FINANCIAL MANAGEMENT

PRESENTED TO,
MR SAJJAD SIRAJ

PRESENTED BY,
RAZIA NASRUDDIN
2002-1-8-2791

COLLEGE OF BUSINESS MANAGEMENT

KORANGI CREEK KARACHI

DESIGNER’S BOTIQUE
September 6, 2003

Mr. Sajjad Siraj

Institute Of Business Management
Korangi Creek, Karachi – 75190
Pakistan

Dear Sir:
The attached report authorized by you in the beginning of the term of summer 2002 of
MBA (Exec.) to meet the requirement of the course, describes the complete feasibility
report about the Boutique
The research on this report is mainly done by visiting different top ranking boutique in the
market, people working in the fashion industry, a lot more information were gathered
form the internet, and then summarized in the form of this report.
I have tried my level best to meet your level of requirement. I would be pleased to discuss
this report and its conclusions with you at your request. I thank you for your guidance to
prepare this comprehensive report.

Yours sincerely,
Razia Nasruddin

DESIGNER’S BOTIQUE
 ACKNOWLEDGEMENTS

Completing any report requires a lot of time, energy and effort. However, we must
acknowledge the sincerity and help that MISS NADIA MISTRY, AND MR ADNAN
KAISAR AND MISS NADIA DR AHMAD extended to us, which has brought
us to this wonderfully complied project. Not to forget the efforts of our
teacher MR SAJJAD SIRAJ who helped me throughout the project.

DESIGNER’S BOTIQUE
 TABLE OF CONTENTS

 Letter of Transmittal
 Acknowledgement
 Project Brief
 Key Assumptions
 Depreciation and Amortization Schedule
 Income Statement
 Balance Sheet
 Cash Flow
 Reference

DESIGNER’S BOTIQUE
PROJECT BRIEF
Clothing is a beautiful visual demonstration of the social and
emotional needs of people wearing it. It also portrays in a clearly understood
visual manner, what people of different cultures and styles want socially. Fashion,
through times, has gone through so many rapid changes and bizarre extremes
that it has examples of nearly every kind of clothing function. However, in a
boutique business, the specifications and descriptions of the designs and clothes
are so general that they can fit more than one costume, which actually are quite
different in nature from each other and this is solely dependent on the taste of the
people. The range of Pakistani dresses is remarkably wide, according to the vast
cultures, geographical differences, purchasing capacities, influence of the
western culture, and bewildering diversities of the ethnic groups. One has,
therefore, to sift and isolate, and then relate and bring together, the ideas for
creating various designs, which can fit in the context of the fashion in vogue and
the culture in practice.

DESIGNER’S BOTIQUE
 In reference to Pakistan, the Boutique business is quite in vogue but has
yet to be formalized. The market of this enterprise is quite scattered and
unorganized. There are a few major players in Boutique business and these
entrepreneurs have also taken an initiative based on their caprice and experience
in the field of fashion design. However, there is a massive potential in this field, if
one has the ability to design and market his/her products through introducing
innovative designs both in stitching as well as the fabric sector. Furthermore,
there is massive export potential in this sector, as the demand of Pakistani
dresses, especially in countries like UAE, USA, and UK, is massive due to a high
number of Pakistani expatriates who have settled in these countries. The
Boutique business can also be expanded into a more profitable venture by
providing stitching facilities to other boutiques, which do not own a stitching unit
or are lacking this facility.

PROPOSED CAPACITY
The Boutique business capacity is greatly dependent on the
market size and the number of potential clientele one can attract. Furthermore,
the women fashion wear garments will be designed through a contracted
designer and then stitched through in-house stitching unit. On average, a
designer can supply forty designs per month from which nearly twenty designs
are selected on average. Approximately, total capacity of the defined unit with 5
stitching machines (basis on 8-10 hours shift) will be about 500 1 dresses. The
breakup of the total number of dresses will be as follows:

Total designs selected by designer 20

Number of dresses in each design 5
Number of dresses in each size 5
Total Number of dresses 500
This production and sales capacity is estimated to be economically viable and
justifies the capital as well as operational costs of the project.

CURRENT INDUSTRY STRUCTURE

Currently, the boutique industry is relatively unorganized and is
scattered in and around the posh areas of the metropolitan cities of Pakistan i.e.
Lahore, Islamabad, Karachi, Peshawar, and Quetta. The boutiques in Peshawar
and Quetta, mostly sell the traditional dresses having indigenous/local designs,
whereas the ones in Lahore, Islamabad, and Karachi deal in fashion wear greatly
influenced by the west and the local trends in vogue. As such, there is no exact
detail available of the number of boutiques; especially in women wear, because
there is no association or link between these enterprises. The reason being the
business rivalries and the competitive structure of this industry. However, one can
name a few major players in the business such as Indifference, Generation,
Parahan, Nee Punhal, Bossini, Kapre Waghera, Maria B, Nina’s, and some
individual designer players like Beegee’s, Nilofar Shahid, Nadia Mistri, Amir
Adnan, Shayan Malik, and Sahar Saigol.

DESIGNER’S BOTIQUE
 MARKETING
The marketing of boutique follows the conventional marketing pattern,
which is dependent on selection of venue of the outlet/s and the product mix
(designs and sizes), as well as the promotional strategy. Furthermore, the
boutique owner has to marketing techniques like:

Usage of print media i.e. printing of posters and pamphlets as well as

displaying it and distributing it at proper places
Advertisement in print media i.e. newspapers and fashion magazines, etc.
Usage of electronic media i.e. projection of the boutique in fashion programs,
advertisement on television, and provision of dresses to various television plays
and films.
Event arrangement like fashion shows and photo-shoots.
Usage of e-commerce i.e. launching of website and advertising on web.
Moreover, in order to keep abreast with the emerging trends and client
tastes, surveys regarding customer satisfaction/needs should be a regular feature
of this project. As this project of Boutique deals in designer women wear,
therefore the product mix will comprise of different styles of the female dresses in
different sizes. Whereas, the styles will be Shalwar Kameez, Q-lots, Pajama
Kameez, Frocks, Kurta, Peeshwaz, Party dresses, Casual Dresses and other
prevalent dresses based on the market trends. The average sale price per dress
is assumed to be Rs.2100.
Apart from this, there is a vast export potential in this industry, which is evident
from the export figures of 1998-99 (available from the data of Federal Bureau of
Statistics-FBS)

SITC 2 Code Product Classification 2000 – 2001

Value (Rs. “000”)
8422102 Suit women cotton not 1415124
knitted
8422103 Suit women synthetic not 501917
knitted
8422104 Suit women (other textile 46861
material not knitted)
8422202 Suit women (other textile 2107
material not knitted)
46,861

8424002 Dresses women not 463346

knitted
8424003 Dresses women man 63438
made fiber not knitted
8424004 Dress women other 17723
textile not knitted
8424006 Shisha embroided 286
dresses of cotton

DESIGNER’S BOTIQUE
8427006 Baluchi Kameez of Silk 27
Total 2510826
(Source: Federal Bureau of Statistics)

Even these figures represent the formal export patterns of women dresses from
Pakistan and are not representative of the export of these dresses taking place
on informal level. Most of the women dresses prepared in Pakistan are exported
to USA, UK, Germany, UAE, Saudi Arabia, France, Belgium, Netherlands, and
South Africa. The end users of these dresses in foreign countries are mostly
Pakistani and Indian women who have immigrated to these countries.

RAW MATERIAL
The raw material required for such sort of projects, would be as follows:
Fabric: The fabric, which is the basic raw material requirement for a boutique
and a major component of the cost, can be obtained from wholesale markets or
from markets specializing in designer cloth at Faisalabad, Karachi, and Lahore.
A ccessories: Accessories such as buttons, laces, zippers, elastics, threads,
needles, embroidery threads, glasses, etc. will be procured from the local market
at competitive rates.
Labels, tags and packaging: Labels and tags can be obtained on order, as
these serve as an identity for the boutique and are useful for promotion.

PRODUCTION PROCESS FLOW:

The process for converting fabric in designer wear garments follows the
below
mentioned sequence:

D
 esign: The initial process starts from the designing phase. Various patterns of
clothing and the fashions in vogue, which also relate to the tastes of the
concerned clientele, are designed. The contracted designer as does this
he/she will provide the basic designs of which the fabric will be converted into
the designer wear garment. On average, a designer is supposed to provide 40
designs per month or 100-120 designs per season i.e. three months. From these
designs, approximately 50% of the designs are selected for further development
of clothes.
Pattern Making/Cutting: Based on the designs selected, patterns for cutting
are
developed and based on these patterns, fabric is cut, embroided, block printed,
and processed accordingly 3 .
Stitching: The cutting is then followed by stitching, which can either be done by
the in-house stitching unit or by outsourcing it 4 . Labels are also attached to the
apparels in this process.
Finishing: The final phase is that of finishing, in which the garment will be
checked for quality control and will cleaned (if required) for final presentation at
the outlet. The garments will also be tagged for identification of sizes, prices,
addresses, handling instructions, etc.

DESIGNER’S BOTIQUE
  resentation/Market: Once the designer wears garment is ready after going
P
through the above-mentioned process, it is presented at the outlet/shop for sale
to the clientele.

Designing Pattern making Stitching

/ cutting

Market / Clientele Presentation Finishing

PREMISES FO R SHOP AND STITCHING UNIT

Recommended mode for renting a Shop

It is recommended that the proposed location for the said enterprise be a
posh area, where people have the buying capacity for women fashion wear. The
size of the shop should be at least 800 Sq.ft i.e. 20 feet front and 40 feet depth.
Furthermore, a small building will be required to establishing the stitching unit.
One viable option is to rent a small house for this purpose.
The shop will be obtained on rental basis, and the rent estimation for such a shop
is Rs 30,000/month. According to the prevailing practice, six months rent as
advance and three months rent, as security would be required for renting the
shop. It is assumed that security is a one-time expenditure, whereas pre-paid rent
will only be given at the beginning, while establishing the boutique. After first six
months, rent will be paid on monthly basis.
The cost estimates for setting up the Boutique are as follows:

Security for renting shop/outlet (Rent @ Rs.30, 000per month. 3 90000

months rent as security)
Interior decoration (installing lighting, mannequins, hanging racks, 300000
mirrors, glass panes, cash counter, and other furnitures, etc.)

Security for renting a house for installing the stitching unit (Rent @ 6000
Rs.6, 000 per month)

INFRASTRUCTURE REQUIREMENTS
The project will have the following infrastructure components:

INFRASTRUCTURE REQUIREMENTS Sq .fts

Main shop 600
Try room 36
Small store 100

DESIGNER’S BOTIQUE
Building for stitching unit 10 Marla house

MACHINERY AND EQUIPMENTS

Single needle lock-stitch machine 4 20,000 80,000

Over-lock stitch machine 1 50,000 50,000
Accessories (Scissors, Cutting Board, Table, stools, 50,000 50,000
carpet, etc.)
Air-conditioner 1 30000 30000
Stereo System 1 23000 23000
Computer and Printer 1 35000 35000
Telephone & Fax 1 10000 10000

KEY SUCCESS FACTORS:

There are a number of factors, which contribute towards the success of a
project. In case of the project of Boutique, some of the Key Success Factors are
as follows:
Proper care while producing dresses should be adopted.
Proper Inventory management i.e. keeping minimum inventory as per past
sales trends.
The dress designs should be according to the emerging trends and fashions.
D  esigning of dresses according to the consumer tastes/preferences gathered
through consumer surveys.
The location of the outlet should be properly selected and attractively
decorated so as to target the clientele effectively.
The customer satisfaction should be given due importance, because it is the
customer satisfaction, which can increase the sales. Hence, excellent customer
service should be provided.

THREATS FOR THE BUSINESS

C
 ompetitive Structure of the market
The market of the boutiques is highly competitive, therefore if the entrepreneur is
not well responsive to the tastes and response of the clientele as well as the
fashions in vogue he/she may not be able to capitalize the opportunity properly.
Pilferage in the designs
The designs, which a designer produce can be sold by the staff even before that
design is launched and that can pose serious threat to the business because in
the fashion industry it is the uniqueness of the design which matters.
Selection of the wrong venue

DESIGNER’S BOTIQUE
Selection of the wrong venue can be a major hurdle in achieving the desired
business objectives.
Selection of the wrong design
If the designs are not selected according to the tastes of the clientele then it can
be detrimental for the business, so the clientele taste should be properly tracked.
Tax
Improper documentation of the sales receipt record may lead to problems with
Tax department.

KEY ASSUMPTIONS

PRODUCTION ASSUMPTIONS

Number of Stitching Machines 5

Production Capacity (No. of dresses per month) 500
Capacity Utilization for the first year (No. of dresses per month) 200
Self Production (% of total production) 60%
Dresses manufactured on CMT basis (% of total production) 40%
Monthly self production (Year 1) 120
Monthly Dresses manufactured on CMT basis (Year 1) 80

COST ASSUMPTIONS

Material & Fabrics 400

Accessories 25
Embroidery Cost 100
Direct Labor Cost 280
Direct Electricity Cost 20
Machine Maintenance Cost 4
Admin & Rent expenses & promotional expenses 446
Fixed electricity 30
Average unit cost per dress (Rs.) 1305

DESIGNER’S BOTIQUE
SALES ASSUMPTIONS:

No. of dresses sold per month (Year 1) 120

Average unit price per dress (Rs.) 2100
Average Monthly Sales through retail outlet (Rs.) 252000
No. Of dresses sold on CMT basis per month (Year). CMT 80
manufacturers are garments manufacturer, they are like the out source
for the company, In boutiques such garments are also available.
Average unit price per dress on CMT basis (Rs.) 250
Average Monthly Sales through outsourcing (Rs.) 20000
Total Average Monthly Sales (Year 1) (Rs.) 272000
Sale growth rate (Units) 10%
Sale growth rate (price) 13.33%

OPERATING ASSUMPTIONS

Hours operational per day 8

Days operational per month (Production) 25
Days operational per month (Boutique) 25

CASH FLOW ASSUMPTIONS

Account Payable Cycle (Days) 10

Account Receivable Cycle (Days) 10
Raw Material Inventory (Days) 15

EXPENSE ASSUMPTIONS

Initial Promotional Expenses (Year 1) (%age of expected sales) 3%

Promotion Expenses after Year 1 (% of expected sales) 1.5%
Machine Maintenance per annum 10000
Direct Electricity per month (Year 1) 4000
Fixed Electricity per month (Year 1) 6000
Telephone and Internet charges (Year 1) 3000
Raw Material Price Growth rate 11%
Payroll growth rate 7%
Machine Maintenance growth rate 2%
Direct electricity growth rate 10%
Fixed electricity growth rate 10%

DESIGNER’S BOTIQUE
Rent growth rate 5%
Telephone and Internet charges growth rate 5%
Depreciation Method STRAIGHT
LINE

FINANCIAL ASSUMPTIONS

PROJECT LIFE 10 YEARS

DEBT: EQUITY 50:50
INTEREST RATE ON LONGTERM DEBT 18%
DEBT TENURE 5 YEARS
TAX RATE 40%

PROJECT COST

DECRIPTION COST (RS)

Machinery & equipment 278000
Furniture & Fixture (Interior Decoration) 300000
Security Deposits for Premises 108000
Pre-operating expenses
Salaries 98000
Promotional Expenses 97920
Total Capital Cost 881920
Working Capital
Raw material (Fabric & Accessories) 28800
Accounts Receivable 108800
Prepaid Rent (Boutique and Stitching Unit) 432000
Total Working capital 569600
Project Cost 1451520

SOURCES

DEBTS 725760
EQUITY 725760

DESIGNER’S BOTIQUE
DESIGNER’S BOTIQUE