Professional Documents
Culture Documents
(Driving School)
Small and Medium Enterprises Development Authority Ministry of Industries & Production
Government of Pakistan
www.smeda.org.pk
HEAD OFFICE
4th Floor, Building No. 3, Aiwan-e-Iqbal Complex, Egerton Road, Lahore Tel: (92 42) 111 111 456, Fax: (92 42) 36304926-7
helpdesk@smeda.org.pk
REGIONAL OFFICE Punjab 3rd Floor, Building No. 3, Aiwan-e-Iqbal Complex, Egerton Road Lahore, Tel: (042) 111-111-456 Fax: (042) 36304926-7 helpdesk.punjab@smeda.org.pk REGIONAL OFFICE Sindh 5TH Floor, Bahria Complex II, M.T. Khan Road, Karachi. Tel: (021) 111-111-456 Fax: (021) 35610572 helpdesk-khi@smeda.org.pk REGIONAL OFFICE Khyber Pakhtunkhwa Ground Floor State Life Building The Mall, Peshawar. Tel: (091) 111-111-456 Fax: (091) 5286908 helpdesk-pew@smeda.org.pk REGIONAL OFFICE Balochistan Bungalow No. 15-A Chaman Housing Scheme Airport Road, Quetta. Tel: (081) 2831623, 2831702 Fax: (081) 2831922 helpdesk-qta@smeda.org.pk
Note: All SMEDA Services / information related to PM's Youth Business Loan are Free of Cost December, 2013
Pre-Feasibility Study
Driving School
Table of Contents
1 DISCLAIMER .......................................................................................................................................... 2 2 PURPOSE OF THE DOCUMENT ......................................................................................................... 3 3 INTRODUCTION TO SMEDA .............................................................................................................. 3 4 INTRODUCTION TO SCHEME ........................................................................................................... 4 5 EXECUTIVE SUMMARY ...................................................................................................................... 4 6 BRIEF DESCRIPTION OF THE PROJECT ........................................................................................ 4 7 CRITICAL FACTORS ............................................................................................................................ 5 8 INSTALLED & OPERATIONAL CAPACITIES................................................................................. 5 9 POTENTIAL TARGET MARKET / CITIES ....................................................................................... 5 10 PROJECT COST SUMMARY ............................................................................................................... 5 10.1 10.2 10.3 10.4 10.5 10.6 10.7 PROJECT ECONOMICS ................................................................................................................... 6 PROJECT FINANCING .................................................................................................................... 6 PROJECT COST ............................................................................................................................. 6 MACHINERY REQUIREMENT ......................................................................................................... 7 RAW MATERIAL REQUIREMENTS ................................................................................................. 7 HUMAN RESOURCE REQUIREMENT .............................................................................................. 7 REVENUE GENERATION................................................................................................................ 8
11 CONTACT DETAILS OF GOVT. INSTITUTIONS / EXPERTS ...................................................... 8 12 ANNEXURE ............................................................................................................................................. 9 12.1 12.2 12.3 INCOME STATEMENT .................................................................................................................... 9 CASH FLOW STATEMENT ........................................................................................................... 10 BALANCE SHEET ........................................................................................................................ 11
Pre-Feasibility Study
Driving School
1 DISCLAIMER
This information memorandum is to introduce the subject matter and provide a general idea and information on the subject. Although, the material included in this document is based on data / information gathered from various reliable sources; however, it is based upon certain assumptions which may differ from case to case. The information has been provided on as is where is basis without any warranties or assertions as to the correctness or soundness thereof. Although, due care and diligence has been exercised 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, its employees or agents do not assume any liability for any financial or other loss resulting from this memorandum in consequence of undertaking this activity. The contained information does not preclude any further professional advice. The prospective user of this memorandum is encouraged to carry out additional diligence and gather any information which is necessary for making an informed decision including taking professional advice from a qualified consultant / technical expert before taking any decision to act upon the information. For more information on services offered by SMEDA, please contact our website: www.smeda.org.pk
SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -
Pre-Feasibility Study
Driving School
3 INTRODUCTION TO SMEDA
The Small and Medium Enterprises Development Authority (SMEDA) was established in October 1998 with an objective to provide fresh impetus to the economy through development of Small and Medium Enterprises (SMEs). With a mission "to assist in employment generation and value addition to the national income, through development of the SME sector, by helping increase the number, scale and competitiveness of SMEs" , SMEDA has carried out sectoral research to identify policy, access to finance, business development services, strategic initiatives, institutional collaboration and networking initiatives. Preparation and dissemination of prefeasibility studies in key areas of investment has been a hallmark of SME facilitation by SMEDA. Concurrent to the prefeasibility studies, a broad spectrum of business development services is also offered to SMEs by SMEDA. These services include identification of experts and consultants and delivery of need based capacity building programs of different types in addition to business guidance through help desk services.
SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -
Pre-Feasibility Study
Driving School
4 INTRODUCTION TO SCHEME
Prime Ministers Youth Business Loan scheme, for young entrepreneurs, with an allocated budget of Rs. 5.0 Billion for the year 2013-14, is designed to provide subsidised financing at 8% mark-up per annum for one hundred thousand (100,000) beneficiaries, through designated financial institutions, initially by the National Bank of Pakistan (NBP) and the First Women Bank Ltd. (FWBL). Youth Business Loans upto 2 million with tenure upto 8 years, inclusive of 01 year grace period and a debt : equity of 90 : 10 will be disbursed to SME beneficiaries across Pakistan, covering; Punjab, Sindh, Khyber Pakhtunkhwa, Balochistan, Gilgit Baltistan, Azad Jammu & Kashmir and Federally Administered Tribal Areas (FATA).
5 EXECUTIVE SUMMARY
This particular Pre-feasibility is for LTV Driving School. Driving is a skilful task that needs proper training and knowledge of traffic laws and regulations. There is a tremendous increase in the number of vehicles particularly in the urban cities of Pakistan. Moreover, the government has been taking steps towards effective implementation of traffic regulations. This has created a demand for formalized driver training and provision of road safety information, thereby creating an opportunity for establishing a Driving School for a prospective entrepreneur. The project is proposed to be set-up in a suitable locality of any urban city such as Lahore, Karachi, Sukkur, Hyderabad, Faisalabad, Sargodha, Multan, Quetta, DI Khan, Nowshera and Peshawar. Keeping in view the nature of services, there is a minimal requirement of establishing a formal office. The facility will comprise of 3 vehicles and employ 4 individuals including the owner/manager. The total capacity of the training service center will be to train 720 drivers annually. During the sessions, trainees shall be familiarized with the basic rules of driving along with traffic signal system, awareness about traffic rules and dealing with emergencies and accidents. Total investment in the project is Rs. 1.8 million with Rs. 1.6 million as capital investment and Rs. 0.2 million as working capital. NPV and IRR of the project is Rs. 8.07 million and 57% respectively with a payback period of 2.35 years.
The proposed Driving School can be started as a home based business without having any formal office set-up, with the legal status of Sole Proprietorship. The facility will acquire three second hand vehicles for practical training and hire three trainers / instructors for imparting training. The instructors will also brief trainees
SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -
Pre-Feasibility Study
Driving School
on traffic regulations and road safety information. The driving school will train 360 individuals in the first year.
7 CRITICAL FACTORS
The following significant factors may be taken into account while making investment decision: Hiring of quality trainers / instructors with a special focus on engaging female drivers. Effective marketing / awareness of the service particularly with traffic police & drivers licensing section. Competitive fee structure offering value for money. Efficient utilization of idle capacity by offering Pick & Drop facilities to office executives on need basis, as an additional business opportunity. Timely and cost effective repair and maintenance of vehicles due to major / minor accidents during the training.
SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -
Pre-Feasibility Study
Driving School
10.1 Project Economics The Driving School will train 360 drivers at 50% capacity in year one with three vehicles and three trainers. The following table shows internal rates of return and payback period.
Table 1: Project Economics
Description Internal Rate of Return (IRR) Payback Period (yrs) Net Present Value (NPV)
Returns on the investment and its profitability are highly dependent on trained staff, marketing, and competitive fee structure. In case the Driving School is not managed efficiently, it will not be able to capitalize on the potential market and recover payments; hence cost of operating the business will increase. 10.2 Project Financing Following table provides details of the equity required and variables related to bank loan:
Table 2: Project Financing Description Details
Total Equity (10%) Bank Loan (90%.) Markup to the Borrower (%age/annum) Tenure of the Loan (Years) Grace Period (Year) 10.3 Project Cost
Rs.180,000 Rs.1,620,000 8% 8 1
Following requirements have been identified for operations of the proposed business.
Table 3: Total Project Cost Capital Investment Amount (Rs.)
Vehicles Total Working Capital Cash in hand Total Total Project Cost
SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -
Pre-Feasibility Study
Driving School
10.4 Machinery Requirement Following table provides list of machinery / equipment required for an average drivers training service:
Table 4: List of Vehicles
Quantity
Main equipment required for a Driving School are vehicle(s) for providing practical training to the drivers. Keeping in view the project investment size, used vehicles are proposed. Therefore, due attention and care should to be exercised while procuring these vehicles.
10.5 Raw Material Requirements Fuel for vehicle(s) will be the only commodity required as a raw material in this project.
Table 5: Cost of Fuel
Sr. No 1 2
Unit Suzuki Mehran Car (800 cc) Suzuki Cultus Car (1000 cc)
Fuel Petrol Consumption Rate / ltr Km/ltr 17 Rs. 109 14 Rs. 109
No. of Employees 1 3 4
The above table provides details of human resource required to run the Driving School. Salaries of all employees are estimated to increase at 10% annually.
SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -
Pre-Feasibility Study
Driving School
Product Fee (Rs./Student) Expected no. of Students First Year Revenue 1st Year (Rs.)
Principal National Logistics Cell (NLC) Driving School G. T. Road, Dina Ph: 0544-631908
National Highways and Motorway Police (NH&MP) Training College P.O. Box #16 General Post Office, Sheikhupura Ph: 056-3794601
SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -
Pre-Feasibility Study
Driving School
12 ANNEXURE
12.1 Income Statement
Income Statement
Revenue Cost of sales Cost of goods sold (Fuel Cost) Operation costs 1 (direct labor) Operating costs 2 (machinery maintenance) Total cost of sales Gross Profit General administration & selling expenses Administration expense Communications expense (phone, fax, mail, inter Promotional expense Depreciation expense Subtotal Operating Income Earnings Before Interest & Taxes Interest expense on long term debt (Project Loan) Subtotal Earnings Before Tax Tax NET PROFIT/(LOSS) AFTER TAX Year 1 2,160,000 21% 25% 8% 54% 459,998 540,000 162,000 1,161,998 998,002 240,000 43,200 108,000 160,000 551,200 446,802 446,802 134,459 134,459 312,342 312,342 Year 2 2,613,600 556,598 592,575 196,020 1,345,193 1,268,407 263,367 52,272 130,680 160,000 606,319 662,088 662,088 123,099 123,099 538,989 13,899 525,090 Year 3 3,136,320 667,918 650,269 235,224 1,553,411 1,582,909 289,008 62,726 156,816 160,000 668,551 914,358 914,358 108,167 108,167 806,191 43,429 762,763 Year 4 3,737,448 795,935 713,580 280,309 1,789,824 1,947,624 317,147 74,749 186,872 160,000 738,768 1,208,856 1,208,856 91,997 91,997 1,116,859 90,029 1,026,831 Year 5 4,427,438 942,877 783,055 332,058 2,057,990 2,369,448 348,025 88,549 221,372 160,000 817,945 1,551,503 1,551,503 74,484 74,484 1,477,019 144,053 1,332,966 Year 6 5,218,052 1,111,248 859,295 391,354 2,361,897 2,856,156 381,909 104,361 260,903 160,000 907,172 1,948,983 1,948,983 55,517 55,517 1,893,466 226,193 1,667,273 Year 7 6,122,515 1,303,864 942,957 459,189 2,706,010 3,416,505 419,092 122,450 306,126 160,000 1,007,668 2,408,837 2,408,837 34,977 34,977 2,373,860 322,272 2,051,588 Year 8 6,734,766 1,434,251 1,034,765 505,107 2,974,123 3,760,644 459,895 134,695 336,738 160,000 1,091,329 2,669,315 2,669,315 12,731 12,731 2,656,583 386,646 2,269,938 Year 9 7,408,243 1,577,676 1,135,511 555,618 3,268,805 4,139,438 504,671 148,165 370,412 160,000 1,183,248 2,956,190 2,956,190 2,956,190 461,547 2,494,643 Year 10 8,149,067 1,735,443 1,246,066 611,180 3,592,689 4,556,378 553,807 162,981 407,453 160,000 1,284,242 3,272,137 3,272,137 3,272,137 540,534 2,731,603
11% 2% 5% 7%
SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -
Pre-Feasibility Study
Driving School
SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -
10
Pre-Feasibility Study
SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -
11
Pre-Feasibility Study
13 USEFUL LINKS
Prime Ministers Office, www.pmo.gov.pk Small and Medium Enterprise Development Authority, www.smeda.org.pk National Bank of Pakistan (NBP), www.nbp.com.pk First Women Bank Limited (FWBL), www.fwbl.com.pk National Highway Authority (NHA) Government of Pakistan, www.pakistan.gov.pk Ministry of Industries & Production, www.moip.gov.pk Ministry of Education, Training & Standards in Higher Education, http://moptt.gov.pk Government of Punjab, www.punjab.gov.pk Government of Sindh, www.sindh.gov.pk Government of Khyber Pakhtoonkhwa, www.khyberpakhtunkhwa.gov.pk Government of Balochistan, www.balochistan.gov.pk Government of Gilgit Baltistan, www.gilgitbaltistan.gov.pk Government of Azad Jammu & Kashmir, www.ajk.gov.pk Trade Development Authority of Pakistan (TDAP), www.tdap.gov.pk Securities & Exchange Commission of Pakistan (SECP), www.secp.gov.pk Federation of Pakistan Chambers of Commerce and Industry (FPCCI), www.fpcci.com.pk State Bank of Pakistan (SBP), www.sbp.org.pk
SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -
12
Pre-Feasibility Study
14 KEY ASSUMPTIONS
Table 8: Project Assumptions
Projected Life of The Project in Years Sponsors' Equity Debt Financing Annual Mark Up Rate (Short Term & Long Term) Debt Tenure (Years) Grace period (Years) General Inflation Rate
Table 9: Operating Assumptions
Fee income per Student Course Duration Expected Number of Students per year at 50% Capacity Sale price growth rate Production capacity growth rate
Table 11: Depreciation Assumptions
Vehicles
Table 12: Expenditure Assumptions
2% 5%
Of Sales Of revenue
SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -
13