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March 2008
Pre-Feasibility Study Laundry & Dry Cleaning
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. The
prospective user of this memorandum is encouraged to carry out additional diligence and
gather any information he/she feels necessary for making an informed decision.
For more information on services offered by SMEDA, please contact our website:
www.smeda.org.pk
DOCUMENT CONTROL
Document No. PREF-78
Prepared by SMEDA-Punjab
1. INTRODUCTION TO SMEDA.................................................................................................... 4
4. PROJECT PROFILE.................................................................................................................... 5
4.1 PROJECT BRIEF ....................................................................................................................... 5
4.2 OPPORTUNITY RATIONALE ...................................................................................................... 5
4.3 MARKET ENTRY TIMING ......................................................................................................... 5
4.4 PROPOSED BUSINESS LEGAL STATUS ....................................................................................... 6
4.5 PROJECT CAPACITY AND RATIONALE ....................................................................................... 6
4.6 PROJECT INVESTMENT ............................................................................................................. 6
4.7 PROPOSED PRODUCT MIX ........................................................................................................ 6
4.8 RECOMMENDED PROJECT PARAMETERS ................................................................................... 7
4.9 PROPOSED LOCATION .............................................................................................................. 7
5. SECTOR & INDUSTRY ANALYSIS........................................................................................... 7
5.1 SECTOR CHARACTERISTICS ..................................................................................................... 7
6. MARKET INFORMATION ......................................................................................................... 8
6.1 MARKET POTENTIAL ............................................................................................................... 8
6.2 TARGET CUSTOMERS .............................................................................................................. 8
7. PRODUCTION PROCESS........................................................................................................... 9
7.1 PRODUCTION PROCESS FLOW .................................................................................................. 9
7.2 RAW MATERIAL REQUIREMENT ............................................................................................. 10
7.3 REVENUES ............................................................................................................................ 10
7.4 TECHNOLOGY AND PROCESSES .............................................................................................. 11
7.5 MACHINERY REQUIREMENT .................................................................................................. 11
7.6 TOTAL MACHINE MAINTENANCE ........................................................................................... 12
8. LAND & BUILDING REQUIREMENT .................................................................................... 13
8.1 LAND REQUIREMENT ............................................................................................................ 13
8.2 COVERED AREA REQUIREMENT ............................................................................................. 13
8.3 RECOMMENDED MODE .......................................................................................................... 13
8.4 SUITABLE LOCATION............................................................................................................. 13
9. HUMAN RESOURCE REQUIREMENT................................................................................... 14
9.1 ESTIMATED TIME FOR PROJECT COMPLETION ........................................................................ 14
10. PROJECT COST.................................................................................................................... 15
1. INTRODUCTION TO SMEDA
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 had adopted a sectoral SME development
approach. A few priority 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 sectors including, fruits and
vegetables, marble and granite, gems and jewelry, marine fisheries, leather and 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 SMEDA’s
areas of operation.
Along with the sectoral focus a broad spectrum of business development services is also
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 exploit viable business opportunities in an
effective way.
4. PROJECT PROFILE
There are three main forms of business: Sole Proprietorship, Partnership and Company.
An enterprise can be a proprietorship or a partnership and even it can be registered under
company law with corporate law authority. Although selection totally depends upon the
choice of the entrepreneur but this financial feasibility is based on a private limited
company.
For getting information on the formation of type of firm/company, please refer to the
website: www.saarcnet.org/newsaarcnet/govtpolicies/Pakistan/settingbusiness.html
It is recommended that the proposed project be started as a sole proprietorship or a
partnership because it requires less legal requirement. Similarly a lower income tax rate
of tax is applicable to sole proprietorship than that of companies.
4.5 Project Capacity and Rationale
The proposed dry clean will handle 60 kg of clothes per bath. Details of the project
capacity are as follow:
Table 4-1: Project Capacity
Project Dry Cleaning
Working hours per day 8 hours
Operating shift per day 1
Working days per annum 300 days
Maximum clothes dry clean per day 395 units of clothes
Maximum weight of clothes per day 320 Kg
Maximum weight of clothes per batch 60Kg
Hours utilized per batch (Laundry & Dry cleaning) 1.5 hours
4.6 Project Investment
Total project cost of the proposed laundry and dry cleaning unit is Rs. 4.603 million. This
includes a fixed cost of Rs. 3.845 million and a working capital of Rs. 0.758 million.
4.7 Proposed Product Mix
Following is the product mix of the proposed laundry & dry cleaning shop:
Table 4-2: Proposed Product Mix
Average Weight Average Number Average Weight
per unit (kg) of units per day per day (kg)
Trousers 0.35 80.00 28.00
Coats (all Kinds)(winter) 2.00 15.00 30.00
Shirts 0.18 60.00 10.80
Jackets/sweater 2.25 15.00 33.75
Dupata 0.05 25.00 1.25
Shalwar Qameez 0.45 40.00 18.00
Blankets 2.25 10.00 22.50
Mall Road, British Kwick dry cleaners at Mall Road, National dry cleaners at Wahdat
Road and Faisal Town and PC dry cleaners. These dry cleaners are using machines of
60kg capacity in general. Similarly, few large Dry cleaners have also been operating in
prime business locations in Rawalpindi, Multan, Karachi and Quetta.
6. MARKET INFORMATION
7. PRODUCTION PROCESS
Tagging
Sorting
Drying
Steam
Pressing
Sorting &
Pressing
The above chart shows two processes separately that are laundry and dry cleaning. Each
process is explained as below:
a) Tagging :- The clothes are firstly tagged with a specific number, mentioned in the
invoice given to customers. This procedure is used for identification of clothes once
ready for collection by the customers.
b) Sorting: - After tagging the clothes are arranged in different sets. Some people sort
by color. Others sort by fabric type
c) Washing: - The clothes are washed in a washing machine using detergent i.e. Surf,
washing powder etc. This procedure is only followed when laundry service is
required by the customers.
d) Dry Cleaning: - In this process, the sensitive, expensive and only dry clean
recommended clothes are cleaned. The chemical used to clean the clothes in this
process is called Perclon (see raw material section for details).
e) Drying :- The clothes washed in a laundry procedure are dried using dryers.
f) Steam Pressing :- In this process both the clothes either washed or dry cleaned are
pressed and shaped using steam press equipments.
g) Packing :- Once pressed, the clothes are properly hanged and covered in the plastic
wrap and then tagged so that it can be easily identified.
7.2 Raw Material Requirement
Raw material used for the purpose of dry cleaning of clothes is Perclon chemical by ICI
Pakistan. Perchloroethylene, or perclon, is the dominant chemical solvent used in dry
cleaning. Perclon (Perchloroethylene) is a liquid chemical that consists of 40% alcohol,
50% kerosene oil and 10% liquid used to save the color fading of clothes. Perclon
(Perchloroethylene) is a clear, colorless liquid and evaporates quickly.
Bleach is also used especially for white clothes. Detergent is used for simple washing i.e.
washing soap and surf. Following table shows the raw material costing:
Table 7-1 Raw Material Costing
Chemicals Quantity Rate per Total Total Cost
Required per Liter Cost per Per Annum
day (Liter) day (Rs.)
Perc Lon 20 285 5,700 1,689,000
Bleach 2 55 110 31,000
Tar pine Oil 20 30 600 178,000
Cost of chemicals 1,898,000
7.3 Revenues
The proposed product mix has been given in table 4-2. Sale prices and the number of
clothes processed are listed in the table below:
Table 7-2 Sale Price
Items Number of units Rate (Rs.) Total sale
per year (Rs.)
Total number of different machines required for the proposed project is as follows:
Table 7-3: Machinery Requirement1
Description No. Cost Per Unit in Rs. Total in Rs.
Washing Machine 42"*60" (60kg) 1 160,000 160,000
Hydro Extractor 24*12 (25 kg) 1 75,000 75,000
Dryer Machine 48*42 (60 kg) 1 175,000 175,000
Dry Clean Machine 30*18 (10 kg) 1 350,000 350,000
Steam Press (pangenetic) 1 200,000 200,000
Form Finisher Recondition 1 170,000 170,000
Cotton Press 1 205,000 205,000
1
Bismillah Washing Lab.&Research Centre,347-262Ammar Block Nashtar Colony,Ferozpur Road Lahore.Tel : 042-5820669,
Mob:0300-4251156
2
Construction rate for 11 feet high roof
Eden City
Islamabad Aabpara Market
Super Market
Blue Area
Karachi Company
Karachi Gulshan Iqbal
Defence Phase 1 to 111
Tariq Road
Sadar
Federal B Area
Quetta Cantonment Area
Liaqat Bazar
Saryab Road
Satelite Town
Jinnah Road
Faisalabad Satelite Town
Madina Town
Railway Road
Peoples Colony(D Ground)
Satiana Road
Multan Cantonment Area
New Multan
YEAR 1 2 3 4 5 6 7 8 9 10
CAPACITY UTILIZATION (%) 50 55 60 65 70 75 80 85 90 95
Sales (See Table 7a) 5,290 5,954 6,971 7,951 8,720 9,681 10,941 12,469 13,987 15,155
Less: cost of sales 2,652 2,874 3,114 3,372 3,649 3,946 4,266 4,609 4,974 5,368
Gross profit 2,638 3,080 3,857 4,579 5,071 5,735 6,675 7,860 9,013 9,787
50 52 55 58 58 59 61 63 64 65
Less: operating expenses
Administrative (See Table 8) 1,005 1,076 1,157 1,246 1,346 1,430 1,555 1,692 1,843 2,010
1,005 1,076 1,157 1,246 1,346 1,430 1,555 1,692 1,843 2,010
Operating profit 1,633 2,004 2,700 3,333 3,725 4,305 5,120 6,168 7,170 7,777
Less:
Financial expenses (See Table 9) 278 222 167 112 57 - - - - -
Profit Before Taxation 1,355 1,782 2,533 3,221 3,668 4,305 5,120 6,168 7,170 7,777
Income Tax 348 498 761 1,001 1,158 1,381 1,666 2,033 2,384 2,596
Net profit After Taxation 1,007 1,284 1,772 2,220 2,510 2,924 3,454 4,135 4,786 5,181
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Pre-Feasibility Study Laundry & Dry Cleaning
Share capital 2,302 2,302 2,302 2,302 2,302 2,302 2,302 2,302 2,302 2,302 2,302
Retained earnings - 1,007 2,291 4,063 6,283 8,793 11,717 15,171 19,306 24,092 29,273
2,302 3,309 4,593 6,365 8,585 11,095 14,019 17,473 21,608 26,394 31,575
LOANS AND DEFERRED LIABILITIES:
Term Loan 2302 1842 1382 922 464 4 4 4 4 4 4
- 1,002 1,161 1,438 1,692 1,864 1,643 1,945 2,330 2,700 2,933
4,604 6,153 7,136 8,725 10,741 12,963 15,666 19,422 23,942 29,098 34,512
Fixed Assets 3,700 3,345 2,990 2,635 2,280 1,925 1,570 1,215 860 505 150
3,700 3,345 2,990 2,635 2,280 1,925 1,570 1,215 860 505 150
CURRENT ASSESTS:
Securities 120 120 120 120 120 120 120 120 120 120
Advance rent 300 -
Store & Spares - 3 3 3 3 3 3 4 4 4 4
Material Stock - 142 162 182 204 227 252 278 307 337 369
A/C Receivable - 123 139 163 186 203 226 255 291 326 354
Cash/Bank 758 2,004 3,635 5,564 7,919 10,485 13,495 17,550 22,360 27,806 33,515
758 2,692 4,059 6,032 8,432 11,038 14,096 18,207 23,082 28,593 34,362
4,604 6,153 7,136 8,725 10,741 12,963 15,666 19,422 23,942 29,098 34,512
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Pre-Feasibility Study Laundry & Dry Cleaning
YEAR 0 1 2 3 4 5 6 7 8 9 10
SOURCES:
Profit before taxation - 1,355 1,782 2,533 3,221 3,668 4,305 5,120 6,168 7,170 7,777
Add: Depreciation - 355 355 355 355 355 355 355 355 355 355
Add: Amortization - 29 29 29 29 29 - - - - -
Add: interest 278 222 167 112 57 - - - - -
- 2,017 2,388 3,084 3,717 4,109 4,660 5,475 6,523 7,525 8,132
OTHER SOURCES:
Sponsor contribution as capital 2,302 - - - - - - - - - -
Term Loan 2,302
Increase/(Dec) - 542 159 277 254 172 239 302 385 370 233
4,604 2,559 2,547 3,361 3,971 4,281 4,899 5,777 6,908 7,895 8,365
APPLICATIONS: - - - - - -
REPAYMENT OF:
3,845 1,314 916 1,432 1,616 1,715 1,889 1,722 2,098 2,449 2,656
SURPLUS (DEFICIT) 759 1,245 1,631 1,929 2,355 2,566 3,010 4,055 4,810 5,446 5,709
BALANCE OPENING - 759 2,004 3,635 5,564 7,919 10,485 13,495 17,550 22,360 27,806
BALANCE CLOSING 759 2,004 3,635 5,564 7,919 10,485 13,495 17,550 22,360 27,806 33,515
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