SMEDA Flower Shop

Pre-Feasibility Study

Flower Shop

Small and Medium Enterprise Development AuthorityGovernment of Pakistan

www.smeda.org.pk

HEAD OFFICE

43-T, Gulberg II,Lahore, 54660.

Tel: (042) 111-111-456Fax: (042) 5753545,

[email protected]

REGIONAL OFFICE SINDH

5TH Floor, BahriaComplex II, M.T. Khan Road,

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

Fax: (021) [email protected]

REGIONAL OFFICE NWFP

Ground FloorState Life Building

The Mall, Peshawar.Tel: (091) 9213046-47


REGIONAL OFFICE BALOCHISTAN

Bungalow No. 15-AChaman Housing Scheme

Airport Road, Quetta.Tel: (081) 831623, 831702


April 2007

Pre-Feasibility Study Flower Shop

PREF-28/October 2001/1

2

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. Therefore,

the content of this memorandum should not be relied upon for making any decision,

investment or otherwise. The prospective user of this memorandum is encouraged to

carry out his/her own due diligence and gather any information he/she considers

necessary for making an informed decision.

The contents of the information memorandum do not bind SMEDA in any legal or other

form.

DOCUMENT CONTROL

Document No. PREF-28

Revision 2

Prepared by SMEDA-Punjab

Approved by GM Punjab

Issue Date October 5, 2001

Revision Date April, 2007


PREF-28/April, 2007/Rev 2

3

11 IINNTTRROODDUUCCTTIIOONN TTOO SSMMEEDDAA............................................................................................... 4

22 PPUURRPPOOSSEE OOFF TTHHEE DDOOCCUUMMEENNTT.......................................................................................... 4

33 BBRRIIEEFF IINNTTRROODDUUCCTTIIOONN ....................................................................................................... 433..11 GGeenneerraall BBrriieeff ......................................................................................................................................... 533..22 PPrroojjeecctt RRaattiioonnaallee.................................................................................................................................... 5

44 RREEGGUULLAATTIIOONN ........................................................................................................................ 5

55 KKEEYY SSUUCCCCEESSSS FFAACCTTOORRSS..................................................................................................... 5

66 TTHHRREEAATTSS ................................................................................................................................ 6

77 PPRROOCCEESSSS FFLLOOWW CCHHAARRTT ..................................................................................................... 6

88 VVIIAABBLLEE EECCOONNOOMMIICC SSIIZZEE ................................................................................................... 6

99 CCUURRRREENNTT IINNDDUUSSTTRRYY SSTTRRUUCCTTUURREE.................................................................................. 7

1100 SSAALLEESS && MMAARRKKEETTIINNGG IISSSSUUEESS ..................................................................................... 71100..11 TTiippss ffoorr sseelllliinngg fflloowweerrss......................................................................................................................... 9

1111 LLAANNDD && BBUUIILLDDIINNGG........................................................................................................ 101111..11 SShhoopp .................................................................................................................................................. 101111..22 LLaanndd sseelleeccttiioonn.................................................................................................................................... 10

1122 FFAARRMM IINNPPUUTTSS ................................................................................................................ 111122..11 FFlloowweerr PPllaannttss && BBuullbbss....................................................................................................................... 111122..22 PPrroodduuccttiioonn BBaassiiccss.............................................................................................................................. 141122..33 WWaatteerriinngg........................................................................................................................................... 151122..44 LLaabboorr ............................................................................................................................................... 161122..55 PPeessttiicciiddee SSpprraayyss ................................................................................................................................ 171122..66 FFeerrttiilliizzeerrss.......................................................................................................................................... 171122..77 HHaarrvveesstt aanndd PPoosstt HHaarrvveesstt................................................................................................................... 181122..88 BBuuiillddiinngg && SShheedd:: .............................................................................................................................. 201122..99 FFaarrmm FFiixxttuurreess && TToooollss:: ..................................................................................................................... 201122..1100 PPaacckkiinngg SShheedd .................................................................................................................................. 201122..1111 TTrraannssppoorrttaattiioonn................................................................................................................................. 211122..1122 EElleeccttrriicciittyy ....................................................................................................................................... 211122..1133 FFoolliiaaggee && FFaasstteenniinngg IItteemmss............................................................................................................... 221122..1133..11 SSuuzzuukkii VVaann................................................................................................................................... 22

1133 OOUUTTPPUUTT........................................................................................................................... 22

1144 PPRRIICCIINNGG AANNDD RREECCOORRDD KKEEEEPPIINNGG............................................................................. 23

1155 GGEENNEERRAALL FFAACCTTSS && FFIIGGUURREESS .................................................................................... 23

1166 FFLLOOWWEERRSS PPUURRCCHHAASSEEDD FFRROOMM VVEENNDDOORRSS............................................................... 24

1177 KKEEYY AASSSSUUMMPPTTIIOONNSS...................................................................................................... 28



4

11 IINNTTRROODDUUCCTTIIOONN TTOO SSMMEEDDAA

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 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.

22 PPUURRPPOOSSEE OOFF TTHHEE DDOOCCUUMMEENNTT

The objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs in project identification for investment. The project pre feasibility may form the basis of an important investment decision and in order to serve this objective, the document/study covers various aspects of project concept development, start-up, production, marketing, finance and business management. The 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 a “Flower Shop”. In meeting the above tasks we have obtained information from industry sources and officials of major flower shop/farm owners in Pakistan.

This report is based on the information obtained from industry sources as well as from the discussions with businessmen. For financial Model, since the forecasts/projections relate to the future, actual results are likely to be different because events and circumstances frequently do not occur as expected and the differences may be material.

Whilst due care and attention have been taken in performing the exercise, no liability can be inferred for any inaccuracies or omissions reported from the results thereof. It is essential that this 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.

33 BBRRIIEEFF IINNTTRROODDUUCCTTIIOONN

Environmentally sound production techniques, increased farm diversification, and increased farm income are basic parts of sustainable farming systems. Cut flower production and marketing offers both small and large-scale growers a way to increase the level of



5

sustainability on their farms. The tremendous variety of plants that can be grown as cut flowers allows growers to choose those which are well-adapted to the farm site and grown without large offsite inputs. This variety also makes diversity in both production and marketing possible. And the high value of cut flowers can increase farm income.

33..11 GGeenneerraall BBrriieeff

Cut flower harvesting is gaining popularity in Pakistan. This sector is attracting not just men but a lot of women into this business as well. Women are entering this field, thinking it is an easy and part time business. But once they are engaged in this work, they realize that it is a full time job.

Although a cut flower farm is a profitable and attractive venture, the grower is still not rewarded properly in financial terms for his/her work. Either the middleman or the retailersmake the profit. Retailers enjoy the maximum margin.

This pre-feasibility is being prepared by SMEDA and is intended to provide general information on the opportunity for an investor in the floricultural sector to establish a flower shop backed by his own cut flowers farm. This would maximize the profits for the investor and make the product value added when sold on the shop as flower basket, bouquet, and bunch.

33..22 PPrroojjeecctt RRaattiioonnaallee

Cut flower production has the potential to increase income for both small and large farms. Cut flower business is a reasonably sound and paying business if conducted in a proper way and on a proper scale. Demand for cut flowers is growing tremendously as more and more people are becoming aware of the beauty of flowers as decorative items. Weddings, birthday parties, seminars, and other such social gathering events are incomplete without floral decorations.

A project that envisages one flower shop in Lahore backed with two farms, one in the outskirts of Lahore and other in Haripur / Abbotabad, seems unreasonable as far as capital investment is concerned, and unmanageable as far as geographic locations are concerned. But when we check the concept on business level, not only the project becomes viable, but also the financial returns make it highly attractive. Unfulfilled demand in posh localities of the city, easy availability of shops, easy availability of leased land, year round demand and high profit margins are some of the factors that convince an investor to come into this business.

44 RREEGGUULLAATTIIOONN

There is no government regulation, which affects this business.

55 KKEEYY SSUUCCCCEESSSS FFAACCTTOORRSS

The proposed project would have a number of competitive advantages:1) Filling the demand gap for quality flower products2) Supply of flowers3) Own sale point



6

4) More extensive product line which suits customer demand

66 TTHHRREEAATTSS

Flowers are perishable products with a limited life span. Even if they are treated with life enhancing solution, their life is limited. If they are not sold in time they loose appeal and have to be dumped, resulting in economic loss.

Another possible threat is the attack of certain diseases on the flower fields. Though pesticides are sprayed regularly, yet there is always a chance of their attack. This could cause considerable and/or detrimental damage.

A distant threat could be the lack of demand either due to excessive supply or change in fashion. But this is too distant and remote to stop anyone from going for this project.

77 PPRROOCCEESSSS FFLLOOWW CCHHAARRTT

88 VVIIAABBLLEE EECCOONNOOMMIICC SSIIZZEE

A normal sized shop of 15’x20’ is required at a posh location in the city. To support this shop, a 5.5-acre farm in Lahore (Mahmood Booti area) and a 4-acre farm in Haripur / Abbotabad is required for constant supply of high quality Roses, Tube Rose, Statice and Gladiola flowers throughout the year. The plantation of flowers in both the farms would be as per the following table:

Table 1: Land size for each Flower Plant

Sr. No. Flower Name Lahore Farm Haripur / Abbotabad Farm

1 Roses 2 Acre 2 Acre

2 Glad 2 Acre 2 Acre

3 Tube Rose 1 Acre -

4 Statice 0.5 Acre -

Picking (Early morning)

Washing in clean water

Treatment with life enhancing

solution

Drying with natural air

Visual Inspection

Packing in wooden and/or

cardboard boxes

Transportation via train /truck or van

Final sorting of flowers, removal of leaves and making of flower

baskets, bouquets & bunch

Direct sales through shop, supply to party decorators & sale in open market (mandi)



7

99 CCUURRRREENNTT IINNDDUUSSTTRRYY SSTTRRUUCCTTUURREE

The standard of retail flower shops in Pakistan is not very good. This is an overall situation in the country. There are very few proper florist shops in the country. Most of the shops can only qualify as covered kiosks, where flowers are being sold in a very ordinary form. Though these are retail outlets, they do not add much value to the product.

Most of these retail outlets exist in a group along some important shopping point or market. This is so because these have been established by the order of local municipalities. They do not have proper display facilities. As these are open shops therefore they have no air conditioners to keep the temperature down so as to keep the flowers fresh. They do this by keeping the flowers in water buckets and spraying them with water every few hours. This is done to keep the flowers fresh, not realizing that this procedure reduces the life of flowers.

All such outlets have a very limited product line with not many variations. Simple bunch of flowers is the major selling product. Very few and ordinary bouquets are also available. Loose rose petals are another form of very popular selling items, to be sprinkled on wedding invitees or for funeral bier.

Proper florist shops exist only in 5-star hotels. To a large extent, this is still the case. Only one or two other shops exist outside a 5-star hotel in all major cities. Like in Lahore there are only two or three proper florist shops, which exist outside a 5-star hotel shopping arcade. The hotel shops are very expensive, though they have very good quality product. These other shops are becoming more popular as they are less expensive compared to the shops in 5-star hotels and have almost similar quality and variety.

The reason being, city shops are becoming more popular is because they sell high quality flowers and have diversified product line. These shops have qualified flower arrangement experts to create quality flower based products.

1100 SSAALLEESS && MMAARRKKEETTIINNGG IISSSSUUEESS

The city shop would serve as the center point of all marketing and sales activities. The whole concept of this pre-feasibility study centers on the flower shop. All other requirements are there to support it. There will be three segments of buyers from the shop:

a) Direct buyers of flower basket, bouquets, and bunch.b) Direct event decoration orders.c) Party decorators, event organizers, and offices.

At present, the roadside flower shops & open flower shops are the only source for purchasing whatever kind of flowers one wants. There are two main reasons for the success of these shops. First of all they are strategically located for easy access. Secondly, they are the only known source for flower sales. People have to buy whatever they have to offer. The second category of party decorators, event organizers, and offices also buy either from these shops and/or different traders cum suppliers, who themselves buy directly from ‘mandi’. In either case the quality is low, there is no variety, and no surety of consistency of supply.

Self owned flower farms would feed the proposed flower shop, the quality of flowers would be excellent. The professional flower arrangement experts would handle the flowers properly



8

and create beautiful flower baskets, bouquets, and bunches. There would be a lot of variety to choose from. The shop would be air-conditioned and therefore the flowers would be fresh and healthy when the buyer would come to purchase. In this way the flower shop would serve as an important sale point for individual customers.

Besides selling flowers directly from the retail outlet, the shop would also take orders for party, offices, and wedding decorations. Marketing possibilities include wholesale markets, restaurants, supermarkets, retail florists, special events such as weddings, and the Internet.

i. Whole sale MarketsWhole sale markets are considered by many to be entry-level markets, a place for new growers to sharpen their skills and cultivate higher-level markets.

ii. RestaurantsSelling to restaurants requires flexibility and high-quality products. The time needed to make deliveries may be considerable.

iii. SupermarketsGrocery stores can handle large volumes, but it can be difficult to establish accounts.

iv. Retail Florists In general, a florist will want flowers that are just beginning to open —unlike most whole sale market customers, who prefer fully open blossoms. Most florists know exactly what they want and may need a fairly large quantity of a certain flower.

Introduce with a bucket of free samples, a flyer that lists the flowers grown & sell at the outlet, delivery schedule, payment terms, and business card. E-mail or fax a list of what is to offer after harvesting, then call for orders.Deliver on the same day and same time every week. Florists need to depend on you if they have downsized standing orders from the wholesale markets so that they can buy from the flower shop.

Use buckets with flower shop’s name/label on them so you can leave them to pick up the following trip. Offer only the best. Consistency in quality, quantity, and variety is crucial.

v. WeddingsWedding work can be profitable, but it is not for everyone who grows flowers. Besides needing aesthetic talents, it takes a certain temperament to work cooperatively with brides, grooms, and often their parents. It also takes a lot of time.

Most weddings involve a bridal bouquet, bridesmaid bouquets, altar arrangements and reception hall arrangements. The price should reflect not only the cost of materials and labor for the finished product but also the time spent in consultation. One needs to give his/herclient a price estimate well in advance of the wedding day.

vi. InternetIn the past decade, the Internet has become an important marketing tool. The Internet allows growers to reach customers that they could not have reached in other ways withoutconsiderable expense. More than 6 percent of all Internet transactions involve flower sales. Building own Web site is a big step, but it may be an excellent way to increase the markets.



9

The shop, with its flower arrangement experts and own direct supply of high quality flowers from the farm, would serve the high end of the market. One of the shops in Lahore is currently doing this and is a very successful business.

Initial introduction and brand awareness campaign would have to be launched for the shop to be a successful retail outlet at its beginning. Two steps would have to be taken for this. First is to choose the right location and setup a proper shop with an appealing interior decoration. The second step is to distribute one page pamphlet along with newspapers in the neighboring localities. In the beginning, some discounts would have to be offered to build relations and retain customers. For this purpose, 1% of total revenues would be used as promotion expenses.

1100..11 TTiippss ffoorr sseelllliinngg fflloowweerrss

a. Have a good volume and plenty of color. It will attract people like a magnet.

b. Sell only quality flowers. (Post-harvest handling is critical.) People will come back if the flowers sold to them have a long vase life.

c. Keep flower buckets wiped off (clean) and neat. Use white plastic buckets for regular bouquets, and taller, thin plastic flower buckets for taller varieties and those with long stems.

d. Tell customers how to maintain their flowers. Tell them to change the water every day or ever other day & give customers a card with a homemade alternative: To three cups of water, add one tablespoon sugar, one teaspoon vinegar, and one crushed aspirin tablet. People seem to like the idea.

e. Wrap bouquets or purchased flowers attractively. Use floral sleeves or use plastic bags and customers don’t seem to mind.

f. Be creative with offerings. Have a variety of sizes of bouquets. ‘Build-your-own’bouquets are popular at some markets. Have several buckets of individual flowers for customers to choose from to make their own bouquets. Or offer bunches of one kind of flower, such as Chrysanthemum or Gladiolus. It is found anything works, as long as it’s colorful. Fall colors don’t do well in summer, and dull colors don’t do well, especially on cloudy days.

g. Have a good awning to protect flowers from the harsh summer sun. Wilting flowers won’t sell.

h. Check flower buckets often during the market to make sure flower stems are in the water. It is noticed when people pick bouquets up to compare; they often don’t set them back in the water. And they break some stems.

i. Have a few sunflowers that aren’t quite perfect? Give them away to kids. It’ll make them happy, and moms will remember.



10

1111 LLAANNDD && BBUUIILLDDIINNGG

Following inputs are required related to land & building:

1111..11 SShhoopp

A 300 square feet shop is required for establishing a proper retail outlet in the posh & well populated area in any of the big cities of Pakistan. Shop is to be obtained on rent. Rent estimation for such a shop is Rs 30,000/month. Six months rent as advance and three months rent as security would be required as well. Security is a one-time expenditure. Advance rent would only be given at the beginning. After first six months, as the shop would be running regularly, rent would be paid on monthly basis.

The shop would be partitioned into two parts. The front part would serve as the display area and the back part of the shop behind the partition would serve as the area where flowers would be received and sorted. After sorting, new flower baskets, bouquets, and bunches would be made everyday and then displayed for sale. As products would be sold, new ones would be made to fill the empty space on display.

The interior decoration of the shop would cost about Rs 300,000. This amount would be spent to create an aesthetic look, to install an air conditioner, to set up the display area, to create partition, to make shelves and install a wash basin behind partition, to buy tools, and to make the cash counter. The area behind partition would be about 100 square foot.

1111..22 LLaanndd sseelleeccttiioonn

Most cut flowers prefer a location in full sun throughout the entire day. The field and soil should be well drained. If at all possible, a location with well drained, sandy loam soil, high in organic matter, and with a neutral pH is desirable. Soil preparation is the most important job to do in the flower farm. All plants should be watered as soon after planting as possible. Delaying the application of water to the newly planted crop may severely reduce overall production.

Wind protection is highly desirable for all plants. Windbreaks serve to reduce water stress on plants and help prevent stem breakage and floral damage. A source of irrigation water is essential. If animal foraging is a problem, fencing may be required.

Land is required at two places. One farm is to be made near Lahore (Mahmood Booti / Burki Area) and the other one in Haripur / Abbotabad. The basic advantage of having a farm at Lahore is that the temperature/weather conditions are feasible and frost is relatively less as compared to its other neighboring areas. The farm at Lahore would be supply source of Gladiolus, Roses, Statice for the shop during winter season & Tube Rose during summer season. This farm would be actively supplying these flowers from mid of March to February. The other farm in Haripur / Abbotabad would also be used for supplying Glads & Roses during summer months & it would be supplying flowers from April to November.

Besides the flower growing area, a little space would be required for post harvest treatment at both of the farms. The farm near Lahore is bigger because it will supply flowers during the peak demand season, the winter & the summer seasons.



11

The land would be obtained on lease. In Mahmood Booti or its neighboring areas, lease rate is Rs 15,000 per acre per year, whereas, in Haripur / Abbotabad it is around Rs 17,500 per acre per year.

1122 FFAARRMM IINNPPUUTTSS

1122..11 FFlloowweerr PPllaannttss && BBuullbbss

a. Preparing the Bed

Plants should be grown in beds raised 4–6 inches to maximize drainage. Poorly drained soil should be corrected by placing drain lines 10–12 inches deep under the beds.

A well-drained soil environment is essential for maximum root development and reduces the potential for root rot problems.

A worker can efficiently reach only 2 feet into a bed to make a proper cut and remove the flower without damage to the crop. Bed length also is set to maximize the area in production versus the area in aisles. The limiting factor to bed length is labor efficiency. The maximum distance a worker should carry harvested flowers is about 50–60 feet. Planting beds should be 100–120 feet long.

b. What To Grow: The Ideal Crop

An ideal cut flower crop, either fresh or dried, would have the following characteristics:

Low cost of production—materials and labor High value and unlimited demand High production per square foot of bed space Extended production and marketing season Long productive life Post harvest vase life of at least 7 days Resistance to diseases and pests of all types Resistance to heat and drought stress Long stems (18 inches) Easy harvest and handling Aesthetically pleasing and/or fragrant flowers, foliage, or stems

No single species or variety of plant material will meet all of these criteria. They are presented here to provide a means of evaluating the relative desirability of producing a crop of a specific plant.

c. When to Plant

Planting dates depend on the target market and on plant classification—whether it is an annual, biennial, or perennial. In general, the peak demand for the retail florist trade is from fall through Mother’s Day. Plantation schedule for both farms is mentioned below:



12

Table 2: Flowers planted at Lahore Farm1

Sr. No

Flower Name Planted In Flowers Blossom in

1 Roses (all species) 15 Jan - 15 Feb First Year, Jul - Feb then every year continue from Apr - Feb

2 Gladiolus

aWhite Prosperity (White Color)

Sep - Jan (mid) After 110 Days

bAdvance Red (Red Color)

Sep - Dec After 120 Days

cPerceilia, (Purple Color)

Aug - Feb 70 Days

dRose Supreme (Pink Color)

Sep - Jan (mid) 90 Days

3 Tube Rose (Single) 15 Apr - 1 May (all at once)

After 60 Days (15 Jun -Jan)

4 Statice Seeds planted in Sept Mar - Apr (mid)Oct & Nov (plants transplanted in the field)

Table 3: Flower planted at Haripur / Abbotabad Farm

Sr. No

Flower Name Planted In Flowers Blossom in

1 Roses (all species) Jan First Year, Jul - Nov/Dec then every year continue from Apr - Nov

2 Gladiolus

aWhite Prosperity (White Color)

Feb – Apr After 110 Days

bAdvance Red (Red Color)

Feb – Apr After 120 Days

cPerceilia, (Purple Color)

Feb – Apr 70 Days

dRose Supreme (Pink Color)

Feb - Apr 90 Days

1 Mr. Umar Farooq, flowers farmer in Pattoki. Cell #: 0333-4181-981



13

d. Plant Density

A closely spaced crop of annual flowers like Gladiolus & Statice will usually produce more flowers over the growing season than a crop at wider spacing. In general, the closer the spacing of annuals the more flowers produced. A 4- to 6-inch spacing within the row and 6–8 inches between rows is ideal for most annual flowers.

In general, perennials like Roses are planted at about 1-foot spacing, within and between rows based on the growth habit of individual species and the growing conditions. It should be noted that closer spacings produce more flowers per square foot of bed, but also reduce air circulation within the bed. Poor air circulation could increase the likelihood of foliar diseases.

An important point is that each species of roses has different life period & the average life of a rose flower plant is 5 years. After 5 years all the plants would have to be replaced with new ones. Following is the table showing the life period of different species of roses:

Table 4: Life period of different species of Roses2

Sr. No

Roses Name Life period of

Plants

Life period of Flowers

Flowers / Plant / Year

1 Kardinal Rose 5 years2 Christian Dior Rose 7 years

3 Gold Medal Rose 5 years

4 Angelique Rose 6 years5 Roses Check 8 years6 Yorkshire Bank Rose 4 years

7 Pink Perfume Rose 8 years

8 Margaret Theatre Rose 7 years9 Mashal Milan Rose 6 years

10 Perfect Moment Rose 4 years

11 Mashish Gonigone Rose

6 years

12 Mccartney Rose 8 years

13 Peter Fanket Flood Rose

5 years

14 Mikado Rose 8 years15 Maalia Rose 5 years

4 to 5 Days in

Summer & 10

to 15 days in

Winter Season

35-40 Flowers 1st year

then 50-60 flowers next

year & this will go up to

4 years and on the 5th

year 40-50 flower, 6th

year 35-40 flower & on

the 7th and 8th year 25-

35 flowers per plant.

Approximately 14,000 plants would be planted in each acre for roses (Internationally this figure has gone up to 22,000 plants per acre, but in Pakistan 14,000 is considered to be the manageable number). Plants are available from local nurseries. They are transferred to the 2 Mr. Umar Farooq, flowers farmer in Pattoki. Cell #: 0333-4181-981



14

farm when plants are an year old. At the farm in Lahore, plants would be transferred to the field around 15th January. After that, they would be looked after for next six months just as if they are being used for commercial production. Commercial production would start in July and will go up to February in the first year then every year will continue from April to February. In Haripur / Abbotabad farm the plants would be transferred to the field in Januaryand then they would be used for commercial production in July to November then every year will continue from April to November. In all, about 56,026 rose plants would be required. Each rose plant costs about Rs 10, when bought from the nursery at twelve months of age. Each rose plant would give about 50 flowers per plant. Out of these 50, 80% would be available for commercial sale.

As far as gladiola is concerned, its bulb is imported from Holland. But it is also available locally through different companies. 55,000 bulbs are planted on one acre of land (International standards go up 110,000 bulbs per acre, but in Pakistan 55,000 bulbs is the maximum at present). In Lahore the sowing of bulbs would start in September. Not all are placed at once. Certain number is sowed in the beginning and then different batches are sowed after 1 - 2 weeks. This is done to obtain flowers over a longer period of time from the land. Gladiola is harvested after 70 - 120 days. In Haripur / Abbotabad sowing would start in February and will go up to April on the same pattern. Each bulb of high quality gladiola flower costs about Rs 4. Yield of gladiola flower based on imported bulb is about 90%.Another important fact about Gladiola is that its species like white prosperity, rose supreme, advance red & yellow glad multiply their varieties.

1122..22 PPrroodduuccttiioonn BBaassiiccss

a. Plan for Season-Spanning BloomsDifferences in location and climate, market, and personal choices will result in different schedules. Gladioli are ready to cut about 70 - 120 days from planting. First planting starts in September, and sequential plantings at intervals of a week or a month, ending at least 90 days before April for the farm based at Lahore & from February to April for the farm at Haripur / Abbotabad.

b. Plant EstablishmentSome flowers in some geographic areas can be easily started by direct seeding. Others are more safely started in flats to be transplanted later. Like Gladioli & Tube Rose are started with bulbs & Statice with seeds.

Start with good seed/bulb. If you save seed/bulb from year to year, do small germination tests several weeks before you plan to plant. Then you’ll have time to order new seed if you need it.

c. Weed ManagementWeeds compete with flowers for nutrients, water, and light, and can harbor insect pests. A heavy stand of weeds in planting can severely reduce cut flower quality and also increases the time required to harvest, raising labor costs. Weeding can be one of the most time consuming operations, especially if you choose not to use chemical herbicides.



15

d. Insect Pests and Disease ManagementThe best way to prevent insect and disease problems is to select plants that grow well, like Roses, Glad, Tube Rose & Statice. A healthy, actively growing plant is more resilient to insect attack. The ideal approach is a preventative program. Control insects early, when they are first detected. Do not wait until a serious infestation occurs.

Next step is to recognize problems caused by insects and diseases. Some can be tolerated; others will destroy the value of flowers. The more you know about their life cycles, the more likely you will be able to manage them effectively with non-toxic methods.

e. Disease ControlFoliar fungus diseases are the most serious disease problem on cut flowers. If mildew or other foliar diseases are a recurring problem, it might be wise to increase the spacing between plants slightly to improve air circulation around the foliage. Powdery mildew and black leaf spot are two of the most common foliar diseases. Botrytis attacks flowers during cool damp weather. Improper watering or frequent rains may cause some root rot problems. These can be minimized by planting on raised beds.

The best approach to disease control is a preventative program. Manage the crop. Don’t neglect it. Practice good sanitation; keep the field free of weeds and plant debris. Adjust planting density for each species to allow sufficient air circulation within the bed.

Table 5: Disease & its symptoms found on Gladiolus3

Host Disease Symptoms

Gladiolus Fusarium crown (corm) rot (Fusarium oxysporum f. gladioli)

During the growing season, leaves on affected plants turn yellow prematurely. During storage, corms develop a dry rot. Diseased corms produce spindly, weak plants thefollowing year.

f. Cultural control. Examples include crop rotation, plant spacing, and adjusting the timing of planting or harvest.

1122..33 WWaatteerriinngg

To maintain floral quality and peak production, the plants must be watered frequently, sometimes daily with some soil types.

Natural rainfall is not sufficient nor reliable. Without supplemental watering, production may not be economically realistic. For both the farms watering would be done with the help of tube well (diesel) as for most of the areas canal irrigation is not sufficient. Each floral crop needs year round water supply on a specific timing.

Overhead watering is not recommended. It may physically damage the flowers, cause spotting on the petals, splash soil onto the foliage, and promote the spread of disease. The

3 The Association of Specialty Cut Flower Growers (www.ascfg.org)



16

basic principle in designing an irrigation system for cut flowers is to place the water uniformly around each plant. Spacing of irrigation lines depends on soil type and structure.

Irrigation should be scheduled based on the soil moisture status in the root zone. Proper irrigation management provides sufficient but not excessive water to the crop. Water stress will reduce production and quality of a crop. A consistently saturated soil will reduce growth and promote the development of root rot. The amount and frequency of water required will vary with the weather and stage of maturity of the crop.

Water is an important requirement to have a good yield of fresh and healthy flowers. Besides requirement of water for growing plants, it has another important role in the post harvest treatment as well. This role centers on post harvest washing and life enhancement solution treatment. Clean and fresh water is required for both these activities.

For both Lahore & Haripur / Abbotabad, a tube well would have to be installed to meet the water requirements of the farm. It would cost Rs 100,000 to install a new tube well and set up the water distribution system. Rose flower plants require water every 20-25 days except for April, May, and June. During these three months fields are watered every week.

For gladiola flower water requirement is every 15 days till harvesting. Tube Rose compared to other crops required more water, since it is harvested in the peak summer season. It would be requiring water each week and will continue for a period of 30 weeks & for Statice water requirement would be after every 15 days from transplanting till harvesting.

Table 6: Watering cost from Tube Well4

Sr. No. Flower Name Per Acre Watering Cost from Tube Well (Annually)

1 Roses Rs. 15,000

2 Gladiolus Rs . 2,500

3 Tube Rose Rs. 12,000

4 Statice Rs. 5,000

In Haripur / Abbotabad, same watering cost would be incurred.

The requirement of water is quite regular at both the farms. It is mostly according to the requirement. The requirement increases if rainfall is low.

1122..44 LLaabboorr

Labor efficiency is a critical factor in choosing a site. Flower production requires intensive management. The site should have ready access for production equipment and removal and handling of the harvested product. The idea is to maximize efficiency of the labor required for all production and marketing functions.




17

General formula is 2 person per acre excluding foreman cum accountant. The laborer would cost Rs 4,500/month/acre. The labor requirement for the farms is mentioned in the table below:

Table 7: Labor requirement for the Farms5

Sr. No. Flower Name Total Land Labor at Lahore Farm

Labor at Haripur / Abbotabad Farm

1 Roses 4 Acres 4 42 Gladiolus 4 Acres 3 33 Tube Rose 1 Acre -

4 Statice 0.5 Acre

1 (for both Tube Rose & Statice) -

For Lahore farm total 8 laborers would be required. The laborers would also act as pickers, cleaners, sorters, packers, etc. There would be 1 foreman cum accountant to keep the work moving and to manage it. During peak season, temporary pickers can be hired on daily wages. But that cost is negligible. Foreman could be hired for Rs 7,000/ month.

For the farm at Haripur / Abbotabad the setup would be the same with the only difference that 7 laborers would be required. Salary structure would almost be the same as well.

For the flower shop, manpower requirements are different. At least 6 persons are required to run this kind of a shop; 2 salesman, 2 workers (flower arrangement experts), and 2 cleaner. Salary for the salesman would be around 6,000 Rs/month. For each worker, it would be around 4,500 Rs/month, and the cleaner would cost around 4,000 Rs/month.

1122..55 PPeessttiicciiddee SSpprraayyss

For rose farm 2 sprays per month would be required at planting and when the plant starts producing flowers 4 sprays per month would be required. Total cost of sprays per acre per year is Rs 9,000. For gladiola one spray is required every fortnight starting from September. It costs Rs. 2,000 per acre for pesticide spray on gladiola. For tube rose & statice no spray would be required.

For Haripur / Abbotabad farm the spraying would remain the same.

1122..66 FFeerrttiilliizzeerrss

Before initiating any fertilizer program, always test the soil for nutrient content. The increased water requirement of cut flowers creates an increased requirement for fertilization. The application of fertilizer should coincide with crop needs. Nitrogen deficiency is the most common nutrient problem.




18

For Roses annual total expenditure on fertilizers per acre is Rs 134,000.

For Gladiolus annual total expenditure on fertilizers per acre is Rs 44,400.

For Tube Rose annual total expenditure on fertilizers per acre is Rs 13,900.

For Statice annual total expenditure on fertilizers per acre is Rs 2,050.

The fertilizer requirement for each flower is mentioned in the table below:

Table 8: Fertilizer requirement for each Flower6

Sr. No Fertilizer’s Names Cost/ Bag Bags/Acre Total Amount 1.0 ROSE 1.1 SSP7 320 60 76,800 1.2 Potash 1,000 6 24,000 1.3 Nitrogen 550 10 22,000 1.4 CAN 350 8 11,200 2.0 GLADIOLUS 2.1 Nitrophos 700 13 36,400 2.2 Potash 1,000 2 8,000 3.0 TUBE ROSE 3.1 Nitrophos 700 17 11,900 3.2 Potash 1,000 2 2,000 4.0 STATICE4.1 Nitrophos 700 3 1,050 4.2 Potash 1,000 2 1,000

For all flowers annual total expenditure 194,350

1122..77 HHaarrvveesstt aanndd PPoosstt HHaarrvveesstt

Post harvest success begins with providing the best growing conditions possible and harvesting at optimum harvest stage. The following practices hold true for most cut flowers:

Use sharp and clean cutting tools. Disinfect cutting tools at least twice per day. Remove excess foliage: foliage exposed to the air increases water loss; submerged foliage

increases microbial growth and clogged stems. Cut into clean buckets that have been washed inside—and out if they will be stacked-with

detergent and two to four tablespoons of household bleach per gallon of water. Place stems in water as you cut to reduce the amount of air that gets into the stems. Recut

stems underwater, removing about one inch, to remove air bubbles and bacteria. Harvest during the coolest part of the day, early morning or late evening, and keep

buckets of flowers out of the sun.

6 Mr. Umar Farooq, flowers farmer in Pattoki. Cell #: 0333-4181-9817 SSP - Single Super Phosphate



19

Use warm, 100 to 110°F water in the buckets. It is taken up more quickly than cool water.

Let flowers stand at room temperature in a hydrating solution for one to two hours. Store in a cooler. Low temperatures prolong quality and vase life. The best temperature

for keeping most cut flowers is 32 to 38°F with 80 to 90 percent humidity.

The longest vase life for some flowers will be achieved if they are cut with color but not yet open. Others are best when cut fully open. Following is the table showing the perfect harvest time of Roses, Tube Rose & Gladioli.

Table 9: Optimal Development Stage of Cut Flowers for Direct Sale8

Common name Species Stage of developmentGlads Gladiolus cultivars 1–5 buds showing colorTuberose Polianthes tuberose Majority of florets openRoses Rosa hybrids

Red and pink cultivars First 2 petals beginning to unfold, Calyx reflexed below a horizontal position.

Yellow cultivars Slightly earlier than red and pinkWhite cultivars Slightly later than red and pink

After flowers are cut, quality cannot be improved, but take steps to maintain quality and extend the vase life by providing food, water, and cool temperatures.

a. Water Flow in StemsWithout water, flowers wilt. When stems are cut, two things happen to restrict water flow:

Air gets into the stems and blocks the uptake of water. Bacteria begin to grow in the vase water and clog the stems.

To reduce the amount of air that gets into the stems, flower stems should be placed in water as you cut them. Later, recut the stems underwater, removing about one inch, to remove air bubbles and bacteria. When cuts are made underwater, a film of water prevents air from entering the stems in the short time it takes to move them to post harvest solutions.

Bacteria, yeasts, and other microbes are present everywhere: in the soil, on plants, and other organic matter. Bacteria grow quickly in any liquid containing sugars and other organic matter. When stems are cut, they release sugars, amino acids, proteins, and other materials that are perfect food for bacteria. They start to grow at the base of cut stems as soon as flowers are put into water.

To prevent the growth of bacteria, commercial preservatives contain anti-microbial compounds, or biocides. But a simple biocide can be made by adding 1 teaspoon of household bleach (5 percent hypochlorite) to 8 gallons of water. This is very effective, but must be replaced every two or three days.

8 The Association of Specialty Cut Flower Growers (www.ascfg.org)



20

b. Vase Life of FlowersFor the longest vase life, flowers should be harvested in the morning before the heat of the day. The flowers are cooler and have more water in them. A number of products have been developed to help prolong vase life. All contain antimicrobials to suppress bacterial growth.

Hydration products make it easier for water to move up the stems. The solution should have a pH of 3.0 to 3.5, as this improves the flow. Hydration usually is best if sugar is not in the hydrating solution.

Holding solutions have sugar to feed the flowers. Sugar provides the energy needed by some flowers to continue opening.

Pulsing is a chemical treatment of flowers to prolong the vase life. The treatment is not continuous and typically lasts for 2–12 hours. Silver Thio Sulfate (STS), and 5–10 percent sucrose solutions are chemicals often pulsed into flowers.

1122..88 BBuuiillddiinngg && SShheedd::

This project does not require any major building structure. Only a small room for storage purpose is required at the farm. A maximum of 12’x12’ room is enough. Besides storage room, one proper shed is required. This is an important requirement. The shed should be 20’x15’ covered area with open sides for air passage. This area is to be used for washing, sorting, packing, and other post harvest activities. The construction rate is Rs. 400 per square feet. This construction rate is based on the fact that the room and the shed would be made up of semi-baked bricks using local masonry skills. The idea is to cut initial capital investment.

One room and one shed each would be constructed in Lahore and Haripur / Abbotabad.

1122..99 FFaarrmm FFiixxttuurreess && TToooollss::

Basic farm tools and fixture would include tools for pruning the plants, picking the flowers, and removing leaves, etc. Besides these tools, other fixtures are required including pesticide spray machine, clean water hand pump, tables, plastic tubs, wooden crates and fans. Total capital requirement for all these items is Rs 8,000 per acre for both the farms. All items would be Pakistan made and are easily available.

1122..1100 PPaacckkiinngg SShheedd

A packing shed is an essential part of any flower farm. A well-designed packing shed will save time and help to maintain high quality. Depending on the size of the farm, it may be as rudimentary as a laundry tub or table under a canopy.

a. Location. The packing shed should be close to the fields so that harvested produce can be moved quickly to the post harvest area. It should also be accessible by whatever vehicle is going to transport the produce off the farm.

b. Space. At a minimum, sinks for washing buckets and vases, tables for sorting and arranging, and a cooler is required. A place to store buckets, vases, and other supplies will also be required. Work stations should be close enough that steps aren’t wasted going back and forth, but they should allow plenty of room for two or more people to work together.



21

c. Light. Good lighting is important because it allows the workers to spot defects in theflowers. From a mental health perspective, try to get as much daylight as possible into thepacking shed.

d. Surfaces. The best flooring is concrete because it allows the workers to use wheeled carts or hand trucks to move boxes or buckets. Concrete should be poured so that it slopes toward a 6-inch drain for easy washing of the floor.

e. Cleanliness. Sanitation is especially important in flower packing sheds, to prevent food-borne illness. In flower packing sheds, packaging can be protected from mice and other pests by keeping supplies in sealed storage containers.

f. Water. Plan for drainage that will handle a large amount of water. Consider running it off to a garden area where it can be used to water plants.

g. Ergonomics. Workstation heights should suit the workers. The most efficient work table height is halfway between the wrist and the elbow, measured when the arm is held down at the worker’s side. For heavier items, it is slightly lower. A loading dock that matches the height of the pickup/truck will minimize back strain when loading.

i. Work flow. The most efficient layout avoids extra steps and crossed paths. It also moves flowers in the direction of the worker’s leading hand (left to right for right-handed people).

Flowers from the farm in Lahore would not need any packing. They would just be put in plastic buckets filled with water and then transported through Suzuki Van to the shop.

The flowers from Haripur / Abbotabad farm would need to be transported in wooden crates to Lahore. About 700 wooden crates for Roses & 468 cartons for Gladiolus would be required & their freight & cost would be charged from the customer. Each wooden crate would cost Rs 100 & cartons would cost Rs. 35.

1122..1111 TTrraannssppoorrttaattiioonn

Transportation of flowers from Lahore farm to the shop would be carried out by a Suzuki van. The distance between the farm and the shop should not be more than 45 minutes drive.

The transportation of flowers from Haripur / Abbotabad farm to the shop would require some planning. The wooden crates would have to be transported to Haripur / Abbotabad city, from where buses take cargo directly to Lahore. The best option of transportation between the farm and Haripur / Abbotabad City would be the local public transportation. Thetransportation cost of each crate / carton from Haripur / Abbotabad would be Rs. 110.

1122..1122 EElleeccttrriicciittyy

The major consumption of electricity would be at the shop where light and air conditioner would run constantly for at least 8 hours a day. Average electricity bill of the shop would be around 10,000 rupees/month.

The consumption of electricity at the farm in Lahore & Haripur / Abbotabad would be nominal. We can assess the electricity charges at the Lahore farms at around Rs 1500/month.



22

1122..1133 FFoolliiaaggee && FFaasstteenniinngg IItteemmss

Availability of foliage is not a big problem. Many private gardeners supply good quality foliage at very low rates. On average it costs Rs 150/day to buy foliage to be used as part of decorative flower arrangements at the shop. Other than that the fastening items like the flower basket, salaphene role, tape role, flower oasis & flower ribbon would cost an average Rs. 100/day.

1122..1133..11 SSuuzzuukkii VVaann

A suzuki van can be hired on daily basis or on monthly basis for transportation of flowersfrom the farm at Lahore to the shop. It would cost around Rs 12,000/month to rent a van. It is advisable to use rented van as it saves you from the hassle of maintenance of the vehicle and the driver.

1133 OOUUTTPPUUTT

Production of rose flowers has different seasonal variations. In Lahore, during November and December, production is on the higher side. January and February are slow growth period because of winter frost. March and early half of April are the maximum yield season. After 20th April till early June there is no yield due to hot blowing winds. From July till September, rose is available but the quality is low. Quality starts to improve from October.

In Haripur / Abbotabad farm, the reverse is true for roses. High yield months are during summer season. Other factors remain the same most of the time.

On an average, one plant of rose flower has an average yield of 50 flowers per year. Out of these 50, about 10 flowers are rendered useless for commercial usage, either by man handling or by some disease. Therefore, only 40 flowers per plant per year are available for commercial sales. Therefore, about 1.1 million rose flowers would be available for commercial sales from the two farms round the year.

As far as the gladiola flower is concerned, in Lahore region it is sowed in September. Harvesting is after 70-120 days based on various species of glads. Therefore, the flower is available for commercial sale during the first week of December. At the time of sowing, a gap of about 15 days is given. Therefore, the sowing continues till February so that flower is available till March and at times till April.

In Haripur / Abbotabad, it is sowed in early February so that yield is available from May till September or even October. Average yield of gladiola flower planted from imported bulb is 90%. Based on these statistics, about 99,000 gladiola flower stems would be available for commercial sale from the two farms.

Tube rose planted in Lahore region will be sowed from 15th April till 1st May. Harvesting is after 60 days. Therefore, the flower is available for commercial sale during the last week of June. At the time of sowing, all the bulbs are sowed at once. About 62,000 of both tube rose & statice flower stems would be available for commercial sale.

Statice seeds will be planted in Lahore region in September and in October/November they will be transplanted in the field. Flowers blossom between March and April



23

First of all, the available flowers would be used for creating beautiful flower baskets, bouquets, and bunches and then selling them from the shop. Besides selling about 25 such arrangements a day from the shop for three hundred & sixty days a year, 30% of the remaining flowers would be used for direct event decoration. Remaining 70% of the totalproduction would be sold directly in ‘mandi’. During summer months, the sale is usually slow, whereas, during winter months, the high season, the sale is at peak on all accounts, including event decoration.

1144 PPRRIICCIINNGG AANNDD RREECCOORRDD KKEEEEPPIINNGG

There are a couple of ways to approach setting the prices. The first is based on the cost of production, and the profit margin you need to make over that, and the second is based on the price the market will bear or what the established selling price of an item is. In reality, what is end up with is a combination of the two. Regardless of the market price, the cost of production must be known.

Set a sale price that covers the cost of production and marketing and provides a profit. Price the flowers fairly in regard to what other producers are charging. Don’t under-price the competition. The only way to know the cost of production, including labor, is to keep records.

1155 GGEENNEERRAALL FFAACCTTSS && FFIIGGUURREESS

Table 10: Salable flowers per year (when farm is operating at 60% capacity)

Sr. No

Flower Name Total Area in Acres

No. of Plants

Salable Flowers /plant or Yield

Total Salable flowers per year

1 Roses 4 56,026 40 1,120,519 2 Gladiolus 4 220,000 90% 99,000 3 Tube Rose 1 125,173 100% 62,586 4 Statice 0.5 12,517 100% 62,586

Table 11: Shop (330 days a year)

Average no. of arrangements sold/day 14Average total arrangements sold/year 4,620

Average number of flowers/arrangement 24Average expected price per arrangement Rs 300

Table 12: Wholesale and Party Decorations

(30% of remaining production)Average no. of flower stems available for Party Decoration

371,000

Average selling price (Roses, Gladiola, Tube Rose & Statice)

Rs. 3.86



24

Table 13: Open Market (Mandi) Sale

Average no. of individual stems available for sale

1,344,692

Average price per rose Rs. 0.65

Average price per gladiola stem Rs 9.00Average price per tube rose stem Rs 1.50

Average price per statice stem Rs 0.50

Table 14: Financial Analysis

Total Investment 4,672,241Total Capital Investment 3,760,974

Total Working Capital 911,267Project IRR 44%

Payback Period 2.57 yrs

1166 FFLLOOWWEERRSS PPUURRCCHHAASSEEDD FFRROOMM VVEENNDDOORRSS

There are numerous variety of flowers normally sold at the flower shops, but Roses, Glads, Tube Rose are sold comparatively more that others. However, to retain the clientele one must have other varieties related to exoitic & speciality cut flowers.

The list of other local and imported flowes to be pruchased from the vendors are:

Table 15: List of flowers to be purchased from Vendors

Sr. No. Flower Name Quantity Sold Annually

1 Iris 8,6402 Lillium 4,3204 Imported Chrysanthemum 4,3205 Imported Lilly Oriental 2,1606 Imported Gerbera 2,1607 Imported Carnations 4,3208 Imported Orchid 2,1609 Imported Jypsophelia 2,16010 Imported Bird of Paradise 1,080


PREF-28/APRIL 2007/2

25

Statement Summaries SMEDAIncome Statement

Rs. in actualsYear 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Revenue 5,264,879 6,703,176 7,286,446 7,923,929 8,620,866 9,383,012 10,216,696 11,128,869 12,127,173 13,220,006 Cost of goods sold 3,303,176 3,632,099 4,064,283 4,565,758 5,097,455 5,713,506 6,506,059 7,190,250 8,073,105 9,096,885

Gross Profit 1,961,704 3,071,077 3,222,163 3,358,171 3,523,410 3,669,506 3,710,636 3,938,620 4,054,068 4,123,121

General administration & selling expensesAdministration expense - - - - - - - - - - Rental expense 512,831 548,831 588,431 631,991 679,907 732,615 790,593 854,369 924,523 1,001,692 Utilities expense - - - - - - - - - - Travelling & Comm. expense (phone, fax, etc.) - - - - - - - - - -

Packing cost of Roses & Glads 86,395 95,034 104,538 114,992 126,491 139,140 153,054 168,359 185,195 203,715 Office vehicles expense 144,000 158,400 174,240 191,664 210,830 231,913 255,105 280,615 308,677 339,544

Transportation expense from Haripur to Lahore 128,461 141,307 155,438 170,981 188,080 206,888 227,576 250,334 275,367 302,904 Office expenses (stationary, etc.) - - - - - - - - - - Promotional expense 52,649 67,032 72,864 79,239 86,209 93,830 102,167 111,289 121,272 132,200 Insurance expense 4,000 3,600 3,200 2,800 2,400 2,000 1,600 1,200 800 400 Professional fees (legal, audit, etc.) - - - - - - - - - - Depreciation expense 269,735 269,785 269,837 269,892 269,950 142,759 313,353 313,420 313,491 313,565 Amortization expense 141,130 141,130 141,130 141,130 141,130 141,130 141,130 141,130 141,130 141,130 Property tax expense - - - - - - - - - - Miscellaneous expense - - - - - - - - - -

Subtotal 1,339,201 1,425,119 1,509,679 1,602,690 1,704,997 1,690,275 1,984,578 2,120,717 2,270,455 2,435,150 Operating Income 622,503 1,645,958 1,712,484 1,755,481 1,818,413 1,979,231 1,726,058 1,817,903 1,783,613 1,687,971

Other income 82,788 183,401 340,146 508,076 688,134 867,694 1,114,819 1,447,370 1,798,472 2,199,718 Gain / (loss) on sale of assets 448,208 392,182 336,156 280,130 224,104 168,078 740,706 637,613 534,520 - Earnings Before Interest & Taxes 1,153,499 2,221,540 2,388,786 2,543,687 2,730,651 3,015,002 3,581,582 3,902,886 4,116,605 3,887,689

Interest expense 309,301 257,935 198,992 131,354 53,737 - - - - - Earnings Before Tax 844,198 1,963,605 2,189,794 2,412,334 2,676,914 3,015,002 3,581,582 3,902,886 4,116,605 3,887,689

Tax 168,840 392,721 437,959 482,467 535,383 603,000 716,316 780,577 823,321 777,538 NET PROFIT/(LOSS) AFTER TAX 675,358 1,570,884 1,751,835 1,929,867 2,141,531 2,412,002 2,865,266 3,122,308 3,293,284 3,110,151

Balance brought forward 675,358 2,246,242 3,998,077 5,927,944 8,069,475 10,481,477 13,346,742 16,469,051 19,762,335 Total profit available for appropriation 675,358 2,246,242 3,998,077 5,927,944 8,069,475 10,481,477 13,346,742 16,469,051 19,762,335 22,872,486 Dividend - - - - - - - - - - Balance carried forward 675,358 2,246,242 3,998,077 5,927,944 8,069,475 10,481,477 13,346,742 16,469,051 19,762,335 22,872,486

* Promotional Expense and Insurance Expense are for the shop alone.* Other Income is the interest earned on cash in bank.* Tax is applied at the rate of 41% approximately.



26

Statement Summaries SMEDABalance Sheet

Rs. in actualsYear 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

AssetsCurrent assets

Cash & Bank 580,000 1,075,754 2,592,266 4,210,649 5,950,876 7,811,796 9,542,074 12,754,296 16,193,105 19,776,342 24,218,014 Accounts receivable - 216,365 245,919 287,458 312,542 339,962 369,943 402,734 438,607 477,864 520,832 Finished goods inventory - - - - - - - - - - - Equipment spare part inventory 125 138 152 168 185 204 224 247 273 301 - Raw material inventory 144,311 166,564 198,725 238,705 283,322 338,553 415,742 484,132 579,356 697,155 - Pre-paid annual land lease 152,831 152,831 152,831 152,831 152,831 152,831 152,831 152,831 152,831 152,831 - Pre-paid building rent 30,000 33,000 36,300 39,930 43,923 48,315 53,147 58,462 64,308 70,738 - Pre-paid lease interest - - - - - - - - - - - Pre-paid insurance 4,000 3,600 3,200 2,800 2,400 2,000 1,600 1,200 800 400 -

Total Current Assets 911,267 1,648,251 3,229,394 4,932,541 6,746,079 8,693,661 10,535,561 13,853,901 17,429,280 21,175,632 24,738,846

Fixed assetsLand - - - - - - - - - - - Building/Infrastructure 595,200 565,440 535,680 505,920 476,160 446,400 416,640 386,880 357,120 327,360 297,600 Machinery & equipment 200,000 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 - Furniture & fixtures 30,000 27,000 24,000 21,000 18,000 15,000 12,000 9,000 6,000 3,000 -

Packing and Covering Sheet for Haripur Farm - - - - - - - - - - - Office vehicles - - - - - - - - - - - Office equipmentSaplings of Roses, Glads, Tube Roses, Statices & Farm Tools 1,524,474 1,308,551 1,092,630 876,712 660,797 444,885 1,208,876 949,692 690,511 431,334 172,161

Total Fixed Assets 2,349,674 2,080,991 1,812,310 1,543,632 1,274,957 1,006,285 1,717,516 1,405,572 1,093,631 781,694 469,761

Intangible assetsPre-operation costs 1,411,300 1,270,170 1,129,040 987,910 846,780 705,650 564,520 423,390 282,260 141,130 - Legal, licensing, & training costs - - - - - - - - - - -

Total Intangible Assets 1,411,300 1,270,170 1,129,040 987,910 846,780 705,650 564,520 423,390 282,260 141,130 - TOTAL ASSETS 4,672,241 4,999,413 6,170,744 7,464,083 8,867,816 10,405,596 12,817,597 15,682,863 18,805,172 22,098,456 25,208,607

Liabilities & Shareholders' EquityCurrent liabilities

Accounts payable - - - - - - - - - - - Export re-finance facility - - - - - - - - - - - Short term debt - - - - - - - - - - - Other liabilities - - - - - - - - - - -

Total Current Liabilities - - - - - - - - - - -

Other liabilitiesLease payable - - - - - - - - - - - Deferred tax - - 0 0 0 0 0 0 (0) (0) 0 Long term debt 2,336,121 1,987,934 1,588,381 1,129,886 603,751 - - - - - -

Total Long Term Liabilities 2,336,121 1,987,934 1,588,381 1,129,886 603,751 0 0 0 (0) (0) 0

Shareholders' equityPaid-up capital 2,336,121 2,336,121 2,336,121 2,336,121 2,336,121 2,336,121 2,336,121 2,336,121 2,336,121 2,336,121 2,336,121 Retained earnings - 675,358 2,246,242 3,998,077 5,927,944 8,069,475 10,481,477 13,346,742 16,469,051 19,762,335 22,872,486

Total Equity 2,336,121 3,011,479 4,582,363 6,334,198 8,264,064 10,405,596 12,817,597 15,682,863 18,805,172 22,098,456 25,208,607 TOTAL CAPITAL AND LIABILITIES 4,672,241 4,999,413 6,170,744 7,464,083 8,867,816 10,405,596 12,817,597 15,682,863 18,805,172 22,098,456 25,208,607



27

Statement Summaries SMEDACash Flow Statement

Rs. in actualsYear 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Operating activitiesNet profit - 675,358 1,570,884 1,751,835 1,929,867 2,141,531 2,412,002 2,865,266 3,122,308 3,293,284 3,110,151 Add: depreciation expense - 269,735 269,785 269,837 269,892 269,950 142,759 313,353 313,420 313,491 313,565 amortization expense - 141,130 141,130 141,130 141,130 141,130 141,130 141,130 141,130 141,130 141,130 Deferred income tax - - 0 - - - - - (0) - 0 Accounts receivable - (216,365) (29,554) (41,539) (25,084) (27,420) (29,981) (32,791) (35,874) (39,256) (42,969) Finished good inventory - - - - - - - - - - - Equipment inventory (125) (13) (14) (16) (17) (19) (21) (23) (25) (28) 301 Raw material inventory (144,311) (22,253) (32,162) (39,979) (44,617) (55,231) (77,189) (68,390) (95,224) (117,799) 697,155 Pre-paid building rent (30,000) (3,000) (3,300) (3,630) (3,993) (4,392) (4,832) (5,315) (5,846) (6,431) 70,738 Pre-paid lease interest - - - - - - - - - - - Advance insurance premium (4,000) 400 400 400 400 400 400 400 400 400 400 Accounts payable - - - - - - - - - - - Other liabilities - - - - - - - - - - -

Cash provided by operations (178,436) 844,992 1,917,169 2,078,038 2,267,578 2,465,950 2,584,268 3,213,630 3,440,289 3,584,791 4,290,471

Financing activitiesChange in long term debt 2,336,121 (348,187) (399,552) (458,496) (526,134) (603,751) - - - - - Change in short term debt - - - - - - - - - - - Change in export re-finance facility - - - - - - - - - - - Add: land lease expense - 152,831 152,831 152,831 152,831 152,831 152,831 152,831 152,831 152,831 152,831 Land lease payment (152,831) (152,831) (152,831) (152,831) (152,831) (152,831) (152,831) (152,831) (152,831) (152,831) - Lease principal repayment - - - - - - - - - - - Issuance of shares 2,336,121 - - - - - - - - - - Purchase of (treasury) shares - - - - - - - - - - -

Cash provided by / (used for) financing activities 4,519,410 (348,187) (399,552) (458,496) (526,134) (603,751) - - - - 152,831

Investing activitiesCapital expenditure (3,760,974) (1,051) (1,104) (1,159) (1,217) (1,278) (853,990) (1,409) (1,479) (1,553) (1,631) Acquisitions - - - - - - - - - - -

Cash (used for) / provided by investing activities (3,760,974) (1,051) (1,104) (1,159) (1,217) (1,278) (853,990) (1,409) (1,479) (1,553) (1,631)

NET CASH 580,000 495,754 1,516,512 1,618,383 1,740,226 1,860,921 1,730,278 3,212,221 3,438,809 3,583,237 4,441,671

Cash balance brought forward 580,000 1,075,754 2,592,266 4,210,649 5,950,876 7,811,796 9,542,074 12,754,296 16,193,105 19,776,342 Cash available for appropriation 580,000 1,075,754 2,592,266 4,210,649 5,950,876 7,811,796 9,542,074 12,754,296 16,193,105 19,776,342 24,218,014 Dividend - - - - - - - - - - - Cash carried forward 580,000 1,075,754 2,592,266 4,210,649 5,950,876 7,811,796 9,542,074 12,754,296 16,193,105 19,776,342 24,218,014



28

1177 KKEEYY AASSSSUUMMPPTTIIOONNSS

The proposed project is based on following assumptions:1. Only rose, gladiola, tube rose & statice flowers would be grown.2. For the Flower Shop a complete variety of local and imported flowers (other than

flowers grown at the farm house) will be maintained. So that the customer gets a complete range of flowers at one shop.

3. Farms are based in Lahore and Haripur / Abbotabad.4. Clean water would be used for irrigation.5. The shop would operate around 300 days an year and would be fed by its own farms.6. 40% production capacity would be achieved during the first year, about 10% next

year, and it will remain at 50% throughout the other years. Since during the month of Ramazan, Moharram and Summer seasons flowers demand is low, that’s why it is assumed that the farm selling capacity would be 50%.

7. Growth rate is assumed at 10% after second year.

Other assumptions are mentioned in the table below:

Table 12: Operating Assumptions

Flower ShopHours Operational per day 12Days operational per month 30Days operational per year 360

Table 13: Economy Related Assumptions

Inflation rate 10% Electricity growth rate 10% Water price growth rate 10% Gas price growth rate 10% Wage growth rate 10% Saplings of Roses 5% Office equipment price growth rate 5%Transportation expense growth rate 10%

Table 14: Expense Assumptions

Communication Expense 1% of Administrative CostsTransportation Expense 8% of Cost of Goods SoldPromotional Expense 1% of Revenues



29

Table 15: Cash flow Assumptions

Initial Cash in Bank Rs. 250,000

Accounts Receivable Cycle in (Days) 15

Raw Material (Fertilizers & Pesticides) Inventory in (Days)

30

Table 16: Rent Assumptions

Refundable Rent Security of Flower Shop (months)

3

Pre-paid Rent in (months) 6

Table 17: Depreciation Expense

Depreciation Method Straight Line MethodDepreciation Rate of Machinery & Furniture (Annual)

10%

Depreciation Rate of Farm Tools & Fixtures (Annual)

20%

Depreciation Rate of Roses (Annual) 20%Depreciation Rate of Gladiolus (Annual) 10%Depreciation Rate of Tube Rose (Annual) 10%Depreciation Rate of Statice (Annual) 100%

Table 18: Financial Assumptions

Project Life (Years) 10Debt Equity Ratio 50:50Return on Equity 25%Interest Rate on Long Term Debt 14%Long Term Debt Tenure (Years) 5Number of Payment/Year 4Income Tax Rates Sole Proprietorship Tax Slabs

SMEDA Flower Shop

Documents

Transcript of SMEDA Flower Shop