Đánh giá tính khả thi mở showroom nội thất

Pre-Feasibility Study

FURNITURE SHOWRROM

Small and Medium Enterprise Development Authority
Government of Pakistan
www.smeda.org.pk
HEAD OFFICE
6th & 8th Floor LDA Plaza, Egerton Road, Lahore.
Tel: (92 042) 111-111-456 Fax: (92 042) 6304926-7

REGIONAL OFFICE
PUNJAB

REGIONAL OFFICE
SINDH

REGIONAL OFFICE
NWFP

REGIONAL OFFICE
BALOCHISTAN

8th Floor LDA Plaza,
Egerton Road, Lahore.
Tel: (042) 111-111-456
Fax: (042) 6304926-7


5TH Floor, Bahria
Complex II, M.T. Khan Road,

Karachi.
Tel: (021) 111-111-456
Fax: (021) 5610572


Ground Floor
State Life Building
The Mall, Peshawar.
Tel: (091) 9213046-47
Fax: (091) 286908


Bungalow No. 15-A
Chaman Housing Scheme
Airport Road, Quetta.
Tel: (081) 831623, 831702
Fax: (081) 831922


June, 2006


Pre-feasibility

Furniture Showroom

DISCLAIMER........................................................................................................................................ 3
1

INTRODUCTION TO SMEDA.................................................................................................... 4

2

PURPOSE OF THE DOCUMENT ............................................................................................... 4

3

CRITICAL SUCCESS FACTORS IN DECISION MAKING FOR INVESTMENT.................. 5
3.1
SWOT ANALYSIS ................................................................................................................ 5
3.1.1
Strengths ........................................................................................................................... 5
3.1.2
Weaknesses........................................................................................................................ 5
3.1.3
Opportunities..................................................................................................................... 5
3.1.4
Threats .............................................................................................................................. 6
3.2
CRITICAL SUCCESS FACTORS.......................................................................................... 6
3.2.1
Quality of raw material...................................................................................................... 6
3.2.2
Attractive Design and Quality Finishing............................................................................. 6
3.2.3
Sales promotion ................................................................................................................. 6
3.2.4
Other Success Factors ....................................................................................................... 6

4

PROJECT PROFILE.................................................................................................................... 7
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11

5

PROJECT BRIEF................................................................................................................... 7
OPPORTUNITY RATIONALE.............................................................................................. 8
TARGET CUSTOMERS........................................................................................................ 8
MARKET ENTRY TIME....................................................................................................... 8
PROPOSED BUSINESS LEGAL STATUS ............................................................................ 8
PROJECT CAPACITY AND RATIONALE ........................................................................... 9
PROPOSED LOCATION....................................................................................................... 9
PROPOSED PRODUCT MIX OFFERED............................................................................... 9
PROPOSED PRODUCT MIX ................................................................................................ 9
PROJECT INVESTMENT ................................................................................................... 10
RECOMMENDED PROJECT PARAMETERS .................................................................... 10

MARKET INFORMATION ABOUT FURNITURE ................................................................. 10
5.1

REQUIREMENT OF WOODEN FURNITURE .................................................................... 11

6

IMPORTED FURNITURE ......................................................................................................... 12

7

PROJECT MARKETING STRATEGY..................................................................................... 14
7.1
MARKETING STRATEGY ................................................................................................. 14
7.1.1
Brand Name .................................................................................................................... 14
7.1.2
Advertising ...................................................................................................................... 14
7.2
TRENDS IN FURNITURE STYLE ...................................................................................... 14
7.3
TRENDS IN MATERIALS, COLOURS AND SHAPES ....................................................... 15
7.3.1
Materials......................................................................................................................... 15

8

PROJECT PRE-REQUISITES................................................................................................... 16

9

FINANCIAL STATEMENTS ..................................................................................................... 23

9.1
9.2
9.3
9.4

PROJECT COST ...................................................................................................................... 23
PROFIT & LOSS ..................................................................................................................... 24
BALANCE SHEET ................................................................................................................... 25
CASH-FLOW STATEMENT ...................................................................................................... 26

PREF-99/June, 2006/ Rev 1

2


Pre-feasibility

Furniture Showroom

DISCLAIMER
The purpose and scope of this information memorandum is to introduce the subject
matter and provide a general idea and information on the said area. All the material
included in this document is based on data/information gathered from various sources and
is based on certain assumptions. Although, due care and diligence has been taken 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 does not assume any liability for any financial or other loss
resulting from this memorandum in consequence of undertaking this activity. The
prospective user of this memorandum is encouraged to carry out additional diligence and
gather any information he/she feels necessary for making an informed decision.

For more information on services offered by SMEDA, please contact our website:
www.smeda.org.pk

DOCUMENT CONTROL
Document No.

PREF-99

Prepared by

SMEDA Punjab

Issue Date

June 2006

Issued by

SMEDA Punjab

PREF-99/June, 2006/ Rev 1

3


Pre-feasibility

1

Furniture Showroom

INTRODUCTION TO SMEDA

The Small and Medium Enterprise Development Authority (SMEDA) was established
with the objective to provide fresh impetus to the economy through the launch of an
aggressive SME Support Program.
Since its inception in October 1998, SMEDA had adopted a sectoral SME Development
Approach. A few priority sectors were selected on the criterion of SME presence. In
depth research was conducted and comprehensive development plans were formulated
after identification of impediments and retardants. The all-encompassing sectoral
development strategy involved recommending changes in the regulatory environment by
taking into consideration other important aspects including Finance, Marketing,
Technology and Human Resource Development.
SMEDA has so far successfully formulated strategies for sectors including, Fruits and
Vegetables, Marble and Granite, Gems and Jewelry, Marine Fisheries, Leather and
Footwear, Textiles, Surgical Instruments, Transport and Dairy. Whereas the task of SME
development at a broader scale still requires more coverage and enhanced reach in terms
of SMEDA’s areas of operation.
Along with the sectoral focus a broad spectrum of Business Development Services is also
offered to the SMEs by SMEDA. These services include identification of viable business
opportunities for potential SME Investors. In order to facilitate these Investors, SMEDA
provides business guidance through its help desk services as well as development of
Project Specific Documents. These documents consist of information required to make
well-researched investment decisions. Pre-feasibility Studies and Business Plan
Development are some of the services provided to enhance the capacity of individual
SMEs to exploit viable business opportunities in a better way.
This document is in the continuation of this effort to enable potential investors to make
well-informed Investment Decisions.

2

PURPOSE OF THE DOCUMENT

The objective of this proposed Pre-feasibility is primarily to facilitate potential
entrepreneurs with the Investment information and provide an overview about the
"Furniture Show Room Business". The proposed Pre-feasibility may form the basis of
an important investment decision and in order to serve this objective, the document
covers various aspects of Furniture Showroom Business Concept Development, Start-up,
Operations, Marketing, Finance and Business Management. This document also provides
Sectoral Information, brief on Government Policies and International Scenario, which
have some bearing on the Project itself.
This particular Pre-feasibility is regarding setting up "Furniture Show Room". In
meeting the above tasks we have obtained information from industry sources and officials
of major wooden furniture manufacturers and owners of Furniture Show Rooms in
Pakistan.
Our report is based on the information obtained by us from industry sources as well as
our discussions with businessmen. For financial model, since the forecast/projections

PREF-99/June, 2006/ Rev 1

4


Pre-feasibility

Furniture Showroom

relate to the future periods, actual results are likely to differ because of the events and
circumstances that don’t occur frequently as expected.
Whilst due care and attention has been taken in performing the exercise, no liability can

be inferred for any in-accuracy or omissions reported from the results thereof. It is
essential that our report be read in its entirety with financial model in order to fully
comprehend the impact of key assumptions on the range of values determined.

3
3. 1

CRITICAL SUCCESS FACTORS IN DECISION MAKING FOR
INVESTMENT
SWOT ANALYSIS

Wood is the main raw material and the entire finished product depends on quality of
wood. The information and technical know how about the quality of wood and use of
seasoned (dry) plays a vital role in the manufacturing of good quality furniture and the
ultimate establishment of Furniture Show Room. Strong competition exists in the
international and domestic market. Manufacturing and sale of high quality trendy designs
and aggressive marketing is essential to get a permanent place in the market.
Before making the decision, whether to invest in setting up the Furniture Show Room or
not, one should carefully analyze the associated risk factors. A SWOT analysis can help
in analyzing these factors, which can play important role in making the decision.
3.1.1 Strengths
i-

Availability of Cheaper Labor & Raw Material.

ii-

Growing Local Market both in organized and un-organized sectors of the
Furniture Industry.

iii-

High quality Furniture using high quality Raw Material.

iv-

The life style of the people is improving and they are getting more quality
conscious and are willing to spend more on their house renovation/decoration.

v-

Market penetration through high quality and heavy promotional activities.

vi-

Own designer who could help to create better furniture designs.

3.1.2 Weaknesses
i-

High employment turnover rate.

ii-

Seasonal sector (especially household furniture in the wedding season –
November to March).

iii-

Heavy investment in the working capital.

iv-

Very strict quality control required.

3.1.3 Opportunities
iii-

Increasing preference for the high quality products.
Construction/Renovation of houses and Offices create new opportunities.

PREF-99/June, 2006/ Rev 1

5


Pre-feasibility
iii-

Furniture Showroom

Market share can be acquired from un-organized sector through high quality and
promotional activity.

3.1.4 Threats
iiiiii3. 2

Narrow market, as target market is high class.
Quality & design of the Furniture needs to be considered very closely as the
lifestyle of people is improving.

Established competitors.
CRITICAL SUCCESS FACTORS

3.2.1 Quality of raw material
The furniture industry in Pakistan is dependent on the quality of the raw material
available. Although high quality wood is abundant in Pakistan but many times customer
complaints arise due to the use of cheaper and low quality wood by the manufacturers. It
has to be ensured that furniture displayed in Showroom is made of high quality wood.
3.2.2 Attractive Design and Quality Finishing
The life style of the people is improving and they are getting more quality conscious.
New tastes and designs are being adopted by the people. Special attention should be
given to present latest designs according to local market demands & requirements.
New designs and styles can build brand equity for the business. As there is high
competition in market, creation of new designs and styles, and setting new trends is vital.
As this proposed showroom business is expected to target high class, it is likely to attract
people living in posh areas of Gulberg, Defence and Model Town etc. and the furniture
should be able to fulfill their special needs. It is therefore more important that furniture
should be of latest design, according to new fashion and beauty standards than mere
durability and hardness. We don’t undermine the importance of durable furniture but it is
of utmost importance that furniture should reflect latest style and fashion so as to attract
the relevant class of the society.
3.2.3 Sales promotion
Another critical success factor of this proposed pre-feasibility is the Marketing and
Promotion of the Furniture in the market. Sales promotion activity is necessary for
market penetration.
This involves the dedication and hard work from the marketing personal and detailed
advertising through electronic Media along with the use of other automated marketing
techniques.
3.2.4 Other Success Factors
i-

Advance Orders for sale can ensure the success of the Business.

ii-

Assurance to customers that furniture is made of seasoned (Dry) wood. Properly
seasoned (Dry) wood ensures high quality furniture as it minimizes deforming
due to dampness in wood.

PREF-99/June, 2006/ Rev 1

6


Pre-feasibility

Furniture Showroom

iii-

New designs and styles can build brand equity for business. As there is high
competition in market, to make the project commercially viable, creation of new
designs ands styles and setting new trends is vital

iv-

The location of Showroom is very important for success. The Showroom should
be located in heavily populated or developing cities and its location within the
city should in accordance with the target market of the business.

v-

Responsiveness to Customers' demands and requirements is very important to
stay in market and retain market share.

vi-

Better customer service and after sale service to promote business goodwill.

vii-

Competitive prices should be offered.

4
4. 1

PROJECT PROFILE
PROJECT BRIEF

The proposed project is for setting up FURNITURE SHOWROOM. This project is
only concerned with “Furniture Showroom” and does not include manufacturing facility.
The furniture manufacturing is assumed to be outsourced to various manufacturers
however the project shall have its own designer for the purpose of collecting information
about furniture market trends, latest styles, designs, fashions and creating new ones. The
Project will cater to the needs of domestic market out of the imports and locally
manufactured furniture through out-sourcing.
The products covered in this pre-feasibility are domestic or household furniture in
finished form. It specifically excludes the contract sector, which includes furniture for
civil aviation, hospitals, schools, and other similar purposes. Antique, second-hand
furniture and garden furniture has been excluded as well.

In this proposed pre-feasibility furniture is divided into the following major categories:
Table 1: Product Categories
Product Categories
Common Room
furniture
Bedroom furniture
Dining and living
Office furniture
Upholstered seating

Non-upholstered
seating

PREF-99/June, 2006/ Rev 1

Most Common Items
Sideboards, shelf systems, room dividers etc.
Beds, bedside tables, dressing tables, chests of drawers,
wardrobes (fitted or free-standing);
Dining sets (tables and chairs), dressers, coffee tables,
Desks, tables, chairs, drawer unit, filing cabinets, integrated
workstations etc.
Armchairs, reclining chairs, couches, sofas, divans, footstools,
seating elements upholstered with leather, wool, synthetic
material, cotton etc;
Seats, armchairs, rocking chairs, seats convertible into beds,
stools;

7

Pre-feasibility
4. 2

Furniture Showroom

OPPORTUNITY RATIONALE

The demand for wooden furniture is increasing in the domestic market as well as in the
international market due to its traditional appeal and durability despite the introduction of
new materials in furniture manufacturing. Furniture Showroom is a viable profitable
business if done properly on Commercial basis. Demand for household and office
furniture is growing considerably as socio-economic development is taking place. With
the rapid increase in the development of new housing schemes, the increased demand of
wooden furniture is also anticipated. According to the National Housing Policy 2001, the
house construction was to be raised by 500,000 houses per annum. Furthermore,
introduction of new schemes by different banks for house and consumer financing have
also raised the purchasing power of general public.
Furniture, which is given as dowry, forms the major portion of sales of furniture in
Pakistan. As a result, the demand for household furniture increases substantially in winter
and spring season due to weddings. Domestic/office requirements and trend of dowry in
the form of furniture considerably increase the need for quality furniture.
Major trading partner of wooden furniture manufactured in Pakistan are USA, UK, Japan,
UAE and earning substantial foreign exchange for the country and contributing towards
the strengthening of economy.
4. 3

TARGET CUSTOMERS

Although, currently the Pakistan’s export of the wooden furniture is not significant as

compared to total International market but its exports are increasing rapidly. Pakistan’s
exports of wooden furniture have increased by 34.33 percent in year 2002-2003.
Internationally, Pakistan’s major trading partners are Gulf region, Australia, and USA,
which are still negligible as compared to the volume of international market. There is
large scope of wooden furniture in other countries like Spain, Germany, Italy, South
Africa, etc.
This proposed project is concerned with the domestic market of Pakistan. The target
market for this proposed project would be high class living in posh areas of developed
cities. The demand in these areas is influenced by the number of new houses/offices built
and old houses/offices renovated/reconstructed. The renovation and redecoration of
households is a routine process in these areas.
4. 4

MARKET ENTRY TIME

Though the demand for wooden furniture in domestic market exists throughout the year
(especially for office furniture & renovation requirements), but it significantly increases
during the period of October to March because of the wedding season and hence the
demand for the furniture almost gets doubled during this period. Hence, the prime time to
enter into market is June so that the Showroom gets into commercial operations before
the start of the wedding season.
4. 5

PROPOSED BUSINESS LEGAL STATUS

The said project can be a sole proprietorship or a partnership and even it can be registered
under the Companies Ordinance, 1984 with the Securities & Exchange Commission of
Pakistan. The selection totally depends upon the choice of the entrepreneur. This pre-

PREF-99/June, 2006/ Rev 1

8


Pre-feasibility

Furniture Showroom

feasibility assumes the legal status of a sole proprietorship/partnership as this does not
involve heavy investment. Moreover less legal requirements and costs are involved in
forming, administration and running the sole proprietorship or partnership business.
Lower tax rates for this type of business legal status would be an added advantage.
4. 6

PROJECT CAPACITY AND RATIONALE

The proposed project is capable of selling the complete range of wooden furniture and
other allied products to meet the demands of the domestic market out of imports and
locally manufactured furniture through out-sourcing. The Show room will work 11 hours
a day for 300 days.
4. 7

PROPOSED LOCATION

The socio-economic conditions of the country and population have a direct influence on
the local furniture demand. The Income level of community and improved life style of
people also effect the good quality furniture requirements. Considering this fact the said
project can be started in any posh area of developed cities like Lahore, Karachi,
Islamabad, Sialkot or Faisalabad etc. It is however recommended to establish the Project
at Lahore - Gulberg. The general living trend of the people in the region considerably

increases the scope for establishment of the proposed project.
4. 8

PROPOSED PRODUCT MIX OFFERED

This unit is capable of selling different sort of wooden furniture and allied accessories.
As this project is catering to the needs of the domestic market, it is however assumed that
the project will be selling the following furniture items, mix of which is as follows:
4. 9

PROPOSED PRODUCT MIX

The proposed project will be selling the Furniture in such mix as have been mentioned
below:
Table 2: Product Mix
1.

Bed Room Set
For Bachelors

3.

For Married
couples
Dinning Room
6 seater
8 seater
Common Room

4.

Drawing Room

5.

Office furniture
Executive

2.

PREF-99/June, 2006/ Rev 1

Single Bed, two side tables, One dressing table,
two chairs & one stool.
Double Bed, two side tables, One dressing table,
double seater sofa, one TV Trolley & one stool.

Projected
Sales
75
125

Dinning Table and chairs with trolley
Dinning Table and chairs with trolley
One TV Trolley, One three seater sofa and two
single seater sofas, One wooden partition and a
central table.
One three seater, two single seater and one double
seater sofa, one central table, one decorative sofa.

75
50
100

One Executive table, one revolving chair, two

75

9

75


Pre-feasibility

General

Furniture Showroom
chairs, one computer table and one 2 seater sofa.
One table including computer cabinet, one
revolving chair and two other chairs

250

Bedroom furniture is the largest segment as far as the domestic market requirements are
concerned and it comprises most of the domestic market of the wooden furniture.
4. 10

PROJECT INVESTMENT

Total Project cost is Rs. 11.97 million worked out in the following table:-.
Table 3: Project Investment
RUPEES
Capital Investment

9,681,000

Working Capital Requirement

2,296,202

Total Investment
4. 11

11,977,202

RECOMMENDED PROJECT PARAMETERS

Table 4: Project parameters
Capacity
1 hour a day for 300
days
Project Cost
11,977,202

Human Resource
11

Location
Gulberg, Lahore

Financial Summary
IRR
NPV (Rs.)
34.67%
16,919,197

Payback period
4.09 Years

The pre-feasibility is based on the assumption of 50% debt and 50% equity. However this
composition can be changed as per the requirements of the Investor.

5

MARKET INFORMATION ABOUT FURNITURE

According to Pakistan Economic Census 2005, out of the total 583 thousand
manufacturing industries covered in the census, 10.8% were in Wood & Wood Products
including furniture. According to the census, in the urban areas the share of house hold
establishments in wood products including furniture manufacturing was about 8% of the
total household manufacturing industries. Area wise analysis also depicts the similar
trends. Details may be seen in the following table. Province wise details are given below;
Table 5: No. of Manufacturing Establishments by Status & Area
Manufacturing Status of Establishments
Industry
All Areas
Rural Areas
Division
Total

House Other Total House Other
hold
than
hold
than
Estab. house
Estab. house
PREF-99/June, 2006/ Rev 1

10

Urban Areas
Total House Other
hold
than
Estab. house


Pre-feasibility

Furniture Showroom

Manufacturing
of Wood and
Wood Products
including
furniture
63,087 9,549

hold

Estab.

hold
Estab.

hold
Estab.

53,538 30,799 8,963

21,836 32,288 586

31,702

Table 6: No. of Manufacturing Establishments by Employment Size & Size
Manufacturing
Industry Division
Total

Status of Establishments
All Areas
Rural Areas
Employees
Total
Employees
Less
More
Less
More
than 10 than 10

than 10
than
10

Manufacturing of
Wood and Wood
Products including
furniture
63,087

5. 1

62,791

296

30,79
9

30,711

88

Total

Urban Areas
Employees
Less
More
than 10

than
10

32,288

32,080

REQUIREMENT OF WOODEN FURNITURE

In local market, the requirement for wooden furniture can be categorized into four types
namely:
a. For newly built house;
b. For dowry;
c. For renovation;
d. For Institutional buyer.
The majority of customers in the domestic market belong to first and second category.
These customers require furniture for their newly built houses and usually buy range of
products like bed sets, dining sets and sofa sets with other required furniture for their
entire house. In Pakistani society, Furniture is given as dowry. Therefore, its demand
increases in the spring and winter season due to weddings. Basic requirement of these
customers is bed set of new designs and styles. These types of customers also buy sofa
set or dining set along with bed set. Initially entrepreneur should target these customers to
establish the business and to increase the customer base. These potential customers can
play a dominating role in the successful break through of the business. With the
flourishing of tourism and hotel industry, considerable scope emerges for wooden
furniture in this sector. Large orders can be secured to supply wooden furniture to these
hotels and resort.

PREF-99/June, 2006/ Rev 1

11

208


Pre-feasibility

6

Furniture Showroom

IMPORTED FURNITURE

Furniture imported in Pakistan is normally of Italy, China & Spain. As this proposed
showroom business is targeted towards high class, it is necessary to offer imported
furniture. Due to its high attraction among targeted market, it can generate significant
revenue for the business.
Made in China’ - which had already hurt the local plastic industry and has made inroads
in toys, electronic items and other products is all set to dominate the local furniture
market. It is now feared that most of the people who had small businesses of producing
furniture have now become importers of Chinese furniture.
Those in the furniture business revealed that some 200 out of 500 factories in different
localities of Karachi including Liaqatabad, Landhi, Shershah and Gharibabad that were
busy in manufacturing small items of furniture like office chairs, TV trolleys and other
items have been completely shut down and that the owners of these factories have
become the importers of Chinese products.
The raw material used in making office chairs, TV trolleys and other small items are
available at a higher price in the local market and Chinese readymade products are
comparatively less expensive so most of the manufacturers have decided to shut down
their business and started to import the same item from China.

The foreign sources of furniture in Pakistan are China, Germany and Italy, however, they
have not yet succeeded in grabbing local market’s share of the heavy furniture. The
quality of local heavy furniture is higher and lesser in price, which includes complete bed
set which is much better than the Chinese one because in the customs, freight charges are
being charged according to the weight and volume of the item, and a Chinese bedroom
set costs around Rs 800,000/- when it reaches Karachi. However for the items which fall
in the light furniture category China has dominated the market and has hurt the local
industry to around 80 per cent.
An attempt on deco furniture and by using MDF chip board and fiber glass approach, the
domestic suppliers have been able to attract the consumers again to the local markets as
by using this approach the manufacturers have created decent designs and carvings on the
bedroom sets and an excellent indigenous bedroom set is now available in Rs175,000.
The Alliance of Market Associations Karachi has assured the government if it caps the
increasing prices of raw material and announces incentives to the manufacturers, the local
small furniture industry would be reactivated and hundreds of sidelined persons could be
re-employed.
Table 7: Furniture Import1
Product Code (HS) and
description

Import from

940310 Office furniture, metal, World
nes
1

Trade Analysis System 2004

PREF-99/June, 2006/ Rev 1

12

Value
Quantity
(000 US$)
(Nos.)
2003
2004
2003
2004
394
387 22,966 23,341


Pre-feasibility

940320 Furniture, metal, nes

940330 Office furniture,
wooden, nes

940340 Kitchen furniture,
wooden, nes

940350 Bedroom furniture,
wooden, nes

940360 Furniture, wooden, nes

940370 Furniture, plastic, nes

940380 Furniture of other
materials, incl. cane, osier,
bamboo/similar material

PREF-99/June, 2006/ Rev 1

Furniture Showroom
China
UAE
World
China
UAE
Thailand
South Africa
World

143
87
534
279
103
23
0
506

199 7,131 8,372
16 1,823
690
741 33,800 41,155
328 14,971 19,622

111 3,504 3,185
67 2,338 6,353
79
0 1,230
552 16,651 20,052

China
Malaysia
USA, PR,USVI
Thailand
Germany
World

130
77
100
47
101
127

198
139
73
59
0
317

5,981 8,471
2,499 5,321
2,545 2,117

1,105 1,332
1,934
0
4,211 11,864

China
Italy
World

70
44
400

203
81
791

3,019
721
16

8,725
2,227
19

Philippines
China
Malaysia
UAE
Italy

World
China
UAE
Germany
Saudi Arabia
World
China
World

0
125
54
91
51
698
331
117
8
99
115
47
372

309
151
100
53
14
1,259
616

117
193
98
175
130
530

0
10
1
2
1
21,960
12,091
3,451
252
553
23,018
6,904
17,337

4
9
2
1
0
43,698
27,305
4,153
3,691

570
33,931
26,837
43,345

USA, PR,USVI
China

194
61

285
100

13

6,062 21,965
4,046 7,728


Pre-feasibility

7
7. 1

Furniture Showroom

PROJECT MARKETING STRATEGY
MARKETING STRATEGY

When marketing furniture for the first time, make use of electronic media (cable
networks, television, etc.), websites, publicity and advertising in trade, Fashion and
Interior Decoration magazines etc.
In addition, sales promotion can be done at a reasonable cost in order to develop new
customers and keep in touch with your current customers. For example by a newsletter
(by e-mail) one can assure the customers that we are actively following latest interior
decoration trends in the Pakistan and are well-aware of the latest developments in quality
standards and newer styles & fashion etc. In the correspondence, a constant, prompt and
reliable communication is vital to build and maintain a long-term business relationship
with your customers.
7.1.1 Brand Name
In our case the name of Furniture Showroom can be promoted. Thus after a while people
believe in quality of furniture with reference to the Showroom name. For this purpose
high quality standards must be maintained along with better customer service.
7.1.2 Advertising
Advertising is another tool aimed at increasing the sale of furniture. Advertising in Print
Media along with Electronic Media is vital for success.
In order to get the best out of investment, following should be clarified:


7. 2

A clearly defined target group
A well-formulated message

- Potential Buyers
- What do I want to tell the customer.

TRENDS IN FURNITURE STYLE

In all furniture styles some significant trends are:
•

Individual items of furniture can be used for different functions: flexible seating for
sitting, reclining or sleeping; modular wall systems and living room systems.
Although newer homes are being built for smaller-sized households, there is a
demand for larger sized furniture, particularly loungers or large sofas. People like to
stretch out on sofas now rather than sitting in the more traditional way.

•

Furniture for older people with a focus on comfort (e.g. higher seats).

•

Part of the trend of making more use of the home space is to extend the home into the
garden or onto a patio or veranda.

•

Many households are full of furniture, so rather than overloading their homes,
consumers are looking for something with a simple elegance to achieve “less is
more”.

•

Combined with this simple functionality, consumers want some emotional attachment
with the item. For example, LED illumination to enhance simple cabinet, invisible

PREF-99/June, 2006/ Rev 1

14


Pre-feasibility

Furniture Showroom

loudspeakers in internal doors, new coverings on handles that feel good to touch, flat
screen TVs which almost disappear into surroundings when not being used.
•
7. 3

Small visible legs, made of metal or wood, are an important feature at the moment for
living room chairs, couches, armchairs and cupboards and small tables.
TRENDS IN MATERIALS, COLOURS AND SHAPES

Home furniture and furnishings are becoming more colorful. The colors used in
upholstery furniture fabrics, and cupboard and cabinet fronts are loud and bold. The
design and form concept in upholstered furniture remains voluminous. As far as materials
are concerned, there is a decrease in the use of cherry in new lines. However, cherry,
along with oak and walnut, are key materials for products at the high end of the market.
The shift towards furniture that is a fusion of wood with materials such as steel, glass and
other fabrics is now even more pronounced. The vogue is still very much for the dark,
exotic look with oak and other wood species presented in a number of guises, striped
effect to emulate zebrano, heavily lacquered and most popular of all, stained dark, almost
black. Modern technology is enhancing pieces with improved finishes and high-tech
options.
7.3.1 Materials
•

Woods: Interior parts and primary and secondary frames of most items are made
from lower quality wood like birch, ply and laminates, while for exposed surfaces
fine timbers are used. Lighter hard woods such as oak, beech, maple, alder, birch,
cherry and hickory have proved more popular than pine.

•

Rattan: fine wickerwork, bamboo, hemp, abaca and sea grass continue to be
important materials, which are increasingly used in natural interiors.

•

Metals: the metallic, hi-tech or industrial look is popular in furniture, being an eye
catching element. Metals in simple forms are often combined with wood or glass.
Stainless steel, chrome, wrought iron, aluminum and copper have become popular in
the past few years.

•

Glass: smoked glass and other opaque finishes, rather than clear (cold) glass is
popular. Natural and acrylic glass is increasingly used in combination with other
materials in tables, cabinets etc.

•

New materials: Experiments are done with new materials: polycarbonates in matt
finish, high gloss, transparent and in many colors. Also, recycled polyester is
increasingly being used in modern items.

•

Fabrics: these are softer in texture and appearance, with single light natural colors
used as a basis. Small motifs, textured look, geometric or large colorful designs are
possible. Floral designs, micro-fibers are still common and (soft) hi-tech fibers are
gaining importance.

•

Finishes: There is a trend towards high gloss finish in many colors for tables and
chests. There is also much use of polished, laminates, satin-finish, acid-etched,
painted glass with neutral or bright colors; opaque lacquers; painted and enameled
steel; anodized, polished and mat aluminum.

PREF-99/June, 2006/ Rev 1

15


Pre-feasibility

PREF-99/June, 2006/ Rev 1

Furniture Showroom

16


Pre-feasibility

8

Furniture Showroom

FIXED ASSETS

Following additional fixed assets are required.
8. 1

Office Equipment
Items

Computers
Printers
Fax Machine
Telephone Sets
Fire Fighting Equipments
TOTAL
8. 2

No. of
Items
2
2
1
5
5

Cost per Unit
Rupees

30,000
25,000
10,000
500
4,500

Furniture, Fixture & Fittings
Items

Office Furniture - including tables, chairs,
cabinets, etc.
Items

Qty

Air Conditioners / Split Units
Generator
Electric Installations & Fittings cables & wires
Fancy Lights
Other decoration espenses - sign
Board, antiques, wall paintings etc.
TOTAL

8
1

8. 3

Total Cost
Rupees

60,000
50,000
10,000
2,500
22,500
145,000

Cost
Rupees
280,000

Total Cost
Rupees
280,000

Cost per Unit
Rupees
25,000
185,000
150,000

Total Cost
Rupees
200,000
185,000
150,000

500
500,000

25,000
500,000

50

1,060,000

Motor Vehicles

The proposed project will also be following vehicles.
Items
Cars
Loader Mazda
Motor Cycles
Cycles

PREF-99/June, 2006/ Rev 1

Qty
1
1
1
1

Cost
600,000
675,000
55,000
3,500

17

Total Cost
600,000
675,000
55,000
3,500
1,333,500


Pre-feasibility

9

Furniture Showroom

LAND & BUILDING REQUIREMENT

9. 1. 1 L and
Land for the proposed business can be acquired on rent or it can be purchased based on
the judgment of the entrepreneur. It is however recommended to acquire the Land on
rent. Acquisition of land by way of purchase is not viable for the project since the project
is recommended to set up the project in posh area like Gulberg or Defense where the land
price ranges between 20,000,000/- to 30,000,000/-. The Land Rent is taken to be about
Rs. 250,000/- per Kannal. The total land requirement for this proposed project is
assumed to be of approximately 1.5 Kannals.
9. 1. 2 B ui l di ng
Building & Civil works

Display Hall - Ground Floor

Display Hall -First Floor
Management Offices
Wash Rooms
Kitchen
Store Room
Garrage - open Plot Area
Lawn / Garden
Total Infrastructure Cost

Space Reqd.
Sq. ft
5,000
3,000
300
100
100
600
550
100
9,750

Rate Per Sq.
Ft.
Rupees
800
700
800
700
600
500

150
100

Total Cost
Rupees
4,000,000
2,100,000
240,000
70,000
60,000
300,000
82,500
10,000
6,862,500

10 HUMAN RESOURCE REQUIREMENT
10. 1

Human Resource Requirements

Following table shows the requirements of Human Resources.
Description
ADMINISTRATIVE COST
Admin & Finance Manager
Engineer / Designer
Showroom Supervisor
Accountant
Store Supervisor
Office Boy
Driver

Security Guard, Gate Keepers
Sweeper
Total Administrative Salaries

PREF-99/June, 2006/ Rev 1

Employees
1
1
1
1
1
1
1
1
1

18

Salary / Month

Annual Salary

20,000
35,000
12,000
7,000
8,000
4,000
5,000

4,500
2,500

240,000
420,000
144,000
84,000
96,000
48,000
60,000
54,000
30,000
1,176,000


Pre-feasibility
MARKETING COST
Senior Sales Officer
Assistant Sales Officer
Total Marketing Salaries
ADMINISTRATIVE COST
Administrative Cost
Other Benefits

Furniture Showroom

300,000
96,000
396,000
Rs.

1,176,000
294,000
1,470,000
MARKETING COST
Rs.
Marketing Cost
396,000
Other Benefits
99,000
495,000
* Other benefits include EOBI, Social Security, Gratuity, Medical and Other welfare
expenses.

PREF-99/June, 2006/ Rev 1

1
1

25,000
8,000

19


Pre-feasibility

Furniture Showroom

11 KEY ASSUMPTIONS
11. 1

Project Assumptions

Projected Life of The Project in Years
Sponsors' Equity
Debt Financing
Annual Mark Up Rate (Short Term & Long Term)
Debt Tenure in Years
General Inflation Rate
11. 2

10
50%
50%
15%
5
5%

Operating Assumptions

Total No. of Days in One Year
Total No. of Months in One Year
No of Working Days in One Year
Capacity ( Sales ) growth rate
11. 3

365
12
300
5%

Depreciation Rate Assumptions

Land
Buildings
Fittings & Installations
Office Equipments
Furniture & Fixtures
Vehicles
11. 4

0%
5%
10%
20%
10%
20%

of the Written Down Value
of the Written Down Value
of the Written Down Value
of the Written Down Value
of the Written Down Value
of the Written Down Value

Working Capital Turnover Assumptions

The investment in the stock in trade is taken
5,000,000
to be Rs.

Stores and Spares
30 Days Stores & Spares Consumption
Accounts Payable
Purchases
30 Days of Cost of Furniture purchase.
Expenses
30 Days of Total Annual Expenditure
11. 5

Advances & Prepayments

Advances to Staff
Loans to Staff
Advances against expenses

Advances to Contractors
Electricity
Telephone (2 sets)
Prepaid Insurance

PREF-99/June, 2006/ Rev 1

20%
10%
5%

of the one month's salary
of the Total annual salary
of the traveling, entertainment, repair,
vehicle running, sale promotion and other

general expenses
5% of the Raw Material purchases
2,000 per month
300 per month
90
Days Insurance Cost

20


Pre-feasibility
11. 6

Furniture Showroom

Long Term Loan

Term
Total Installments
Installments
Markup
Sales Tax Payable
11. 7

5 Years
10 bi-annually
2 per year
15% or 7.5% (arrear)
Rate 15% 1 month's Annual Sales Tax

Revenue Assumptions of locally manufactured furniture - Sale price &
Production Mix
Units

1. Bed Room Set
i For Bachelors
ii For Married couples
2. Dinning Room
i 6 seater
ii 8 seater
3. Common Room
4. Drawing Room
5. Office furniture
i Executive
ii General
11. 8

Final Price to Consumers net of discount
Value ex-Sales Discount
Net Sales
Tax
allowed
Value
10%
Rupees
Rupees
Rupees

75
125

60,000
105,000

6,000
10,500

54,000
94,500

75
50
100
75

15,000
20,000
95,000
120,000

1,500
2,000
9,500
12,000

13,500
18,000
85,500
108,000

75
250

65,000
25,000

6,500
2,500

58,500
22,500

Revenue Assumptions of Imported furniture - Sale price & Production
M ix

Final Price to Consumers net of discount
Units
Value exDiscount
Net Sales
Sales Tax
allowed
Rupees
Rupees
Rupees
1. Bed Room Sets for married
24 165,000
16,500
148,500
Couples
2. Drawing Room

18 245,000
24,500
220,500
3. Common Room
18 160,000
16,000
144,000

PREF-99/June, 2006/ Rev 1

21


Pre-feasibility

11. 9

Furniture Showroom

Cost of Sales

Locally manufactured Furniture Cost
1.

2.

3.
4.
5.

Cost per set
Rupees

Bed Room Set
iFor Bachelors
ii For Married couples
Dinning Room
i6 seater
ii 8 seater
Common Room
Drawing Room
Office furniture
iExecutive
ii General

40,500
70,875
10,125
13,500
64,125
81,000
43,875
16,875

Imported Furniture Cost
1.
2.
3.

Bed Room Sets for married Couples

Drawing Room
Common Room

11. 10

111,375
165,375
108,000

Others

Carriage & Freight Inward
Stores & Spares
Research & Development Cost
Building and fittings & installations
Building Insurance
Salaries, Wages & other benefits
Traveling & Conveyance
Printing & Stationary
11. 11

2%
1%
1%
7%
2%
25%
1%
.5%

of Cost of Furniture
of Cost of Furniture
of Cost of Furniture
of the Cost
of the Cost of Building
of the Salaries & Wages
of Total Cost of Goods Sold
of Total Cost of Goods Sold

Vehicle Running Expenses
Consumption per liter.

1 Loader Mazda
2 Cars
1 Motor Cycles

5 Km / Liter
10 Km / Liter
50 Km / Liter

PREF-99/June, 2006/ Rev 1

Rate per liter
Diesel
Diesel
Petrol

22

35

35
57

Traveling / day
40 km / day
50 km / day
30 km / day

Annual
Tours
600
300
300


Pre-feasibility

Furniture Showroom

12 FINANCIAL STATEMENTS
12. 1

Project Cost

ESTIMATED PROJECT COST & PROPOSED FINANCING
RUPEES
Fixed Capital Expenditure
Building
6,862,500
Fittings & Installations

1,060,000
Office Equipments
145,000
Furniture & Fixtures
280,000
Vehicles
1,333,500
9,681,000
Working Capital
Current Assets:
Stock in Trade
5,000,000
Stores & Spares
31,373
Cash introduced
500,000
Advances, Deposits & Other Receivables
1,535,655
7,067,027
Current Liabilities:
Accounts Payable
2,486,301
Accrued Charges
557,978
Sales Tax Payable
715,688
Provision for Taxation
1,010,859
4,770,826
Total Working Capital

2,296,202
11,977,202
Financed By:
Sponsors' Equity
5,988,601
Debt Financing
5,988,601
Total
11,977,202
Project Viability:
IRR
Payback
NPV @ 20%

PREF-99/June, 2006/ Rev 1

34.67%
4.09 Yrs
16,919,197

23


Pre-feasibility

12. 2

Furniture Showroom

Profit & Loss

Sales out of locally
manufactured goods
Sales out of imported furniture
Sales - Net of Sales Tax
Cost of Sales
Gross Profit
Operating Expenses:
Administrative Expenses
Marketing Expenses
Operating Profit
Other Income
Financial & Other Charges
Mark up on Long Term Loans
Bank Charges
Profit before Taxation
Taxation
Profit after Taxation
Accumulated Profits - brought
forward
Accumulated Profits - carried
to the Balance Sheet

Year - 1

Year - 2

Year - 3

Year - 4

Year - 5

Year - 6

Year - 7

Year - 8

Year - 9

Year - 10

40,837,500

45,023,344

49,638,236

54,726,156

60,335,587

66,519,984

73,338,283

80,855,457

89,143,141

98,280,313

10,692,000
51,529,500
43,009,425
8,520,075

11,787,930
56,811,274
47,239,820
9,571,454

12,996,193
62,634,429
51,894,927
10,739,502

14,328,303
69,054,458
57,017,834
12,036,624

15,796,954
76,132,540
62,656,023
13,476,517

17,416,141
83,936,126

68,861,819
15,074,306

19,201,296
92,539,579
75,692,887
16,846,691

21,169,429
102,024,885
83,212,777
18,812,109

23,339,295
112,482,436
91,491,523
20,990,913

25,731,573
124,011,886
100,606,312
23,405,574

4,266,144
1,674,940
5,941,084
2,578,991
386,471
2,965,462

4,254,713
1,376,687
5,631,400
3,940,053
426,085
4,366,138

4,428,196
943,871
5,372,067
5,367,435
469,758
5,837,193

4,635,418
1,019,651
5,655,069
6,381,555
517,908
6,899,464

4,875,924
1,102,079
5,978,002
7,498,515
570,994
8,069,509

5,149,885
1,191,772

6,341,657
8,732,649
629,521
9,362,170

5,458,028
1,289,409
6,747,437
10,099,254
694,047
10,793,301

5,801,581
1,395,732
7,197,314
11,614,795
765,187
12,379,982

6,182,244
1,511,557
7,693,802
13,297,112
843,618
14,140,730

6,602,162
1,637,778
8,239,940
15,165,634

930,089
16,095,723

77,294
77,294
2,888,168
1,010,859

853,376
85,217
938,593
3,427,545
1,199,641

673,718
93,952
767,669
5,069,524
1,774,333

494,060
103,582
597,641
6,301,822
2,205,638

314,402
114,199
428,600
7,640,908

2,674,318

134,744
125,904
260,648
9,101,522
3,185,533

138,809
138,809
10,654,492
3,729,072

153,037
153,037
12,226,944
4,279,431

168,724
168,724
13,972,006
4,890,202

186,018
186,018
15,909,705
5,568,397

1,877,309
-

2,227,904
1,877,309

3,295,190
4,105,214

4,096,185
7,400,404

4,966,590
11,496,589

5,915,989
16,463,179

6,925,420
22,379,169

7,947,514
29,304,588

9,081,804
37,252,102

10,341,308
46,333,906

1,877,309

4,105,214

7,400,404

11,496,589

16,463,179

22,379,169

29,304,588

37,252,102

46,333,906

56,675,214

PREF-99/June, 2006/ Rev 1

24


Pre-feasibility

12. 3

Furniture Showroom

Balance Sheet

Tangible Fixed Assets
Long Term Deposits
Electricity
Sui Gas
Current Assets:
Stock in Trade
Stores & Spares
Advances, Deposits & Other
Receivables
Cash in Hand / Bank

Owners Equity:
Capital Introduced
Accumulated Profits
Long Term Loan
Current Liabilities:
Current Portion of Long Term Loan
Accounts Payable
Accrued Charges
Mark - up payable
Sales Tax Payable
Provision for Taxation

PREF-99/June, 2006/ Rev 1

Year - 1
8,908,175

Year - 2

8,225,046

Year - 3
7,617,588

Year - 4
7,074,317

Year - 5
6,585,803

Year - 6
6,144,279

Year - 7
5,743,321

Year - 8
5,377,600

Year - 9
5,042,671

Year - 10
4,734,814

50,000
10,000
60,000

50,000
10,000
60,000

50,000
10,000
60,000

50,000
10,000
60,000

50,000
10,000
60,000

50,000
10,000
60,000

50,000
10,000
60,000

50,000
10,000
60,000

50,000
10,000

60,000

50,000
10,000
60,000

5,000,000
31,373
1,535,655

5,250,000
34,588
1,640,298

5,512,500
38,134
1,760,374

5,788,125
42,042
1,920,229

6,077,531
46,352
2,096,099

6,381,408
51,103
2,289,506

6,700,478
56,341
2,502,140

7,035,502
62,116
2,735,874

7,387,277
68,482
2,992,785

7,756,641
75,502
3,275,165

3,090,134
9,657,162
18,625,337

5,359,983
12,284,869
20,569,915

8,522,696
15,833,704
23,511,291

12,307,416
20,057,812

27,192,129

16,959,605
25,179,587
31,825,390

22,573,445
31,295,462
37,499,741

30,450,337
39,709,295
45,512,617

39,387,857
49,221,349
54,658,949

49,514,455
59,963,000
65,065,671

60,969,561
72,076,869
76,871,684

5,988,601
1,877,309
7,865,910
4,790,881

5,988,601
4,105,214
10,093,815
3,593,160

5,988,601
7,400,404
13,389,005
2,395,440

5,988,601
11,496,589
17,485,190
1,197,720

5,988,601
16,463,179
22,451,780
-

5,988,601
22,379,169
28,367,769
-

5,988,601
29,304,588
35,293,189
-

5,988,601
37,252,102
43,240,703
-

5,988,601
46,333,906
52,322,507
-

5,988,601
56,675,214
62,663,815
-

1,197,720
2,486,301
557,978
715,688
1,010,859

1,197,720
2,741,147
551,156
404,231
789,045
1,199,641

1,197,720

3,022,115
548,354
314,402
869,923
1,774,333

1,197,720
3,331,882
590,317
224,573
959,090
2,205,638

1,197,720
3,673,399
636,033
134,744
1,057,396
2,674,318

4,049,923
685,822
44,915
1,165,780
3,185,533

4,465,040
740,044

4,922,707

799,097

5,427,284
863,421

5,983,581
933,504

1,285,272
3,729,072

1,417,012
4,279,431

1,562,256
4,890,202

1,722,387
5,568,397

5,968,546
18,625,337

6,882,940
20,569,915

7,726,846
23,511,291

8,509,219

27,192,129

9,373,610
31,825,390

9,131,972
37,499,741

10,219,428
45,512,617

11,418,246
54,658,949

12,743,164
65,065,671

14,207,868
76,871,684

25