Super Final Jeeea

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University of International Business

Business Plan for

Relax Hostel

Dana Ramazanova

GaukharSarsymbayeva

Leila Ungutbayeva

11.856

Almaty 2013


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Content

I. Executive Summary...3

II. Strategic Analysis and Strategic Plan5

III. Product Analysis6

IV. Marketing Plan..8

V. Production Plan12

VI. Organization Plan.13

VII. Financial Plan...15


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Executive Summary

Relax Hostel is one of the first hostels in Almaty where people can spend weekends,

holidays, or a business trip in cozy atmosphere at a relatively cheap price. The price of the stay inthe hostel includes breakfast, linen, towels, free internet access, maps with the most popular places

to visit in Almaty!

There are three owners of the hostel Ramazanova Dana, Sarsymbayeva Gaukhar and

Ungutbayeva Leila and our company is a Limited Liability Company(LLC), thus the owners will

share the profit equally.

Competi ti ve advantage.

In Kazakhstan hotels are relatively expensive thats why hostels are a great way to save

money while still getting the opportunity to see the country. While hotels allow and encourage

privacy, hostel is designed to offer sociable accommodation, with bunk beds in dormitories, living

rooms with televisions and books, and self-catering facilities. Bathrooms will be shared, although

for a little more money you may be able to rent a private room with en-suite bathroom.

Hostels are also more informal than hotelstheres much less emphasis on good-quality service

because of the cheap prices. There are plenty of hotels that have high, low and average prices,

however not all of them have appropriate level of service. According to statistics (stat.kz),

percentage of business tourism in Kazakhstan is 93% of the total number of tourists, which is 189

648. Some of the tourists are coming for business trips for not more than one week. That means that

they dont want to spend a lot of money for bed, because most of their time in Almaty they will

spend at work or they and their company dont want to spend lots of money on accommodation,

thats why hostel is a good decision.

Mission and Vi sion Statement

Our mission is not to establish a business, but to create a brand new type of youth community in our

country: open to new ideas and ventures, not to attract a new customer niche, but to invite guests toour country. Our aim is to create a place where people from any part of in the world would feel like

home. Our everyday work is dedicated to provision of relaxing and comfortable atmosphere for our

guests.

Firstly, the company is aimed at the establishment of a chain of hostels in other large cities,other

than Almaty (Astana, Karaganda, Atyrau, etc),that would be located near airports, train and central


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metro stations. Taking into consideration expanding economic and cultural globalization, it is

necessary to emphasize the evolving value of intangible assets of our life, while everything tangible

losses its worth. Ecotourism is growing rapidly at an amazing speed; hence it is necessary to provide

appropriate conditions.

We are going to make RELAX hostel known as a brand of ecological and social sustainability. Byapplying Total Quality Approach, companys customer service and managements decisions would

be based on continuous quality improvement and satisfaction of customer needs.

Management and Organization:

The organization of the company is simple, as the 2 owners of the hostel are involved in the work

process. Accountant/financial director-is one person, Ungutbayeva Leila who is responsible for all

issues connected with the cash. Senior manager, Sarsymbayeva Gaukhar, is liable for the control

over the receptionist and cashier and checks the presence of items that are needed for clients.

Receptionist works 8 hours per day and registers people for accommodation, at the same time is in

charge of the cash machine. Janitor is a non-regular worker and cleans the hostel 2 times per week


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Analyzing the product

Mission

Hostelling business is widely spread around the world. It provides youth usually represented by

backpacking community or tourists with cheap but comfortable accommodation. It is not only the

source of accommodation but a part of an adventure alongside with travelling. It is a place where

you can meet people from any place in the world, communicate and share memories with them. It is

an unforgettable and challenging experience, which luxurious hotels are not able to give.

So, our mission is not to establish a business, but to create a brand new type of youth community in

our country: open to new ideas and ventures, not to attract a new customer niche, but to invite

guests to our country. Our aim is to create a place where people from any part of in the world would

feel like home. Our everyday work is dedicated to provision of relaxing and comfortable atmosphere

for our guests.

Vision

Our company is planning to evolve in 2 directions: material and sustainable.

Firstly, the company is aimedat the establishment of a chain of hostels in other large cities, other

than Almaty (Astana, Karaganda, Atyrau, etc),that would be located near airports, train and central

metro stations.

Taking into consideration expanding economic and cultural globalization, it is necessary to

emphasize the evolving value of intangible assets of our life, while everything tangible losses its

worth.

Ecotourism is growing rapidly at an amazing speed; hence it is necessary to provide appropriate

conditions.

We are going to make RELAX hostel known as a brand of ecological and social sustainability. By

applying Total Quality Approach, companys customer service and managements decisions would

be based on continuous quality improvement and satisfaction of customer needs.


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Product analysis

In Kazakhstan hotels are relatively expensive thats why hostels are a great way to save

money while still getting the opportunity to see the country. While hotels allow and encourage

privacy, hostel is designed to offer sociable accommodation, with bunk beds in dormitories, living

rooms with televisions and books, and self-catering facilities. Bathrooms will be shared, although

for a little more money you may be able to rent a private room with en-suite bathroom.

Hostels are also more informal than hotels theres much less emphasis on good-quality service

because of the cheap prices. There are plenty of hotels that have high, low and average prices,

however not all of them have appropriate level of service. According to statistics (stat.kz),

percentage of business tourism in Kazakhstan is 93% of the total number of tourists, which is 189

648. Some of the tourists are coming for business trips for not more than one week. That means that

they dont want to spend a lot of money for bed, because mostof their time in Almaty they will

spend at work or they and their company dont want to spend lots of money on accommodation,

thats why hostel is a good decision.

Our Hostel is located at apartment complex Stolichnii center.We occupy the 1st floor of

the building and its hard to get lost. Apartment complex Stolichnii Center is situated in the

historical part of Almaty. It is an ideal starting point to explore this beautiful and enchanting city.

Hostel is only 5 minutes away from Almaly metro station! Our hostel is surrounded by picturesque

parks and nice cafes with warm atmosphere and fashionable design. The atmosphere of the hostel is

very cozy, as it designed with light and calming colors, such as: light purple, beige and light pink.

First of all, our business must have Certificate of Conformity(GOST), as it is a guarantee of

standardized requirements of provided service. There are two types of certification mandatory and

voluntary and in order to stay afloat in the market, after proving the conformity of the service we

should assure the quality of the service which is evaluated by the customers. Quality Certificate

attributes can be formed by Kazakh Association of Hotels and Restaurants; you are notified before 2weeks of the arrival of the inspection control and the commission checks the quality every year.

ISO certificate is related toquality management systems and designed to help organizations

ensure that they meet the needs of customers, while meeting statutory and regulatory requirements

related to the product. This certificate is very important to have as it responses to international

standards so that our customers interests will be on the first place. Actually, there are plenty of
http://en.wikipedia.org/wiki/Quality_management_systemhttp://en.wikipedia.org/wiki/Quality_management_system


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certificates that guarantee and confirm the quality of the service, and its not hard to obtain them, but

the previous ones are major and obligator.

As 60 % of the world are Muslims and having Halal Certificate is becoming very crucial. From

the prospective of the tourists whose choice of the hostel depends on religion, Halal certificate will

be defining aspect of the choice.According to the World Tourism Organization, ecotourism is the fastest growing market in the

tourism industry, growing at a rate of 5% worldwide and representing over 11% of all consumers

spending. Thats why we must implement and certify EcoCriteria strategy for such small

organization as our hostel. Working with a board of advisors comprised of some of the brightest

minds in sustainability, EcoRooms&EcoSuites has developed a strict set of EcoCriteria that is

raising the bar for environmental excellence in hospitality. There are two tiers of green designations

approved status is based upon satisfactory completion of an application, and certified status

requires an on-site audit of the claims made on the application by one of the programs board of

advisors.

If the hostel after launching develops according to the plan and the profits are earned on time then

there is a possibility to expand. It is necessary to open the next branch of the business in the capital

of the country, as it is the biggest touristic attraction. Who knows, there is a chance to become one

of the first and biggest Hostel chains in the country.

Licensing is aimed at governmental security, realization of authoritative monopoly and for

protecting the environment. Licenses are given out to legislative entities and they cannot be used by

other entities. Firstly, we should write application established by the government, and then we must

have documents that confirm the conformity to qualified requirements and the document of payout

to the budget for the right to have different types of activity. Ready license gives opportunity to

prevent occurrence of the same business with the same name and it protects the business from

stealing ideas, people, trademark etc.


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Marketing Plan

Hostel is a new trend in the market of hotel services. Relax hostel is relatively new type of

accommodation in Almaty. The main product that we offer to customers is our pleasant and cozy

atmosphere, quality service at a relatively cheap price in comparison with low-cost hotels and otherhostels. We are creating friendly work environment, only hardworking and well-mannered staff will

be attracted; this fact shows that both clients and prospective employees will be interested in having

business with us.

Keys to Success:

The keys to success and advantages of our business are:

Affordable prices

Convenient location

Friendly service

Safety

Products and Services

Relax hostel is positioning itself as a temporary type of accommodation for different groups of

people. Our services are:

24/7 hostel with 6 rooms (primary function)

Help of multilingual staff

Lockers, luggage storage

Kitchen and laundry services

Free Wi-Fi access


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Competitiveness

Hostel business is an unfilled niche in Almaty. Knowing our direct and indirect competitors

gives us clearer image of what we should do to be successful and have the ability to compete.

Our direct competitors are Almaty hostel, Apple hostel and Hostel Park.

Almaty hostel is located in the foothills of the Almaty, this hostel is a 15-minute drive from

Almaty city center. Its rooms and dormitories have free Wi-Fi and offer mountain views.

The self-catering Almaty Hostel offers simply furnished rooms and dormitories with either a

private or shared bathroom. Bed linen and towels are provided.

The main disadvantage of this hostel is that it is not in the city and it is expensive to use a

taxi. Mostly for tourists who want to explore the mountain nature.

Apple hostelis located 3 minutes walkfrom Auezov Theatre Metro Station in Almaty. This

hostel features free Wi-Fi and a shared lounge with a TV. Abay Avenue is 8 minutes walk

away. Set in the city centre, Apple Hostel provides quick access to Almatys main

attractions, such as the Central Stadium, 1.5 km away. The Square of the Republic is 8

minutes drive from the property. Every room at the hostel is decorated in a simple style, and

bathrooms are fitted with a shower. Guests can use the shared fridge and microwave to cook

simple meals, while several cafs and restaurants can be found within a 10-minute walk of

the hostel.

This hostel has high ratings on booking.com, which shows its ability to compete.

Hostel Park is located a 5-minute walk from Alatau Metro Station. Free Wi-Fi and a 24-

hour reception are featured. The bright dormitory rooms are simply decorated and include a

sofa. The shared bathrooms are in the hallway. Guests can cook their meals in the shared

fully equipped kitchen, complete with a dining area. A variety of cafs and restaurants can be

found within a 5-minute walk from the hostel. The Almaty Central Stadium is a 5-minute

drive away, and Globus Shopping Mall is a 15-minute walk from the hostel.


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The main advantage of Relax hostel is that it is situated in the downtown, in comparison with its

direct competitors and only 2-5 minutes away from Almaly metro station. The hostel itself is pretty

cheap, but is situated in area with all the trendy shops and cafes.

Our indirect competitors are cheap and middle-class hotels and real estate companies,

offering short-term apartment rental. According to booking.com website there are approximately 25

middle class hotels. Although hotels are more expensive, they dont provide necessary youth

backpackers atmosphere. Still they are not true competitors to the hostel. They cater to an older

demographic and have the ability to be much more private, although some do encourage mingling

with guests by offering breakfast in communal areas.They are also two to ten times the price of the

hostel which makes them out of price range of our potential customers.

As mentioned before, because market of hostel is the developing area business, the quantity

of hostels is growing. This can definitely be a threat. On the other hand starting such business

Target Market Demographics

The target market will be 18 to 34-year-old people:

foreign travelers living on a budget and out of a backpack

students from other cities of Kazakhstan

tourists

working peopleon business trips (both Kazakhstani and foreign)

There will be heavy marketing towards international travelers; however, considering the data

provided by stat.kz number of students in Kazakhstan is more than 200 000, 70% of them are not

Almaty residents. That means that when they come to Almaty and search for the permanent place to

live, they need at least 2-7 days where to stay at. Also according to statistics in 2011 (stat.kz),

percentage of business tourism in Kazakhstan is 93% of total number of tourists (189 648 people).

Advertising

This hostel plans to use an effective low cost advertising approach though backpacker forums,

free web building software, low cost hosting, and through placement in traditional backpacker

guides as well as word of mouth through large backpacking networks.A good website with lots of


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pictures and testimonials and with online availability and booking will be a massive step ahead of

the competition. Its also easier to book through Internet. The current hostels in Almaty either do not

administer their own websites and, or they do, they do not do a good job updating them. Because we

are going to use free cheap hosting like Wordpress or Tumblr, the approximate cost of building of

the website will not exceed $700.

We are going to promote our hostel on:

Booking and real estate websites, both local and international (krisha.kz, booking.com,

hostels.com)

Social media advertising. In the world of fast developing new technologies it is necessary to

update information about hostel daily (vk.com, twitter.com, mail.ru, instagram.com).

Travel agencies and universities, using posters and brochures.

Price

Hostel is initially a place for people who dont want to be wasteful and/or are on a low

budget. This means that price should be affordable.

We offer many types of rooms for families, groups of students and even single travellers.

Type of room Price10-bed room 2000 KZT

6-bed room 3000 KZT

Private family room 6500 KZT

These prices include such services as:

The room or a bed itself

Wi-Fi access, TV

1 locker and luggage space per person Usage of washing machine, BBQ and refrigerator

Guide-maps


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Additional paid services:

Snacks and beverages

Bicycle/car rent

Linen and towels rent

City tours


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Production plan

Floor space 180m2

Capacity Up to 19 persons can be accommodated in one day

Quality assurance sertificates GOST, ISO, Halal, EcoCriteriaetc (see detailed information in the

product analysis)

Ecology Our hostel will implement green strategy, as it has already beenmentioned in the Product analysis. Firstly, our hostel will beprovided with eco-friendly trash cans(plastic, glass, paper, steel) sothat the trash could be recycled.(approx. 12000tg) We also willchange bulbs for energy-saving once. Further growth ofsustainable environment in the hostel depends on the developmentof the business.

Legal Protection The license of the company is obtained on the www.elicense.kz ,which is easy and mobile. Firstly, we send application ofElectronic Digital Signature to registration center, then register onelicense and write application for license. The 4th stage is applyingfor enclosure of the license, which requires a long list ofdocuments and only then we take the license

Marketing products:

8 double-decker beds

1 double bed

1 single bed

21 lockers

38 linens

25 towels

23 pillows

23 blankets

2 computers

2 washing machines

4 tables

Sofa( in the lobby)

3 Chairs( lobby)

Guide-maps (approx. 600/month)


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Organizational Plan

There are three general partners with equally distributed liabilities, who will actively participate in

the establishment and maintenance of business.

Owners:

Ramazanova Dana

SarsymbaevaGaukhar

Ungutbayeva Leila

Personnel:

Accountant/Financial director

Senior manager

Receptionist/Cashier (3shift workers)

Janitor


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HR strategy

Selection & Recruitment.

The main sources for supplying employees are University alumni and Internship programs.

Interns would be selected through 2-day interview. Our company gives a rare opportunity for

interns, as they would be able to gain both managerial and cultural experience.

Internship programs would be announced through Universities assembly, career centers,

Social Media, language skills training centers.

Training & Development

Non-managerial employees who are authorized to communicate with customers directly are

required to have advanced foreign languages skills (English, French, Spanish, Chinese).

Also stuff will have to undergo training & development program, which contains not only

the skills of managing hostel duties, but also personal guidance, as our employees will have

to communicate with representatives of different nationalities, therefore perform ethically.

Compensation & Benefits

Sufficient actions are to be undertaken in order to keep up efficient and fruitful work of the staff

members. We enclose system of incentives by implementing bonuses and various compensations:

Basic salary + performance based bonuses

Healthcare and insurance

3-week paid vacation per year


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Financial Plan

Financial planning is the task of determining how a business will afford to achieve its

strategic goals and objectives. Financial plan is one of the integral parts of business plan. In order to

obtain profitability and efficiency of the prospective business, it is necessary to make detailedanalysis of all the financial factors. Here we will describe the sources of financing, the allocation of

financial resources at maximum possible efficiency and their cost.

To identify the cost of our project, we estimated the total initial investment into the

company (in tenge):

I. Financial Statements analysis

1. Investing in inventories (year 1):

Quantity Costperunit Totalcost

Bunkbed 11 23000 253000

Queen-sizebed 2 30000 60000

Twin-sizebed 2 10000 20000

Pillow 28 1000 28000

Duvet 28 4000 112000

Bedding 28 4000 112000

Lamp 18 600 10800

Bulb 18 300 5400Washingmachine 1 40000 40000

Mattress 28 22000 616000

Refregirator 1 50000 50000

Microwave 1 15000 15000

Personalcomputer 1 100000 100000

Towel 30 500 15000

Tissue 20 200 4000

Locker 28 10000 280000

Soap 120 180 21600

Toaster 1 2000 2000Cashregister 1 50000 50000

Map 8640 60 518400

Fireextinguisher 1 15000 15000

Foodandbeverages 2328200

Marketingexpences 107800

Totalcost: 4764200


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All the furniture, household appliances, items of daily use and food related products will be

purchased at abelow-averageprice without sacrificing quality and will meet all sanitary

norms and standards.

Most of our advertising is used in social media and Internet, which means that it is

practically free. However the cost will include initial research and some printed advertisingmaterials for distribution purposes.

2. Depreciation:

3. Operating costs:

Cost Sum (per year)

Long-term rent 4250400

Telephone, Internet 60000

Utility (water, electricity, etc.) 480000

Marketing expense 360000

Total 5150400

Value(tg)

Depreciation per

year

(total 5 years)

Bunkbed 230004600Queen-sizebed 30000 6000

Twin-sizebed 10000 2000

Pillow 1000 200

Duvet 4000 800

Bedding 4000 800

Lamp 600 120

Washingmachine 40000 8000

Mattress 22000 4400

Refregirator 50000 10000

Microwave 15000 3000

Personalcomputer 100000 20000

Locker 10000 2000

Toaster 2000 400

Cashregister 50000 10000

Total

depreciation: 72320


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4. Personnel cost:

Position Numberofemployees Yearlypayment

Accountant/financial

director 1 240000

Senior manager

1 400000

Receptionist/cashier/roomservice 3 720000

Janitor

1 180000

Total: 6 1540000

5. Income statement

Revenues. It is possible to accommodate 28 people per day in our hostel, so if our maximum

capacity is 100% daily revenue of the hostel equals to 95000. However we assume that average

amount of people to whom we will render services is 22 clients per day. Mathematically average

revenue per person: 95000/28=3393, we multiply this number by 22 and get 27,244,643 tg per year.

We take a loan from Kazkommertsbank; we need 4764200 for our initial investment,

5150400tg to cover 1-year operating costs and 1540000tg to pay salaries for employees, so overall

we need 11500000tg. Our interest expense is calculated as follows: 11500000*0,14=1610000.

Income statement for the 1styear

Sales 27244643

COGS -4656400

Gross Profit 22588243

Selling and AdministrativeExpenses -6690400

Depreciation Expense -72320

EBIT 15825523

Interest Expense -1610000

EBT 14215523

Taxes(20%) -2843105

Net Income 11372418


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In the second year due to the marketing strategy we assume to have increase in number of

clients from 22 to 26, and this year hostel will spend only 700$ on advertising, as in the previous

year it has already obtained target group.

Income Statement for the 2nd

year

Sales 32198214

COGS -2877600

Gross Profit 29320614

Selling and AdministrativeExpenses

-6438200

Depreciation Expense -72320

EBIT 22810094

Interest Expense -1610000

EBT 21200094

Taxes(20%) 4240018,8

Net Income 16960075

6. Estimated balance sheet for year 1:

Assets

Currentassets:

Cash 105000+2850000

Inventory 4764200Totalcurrentassets 7719200

Fixedassets:

Furniture and fixtures 1748800

Lessaccumulateddepreciation 72320

Totalfixedassets 1676480

Totalassets 9395680

Liabilitiesandequity

Currentliabilities:

Taxespayable 2843105

Accruedexpenses 552575+1540000Totalcurrentliabilities 4935680

Long-termdebt: 1610000

Totallong-termdebt 1610000

Totalliabilities 6545680

Equity:

Totalequity 2850000

Totalliabilitiesandequity 9395680


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Ratios.

Profitabilityratios shows the differenceofrevenueandexpenses;itprovidesinformationabout

earnedamountofmoneyrelativetosales,valueofassetsandequity.

Gross profit margin is equal to 22588243tg, revenue is equal to 27244643tg;

Gross profit margin ratio=22588243/27244643= 0.83= 83%It shows that from the revenue of our hostel, from each tenge earned 83% is available to cover

overhead, other expenses and profits.

Operating margin ratio or return on sales ratio is the ratio of operating income of a business to its

revenue. It is profitability ratio showing operating income as a percentage of revenue.

From the income statement we see that Operating Income(EBIT)=15825523; revenue is 27244643,

and according to the formula:

Operatingprofitmargin=15825523/27244643=0.58=58%

Operating margin ratio of 58% means that a net profit of 58tyin is made on each tenge of sales. Thus

a higher value of operating margin ratio is favorable which indicates that more proportion of

revenue is converted to operating income.

Net profit margin is a key ratio of profitability. It is very useful when comparing companies in

similar industries. A higher net profit margin means that a company is more efficient at converting

sales into actual profit. Net profit=11372418; revenue=27244643

Net profit margin ratio= 11372418/27244643=0.42=42%

Return on assets is the ratio of annual net income to average total assets of a business during a

financial year. It measures efficiency of the business in using its assets to generate net income.

NI=11372418; total assets=9395680

Return on assets=11372418/9395680=1,21

Thisnumbershowsthatusageofassetsandtheirturnoverisprettyfast,assetsareliquidandforeachass

etboughtwegenerate1,21tg ofincome

Return on equity= 11372418/2850000=40%

The owners receive 40% from each tenge earned

Liquidity ratios shows how fast assets can be converted to cash and whether the company is able to

pay short-term obligations.

Current ratio=7719200/4935680=1,56

Relax Hostel hasitscurrentliabilitiescovered1.56 timesover.

Thequickoracidratiomoreexactlymeasuresliquidity.Inventory value is 4764200

Quick ratio= 7719200-4764200/4935680= 0,60


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Debt ratios

Thedebttototalassetsratio shows the share of assets that were budgeted with liability

Debt to total assets=6545680/9395680=0,70=70%

70% of our assets are financed with liabilities

Debt to equity measures the debt relative to equityDebt to equity=6545680/2850000=0,89=89%

Thetimesinterestearnedratio shows how well the company has its obligations covered.

EBIT=15825523; Interest=1610000

Times Interest earned= 15825523/1610000=9,82

Assetactivityratios

Inventory turnover ratio measures how efficiently the company manages its inventory. COGS is

equal to 4656400;

Inventory Turnover=4656400/4764200=0,98=98%

Totalassetturnover measureshowefficientlyafirmutilizesitsassets.Revenue is 27244643

TAT=27244643/9395680=2,9


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Capital budgeting

NPV- is the difference between the present value of cash inflows and the present value of cash

outflows. NPV is one of the major measures of undertaking the investment decision.

Cash flows

-11500000

In order to make sure that we made the right decision, we calculate NPV of our project, we take the

rate of 7%:

NPV=-115000000+11444738/(1,07)+17032395/(1,07)^2=14072770 KZT

Analyzing our NPV, we can come to the conclusion that the project should be accepted, as the

current value of a project, that have operated at 2 years(minimum), is 14072770 KZT at the rate of

7%.

IRR is another measure of the reliability of our project.

IRR is the estimated rate of return at NPV equal to 0

r 0 0,3 0,5 0,85 0,9

NPV 16977133 7381984,852 3699778,7 -337061 -758339

IRR=0,07+14072770/(14072770-(-337060,54))*(0,85-0,07)=0,831755 or 83,17%,

where: 7% is the percentage with positive NPV equal to 14072770,

85% is the percentage with negative NPV equal to -337061.

High value of IRR of our project shows high reliability and success of the project, which supportsthe claim that the project should be accepted.

11444738 17032395


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At the table of NPV profile we can clearly see the IRR=83,17% at which NPV is 0, and that if the

rate is more than 83%, NPV is negative. Also we can conclude that the lower the rate, the higher is

NPV so our rate of 7% is quite appropriate.

PI of our project is equal to 0,22371915 , which is beneficial to our project.

The PP(pay period) of our project does not need to be estimated as it can be clearly seen from the

Cash Flows of our project.

It is obvious that the CF from the first year equal to 11444738 does not cover the initial investment

of 11500000, nevertheless the second years CF of 17032395 cover the residual value of initial

investment equal to 55262. Therefore we can conclude that the initial investment would be covered

in 1 year and a month.

-2000000

0

2000000

4000000

6000000

8000000

10000000

12000000

14000000

16000000

18000000

0 0.3 0.5 0.85 0.9

r

NPV


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Project analysisIncremental cash flowspositive and negative cash flows that will occur if an investment is

undertaken.

Initial investment Cash Flows.

Current asset changes Current liabilities changes

105000 increase in Cash1610000 increasein AP

1550000 in Inventory 552575 increase in Accruals

Total CA change:1655000 Total CL change: 2162575

Operating Cash Flows

Sales 21244643

Operating Expenses -2609900

Depreciation Expense -72 320

EBIT 18 562 423

Corporate Income Tax in KZ(20%)

3712484,6

Net Profit 14 849 938

Depreciation Expense (addedback)

72 320

Net Incremental OperatingCash Flow

14 922 258


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Break-even analysis

Fixed Costs: 5150400+1540000=6650400

Variable cost per unit: 580

Price of the service: 3393

BEP(units)=6650400/3393-580=2364

BEP(sales)= 2364*3393=8021616 tg

-10,000,000 KZT

-5,000,000 KZT

0 KZT

5,000,000 KZT

10,000,000 KZT

15,000,000 KZT

0 400 800 1,200 1,600 2,000 2,400 2,800 3,200 3,600 4,000

TFC

TVC

TC

Sales

Profi


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Information on loan

The main source of our investments is bank. As stated previously, the amount that we should take

from the bank as a loan is 11500000tenge. The bank offers us 14% loan for 10 years. As borrowers,

we should repay the fixed percentage every month.

Table of amortization of loan

Month Start Balance Principal Interest Payment

1 11,500,000.00 44,389.73 134,166.67 178,556.40

2 11,455,610.27 44,907.61 133,648.79 178,556.40

3 11,410,702.65 45,431.54 133,124.86 178,556.40

4 11,365,271.12 45,961.57 132,594.83 178,556.40

5 11,319,309.55 46,497.79 132,058.61 178,556.40

6 11,272,811.76 47,040.26 131,516.14 178,556.40

7 11,225,771.49 47,589.07 130,967.33 178,556.40

8 11,178,182.43 48,144.27 130,412.13 178,556.40

9 11,130,038.16 48,705.96 129,850.45 178,556.40

10 11,081,332.20 49,274.19 129,282.21 178,556.40

11

120 176,497.27 176,497.27 2,059.13 178,556.40

The total outflow of cash from budget is 178556tg per month.


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Risk assessment

A probability or threat of a damage, injury, liability, loss, or other negative occurrence that is caused

by external or internal vulnerabilities, and that may be neutralized through preemptive action.

Some of the risks associated with a hostelbusiness include:

1. Safety:

Safety of guests and visitors must be the prime consideration for hostels.

There also is risk of workplace injuries and accidents.

Were using electrical equipment, which can cause fire.

Solution: we will place strict prohibition for smoking inside the hostel building. It will not

only a good step toward health but also helpful from fire and any other explosion. There

should be the fire protection instruments inside the hostel building as well.

2. Poor Quality:

It is very important to have a good reputation among hostels, as the quantity of them is little. Hostels

positioning itself as cheap type of accommodation and sometimes it can be challenging to achieve

quality for a low price. The risk of losing customers and earnings due to poor service quality exists.

Solution: quality issues shouldnt be eliminated as they arise, but they should be prevented at

the very beginning.

3. Staff Issues:

To achieve good quality of service, we should hire competent service workers. Issues related to staff

not performing, turning up late or causing problems with other staff members may arise. Employees

may commit fraud in the mess expense and in transportation etc. As our product is service, mostly

personnel creates necessary friendly atmosphere. Also employees are very important for any

organization. If they are satisfied of their jobs and the management behavior, then they will be

motivated and will not leave the organization.

Solution: manager will check the record on daily basis. Furthermore, there must be check

and balance upon employees, and there must be proper monitoring system to check

performance of staff.

Giving employees the opportunity to express themselves.


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4. Financial Risk:

Hostel business is risky itself. We should be able to fill in the hostel at its maximum capacity (or

close to 100%).When the opportunity arises,then we need resources to obtain the advantage of that

opportunity. To avail this opportunity, we may go to the bank and other financial institution and

demand loan, in case, when we dont have further capital. If they refuse to lend us loan, then wemay miss to avail that opportunity.

In order to prevent form this kind of risk we should have to make a reserve fund from our

profit and will use this reserve when we have no capital to meet the requirement of our

business and also used to avail the opportunity when it will be rouse.

Hostel Risk Assessment Plan:

1. Identify the hazards

2. Decide who might be harmed and how

3. Evaluate the risks and prevent it

4. Record your findings and implement them

5. Review your assessment and update quality control (if needed)

Super Final Jeeea

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