Wooden Furniture Manufacturing

Pre-Feasibility Study
WOODEN FURNITURE MANUFACTURING UNIT
Small and Medium Enterprises Development

Authority Ministry of Industries & Production
Government of Pakistan
www.smeda.org.pk
HEAD OFFICE
4th Floor, Building No. 3, Aiwan-e-Iqbal Complex, Egerton Road,
Lahore
Tel: (92 42) 111 111 456, Fax: (92 42) 36304926-7
helpdesk@smeda.org.pk
REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE

PUNJAB SINDH KPK BALOCHISTAN
3rd Floor, Building No. 3, 5TH Floor, Bahria Ground Floor Bungalow No. 15-A
Aiwan-e-Iqbal Complex, Complex II, M.T. Khan Road, State Life Building Chaman Housing Scheme
Egerton Road Lahore, Karachi. The Mall, Peshawar. Airport Road, Quetta.
Tel: (042) 111-111-456 Tel: (021) 111-111-456 Tel: (091) 9213046-47 Tel: (081) 831623, 831702
Fax: (042) 36304926-7 Fax: (021) 5610572 Fax: (091) 286908 Fax: (081) 831922
helpdesk.punjab@smeda.org.pk helpdesk-khi@smeda.org.pk helpdesk-pew@smeda.org.pk helpdesk-qta@smeda.org.pk
October 2014
Pre-Feasibility Study Wooden Furniture Manufacturing Unit
TABLE OF CONTENTS
1 DISCLAIMER ....................................................................................................................... 3
2 EXECUTIVE SUMMARY ..................................................................................................... 4
3 INTRODUCTION TO SMEDA .............................................................................................. 4
4 PURPOSE OF THE DOCUMENT ........................................................................................ 5
5 BRIEF DESCRIPTON OF PROJECT & PRODUCT ............................................................. 5
5.1 Production Process Flow .............................................................................................. 6
5.2 Installed & Operational Capacities ................................................................................ 7
6 CRITICAL FACTORS........................................................................................................... 8
7 GEOGRAPHICAL POTENTIAL FOR INVESTMENT ........................................................... 9
8 POTENTIAL TARGET CUSTOMERS / MARKETS .............................................................. 9
9 PROJECT COST SUMMARY .............................................................................................. 9
9.1 Project Economics ...................................................................................................... 10
9.2 Project Financing ........................................................................................................ 10
9.3 Project Cost ................................................................................................................ 10
9.4 Space Requirement .................................................................................................... 11
9.5 Machinery And Equipment Requirement ..................................................................... 11
9.6 Office Equipment Requirement ................................................................................... 12
9.7 Furniture And Fixture Requirement ............................................................................. 12
9.8 Raw Material Requirement .......................................................................................... 14
9.9 Human Resource Requirement ................................................................................... 19
9.10 Other Costs ................................................................................................................. 19
9.11 Revenue Generation ................................................................................................... 19
10 CONTACT DETAILS .......................................................................................................... 21
11 USEFUL LINKS ................................................................................................................. 22
12 ANNEXURES .................................................................................................................... 23
12.1 Income Statement ....................................................................................................... 23
12.2 Balance Sheet ............................................................................................................ 24
12.3 Cash Flow Statement .................................................................................................. 25
13 KEY ASSUMPTIONS ......................................................................................................... 26
13.1 Operating Cost Assumptions....................................................................................... 26
13.2 Production Cost Assumptions ..................................................................................... 26
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13.3 Revenue Assumptions.................................................................................................26

13.4 Financial Assumptions.................................................................................................26
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1 DISCLAIMER
This information memorandum is to introduce the subject matter and provide a general idea
and information on the said matter. Although, the material included in this document is
based on data / information gathered from various reliable sources; however, it is based
upon certain assumptions, which may differ from case to case. The information has been
provided on as is where is basis without any warranties or assertions as to the correctness
or soundness thereof. 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, its employees or agents do not assume any liability for any financial or other loss
resulting from this memorandum in consequence of undertaking this activity. The contained
information does not preclude any further professional advice. The prospective user of this
memorandum is encouraged to carry out additional diligence and gather any information
which is necessary for making an informed decision, including taking professional advice
from a qualified consultant / technical expert before taking any decision to act upon the
information.
For more information on services offered by SMEDA, please contact our website:
www.smeda.org.pk
DOCUMENT CONTROL
Document No. PREF-NO. 70

Revision 3rd
Prepared by SMEDA-Punjab
Revision Date October 2014
Provincial Chief (Punjab)
For Information
janjua@smeda.org.pk
October 2014 3
2 EXECUTIVE SUMMARY
The proposed project is for setting up a Wooden Furniture Manufacturing Unit. This unit
will be capable of integrated wooden furniture manufacturing from sourcing and cutting
of wood, to retailing of product to the end customer.
The project will cater to the growing needs of domestic wooden furniture market. The
housing and construction industry has seen a steady growth over the past many years
due to a number of factors which include; development of new housing schemes,
introduction of housing finance schemes / loans by different banks, increased
urbanization and a growing middle class and enhanced purchasing power of the public.
All these factors have contributed directly and indirectly towards an increased demand
for wooden furniture.
The proposed wooden furniture business venture entails a total investment of about Rs.
18.08 million. This includes a capital investment of Rs.15.93 million and a sum of Rs.
2.15 million as initial working capital. The project is financed through 50% debt and 50%
equity. The Net Present Value (NPV) of the project is around Rs. 46.57 million with an
Internal Rate of Return (IRR) of 43% and a payback period of 4.94 years. Higher returns
on investment and a steady growth of business are expected if the entrepreneur has
some prior experience / education in the related field of business. The project will
generate direct employment opportunity for 24 persons. The legal business status of
this project is proposed as ‘Sole Proprietorship’.
3 INTRODUCTION TO SMEDA
The Small and Medium Enterprises Development Authority (SMEDA) was established in
October 1998 with an objective to provide fresh impetus to the economy through
development of Small and Medium Enterprises (SMEs).
With a mission "to assist in employment generation and value addition to the national
income, through development of the SME sector, by helping increase the number, scale
and competitiveness of SMEs", SMEDA has carried out ‘sectoral research’ to identify
policy, access to finance, business development services, strategic initiatives and
institutional collaboration and networking initiatives.
Preparation and dissemination of prefeasibility studies in key areas of investment has
been a successful hallmark of SME facilitation by SMEDA.
Concurrent to the prefeasibility studies, a broad spectrum of business development
services is also offered to the SMEs by SMEDA. These services include identification of
experts and consultants and delivery of need based capacity building programs of
different types in addition to business guidance through help desk services.
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4 PURPOSE OF THE DOCUMENT
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, and production,
marketing, finance and business management.
The purpose of this document is to facilitate potential investors in Wooden Furniture
Manufacturing Unit by providing them with a general understanding of the business
with the intention of supporting potential investors in crucial investment decisions.
The need to come up with pre-feasibility reports for undocumented or minimally
documented sectors attains greater imminence as the research that precedes such
reports reveal certain thumb rules; best practices developed by existing enterprises by
trial and error, and certain industrial norms that become a guiding source regarding
various aspects of business set-up and it’s successful management.
Apart from carefully studying the whole document one must consider critical aspects
provided later on, which form basis of any Investment Decision.
5 BRIEF DESCRIPTON OF PROJECT & PRODUCT
This unit is capable of producing different types of wooden furniture i.e. bed sets,
dinning sets, sofa sets, center tables, side tables and office furniture.
The entire finished product depends on the quality of wood. Detailed technical know-
how about the quality of wood and the use of seasoned / dry wood plays a vital role in
the manufacturing of quality furniture. It is recommended that dry wood, from forests is
used for manufacturing quality wooden furniture. Forest reserves like Changa Manga,
Pakhowal, Kundian, Chichawatni, Bahawalpur and other forests are potential sources of
quality wood. Furniture manufacturing units in Pakistan mostly use Sheesham wood.
Other types of woods used in manufacturing furniture are; Teak wood, Walnut wood and
Keekar wood. Besides this, substitute material like Lasani and Vinboard are also used
in the manufacturing of furniture. Other materials used in furniture manufacturing
process are nails, screws, glue / solution, spirit, lakh, thinner, lacquer, sealer, hardener
etc. These raw materials are easily available in the market.
The demand for wooden furniture in the domestic market is consistent throughout the
year; however, it significantly increases during the period of October to March due to
‘wedding season’. The demand for furniture almost doubles during this period and is a
good time to enter the market. Since strong competition already exists in the domestic
market, manufacturing of high quality trendy designs and aggressive marketing is
essential to get a prominent place in the market. Despite the introduction of new /
October 2014 5
alternative materials in furniture manufacturing, wooden furniture is still preferred in the

domestic as well as in the international market due to its traditional appeal and
durability. Over the years, entry into the global market has also become more
competitive, due to demanding factors like green furniture, multi-functionality, simplicity
and neutral colors, Ready-to-assemble (RTA) and Do-it-yourself (DIY) furniture.
Malaysia, Philippines, Indonesia and China have established strong brand names and
have emerged as key market players.
5.1 Production Process Flow
The process of converting wood into furniture mainly involves the following sequence of
operations:
Purchase of Wood Cutting Wood comes in Wood

Wood (Timber at Trolley (Big Factory Seasoning
Market) Saw)
Wood comes at Wood comes to Furniture

Shaper Machine Machine Man Designing on
CAD
Carpenter shape Furniture comes Furniture comes

the wood into to Spindle / to Carver for
Furniture Molding Machine Carving
Furniture goes to Store Furniture comes Carpenter

or for Polishing to Inspection assembles the
before finishing Furniture
Purchase of Wood
Wood is purchased after Quality inspection. Following points are to be considered
while inspecting quality:
 Age of wood
 Dryness of wood
 Its surface, which should be plain without holes etc.
Cutting of Wood
Wood of natural form, after purchase is cut into different sizes of blocks and slabs.
October 2014 6
Seasoning / Drying of Wood

Season wood is higher in price than the fresh wood, so if the wood purchased is not
properly dried than these blocks / slices are seasoned through different processes,
namely:
 Condensation
 Boiler System
 Vacuum System
 Seasoning the wood by putting the wood slices under normal environmental
temperature for considerable duration.
Selection of Design
Before manufacturing any furniture product the desired design is selected. Selection
of elegant design is important to ensure attractive finished product.
Cutting into Slices
The seasoned wood blocks are cut into desired shape and slices according to the
requirement of design.
Molding
The slices of wood are molded into the desired shape according to the design.
Carving
Carving means the different elegant patterns carved in the wood. Quality of carving
depends on the skills of the labor.
Assembly / Fitting
Once the different pieces are carved & molded than these parts / pieces are
assembled or fixed together to give the shape to the final product.
Finishing (Paint / Polish)
Assembled product is grinded to make the surface smooth. Once the surface is
smooth, finishing material is applied to make the surface ready for paint or polish.
After the base is prepared final finishing is applied depending on requirement in
terms of paint / polish. Upholstery of fabric is carried out according to the requirement
of the design.
5.2 Installed & Operational Capacities
The proposed project is capable of manufacturing a complete range of wooden furniture and other allied products
to meet the demand of domestic market. The Unit will work on an 8 hours shift for 300 days. Total number of
furniture items produced in year 1 would be 233.
October 2014 7
Details of proposed production mix offered by the business is provided in the table below:
Table 1 - Proposed Production Mix Capacity
Description Percentage
Bed Set 40%
Dinning Set 10%
Sofa Set 30%
Misc. Furniture 10%
Office Furniture 10%
Total 100%
Table 2 - Proposed Production Mix Details

Quality
Bed Set Dinning Set Sofa Set Misc. Furniture Office Furniture
Standards
Superior 20% 20% 20% 20% 20%
Fine 30% 30% 30% 30% 30%
Normal 50% 50% 50% 50% 50%
Total 100% 100% 100% 100% 100%
6 CRITICAL FACTORS
Following are the factors critical for the success of this business venture;
 Ensuring availability of seasoned (dry) wood for high quality furniture

manufacturing. Seasoned wood minimizes deforming that may occur due to
dampness in wood.
 Selection of skilled labor is an important factor, as it can improve quality of
finished products by better craftsmanship & lower wastage. It is recommended
that specialized labor is hired for this business.
 New designs and styles can build brand equity for the business. Creation of
new designs and styles is vital for setting new trends as the market is quite
competitive.
 Aggressive virtual marketing needs to be undertaken in the absence of a
physical showroom.
 Though skilled labor is available in the market, additional manufacturing
workload can be sub-contracted to save time and resources.
October 2014 8
 The manufacturing unit will require selling directly to showrooms and direct
clients, for which the owner would need to develop extensive knowledge of the
market.
 Higher return on investment and a steady growth of business is expected with
the entrepreneur having some prior experience / education in the related field
of business.
 Easy access to raw material should be ensured.
7 GEOGRAPHICAL POTENTIAL FOR INVESTMENT
The demand for wooden furniture is higher in densely populated cities of Pakistan i.e.
Lahore, Multan, Karachi, Peshawar, Quetta, Rawalpindi and Islamabad, making all these
cities viable for business. However, establishment of the unit in the vicinity of established
wooden furniture clusters i.e. Lahore, Chiniot, Faisalabad, Hyderabad, Gujranwala, Sialkot
or Gujrat gives the added advantage of easy availability of skilled labor.
8 POTENTIAL TARGET CUSTOMERS / MARKETS
Potential markets for wooden furniture can be categorized into the following:
 Newly constructed houses
 Gift on weddings
 Building renovations
 Public / private institutions
Majority of customers in the domestic market belong to first and second category. These
customers require furniture for their newly built houses and usually buy a range of
products like bed sets, dining sets and sofa sets with other decorative material for their
entire house. Initially, entrepreneurs should target these customers to establish the
business and increase their customer base. Flourishing hotel and tourism industry can
considerably increase the demand for wooden furniture whereby; large orders can also
be secured to supply wooden furniture to hotels and resorts. Wooden furniture retail
clusters are found in most areas of all big cities of Pakistan, where manufactured
furniture can be sold.
9 PROJECT COST SUMMARY
A detailed financial model has been developed to analyse the commercial viability of the
Wooden Furniture Manufacturing Unit. Various costs and revenue related assumptions
along with results of the analysis are outlined in this section.
October 2014 9
The projected Income Statement, Cash Flow Statement and Balance Sheet are also
attached as annexure.
9.1 Project Economics
The unit is capable of producing different types of wooden furniture, as it builds

predominantly upon, craftsmanship of skilled labour. However, this particular pre-
feasibility focuses on manufacturing of bed sets, dinning sets, sofa sets, office furniture
and miscellaneous furniture (centre table & tables for sofa set etc.).
All the assumptions in this financial model are based upon manufacturing of around 254
items annually. Whereas, during first year around 233 items production is targeted.
The following table shows internal rate of return, payback period and Net Present Value.
Table 3: Project Economics
Description Details
Internal Rate of Return (IRR) 43%
Pay Back Period (Years) 4.94
Net Present Value (NPV) Rs. 46,573,335
Returns on investment and profitability depend upon the entrepreneur’s practical

knowledge about furniture manufacturing, quality of wood, skilled labor and design &
style of furniture manufactured.
9.2 Project Financing
Following table provides the details of required equity and variables related to bank loan;
Table 4: Project Financing
Description Details
Total Equity (50%) Rs. 9,040,705
Bank Loan (50%) Rs. 9,040,705
Annual Markup to the Borrower– Long Term Loan 16%
Tenure of the Loan (Years) 5
9.3 Project Cost
Following fixed and working capital requirements have been identified for operations of
the proposed business.
October 2014 10
Table 5: Project Cost

Description Amount (Rs.)
Capital Cost
Land 10,000,000
Building & Infrastructure 4,500,000
Machinery & Equipment 1,002,500
Furniture & Fixture 78,500
Office Equipment 120,000
Pre-Operational Cost 230,000
Total Capital Cost 15,931,000
Working Capital Requirements
Raw Material Inventory 1,073,753
Cash 1,076,656
Total Working Capital 2,150,409
Total Investment 18,081,409
9.4 Space Requirement
The proposed Wooden Furniture Manufacturing Unit will be established in a purchased

premises. An estimated area of 2 Kanals will be required for the proposed business
venture. The land is estimated to be purchased at Rs. 10,000,000.
An estimated 4,500 sq. ft. covered area will be required for the Unit with an estimated
cost of Rs. 1,000 per sq.ft. and total construction cost of the Unit is Rs. 4,500,000.
There is a provision for Showroom in Year 6 when the project will be sustainable
enough and sales will be good.
9.5 Machinery and Equipment Requirement
Following table provides list of machinery and equipment required for an average sized
Wooden Furniture Manufacturing Unit.
Table 6: Machinery and Equipment Required
Unit Cost Total Cost
Description Quantity
(Rs.) (Rs.)
Saw 18" 1 45,000 45,000
Saw 27" 1 75,000 75,000
Saw 30" 1 85,000 85,000
Cutter Sliding 1 15,000 15,000
October 2014 11
Cutter Round 1 12,500 12,500

Gauge 14" 1 90,000 90,000
Gauge 18" 1 125,000 125,000
Planer / Shaper 12" 2 75,000 150,000
Spindle Moulder Machine 2 75,000 150,000
Chapaka 2 16,000 32,000
Hand Chapaka (Jug Saw) 3 13,000 39,000
Grinder 2 9,000 18,000
Drill Machine 12 4,000 48,000
Compressor 2 16,000 32,000
Miscellaneous Tools (Hand Tools, Paint
Gun etc.) 1 36,000 36,000
Installation Costs for Machines 1 50,000 50,000
Total 1,002,500
Technically advanced machines are not required in the manufacturing process.

Therefore, machine maintenance cost is also expected to be on the lower side. The
major maintenance cost will be of oiling and greasing of machines.
9.6 Office Equipment Requirement
Following office equipment will be required for the proposed business venture:
Table 7: Office Equipment Requirement
(Rs.) (Rs.)
Computer (With LCD) 1 40,000 40,000
Printer 2 15,000 30,000
UPS 1.5 KVA 1 35,000 35,000
Telephone set 2 1,500 3,000
Fax Machine 1 12,000 12,000
Total 120,000
9.7 Furniture and Fixture Requirement
Details of furniture and fixture required for the proposed unit are provided in the
following table:
October 2014 12
Table 8: Furniture and Fixture Requirement

(Rs.) (Rs.)
Office Table Set for CAD Operator 1 15,000 15,000
Visitors Chairs 4 4,000 16,000
Table & Chair set for admin, store &
3 12,500 37,500
production
Fire Extinguishers 2 5,000 10,000
Total 78,500
October 2014 13
9.8 Raw Material Requirement
As different variety of material is used for the manufacturing of each type of furniture; following tables shows the raw
material requirement for each type of furniture:
Table 9 – Bed Set Cost
Costing Bed Set Superior Quality Costing Bed Set Fine Quality Costing Bed Set Normal Quality
Raw Material Cost Raw Material Cost Raw Material Cost

Description No. of Unit Rate/Unit Total Amount Description No. of Unit Rate/Unit Total Amount Description No. of Unit Rate/Unit Total Amount
Wood (Cubic ft) 15 2200 33,000 Wood (Cubic ft) 12 1,800 21,600 Wood (Cubic ft) 10 1,600 16,000
Nails/Screws 1 450 450 Nails/Screws 1 425 425 Lasani 5 2,650 13,250
Glue/Solution 1 380 380 Glue/Solution 1 300 300 Nails/Screws 1 350 350
Spirit (in Ltr.) 20 60 1,200 Spirit (in Ltr.) 15 60 900 Glue/Solution 1 300 300
Lakh (in kgs) 1.5 2400 3,600 Lakh (in kgs) 1 2,400 2,400 Paint (in Ltr.) 1 1,500 1,500
Thinner (in Ltr.) 8 130 1,040 Thinner (in Ltr.) 4 130 520 Thinner (in Ltr.) 10 130 1,300
Lacquer (in Ltr.) 2 300 600 Lacquer (in Ltr.) 2 300 600 Lacquer (in Ltr.) 1 300 300
Wooden Frame for Matress 1 5500 5,500 Sealer (in Ltr.) 2 285 570 Wooden Frame for Matress 1 4,000 4,000
Sealer (in Ltr.) 3 285 855 Wooden Frame for Matress 1 4,000 4,000 Dressing Set Glass 16 150 2,400
Dressing Set Glass 16 175 2,800 Dressing Set Glass 16 175 2,800 Tapestry Dressing St. (in 4 160 640
Meters)
Tapestry Dressing St. (in 16 160 2,560 Tapestry Dressing St. (in 8 160 1,280 Foam 1 150 150
Meters) Meters)
Foam 1 150 150 Foam 1 150 150 COB (alternate for Hardner) 1 350 350
Channels, Handles 1 4500 4,500 Channels, Handles 1 3500 3,500 Thinner (Butyl) 1 190 190
Thinner (Butyl) 1 270 270 Thinner (Butyl) 1 270 270 Thinner (imported) 1 270 270
Thinner (imported) 1 180 180 Thinner (imported) 1 180 180 Channels, Handles 1 2500 2,500
Total 57,085 Total 39,495 Total 43,500
October 2014 14
Table 10: – Dining Set Cost
Costing Dinning Set Superior Quality Costing Dinning Set Fine Quality Costing Dinning Set Normal Quality

Wood (Cubic ft) 8 2,200 17,600 Wood (Cubic ft) 8 1,800 14,400 Wood (Cubic ft) 6 1,600 9,600
Poshish/Seat 8 550 4,400 Poshish/seat 8 410 3,280 Poshish/seat 8 370 2,960
Nails/Screws 1 400 400 Nails/Screws 1 400 400 Nails/Screws 1 400 400
Glue/Solution 1 400 400 Glue/Solution 1 400 400 Glue/Solution 1 400 400
Spirit (in Ltrs.) 18 60 1,080 COB 1 350 350 COB 1 350 350
Lakh (in Kgs) 2 2,400 4,800 Paint 1 2,000 2,000 Lasani 1 2,650 2,650
Thinner (in Ltrs.) 8 130 1,040 Thinner (in Ltrs.) 15 130 1,950 Paint 1 2,000 2,000
Lacquer (in Ltrs.) 2 300 600 Lacquer 2 300 600 Thinner (in Ltrs.) 10 130 1,300
Sealer (in Ltrs.) 2 285 570 Glass Top 12mm in (Sq.ft) 32 225 7,200 Lacquer 2 300 600
Glass Top (12 mm) in sq.ft 32 225 7,200 Foam 1 5,800 5,800 Glass Top 12mm in (Sq.ft) 32 225 7,200
Foam 1 8,000 8,000 Tapestry (in Meters) 3 160 480 Foam 1 5,000 5,000
Tapestry (in Meters) 5 160 800 Misc. 1 3,000 3,000 Tapestry (in Meters) 3 160 480
Misc. 1 4,000 4,000 Misc. 1 2,000 2,000
October 2014 15
Table 11: – Sofa Set Cost
Costing Sofa Set Superior Quality Costing Sofa Set Fine Quality Costing Sofa Set Normal Quality

Wood (Cubic ft) 6 850 5,100 Wood (Cubic ft) 6 800 4,800 Wood (Cubic ft) 6 800 4,800
Poshish/per seat 6 1500 9,000 Poshish/Seat 6 1200 7,200 Poshish/Seat 6 850 5,100
Springs (Dozs) 7 200 1,400 Spring (Doz) 7 200 1,400 Spring (Doz) 7 200 1,400
Tat (in Meters) 10 55 550 Tat (in Meters) 10 40 400 Tat (in Meters) 10 40 400
Rubber Pati 25 22 550 Rubber Patti 25 22 550 Rubber Patti 22 20 440
Dori (in Kgs) 0.5 195 98 Dori (in Kgs) 0.5 195 98 Dori (in Kgs) 0.5 195 98
Foam "A" 1 3,800 3,800 Foam 1 3,300 3,300 Foam 1 3,300 3,300
Tapestry (in Meters) 27 450 12,150 Tapestry 25 350 8,750 Tapestry (in Meters) 20 300 6,000
October 2014 16
Table 12: – Misc. Furniture Cost
Costing Misc. Funiture Superior Quality Costing Misc. Furniture Fine Quality Costing Misc. Furniture Normal Quality

Spirit (in Ltrs.) 8 60 480 COB 1 350 350 COB 1 350 350
Lakh (in Kgs) 1 2,400 2,400 Paint 1 1,800 1,800 Lasani 1 2,650 2,650
Thinner (in Ltrs.) 3 130 390 Thinner (in Ltrs.) 10 130 1,300 Paint 1 1,500 1,500
Sealer (in Ltrs.) 1 285 285 Glass Top 12mm in (Sq.ft) 17 225 3,825 Lacquer (in Ltrs.) 1 300 300
Glass Top (12 mm) in sq.ft 17 225 3,825 Misc. 1 1,500 1,500 Glass Top 12mm in (Sq.ft) 15 225 3,375
Misc. 1 1,800 1,800 Misc. 1 1,000 1,000
October 2014 17
Table 13: – Office Furniture Cost
Costing Office Furniture Superior Quality Costing Office Furniture Fine Quality Costing Office Furniture Normal Quality

Spirit (in Ltrs.) 10 60 600 COB 1 350 350 COB 1 350 350
Lakh (in Kgs) 1.5 2,400 3,600 Paint 1 1,800 1,800 Lasani 2 2,650 5,300
Thinner (in Ltrs.) 5 130 650 Thinner (in Ltrs.) 8 130 1,040 Paint 1 1,500 1,500
Sealer (in Ltrs.) 2 285 570 Glass Top 12mm in (Sq.ft) 21 225 4,725 Lacquer (in Ltrs.) 2 300 600
Channels, Handles 1 4500 4,500 Channels, Handles 1 3500 3,500 Channels, Handles 1 2500 2,500
Thinner (Butyl) 1 270 270 Executive Chair 1 12000 12,000 Executive Chair 1 9000 9,000
Thinner (imported) 1 180 180 Visitors Chair 2 3500 7,000 Visitors Chair 2 3000 6,000
Executive Chair 1 15000 15,000 Misc. 1 2,500 2,500 Misc. 1 2,000 2,000
Visitors Chair 2 3800 7,600
Misc. 1 3,000 3,000
Total 59,350 g Total 48,315 Total 42,050
October 2014 18
9.9 Human Resource Requirement
In order to smoothly run operations of the proposed unit, details of recommended

human resource required along with their proposed monthly salaries are as follows:
Table 14: Human Resource Requirement
No. Of Salary per Employee Per Month
Description
Employees (Rs.)
Production Supervisor 1 30,000
Carpenter 10 20,000
Machine Man 1 20,000
Polish Man 3 20,000
Carving 2 22,000
Helpers 2 12,000
Factory Admin Officer 1 25,000
Draftsman / CAD Operator 1 20,000
Purchaser / Store Officer 1 18,000
Gate Keeper 2 12,000
It is assumed that the owner would have prior experience or knowledge about the proposed
business. Salaries of all employees are estimated to increase at 10% annually.
9.10 Other Costs
An essential cost to be borne by the business is the cost of electricity; a three-phase

commercial electricity connection is required. The annual electricity expenses are
estimated as Rs. 600,000. This project also requires marketing activities; for which
approximately 5% of total revenues (i.e. Rs. 982,133) will be spent on marketing
st
annually. Similarly, during 1 year of operation communication and office expenses are
estimated at Rs. 180,000 and 120,000, respectively.
9.11 Revenue Generation
Following table provides revenue assumptions of the proposed Wooden Furniture

Manufacturing Unit during first year of operation:
Table 15: Revenue Generation
Product Units Sold in Year 1 Sale Price* Per Unit Sale Price* Per Unit
(Rs.)– Other (Rs.)– Own
Showrooms Customers
Bed Set
Superior 6 217,000 248,000
Fine 13 145,000 165,500
October 2014 19
Normal 29 108,500 124,000

Dining Set
Superior 2 158,500 181,000
Fine 4 126,750 145,000
Normal 7 105,500 120,750
Sofa Set
Superior 7 123,000 140,500
Fine 15 87,750 100,000
Normal 32 68,250 78,000
Misc.
Superior 11 57,500 65,500
Fine 22 43,000 49,000
Normal 45 34,500 39,500
Office Furniture
Superior 4 157,500 180,000
Fine 11 94,500 108,000
Normal 25 67,500 77,000
*Prices Have Been Rounded Off.
Table 16: Total Revenue Generation

Revenue from selling to other Showrooms in (Rs.) 40%
Bed Sets 4,067,213
Dinning Sets 988,963
Sofa Sets 2,874,959
Misc. furniture 2,015,616
Office furniture 2,212,987
Total Revenue 12,159,738
Revenue from selling to own Customers in (Rs.) 60%
Bed Sets 2,502,900
Dinning Sets 608,593
Sofa Sets 1,769,205
Total Revenue (Rs.)
Bed Sets 6,570,113
Dinning Sets 1,597,556
October 2014 20
Sofa Sets 4,644,164

10 CONTACT DETAILS
In order to facilitate potential investors, contact details of private sector Service Providers
relevant to the proposed project are given as under:
No. Name Address Mobile Telephone

1 Nadeem Ahmed Mabson Industries
Warriach G.T. Road, 0300-8641646 055-6601646
Wazir Abad
Elebe Handicraft
2 Ch. Tahir Pervez
G.T. Road, 0345-6874448 053-2107477
Gujrat
Heritage One
3 Maqsood Afzal
Sargodha Road 0300-8519464 053-3020749
Gujrat
Heritage One
4 Masood Afzal Sargodha Road 0300-8541897 053-7611491
Gujrat
5 Mohammed Arshad Wood Designer
Farooq
By Pass, G.T. Road 0300-9625236 053-3530310
Gujrat
6 Usman Sheikh Shell Wood
Shelton Hotel Building 0300-8744400 0300-8742030
G.T.Road, Gujranwala
Asad Carpets And
7 M Asad Raza Fabrics 051-2274821-
0333-5152991
103-Golden Plaza, Blue 24
Area, I.S.D
Unique Woodworking
8 Muhammad Yaqub Company
0302-8565255 051-4450748
Service Road Muslim
Town R.W.P
9 Abdul Rehman Duke Wood Center
G.T. Road, 0300-6237997 053-3525983
Gujrat
October 2014 21
11 USEFUL LINKS
Small & Medium Enterprises Development

www.smeda.org.pk
Authority (SMEDA)
Government of Pakistan www.pakistan.gov.pk
Ministry of Industries & Production www.moip.gov.pk
Ministry of Education, Training & Standards in
http://moptt.gov.pk
Higher Education
Government of Punjab www.punjab.gov.pk
Government of Sindh www.sindh.gov.pk
Government of Khyber Pakhtunkhwa www.khyberpakhtunkhwa.gov.pk
Government of Balochistan www.balochistan.gov.pk
Government of Gilgit Baltistan www.gilgitbaltistan.gov.pk
Government of Azad Jamu Kashmir www.ajk.gov.pk
Trade Development Authority of Pakistan (TDAP) www.tdap.gov.pk
Security Commission of Pakistan (SECP) www.secp.gov.pk
Federation of Pakistan Chambers of Commerce
www.fpcci.com.pk
and Industry (FPCCI)
State Bank of Pakistan (SBP) www.sbp.org.pk
Punjab Small Industries Corporation www.psic.gop.pk
Sindh Small Industries Corporation www.ssic.gos.pk
Punjab Vocational Training Council (PVTC) www.pvtc.gop.pk
Technical Education and Vocational Training www.tevta.org
Authority (TEVTA)
Punjab Industrial Estates (PIE) www.pie.com.pk
Faisalabad Industrial Estate Development and www.fiedmc.com.pk
Management Company (FIEDMC)
Furniture Pakistan www.furniturepakistan.org.pk
Pakistan Institute of Fashion and Design www.pifd.edu.pk
October 2014 22
12 ANNEXURES
12.1 Income Statement
Statement Summaries SMEDA

Income Statement
Rs. in actuals
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Revenue 19,642,654 25,666,046 33,152,353 43,361,915 55,593,832 74,446,459 96,713,575 125,221,538 162,762,654 213,528,924
Cost of goods sold 13,362,350 17,119,828 21,613,845 27,545,688 34,307,698 42,757,581 53,480,576 67,532,594 85,598,522 109,495,854
Gross Profit 6,280,304 8,546,218 11,538,508 15,816,227 21,286,134 31,688,878 43,232,999 57,688,945 77,164,132 104,033,070
General administration & selling expenses

Administration expense 780,000 858,000 943,800 1,038,180 1,141,998 2,879,592 3,167,551 3,484,306 3,832,737 4,216,010
Rental expense - - - - - - - - - -
Utilities expense 240,000 264,000 290,400 319,440 351,384 386,522 425,175 467,692 514,461 565,907
Communications expense (phone, fax, etc.) 180,000 198,000 217,800 239,580 263,538 289,892 318,881 350,769 385,846 424,431
Office vehicles running expense 371,117 453,691 562,562 707,741 903,288 1,168,972 1,532,631 2,033,492 2,726,875 3,690,836
Office expenses (stationary, etc.) 120,000 132,000 145,200 159,720 175,692 193,261 212,587 233,846 257,231 282,954
Promotional expense 982,133 785,706 628,565 502,852 402,282 321,825 257,460 205,968 164,775 131,820
Insurance expense - - - - - - - - - -
Professional fees (legal, audit, etc.) - - - - - - - - - -
Depreciation expense 345,100 345,100 345,100 345,100 345,100 345,100 1,120,390 1,120,390 1,120,390 1,120,390
Amortization expense 46,000 46,000 46,000 46,000 46,000 - - - - -
Subtotal 3,064,350 3,082,498 3,179,427 3,358,613 3,629,281 5,585,165 7,034,676 7,896,464 9,002,314 10,432,349
Operating Income 3,215,954 5,463,721 8,359,081 12,457,614 17,656,853 26,103,714 36,198,324 49,792,481 68,161,817 93,600,722
Other income - - - - - - - - - -
Gain / (loss) on sale of assets - - - - - - - - - -
Earnings Before Interest & Taxes 3,215,954 5,463,721 8,359,081 12,457,614 17,656,853 26,103,714 36,198,324 49,792,481 68,161,817 93,600,722
Interest expense 1,557,449 1,321,651 1,019,670 665,667 250,680 - - - - -

Earnings Before Tax 1,658,505 4,142,069 7,339,410 11,791,947 17,406,173 26,103,714 36,198,324 49,792,481 68,161,817 93,600,722
Taxable earnings for the year 1,658,505 4,142,069 7,339,410 11,791,947 17,406,173 26,103,714 36,198,324 49,792,481 68,161,817 93,600,722
Tax 179,201 765,120 1,791,293 3,349,681 5,314,660 8,358,799 11,891,913 16,649,868 23,079,135 31,982,752
NET PROFIT/(LOSS) AFTER TAX 1,479,304 3,376,949 5,548,117 8,442,266 12,091,513 17,744,915 24,306,411 33,142,613 45,082,682 61,617,970
October 2014 23
12.2 Balance Sheet

Balance Sheet
Rs. in actuals
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Assets
Current assets
Cash & Bank 1,076,656 1,486,741 1,748,976 3,983,564 8,031,721 14,292,333 27,318,147 45,281,663 68,659,498 98,664,371 195,526,434
Accounts receivable - 982,133 2,265,435 2,940,920 3,825,713 4,947,787 6,502,015 8,558,002 11,096,756 14,399,210 18,814,579
Finished goods inventory - 278,382 356,663 450,288 573,869 714,744 890,783 1,114,179 1,406,929 1,783,303 2,281,164
Equipment spare part inventory - - - - - - - - - - -
Raw material inventory 1,073,753 1,539,823 2,235,810 3,282,983 4,868,536 7,281,887 10,971,062 16,630,320 25,336,321 38,759,817 -
Pre-paid annual land lease - - - - - - - - - - -
Pre-paid building rent - - - - - - - - - - -
Pre-paid lease interest - - - - - - - - - - -
Pre-paid insurance - - - - - - - - - - -
Total Current Assets 2,150,409 4,287,079 6,606,884 10,657,756 17,299,839 27,236,751 45,682,006 71,584,163 106,499,504 153,606,701 216,622,176
Fixed assets
Land 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 30,101,435 30,101,435 30,101,435 30,101,435 30,101,435
Building/Infrastructure 4,500,000 4,275,000 4,050,000 3,825,000 3,600,000 3,375,000 14,457,057 13,666,704 12,876,351 12,085,998 11,295,646
Machinery & equipment 1,002,500 902,250 802,000 701,750 601,500 501,250 401,000 300,750 200,500 100,250 -
Furniture & fixtures 78,500 70,650 62,800 54,950 47,100 39,250 1,990,775 1,786,988 1,583,200 1,379,413 1,175,625
Office vehicles - - - - - - - - - - -
Office equipment 120,000 108,000 96,000 84,000 72,000 60,000 188,000 162,000 136,000 110,000 84,000
Total Fixed Assets 15,701,000 15,355,900 15,010,800 14,665,700 14,320,600 13,975,500 47,138,267 46,017,876 44,897,486 43,777,096 42,656,705
Intangible assets
Pre-operation costs 230,000 184,000 138,000 92,000 46,000 - - - - - -
Training costs - - - - - - - - - - -
Total Intangible Assets 230,000 184,000 138,000 92,000 46,000 - - - - - -
TOTAL ASSETS 18,081,409 19,826,979 21,755,684 25,415,456 31,666,439 41,212,251 92,820,273 117,602,039 151,396,990 197,383,796 259,278,882
October 2014 24
12.3 Cash Flow Statement

Cash Flow Statement
Rs. in actuals
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Operating activities
Net profit - 1,479,304 3,376,949 5,548,117 8,442,266 12,091,513 17,744,915 24,306,411 33,142,613 45,082,682 61,617,970
Add: depreciation expense - 345,100 345,100 345,100 345,100 345,100 345,100 1,120,390 1,120,390 1,120,390 1,120,390
amortization expense - 46,000 46,000 46,000 46,000 46,000 - - - - -
Deferred income tax - - - - - - - - - - -
Accounts receivable - (982,133) (1,283,302) (675,485) (884,793) (1,122,074) (1,554,227) (2,055,987) (2,538,754) (3,302,454) (4,415,369)
Finished good inventory - (278,382) (78,281) (93,625) (123,580) (140,875) (176,039) (223,396) (292,750) (376,374) (497,861)
Equipment inventory - - - - - - - - - - -
Raw material inventory (1,073,753) (466,070) (695,987) (1,047,173) (1,585,553) (2,413,351) (3,689,176) (5,659,257) (8,706,002) (13,423,496) 38,759,817
Pre-paid building rent - - - - - - - - - - -
Pre-paid lease interest - - - - - - - - - - -
Advance insurance premium - - - - - - - - - - -
Accounts payable - 266,265 304,698 166,578 217,643 278,213 355,240 475,355 652,338 904,124 277,116
Other liabilities - - - - - - - - - - -
Cash provided by operations (1,073,753) 410,085 2,015,177 4,289,512 6,457,082 9,084,526 13,025,813 17,963,516 23,377,835 30,004,873 96,862,062
Financing activities
Change in long term debt 9,040,705 - (1,752,942) (2,054,923) (2,408,926) (2,823,914) - - - - -
Change in short term debt - - - - - - - - - - -
Change in export re-finance facility - - - - - - - - - - -
Add: land lease expense - - - - - - - - - - -
Land lease payment - - - - - - - - - - -
Lease principal repayment - - - - - - - - - - -
Issuance of shares 9,040,705 - - - - - 33,507,867 - - - -
Purchase of (treasury) shares - - - - - - - - - - -
Cash provided by / (used for) financing activiti 18,081,409 - (1,752,942) (2,054,923) (2,408,926) (2,823,914) 33,507,867 - - - -
Investing activities
Capital expenditure (15,931,000) - - - - - (33,507,867) - - - -
Acquisitions - - - - - - - - - - -
Cash (used for) / provided by investing activiti (15,931,000) - - - - - (33,507,867) - - - -
NET CASH 1,076,656 410,085 262,235 2,234,589 4,048,156 6,260,613 13,025,813 17,963,516 23,377,835 30,004,873 96,862,062
October 2014 25
13 KEY ASSUMPTIONS
13.1 Operating Cost Assumptions
Description Details
Communication Expenses Rs. 15,000 per Month
Office Expenses Rs. 10,000 per Month
5% of material procurement
Transportation Cost
cost
Marketing Expenses 5% of revenue
Depreciation Method Straight Line
10% on Furniture & Fixtures
Depreciation Rate
10% on Office Equipment
Operating Cost Growth Rate 10%
13.2 Production Cost Assumptions
Accounts Receivable Cycle (In Days) 30

Accounts Payable Cycle (In Days) 10
Raw Material Inventory Other Than Wood 1 Month
Raw Material Inventory Of Wood 3 Months
Finished Goods Inventory 0.25 Month
Raw Material Price Growth Rate Other Than Wood 10%
Raw Material Price Growth Rate Of Wood 40%
13.3 Revenue Assumptions
Description Details
Growth In Sales Price 3%
Days Operational / Year 300
13.4 Financial Assumptions
Description Details
Debt : Equity 50% : 50%
Internal Rate on Debt 16%
Debt Tenure 5 Years
October 2014 26

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Pre-Feasibility Study

WOODEN FURNITURE MANUFACTURING UNIT

Small and Medium Enterprises Development

REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE

13.3 Revenue Assumptions.................................................................................................26

Document No. PREF-NO. 70

4 PURPOSE OF THE DOCUMENT

The objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs

5 BRIEF DESCRIPTON OF PROJECT & PRODUCT

alternative materials in furniture manufacturing, wooden furniture is still preferred in the

5.1 Production Process Flow

Purchase of Wood Cutting Wood comes in Wood

Wood comes at Wood comes to Furniture

Carpenter shape Furniture comes Furniture comes

Furniture goes to Store Furniture comes Carpenter

Seasoning / Drying of Wood

5.2 Installed & Operational Capacities

Table 2 - Proposed Production Mix Details

 Ensuring availability of seasoned (dry) wood for high quality furniture

7 GEOGRAPHICAL POTENTIAL FOR INVESTMENT

8 POTENTIAL TARGET CUSTOMERS / MARKETS

9 PROJECT COST SUMMARY

9.1 Project Economics

The unit is capable of producing different types of wooden furniture, as it builds

Returns on investment and profitability depend upon the entrepreneur’s practical

9.2 Project Financing

9.3 Project Cost

Table 5: Project Cost

9.4 Space Requirement

The proposed Wooden Furniture Manufacturing Unit will be established in a purchased

9.5 Machinery and Equipment Requirement

Cutter Round 1 12,500 12,500

Technically advanced machines are not required in the manufacturing process.

9.6 Office Equipment Requirement

9.7 Furniture and Fixture Requirement

Table 8: Furniture and Fixture Requirement

9.8 Raw Material Requirement

Raw Material Cost Raw Material Cost Raw Material Cost

Total 57,085 Total 39,495 Total 43,500

Table 10: – Dining Set Cost

Raw Material Cost Raw Material Cost Raw Material Cost

Total 50,890 Total 39,860 Total 34,940

Table 11: – Sofa Set Cost

Raw Material Cost Raw Material Cost Raw Material Cost

Total 33,448 Total 27,298 Total 22,338

Table 12: – Misc. Furniture Cost

Raw Material Cost Raw Material Cost Raw Material Cost

Total 23,460 Total 20,575 Total 20,515

Table 13: – Office Furniture Cost

Raw Material Cost Raw Material Cost Raw Material Cost

Total 59,350 g Total 48,315 Total 42,050

9.9 Human Resource Requirement

In order to smoothly run operations of the proposed unit, details of recommended

9.10 Other Costs

An essential cost to be borne by the business is the cost of electricity; a three-phase

9.11 Revenue Generation

Following table provides revenue assumptions of the proposed Wooden Furniture

Normal 29 108,500 124,000

Table 16: Total Revenue Generation