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8/12/2019 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
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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)