Cosmetics Business Plan [PDF]

Zitiervorschau

TABLE OF CONTENTS 0|Page

1. List of figures.............................................................................................................................3 2. List of tables...............................................................................................................................3 3. Introduction...............................................................................................................................4 1.1 Company overview....................................................................................................4 1.2 Market & Growth Drivers..........................................................................................4 1.2.1 In Cosmetics Industry...........................................................................................4 4. Marketing plan..........................................................................................................................5 1.3 Marketing strategy.....................................................................................................5 5. Production plan.........................................................................................................................6 1.3.1 Production process................................................................................................6 1.3.2 Packaging..............................................................................................................7 6. Project startup cost...................................................................................................................8 1.4 Start-up funding.........................................................................................................8 1.5 Estimated block capital cost of project and means of finance...................................8 7. Plant & machinery required....................................................................................................9 1.6 Estimated man power required.................................................................................10 1.7 Suggested location...................................................................................................10 8. Project time line......................................................................................................................10 9. Financial indicators................................................................................................................10 1.8 Vertical analysis.......................................................................................................12 1.9 Horizontal analysis...................................................................................................13 1.10 Trend analysis..........................................................................................................13 1.11 Risk analysis.............................................................................................................14 1.11.1 Business risk.......................................................................................................14 1.11.2 Solvency Ratio Analysis.....................................................................................18 1.11.3 Operating Efficiency...........................................................................................18 1.11.4 Operating Profitability........................................................................................18 1.11.5 Growth Analysis.................................................................................................19 10.

Conclusion........................................................................................................................21

11.

References.........................................................................................................................22

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1. List of figures Figure 9-1Authors work based on Trend analysis........................................................................13 Figure 9-2Authors work based on Sustainable Growth...............................................................20

2. List of tables Table 4-1Authors work based on Capacity of packaging units......................................................8 Table 4-2Authors work based on Start-up funding.........................................................................8 Table 4-3Authors work based on Estimated block capital cost of project and means of finance. .9 Table 5-1Authors work based on Plant & machinery required......................................................9 Table 6-1Authors work based on project time line.......................................................................10 Table 7-1Authors work based on income statement (consolidated).............................................12 Table 7-2Authors work based on Consolidated Balance Sheets..................................................17 Table 7-3Authors work based on Growth Analysis......................................................................20

3. Introduction 1.1

Company overview

Our Vision Statement 2|Page

“To be a brand that is known for the quality of the products.” Our Mission Statement Design and manufacture beauty products that help professionals achieve the highest quality standards so that their work meets the highest quality standards. Our Structure BareBeauty Cosmetics is a company based in Colombo. Roshan De Silva and Ashok Perera, the founders, own the company 100 percent. The Board of Management will include seven members: Roshan De Silva, one additional manager, three external managers designated by Ashok Perera and two appointed major investor representatives. Mr. De Silva and Mr. Perera have combined retail experience over sixty-five years together. Both held senior management positions in this field with major companies. 1.2 1.2.1

Market & Growth Drivers In Cosmetics Industry

Due to the rapidly increasing demand for specialty beauty products, the concentration in the cosmetics sector has increased in recent years. In the future, the concentration of industry is expected to continue over the next five years as consumer spending increases and people turn to well-known, trusted products for their beauty and cosmetic needs. Skilled inventors will boost sales for the cosmetics industry. In addition, with the rise in youthoriented cosmetics, the growth of male-specific products and various beauty products has given specialization to a new range of cosmetics and beauty items to be sold to consumers. Income will continue to rise and the revenues generated by this industry will also enjoy positive growth. Commercially formulated cosmetic items marketed to customers include items for moisturizing and washing the face, hands and body, as well as products for mitigating the effects of aging on the skin and other toiletries. The products come in a wide range of packaging and forms, such as creams, serums, liquids and lotions. The cosmetics market can be broadly classified into the following range: 

Facial cleansers 3|Page



Facial moisturizers



Anti-aging preparations, or "treatment products,"



Hand and body lotions



Other toiletries like shampoos, toothpastes and shower gels.

4. Marketing plan We have positioned our cosmetics on supermarkets, beauty and fragrance shops and saloons scattered across the country and we intend opening our chains of cosmetics and beauty stores. We conduct a market research to get feedbacks of what our target market would be expecting from us. We are planning offer wide range of products to following groups: 

Teenagers



Middle ages women’s



Men’s



Sports men and women



Tourists

Marketing strategy

1.3

We intended to use content marketing, as content marketing is one of the most effective tactics when it comes to brand promotion. It's all about sharing important and useful content to attract, win and engage our target audience. We consider following marketing concepts: 

Build "how to use" videos to show people how to set up skincare routines or spa treatments.



Create a list of subscribers to the newsletter and use it to deliver exclusive deals and engaging content to your current and future customers.



Go live on social medias and real time broadcast messages. Video content is very appealing and thus a convenient way to help improve exposure for free.



Survey consumers to get reviews and measure the success of the promotions. We can do this with fun interactive material, such as quizzes, which can be incorporated as pop-ups 4|Page

on our website, in native ad campaigns or via social media. Using the results to change the marketing plan. 

Interview with people from the natural beauty industry. Get in contact with bloggers and influencers who are in beauty and cosmetics. Influencer marketing is big in the beauty industry, and it can be a win - win strategy for both of us as a business and the force we're dealing with.

5. Production plan In manufacturing, we aim to produce specialty goods with the finest ingredients, to offer the quietest goods. Our main objective is to improve the quality of the product. We are qualified in the following field. 

Hair care and shower products



Skin care products



Men’s products



Anti- aging products



Baby care, sun care, and other products

1.3.1

Production process

When considering Personal Care Goods Manufacturing is a crucial step in our production cycle. We use the new design methodology in the manufacturing cycle to optimize the workflow and reduce waste. We ensure that our entire workforce is highly qualified and that we use the latest technical equipment to manufacture innovative, skilled skincare products on fluid production lines. We produce all of our goods in Sri Lanka at Cosmetic Solutions. Our project facility houses state-of - the-art equipment that we are able to put thousands of items to market successfully. We plan to have ISO and adhere strictly to all GMP requirements during formulation, development and post-product processes. We also use stringent quality assurance protocols to ensure that all goods comply with our purity and efficacy requirements. We check products methodically and consistently during the formulation and production processes.

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Cosmetic Solutions assumes that they are free from cruelty. We never check our goods on animals. Every phase of our manufacturing process is willing to examine for optimum performance, including mixing, filling, capping, coding, marking, safety sealing and packaging. This method has helped us to generate savings internally, which we have passed on to our clients. Our manufacturing facility uses state-of - the-art production equipment to guarantee high-quality goods to our customers in both high and low volumes. In order to run the project, our facility is operated by a trained and committed group of chemists and an extremely knowledgeable team. We are prepared to combine formulas in modern stainless-steel mixers capable of both hot and cold mixing processes and to handle a wide variety of formulations, viscosities and particle sizes. Each of our lines are fitted with semi-automatic and automatic fillers, cappers and sealers. Mix formulations are then stored on either the jar and bottle lines or the tube lines. We are committed to providing a seamless, modern manufacturing facility and to delivering products of the highest effectiveness and quality. Our highly trained production team has a wealth of success developing a line of personal care. 1.3.2

Packaging

The primary purpose of the packaging is to protect the product from air, light, heat, cold, moisture, dust, dirt, etc. In addition, the packaging, along with the deliver case, would protect the product from the hazards that the package will be exposed to during transport and handling.

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6. Project startup cost Capacity of creams manufacturing unit – 1000 Liters per day. Capacity of Liquid manufacturing unit – 2500 Liters per day. Capacity of packaging units. Unit Name Capacity Bottle packing unit 2000 Tube packing 1500 Cream Jar packing 1000 Table 6-1Authors work based on Capacity of packaging units 1.4

Start-up funding

Sr. No Source 1 Start-up Expenses to Fund 2 Start-up Assets to Fund Total Funding Required Table 6-2Authors work based on Start-up funding 1.5

Estimated block capital cost of project and means of finance

Sr. No 1 2 3 4 5 6 7 8 9

LKR in million 50 150 200

Cost of project Land and Land development Building & Civil works Plant & Machinery Misc. Fixed Assets Preliminary & Pre-operative Provision for contingencies Total Fixed Assets Margin Money for working capital Estimated Block Capital Cost of Project Means of Finance Our contribution Term loan Total Means of Finance

LKR in million 20 50 15 5 10 5 105 50 155 55 100 155

Table 6-3Authors work based on Estimated block capital cost of project and means of finance The proposed land area of 50 perches. And building area proposed is 2500 Sq.mt. The Fixed cost of project estimated is LKR 105 million and adding working capital margin of LKR 50 million total project cost is estimated at LKR 155 million. The project will have Debt: Equity ratio of 2:1 7|Page

and accordingly promoter will bring LKR 55 million against the term loan amount of LKR 100 million.

7. Plant & machinery required The proposed project of cosmetics manufacturing unit would require the following as basic and necessary plant and machinery: Sr. No 1 2 3 4 5

Particular Water filtering machine Emulsifier homogenizer Mixing tank Automatic cream filling machine Automatic plastic bottle filling

Quantity 2 1 1 1

1 machine 6 Automatic tube filling machine 1 7 Sticker labeling machine. 1 8 Capping Machine 1 9 Turn table and conveyor, 1 Table 7-4Authors work based on Plant & machinery required 1.6

Estimated man power required

The proposed project will have total manpower requirement of 80 persons. This will include 4 managerial posts, 4 supervisory post, 15 operators, 3 engineering maintenance staff like and 12 accounts, administrative and security staff. 1.7

Suggested location

The suggested districts for the location of the proposed project is Homagama Industrial Estate.

8. Project time line The proposed project would have a cumulative period of 15 to 18 months, of which 3 to 4 months would have the obligation to obtain authorisations from the various authorities.

Phase One Phase Two Phase Three

Description of Work Preliminary stage – Land and Building

Start and End Dates April 2020 – December

development Fixed assets installation Build manufacturing work flows and

2020 January 2021 – April 8 |2021 Page

test trials

May 2021 – July 2021

Table 8-5Authors work based on project time line

9. Financial indicators Income Statement (Consolidated) Net sales Cost of sales Gross profit Selling, general and administrative expenses EBIT Interest expense, net EBT Provision for income taxes Net income including Earnings per share Vertical Analysis Net sales Cost of sales Gross profit Selling, general and administrative expenses Operating profit Interest expense, net Income before income taxes Provision for income taxes Net income including noncontrolling interests Effective Tax Rates

Year 1 50 31 19

LKR Mn Year 2 Year 3 55 65 32 35 23 30

Year 4 78 40 38

Year 5 95 45 50

20

22

24

25

28

(1) 22

1 18

6 14

13 9

22 3

(23) (23) (0.83)

(17) (17) (0.36)

(8) (8) (0.14)

4 0.6 3 0.05

19 2.9 16 0.18

Year 1

Year 2

Year 4

Year 5

100.0%

100.0%

Year 3 100.0

100.0%

100.0%

62.0% 38.0%

58.2% 41.8%

% 53.8% 46.2%

51.3% 48.7%

47.4% 52.6%

40.0%

40.0%

36.9%

32.1%

29.5%

-2.0% 43.4%

1.8% 32.9%

9.2% 21.4%

16.7% 11.5%

23.2% 3.6%

-45.4% 0.0%

-31.1% 0.0%

-12.2% 0.0%

5.1% 0.8%

19.6% 3.1%

-45.4%

-31.1%

-12.2%

4.4%

16.5%

0.0%

0.0%

0.0%

15.0%

15.6%

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Horizontal Analysis Net sales Cost of sales Gross profit

Year 1

Selling, general and administrative expenses

Operating Profit (EBIT) Net Income

Year 5 21.8% 12.5% 31.6%

10.0%

9.1%

4.2%

12.0%

116.7%

69.2%

-35.3%

-62.2%

500.0

-16.6% -24.7%

-53.8%

-150.6%

365.0% 383.3%

-24.7%

-53.8%

-143.0%

361.8%

Year 1 50 (23)

Year 2 55 (17)

Year 3 65 (8)

Year 4 78 3

Year 5 95 16

100.0%

110.0%

156.0%

190.0%

15.0%

69.2%

Year 4 20.0%

Year 5 21.8%

116.7%

69.2%

-143.0%

361.8%

-7.15x 5.83x -1.23x

16.60x 3.18x 5.23x

Company

Business Risk Sales

Year 4 20.0% 14.3% 26.7%

% -23.2%

Income before income taxes Provision for income taxes Net income attributable to

Sales Net Profit

Year 3 18.2% 9.4% 30.4%

-200.0%

Operating profit Interest expense, net

Trend Analysis Sales Net Profit

Year 2 10.0% 3.2% 21.1%

-75.3% Year 1

Year 2 10.0% -200.0% -24.7%

130.0 % -34.8% Year 3 18.2% 500.0 % -53.8%

Total Leverage -2.47x -2.96x Operating Leverage -20.00x 27.50x Financial Leverage 0.12x -0.11x Table 9-6Authors work based on income statement (consolidated) 1.8

Vertical analysis

In Vertical analysis is a method used to determine where the organization has spent its money and the proportions in which those money are allocated between the various balance sheets and the income statement records. The review shall assess the relative weight of each account and its share of assets or revenue generation. 10 | P a g e

With the increase of net sale, operation loss of 2% in first year drives to 23.2% of profits in five years. Loss before income taxes of 45.4% in first year increase up to 19.6% of profits in five years, majorly due to 39.80% of reducing in term loan interest. Within five years company able to earn a of 16.5% 1.9

Horizontal analysis

Horizontal analysis is a method used to analyze patterns over time by measuring percentage increases or decreases compared to the base year. It provides an analytical link between accounts measured on different dates using a currency with different purchasing powers. In addition, this study indexes and compares the evolution of the accounts over time. Net sale of the company comparatively increase by 10.0%, 18.2%, 20.0% and 21.8% when compare to the recent year. Net income attributable to Company rapidly increase up to 361.8% when it compares to the first year. 1.10 Trend analysis Trend analysis measures the overall growth of sales and net profit through the financial years.

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Trend Analysis 250.0% 200.0% 150.0% 100.0% 50.0% 0.0%

1

2

3

4

5

-50.0% -100.0% Sales

Net Profit

Figure 9-1Authors work based on Trend analysis As per the trend analysis, Company owns profits from 3rd year final quarter. 1.11 Risk analysis Risk analysis explores the volatility of profits for the company and the investor the overall risk of the business can be broken down into three basic sources. 

Business risk



Financial risk



External liquidity risk

1.11.1 Business risk Wikipedia defines as “the possibility a company will have lower than anticipated profits or experience a loss rather than making a profit”. If look at the income statement, there are a variety of reasons that relate to the risk of losses. In this, we able to calculate three types of market risks 

Total Leverage.



Operating Leverage.



Financial Leverage.

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1.11.1.1 Operating Leverage As per the company financial figures operation leverage decrease after the second year in 3rd year by 27.50x in 4th year by 5.83x in 5th year by 3.18x. It means that the sensitive of operating profit changes for every 1% of change in net sales, is decreased. 1.11.1.2 Financial Leverage As per the company financial figures financial leverage increase to 5.23x in 5 th year from 0.12x of 2nd year. It means that the sensitive of net sales changes for every 1% of change in operating profit, is increased. 1.11.1.3 Total Leverage As per the company financial figures total leverage increase to 16.60x in 5th year from -2.47x of 2nd year. It means that the sensitive of net profits changes for every 1% of change in net sales, is increased.

Consolidated Balance Sheets   Assets Current Assets Cash and cash equivalents Receivables Inventories Other current assets Total current assets

Year 1

Year 2

LKR Mn Year 3

Year 4

Year 5

3 2 6 2 13

5 2 7 2 16

7 1 7 3 18

8 2 6 3 19

12 3 4 4 23

155 168

155 171

155 173

155 174

155 178

Equity Current Liabilities Current portion of long-term debt Accounts payable Accrued income taxes Other accruals Total current liabilities

14 5 10 29

12 2 4 18

9 3 15 27

6 1 16 23

2 2 1 20 25

Long-term debt

100

86

69

56

42

Property, plant and equipment, net Total assets   Liabilities and Shareholders'

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Other liabilities Total liabilities

12 141

20 124

20 116

22 101

23 90

50 (23) 27

50 14 (17) 47

50 15 (8) 57

50 20 3 73

50 22 16 88

168

171

173

174

178

  Assets Current Assets Cash and cash equivalents Receivables Inventories Other current assets Total current assets

Year 1

Year 2

Year 3

Year 4

Year 5

1.8% 1.2% 3.6% 1.2% 7.7%

2.9% 1.2% 4.1% 1.2% 9.4%

4.0% 0.6% 4.0% 1.7% 10.4%

4.6% 1.1% 3.4% 1.7% 10.9%

6.7% 1.7% 2.2% 2.2% 12.9%

Property, plant and equipment, net   Liabilities and Shareholders'

92.3%

90.6%

89.6%

89.1%

87.1%

Equity Current Liabilities Notes and loans payable Current portion of long-term debt Accounts payable Accrued income taxes Other accruals Total current liabilities

Year 1

Year 2

Year 3

Year 4

Year 5

0.0% 8.3% 3.0% 0.0% 6.0% 17.3%

0.0% 7.0% 1.2% 0.0% 2.3% 10.5%

0.0% 5.2% 1.7% 0.0% 8.7% 15.6%

0.0% 3.4% 0.6% 0.0% 9.2% 13.2%

0.0% 1.1% 1.1% 0.6% 11.2% 14.0%

Long-term debt Deferred income taxes Other liabilities Total liabilities

59.5% 0.0% 7.1% 83.9%

50.3% 0.0% 11.7% 72.5%

39.9% 0.0% 11.6% 67.1%

32.2% 0.0% 12.6% 58.0%

23.6% 0.0% 12.9% 50.6%

Shareholders' Equity Common stock Additional paid-in capital Retained earnings Total Colgate-Palmolive Company

29.8% 0.0% -13.5%

29.2% 8.2% -10.0%

28.9% 8.7% -4.6%

28.7% 11.5% 2.0%

28.1% 12.4% 8.8%

shareholders' equity Total shareholders' equity

16.3% 16.3%

27.4% 27.4%

33.0% 33.0%

42.2% 42.2%

49.3% 49.3%

Shareholders' Equity Common stock Additional paid-in capital Retained earnings Total shareholders' equity Total liabilities and shareholders' equity

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Total liabilities and shareholders' equity

100.2%

99.9%

100.1%

100.2%

99.8%

.45x

.89x

.67x

.83x

.92x

Solvency Ratios Current ratio Operating Efficiency Total asset turnover Equity turnover

 

Operating Profitability Gross Profit Margin Operating Profit Margin Net Profit Margin

 

Return on Total Assets Return on Owner's Equity or ROE

 

  0.32 1.48

  38.0% -2.0% -45.4%

  0.38 1.25

 

  0.45 1.20

 

0.54 1.18  

41.8% 1.8% -31.1%

46.2% 9.2% -12.2%

48.7% 16.7% 4.4%

52.6% 23.2% 16.5%

0.6% -46.1%

3.5% -15.2%

7.5% 5.2%

12.5% 19.5%

ROE DuPont Analysis           Profit Margin -31.1% -12.2% 4.4% 16.5% Asset Turnover 32.4% 37.8% 45.0% 54.0% Financial Leverage 456.9% 330.8% 265.9% 218.5% ROE -46.1% -15.2% 5.2% 19.5% Table 9-7Authors work based on Consolidated Balance Sheets

1.11.2 Solvency Ratio Analysis 1.11.2.1 Current Ratio The current ratio is the most frequently used ratio to calculate the liquidity of the company. As per the company financial figures current ratio is gradually increase from .45x in 1st year when it compares with the .92x of 5th year but company unable to maintain the current ratio at a positive level. 1.11.3 Operating Efficiency 1.11.3.1 Total asset turnover Total asset turnover ratio shows efficiently the assets are being utilized to generate sales.

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As per the company financial figures, efficiency assets utilization is increase gradually from 0.32 in 2nd year, 0.38 in 3rd year, 0.45 in 4th year and 0.54 in 5th year. That shows a positive sign of future return. 1.11.3.2 Equity turnover Equity turnover ratio shows how efficient the company is deploying equity to generate sales. As per the company financial figures comparatively efficiency equity utilization is decrease gradually from 1.48 in 2nd year 1.25 in 3rd year, 1.20 in 4 th year and 1.18 in 5th year. This figures shows negative sign of equity utilization. 1.11.4 Operating Profitability 1.11.4.1 Gross Profit Margin Gross Profit is the difference between revenue and the actual cost of making a product or delivering a service. As per the company financial figures gross profit margin of the company increase gradually from 38.0% in 1st year, 41.8% 2nd year, 46.2% 3rd year, 48.7% 4th year and 52.6% 5th year. That shows a positive sign of cost effectiveness. 1.11.4.2 Operating Profit Margin Operating income or Earnings before Interest and Tax (EBIT) margin calculates the amount of profit on revenue after operating expenses. Operating profits can be thought of as the "bottom line" of activities. As per the company financial figures operating profit margin of the company increase gradually from -2.0% 1st year, 1.8% 2nd year, 9.2% 3rd year, 16.7% 4th year and 23.2% 5th year. That shows a positive sign of cost, administrative and financial effectiveness. 1.11.4.3 Return on Total Assets The Return on Assets or the Return on Total Assets refers to the company's profits on all resources invested in the sector.

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As per the company financial figures return on total assets of the company increase gradually from 0.6% 2nd year, 3.5% 3rd year, 7.5% 4th year and 12.5% 5 th year. That shows how effectively utilize the company assets. 1.11.4.4 Return on Owner's Equity Return on Owner's Equity is based exclusively on the equity of the common shareholder. Preferred dividends and minority interests are excluded from Net Profits as a priority right. Return on equity is the rate of return received on the Common Shareholder's Capital. As per the company financial figures return on owner's equity has increase from -46.1% 2 nd year, -15.2% 3rd year, 5.2% 4th year and 19.5% 5th year. That shows a positive sign of effectively utilize the Owner's Equity. 1.11.5 Growth Analysis Growth rate is one of the most important parameters when we look at an overview of a product. As a company grows larger and larger, its growth is stalling and approaching a sustainable growth rate in the long term. Total Dividends Paid Net Income Dividend Payout Ratio Retention Ratio

0.00 -22.7 0% 100%

Sustainable Growth Table 9-8Authors work based on Growth Analysis

0.00 -17.1 0% 100%

0.00 -7.9 0% 100%

0.00 3.4 0% 100%

10.00 15.7 64% 36%

-46.1%

-15.2%

5.2%

7.1%

1.11.5.1 Sustainable Growth The top- growth of the company is one of the most relevant metrics for both investors and creditors in the study of ratios. It allows the investor to forecast growth in earnings and valuations. As per the company financial figures Sustainable Growth of has increase from -46.1%2nd year, -15.2% 3rd year, 5.2%4th year and 7.1% 5th year. That shows a positive sign of the company Sustainable Growth.

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Sustainable Growth 10.0%

0.0%

5.2%

1

2

3

7.1%

4

-10.0% -15.2% -20.0%

-30.0%

-40.0% -46.1% -50.0%

Figure 9-2Authors work based on Sustainable Growth

10.

Conclusion

Before beginning a business, it is very important to prepare a proper business plan and assess the company's ability to meet its objectives. It is also clear from the study that the financial component of the BareBeauty Cosmetics business strategy for the new manufacturing company is a sound business strategy and has been successfully designed to help the other aspects of the business plan.

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11.

References

https://rapidbi.com/writeamissionstatement/ https://www.wallstreetmojo.com/ratio-analysis/ http://www.smusolvedassignments.com/nmims http://us.studybay.net/cosmetics-in-china-consumer-behaviour/ https://www.marketresearchreports.com/skin-care?page=7 https://www.businesswire.com/news/home/20110424005017/en/Skin-Care-Shoppers-Dead-SeaFormula-Beauty 19 | P a g e

http://www.roopsinghar.com.pk/ http://www.ecosmetics.com.br/en-us/mission-vision-and-values/ Adaptation and Translation in the Digital Heterogossia - Richard Berger - March 2005

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