Business Planning and Feasibility Assessment Essay

Business Planning and Feasibility Assessment - Essay Example The primary target market of the clothing store will be the tourists of Dammam city. As Dammam is a prime tourist spot and many tourists from across the world come to Dammam to visit or for business purposes, thus it will prove to be a large customer base for clothing store.The secondary target customers will be the residents of Dammam. The population in Dammam city is growing rapidly and the people tend to follow the western culture and fashion. Therefore, soon there will be much demand for fashionable clothes in Dammam city. As there is limited number of clothing store in Dammam, it will be easy to attract large number of customers. In the first operating year, it is estimated that the growth of clothing store will be moderate and cash in hand/bank will be positive. The clothing store will not sell on credit rather it will accept cash and all kinds of cheques and credit cards. The initial investment will be 150000000 SR (Saudi Riyal). The cost of land and building is estimated as 9 0000000 SR and Machinery will be bought about 30000000 SR. The estimated cost of Furniture is 15000000 SR. Depreciation will be charged on machinery and furniture to 8% and 2% per annum. In the first operating year it is estimated that the forecasted sales is 30000000 SR. The Gross Margin is accounted as 30% of the total sales. The cost of insurance is estimated as 9% of total gross margin and the selling & distribution expenses are calculated as 70000 SR (estimated figure). According to Saudi Arabia’s tax rate the income tax is charged as 20% on revenue. Fig: 1 Shows Estimated Income Statement of the Clothing Store Income Income (SR) Expenditure (SR) Sales 30000000 Gross Margin (30% of Sales) 9000000 Expenditure Payroll (9 ? 10000 ? 12) 1080000 Insurance (9% of Gross Margin) 810000 Depreciation on Machinery (8%) 2400000 Depreciation on Furniture (2%) 300000 Selling & Distribution Expenses 70000 Profit Before Tax 4640000 Income tax (20%) 928000 Profit After Tax/Net Profit 371 2000 Fig: 2 Shows Estimated Financial Statement of One Year of the Clothing Store Liabilities Asset Capital Investment 150000000 Land & Building