Feasibility Study-Soap Factory

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TABLE OF CONTENTS 1 2 EXECUTIVE SUMMARY .............................................................................. 2 PROJECT DESCRIPTION............................................................................ 3 2.1 2.2 3 3.1 3.2 4 FACILITIES AND BEGINNING INVENTORIES .................................................... 3 STAFFING STRUCTURE .............................................................................. 3 FORMS AND SCENTS ................................................................................. 3 PRODUCTION PROCESS ............................................................................ 3

PRODUCT STRATEGY................................................................................ 3

MARKET ANALYSIS.................................................................................... 3 4.1 SOAP MARKET OVERVIEW .......................................................................... 3 4.2 MAIN COMPETITION ................................................................................... 3 4.3 TARGET MARKET ...................................................................................... 3 4.4 SWOT ANALYSIS ..................................................................................... 3 4.4.1 Strengths ........................................................................................ 3 4.4.2 Weaknesses ................................................................................... 3 4.4.3 Opportunities .................................................................................. 3 4.4.4 Threats............................................................................................ 3

5 6

MARKETING PLAN...................................................................................... 3 FINANCIAL PLAN ........................................................................................ 3 6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 INITIAL INVESTMENT .................................................................................. 3 MAJOR ASSUMPTIONS ............................................................................... 3 PROJECTED INCOME STATEMENT .............................................................. 3 PROJECTED BALANCE SHEET .................................................................... 3 PROJECTED CASH FLOWS ......................................................................... 3 RATIO ANALYSIS ....................................................................................... 3 BREAK-EVEN ANALYSIS ............................................................................. 3 SENSITIVITY ANALYSIS .............................................................................. 3

7 8

RECOMMENDATIONS AND KEY SUCCESS FACTORS ........................... 3 ECONOMIC IMPACT EVALUATION ........................................................... 3

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Feasibility Study-Soap Factory

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1 Executive Summary
The proposed project consists in establishing a soap factory in Bint Jbeil caza. The factory will produce both laurel and natural soaps. The initial investment is at $60,164, which includes $38,600 in equipment, and $21,564 in working capital needs (including beginning inventories). The main assumptions are conservative and consider an average yearly sale of 31.2 tons of natural soaps per year and 31.2 tons of laurel soaps per year, which is equivalent to a total of 1 ton per week (500 Kg of each type). The projections are taken over a period of 5 years. The soap factory is expected to provide an average annual net profit of $31,793. It will be able to distribute dividends of $30,000 starting in year 3. The soap factory will provide an internal rate of return (IRR) of 50% and a payback period of almost 4 years. These results show that the project is feasible. A worse case scenario was developed with the assumption that the factory would produce an average of 800Kg per week instead of 1 ton per week. These assumptions gave an IRR of 34% and a payback period of 4.8 years. A bestcase scenario was based on the production of 1.4 tons per week. This scenario provided an IRR of 75% and a payback period of 2.11 years. In order to achieve satisfactory results, the plant should be well managed with intensive marketing efforts, high quality soaps, excellent service, as well as tight control over receivables.

The soap factory will offer 5 job opportunities and will contribute to the development of the economic and social environment in the region.

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2 Project description
The project aims at creating a soap factory in Bint Jbeil. The factory will be mainly specialized in producing natural soaps as well as laurel soaps

2.1

Facilities and beginning inventories

The warehouse area is assumed to be 400 m2. It is assumed that the warehouse would be rented out at a rate of $6/m2 per year for a total annual rent of $2,400.

The following table shows the projected equipment and initial investment requirements. The total investment required includes the cost of equipment, transport vehicle as well as working capital requirements.

EQUIPMENT OF SOAP FACTORY Cost Items Insulated pan with coils Reservoirs for caustic soda, salt, water Boiler for steam generation Installation Generator incl. connections Van Office Equipment (computer, phone, fax) Office Furniture Total equipment Working capital needs Total initial investment

Quantity 1 3 1 1 1 1 1 1

Unit cost Total cost 4,000 4,000 700 2,100 7,000 7,000 4,000 4,000 6,500 6,500 10,000 10,000 3,000 3,000 2,000 2,000 38,600 21,564 60,164

Source: Les Fils De Chamel Nasr, Savonnerie Orientale

2.2

Staffing structure

The plant will have 5 employees distributed as follows: General manager: 1 Sales representative / driver: 1 Labors: 3

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3 Product strategy
The Bint Jbeil soap factory will seek to deliver high quality natural soaps. In simple words, soap is a salt produced by mixing an acid (fatty acids of the oils) with an alkali solution (sodium hydroxide). Every oil has different fatty acids in its structure and therefore, their benefits to human skin are different. Also, every oil needs different amount of alkali solution to have a complete saponification. There are many different kinds of soaps in the market today. The majority is the commercial beauty" or " toilet" soaps. Having different brands, shape, color, scent and packaging, they are sometimes called "detergents" due to their content of various chemicals, artificial colorants, scents and other artificial preservatives. They have no curing effect on human skin and they are used mainly for cleaning purposes. Besides, some studies have proven that such chemicals are absorbed by the body cells and transferred into the blood circulation system, causing some health problems in the long run. For this reason, the trend towards the consumption of "cold process" natural soaps is increasing day by day.

3.1

Shapes and scents

Natural soaps can have different shapes and scents.

The rounds

The ovals

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The squares

The bath bars

As for the scents, we have: CEDAR OF LEBANON: the scent of cedar wood is famous for its calming, restful effect on the mind and the body.

Rose of Damascus:

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Lavender: the lavender is known for its soothing and calming effect.

Tea Tree: Thanks to its medicinal properties that encourage the natural healing action of the epidermis; it is particularly effective for problematic skin. This soap is also a welcome remedy for insect bites.

Amber: it has a light musky scent.

Olive: This soap is well known to nourish the skin with vitamins, minerals and proteins.

Mastic: It is made with the aromatic resin of the pistacia lentiscus , this soap is known for its antibacterial and astringent properties.

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Tuberose:

Orange Blossom:

Honey: this kind of soap seems to be very powerful in removing impurities from the skin's surface. It fortifies the skin against environmental aggression.

Almond Exfoliant: This soap is rich in protein and vitamin E. It is composed of oat grain and wheat germ that are known for their energizing and healing action as well as removing impurities. Pure almond essential oil is also a component of this soap.

Laurel: The laurus nobilis is a plant typical of the Mediterranean region that has been celebrated since antiquity for its renowned healing virtues.

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Alghar is a member of the Laurel family of evergreen trees, also known as Bay trees. Laurel has been used as a symbol of power and victory throughout history; Julius Caesar wore a crown of laurel. Cleopatra was also known to use laurel in her beauty regimen. Laurel botanicals have been used in soaps and beauty enhancers for centuries and the tradition of using laurel extracts in shampoos, soaps and cosmetics continues to this day. Laurel soap is considered an effective antiseptic; laurel relieves tired muscles and stimulates the circulation, easing arthritis pains. Often, theses types of soaps are sold in pharmacies for their healing effects.

3.2

Production Process

1. The soap maker will empty the oils directly in the pan, which already is filled with a little bit of water 2. Water and caustic are added and the pan is brought to a boil 3. Diluted salt is added every day for 3 days 4. On the 4th day, the bottom of the pan is opened and the nigger (black soap) is thrown away. The remainder is clean soap and is left to dry 5. Hand cutting is feasible and we obtain crude shaped soaps If we need a properly shaped soap, then a plodder is needed as well as a stamper.

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Vapor Coil

Boiler

Caustic

Salt

Water

4 Market Analysis
4.1 Soap market overview The total toilet soaps market size in Lebanon is estimated at 4,000 tons. The soap market in Lebanon is worth 21,097,000,000 LL; Thus USD 14,064,667. Natural soaps are becoming very trendy in the most distinguished regions of Beirut, where some stores are becoming specialized in the sale of these items.

Moreover, the well-known Tripoli Souk as well as Saidas soap museum are an important destination for all those seeking natural soaps.

4.2

Main competition

The most serious competitors for natural and laurel soaps remain the commercial soaps that have a strong presence in the market. In general, the known brands represent 76% of the market. The following table presents the pricing of the commercial soaps found in

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Lebanese supermarkets:

Brand Le Chat Lux Camay Zest Palmolive Fa Dove Cream Yasmine Sopa (3) Persavon (savon crme) Persavon (bar) Dettol (antibacterial) Dettol (fragrance) Lifebuoy Johnson's Lotion Soap Duru Al Wazir

Price (in LL) 946 633 528 930 820 836 1161 611 930 1540 693 1001 1183 550 1436 671 1859

Weight (in grams) 125 115 115 125 125 125 100 125 225 100 100 75 75 90 125 200 90

The natural soaps present on the Lebanese market are not very numerous, among them:

Brand Al Koura Baalbeck scented natural soap Al Sayyah Al Baydar

Price (in LL) 2398 2970 2519 6958

Weight (in grams) 1000 1000 900 200

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4.3

Target market

The soap factory will produce natural soaps that can be sold to Bint Jbeil families but also everywhere in Lebanon. Natural soaps were mainly used by conservative families. However, nowadays, it is increasingly gaining in popularity among the trendiest people. Women seem to be more sensitive to the importance of natural soaps for an esthetic use. On the other hand, laurel Soaps are used for medicinal reasons as they can cure some illnesses such as rheumatism.

4.4

SWOT Analysis

4.4.1 Strengths Natural soaps are generally preferred in most villages. Olive oil soaps are witnessing an increasing demand in Lebanon for esthetic and beauty care reasons. Laurel soaps are highly demanded for their medical virtues. Laurel trees are widely available in Bint Jbeil. Some Bint Jbeil residents already have the necessary know-how for the natural soaps production. 4.4.2 Weaknesses Soap production can be a seasonal activity that increases mainly in summer as the demand for soap increases at this period of the year. The commercial soaps represent today the largest share of the market and are present everywhere. Laurel soaps are more expensive than others, so additional marketing efforts will be needed focusing on the numerous advantages of this soap in order to justify their elevated price.

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4.4.3 Opportunities There is no soap factory in Bint Jbeil. The nearest soap factory is situated in Saida and Houla (not yet operational). The natural soaps are witnessing a growing demand in Lebanon, especially sophisticated natural soaps with exotic scents such as orange blossom, laurel, lavender, jasmine The production process of the soap can offer job opportunities to women who can participate actively in soap making. Branding and attractive packaging along with successful marketing strategies can help in promoting Bint Jbeil soaps that could gain a decent reputation. 4.4.4 Threats The bigger share gained by commercial soaps can represent a threat to the sale of natural and laurel soaps. The political situation is still relatively unstable in this region.

5 Marketing Plan
The soap factorys main marketing objectives involve: Intensive public relations efforts, through direct contacts with the supermarkets and mini markets of the region, to build a reputation of reliable and quality supplier of natural and laurel soap not only in the caza but also all over Lebanon. Building a loyal clientele by offering good reliable services (delivery on time) and quality products. Pricing the products according to market levels, while offering discounts (2 to 5%) for cash payments. Preparing attractive packaging and labeling to give at the same time a natural and modern look as It is important to develop sales on a wide-scale basis. Developing contacts with expatriates for the possibility of exporting the soaps.

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6 Financial Plan
This section details the calculations, assumptions and methodology used as a basis for the projections of the expected financial performance of the soap factory. 6.1 Initial Investment
EQUIPMENT OF SOAP FACTORY Cost Items Insulated pan with coils Reservoirs for caustic soda, salt, water Boiler for steam generation Installation Generator incl. connections Van Office Equipment (computer, phone, fax) Office Furniture Total equipment Working capital needs Total initial investment Quantity 1 3 1 1 1 1 1 1 Unit cost Total cost 4,000 4,000 700 2,100 7,000 7,000 4,000 4,000 6,500 6,500 10,000 10,000 3,000 3,000 2,000 2,000 38,600 21,564 60,164

Source: Les Fils De Chamel Nasr, Savonnerie Orientale

The above table shows the various equipments needed in the soap factory. The insulated pan with coils is the equipment where all the raw materials will be added. This machine has a cost of $4,000. 3 reservoirs will contain respectively caustic soda, salt and water. Each one of these reservoirs will have a cost of $700. Moreover, a boiler whose cost is approximately $7,000 is a necessary equipment for the production process. Moreover, a generator will have to be provided in case of electricity power failure. It is expected to have a cost of $6,500. Installations and piping will cost approximately $ 4,000. In order to market its products and ensure their distribution all over the Lebanese market, a van, with a cost of $ 10,000, will be needed. Finally, we can consider a budget of $ 3,000 for the office equipment such as a computer, a phone line and fax, and a budget of $2,000 for the office furniture. The total equipment cost is $ 38,600 while the total investment is evaluated at USD 60,164. This last figure includes, besides the cost of equipments, the working capital needs at the start of operations. Working capital needs are calculated by adding beginning inventories to expected receivables over a period of 4 months and deducting the expected payables over a period of 1 month.

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Beginning inventory Olive kernel oil Laurel Salt Caustic soda (concentration 100%) Packaging (nylon bags) Total beginning inventory
Source: Les Fils De Chamel Nasr, Savonnerie Orientale.
Soap factory-Houla

Tons 5 1 1 1

Unit cost Total cost 750 3,750 7,407 7,407 250 250 500 500 300 300 12,207

The above table shows the beginning inventory needed to start the business.

6.2

Major assumptions

The assumptions are conservative and are based on market achievable levels. The prices of natural and laurel soaps are shown in the following table:
prices Price of 1Kg of Laurel Soap Price of 1 ton (1000Kg) of Laurel Soap Price of 1 Kg of Natural Soap Price of 1 ton (1000 Kg) of Natural Soap Source: soap factory-Houla $4 $4,000 $1 $1,000

The production costs are figured out in the table below:

Production of 1 ton of Laurel soap Olive oil kernel Laurel Salt (16%) Caustic soda (concentration 100%) Total Kgs needed Cost of 1 Kg (in $) 720 160 128 120 Total Cost (in $) 0.75 7.41 0.25 0.5 540 1,185 32 60 1,817

Production of 1 ton of Natural soap Olive oil kernel Laurel Salt (16%) Caustic soda Total

Kgs needed Cost of 1 Kg (in $) 720 0 128 120

Total Cost (in $) 0.5 7.41 0.25 0.5 360 32 60 452

Source: Les Fils De Chamel Nasr, Savonnerie Orientale, S.A.R.L.

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Sales assumptions
Laurel Soaps Production Daily production of Laurel Soaps (in tons) Monthly production of Laurel Soaps (in tons) Yearly Production of Laurel Soaps (in tons) Yearly production of Laurel Soaps (in Kgs)
Natural Soaps Production Daily production of Natural Soaps (in tons) Monthly production of Natural Soaps (in tons) Yearly Production of Natural Soaps (in tons) Yearly Production of Natural Soaps (in Kgs)

0.1 2.6 31.2 31,200

0.1 2.6 31.2 31,200

The above assumptions consider that 0.5 ton of laurel and natural soaps are produced every 5 days. It is assumed that all the production will be sold.

It is assumed that laurel and natural soaps revenues will grow by 5% in year 2, by 5% in year 3, by 3% in year 4, and 2% in year 5. The daily sales of laurel soaps and natural soaps will grow as follow:
Year 1 Forecasted growth per year Sales of Laurel Soap / day Sales of Natural Soap / day 400 100 Year 2
5%

Year 3
5%

Year 4
3%

Year 5
2%

420 105

441 110

454.23 114

463.31 116

Other assumptions The following table shows the main assumptions for the income statement. The marketing expenses are assumed to be 2% of annual revenues. An annual increase in general expenses of 2% is taken into account for inflation factors. The maintenance expenses are taken as 3% of total fixed assets while the annual increase in salaries is assumed o be of 2% annually. The increase in rental expenses is estimated to be of 10% every 3 years. Other assumptions include the cost of packing, which is of $ 50 for every ton of soap, as well as the energy cost estimated at $ 30 for every ton of soap produced.

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Income Statement Assumptions

Packaging cost Energy cost (electricity) Marketing expenses Annual increase in general expenses Maintenance expenses
Annual increase in salaries Increase in rental expenses Income Tax Rate

50 30 2% 2% 3% 2% 10% 15%

per ton of soap per ton of soap of revenues of fixed assets

annually

every 3 years

The following table shows the balance sheet assumptions:

Balance Sheet Assumptions Accounts Receivable Inventories Accounts payable Expenses payable

3 months of sales 2 months of cost of sales 1 months of cost of sales 20% of general expenses

The following table shows the depreciation rates, which follow international accounting standards:
DEPRECIATION RATES Equipment Office Equipment Vehicles Furniture

10% 15% 12% 7.5%

The cost of the warehouse to be rented is figured out below:

Warehouse to be rented Warehouse area Rental per square meter in USD Annual rent

400 6 2,400

In order to ensure the proper distribution of soap all over the Lebanese territory, the soap factory should take into account the transport expenses.

Transport expenses (gas) Maintenance on vehicle

$617.14 per month $50.00 per month

In the above table, we considered that the sales representative/driver would need to undertake approximately 18 trips every month. The trip is expected to be

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of 300 Km and the price of one tank of gasoline is $16, taking into consideration that one tank of gasoline allows him to undertake a trip of 140 Km.

Staff structure The soap factory will create 5 job opportunities.

STAFF STRUCTURE Number of Monthly employees Salaries Management & Sales General manager Sale Representative Labor TOTAL 1 1 3 5 700 400 300 1,400 Total salaries 700 400 900 2,000 NSSF 151 86 237 Total Monthly Transport Transport Total 104 104 104 104 208 955 590 900 2,445

The General Managers tasks consist in directing the production team, developing new marketing strategies and establishing contacts with clients. The General Manager will have a monthly salary of $ 700.The sales representative will handle sales and delivery. He is expected to have frequent trips in order to promote the soap products over all the Lebanese territory. His salary will be around $400 per month. Moreover, the soap factory will need three workers with a monthly salary of $300 for each. Thus, the total monthly salaries are around $ 2,445, including transport and NSSF.

6.3

Projected Income Statement

The following income statement is based on conservative assumptions of revenues as well as costs.

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SOAP Projected Income Statement

Year 1 124,800 31,200 156,000 56,696 14,102 3,120 1,872 10,800 8,006 94,596 61,404 39% 2,400 3,120 1,158 13,200 2,838 2,496 600 1,200 27,012 34,392 4,160 4,535 25,697 16%

Forecasted growth per year

Sales laurel soaps Sales natural soaps Total Revenues COGS (laurel soaps) COGS (Natural soaps) Cost of Packaging of soap Utilities:Electricity Salaries-production Transport and vehicle -expenses Total cost of sales Gross margin Gross profit margin% Expenses Rental of center Marketing expenses Maintenance Salaries-Administrative Social Security Charges Transport-staff Supplies Other expenses Total General & Administrative Exp EBITDA Depreciation expenses Tax expenses Net Income Net profit Margin

Year 2 5% 131,040 32,760 163,800 59,531 14,808 3,276 1,966 11,016 8,166 98,762 65,038 40% 2,400 3,276 1,181 13,464 2,895 2,496 630 1,260 25,202 39,836 4,160 5,351 30,325 19%

Year 3 5% 137,592 34,398 171,990 62,508 15,548 3,440 2,064 11,236 8,329 103,125 68,865 40% 2,400 3,440 1,205 13,733 2,953 2,496 662 1,323 25,811 43,054 4,160 5,834 33,060 19%

Year 4 3% 141,720 35,430 177,150 64,383 16,014 3,543 2,126 11,461 8,496 106,023 71,127 40% 2640 3,543 1,229 14,008 3,012 2,496 681 1,363 26,332 44,795 4,160 6,095 34,540 19%

Year 5 2% 144,554 36,139 180,693 65,670 16,335 3,614 2,168 11,690 8,666 108,143 72,550 40% 2640 3,614 1,253 14,288 3,072 2,496 695 1,390 26,808 45,741 4,160 6,237 35,344 20%

The income statement shows satisfactory income levels with an average net profit margin of 19%.

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6.4

Projected Balance Sheet

The balance sheet shows the projected assets and liabilities of the company.
SOAP Projected Balance Sheet

Year 1

Year 2

Year 3

Year 4

Year 5

Cash & Equivalents Accounts Receivable Inventory Current Assets Equipment Vehicle Office Equipment Office Furniture Accumulated Depreciation Net Fixed Assets Total Assets Accounts payable Expenses payables Total Liabilities Invested Capital Retained Earnings Shareholders Equity Total Liab. & Shrholders Equity

13,098 39,000 9,449 61,548 23,600 10,000 3,000 2,000 4,160 34,440 95,988 4,725 5,402 10,127 60,164 25,697 85,861 95,988

45,035 40,950 9,922 95,907 23,600 10,000 3,000 2,000 8,320 30,280 126,187 4,961 5,040 10,001 60,164 56,022 116,185 126,187

50,081 42,998 10,418 103,497 23,600 10,000 3,000 2,000 12,480 26,120 129,617 5,209 5,162 10,371 60,164 59,082 119,246 129,617

57,439 44,287 10,730 112,457 23,600 10,000 3,000 2,000 16,640 21,960 134,417 5,365 5,266 10,632 60,164 63,622 123,786 134,417

66,046 45,173 10,945 122,164 23,600 10,000 3,000 2,000 20,800 17,800 139,964 5,473 5,362 10,834 60,164 68,966 129,130 139,964

Stat. Of Retained Earnings Begin. Retained Earnings Net income Dividends Paid Ending Retained Earnings

Year 1 25,697 25,697

Year 2 25,697 30,325 56,022

Year 3 56,022 33,060 30,000 59,082

Year 4 59,082 34,540 30,000 63,622

Year 5 63,622 35,344 30,000 68,966

The company is expected to start distributing dividends of $30,000 annually starting in year 3.

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6.5

Projected Cash Flows

The following table shows the projected cash flows of the hotel.

SOAP STATEMENT OF CASH FLOWS Net income Adjustments to reconcile net income to cash provided by operating activities Depreciation Changes in Working Capital Total Adjustments Cash provided by operating activities Cash Flow from Investing Activities Capital expenditures Investment in fixed assets Net cash used in investing activities Cash flow from financing activities Net Investment by owners Net borrowings & repayments of loans Dividends distributed Cash provided by financing activities Cash at beginning of year Changes in cash Cash at end of year

Year 1 25,697

Year 2 30,325

Year 3 33,060

Year 4 34,540

Year 5 35,344

4,160 (38,322) (34,162) (8,465)

4,160 (2,548) 1,612 31,936

4,160 (2,174) 1,986 35,047

4,160 (1,342) 2,818 37,358

4,160 (898) 3,262 38,606

(38,600) (38,600)

60,164 0 13,098 31,936 45,035 (30,000) (30,000) 45,035 5,047 50,081 (30,000) (30,000) 50,081 7,358 57,439 (30,000) (30,000) 57,439 8,606 66,046

60,164 13,098 13,098

The projected cash flows show the initial net investment in fixed assets. It also shows the net invested capital by the owners. The distributed dividends are shown starting in year 3.

6.6

Ratio analysis

The following table shows the main financial ratios for the soap factory. The current ratio, which is equal to current assets divided by current liabilities, shows satisfactory levels in all years (above 2). The return on average assets has acceptable levels in all years.

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Ratio Analysis Current Ratio Return on Average Assets Total Assets Turnover: Sales / total assets Gross Profit Margin Operating Profit Margin Net Profit Margin Return On Average Equity=ROE Return on Investment = ROI

Year 1

Year 2

Year 3

Year 4

Year 5

6.08 26.8% 163% 39% 22% 16% 30% 43%

9.59 27.3% 130% 40% 24% 19% 30% 50%

9.98 25.8% 133% 40% 25% 19% 28% 55%

10.58 26.2% 132% 40% 25% 19% 28% 57%

11.28 25.8% 129% 40% 25% 20% 28% 59%

The total assets turnover, which is sales over total assets, is very high in all the years. The main reason is that the total sales are high in comparison to the limited assets structure of the plant. The profitability margins are satisfactory over the years. The return on average equity is around 28.9%. The return on investment is around 52.8%. These are considered high levels. The internal rate of return is 50% and the payback period, which is the period necessary to pay back the investment, is of 4 years. These results confirm the feasibility of the project.

6.7

Break-even analysis

The following table shows the annual revenue levels needed for the plant to break even. Thus, an average of $76,214 per year is a minimum level of revenues for the soap factory.

SOAP BREAK-EVEN ANALYSIS

Year 1

Year 2

Year 3

Year 4

Year 5

Total Revenues Total Variable Costs Total Fixed Costs

Break-even revenues

156,000 94,596 31,172

79,194

163,800 98,762 29,362

73,949

171,990 103,125 29,971

74,852

177,150 106,023 30,492

75,943

180,693 108,143 30,968

77,130

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6.8

Sensitivity analysis

A worse case scenario is taken by assuming that the daily production of natural soaps and laurel soaps is of 800Kg/week, thus the yearly production is of 24.96 tons for each type of soaps. In this case, the soap factory has an average profitability of $ 17,518 annually. The internal rate of return is 34%. The payback period is 4.8 years. A best-case scenario is developed considering that 104 tons will be produced weekly. These assumptions will give as a result a yearly production of 43.68 tons for each type of soap. This scenario gives an average profitability of $ 60,344 annually. The internal rate of return is 75% and the payback period is 2.11 years.

Yearly Production Laurel Soap (in tons) Yearly Production Natural Soap (in tons) Average net income Average net profit margin Internal rate of return Payback period in years

Worse-case Most likely Best-case 24.96 31.20 43.68 24.96 31.20 43.68 17,518 13% 34% 4.8 years 31,793 19% 60,344 25%

50% 75% 4 years 2.11 years

These results confirm the viability of the project, especially if it is well-managed providing quality soaps at affordable prices.

7 Recommendations and key success factors

In order to achieve satisfactory results, there are some key success factors that should be highlighted: The soap factory should focus on delivering quality soap products. Intensive marketing efforts should be deployed in order to gain market share. It is also necessary to develop public relations and direct contacts with supermarkets, mini-markets, specialized retailers for natural soaps, etc Also, advertising in local cooperatives could be a good tool to attract

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new clients. Prices should be equal or less than the competition. In fact, discounts should be applied for cash payments, in order to manage cash flows. Discounts of 2% to 5% could be provided to those customers that pay in cash. Eventually, the soap factory should develop contacts with expatriates to try to open up new markets abroad.

8 Economic Impact Evaluation

The soap factory is expected to deliver very satisfactory results, contributing in promoting the Bint Jbeil soap production into other markets. Moreover, it will create 5 new jobs, thereby contributing positively to society by offering new opportunities to young Bint Jbeil citizens and preventing them from emigrating. Also, the soap factory can offer job opportunities for women as they can contribute effectively in this kind of production. On the other hand, it will help in revitalizing the industrial sector of Bint Jbeil. The soap factory will contribute in propping up the soap production as well as the demand for the local soap. This will pave the way for further new developments in Bint Jbeil as the success of the soap industry can encourage other investments in new industries. It can promote also the export of Bint Jbeil soaps to Arab countries and some European countries in the long run. Besides its expected business performance, the soap factory will be seen as an organization that is contributing to enhance the social good of Bint Jbeil.

Etudes et Consultations Economiques s.a.r.l.

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