Project Report GMCS (1)

7/15/2019 Project Report GMCS (1)

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Business Plan



Executive SummarySoapy Rides is a prominent hand car wash serving the Chennai & Banglore.. SoapyRides will be run by Team 4.

The Business Soapy Rides will be providing customers with three services: exterior car washing, ,interior cleaning, and detailing. Soapy Rides has no true competitors that are tryingto offer a high quality service for a reasonable rate. Most are trying to compete onprice alone. Soapy Rides' ability to provide a high quality service, both in regards tothe actual washing as well as customer service is all based on their ability to find the

best employees. Hiring the best employees is cost effective because it decreasesHR costs associated with turnover and other employee costs. Hiring the bestemployees and making sure that they are well taken care of ensures that they in turntake care of the customers. Study after study proves that a happy employee is far more likely to provide the highest level of customer service compared to anemployee who is not happy and feels that they are being taken advantage of.

The Customers Soapy Rides will target three main groups of customers: individual car owner andleasers, car dealerships, and local businesses. The surrounding area is quiteaffluent, 40% of the residents earn over Rs.70,00,000 a year. Consequently, theyhave nice cars and want them to look nice. There are five different car dealershipswithin a three-mile radius which will require car washing services for the variousfleets. Lastly, there are many different local businesses that have company cars andthat require clean appearances.



1.1 ObjectivesThe objectives for Soapy Rides Car Wash and Detail Service are:

1. To be viewed as a premium car wash and detail service in Chennai.2. Maintain a very high gross profit margin.3. Maintain a modest, steadily growing net profit margin.4. Expand to two locations after third year of operation.

1.2 MissionThe mission of Soapy Ride is to provide top-quality washing and detail service for luxury car owners in Chennai. Soapy Rides will work to keep employees satisfied inorder to maintain impeccable customer service.

ServicesSoapy Rides will provide three services to its customers:

Car washing (exterior) Car cleaning (interior) Car detailing

Market Analysis SummaryThe car wash will be based in Chennai. This area has a number of benefits in termsof the market that it will provide for the business. Over 40% of households in theimmediate neighborhood earn over Rs.70,00,000 annually. Many people in theneighborhood own and/or lease new cars and place great value on their cars andhow they look. There are a large number of car dealerships in the area--five withinthree miles of the proposed location for Soapy Rides.4.1 Market SegmentationSoapy Rides segments its customers by type of car ownership. We believe that thetype of car that a person owns says volumes about their driving, and, therefore their

car washing and detailing requirements.

1. New car owners: Owners of newer cars are most likely to use a hand car washingservice. These owners take great pride in their cars and will bring them often to thewash and detail service. The goal with these customers is to promote regular use of the wash and detail service. The aim is to inform these customers that Soapy Rideswill keep their car looking as good as it did the day they drove it off the lot.

2. Older luxury car owners: These people have either owned their high-end luxurycars for several years or are unable to afford the expense of a new luxury car butwant the feel of relaxed driving. Both of these groups want to keep their cars in the

best shape possible. Those who have bought second-hand cars will often spend



many hours in their cars and will place high importance on keeping their cars lookinggood. These owners will bring their cars in for regular washes and occasional details.

3. Sports car owners: These people are often younger or middle-aged men and willregard the look of their car as important. They will also pride themselves on the look

of their car and will have their car hand washed (at least) weekly. These drivers willhave an occasional detail, but will keep their cars so clean the detail will not benecessary very often.

4. Lifetime owners: Many of these people have owned their cars for more than five or six years, and are more likely to be women. They are attached to their cars asfriends and though it may be more sensible for them to purchase a new car, they willbring their car in for a wash occassionally, just when the car is dirty. They like their cars to look presentable, and want to keep it in good shape but are not tied up in the

look of their car. For this reason, they will not have a detail carried out on their car unless they are selling it.

5. Dealerships: There are five new and used car dealerships within three miles of theproposed location of Soapy Rides. These dealerships often use outside car washservices to detail their vehicles before they are put up for sale. In addition, there arefifteen other car dealerships within a seven mile radius of Soapy Rides.

6. Local businesses: Some local businesses have fleets of cars and small vans thatmust be kept clean to maintain their company image. These businesses will

be looking for a cost effective, efficient car washing service to perform this service,and will prefer to use a car wash service during the week rather than duringweekends, like the general public.



4.2 Target Market Segment Strategy

The strategy behind Soapy Rides target segmentation is to attract customers whowill be repeat users and will frequent the business in the typically quiet times for acar wash business. It will not be difficult to attract customers during the summer months and on the weekends, the weekdays however, especially in the winter,people will not think about having their cars washed. For this reason, Soapy Rideswill target people who will tend not to be restricted to these busy times.

Business owners (new car owners) tend to be very busy people, but are often able tomake their own hours.

Retired people (older luxury car owners) are not restricted by typical work schedulesso will be able to frequent the car wash during the week.

Dealerships will need cars detailed and washed regardless of the time of the day andweek. This will supply a constant flow of traffic.

Businesses will need their fleet cars washed during the week during regular businesshours.

4.3 Service Business AnalysisThe hand car washing business in Chennai consists of many smallcompetitors. Everything from local children raising money for their youth group on aSaturday by cleaning cars, to the automatic car wash machines, are competition for Soapy Rides. However, these two alternatives aim to meet the needs of the price-conscious individuals who are choosing the service simply so they do not have toclean the car themselves. Soapy Rides on the other hand, targets the quality-conscious individuals who value their car enough to spend Rs.10-Rs.15 per week tomake it look good.

4.3.1 Competition and Buying Patterns

There is one other hand car wash shop in Chennai. It is quite new and is trying tocompete with automatic car washes by offering low prices. However, it is nottargeting the customers who seek quality cleaning.The customers who Soapy Rides is targeting have their cars washed based on thequality of the job. They do not mind spending a little more each week to have their car washed and waxed in order to keep the paint work in excellent shape. Thebusinesses that Soapy Rides targets will be more cost conscious, so prices will beapproximately 30% less for these customers to promote volume usage.

Strategy and Implementation Summary

The key differentiator for Soapy Rides Car Wash is Team 4 and his business andpersonal connections within the Chennai neighborhood. For this reason, the sales



and marketing focus will be on a one-to-one basis, with the emphasis on gainingloyal and repeat customers as "friends" of the business. Soapy Rides, therefore, willdepend on word-of-mouth advertising for the immediate community.

5.1 Competitive Edge

Soapy Rides' competitive edge will be Team 4 and the quality of the family name inthe Chennai area. As mentioned, the family has been in the car business for over 30years, and has an excellent reputation and a myriad of both business and personalcontacts. In addition, Mark has put a great deal of emphasis on creating a systemthat is both fast and efficient, which will keep costs, in terms of time spent per car, toa minimum.

5.2 Sales StrategySales strategy is on a one-to-one basis. All customers will feel they are a valuedfriend of Soapy Rides, and that all employees care about the care and upkeep of

each vehicle. We must be aware that there are low switching costs in the car washing industry, so we have to work hard to develop and keep repeat customers.

5.2.1 Sales ForecastThe following chart forecasts sales based upon the Market Segmentation Strategy.Sales are seasonal in this industry, tending to be higher in the warmer summer months, and to drop off in the winter. However, we will aim to flatten sales across thesales cycle by targeting segments that will want to keep their cars clean and lookinggood year round.



Sales Forecast ( Rs. In ’00)

Year 1 Year 2 Year 3

Unit Sales

Full Wash 1,760 2,288 2,974

Exterior Wash 2,050 2,665 3,465

Interior Clean 770 1,001 1,301

End User Detail 129 193 290

Business Fleet Washes 615 923 1,384

Car Dealership Details 494 642 963

Total Unit Sales 5,818 7,712 10,376

Unit Prices Year 1 Year 2 Year 3

Full Wash Rs.15.00 Rs.15.00 Rs.15.00



Exterior Wash Rs.9.00 Rs.10.00 Rs.12.00

Interior Clean Rs.8.00 Rs.9.00 Rs.9.00

End User Detail Rs.140.00 Rs.145.00 Rs.150.00

Business Fleet Washes Rs.10.00 Rs.10.00 Rs.10.00

Car Dealership Details Rs.70.00 Rs.75.00 Rs.80.00

Sales

Full Wash Rs.26,400 Rs.34,320 Rs.44,616

Exterior Wash Rs.18,450 Rs.26,650 Rs.41,574

Interior Clean Rs.6,160 Rs.9,009 Rs.11,712

End User Detail Rs.18,060 Rs.27,985 Rs.43,425

Business Fleet Washes Rs.6,150 Rs.9,225 Rs.13,838

Car Dealership Details Rs.34,580 Rs.48,150 Rs.77,040

Total Sales Rs.109,800 Rs.155,339 Rs.232,204

Direct Unit Costs Year 1 Year 2 Year 3

Full Wash Rs.0.70 Rs.0.80 Rs.0.90

Exterior Wash Rs.0.40 Rs.0.45 Rs.0.50

Interior Clean Rs.0.30 Rs.0.35 Rs.0.40

End User Detail Rs.3.00 Rs.3.50 Rs.4.00

Business Fleet Washes Rs.0.70 Rs.0.75 Rs.0.80

Car Dealership Details Rs.3.00 Rs.3.50 Rs.4.00

Direct Cost of Sales

Full Wash Rs.1,232 Rs.1,830 Rs.2,677

Exterior Wash Rs.820 Rs.1,199 Rs.1,732

Interior Clean Rs.231 Rs.350 Rs.521



End User Detail Rs.387 Rs.676 Rs.1,158

Business Fleet Washes Rs.431 Rs.692 Rs.1,107

Car Dealership Details Rs.1,482 Rs.2,247 Rs.3,852

Subtotal Direct Cost of Sales Rs.4,583 Rs.6,994 Rs.11,047

5.3 MilestonesThe following table outlines the important milestones in the planning andimplementation of Soapy Rides.

Milestones ( Rs. In ’00)

Milestone Start Date End Date Budget Manager Department

Complete Business

Plan 2/1/2001 5/1/2001 Rs.0 ABC Department

Sign Rental Contract 3/20/2001 3/20/2001 Rs.475 Mark Owner

Convert Premises 4/1/2001 4/30/2001 Rs.0 Contractors Contractors

Hire Car Wash Staff 4/20/2001 4/20/2001 Rs.200 Mark Owner



Hire Admin Staff 4/20/2001 4/20/2001 Rs.200 Mark Owner

Open for Business 5/1/2001 5/1/2001 Rs.0 Staff Staff

Distribute Flyers 4/28/2001 5/5/2001 Rs.75 Friends Friends

Press Release 4/29/2001 4/29/2001 Rs.25 Mark Owner

Follow-up on Press

Release 4/30/2001 4/30/2001 Rs.0 Mark Owner

Totals Rs.975

6.1 Personnel PlanSince car washing is a seasonal business, with business increasing in the warmsummer months, and being busier on the weekends than during the week, SoapyRides will rely on both temporary and part-time help. The company will hire one full-time car wash/detail specialist and one full-time car wash specialist when it opens for business. Although it will rely on temporary and part-time help, quality will not becompromised, since all washers and detailers will receive thorough training. Thecompany will also hire an administrative assistant who will assist Mark withpaperwork and act as a receptionist.

Personnel Plan ( Rs. In ’00)


Owner Rs.18,000 Rs.30,000 Rs.40,000

Car Washers Rs.30,240 Rs.43,312 Rs.51,174

Admin/Sales Rs.13,440 Rs.15,000 Rs.22,000

Total People 0 0 0

Total Payroll Rs.61,680 Rs.88,312 Rs.113,174

Financial PlanThe following plan outlines the financial development of Soapy Rides. The business

will be initially financed by a personal investment by Team 4 and will finance growththrough cash flow. This will mean that the company will grow more slowly than it



could, but it will ensure that Mark retains control over the direction of the company. Inyear three, it is hoped that the company will be able to open a second location. It isenvisioned that an outside loan or equity funding will be sought at that time.7.1 Important AssumptionsThe financial projections for Soapy Rides are based on the following assumptions.

These assumptions are thought to be quite conservative, as are the financialforecasts.

General AssumptionsYear 1 Year 2 Year 3

Plan Month 1 2 3

Current Interest Rate 10.00% 10.00% 10.00%

Long-term Interest Rate 10.00% 10.00% 10.00%

Tax Rate 25.42% 25.00% 25.42%

Other 0 0 0

7.2 Break-even AnalysisThe table and chart below show the monthly break-even analysis calculations for Soapy Rides.

Break-even Analysis ( Rs. In ’00) Monthly Units Break-even 423

Monthly Revenue Break-even Rs.7,974



Assumptions:

Average Per-Unit Revenue Rs.18.87

Average Per-Unit Variable Cost Rs.0.79

Estimated Monthly Fixed Cost Rs.7,641

7.3 Projected Profit and LossThe following Profit and Loss table illustrates income and expenses monthly for thefirst year, and annually for the next two years.

Pro Forma Profit and Loss ( Rs. In ’00)


Sales Rs.109,800 Rs.155,339 Rs.232,204Direct Cost of Sales Rs.4,583 Rs.6,994 Rs.11,047

Other Rs.0 Rs.0 Rs.0

Total Cost of Sales Rs.4,583 Rs.6,994 Rs.11,047

Gross Margin Rs.105,218 Rs.148,345 Rs.221,157

Gross Margin % 95.83% 95.50% 95.24%

Expenses

Payroll Rs.61,680 Rs.88,312 Rs.113,174

Sales and Marketing and Other Expenses Rs.2,600 Rs.1,550 Rs.1,700

Depreciation Rs.2,070 Rs.2,070 Rs.2,070Leased Equipment Rs.0 Rs.0 Rs.0



Utilities Rs.3,325 Rs.3,500 Rs.3,750

Insurance Rs.1,800 Rs.1,800 Rs.1,800

Rent Rs.4,800 Rs.5,500 Rs.6,000

Payroll Taxes Rs.15,420 Rs.22,078 Rs.28,294

Other Rs.0 Rs.0 Rs.0

Total Operating Expenses Rs.91,695 Rs.124,810 Rs.156,788

Profit Before Interest and Taxes Rs.13,523 Rs.23,535 Rs.64,370

EBITDA Rs.15,592 Rs.25,605 Rs.66,440

Interest Expense Rs.0 Rs.0 Rs.0

Taxes Incurred Rs.3,204 Rs.5,884 Rs.16,361

Net Profit Rs.10,318 Rs.17,651 Rs.48,009

Net Profit/Sales 9.40% 11.36% 20.68%

7.4 Projected Cash FlowThe following Cash Flow table illustrates that if Soapy Rides meets projected sales, it

will have positive cash flow after half a year of operations.



Pro Forma Cash Flow ( Rs. In ’00)

Year 1 Year 2 Year 3Cash Received

Cash from Operations

Cash Sales Rs.93,330 Rs.132,038 Rs.197,374

Cash from Receivables Rs.13,097 Rs.21,902 Rs.32,470

Subtotal Cash from Operations Rs.106,427 Rs.153,940 Rs.229,843

Additional Cash Received

Sales Tax, VAT, HST/GST Received Rs.0 Rs.0 Rs.0

New Current Borrowing Rs.0 Rs.0 Rs.0

New Other Liabilities (interest-free) Rs.0 Rs.0 Rs.0

New Long-term Liabilities Rs.0 Rs.0 Rs.0

Sales of Other Current Assets Rs.0 Rs.0 Rs.0

Sales of Long-term Assets Rs.0 Rs.0 Rs.0

New Investment Received Rs.0 Rs.0 Rs.0

Subtotal Cash Received Rs.106,427 Rs.153,940 Rs.229,843

Expenditures Year 1 Year 2 Year 3

Expenditures from Operations

Cash Spending Rs.61,680 Rs.88,312 Rs.113,174

Bill Payments Rs.33,052 Rs.46,837 Rs.67,743

Subtotal Spent on Operations Rs.94,732 Rs.135,149 Rs.180,917Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out Rs.0 Rs.0 Rs.0

Principal Repayment of CurrentBorrowing Rs.0 Rs.0 Rs.0

Other Liabilities Principal Repayment Rs.0 Rs.0 Rs.0

Long-term Liabilities PrincipalRepayment Rs.0 Rs.0 Rs.0

Purchase Other Current Assets Rs.0 Rs.0 Rs.0

Purchase Long-term Assets Rs.0 Rs.0 Rs.0

Dividends Rs.0 Rs.0 Rs.0Subtotal Cash Spent Rs.94,732 Rs.135,149 Rs.180,917

Net Cash Flow Rs.11,695 Rs.18,791 Rs.48,927

Cash Balance Rs.20,395 Rs.39,186 Rs.88,112

7.5 Projected Balance Sheet

Soapy Rides' balance sheet illustrates a healthy financial position for this newcompany. The monthly estimates are included in the appendix.



Pro Forma Balance Sheet

( Rs. In ’00) Year 1 Year 2 Year 3

Assets

Current Assets

Cash Rs.20,395 Rs.39,186 Rs.88,112

Accounts Receivable Rs.3,373 Rs.4,772 Rs.7,133

Inventory Rs.668 Rs.1,019 Rs.1,609

Other Current Assets Rs.1,000 Rs.1,000 Rs.1,000

Total Current Assets Rs.25,435 Rs.45,976 Rs.97,854

Long-term Assets

Long-term Assets Rs.10,000 Rs.10,000 Rs.10,000

Accumulated Depreciation Rs.2,070 Rs.4,140 Rs.6,210Total Long-term Assets Rs.7,930 Rs.5,860 Rs.3,790

Total Assets Rs.33,365 Rs.51,836 Rs.101,644

Liabilities and Capital Year 1 Year 2 Year 3

Current Liabilities

Accounts Payable Rs.3,097 Rs.3,917 Rs.5,716

Current Borrowing Rs.0 Rs.0 Rs.0

Other Current Liabilities Rs.0 Rs.0 Rs.0

Subtotal Current Liabilities Rs.3,097 Rs.3,917 Rs.5,716

Long-term Liabilities Rs.0 Rs.0 Rs.0

Total Liabilities Rs.3,097 Rs.3,917 Rs.5,716

Paid-in Capital Rs.30,000 Rs.30,000 Rs.30,000

Retained Earnings (Rs.10,050) Rs.268 Rs.17,919

Earnings Rs.10,318 Rs.17,651 Rs.48,009

Total Capital Rs.30,268 Rs.47,919 Rs.95,929

Total Liabilities and Capital Rs.33,365 Rs.51,836 Rs.101,644

Net Worth Rs.30,268 Rs.47,919 Rs.95,929

7.6 Business Ratios



The following table contains important ratios for the car wash industry, as determinedby the Standard Industry Classification (SIC) code, 7542.

Ratio Analysis

Year 1 Year 2 Year 3Industry

Profile

Sales Growth 0.00% 41.47% 49.48% 3.00%

Percent of Total Assets

Accounts Receivable 10.11% 9.21% 7.02% 8.70%

Inventory 2.00% 1.97% 1.58% 9.50%

Other Current Assets 3.00% 1.93% 0.98% 26.40%

Total Current Assets 76.23% 88.69% 96.27% 44.60%

Long-term Assets 23.77% 11.31% 3.73% 55.40%

Total Assets 100.00% 100.00% 100.00% 100.00%

Current Liabilities 9.28% 7.56% 5.62% 29.30%Long-term Liabilities 0.00% 0.00% 0.00% 27.80%

Total Liabilities 9.28% 7.56% 5.62% 57.10%

Net Worth 90.72% 92.44% 94.38% 42.90%

Percent of Sales

Sales 100.00% 100.00% 100.00% 100.00%

Gross Margin 95.83% 95.50% 95.24% 0.00%

Selling, General & AdministrativeExpenses 86.59% 84.13% 74.45% 68.20%

Advertising Expenses 0.91% 0.74% 0.56% 1.50%

Profit Before Interest and Taxes 12.32% 15.15% 27.72% 2.70%

Main Ratios

Current 8.21 11.74 17.12 1.53

Quick 8.00 11.48 16.84 0.88

Total Debt to Total Assets 9.28% 7.56% 5.62% 57.10%

Pre-tax Return on Net Worth 44.68% 49.11% 67.10% 3.40%

Pre-tax Return on Assets 40.53% 45.40% 63.33% 8.00%

Additional Ratios Year 1 Year 2 Year 3

Net Profit Margin 9.40% 11.36% 20.68% n.a

Return on Equity 34.09% 36.83% 50.05% n.aActivity Ratios

Accounts Receivable Turnover 4.88 4.88 4.88 n.a

Collection Days 57 64 62 n.a

Inventory Turnover 5.45 8.30 8.41 n.a

Accounts Payable Turnover 11.67 12.17 12.17 n.a

Payment Days 27 27 25 n.a

Total Asset Turnover 3.29 3.00 2.28 n.a

Debt Ratios

Debt to Net Worth 0.10 0.08 0.06 n.a

Current Liab. to Liab. 1.00 1.00 1.00 n.a



Liquidity Ratios

Net Working Capital Rs.22,338 Rs.42,059 Rs.92,139 n.a

Interest Coverage 0.00 0.00 0.00 n.a

Additional Ratios

Assets to Sales 0.30 0.33 0.44 n.a

Current Debt/Total Assets 9% 8% 6% n.a

Acid Test 6.91 10.26 15.59 n.a

Sales/Net Worth 3.63 3.24 2.42 n.a

Dividend Payout 0.00 0.00 0.00 n.a

Project Report GMCS (1)

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