A BUSINESS PLAN: TARAI SCHOOL OF MANAGEMENT (T-SOM) 1.

1 INTRODUCTION The selected business plan is Establishment of a Business School in Janakpur, Nepal. Although there are 5 to 6 B-Schools providing management education in Janakpur, I have found that I can differentiate my product/ services and provide better education. The name of my B-School will be Tarai School of Management (T-SOM). Initially I would like to launch BBA program which will be totally different from other B-school allocate in this area regarding teaching methodology, faculty members, student selection and extra curriculum. 1.2 PROBLEM IDENTIFICATION The management education in Nepal began in September 1954 when Tri-Chandra College first time launched intermediate of Commerce ( I.Com). In Janakpur it is not history of more than 10 years for any college in providing management education. Although there are 5 to 6 B schools offered management study in Janakpur, only 1-2 schools are offered BBA course. Even these two colleges are not able to provide quality education due to lack of faculty member and creativity. So, the management students have to go hither and thither for the further study especially for BBA and MBA. The colleges in janakpur are not able to enhance leadership quality, interpersonal skill, practical knowledge except putting the bunch of theory and theory. 1.3 BUSINESS IDEA AND OPPORTUNITY ASSESSMENT From my survey to find out the total demand for various level management education and market share occupied by the existing B-schools, I have found that at +2 level almost 70% market is captured but there is huge opportunity for masters level (MBA) study. So, I will analyze feasibility of these entire three market segment and then make decision to start my business. The growth rate of enrollment of students for management education is 12%. So, seeing future prospect I think it is good opportunity to establish B-school. At Master level, the market is almost untouched but to start my school only for master level, I need more highly qualified lecturer and faculties which is very difficult at initial level. At +2 levels almost 70% market is captured so again its difficult task to capture more proportion of this market segment. At bachelor level (BBA), I think it will be comfortable for me to cater market demand as well as manage internal resources. It is appropriate time to establish B-school because there is lower competition but high demand of quality education. The demand will be increase in future because the trend of students enrolled in management education is increasing. We can earn high profit margin as cost of rent and other expenses is low.

1.4 ENTREPRENEURIAL STRATEGIES The business of establishing Management College is not an entirely novice and innovative concept. However, the way T-SOM plan to deliver management education can be regarded as product differentiation strategy. This strategy is a creative imitation of what has been already practiced in other parts of the city with few new concepts. The main focus will be on differentiating T-SOM from other business school in providing quality service but initially the price will be same as others competitors are charging. Once we will success in attracting students toward us, our plan is to charge premium fees in future by providing high quality education. 1.5 MARKETING PLAN Total demand for BBA study: Total number of students enrolled in intermediate was 143854 in Tarai region, among which I estimate that 30% would be in management and at least 50% of management student will pass intermediate and seek for BBA study. So, Total number of students interested in BBA study will be 143854*0.3*.5=21578. In Jankpur it is estimated to be 3000 students. Targeted sales forecast: Total number of competitors in Janakpur is 6 who approximately capture 13.901% of total demand. The rest of students go outside Janakpur like Kathmandu, Biratnagar, India for further study. So, in the first year our target students will be 0.05%. After then the annual growth on students enrollment estimated 20%, 20%, 10%, for 2014, and 2015 Students Fees: The Fees for bachelor studies in Janakpur is 70000 to 90000 per year. So I would like to set annual fee Rs. 72000 per students each year for 4 years course. But the forecasted price will be changed after preparing income statements. Marketing Strategy: The marketing strategy of the T-SOM will be based on the following strategies. a) Product differentiation: - Affiliation from reputed University - Qualified faculties - Virtual Class and online course materials - Job placement facility and consultancy for study (GMAT preparation, Foreign University collaboration) b) b) Pricing strategy: My main focus will be on product differentiation so, the fee will be a little bit higher than competitors but there may be scholarship facilities to the few needy and intelligent students. c) Advertising and promotion: To educate the features and qualities of my B-schools course delivery methods I will spend Rs. 100000- Rs. 150000 per season. The main focus will be on conducting seminar, visiting +2 schools etc.

1.6 OPERATION PLAN The total fixed capital requirement is Rs1200000. In the initial stage we will not purchase any land and building but lease on contract. The pre operating expenses will be for Rs. 5858500 which includes registration charge, affiliation charge etc. the details of pre operating Giant Chart is given bellow, See Annex: 2. In the office and administrative expenses the main cost will be salaries to the faculties and some other office expenses. 1.7 ORGANIZATION & MANAGEMNT PLAN Organization structure: I proposed the organization structure of T-SOM to be divided in to 4 levels. On the top level, there will be Board of director headed by Mr Umesh Kumar Yadav consisting of 10 members. On the second level there will be Dean (principal) under whom four departments will be operating. Mr. Shivshankar (I) will be principal. At third level of organization structure there will be head of department and vice- principal for all departments. Finally at fourth level, we are going include all the lower level staffs of various departments. We are planning to hire 5 fulltime faculties including myself as faculty of Finance and Economics and we may also hire some part time faculties as per need. Other Staffs will also be hired as per need. See Annex: 1 for organizational structure diagram. Entrepreneur profile: Mr. Umesh kumar Yadav, the director of the board, has 7 years experience as principal of government owned high school. He has also been director of board of private owned high school for 5 years. He did his masters in Economics from JNU and M.Com from TU. He was motivated to start his own Business school after completing his M.com but due to lack of capital he couldnt do at that time but now he gathers so many experience, knowledge and capital to run B-school successfully. I have joined myself as Principal of this college. I have done my MBA from KUSOM, a leading B-school in Nepal. I have learnt so many ideas, organization culture and method of teaching at the period of study in KUSOM. So, I hope I can contribute to differentiate our School from others. I have studied Entrepreneurial Management in KUSOM, so preparation of the whole framework for this business is assigned to me. 1.9 FINANCIAL PLAN The main components of financial plan are investing activities, financing activities and working capital & cash management. Investing activities: The total purchase of fixed assets will be for Rs.1200000 which includes office equipment for Rs. 300000, books in library for Rs. 500000 and furniture for Rs.400000.

Financing activities: Total capital requirement for this business will be Rs 7558500. Our plan is to finance this capital requirement, 41% from debt and 59% from our own equity capital. The debt to equity ratio will be 70%. The loan will be taken from NABIL bank of two types. Rs. 1200000 at the rate of 12% for 5 years and Rs. 5858500 at the rate of 13% for 8 years. Working capital and cash management: To deal with daily activities I would like to maintain minimum cash balance in hand Rs.500000. This amount will be deposited in bank in current a/c. Ratio analysis: In this part I will discuss various ratios to analyze profitability, assets utilization capacity and riskiness of this business. Profit Margin: The projected Profit margin for the first year of operation is 10.4% and then will reach to 26.2% in 4th years which demonstrates that the business will be in growing phase. ROE: The first year projected to be 14% and then in increasing trend. It will reach to 22%in 4th years. It demonstrates that the business have capacity to generate profit for the business owner after deducting all the incurred expenses. ROA: The Projected ROA for the first year is 9%. This figure is lower indicating that the assets capacity to generate profit is very low. This can be improved by utilizing the available resources efficiently. BEP (%): From this business plan, the projected BEP in % is 63% in first year and then in decreasing trend. It will be 28% in 4th year. This figure illustrates that we can make abnormal profit only beyond 63% of total target students in first year and then only after 28%. This demonstrates less possibility of losses from this business. IRR: Internal rate of return is 15% and NPV is Rs303318 which further support the feasibility and attractiveness of this business. The IRR is higher than WACC 12.52% so, the business will be feasible to start. Sensitivity analysis: In sensitivity analysis our IRR is very close to WACC hence the probability that our IRR will be less than WACC is high i.e.43.82%.

1.10 OVERALL FEASIBILITY The analysis above shows that the business is an economically viable undertaking. The market opportunity, growth prospect, profitability ratio, ROE, ROI, BEP are all attractive. The NPV is positive and The IRR is higher than WACC. From the beginning of the operation there is positive cash flow and profitability is in increasing trend. These all indicate that the business is feasible and it not only will provide earnings to us but also social status and social recognition.

ANNEX:1 Organizational structure

Boar of Director (Director Umesh Kr. Yadav)

Principal Shivshankar Yadav

Account Dep.
(Account Head: Dambar N.YAdav)

Facuty supervision dep.

(Vice-Principal: Sanjeep Kr YAdav

IT dep.
(IT Head: S.K. Yadav)

Public relation and admission dep.

(PR Head): Rubi Yadav

Labrary and logistic Dep.

(Labrary Head: Mukul )

5 Full time faculties

Part time faculites

1 Staff

3 Staffs

2 Staffs

2 Staffs

ANNEX:2 Giant Chart of Pre-operating activities

1 2 3 4 5 Time line in weeks 6 7 8 9 10 11 12

1. 2. 3. 4. 5. 6. 7. 8. 9.

Brain storming and discussion with various experts and faculties.14 days Registering the business 14 days Affailation from university14 days Preparing the business plan....21 days Gathering reuired capital. 28 days Contracting with equipment suppliers and faculties7 days Construction in infrastructure . 56 days Hiring required staffs and purchase required equipments14 days Advertising and students interaction program.14 days

ANNEX:3 Calculated Ratios Ratio/ years Profit margin 10.4% 20.0% 35.6% 14% 25% 35% ROE 9% 18% 29% ROA 63% 42% 24% BEP % 63 students 50 students 35 students BEP in units IRR =15% , NPV = Rs303318 and WACC = 12.52%, Sensitivity is 43.82

26.2% 22% 20% 28% 44 students