EXECUTIVE SUMMARY @ Business Proposal on Cement Distribution Business in Nigeria.
By the end of the first year the expected net profit/ earnings from sales before tax is N11,276,000 while net profit/earning after tax is N9,020,800, giving a 100.2% returns on investment (ROI) and 225.5% return on Equity (ROE). It is also expected to grow by 20% in subsequent years. This is shown by the expected earnings for the second year which gives N14,423,500 profit before tax and N 11,538,800 profit after tax generating 128% ROI and 228.5% ROE respectively.
Furthermore, the competitive edge of the business is in its ability to penetrate into the market freely, and the use of marketing strategies that will promote rapid turnover. However, it has in mind to establish two other depots in Lagos area within the next three years. This project is highly recommendable, because judging from the above profitable measures. It shows that the project offers good investment benefits which is found technically feasible, financially viable and economically desirable
NAME OF BUSINESS:
NATURE OF BUSINESS:
Business Proposal on Cement Distribution Business in Nigeria – OBJECTIVE:
- To make cement available to the members of the public at a very affordable price.
- To close the gap in cement product supply chain that always cause product scarcity. This will make cement available to the public at all times.
- And focus the activities towards specific services delivery that will achieve the above objectives, and thereby to become a leader in this market.
- Generate customer satisfaction so that at least 80% of our customer base is repeat business.
- To generate sufficient cash flow to finance the activities of the company, and the future growth and development of the company.
- Provide key resources needed by the company and its owners.
- To expand the business at a rate that is both challenging and manageable, and competitively enviable.
- And maintain a Constant growth in sales in 12 months.
To become a household name in cement distribution in Lagos area of Nigeria. Achieve sales and services and profit growth goal of 20%, in the next three years.
A-Z Merchant Ltd mission is to become the recognized leader in its targeted local market in cement distribution, and to give customer optimum satisfaction, through its innovative, quality, and timely service delivery.
PURPOSE OF THE BUSINESS PROPOSAL:
The aim of this plan is to set up . A-Z Merchant Ltd using only 55% loan from the investors and 45% equity. The plan is to liquidate the loan with the interest within the first three years. It is hoped that by this time. A-Z Merchant Ltd would have been able to generate enough fund to stand by itself. . Further expansion and diversification will be the subject of a Growth Model Plan.
A BUSINESS PROPOSAL ON CEMENT DISTRIBUTION BUSINESS IN NIGERIA – COMPANY PROFILE:
A-Z Merchant Ltd was incorporated on the 6th of April 2017 with RC No 2419 and a share capital of One million Naira of one Naira per share. It is made up of six directors and shareholders. The primary object clause of the company is cement distribution “to carry on business of trading, marketing, sales and distribution of general goods, such as cement and blocks, commission agents, manufacturers’ representatives, general suppliers and general contractors.”
The Federal Inland Revenue Services (FIRS) Tax Identification Number( TIN) , VAT registration Number and bank account are being processed.
The company is located at Lagos, Nigeria. It was founded by Mr. AB Merchant. A-Z Merchant Ltd is a 100% Nigerian owned company engaged in providing high end user services with latest and innovative business support solutions that add value to any new or existing businesses. It is constituted of other five directors and investors.
The management will work with a strategic blueprint that identifies the needs in the market and develop solutions to meet these needs beyond the expectations of our end users using every available communication/delivery technologies.
Names and briefs of the directors:
The board of directors are made up of, Mr. AB Merchant, CD Merchant, FH Merchant, JL Merchants, MO Merchants, RS Merchant. and YZ Merchant. They are all members of the same family. The CEO, Mr. AB Merchant is the prime mover and the key officer to drive the operations of the business.
PRODUCTS AND SERVICES:
Explained below is a description of the products offered by A-Z Merchant Ltd.
Wholesale Distribution of Dangote Cement:
The primary revenue source for the business will come from the wholesale of Dangote cement to the general public. The Managing Director Mr. AB Merhant intends to carry out multiple strategic marketing activities that will promote the distribution business which will generate high turnover for the business. He intends to source inventories/stock from the Dangote cement factory in Abajana, Kogi State, Nigeria.
Four employees (which include one Supervisor, one security man, one sales attendant, one driver) will be involved in the business operations and to assist customers with their needs.
Dangote Cement is a fully integrated cement company and has projects and operations in Nigeria and 14 other African countries. Its operations include, manufacturing/ importation, packaging and distribution of cements.
The Obajana Cement Plant (OCP) located in Kogi State is reputed to be one of the single largest cement plants in the world with a combined capacity of 10.25MMTPA.
Dangote Cement is also the biggest quoted company in West Africa and the only Nigerian company on the Forbes Global 2000 Companies.
The market characteristics show that there is steady demand for the commodity. Our survey also reveal that over 60% of the buyers ask for Dangote brand of cement. The fact that there is housing deficit and people are eager to have roof over their heads promotes the demand for cement. The location of this business is going to be in Lekki and later in Badagiri where there are a lot of building construction going on at all times. In fact, A-Z Merchant Ltd will sale to both retailers and direct consumers who could buy not less than 100 bags at a time.
One known fact about cement business is that it has a stable retail price which apply generally to all marketers. It is not foreseeable that a single wholesaler will be able to manipulate the price of the commodity. In such a price taker market, marketers make other marketing efforts to promote sales instead of price cut.
BUSINESS PROPOSAL ON CEMENT DISTRIBUTION BUSINESS IN NIGERIA.
A-Z Merchant Ltd will take the following measure to promote sales:
- Good publicity fliers, posters, and sign- posts
- Regular visits to customers, construction sites etc.
- Retailers friendship – good public relations with retailers, this will make him form a clique of retailers that he can always count on.
The long-range goal is to gain enough visibility to leverage upon so that A-Z Merchant Ltd will be able to expand with additional two warehouses in other parts of Lagos within its three years of existence.
The unique marketing approach / analysis using word of mouth, free gifts, loyalty cards, special offers will be applied. A special awareness contact marketing will be carried out by a dedicated staff within the first two months of the start-up of the business.
BASIC ASSUMPTIONS @ Business Proposal on Cement Distribution Business in Nigeria:
- This investment business plan and feasibility study, is anchored on the following critical assumptions:
- A-Z Merchant Ltd will have an annual turnover of N405,600,000.00 in the first year with growth rate of 20% per year in subsequent years.
- The Owner (Mr. AB Merchant) will acquire N5,000,000 of debt funds and personal equity contribution of N3,000,000. In addition to the N1,000,000 authorized share capital fully subscribed, to grow and develop the business.
- The loan will have a 3 year term with a 25% interest rate. Repayment of 33.33% of the loan annually while interest accrues only on the outstanding loan annually.
- Some macro-economic indicators like the price level and exchange rate will remain stable. At least, in the next one year, and that even when prices change, cement always maintain a constant rate of return..
- Democracy will continue to thrive thereby engendering political stability necessary for socio-economic growth and development.
The present macro-economic indicators, (economy-wide trends), government economic policies and the conditions peculiar to cement trading business in Nigeria provide reasonable assurance that the assumptions are realistic and will hold. Therefore, one is assured that some of the necessary conditions for the unhindered operations of A-Z Merchant Ltd. can be guaranteed.
Business Proposal on Cement Distribution Business in Nigeria – MANAGEMENT TEAM:
- This will be made up of the Managing Director Mr. AB Merchant and the following;
- Supervisor = 1 person
- Sales Man/Girl = 1 people
- Driver = 1 person
- Security = 1 person
Activities are scheduled as follows:
· Start-up capital to be ready by 5th July, 2017
· Every preparations to be concluded by 26th July, 2017
· The business to start off 1st August 2017
· Acquisition and disposal of five truck load of cement each week.
· Opening of two other branches within or after three years.
· Sales promotion activities at construction sites.
The proposed A_Z Merchants Ltd is going to be located in Lekki, Badagiri and Egbeda areas of Lagos where there are a lot of competitors.
A SWOT analysis carried out on the project reveals the following:
· Sited within construction areas
· Product is in high demand
· And, does not expire easily
The company will capitalize on its strengths to advance.
- A_Z Merchants Ltd is a new comer in the business.
- The source of product supply is Abajana in Kogi state
- The choice of selling only Dangote cement for now.
A BUSINESS PROPOSAL ON CEMENT DISTRIBUTION BUSINESS IN NIGERIA.
The external environmental analysis reveals certain new opportunities for profit and growth of the business. Some examples of such opportunities include:
- The market trends favours Dangote Cement brand
- Households, social organizations favours relocation to Lekki and Badagiri
- Market trend reveals an all-year-round demand
Changes in the external environment also may present threats to the business. Some examples of such threats include:
- The presence of other variety of product in the market
- Environment and Health regulations agency threats
- Tendency of existence/emergence of price war
- Lack of market entry barriers.
BUSINESS PROPOSAL ON CEMENT DISTRIBUTION BUSINESS IN NIGERIA – MARKET ANALYSIS:
We identify cement distribution business as non-gender sensitive. What we have found out is that every human needs house to live in. We have identified that every one from the age of twenty upwards wants to own a personal house.
There are five key factors that drive the demand for cement in Lagos:
- Every family needs a roof over her head.
- And, every grown up person; ages 20 and above need to be in his/her house.
- Governments (Local, State, and Federal) embark on infrastructural development efforts
- Estate investors continue to build more houses.
- Urban growth – Lagos has continued to grow and develop all round.
- Social organizations like Churches, Mosques build regularlly
Segment Expected Demand:
- Constructions firms 20%
- Block moulding firms 25%
- Government agencies 15%
- Households 8%
- Estate owners and managers 15%
- Retailers 7%
- Social organizations 10%
BUSINESS PROPOSAL ON CEMENT DISTRIBUTION BUSINESS IN NIGERIA – MARKET PLAN
Since cement business is a standard price market , that is to say, a price taker, A_Z Merchants Ltd will adopt various service delivery strategies to attract and sustain customer loyalty.
These will be in the form of:
- Use of the business van to deliver goods to customers
- Making bulk delivery direct to customers sites
- And, making flexible purchase plan for customers’
Marketing objectives are to:
- Attract buyers
- Increase turnover
- Create customer
- Create customer satisfaction.
A_Z Merchants Ltd will apply a lot of marketing strategies which will aim at increased turnover. These will include:
1. Good public relations
2. Advertising methods – distribution of fliers, use of banners etc.
3. Sales incentives like free delivery service, advisory services etc.
BUSINESS PROPOSAL ON CEMENT DISTRIBUTION BUSINESS IN NIGERIA – FINANCIAL ANALYSIS:
In order to carry out this project, plans on how to raise the venture capital are stated below.
Table: Source of Funds:
REQUIRED START-UP CAPITAL
FIXED CAPITAL INVESTMENTS/EXPENSES:
Table: Fixed Capital Investment
Estimate: 5 Trucks must be sold per week
Growth rate is 20% in year 2 and 3
BREAK EVEN ANALYSIS:
Break even analysis based on sale of number of trucks per week for 52 weeks of the year. The monetary values are in Naira.
From these break even analysis:
- The company must not sell less than 5 trucks in a month
- As a distributive trade all start-up expenses are considered as fixed
- The company intends to expand within 3 years with additional 2 branches
- The Business Plan is bench marking 5 trucks per week for 52 weeks of the year. This will enable proper utilization of borrowed fund and make it achieve its objectives
- Because most of the fixed costs are due towards the year end, the company can increase its turnover and earnings above 5 trucks a week for 52 weeks in the year without incurring further costs.
Business Proposal on Cement Distribution Business in Nigeria – BUSINESS RATIOS:
All the business ratios generated in this business proposal are shown in this table
Economically, this business will not only create wealth and benefits to its promoters, the project will fetch its entrepreneur’s good financial resources for business expansion.
A BUSINESS PROPOSAL ON CEMENT DISTRIBUTION BUSINESS IN NIGERIA.
Business Proposal on Cement Distribution Business in Nigeria – CONCLUSION
Based on the projections of A_Z Merchants Ltd above, the project has a very good chance to be financially successful. More importantly is the positive economic impact it will have in the lives of the people of Lekki and its environs.
The management is free to make their expansion decisions after three years of operations.
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Founder/Managing Partner of Complete Full Marks Consultants Ltd. An Economist turned Chattered Accountant and Tax Practitioner with over 37 years of industrial experience.