,789
Total Liabilities & Shareholder’s Equity	135,663	176,801	186,401
Net working capital	20,187.00	49,425.00	129,255.00

Table 13: Projected Balance Sheet for three years

As a part of financial plan, this Balance Sheet includes the expected total liabilities and total assets for the first year of business in the Sydney. Everest Leathers is expecting the total assets of $155,850 for the first year, $226,226 for the second year and $315,656 for the third year as well company is expecting the total liabilities and shareholders’ equity of $135,663 for the first year, $176,801 for the second year and $186,401 for the third year of the business. Company is expecting the net working capital of $20,187.00 for the first year, $49,425.00 for the second year and $129,255.00 for the third year.

Business Ratios

The following table presents important business ratios for the business services industry.

Item	Year 1	Year 2	Year 3
Sales Growth	0.00%	22.26%	32.85%
Percent of Total Assets
Accounts Receivable	0.00%	1.1%	3.98%
Other Current Assets	76.09%	78.40%	78.16%
Total Current Assets	76.09%	79.51%	82.14%
Long-term Assets	23.90%	20.49%	17.86%
TOTAL ASSETS	100.00%	100.00%	100.00%
Current Liabilities	22.88%	25.02%	19.20%
Long-term Liabilities	0.00%	0.00%	0.00%
Total Liabilities	87.05%	78.15%	59.05%
NET WORTH	12.95%	21.85%	40.95%
Main Ratios:
Current ratio	3.32	3.18	4.28
Quick ratio	2.23	2.24	3.63
Net Profit Margin	17.53%	22.16%	28.31%
Return on Equity	15.89%	24.96%	41.48%
Accounts Receivable Turnover	0.00	450.68	97.74
Accounts Payable Turnover	9.57	12.17	12.17
Net Working Capital	12.95	21.84	40.94

Table 14: Business Ratios

Formulas

1. The Accounting Equation

Equation: (Assets = Liability + Owner’s Equity)

What It Means:

Assets are all of the things your company owns, including property, cash, inventory and equipment that will provide you with a future benefit.

Liabilities are obligations that you must pay, including things like lease payments, merchant account fees and debt service.

Owner’s Equity is the portion of the company that actually belongs to the owner.

2. Net Income

Equation: (Revenues – Expenses = Net Income)

What It Means:

Revenues are the sales or other positive cash inflow that comes into your company.

Expenses are the costs that are associated with making sales.

By subtracting your revenue from your expenses, you can calculate your net income. This is how much you’re earning, and the goal is for this to become positive (and as high as possible).

3. Break-Even Point

Equation: (Break-Even Volume = Fixed Costs / Sales Price – Variable Cost per Unit)

What It Means:

Fixed Costs are recurring, predictable costs that you must pay in order to conduct business. These costs include insurance premiums, rent, employee salaries, etc.

Sales Price is the retail price you sell your products or services for.

Variable Cost per unit is the amount it costs you to make your product.

This tells you how much of your product you need to sell in order to cover your costs and start making money.

4. Cash Ratio

Equation: (Cash Ratio = Cash / Current Liabilities)

What It Means:

Cash is simply the amount of cash you have at your disposal. This can include actual cash and cash equivalents (i.e. highly liquid investment securities).

Current Liabilities are the current debts the business has incurred.

This gives you an idea of how much cash you currently have on hand. The higher the number, the healthier your company.

5. Profit Margin

Equation: (Profit Margin = Net Income / Sales)

What It Means:

Net Income is the total amount of money your business has made after expenses have been removed.

Sales are the total amount of sales you’ve generated.

This shows how much you’re making per sale. If it’s too low, it may reflect that your costs are too high, or that your business is not very healthy.

6. Debt-to-Equity Ratio

Equation: (Debt-to-Equity Ratio = Total Liabilities / Total Equity)

What It Means:

Total Liabilities include all of the costs you must pay to outside parties, such as loan or interest payments.

Total Equity is how much of the company actually belongs to the owner or other employees.

This ratio shows how much of your company’s financing comes from external sources. A high number might make it more difficult to get more financing or investors.

7. Cost of Goods Sold

Equation: (Cost of Goods Sold = Cost of Materials/Inventory – Cost of Outputs)

What It Means:

Cost of Materials/Inventory is the amount of money your company has to spend to secure the necessary products or materials to manufacture your product.

Cost of Outputs is the total cost of the goods sold.

This tells you if the costs you’re paying to make your product are in line with the revenue you earn when you sell it.

Even if you’re not planning to manage your own accounting, you should have a good grasp of these fundamental accounting formulas. The more knowledge you have regarding your finances, the better you can manage your business.

8. Current Ratio

Equation: Current Assets/Current Liabilities.

The purpose of this ratio is to measure if your company can currently pay off short-term debts by liquidating your assets.

9. Quick Ratio

Equation: Quick Assets/Current Liabilities.

This ratio is similar to the current ratio, except that to measure “quick” assets, you only consider your accounts receivable plus cash plus marketable securities.

10. Net Working Capital Ratio

Equation: (Current Assets – Current Liabilities)/Total Assets.

By calculating the net working capital ratio, you’re calculating the liquidity of your assets. An increasing net working capital ratio indicates that your business is investing more in liquid assets than fixed assets.

11. Cash Ratio

Equation: Cash/Current Liabilities.

This ratio tells you how capable your business is of covering your debts using only cash. No other assets are considered in this ratio.

References

Kenton, W. 2018. Markets & Economy. [Online]. [12 March 2019]. Available from: https://www.investopedia.com/terms/m/market-research.asp

Anthony, M. 2017. Market Segmentation, Targeting and Positioning. [Online]. [13 March 2019]. Available from: https://link.springer.com/chapter/10.1007/978-3-319-49849-2_4

Dye, C. 2018. Main Activities of Target Market. [Online]. [13 March 2019]. Available from: https://yourbusiness.azcentral.com/3-main-activities-target-marketing-12505.html

Pestle analysis. 2015. Environmental analysis. [Online]. [13 March 2019]. Available from: https://pestleanalysis.com/what-is-environmental-analysis

Porter, M. 1979. How Competitive Forces Shape Strategy. [Online]. [13 March 2019]. Available from: https://www.mindtools.com/pages/article/newTMC_08.htm

Québec. 2009. Understand your Competitors. [Online]. [13 March 2019]. Available from: http://www.infoentrepreneurs.org/en/guides/understand-your-competitors

Bovée, C.L. 1992. Contemporary Advertising. William F. Arens.

Annexures

Figure 3: Business Canvas Model

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