Pre-Feasibility Study

MONTESSORI SCHOOL

Small and Medium Enterprises Development Authority

Government of Pakistan
www.smeda.org.pk

HEAD OFFICE 6th Floor LDA Plaza, Egerton Road, Lahore. Tel: (92 042) 111-111-456 Fax: (92 042) 6304926-7 helpdesk@smeda.org.pk
REGIONAL OFFICE PUNJAB REGIONAL OFFICE SINDH 5TH Floor, Bahria Complex II, M.T. Khan Road, Karachi. Tel: (021) 111-111-456 Fax: (021) 5610572 helpdesk-khi@smeda.org.pk REGIONAL OFFICE NWFP Ground Floor State Life Building The Mall, Peshawar. Tel: (091) 9213046-47 Fax: (091) 286908 helpdesk-pew@smeda.org.pk REGIONAL OFFICE BALOCHISTAN Bungalow No. 15-A Chaman Housing Scheme Airport Road, Quetta. Tel: (081) 831623, 831702 Fax: (081) 831922 helpdesk-qta@smeda.org.pk

8th Floor LDA Plaza, Egerton Road, Lahore. Tel: (042) 111-111-456 Fax: (042) 6304926-7 helpdesk.punjab@smeda.org.pk

June, 2010

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DISCLAIMER
The purpose and scope of this information memorandum is to introduce the subject matter and provide a general idea and information on the said area. All the material included in this document is based on data/information gathered from various sources and is based on certain assumptions. Although, due care and diligence has been taken to compile this document, the contained information may vary due to any change in any of the concerned factors, and the actual results may differ substantially from the presented information. SMEDA does not assume any liability for any financial or other loss resulting from this memorandum in consequence of undertaking this activity. Therefore, the content of this memorandum should not be relied upon for making any decision, investment or otherwise. The prospective user of this memorandum is encouraged to carry out his/her own due diligence and gather any information he/she considers necessary for making an informed decision.

The content of the information memorandum does not bind SMEDA in any legal or other form.

DOCUMENT CONTROL
Document No. Revision Prepared by Issue Date Revision Date Issued by PREF-66 3 SMEDA-Punjab August, 2003 June, 2010 Library Officer

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1 2 3 4

EXECUTIVE SUMMARY INTRODUCTION TO SMEDA PURPOSE OF THE DOCUMENT PROJECT PROFILE 4.1 4.2 4.3 4.4 4.5 PROJECT BRIEF OPPORTUNITY RATIONALE PROJECT COST VIABLE SIZE PROPOSED CAPACITY

4 5 5 5 5 6 6 6 6 7 8 8 9 9 9 10 10 10 11 11 12 13 13 14 14 14 15 15 16 17 18 19 21 22 24 24 24 24 25

CURRENT INDUSTRY STRUCTURE 5.1 5.2 PRE SCHOOL/DAYCARE NURSERY/KINDERGARTEN/MONTESSORI

MARKET ANALYSIS 6.1 6.2 6.3 THE HIGH INCOME GROUP THE MIDDLE INCOME GROUP THE LOW INCOME GROUP

7 8 9

KEY SUCCESS FACTORS REGULATIONS HUMAN RESOURCE REQUIREMENT 9.1 KEY PERSONNEL

10 11

EQUIPMENT REQUIREMENT LAND & BUILDING 11.1 11.2 11.3 11.4 AREA REQUIREMENTS RECOMMENDED MODE FOR ACQUIRING LAND BUILDING RENT SUITABLE LOCATION

12

FINANCIAL ANALYSIS 12.1 12.2 12.3 12.4 12.5 12.6 PROJECT ECONOMICS PROJECTED INCOME STATEMENT PROJECTED BALANCE SHEET PROJECTED CASH FLOW STATEMENT FEE INCOME SALARIES EXPENSE

13 14

KEY ASSUMPTIONS ANNEXURE 14.1 14.2 14.3 14.4 SCHOOL FURNITURE SUPPLIERS AND MARKETS IT EQUIPMENT MARKETS ELECTRICAL EQUIPMENT AND APPLIANCES SUPPLIERS AND MARKETS EDUCATIONAL EXPERTS/CONSULTANTS

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EXECUTIVE SUMMARY

This project involves establishing a Montessori school in big cities of Punjab, starting classes from Play-group to Class II. The target market of this school is children, 3 7 years of age, belonging to the middle income group. The school will provide quality education starting at the Elementary level charging an affordable fee. The school will practice advanced educational procedures teaching an extensive curriculum and using modern teaching methodology in sync with international standards. Qualified and experienced faculty will be hired. The school will have sophisticated infrastructural facilities, spacious classrooms, and wide-ranging learning material from books to toys for a good educational experience. Schools with high reputation have a stringent admission selection process, for which Montessori schools provide the necessary training. This has given rise to high demand for Montessori school systems that can prepare children for admission to reputable Primary schools. With the growing population and a limited number of schools, establishment of elementary schools has become a requirement for necessary educational training starting at an early age. The total project cost for setting up this school is estimated at Rs. 4.533 million out of which the Capital Cost is estimated at Rs. 2.533 million. The project is financed through 50% debt and 50% equity. The project NPV is around Rs. 10.647 million, with an IRR of 63% and payback period of 2.50 years. The legal business status of this project is proposed as Sole Proprietorship. The overall proposed capacity of the school is 300 students. Each class level from Playgroup Class II has two to three sections. The maximum number of enrollments per class is limited to 20 students from Playgroup till KG II and 30 students for class I and II. The proposed building will be acquired on rent, covering an aprox. area of 2.5-Kanals to accommodate the proposed student strength.

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INTRODUCTION TO SMEDA

The Small and Medium Enterprise Development Authority (SMEDA) was established with the objective to provide fresh impetus to the economy through the launch of an aggressive SME support program. Since its inception in October 1998, SMEDA adopted a sectoral SME development approach where key sectors were selected on the criterion of SME presence. In depth research was conducted and comprehensive development plans were formulated after identification of impediments and retardants. The all-encompassing sectoral development strategy involved overhauling of the regulatory environment by taking into consideration other important aspects including finance, marketing, technology and human resource development. SMEDA has so far successfully formulated strategies for key sectors including, Fruits & Vegetables, Marble & Granite, Gems & Jewelry, Marine Fisheries, Leather & Footwear, Textiles, Surgical Instruments, Transport and Dairy. Whereas the task of SME development at a broader scale still requires more coverage and enhanced reach in terms of SMEDAs areas of operation. Along with the sectoral focus a broad spectrum of Business Development Services is also being offered to the SMEs by SMEDA. These services include identification of viable business opportunities for potential SME investors. In order to facilitate these investors, SMEDA provides Help Desk Services as well as development of project specific documents. These documents consist of information required to make well researched investment decisions. Pre-feasibility Studies and Business Plan Development are some of the services provided to enhance the capacity of individual SMEs to capitalize on viable business opportunities.

PURPOSE OF THE DOCUMENT

Pre-feasibility studies are developed primarily to facilitate potential entrepreneurs in project identification for investment. Pre-feasibility Studies may form the basis on which an important investment decision maybe made. The document covers various aspects of the business venture from project concept development to, financing and business management.

PROJECT PROFILE

The project is about starting a Montessori School (Elementary level education) for children. The proposed plan is to start classes from Playgroup to Class II. 4.1 Project Brief

The study provides information regarding investment opportunity for setting up a Montessori school in any big city of Pakistan i.e. Lahore, Islamabad, Multan, Faisalabad, Peshawar, Quetta or Karachi. However, the project may also be started in smaller cities, after careful market research. It is also recommended that the Montessori school should be located in an easily approachable location in line with the selected target market.

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4.2

Opportunity Rationale

Montessori school education is the first formal learning stage for a child. A child learns to recognize different alphabets, words, sounds and characteristics. It teaches children to behave in groups, helping them learn socialization at an early stage. The fast paced life of the metropolitan cities is significantly influencing the life style of its inhabitants. Economic pressures are compelling both parents to work towards achieving and sustaining quality life standards. This has further added to complexity and competition of a Metropolitan city. As a result of these social changes, the trend of sending children to Daycare Centers or to Montessori schools at a much earlier age is gaining rapid grounds. This has further added to complication and competition of a metropolitan city resulting in high demand for Montessori schools in the metropolitan cities. The growing population has exhausted the limited capacity of the existing private as well as public primary school systems. The growing population has put tremendous pressure on the existing public sector education infrastructure in the country. Private sector with its investment capacity to provide well equipped and well staffed school system is therefore, well positioned to exploit this opportunity for establishing viable school systems in the country. 4.3 Project Cost

Total project cost for setting up a Montessori School is estimated at Rs. 4.533 million. The financial structure for the proposed pre-feasibility is assumed to consist of 50% debt and 50% equity. However this composition of debt and equity can be changed as per the requirement of the investor. 4.4 Viable size

The minimum viable size for this particular school is around 300 students. 4.5 Proposed Capacity

It is proposed that students be admitted for Playgroup to Class II. There are 13 proposed classrooms for the school having a total capacity of 300 students. However, this capacity may not be achieved in the initial years of operations. The year wise capacity utilization details are mentioned in the table below: Table 4-1: Year Wise Number of Students (Maximum Utilization) Class Students Per Year Year 1 Year 2 Year 3 Year 4 Play Group 60 60 60 60 KG-I 30 60 60 60 KG-II 30 60 60 60 Class I 15 45 60 60 Class II 15 31 60 60 Total 150 256 300 300
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Year 5 60 60 60 60 60 300

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CURRENT INDUSTRY STRUCTURE

In Pakistan, education remains inequitably distributed among various income groups and regions. Literacy and participation rates are below those in other South Asian countries with similar level of economic development. Due to financial constraints and requirement of managerial capacity, education targets have remained unaccomplished. Programs approved by the Government were not completed because of inadequate resource allocation. The slow implementation of programs/projects undermined the efficiency of the system at all levels, significantly in terms of qualitative improvement. Education is the key to change and progress and the Government of Pakistan has adopted this sector as one of the pillars for poverty reduction and benefit of masses. The Government is committed to provide best educational facilities to its people within the minimum possible time, by introducing its incentive for private investment and the concept of Public-Private partnership as described earlier in the report. The Education system of Pakistan is divided into the following tiers: Table 5-1: Education System in Pakistan1 Level Elementary (Montessori) Primary Middle Secondary Higher Secondary B.A (Graduate Degree) M.A (Post-graduate Degree) M. Phil/ Ph.D. Classes Playgroup, Kindergarten I-V VI-VIII IX-X XI-XII Admission Age (Year) 3-5 5 10 13 16 Duration 2 Years 5 Years 3 Years 2 Years 2 Years 2 Years 2 Years 3 Years

According to Pakistan Social and Living Measurement (PSLM) Survey, the over all literacy rate, in 2007-08 was 56% compared to 55% in 2006-07. Literacy remains higher in urban areas (71%) than in rural areas (49%) and more in men (69%) compared to women (44%).2 Comparatively high incidence of illiteracy among female may be due to pervasive gender inequality and limited access to the available educational facilities. A comparative picture of literacy rates of both sexes by province and rural/urban division is given in table below: Table 5-2 Literacy Rates in Percentage3 2006-07 Total 55 Male 67 Female 42 2007-08 Total 56 Male 69 Female 44

Province/Area Pakistan
1

Source: Educational Guide of Pakistan (2008-09) www.pef.com.pk 2 Economic Survey of Pakistan 2008-09 (www.finance.gov.pk) 3 Economic Survey of Pakistan 2008-09 (www.finance.gov.pk) PREF-66/Rev 3/June, 2010

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RURAL URBAN Balochistan Rural Urban NWFP Rural Urban Punjab Rural Urban Sindh Rural Urban

48 73 42 33 60 47 47 64 58 53 75 55 37 74

63 80 58 49 75 67 68 78 67 66 81 67 54 81

32 66 22 13 41 28 26 49 48 40 69 42 17 65

49 71 46 34 60 49 48 65 59 55 74 56 41 74

65 81 66 51 78 68 68 80 70 68 80 69 59 82

36 65 23 15 39 33 30 52 48 44 69 42 22 66

The Montessori education in the country is yet at an early stage to absorb the growing demand. However, few school systems have steadily established themselves at least in bigger cities of the country. Some prominent names in Montessori education in Lahore include, The Lahore Pre-School, Kids Campus, Scarsdale, Lahore Grammar School, Lahore Alma and the Lahore Kindergarten within the Lahore city. Karachi is the largest city with well-established private sector education systems. Major Montessori schools in Karachi include Montessori World, Radiant Montessori, PAF Montessori, Head Start and CAS (Center for Advanced Studies). At present, most of the elementary school systems in the country fall in one of the following two categories. 5.1 Pre-School/Daycare Nursery/Kindergarten/Montessori/Test Preparation Centers Pre School/Daycare

The Pre-school/ Daycare Centers admit children ranging from 3 months to 3 years of age. However, on an average a child of two and a half years of age is normally admitted to a Pre-School. At Daycare Centers, children are normally engaged in playful activities with no formal training imparted. Pre-school training includes recognition of numbers and alphabets, introduction to basic shapes, body parts, poems and basic religious knowledge. 5.2 Nursery/Kindergarten/Montessori

This tier of education system is the first stage of formal learning process for a child. Normally a child of three years of age is admitted to this system of education. Different teaching methods and course work is applied at this level of education. Most school systems adopt their own teaching methodology. At this level of school education, it is the

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teachers and the school environment that is more important for the pupils than the course work itself. The schools prepare their students to socialize with other children in the same age bracket and familiarize them for a more formal primary level education. In addition, a vast majority of the schools in this tier also adopt their course curriculum to prepare the children for admission in primary level schools, where admission is highly competitive.

MARKET ANALYSIS
Based on the household income, the target market will be middle income group. Based on the target markets preference, the school will provide quality education at an affordable fee.

There are two broad market-positioning options available to a Montessori School System.

Irrespective of the education services, income based target market will play a crucial role in the overall positioning of the school. Any entrepreneur planning to open up a Montessori school should first decide upon the objective of the venture. Various options available in this regard may include: To plan a Montessori school with emphasis on Daycare services. To establish a school as a Preparatory School for other reputed Primary Level Schools. To establish a Montessori School with incremental expansion of services into primary and high school level.

Based on income level, the school can position itself for any of the following three broad income groups; 6.1 The High Income Group

The upper income group segment is quality and reputation conscious. Most parents of the children enrolled in these schools belong to the different section of the society i.e. selfemployed businessmen, high paid government or private sector executives. Existing schools in the category charge a fee ranging from Rs. 5,000-10,000 per month. These schools are characterized by large custom built campuses, swimming pools, indoor as well as outdoor physical activities areas, and furnished spacious classrooms with heaters and air conditioners. These schools offer well designed modern course work, and employ highly trained Montessori teachers. 6.2 The Middle Income Group

Schools in this category normally charge a fee ranging from Rs. 1,500-5,000 per month. These schools cater to children of well-educated and professionally employed parents. The important characteristics of these schools include well located school buildings that may be custom built or rented premises, modern course work adopted by other modern school systems, and comfortable class rooms with some provisions for playing area.

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6.3

The Low Income Group

The concept of Montessori education is not very old in this income bracket; however an increasing number of parents in this category have also now started sending their children to these schools. One of the major reasons is that most of the private schools at primary level now do not accept students directly in Class 1. This category of schools charges a monthly fee up to Rs. 1,500. These schools have small buildings with little or no provisions for physical activities.

KEY SUCCESS FACTORS

At a Montessori school level, teachers/attendants play a critical role in the success of learning process. Therefore, it is suggested that staff employed by the school should be highly educated and properly trained for Montessori education. Before starting education services, it is recommended that teacher training program should be imparted. In addition to the quality of teachers employed, the teacher student ratio should be kept at a well-researched optimum level. The education curriculum should be well researched and comprehensive. In addition to paper course work, it is suggested that visual and other teaching tools should also be optimally used. Parents are conscious about the well being and safety of their children at schools, therefore, it is suggested that the school environment ensures security and should be free from any apparent hazards. The school should preferably not be located in a highly populated location or at a location with high traffic hazards. The area of the classrooms should be in line with the number of students in each classroom. Moreover, the classrooms should either be air-conditioned or at least well ventilated. Classrooms should also be well equipped with teaching as well as extra curricular activity aids. Adequate provisions for physical, either indoor or outdoor or both facilities should be made available. Continuous teacher parent interaction should also be a regular feature of the school education system.

REGULATIONS

Formal registration is required for the setup of new Montessori and elementary schools with the Executive District Officer (EDO) Education. The application is to be submitted on a prescribed form which can be obtained from the department along with Rs.5,000 registration fee and Rs. 500 annual subscription. Domestic rates apply on the utility bills if an institution is registered with the department.

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HUMAN RESOURCE REQUIREMENT

Salary/month Annual Salary (Rs.) (Rs.) 20,000 240,000 12,000 144,000 10,000 120,000 12,000 144,000 10,000 720,000 10,000 360,000 10,000 240,000 10,000 120,000 10,000 120,000 12,000 144,000 12,000 144,000 10,000 600,000 8,000 192,000 7,000 84,000 7,000 168,000 3,540,000

Table 9-1: Human Resource required for the first year Position Principal Teacher coordinator Activity Teacher cum Librarian Computer Teacher Teacher Play Group Teacher KG-I Teacher KG-II Class I Class II Games teacher Accountant Student Attendant Guard Peon / Helper Cleaner TOTAL 9.1 Key Personnel Number 1 1 1 1 6 3 2 1 1 1 1 5 2 1 2 29

i. Principal The principal should be responsible for coordinating all the activities of the school including the hiring of teachers, developing liaison with the parents, maintaining and developing the brand name of the school for appropriate positioning, course design, admission tests and extra curricular activities. ii. Teachers coordinator An experienced and trained Montessori school teacher is recommended for this post The Coordinator would be assisting the principal in all school matters. He/she will be responsible for teachers attendance, their performance and evaluation. He/she has to collaborate with students, parents, staff and volunteers to ensure that group activities run effectively. Supervise and monitor the tutoring of students. Coordinate any special projects to increase coaching awareness among teachers including arranging guest speakers, visits and workshops. iii. Accountant The accountant will be responsible for book keeping and maintaining accounts, salaries, and other administrative expenditures. iv. Teachers Experienced teachers or fresh graduates with a natural aptitude for teaching should be employed. A balanced mix of experienced and fresh teachers is recommended for efficient running of the school. Each teacher shall be given a class and held responsible

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for proper training, imparting knowledge, arranging co-curricular activities for the children and their performances in the examinations. v. Student Attendants The students in the elementary institutes are very young and may also need attendants or baby-sitters. One attendant will be require for every two classes. Librarian / Activity Teacher One person is recommended for running the library and for activity room. vi. Computer Teacher The person should be responsible for the introduction of information technology to the young students and for proper arrangement of students games and basic computer learning.

10 EQUIPMENT REQUIREMENT
The details of the different equipment required for the project is given in the following tables: Table 10-1: Office Equipment Details Equipment Computers Printer (Laser) UPS Air condition (1.5 tons) Fax Machine Telephone Sets Total Equipment Table 10-2 Other Equipment Detail Description See Saw 4 Feet Slide 6 Feet Slide 8 Feet Slide Monkey Bars 6x6 White Boards Soft Boards Computer UPS Water cooler Microwave Oven Refrigerator
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Quantity 3 1 3 4 1 4 16

Cost per Unit (Rs.) 25,000 10,000 7,500 40,000 12,000 1,000

Total Cost (Rs.) 75,000 10,000 22,500 160,000 12,000 4,000 283,500

Quantity 2 1 1 1 1 15 2 15 15 2 1 1 12

Cost per Unit (Rs) 10,000 12,000 15,000 18,000 10,000 2,200 1,800 25000 7,500 15,000 7,500 22,000

Total Cost (Rs) 20,000 12,000 15,000 18,000 10,000 33,000 3,600 375,000 112,500 30,000 7,500 22,000

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Generator (5KV) Merry-go-Round Inflatable Pool Computer Server Printer for Lab Total Table 10-3: Furniture & Fixtures Detail Furniture & Fixtures Round tables for Play group Chairs for Play group Teacher chairs for Play group Round Tables for KG-I Chairs for KG-I Teacher chairs for KG-I Round Table for KG-II Chairs for KG-II Teachers Chair for KG -II Teacher Table & Chair for class-I Student table & Chair for Class- I Teacher Table & Chair for class -II Student Table & Chair for Class -II Cupboards & Book shelves Children Books /toys/Entertainment equipment Computer Chairs Computer Tables Carpet ( sq. ft) Principal and admin staff Total Furniture & Fixture Cost

1 1 2 1 1 63

65,000 12,000 2,000 50,000 10,000

65,000 12,000 4,000 50,000 10,000 799,600

Quantity 8 60 6 8 60 6 8 60 4 3 60 3 60 8

Cost per Unit(Rs) 3,000 1,000 1,500 3,000 1,000 1,500 3,000 1,000 1,500 4,000 2,000 4,000 2,000 5,000

Total Cost(Rs) 24,000 60,000 9,000 24,000 60,000 9,000 24,000 60,000 6,000 12,000 120,000 12,000 120,000 40,000 150,000 45,000 37,500 200,950 100,000 1,113,450

30 15 4,019 1

1,500 2,500 50 100,000

11 LAND & BUILDING

11.1 Area Requirements For three hundred (300) students, 2.5 kanals of land comprising double story building would be sufficient. A purpose built building may also be purchased. The covered area should have 13 classrooms, one common room for teachers, one room for principal, one for teacher coordinator and one room for the administration staff. Appropriate numbers of washrooms are suggested for teachers, principal, children and administration staff. A big hall should be allocated with proper divisions for library/ entertainment room, and
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computer section. An adequate area should be allocated for the playground. The playground should have seesaws, slides, monkey bars and other playing equipment and tools. Table 111-1 Covered Area Requirements Space Requirements Class Rooms Teachers Staff Room Library/Entertainment Room Admin Rooms Computer Class Washrooms & Kitchen Grounds Total Covered Area Requirement 11.2 Recommended Mode for Acquiring Land It is recommended that the proposed project should be established in a rented building to reduce initial infrastructure cost. In case a purpose built building is purchased, infrastructure cost will increase. 11.3 Building Rent Monthly rent for the proposed 2.5 Kanal building is estimated at Rs. 200,000. 11.4 Suitable Location The suitable location will depend upon the target market. All major cities in the country are best suited for starting a Montessori school. However, with the increasing population pressure and increasing concentration of well reputed Montessori schools in metropolitan cities, peripheral and smaller cities also present a very lucrative business opportunity for opening up a well planned Montessori school. Other than Lahore, Karachi & Islamabad, cities like Sargodha, Multan, Faisalabad, Sheikhupura, Rahimyar Khan, Gujranwala, Sialkot, Gujrat, Hyderabad and Abbotabad are some of the cities in this category. Moreover, the presence of large middle class families in major cantonment cities of the country is another opportunity to be tapped. Required Area (Sq. ft) 6,000 144 500 575 400 270 6,961 14,850

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12 FINANCIAL ANALYSIS
12.1 Project Economics Table 122-1 Project Cost/Capital Requirements Fixed Capital Requirement Machinery & Equipment Office Equipment Office Furniture & Fixture Pre-Operating Cost Registration Cost Total Fixed Capital Cost Working Capital Upfront Building Rental Rent Security (Refundable) Cash Total Working Capital Total Investment in the Project (Rs.) Table 12-2 Description Equity Debt Table 12-3 Project Returns Equity 10,755,793 97% 1.93 Project 10,647,971 63% 2.50 Financing Plan 50% 50% Total Amount Rs. 2,266,525 2,266,525 Total Cost Rs. 799,600 283,500 1,113,450 329,000 7,500 2,533,050 1,200,000 600,000 200,000 2,000,000 4,533,050

Net Present Value Internal Rate of Return Payback Period (Years)

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12.2 Projected Income Statement

Projected Income Statement

Year 1 Revenue Admission Fee Tuition Fee Sub Total COST OF GOOD SOLD Faculty Staff Salary Total Gross Profit GENERAL ADMINISTRATION & SELLING EXPENSE Administration Staff Salary Building Rent Electricity Expense Water Expense Gas Expense Communication Expense (Telephone,fax, internet etc.) Office Expenses (Stationary, entertainment etc.) Students' Teaching Aid Entertaimnet and Events Expense Professional Fee (Legal, Audits, etc.) Depreciation expense Amortization of pre-operating costs Plantation & Decoration Medical & First Aid Amortization of legal, licensing, and training costs Promotional Expense (Marketing Exp) Repair & Maintenance Cost Miscellaneous Expenses Total Operating Expenses Operating Income Earning Before Interest & Taxes Interest expense on long term debt Earning Before Taxes Taxes Net Profit After Taxes 1,050,000 6,120,000 7,170,000 2,352,000 2,352,000 4,818,000 1,188,000 2,400,000 514,670 45,000 10,500 118,800 118,800 107,550 71,700 24,000 334,190 65,800 12,000 12,000 1,500 143,400 43,931 36,000 5,247,841 (429,841) (429,841) (429,841) (429,841) Year 2 1,220,100 11,932,800 13,152,900 3,484,800 3,484,800 9,668,100 1,306,800 2,640,000 566,137 79,200 11550 130,680 130,680 197,294 131,529 26,400 176,900 65,800 13,200 13,200 1,500 157,740 48,324 39,600 5,736,533 3,931,567 3,931,567 624,046 3,307,521 826,880 2,480,641 Year 3 802,620 15,681,600 16,484,220 3,978,480 3,978,480 12,505,740 1,437,480 2,904,000 622,751 87,120 12705 143,748 143,748 247,263 164,842 29,040 176,900 65,800 14,520 14,520 1,500 173,514 53,157 43,560 6,336,167 6,169,573 6,169,573 219,353 5,950,220 1,487,555 4,462,665 Year 4 486,203 17,249,760 17,735,963 4,376,328 4,376,328 13,359,635 1,581,228 3,194,400 685,026 95,832 13975.5 158,123 158,123 266,039 177,360 31,944 176,900 65,800 15,972 15,972 1,500 190,865 58,472 47,916 6,935,447 6,424,187 6,424,187 143,199 6,280,988 1,570,247 4,710,741

SMEDA Pak Rupees Year 5 510,513 18,974,736 19,485,249 4,813,961 4,813,961 14,671,288 1,739,351 3,513,840 753,529 105,415 15373.05 173,935 173,935 292,279 194,852 35,138 176,900 65,800 17,569 17,569 1,500 209,952 64,319 52,708 7,603,964 7,067,324 7,067,324 53,926 7,013,397 1,753,349 5,260,048

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12.3 Projected Balance Sheet

Projected Balance Sheet

Const. Year CURRENT ASSETS Cash in Bank Accounts Receivable Rent Security(Refundable) Pre-paid Building Rent Total Current Asset FIXED ASSETS Machinery & Equipment Office Equipment Furniture & Fixtures Total Fixed Assets INTANGIBLE ASSETS Pre-Operational Costs Training & Legal Cost Total Intangible Assets TOTAL ASSETS CURRENT LIABILITIES Accounts Payable Students Security Payable Total Current Liabilities OTHER LIABILITIES Long Term Debt Total Long Term Liabilities SHAREHOLDER'S EQUITY Paid-up Capital Retained Earnings Total Equity TOTAL CAPITAL & LIABILITIES 200,000 600,000 405,014 1,205,014 799,600 283,500 1,113,450 2,196,550 329,000 7,500 336,500 3,738,064 2,266,525 2,266,525 2,266,525 2,266,525 4,533,050 Year 1 1,170,100 597,500 600,000 445,515 2,813,116 727,636 257,985 876,740 1,862,361 263,200 6,000 269,200 4,944,676 91,467 750,000 841,467 2,266,525 2,266,525 2,266,525 (429,841) 1,836,684 4,944,676 Year 2 3,412,094 1,096,075 600,000 490,067 5,598,235 655,672 232,470 797,319 1,685,461 197,400 4,500 201,900 7,485,596 135,520 1,465,000 1,600,520 1,567,751 1,567,751 2,266,525 2,050,800 4,317,325 7,485,596 Year 3 7,659,483 1,373,685 600,000 539,073 10,172,241 583,708 206,955 717,899 1,508,562 131,600 3,000 134,600 11,815,403 154,719 1,755,000 1,909,719 1,125,694 1,125,694 2,266,525 6,513,465 8,779,990 11,815,403 Year 4 11,848,466 1,477,997 600,000 592,981 14,519,443 511,744 181,440 638,478 1,331,662 65,800 1,500 67,300 15,918,405 170,191 1,650,000 1,820,191 607,483 607,483 2,266,525 11,224,206 13,490,731 15,918,405

SMEDA Pak Rupees Year 5 16,159,456 1,623,771 17,783,226 439,780 155,925 559,058 1,154,763 18,937,989 187,210 187,210 0 0 2,266,525 16,484,254 18,750,779 18,937,989

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12.4 Projected Cash flow Statement

Projected Cash Flows

Year-0 Operating activities Net profit Add: depreciation expense amortization of pre-operating costs amortization of training costs Accounts receivable Pre-paid building rent Rent Security (Refundable) Accounts payable Student Security(Refundable) Cash provided by operations Financing activities Long Term Debt Repayment Additions of New Long Term Debt Issuance of shares Cash provided by / (used for) financing activities Investing activities Capital expenditure Cash (used for) / provided by investing activities NET CASH (405,014) (600,000) (1,005,014) Year 1 (429,841) 334,190 65,800 1,500 (597,500) (40,501) 91,467 750,000 175,114 Year 2 2,480,641 176,900 65,800 1,500 (498,575) (44,552) 44,053 715,000 2,940,767 Year 3 4,462,665 176,900 65,800 1,500 (277,610) (49,007) 19,199 290,000 4,689,447 Year 4 4,710,741 176,900 65,800 1,500 (104,312) (53,907) 15,472 (105,000) 4,707,193

SMEDA Pak Rupees Year 5 5,260,048 176,900 65,800 1,500 (145,774) 592,981 600,000 17,019 (1,650,000) 4,918,473

` 2,266,525 2,266,525 4,533,050

(698,774) (698,774)

(442,057) (442,057)

(518,211) (518,211)

(607,483) (607,483)

(2,533,050) (2,533,050) 994,986

175,114

2,241,993

4,247,389

4,188,983

4,310,990

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12.5 Fee Income

Total Students Play Group KG 1 KG 2 Class 1 Class 2 Total Students Growth in Admission of Students Total Number of Students Enrolled Annual New Admissions Drop-Outs Pass-Outs Total Students Drop-Out/Pass-Out Proportion 40% 20% 20% 10% 10% 100% Year 1 60 30 30 15 15 150 150 150 150 Year 2 60 60 60 45 31 256 158 285 121 8 15 23 Year 3 60 60 60 60 60 300 166 405 75 15 31 46 Year 4 60 60 60 60 60 300 175 499 60 21 60 81 Year 5 60 60 60 60 60 300 184 598 60 25 60 85

New Addmissions Play Group KG 1 KG 2 Class 1 Class 2 Total New Admissions

Addmission Fee 7,000 7,000 7,000 7,000 7,000

Sections 3 3 3 2 2 13

Year 1 420,000 210,000 210,000 105,000 105,000 1,050,000

Year 2 441,000 220,500 220,500 220,500 117,600 1,220,100

Year 3 463,050 115,763 223,808 802,620

Year 4 486,203 486,203

Year 5 510,513 510,513

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Tuition Fee Play Group KG 1 KG 2 Class 1 Class 2 Total Yearly Tuition Revenue Total Revenue Admission Fee Yearly Tuition Revenue Total Revenue

Monthly Fee/Student 3,000 3,500 3,500 4,000 4,000

Year 1 2,160,000 1,260,000 1,260,000 720,000 720,000 6,120,000 Year 1 1,050,000 6,120,000 7,170,000

Year 2 2,376,000 2,772,000 2,772,000 2,376,000 1,636,800 11,932,800 Year 2 1,220,100 11,932,800 13,152,900

Year 3 2,613,600 3,049,200 3,049,200 3,484,800 3,484,800 15,681,600 Year 3 802,620 15,681,600 16,484,220

Year 4 2,874,960 3,354,120 3,354,120 3,833,280 3,833,280 17,249,760 Year 4 486,203 17,249,760 17,735,963

Year 5 3,162,456 3,689,532 3,689,532 4,216,608 4,216,608 18,974,736 Year 5 510,513 18,974,736 19,485,249

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12.6 Salaries Expense

Pre-Operating Expenses Year-2 Months To PreSalary Nos. Annual Rs Nos. Annual Rs Before Operating Rs/Month Operations Faculty Staff Principal Teacher Play Group Activity Teacher cum Librarian Computer Teacher Teacher KG-I Teacher KG-II Class I Class II Teacher coordinator Games teacher Total Faculty Staff Administrative Staff Accountant Student Attendant Guard Peon / Helper Cleaner Total Administrative Staff 1 6 1 1 3 2 1 1 1 1 18 1 5 2 1 2 11 20,000 10,000 10,000 12,000 10,000 10,000 10,000 10,000 12,000 12,000 240,000 720,000 120,000 144,000 360,000 240,000 120,000 120,000 144,000 144,000 2,352,000 144,000 600,000 192,000 84,000 168,000 1,188,000 2 0 0 0 0 0 0 0 1 0 40,000 12,000 52,000 24,000 32,000 7,000 14,000 77,000 1 6 1 1 6 4 3 2 1 0 25 1 5 2 1 2 11 264,000 792,000 132,000 158,400 792,000 528,000 396,000 264,000 158,400 3,484,800 158,400 660,000 211,200 92,400 184,800 1,306,800 Year-1 Year-3 Nos. Annual Rs Year-4 Year-5

Nos. Annual Rs Nos. Annual Rs

1 6 1 1 6 4 3 3 1 0 26 1 5 2 1 2 11

290,400 871,200 145,200 174,240 871,200 580,800 435,600 435,600 174,240 3,978,480 174,240 726,000 232,320 101,640 203,280 1,437,480

1 6 1 1 6 4 3 3 1 0 26 1 5 2 1 2 11

319,440 958,320 159,720 191,664 958,320 638,880 479,160 479,160 191,664 4,376,328 191,664 798,600 255,552 111,804 223,608 1,581,228

1 6 1 1 6 4 3 3 1 0 26 1 5 2 1 2 11

351,384 1,054,152 175,692 210,830 1,054,152 702,768 527,076 527,076 210,830 4,813,961 210,830 878,460 281,107 122,984 245,969 1,739,351

12,000 10,000 8,000 7,000 7,000

2 1 2 1 1

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13 KEY ASSUMPTIONS
Table 133-1 Operating Assumptions Operational Days Per Month Months Operational Table 133-2 Capacity Utilization Assumptions Capacity Utilization (First Year) New Students Admission Growth Rate First Year Student Enrollment Student Drop-out Ratio Table 133-3 Economic Assumptions Electricity Growth Rate Salary Growth Rate Rent Growth Rate Student Fee Growth Rate Admission Fee Growth Rate Misc. Expense Growth Rate Table 133-4 Expense Assumptions Office Expense (Stationary, Entertainment etc.) Communication Expense Promotional Expense Students Teaching Aid Entertainment &Event Expense Repair & Maintenance Expense 10% of Administrative Expense 10% of Administrative Expense 2% of Revenue 1.5% of Revenue 1% of Revenue 2% of Machinery, Equipments, Furniture & Fixtures 10% 10% 10% 10% 10% 10% 50% 5% 150 5% 22 12

Table 133-5 Depreciation Assumptions Depreciation Method Equipment Office Furniture & Fixtures Straight Line 10% 10%

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Table 133-6 Proportion of New Admission Play Group KG 1 KG 2 Class 1 Class 2 Table 13-7 Revenue Assumptions Admission Fee Play Group KG 1 KG 2 Class 1 Class 2 Table 13-8 Income Tax Slabs Tax Rate 0.00% 0.50% 1.00% 2.00% 3.00% 4.00% 5.00% 7.50% 10.00% 12.50% 15.00% 17.50% 21.00% 25.00% 7,000 7,000 7,000 7,000 7,000 Student Security (Refundable) 5,000 5,000 5,000 5,000 5,000

40% 20% 20% 10% 10%

Monthly Fee 3,000 3,500 3,500 4,000 4,000

Income Slabs 100,000 110,000 110,000 125,000 125,000 150,000 150,000 175,000 175,000 200,000 200,000 300,000 300,000 400,000 400,000 500,000 500,000 600,000 600,000 800,000 800,000 1,000,000 1,000,000 1,300,000 1,300,000 and above

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14 ANNEXURE
14.1 School Furniture Suppliers and Markets i. Decora Furniture Lahore Address: 47-Ferozpur Road, Lahore, Pakistan Tel: +92-42-37554862 ii. Interwood Mobel Lahore Address: 117-E-1, Gulberg-III, Lahore Tel: +92-42-35870222-6549123-5711117 Fax: +92-42-36549126 Email: sales@interwoodmobel.com URL: http://www.interwoodmobel.com iii. Javaid & Co. Lahore Address: 29130-Nishter Road, Lahore Tel: +92-42-37653007 iv. Master Fibre Glass Lahore Address: 47-C,3 Miraj Building, Ferozepur Road, Lahore Tel: +92-42-35010010 v. Koncept Furniture - Gujrat Address: Dheerkay By Pass, G.T. Road, Gujrat, Pakistan Tel: +92-300-6233455 vi. vii. Nisbat Road Market Lahore Ferozepur Road Market - Lahore

14.2 IT Equipment Markets i. ii. Hafeez Centre Lahore Hall Road - Lahore

14.3 Electrical Equipment and Appliances Suppliers and Markets i. Asian Electronics Address: 7-C, Ground Floor, Abid Market, Shadab Colony, Temple Road, Lahore Tel: +92-42-35030276 Fax: +92-42-36372772 E-mail: asian_elc@hotmail.com

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ii.

Volta Electrical Equipment Address: 81-3, Shahra-e-Quaid-e-Azam, Lahore Tel: +92-42-36304616, 36301546

iii.

VIP Electronics Address: G-1, Ahmed Plaza, Main Hall Road, Lahore Tel: +92-42-37220089, 37230089 Fax: +92-42-37233534

iv.

Swans International Address: 50-F, Main Gulberg-III, Lahore Tel: +92-42-35752839, 35877761 Fax: +92-42-35753901 E-mail: swansintl@technologist.com

v.

Madina Electronics Address: 126-A, Temple Road, Lahore Tel: +92-42-37356612, 37356740

vi. vii.

Abid Market Lahore Hall Road - Lahore

14.4 Educational Experts/Consultants i. Ms. Rozina Jumani Director Planning and Capacity Building/Educational Consultant Email: rozinajumani@gmail.com ii. FINCON Services Inc. Pakistan House #798 Street 16, Sector I-8/2 Islamabad 46000, Pakistan Phone: 92-51-3410-0933 Fax: 92-51-3444-3993 iii. Academy for Educational Development House 299, Street 19, E-7, Aurangzeb Road, Islamabad Tel: 92-51-3265-4091-3 Fax: 92-51-3265 4094 E-mail: aedpk@comsats.net.pk Website: www.aed.org

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iv.

Aga Khan University Institute for Educational Development F.B. Area, Karimabad, P.O. Box 13688, Karachi 75950, Pakistan Tel: 92-21-3634-7611 Fax: 92-21-3634-7616, 3634-6624 Email: ied@aku.edu

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