Sample Business Plan

ELECTRON: ELECTRONIC SPARE PARTS

& REPAIR SERVICES

BUSINESS PLAN

CALENDAR YEAR 2013

BY:

Angelica Marie S. Uy

SECTION 1

EXECUTIVE SUMMARY

The name of the business will be ELECTRON: Electronic Spare Parts & Repair Services. It will be located at LandCo Business Park Legazpi City. The business will adopt a partnership form of business organization. The proprietors are Matt Lignon B. Lao and Mary Joan Lim; both are to contribute and an amount of P 140,574.06. The total projected cost is P 281, 148.12.

Spare parts are offered by the firm are mainly used for repairing electronic devices such as radios, components, televisions, refrigerators and other appliances. The products to be offered by Electron include all kinds of diodes, filament soldering, soldering wire lead, transistors, Light Emitting Diodes (LED) and ICs. These will be purchased mainly from two suppliers which are Newport Electronics Center for electronic spare parts and Qualitek: Core Solder, for soldering leads. More products will be added over time depending on the demand of the customers. ELECTRON, unlike a typical electronic spare part Shop, is combined with Repair services in order to provide better service to the customers and also to provide additional income to the business. Electron aspires to provide good quality repairs and quality spare parts to satisfy and meet the demands of the customers. While there are currently three businesses offering Electronic Repair Parts in Legazpi City, none of these offers Repair Services at the same time.

Electron’s marketing strategy also emphasizes the quality and the availability of the products and services that it provides. All repair services will be provided by a staff trained in electronics and repairs and the staff to be hired are all graduates of electronic courses and had at least 2 years of experience in Repairs. In order to meet customer expectation and quality service, Electron aims to be accredited by different electronics manufacturer such as Sony, Samsung, Panasonic, Aiwa, and other brands. At start-up, we will have two trained staffs to provide assistance with spare parts and who will co repair services. More employees will be hired for the coming years once financing is secured.

The management of Electron consists of co-partners Matt Lignon B. Lao and Mary Joan E. Lim. Both partners will be taking hands on management and operation roles in the business. Co-partner Matt Lignon will be the financial manager and Mary Joan will be the purchasing and marketing manager.to begin with, co-owner Mary Joan will be the cashier and Matt Lignon will be the assistant personnel, but more assistant personnel will be hired when the business become stable.

The Sales Projections for the first year and the second year are P 840,528.00 and P882, 554.40 respectively. Sales are assumed to increase 5% annually. The monthly salary of technicians will be P6, 240. It is assumed to increase 3% annually. Each partner will have P8, 000 allowance per month. The projected net income after tax for the first year is P413,253.06 and P431,748.07 for the second year. Therefore the average net income is

P422,500.57. The rate of return on investment is 150% and the payback period is .66 year or 241 days or 7 months and 28 days.

SECTION 2

BUSINESS DESCRIPTION

Nowadays, we experience great advancement in every field of study. Electronics is

one of the most essential components of technological advancements. Since people now

can’t live without all these technology, they tend to buy and acquire these gadgets to ease

their daily works. However, these devices also have downsides, just like any other non-living

things, it can be broken. In order to still make use of it, skilled persons are needed for repairs

and as well as maintenance of these appliances. These skilled persons are the technicians

and repair mans, for them to provide repair services, electronic spare parts will be needed.

ELECTRON: Electronic Spare Parts & Repair Services is an independent business

formed Partnership type of organization in which the owners are the general partners. The

proponents chose this type of organization because this would be an advantage since they

share the same amount in the business; liabilities or losses will be lessen. All losses and

liabilities will be in the extent of the partner’s separate assets. The net income of the

company will be divided equally.

In Legazpi, there are only few establishments selling electronic spare parts; however

there are many customers in need of electronic supplies, such as the technicians,

electricians, repairmen and other customers.

SECTION 3

PRODUCT AND SERVICE

ELECTRON will provide a wide variety of electronic spare parts including minor and

major repair services for the convenience of the customers. Spare parts will be purchased

from the two suppliers, Newport Electronics Center for electronics and spare parts, and

Qualitek, Core Solder for soldering leads. Spare parts that are offered by the firm are mainly

used for repairing electronic appliances such as radios, components, televisions, and others.

The products to be offered will include all kinds of diodes, filament soldering, soldering wire

lead, soldering guns, soldering irons, resistors, capacitors (AC Ceramics & Electrolytic),

transistors, Light emitting diodes(LED) and ICs. This would be the start-up inventories and

more products will be added over time depending on the demand of the customers.

With the suppliers mentioned earlier, Electron ensures products with good quality.

Electron will do its best to make sure that products are available since the concept of

availability is one of the secret for an effective business.

Electron shall also provide product service and repair. Quality of repair shall be

improved by the accreditation or tying-up with different companies like, Sony, Aiwa, Sharp

and others. With the accreditations, crews and personnel shall attend the seminars and

trainings resulting in better job performance. Parts for the repair shall not be burden since

Electron has its own spare parts.

SECTION 4

MARKET ANALYSIS

Target market

Electron intends to cater to people who engage in repairs and maintenance of

electronic appliances since they are the ones in great need of electronics supplies and spare

parts. These people are the technicians, repairmen, electricians. Other customers, such as

households that need repair services for their appliances, school (for laboratory use), and

students whose course are related to electronics like, Electrical Engineering and Electronics

Technology, are also considered.

DEMAND ANALYSIS

Before organizing a business, many factors are to be considered such as: net income

of people, quality of products, selling price, location of the business establishment,

population growth and the percentage of the target market on the population. Aside from the

fact that electronics and appliances are needed, this shows that demand for electronic

supplies is high regardless of its place of dispersion, However, Electron: Electronics Spare

parts & Repair Services still aims to offer electronic supplies and repair services at the most

reasonable and affordable price.

TABLE 1

TARGET DEMAND-SALES

YEARS

Total

population of

Legazpi City

Average

percentage

of persons

engaging in

Repair

Services

Demand

each year

Percentage

of persons

willing to

avail of the

products

No. of

persons

demanding

for spare

parts

Total

Demand

2007 179, 481 19% 34,101 90% 30,691 368, 292

2008 182, 945 19% 34,760 90% 31,284 375,408

2009 186, 476 19% 35,430 90% 31,887 382,644

2010 190, 075 19% 36,114 90% 32,503 390,036

2011 193, 743 19% 36,811 90% 33,130 397,560

2012 197,482 19% 37,552 90% 33,770 405,250

Source: National Statistics Office

TABLE 2

TARGET DEMAND- REPAIRS

YEARS

Total number of

households in

Legazpi City

Percentage of

households

willing to avail of

ELECTRON’s

Services

Total

householdsFrequency Total Demand

2007 38,487 90% 34, 638 6 207,828

2008 39,746 90% 35,771 6 214,626

2009 41,005 90% 36,905 6 221,430

2010 42,264 90% 38,038 6 228,228

2011 43,743 90% 39,369 6 236,214

2012 45,222 90% 40,700 6 244,200

Source: National Statistics Office

Table 1 shows that according to the National Statistics Office Census as of 2007, the

population of Legazpi City is 179,481 and the rate of increase from 1995-2007 is 2.00% and

from 2000-2007 is 1.86%. therefore the average increase in population is 1.93% [(2%

+1.86%)/2] is considered

SUPPLY ANALYSIS

TABLE 3

HISTORICAL SUPPLY (SALES)

CompetitorsNumber of customers Rate of increase

or (decrease)Weekly Monthly Yearly

Family Electronics 100 400 4,800 1%

Laytronics 300 1,200 14,400 5%

United Electrons 120 480 5,760 3%

Total 24,960

Source: Actual Interview

TABLE 4

HISTORICAL SUPPLY (REPAIRS)

CompetitorsNumber of customers Rate of increase

or (decrease)Weekly Monthly Yearly

Sony Center 60 240 2,880 2%

B & L 80 320 3,840 3%

Sharp Center 70 280 3,360 2%

Total 10080

Souce: Actual Interview

The above table (Table 3) shows the total number of customers of existing electronics

spare parts shop in Legazpi city. The average rate of increase in customers yearly is 3% (9%

divided by 3).

Table 4 shows the total number of customers of existing accredited repair shops in

Legazpi City. The average rate of increase of customers yearly is 2.33% (7 divided by 3).

TABLE 5

PROJECTED SUPPLY (SALES)

YEARTotal Yearly

CustomersFrequency Total Supply

2007 23,527 12 282,324

2008 24,233 12 290,796

2009 24,960 12 299,520

2010 25,709 12 308,508

2011 26,480 12 317,760

2012 27,274 12 327,288

The table shows the projected annual customers who purchase electronics spare parts. It is

assumed that the number of customers will increase by 3% annually.

TABLE 6

PROJECTED SUPPLY (REPAIRS)

YEARTotal Yearly

CustomersFrequency Total Supply

2007 9,627 6 115928334

2008 9,851 6 118684848

2009 10,080 6 121504320

2010 10,264 6 123783840

2011 10,503 6 126729198

2012 10,748 6 129749856

Table 6 shows the projected annual customers of competitors who offer repair services.

SECTION 5

STRATEGY AND IMPLEMENTATION

Combining the sales of electronics spare parts and repair service is already a

marketing strategy of the proponent. Meeting the customers’ need is the main objective of

Electron: Electronic Spare parts and Repair Service and for this reason the proponents

searched for a good suppliers which will offer wide variety of good quality and affordable

products. These suppliers are: NEWPORT ELECTRONIC CENTER located at 541

Evangelista St., Corner Raon St., Quiapo, Manila who offers very affordable prices of

electronics and spare parts compared with other electronics shop and they assure that their

products are of good quality. The other is QUALLITEK, Core Solder, located at Makati,

Metro Manila, which is a manufacturer of soldering wire leads. They sell soldering leads at

P1,700 per kilo. This way we can resell products at a very affordable and reasonable price,

while still having great profit.

Another strategy is categorizing repairs into two types, minor and major repairs. Minor

repairs can still be used and minor damages needs only replacement of certain parts. Major

repairs usually needs replacement of almost the whole major parts of it. Another strategy is

the business location which is very accessible to all especially to the commoners near

Legazpi City. Availability and maintaining good communication with suppliers and customers

is very useful. The business starts a small area in order to have more experience and learn

customer’s behaviors and needs, focusing on target area and target market to meet their

demand.

The pricing strategy used is “lower than the market or competitors price”, since the

proponents have found good suppliers and compared the price from average market price

and discovered that even though the prices are lowered, the business will still earn good

profits. Prices of the products will be raised on a regular basis; it might increase by 1% to 5%

every year since certain costs always rise.

REPAIR SERVICE RATE

For Minor Repairs = P 200.00 per unit or appliance

For Major Repairs = P400.00 per unit or appliance.

SECTION 6

MANAGEMENT TEAM

ELECTRON: Electronic Spare Parts & Repair Services is an independent

business formed Partnership type of organization in which the owners are the general

partners. The proponents chose this type of organization because this would be an

advantage since they share the same amount in the business; liabilities or losses will be

lessen. All losses and liabilities will be in the extent of the partner’s separate assets. The net

income of the company will be divided equally. The owners are also the manager and

cashier. They will supervise all the business transactions.

The source of the funds for the business will come from the personal and family

savings of the proponents.

ORGANIZATIONAL STRUCTURE

Figure 1

ORGANIZATIONAL CHART

MANAGER

SUPERVISOR

ELECTRONIC TECHNICIAN SALES PERSONNEL

DUTIES AND RESPONSIBILITIES AND EMPLOYEES STANDARD QUALIFICATIONS

MANAGER (OVER-ALL FINANCIAL MANAGER/ SALES PERSONNEL)

Matt Lingnon B. Lao

DUTIES AND RESPONSIBILITIES

Responsible for Bookkeeping and Preparation of financial reports, such as income

statements, balance sheets and analyses of future earnings or expenses, that

summarizes and forecast the business’s financial position

Managing budgets

Supervising cash management activities

Responsible for monitoring the collections and past due accounts

Monitors and controls the cash flows and predicting future trends

Formulating strategic and long-term business plans

Assists the electronic technician and takes charge of getting the ordered products

from the stock room

Cleans and arranges the supplies according to order

SUPERVISOR (PURCHASING AND MARKETING MANAGER/ CASHIER)

Mary Joan E. Lim

DUTIES AND RESPONSIBILITIES

Responsible for order placements to suppliers

Responsible for buying and approving the acquisition of supplies and inventories

needed by the business

Seeking reliable vendors and suppliers to provide quality goods at reasonable prices

Responsible for negotiating prices and contracts

Responsible for determining quantity and timing of deliveries

Responsible for keeping track of the inventories and supplies

Responsible for developing and maintaining marketing strategies to ensure market

share and profitability of products and service

Effective management of the marketing, advertising and promotional activities of the

business

Analyzing the competitors and market trends

Takes charge of payments by the customers

Takes charge of collecting bills

Prepares daily report of cash receipts and cash payments

Accountable for any cash shortage on daily sales

ELECTRONIC TECHNICIAN

Hiring requirements:

Highest Educational Attainment : College graduate of any course related to electronics

preferably a graduate of Eletrical Engineering or Electronic Technology

Experience : At least one year

Age : 20-40 years old

Civil Status : Single or Married

Others : a) knows all electronic spare parts and its uses

b) Honest and Trustworthy

c) Hard working

d) Friendly and has pleasing personality

DUTIES AND RESPONSIBILITIES

Responsible for assisting the customers for their ordered products/ spare parts

Responsible for getting customer orders and getting the ordered items from the stock

room

Responsible for assisting and guiding the owners about the spare parts and their

uses

Responsible for arranging the supplies according to order

Responsible for repairs of appliances

COMPENSATION

TABLE 7

EMPLOYEES’ SALARIES

PositionWage per

Worker

No. of

Workers

Monthly

Salary

Annual

Salary

Cashier *Owner*

Electronic 6,240 2 12,480 149,760

Technician

Assistant *Owner*

Personnel

Total 2 P 12, 480 P 149,760

Source: DOLE

TABLE 8

PARTNERS’ ALLOWANCES

Owner’s Monthly Allowance Annual Allowance

LAO P 8,000 P 96,000

LIM P 8,000 P 96,000

Total P 16,000 P 192,000

Note:

a. Bicol Region minimum wage rate, effective March 2009, on establishments employing not more than 10 workers in Legazpi City is P 208.00 per day.

TABLE 9

PROJECTED EMPLOYEE’S/ EMPLOYER’S SSS MONTHLY CONTRIBUTION

PositionMonthly

Salary

Monthly ContributionTotal

Employee Employer

Electronic 12, 480 415.58 632.74 1,048.32

Technician

Total 415.58 632.74 1,048.32

Source: Social Security System

TABLE 10

EMPLOYEE’S/ EMPLOYER’S MONTHLY PHILHEALTH CONTRIBUTION

PositionMonthly

Salary

Monthly ContributionTotal

Employee Employer

Electronic 12, 480 156.00 156.00 312.00

Technician

Total 156.00 156.00 312.00

Source: Phil Health

PLANS Dec Jan Feb March April May June July Aug

Preparation of

the feasibility

study

Registration

Acquisition of

tools and

equipment

Hiring and

training of

employees

Acquisition of

inventories

Renovation and

interior

decoration

Normal

operation of the

business

GANTT CHART

Figure 2

GANTT CHART

SECTION 7

FINANCIAL ANALYSIS

This section provides information about the allocation of funds of Electron. Financial

Statements and Financial Assumptions are also included in this section. This section also

shows the Financial Status of Electron and the Computations of the Rate of Return (ROI),

Payback Period, Break-even Alanysis and Current Assets to total Assets Ratio.

ELECTRON: Electronic Spare Parts & Repair Service

TOTAL PROJECTED COST

Projected Cost for 3 months

Fixes Assets

Furniture and Fixtures p 44,520.00

Tools and Equipments 23,720.00

Total P 68,240.00

Working Capital

Inventories 116,325.60

Operating Expenses

Office and Store Supplies 609.00

Utitlities 3,908.00

Telephone Installation Fee 1,250.00

Salaries Expense 37,440.00

Partners’ Allowances 48,000.00

SSS Contribution 1,898.22

Medicare 156.00

Pre-operating Expense 3,321.00

Total Operating Expenses P 96,582.52

TOTAL PROJECTED COST P 281,148.12

Partners Capital Contribution

LAO p 140, 574.06

LIM 140, 574.06

Total Investment P 281, 148.12

FINANCIAL ASSUMPTIONS

1. The Cost of Inventory and cost of sales will increase 3% annually.

2. Annual sales is assumed to increase 5% annually due to increase in cost of sales

3. Salaries are assumed to increase 3% annually

4. SSS expense increases 3% annually

5. Phil Health expenses increases 3% annually

6. Income tax rate will be 30%

7. Estimated useful life of Furniture and Fixtures is 15 years

8. Estimated useful life of Tools and Equipments is 10 years

FINANCIAL ANALYSIS

RATE OF RETURN ON INVESTMENT (ROI)

¿ Average net incomeTotal Investment

x100

¿ Php 422,500.57Php281,148.12

x100

¿150%

PAYBACK PERIOD

¿ Total InvestmentAverage net income+Depreciation

¿ Php281,148 ,12Php 422,500.57+Php5,340.00

¿ .66∨241days∨7months∧28days

BREAK-EVEN ANALYSIS

¿ ¿CostContributionMargin

CONTRIBUTION MARGIN

¿ Sales−VariableCostSales

August 2010= Php840,520.00−Php218 ,759.48Php840 ,520.00

¿73.9∨74%

August 2010= Php882,554.40−Php220 ,593.92Php882,554.40

¿75%

August 2010−July2011=Php62,900.0074%

¿ Php85,000.00

August 2011−July2012=Php57,560.0075%

¿ Php76 ,746.66

CURRENT ASSETS TO TOTAL ASSETS

¿ Current AssetsTotal Assets

Year Current Assets Total Assets Net Profit Margin

August 2010 – July 2011 Php 631,501.18 Php 694,401.18 90.34 %

August 2011- July 2012 Php 1,068,589.25 Php 1,126,589.25 94.89 %

CRITICAL ANALYSIS

Every business encounters problems and risks and Electron is no exemptions. The

expected risks though are still manageable, like in case of brown-outs, Electron doesn’t have

generators because it is not practical for the business to purchase one but to ensure

continuous business operation. As a result, claiming date of some repairs may be extended

Spare parts defects are also inevitable. These items shall be returned replaced by the

suppliers.

Competition is also one of the risks since there are existing businesses of the same

type here in Legazpi City. Acceptance by the public is another risk, whether they will

continuously avail of Electron’s products and services or not.

APPENDICES

APPENDIX A

SUPPLIERS

NEWPORT ELECTRONIC CENTER

541 Evangelista St., Corner Raon St.,

Quiapo, Manila

QUALITEK, Core Solder

Makati, Metro Manila

ALLIED ELECTRICAL

675 G. Puyat St., Quiapo, Manila

733-1777

DEE HWA LIONG ELECTRONICS EQUIPMENT CORPORATION (DEECO)

605-607 Sales St., Sta. Cruz, MNL

p: (02) 733.1749 f: (02) 733.1756

WATSONS ELECTRONICS

533 F. Torres, Sta Cruz, Manila

733-0032