AFC Consultants International

DRY CLEANING PROJECT

TABLE OF CONTENTS

EXECUTIVE SUMMARY............................................................................ 2

PROJECT DESCRIPTION ......................................................................... 2

2.1
2.2

DRY CLEANING PROCESS ....................................................................................... 3

DRY-CLEANING WASTES ........................................................................................ 4
MARKET ANALYSIS ................................................................................ 4

3.1
3.2

TARGET MARKET ................................................................................................ 4

SWOT ANALYSIS .............................................................................................. 5

MARKETING PLAN.................................................................................. 5

FINANCIAL PLAN ................................................................................... 6

5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8

INITIAL INVESTMENT ........................................................................................... 6

MAJOR ASSUMPTIONS .......................................................................................... 6
PROJECTED INCOME S TATEMENT .............................................................................. 8
PROJECTED B ALANCE S HEET ................................................................................... 9
PROJECTED C ASH FLOWS ...................................................................................... 9
RATIO ANALYSIS ...............................................................................................10
BREAK-EVEN ANALYSIS ........................................................................................10
SENSITIVITY ANALYSIS ........................................................................................11

RECOMMENDATIONS AND KEY SUCCESS FACTORS ................................ 11

ECONOMIC IMPACT EVALUATION......................................................... 11

LBN/B7-4100/IB/99/0225/JC20/0105

AFC Consultants International

Executive Summary

The project consists in establishing a dry cleaning outlet in the Minieh-Donnieh Caza region in
North of Lebanon. This outlet will cater to the Minieh-Donnieh Caza and North of Lebanon
region and will reach its peak during the summer season where all the Lebanese expatriates
come back for the summer to visit their families and a large number of vacationing residents
from Tripoli and other areas come to spend the summer season.
The initial investment for the project is estimated at $49,500 which includes $35,500 in dry
cleaning equipment, $5,000 in generator, $2,000 in furniture, $2,000 in office equipment, and
$5,000 in working capital.
The main assumptions consider average daily cleaning of 25 pieces over an average period of
6 months. This is a conservative figure due to the high demand during the summer season
and limited competition in the region. The success of the business will rely on a convenient
and accessible location.
The projections are taken over a period of 7 years. The dry cleaning outlet is expected to
provide an average annual net profit of $8,086. It will be able to distribute dividends starting
year 1.
The dry cleaning outlet provides an internal rate of return (IRR) of 30% and a payback period
of 4 years and 2 months. These results show that the project is feasible if it is well managed.
A worst-case scenario was developed with the assumption of lower number of units from 25
pcs/day to 20 pcs/day for the dry cleaning outlet, gave an IRR of 22% and a payback period
of 5 years and 6 months. A best-case scenario based on higher number of units per day from
25 pcs/day to 30 pcs/day provides the dry cleaning outlet an IRR of 37% and a payback
period of 3 years and 5 months.
The project will offer 2 full time job opportunities (including the project owner) and will
provide a convenient dry cleaning facility in the Donnieh area.

Project description

The project consists in establishing a dry cleaning outlet in Donnieh area in North of Lebanon.
Currently, there is only one dry cleaning facility in the whole Donnieh area, which is also
located at the borders of Minieh and is not convenient for the Donnieh residents. In fact, this
facility could not be sufficient, especially during the summer season when all the vacationing
people come to spend the summer season, running away from the heat on the coast.
Dry cleaning is any cleaning process for clothing and textiles using an organic solvent rather
than water. The solvent used is typically tetrachloroethylene (perchloroethylene), abbreviated
"perc" in the industry and "dry-cleaning fluid" by the public. Dry cleaning is necessary for
cleaning items which would otherwise be damaged by water and soap or detergent. It may be
used if hand washing needed for some delicate fabrics is excessively laborious.
The dry cleaner places cleaned clothes on metallic hangers, inside thin clear plastic garment
bags before delivering to the clients.

Minieh-Donnieh Caza - Feasibility Study Dry cleaning project

LBN/B7-4100/IB/99/0225/JC20/0105

AFC Consultants International

2.1 Dry cleaning process

A dry cleaning machine is similar to a combination of a domestic washing machine, and
clothes dryer. Garments are placed into a washing/extraction chamber (referred to as the
basket, or drum), which is the core of the machine. The washing chamber contains a
horizontal, perforated drum that rotates within an outer shell. The shell holds the solvent
while the rotating drum holds the garment load. The basket capacity is between 9 and 36 kg
of garments.
During the wash cycle the chamber is filled approximately 1/3 full of solvent and begins to
rotate, agitating the clothing. The solvent temperature is maintained at 29.4C, as a higher
temperature may extract dye from garments, causing color loss. During the wash cycle, the
chamber is constantly fed a supply of fresh solvent from the working solvent tank while spent
solvent is removed and sent to a filter unit comprising a distillation boiler and condenser. The
ideal flow rate is roughly 8 liters of solvent per kilogram of garments per minute, depending
on the size of the machine.
Before being placed in the machine, garments are inspected for stains and soils by the
operator. Depending on the nature of the soil, a catalyst may be applied to it. This depends on
the operator's judgment of the makeup of the textile and the soil itself. Oil-based soils (such
as grease, oil, or lipstick) typically are removed well by perchloroethylene, while water-based
soils (such as coffee, wine, perspiration, blood, and semen) will need a catalyst to allow the
dry cleaning solvent to emulsify and lift them. Food-based grease soils fall in between the two,
and a milder catalyst may be applied.
Garments are also checked for foreign objects. Items such as plastic pens will dissolve in the
solvent bath and may damage textiles beyond recovery. Some textile dyes are "loose" (red
being the main culprit), and will shed dye during solvent immersion. These will not be included
in a load along with lighter colored textiles to avoid color transfer. The solvent used must be
distilled to remove impurities that may transfer to clothing.
Garments are checked for dry-cleaning compatibility, including fasteners. Many decorative
fasteners either are not dry cleaning solvent proof or will not withstand the mechanical action
of cleaning. These will be removed and re-stitched after the cleaning, or protected with a
small padded protector. Fragile items, such as feather bedspreads or tasseled rugs or
hangings may be enclosed in a loose mesh bag. The density of perchloroethylene is around
1.7 g/cm at room temperature (70% heavier than water), and the sheer weight of absorbed
solvent may cause the textile to fail under normal force during the extraction cycle unless the
mesh bag provides mechanical support.
A typical wash cycle lasts for 8-15 minutes depending on the type of garments and amount of
soiling. During the first three minutes, solvent-soluble soils dissolve into the perchloroethylene
and loose, insoluble soil comes off. It takes approximately ten to twelve minutes after the
loose soil has come off to remove the ground-in insoluble soil from garments. Machines using
hydrocarbon solvents require a wash cycle of at least 25 minutes because of the much slower
rate of solvation of solvent-soluble soils. A dry-cleaning surfactant "soap" may also be added.
At the end of the wash cycle, the machine starts a rinse cycle, and the garment load is rinsed
with fresh distilled solvent from the pure solvent tank. This pure solvent rinse prevents
discoloration caused by soil particles being absorbed back onto the garment surface from the
"dirty" working solvent.
After the rinse cycle the machine begins the extraction process, which recovers dry-cleaning
solvent for reuse. Modern machines recover approximately 99.99% of the solvent employed.
The extraction cycle begins by draining the solvent from the washing chamber and
accelerating the basket to 350 to 450 rpm, causing much of the solvent to spin free of the
fabric. When no more solvent can be spun out, the machine starts the drying cycle.
During the drying cycle, the garments are tumbled in a stream of warm air (145F/63C) that

Minieh-Donnieh Caza - Feasibility Study Dry cleaning project

LBN/B7-4100/IB/99/0225/JC20/0105

AFC Consultants International

circulates through the basket, evaporating any traces of solvent left after the spin cycle. The
air temperature is controlled to prevent heat damage to the garments. The exhausted warm
air from the machine then passes through a chiller unit, where solvent vapors are condensed
and returned to the distilled solvent tank. Modern dry cleaning machines use a closed-loop
system where the chilled air is reheated and re-circulated. This results in high solvent
recovery rates and reduced air pollution. In the early days of dry cleaning, large amounts of
perchlorethylene were vented to the atmosphere, because it was regarded as cheap and
believed to be harmless.
After the drying cycle is complete, a deodorizing (aeration) cycle cools the garments and
removes the last traces of solvent, by circulating cool outside air over the garments and then
through a vapor recovery filter made from activated carbon and polymer resins. After the
aeration cycle, the garments are clean and ready for pressing/finishing.

2.2 Dry-cleaning wastes

Cooked muck - Cooked Powder Residue the waste material generated by cooking
down or distilling muck. Cooked powder residue is a hazardous waste and contains
solvent, powdered filter material (diatomite), carbon, non-volatile residues, lint, dyes,
grease, soils and water. This material should then be disposed of in accordance with
the municipality.

Sludge - The waste sludge or solid residue contains solvent, water, soils, carbon and
other non-volatile residues. Still bottoms from chlorinated solvent dry cleaning
operations are hazardous wastes.

Environment - Perc is classified as a hazardous air contaminant by the EPA and must
be handled as a hazardous waste. To prevent it from getting into drinking water, dry
cleaners that use perc must take special precautions against site contamination.

Market Analysis

Minieh-Donnieh Caza region is a perfect location for the establishment of a Dry cleaning outlet
as this part of the country has only two similar projects in Meriata which is located on the
coastal part of the caza on the border between Minieh and Donnieh. For that matter it is
advisable to locate this project towards the upper part of Donnieh, which does not have any
dry cleaning facility.

3.1 Target market

It is expected to have seasonal effects on the productivity of the dry-cleaning facility: During
the summer season, some expatriates and locals that reside in the capital and other main
cities come to spend the vacations in their native villages. Moreover, the region of Donnieh
consists in a vacationing area for residents from the coast extending from Tripoli to Minieh and
part of Akkar. These visitors flow will create increased demand for the dry-cleaning facility as
they will need services for items such as:

Suits
Shirts
Wedding events
Curtain cleaning
Dresses etc...

Minieh-Donnieh Caza - Feasibility Study Dry cleaning project

LBN/B7-4100/IB/99/0225/JC20/0105

AFC Consultants International

3.2 SWOT Analysis

STRENGTHS

WEAKNESSES

The dry cleaning facility will offer

convenient, competitively priced, quality
service to a number of villages in the area
of Donnieh and part of Minieh.

Since this business is repetitive, it is more

likely to have repeat customers from
season to season.

Pressure on cash flows of the project as

the revenues are not evenly spread
throughout the year. It is expected to
have most of the business from
vacationers and expatriates coming to
their villages on holidays and in the
summer.

OPPORTUNITIES

THREATS

The Donnieh area needs a dry cleaning

facility as there is a large resident
population from vacationers to visiting
expatriates during the spring and summer
months that require dry cleaning services.

2 similar projects on the coastal part of

the caza in Meriata could add some
pressure on the sales if the prices are not
competitive or the quality of the service is
not at least comparable.

Joint ventures are possible to increase the

business volume to serve nearby villages.
Hence, small satellite shops could
quickly mushroom to share the existing
facility.

The use of easier to wash fabrics might

limit the use of the dry cleaning facility.

The difficult economic and political

situation in the country constitutes
constant threat for Lebanese enterprises.

Marketing Plan

The main marketing objectives include:

Direct contacts with local customers in order to quickly boost sales.

Providing an excellent service to ensure customer satisfaction for repetitive business.

It is very common to see a production facility share its resources (such as machinery,
know-how, soap and chemicals etc) with other dry clean outlets. These outlets would
not have to heavily invest in machinery and would be able to quickly launch their
business. In this case, the dry clean project owner would be able to significantly boost
his turnover.

Need to differentiate the service from the existing two dry cleaning outlets that
already exist in Meriata. That could be achieved by client awareness and excellent
prices and quality of service.

Minieh-Donnieh Caza - Feasibility Study Dry cleaning project

LBN/B7-4100/IB/99/0225/JC20/0105

AFC Consultants International

Financial Plan

This section details the calculations, assumptions and methodology used as a basis for the
projections of the expected financial performance of the dry cleaner outlet.

5.1 Initial Investment

Investment Requirements
Description

Quantity

Industrial washing machine 20kg (used)

Table for ironing (used)
Drying press machine - 20kg (used)
Professional dry/clean machine - 20kg
Dryer machine - 20kg (used)
Generator (used)
Boiler sytem and exaust
Installations of boiler system
Spotting table
Ventillation + ducting
Computer and office equipment
Furniture

1
1
1
1
1
1
1
1
1
1

Total costs of equipments

Working capital needs

Unit price Amount in $

5,500
5,500
2,000
2,000
3,000
3,000
12,000
12,000
3,000
3,000
5,000
5,000
5,000
5,000
2,000
2,000
2,000
2,000
1,000
1,000
2,000
2,000
44,500
5,000

Total investment cost

49,500

The above table shows the various equipments needed for the establishment of the Dry
cleaning shop facility.
The initial investment for the project is estimated at $49,500 which include $35,500 in
industrial equipment, $5,000 in generator, $2,000 in furniture, $2,000 in office equipment,
and $5,000 in working capital.

5.2 Major assumptions

The assumptions are conservative and are based on market achievable levels.
They consider an average daily cleaning of 25 pieces over an average operating period of 6
months per year, which is a conservative figure due to the high demand and limited
competition in the region.

GENERAL ASSUMPTIONS

Revenues assumptions

price / item

Shirts
Pants
Suits
Dresses
Coats
Curtains
Leather coats / shirts
Blazers

$1.3
$2.7
$8.0
$6.6
$6.6
$6.6
$16.6
$5
Totals

Minieh-Donnieh Caza - Feasibility Study Dry cleaning project

Percentage of
sales

Units per day

25
Total revenue / week

20%
30%
23%
10%
4%
2%
1%
10%
100%

$39.8
$119.4
$274.6
$99.5
$39.8
$19.9
$24.9
$79.6
$697.5
6

LBN/B7-4100/IB/99/0225/JC20/0105

AFC Consultants International

The project assumes an average of 25 pieces of clothing per day for a 6 day/week schedule.
The breakdown percentages of the items to be washed are also stated in the above mentioned
table. From the 25 pcs per day we assumed that 30% of them were pants, 20% shirts, 23%
suits etc. The total sales revenue per week has been calculated to be approximately
$697.5/week.
The following revenue growth assumptions are taken for the subsequent years.
Revenue growth assumptions

Sales growth
Total units per year
Total units per day

Year 1

3,900
25

Year 2

20%
4,680
30

Year 3

15%
5,382
35

Year 4

10%
5,920
38

Year 5

Year 6

5%
6,216
40

5%
6,527
42

Year 7

5%
6,853
44

The following table shows the main assumptions for the income statement:
Income Statement Assumptions

Working days
Working weeks per year
Working months per year
Nylon garment bags (price/kg)
Nylon bags weight per garment
Hangers (box of 450 units)

Soap price per kg

Soap usage per garment
Perclore (for dry clean) / 1 barrel
Maintenance on equipment
Fuel cost
Electricity
Annual rent-100 m2 premises
Increase in rent every 3 years
Annual increase in general expenses
Annual increase in salaries
Income Tax Rate

6
26
6
$3.1
40
$29
$1.7
20
$540
$100
15%
6%
$2,000
10%
3%
2%
2%

per week
per year
per year
gr.
1 kg/day
gr.
/year
/month
of sales
of sales
/year

As stated earlier, conservatively, the income statement is based on an average of 6 months of

operations. Hence, it will be mainly operated during part of spring, summer and part of the fall
season to accommodate the local and expatriates clients during the summer.
An annual increase in general expenses of 3% is taken into account for inflation factors. The
electricity expenses are estimated to represent 6% of sales. The fuel cost is assumed at an
average of 15% of sales.

Staff structure

The dry cleaning facility will have two full-time jobs: one manager (the owner) and one full
time skilled worker. We have to note that the shop will be operational only 6 months of the
year, hence, the project incurs wages during 6 months only, although the owner would
continue the operations alone during the low season.
The manager/owner will be responsible for running the daily operations, developing new
marketing strategies, as well as dealing with the clients while ensuring quality servicing.
Moreover, the manager will be in charge of the accounting operations of the outlet. The
manager/owner will not have a monthly salary but will be able to have dividends starting in
year 1.

Minieh-Donnieh Caza - Feasibility Study Dry cleaning project

LBN/B7-4100/IB/99/0225/JC20/0105

AFC Consultants International

Furthermore, 1 skilled worker will be hired with a monthly salary of $300.

5.3 Projected Income Statement

Dry Cleaning project
Projected Income Statement
Total revenues
Sales revenues
Total revenues
Cost of materials-soap
Cost of materials-packaging
Electricity
Fuel
Maintenance of machines
Total cost of sales
Gross margin
Gross profit margin %
General & administrative expenses
Salaries
Rental charges
Telephone expenses
Other administrative costs
Total General & Administrative Exp
EBITDA
Depreciation expenses
Tax expenses
Net Income
Net profit Margin

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

18,135
18,135
673
735
1,088
2,720
600
5,816
12,319
68%

21,762
21,762
699
882
1,306
3,264
618
6,769
14,993
69%

25,027
25,027
723
1,014
1,502
3,754
637
7,629
17,397
70%

27,529
27,529
741
1,116
1,652
4,129
656
8,294
19,236
70%

28,906
28,906
751
1,171
1,734
4,336
675
8,668
20,238
70%

30,351
30,351
762
1,230
1,821
4,553
696
9,061
21,290
70%

31,869
31,869
773
1,291
1,912
4,780
716
9,473
22,395
70%

1,800
2,000
300
1,000
5,100
7,219
4,650
51
2,518
14%

1,836
2,000
309
1,030
5,175
9,818
4,650
103
5,065
23%

1,873
2,000
318
1,061
5,252
12,146
4,650
150
7,346
29%

1,910
2,200
328
1,093
5,531
13,705
4,650
181
8,874
32%

1,948
2,200
338
1,126
5,612
14,626
4,650
200
9,777
34%

1,987
2,200
348
1,159
5,694
15,596
4,250
227
11,119
37%

2,027
2,420
358
1,194
5,999
16,396
4,250
243
11,903
37%

The income statement shows satisfactory income levels with an average net profit margin of
30% starting from year 1. Of course, these results will depend on the projected sales. In
subsequent years, the dry cleaning outlet will benefit from increased marketing efforts by the
manager, and repeat business. The company reaches a net profit that exceeds $7,000 in year
3.
With constant marketing and networking efforts from the site manager, the project is
expected to reach a sales volume of $28,906 by year 5, which would provide net profits
exceeding $9,000 for that year.
The projections are taken over a period of 7 years. The dry cleaning outlet is expected to
provide an average annual net profit of $8,086. It will be able to distribute dividends starting
in year 1.

Minieh-Donnieh Caza - Feasibility Study Dry cleaning project

LBN/B7-4100/IB/99/0225/JC20/0105

AFC Consultants International

5.4 Projected Balance Sheet

The balance sheet shows the projected assets and liabilities of the company.
Dry Cleaning project
Projected Balance Sheet

Cash & Equivalents

Accounts Receivable
Current Assets
Equipment
Furniture
Computer & office equipment
Accumulated Depreciation
Net Fixed Assets
Total Assets
Expenses payable
Total Liabilities
Invested Capital
Retained Earnings
Shareholders Equity
Total Liab. & Shrholders Equity

Stat. Of Retained Earnings

Begin. Retained Earnings
Net income
Dividends Paid
Ending Retained Earnings

Year 1

Year 2

9,656
756
10,412
40,500
2,000
2,000
4,650
39,850
50,262
510
510
49,500
252
49,752
50,262

Year 1
2,518
2,266
252

Year 3

Year 4

Year 5

Year 6

Year 7

14,669
907
15,576
40,500
2,000
2,000
9,300
35,200
50,776
518
518
49,500
758
50,258
50,776

19,925
1,043
20,968
40,500
2,000
2,000
13,950
30,550
51,518
525
525
49,500
1,493
50,993
51,518

25,386
1,147
26,533
40,500
2,000
2,000
18,600
25,900
52,433
553
553
49,500
2,380
51,880
52,433

30,965
1,204
32,169
40,500
2,000
2,000
23,250
21,250
53,419
561
561
49,500
3,358
52,858
53,419

36,275
1,265
37,539
40,500
2,000
2,000
27,500
17,000
54,539
569
569
49,500
4,470
53,970
54,539

41,682
1,328
43,010
40,500
2,000
2,000
31,750
12,750
55,760
600
600
49,500
5,660
55,160
55,760

Year 2
252
5,065
4,558
758

Year 3
758
7,346
6,611
1,493

Year 4
1,493
8,874
7,986
2,380

Year 5
2,380
9,777
8,799
3,358

Year 6
3,358
11,119
10,007
4,470

Year 7
4,470
11,903
10,713
5,660

The company is expected to start distributing dividends starting in year 1 at 90% of net
profits.

5.5 Projected Cash Flows

The following table shows the projected cash flows of the project.
Dry Cleaning project
STATEMENT OF CASH FLOWS
Net income
Adjustments to reconcile net income
to cash provided by operating activities
Depreciation
Change in receivables
Change in payables
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

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

2,518

5,065

7,346

8,874

9,777

11,119

11,903

4,650
(756)
510
4,404
6,922

4,650
(151)
8
4,506
9,571

4,650
(136)
8
4,522
11,867

4,650
(104)
28
4,574
13,447

4,650
(57)
8
4,601
14,377

4,250
(60)
8
4,198
15,317

4,250
(63)
30
4,217
16,120

(44,500)
(44,500)

49,500
(2,266)
47,234

(4,558)
(4,558)

(6,611)
(6,611)

(7,986)
(7,986)

(8,799)
(8,799)

9,656
9,656

9,656
5,013
14,669

14,669
5,256
19,925

19,925
5,461
25,386

25,386
5,578
30,965

(10,007)
(10,007)

(10,713)
(10,713)

30,965
5,310
36,275

36,275
5,408
41,682

The projected cash flows show the initial net investment in the equipment in year 1. This
investment is financed by capital injection of $49,500. In the same year, the dry cleaning
outlet starts operations and is able to start distributing dividends.

Minieh-Donnieh Caza - Feasibility Study Dry cleaning project

LBN/B7-4100/IB/99/0225/JC20/0105

AFC Consultants International

5.6 Ratio analysis

The following table shows the main financial ratios for the cold storage facility.
Ratio Analysis

Year 1

Current Ratio
Working capital
Profitability Ratios
Gross Profit Margin
Operating Profit Margin
Net Profit Margin
Financial Strength
Total Debt to Owners' Equity
Management Effectiveness
Return on Average Assets
Return On Average Equity=ROE
Return on Investment = ROI
Asset Management (Efficiency)
Total Assets Turnover: Sales / total
assets
Total Debt to Total Assets

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

20.42
9,902

30.10
15,058

39.92
20,443

47.97
25,980

57.33
31,608

65.92
36,970

71.69
42,410

68%
40%
14%

69%
45%
23%

70%
49%
29%

70%
50%
32%

70%
51%
34%

70%
51%
37%

70%
51%
37%

1.0%

1.0%

1.0%

1.1%

1.1%

1.1%

1.1%

5%
5%
6%

10%
10%
14%

14%
14%
24%

17%
17%
34%

18%
18%
46%

20%
21%
65%

21%
22%
93%

36%
1.0%

43%
1.0%

49%
1.0%

53%
1.1%

54%
1.1%

56%
1.0%

57%
1.1%

The current ratio, which is computed by dividing current assets by current liabilities, shows
increasing and high levels throughout the years. The working capital is positive in all the
years, confirming the ability of the company to meet its short term liabilities.
The net profit margin increases gradually with the increased profitability. Starting year 2, this
margin increases from 23% up to 37% in year 7.
The return on average assets, which is computed by dividing net profits by total assets, shows
how much profit the company is able to achieve from the use of its assets. This ratio reaches
18.3% by year 5 as the Dry cleaning shop achieves higher sales volume.
The return on average investment shows healthy levels fueled by the growth in profitability.
The average return on investment is around 15%.
The total assets turnover shows how well the management is making use of its assets. The
assets turnover is computed by dividing sales over total assets. This ratio shows satisfactory
levels starting in year 2.
The internal rate of return (IRR) is 30% and the payback period, which is the period
necessary to pay back the investment, is 4 years and 2 months. These results show that the
project is feasible.

5.7 Break-even analysis

The following table shows the annual revenue levels needed for the Dry cleaning shop project
to break even. Thus, an average of $14,529 in year 1 is a minimum level for the outlet to
break even.
Dry Cleaning project
BREAK-EVEN ANALYSIS

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Total Revenues
Total Variable Costs
Total Fixed Costs

18,135
5,216
10,350

21,762
6,151
10,443

25,027
6,993
10,538

27,529
7,638
10,836

28,906
7,993
10,937

30,351
8,366
10,640

31,869
8,757
10,966

Break-even revenues

14,529

14,558

14,625

14,997

15,117

14,689

15,121

Minieh-Donnieh Caza - Feasibility Study Dry cleaning project

10

LBN/B7-4100/IB/99/0225/JC20/0105

AFC Consultants International

5.8 Sensitivity analysis

A worst-case scenario was developed with the assumption of lower turnover from 25
pcs/day to 20 pcs/day for the dry cleaning outlet, gave an IRR of 22% and a payback period
of 5 years and 6 months.
In this case, the business will have an average profitability of $4,271 annually.
A best-case scenario was based on higher turnover up from 25 pcs/day to 30 pcs/day. This
scenario provided the dry cleaning project an IRR of 37%, an average profitability and a
payback period of 3 years and 5 months.

Sensitivity Analysis

Worst-case
20 pcs/day

Most likely
25 pcs/day

Best-case
30 pcs/day

Average net income

Average net profit margin

19%

30%

37%

Internal rate of return

Payback period in years

22%
5 years and 6 months

30%
4 years and 2 months

37%
3 years and 5 months

4,271

11,901

8,086

These results show that the project is feasible, especially if it is well-managed providing
quality services and if the manager is able to market well the dry cleaning outlet to optimize
the sales and leverage the projects capacity.

Recommendations and key success factors

In order to achieve satisfactory results, there are some key success factors that should be
highlighted:

The management needs to invest in direct contacts and public relations efforts to
attract the largest number of clients from neighboring villages to utilize the facility.
The business should try to build a loyal clientele, which will come back every year.

The manager needs to be able to operate on his own with the help of an additional
skilled labor during high seasons in order for him to optimize his profit margins.

The plant manager should ensure proper maintenance and regular daily cleaning
services to keep the facility as clean and as efficient as possible.

Economic Impact Evaluation

The dry cleaning outlet will create 2 new jobs: one full time manager/owner and 1 skilled
worker, thereby contributing positively to the socio-economic environment by offering new
opportunities to Minieh-Donnieh caza citizens.

Minieh-Donnieh Caza - Feasibility Study Dry cleaning project

11