TABLE OF CONTENTS

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1. List of figures.............................................................................................................................3
2. List of tables...............................................................................................................................3
3. Introduction...............................................................................................................................4
1.1 Company overview....................................................................................................4
1.2 Market & Growth Drivers..........................................................................................4
1.2.1 In Cosmetics Industry...........................................................................................4
4. Marketing plan..........................................................................................................................5
1.3 Marketing strategy.....................................................................................................5
5. Production plan.........................................................................................................................6
1.3.1 Production process................................................................................................6
1.3.2 Packaging..............................................................................................................7
6. Project startup cost...................................................................................................................8
1.4 Start-up funding.........................................................................................................8
1.5 Estimated block capital cost of project and means of finance...................................8
7. Plant & machinery required....................................................................................................9
1.6 Estimated man power required.................................................................................10
1.7 Suggested location...................................................................................................10
8. Project time line......................................................................................................................10
9. Financial indicators................................................................................................................10
1.8 Vertical analysis.......................................................................................................12
1.9 Horizontal analysis...................................................................................................13
1.10 Trend analysis..........................................................................................................13
1.11 Risk analysis.............................................................................................................14
1.11.1 Business risk.......................................................................................................14
1.11.2 Solvency Ratio Analysis.....................................................................................18
1.11.3 Operating Efficiency...........................................................................................18
1.11.4 Operating Profitability........................................................................................18
1.11.5 Growth Analysis.................................................................................................19
10. Conclusion........................................................................................................................21
11. References.........................................................................................................................22

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1. List of figures
Figure 9-1Authors work based on Trend analysis........................................................................13
Figure 9-2Authors work based on Sustainable Growth...............................................................20

2. List of tables
Table 4-1Authors work based on Capacity of packaging units......................................................8
Table 4-2Authors work based on Start-up funding.........................................................................8
Table 4-3Authors work based on Estimated block capital cost of project and means of finance. .9
Table 5-1Authors work based on Plant & machinery required......................................................9
Table 6-1Authors work based on project time line.......................................................................10
Table 7-1Authors work based on income statement (consolidated).............................................12
Table 7-2Authors work based on Consolidated Balance Sheets..................................................17
Table 7-3Authors work based on Growth Analysis......................................................................20

3. Introduction

1.1 Company overview

Our Vision Statement

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“To be a brand that is known for the quality of the products.”

Our Mission Statement

Design and manufacture beauty products that help professionals achieve the highest quality
standards so that their work meets the highest quality standards.

Our Structure

BareBeauty Cosmetics is a company based in Colombo. Roshan De Silva and Ashok Perera, the
founders, own the company 100 percent. The Board of Management will include seven
members: Roshan De Silva, one additional manager, three external managers designated by
Ashok Perera and two appointed major investor representatives.

Mr. De Silva and Mr. Perera have combined retail experience over sixty-five years together.
Both held senior management positions in this field with major companies.

1.2 Market & Growth Drivers

1.2.1 In Cosmetics Industry

Due to the rapidly increasing demand for specialty beauty products, the concentration in the
cosmetics sector has increased in recent years. In the future, the concentration of industry is
expected to continue over the next five years as consumer spending increases and people turn to
well-known, trusted products for their beauty and cosmetic needs.

Skilled inventors will boost sales for the cosmetics industry. In addition, with the rise in youth-
oriented cosmetics, the growth of male-specific products and various beauty products has given
specialization to a new range of cosmetics and beauty items to be sold to consumers. Income will
continue to rise and the revenues generated by this industry will also enjoy positive growth.

Commercially formulated cosmetic items marketed to customers include items for moisturizing
and washing the face, hands and body, as well as products for mitigating the effects of aging on
the skin and other toiletries. The products come in a wide range of packaging and forms, such as
creams, serums, liquids and lotions. The cosmetics market can be broadly classified into the
following range:

 Facial cleansers

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  Facial moisturizers
 Anti-aging preparations, or "treatment products,"
 Hand and body lotions
 Other toiletries like shampoos, toothpastes and shower gels.

4. Marketing plan

We have positioned our cosmetics on supermarkets, beauty and fragrance shops and saloons
scattered across the country and we intend opening our chains of cosmetics and beauty stores.
We conduct a market research to get feedbacks of what our target market would be expecting
from us.

We are planning offer wide range of products to following groups:

 Teenagers
 Middle ages women’s
 Men’s
 Sports men and women
 Tourists

1.3 Marketing strategy

We intended to use content marketing, as content marketing is one of the most effective tactics
when it comes to brand promotion. It's all about sharing important and useful content to attract,
win and engage our target audience. We consider following marketing concepts:

 Build "how to use" videos to show people how to set up skincare routines or spa
treatments.
 Create a list of subscribers to the newsletter and use it to deliver exclusive deals and
engaging content to your current and future customers.
 Go live on social medias and real time broadcast messages. Video content is very
appealing and thus a convenient way to help improve exposure for free.
 Survey consumers to get reviews and measure the success of the promotions. We can do
this with fun interactive material, such as quizzes, which can be incorporated as pop-ups

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 on our website, in native ad campaigns or via social media. Using the results to change
the marketing plan.
 Interview with people from the natural beauty industry. Get in contact with bloggers and
influencers who are in beauty and cosmetics. Influencer marketing is big in the beauty
industry, and it can be a win - win strategy for both of us as a business and the force we're
dealing with.

5. Production plan

In manufacturing, we aim to produce specialty goods with the finest ingredients, to offer the
quietest goods. Our main objective is to improve the quality of the product. We are qualified in
the following field.

 Hair care and shower products

 Skin care products
 Men’s products
 Anti- aging products
 Baby care, sun care, and other products

1.3.1 Production process

When considering Personal Care Goods Manufacturing is a crucial step in our production cycle.
We use the new design methodology in the manufacturing cycle to optimize the workflow and
reduce waste. We ensure that our entire workforce is highly qualified and that we use the latest
technical equipment to manufacture innovative, skilled skincare products on fluid production
lines.

We produce all of our goods in Sri Lanka at Cosmetic Solutions. Our project facility houses
state-of - the-art equipment that we are able to put thousands of items to market successfully. We
plan to have ISO and adhere strictly to all GMP requirements during formulation, development
and post-product processes. We also use stringent quality assurance protocols to ensure that all
goods comply with our purity and efficacy requirements. We check products methodically and
consistently during the formulation and production processes.

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Cosmetic Solutions assumes that they are free from cruelty. We never check our goods on
animals.

Every phase of our manufacturing process is willing to examine for optimum performance,
including mixing, filling, capping, coding, marking, safety sealing and packaging. This method
has helped us to generate savings internally, which we have passed on to our clients.

Our manufacturing facility uses state-of - the-art production equipment to guarantee high-quality
goods to our customers in both high and low volumes.

In order to run the project, our facility is operated by a trained and committed group of chemists
and an extremely knowledgeable team.

We are prepared to combine formulas in modern stainless-steel mixers capable of both hot and
cold mixing processes and to handle a wide variety of formulations, viscosities and particle sizes.

Each of our lines are fitted with semi-automatic and automatic fillers, cappers and sealers. Mix
formulations are then stored on either the jar and bottle lines or the tube lines.

We are committed to providing a seamless, modern manufacturing facility and to delivering

products of the highest effectiveness and quality. Our highly trained production team has a
wealth of success developing a line of personal care.

1.3.2 Packaging
The primary purpose of the packaging is to protect the product from air, light, heat, cold,
moisture, dust, dirt, etc. In addition, the packaging, along with the deliver case, would protect the
product from the hazards that the package will be exposed to during transport and handling.

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6. Project startup cost
Capacity of creams manufacturing unit – 1000 Liters per day.

Capacity of Liquid manufacturing unit – 2500 Liters per day.

Capacity of packaging units.

Unit Name Capacity

Bottle packing unit 2000
Tube packing 1500
Cream Jar packing 1000
Table 6-1Authors work based on Capacity of packaging units

1.4 Start-up funding

Sr. No Source LKR in million

1 Start-up Expenses to Fund 50
2 Start-up Assets to Fund 150
Total Funding Required 200
Table 6-2Authors work based on Start-up funding

1.5 Estimated block capital cost of project and means of finance

Sr. No Cost of project LKR in million

1 Land and Land development 20
2 Building & Civil works 50
3 Plant & Machinery 15
4 Misc. Fixed Assets 5
5 Preliminary & Pre-operative 10
6 Provision for contingencies 5
Total Fixed Assets 105
7 Margin Money for working capital 50
Estimated Block Capital Cost of Project 155
Means of Finance
8 Our contribution 55
9 Term loan 100
Total Means of Finance 155

Table 6-3Authors work based on Estimated block capital cost of project and means of finance
The proposed land area of 50 perches. And building area proposed is 2500 Sq.mt. The Fixed cost
of project estimated is LKR 105 million and adding working capital margin of LKR 50 million
total project cost is estimated at LKR 155 million. The project will have Debt: Equity ratio of 2:1

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and accordingly promoter will bring LKR 55 million against the term loan amount of LKR 100
million.

7. Plant & machinery required

The proposed project of cosmetics manufacturing unit would require the following as basic and
necessary plant and machinery:

Sr. No Particular Quantity

1 Water filtering machine 2
2 Emulsifier homogenizer 1
3 Mixing tank 1
4 Automatic cream filling
1
machine
5 Automatic plastic bottle filling
1
machine
6 Automatic tube filling machine 1
7 Sticker labeling machine. 1
8 Capping Machine 1
9 Turn table and conveyor, 1
Table 7-4Authors work based on Plant & machinery required

1.6 Estimated man power required

The proposed project will have total manpower requirement of 80 persons. This will include 4
managerial posts, 4 supervisory post, 15 operators, 3 engineering maintenance staff like and 12
accounts, administrative and security staff.

1.7 Suggested location

The suggested districts for the location of the proposed project is Homagama Industrial Estate.

8. Project time line

The proposed project would have a cumulative period of 15 to 18 months, of which 3 to 4
months would have the obligation to obtain authorisations from the various authorities.

Description of Work Start and End Dates

Preliminary stage – Land and Building April 2020 – December
Phase One
development 2020
Phase Two Fixed assets installation January 2021 – April
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Build manufacturing work flows and
Phase Three May 2021 – July 2021
test trials
Table 8-5Authors work based on project time line

9. Financial indicators
LKR Mn
Income Statement (Consolidated)
Year 1 Year 2 Year 3 Year 4 Year 5
Net sales 50 55 65 78 95
Cost of sales 31 32 35 40 45
Gross profit 19 23 30 38 50

Selling, general and

20 22 24 25 28
administrative expenses
EBIT (1) 1 6 13 22
Interest expense, net 22 18 14 9 3

EBT (23) (17) (8) 4 19

Provision for income taxes - - - 0.6 2.9
Net income including (23) (17) (8) 3 16
Earnings per share (0.83) (0.36) (0.14) 0.05 0.18

Vertical Analysis Year 1 Year 2 Year 3 Year 4 Year 5

100.0
100.0% 100.0% 100.0% 100.0%
Net sales %
Cost of sales 62.0% 58.2% 53.8% 51.3% 47.4%
Gross profit 38.0% 41.8% 46.2% 48.7% 52.6%

Selling, general and

40.0% 40.0% 36.9% 32.1% 29.5%
administrative expenses
Operating profit -2.0% 1.8% 9.2% 16.7% 23.2%
Interest expense, net 43.4% 32.9% 21.4% 11.5% 3.6%

Income before income taxes -45.4% -31.1% -12.2% 5.1% 19.6%

Provision for income taxes 0.0% 0.0% 0.0% 0.8% 3.1%
Net income including non-
-45.4% -31.1% -12.2% 4.4% 16.5%
controlling interests
Effective Tax Rates 0.0% 0.0% 0.0% 15.0% 15.6%

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 Horizontal Analysis Year 1 Year 2 Year 3 Year 4 Year 5
Net sales 10.0% 18.2% 20.0% 21.8%
Cost of sales 3.2% 9.4% 14.3% 12.5%
Gross profit 21.1% 30.4% 26.7% 31.6%

Selling, general and

10.0% 9.1% 4.2% 12.0%
administrative expenses
500.0
-200.0% 116.7% 69.2%
Operating profit %
Interest expense, net -16.6% -23.2% -35.3% -62.2%

Income before income taxes -24.7% -53.8% -150.6% 365.0%

Provision for income taxes 383.3%
Net income attributable to
-24.7% -53.8% -143.0% 361.8%
Company

Trend Analysis Year 1 Year 2 Year 3 Year 4 Year 5

Sales 50 55 65 78 95
Net Profit (23) (17) (8) 3 16

130.0
100.0% 110.0% 156.0% 190.0%
Sales %
Net Profit -75.3% -34.8% 15.0% 69.2%

Business Risk Year 1 Year 2 Year 3 Year 4 Year 5

Sales 10.0% 18.2% 20.0% 21.8%
500.0
-200.0% 116.7% 69.2%
Operating Profit (EBIT) %
Net Income -24.7% -53.8% -143.0% 361.8%

Total Leverage -2.47x -2.96x -7.15x 16.60x

Operating Leverage -20.00x 27.50x 5.83x 3.18x
Financial Leverage 0.12x -0.11x -1.23x 5.23x
Table 9-6Authors work based on income statement (consolidated)

1.8 Vertical analysis

In Vertical analysis is a method used to determine where the organization has spent its money
and the proportions in which those money are allocated between the various balance sheets and
the income statement records. The review shall assess the relative weight of each account and its
share of assets or revenue generation.

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With the increase of net sale, operation loss of 2% in first year drives to 23.2% of profits in five
years.

Loss before income taxes of 45.4% in first year increase up to 19.6% of profits in five years,
majorly due to 39.80% of reducing in term loan interest.

Within five years company able to earn a of 16.5%

1.9 Horizontal analysis

Horizontal analysis is a method used to analyze patterns over time by measuring percentage
increases or decreases compared to the base year. It provides an analytical link between accounts
measured on different dates using a currency with different purchasing powers. In addition, this
study indexes and compares the evolution of the accounts over time.

Net sale of the company comparatively increase by 10.0%, 18.2%, 20.0% and 21.8% when
compare to the recent year.

Net income attributable to Company rapidly increase up to 361.8% when it compares to the first
year.

1.10 Trend analysis

Trend analysis measures the overall growth of sales and net profit through the financial years.

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 Trend Analysis
250.0%

200.0%

150.0%

100.0%

50.0%

0.0%
1 2 3 4 5
-50.0%

-100.0%

Sales Net Profit

Figure 9-1Authors work based on Trend analysis

As per the trend analysis, Company owns profits from 3rd year final quarter.

1.11 Risk analysis

Risk analysis explores the volatility of profits for the company and the investor the overall risk of
the business can be broken down into three basic sources.

 Business risk
 Financial risk
 External liquidity risk

1.11.1 Business risk

Wikipedia defines as “the possibility a company will have lower than anticipated profits or
experience a loss rather than making a profit”. If look at the income statement, there are a variety
of reasons that relate to the risk of losses. In this, we able to calculate three types of market risks

 Total Leverage.
 Operating Leverage.
 Financial Leverage.

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1.11.1.1 Operating Leverage
As per the company financial figures operation leverage decrease after the second year in 3rd year
by 27.50x in 4th year by 5.83x in 5th year by 3.18x. It means that the sensitive of operating profit
changes for every 1% of change in net sales, is decreased.

1.11.1.2 Financial Leverage

As per the company financial figures financial leverage increase to 5.23x in 5 th year from 0.12x
of 2nd year. It means that the sensitive of net sales changes for every 1% of change in operating
profit, is increased.

1.11.1.3 Total Leverage

As per the company financial figures total leverage increase to 16.60x in 5th year from -2.47x of
2nd year. It means that the sensitive of net profits changes for every 1% of change in net sales, is
increased.

Consolidated Balance Sheets LKR Mn

  Year 1 Year 2 Year 3 Year 4 Year 5
Assets
Current Assets
Cash and cash equivalents 3 5 7 8 12
Receivables 2 2 1 2 3
Inventories 6 7 7 6 4
Other current assets 2 2 3 3 4
Total current assets 13 16 18 19 23

Property, plant and equipment, net 155 155 155 155 155
Total assets 168 171 173 174 178
 
Liabilities and Shareholders'
Equity
Current Liabilities
Current portion of long-term debt 14 12 9 6 2
Accounts payable 5 2 3 1 2
Accrued income taxes - - - - 1
Other accruals 10 4 15 16 20
Total current liabilities 29 18 27 23 25

Long-term debt 100 86 69 56 42

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Other liabilities 12 20 20 22 23
Total liabilities 141 124 116 101 90

Shareholders' Equity
Common stock 50 50 50 50 50
Additional paid-in capital 14 15 20 22
Retained earnings (23) (17) (8) 3 16
Total shareholders' equity 27 47 57 73 88
Total liabilities and shareholders'
equity 168 171 173 174 178

  Year 1 Year 2 Year 3 Year 4 Year 5

Assets
Current Assets
Cash and cash equivalents 1.8% 2.9% 4.0% 4.6% 6.7%
Receivables 1.2% 1.2% 0.6% 1.1% 1.7%
Inventories 3.6% 4.1% 4.0% 3.4% 2.2%
Other current assets 1.2% 1.2% 1.7% 1.7% 2.2%
Total current assets 7.7% 9.4% 10.4% 10.9% 12.9%

Property, plant and equipment, net 92.3% 90.6% 89.6% 89.1% 87.1%
 
Liabilities and Shareholders'
Equity Year 1 Year 2 Year 3 Year 4 Year 5
Current Liabilities
Notes and loans payable 0.0% 0.0% 0.0% 0.0% 0.0%
Current portion of long-term debt 8.3% 7.0% 5.2% 3.4% 1.1%
Accounts payable 3.0% 1.2% 1.7% 0.6% 1.1%
Accrued income taxes 0.0% 0.0% 0.0% 0.0% 0.6%
Other accruals 6.0% 2.3% 8.7% 9.2% 11.2%
Total current liabilities 17.3% 10.5% 15.6% 13.2% 14.0%

Long-term debt 59.5% 50.3% 39.9% 32.2% 23.6%

Deferred income taxes 0.0% 0.0% 0.0% 0.0% 0.0%
Other liabilities 7.1% 11.7% 11.6% 12.6% 12.9%
Total liabilities 83.9% 72.5% 67.1% 58.0% 50.6%

Shareholders' Equity
Common stock 29.8% 29.2% 28.9% 28.7% 28.1%
Additional paid-in capital 0.0% 8.2% 8.7% 11.5% 12.4%
Retained earnings -13.5% -10.0% -4.6% 2.0% 8.8%
Total Colgate-Palmolive Company
shareholders' equity 16.3% 27.4% 33.0% 42.2% 49.3%
Total shareholders' equity 16.3% 27.4% 33.0% 42.2% 49.3%
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 Total liabilities and shareholders'
equity 100.2% 99.9% 100.1% 100.2% 99.8%

Solvency Ratios
Current ratio .45x .89x .67x .83x .92x

Operating Efficiency          
Total asset turnover 0.32 0.38 0.45 0.54
Equity turnover 1.48 1.25 1.20 1.18

Operating Profitability          
Gross Profit Margin 38.0% 41.8% 46.2% 48.7% 52.6%
Operating Profit Margin -2.0% 1.8% 9.2% 16.7% 23.2%
Net Profit Margin -45.4% -31.1% -12.2% 4.4% 16.5%

Return on Total Assets 0.6% 3.5% 7.5% 12.5%

Return on Owner's Equity or ROE -46.1% -15.2% 5.2% 19.5%

ROE DuPont Analysis          

Profit Margin -31.1% -12.2% 4.4% 16.5%
Asset Turnover 32.4% 37.8% 45.0% 54.0%
Financial Leverage 456.9% 330.8% 265.9% 218.5%
ROE -46.1% -15.2% 5.2% 19.5%
Table 9-7Authors work based on Consolidated Balance Sheets

1.11.2 Solvency Ratio Analysis

1.11.2.1 Current Ratio

The current ratio is the most frequently used ratio to calculate the liquidity of the company.

As per the company financial figures current ratio is gradually increase from .45x in 1st year
when it compares with the .92x of 5th year but company unable to maintain the current ratio at a
positive level.

1.11.3 Operating Efficiency

1.11.3.1 Total asset turnover

Total asset turnover ratio shows efficiently the assets are being utilized to generate sales.

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As per the company financial figures, efficiency assets utilization is increase gradually from 0.32
in 2nd year, 0.38 in 3rd year, 0.45 in 4th year and 0.54 in 5th year. That shows a positive sign of
future return.

1.11.3.2 Equity turnover

Equity turnover ratio shows how efficient the company is deploying equity to generate sales.

As per the company financial figures comparatively efficiency equity utilization is decrease
gradually from 1.48 in 2nd year 1.25 in 3rd year, 1.20 in 4 th year and 1.18 in 5th year. This figures
shows negative sign of equity utilization.

1.11.4 Operating Profitability

1.11.4.1 Gross Profit Margin

Gross Profit is the difference between revenue and the actual cost of making a product or
delivering a service.

As per the company financial figures gross profit margin of the company increase gradually from
38.0% in 1st year, 41.8% 2nd year, 46.2% 3rd year, 48.7% 4th year and 52.6% 5th year. That shows
a positive sign of cost effectiveness.

1.11.4.2 Operating Profit Margin

Operating income or Earnings before Interest and Tax (EBIT) margin calculates the amount of
profit on revenue after operating expenses. Operating profits can be thought of as the "bottom
line" of activities.

As per the company financial figures operating profit margin of the company increase gradually
from -2.0% 1st year, 1.8% 2nd year, 9.2% 3rd year, 16.7% 4th year and 23.2% 5th year. That shows
a positive sign of cost, administrative and financial effectiveness.

1.11.4.3 Return on Total Assets

The Return on Assets or the Return on Total Assets refers to the company's profits on all
resources invested in the sector.

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As per the company financial figures return on total assets of the company increase gradually
from 0.6% 2nd year, 3.5% 3rd year, 7.5% 4th year and 12.5% 5 th year. That shows how effectively
utilize the company assets.

1.11.4.4 Return on Owner's Equity

Return on Owner's Equity is based exclusively on the equity of the common shareholder.
Preferred dividends and minority interests are excluded from Net Profits as a priority right.
Return on equity is the rate of return received on the Common Shareholder's Capital.

As per the company financial figures return on owner's equity has increase from -46.1% 2 nd year,
-15.2% 3rd year, 5.2% 4th year and 19.5% 5th year. That shows a positive sign of effectively
utilize the Owner's Equity.

1.11.5 Growth Analysis

Growth rate is one of the most important parameters when we look at an overview of a product.
As a company grows larger and larger, its growth is stalling and approaching a sustainable
growth rate in the long term.

Total Dividends Paid 0.00 0.00 0.00 0.00 10.00

Net Income -22.7 -17.1 -7.9 3.4 15.7
Dividend Payout Ratio 0% 0% 0% 0% 64%
Retention Ratio 100% 100% 100% 100% 36%

Sustainable Growth -46.1% -15.2% 5.2% 7.1%

Table 9-8Authors work based on Growth Analysis
1.11.5.1 Sustainable Growth
The top- growth of the company is one of the most relevant metrics for both investors and
creditors in the study of ratios. It allows the investor to forecast growth in earnings and
valuations.

As per the company financial figures Sustainable Growth of has increase from -46.1%2nd year,
-15.2% 3rd year, 5.2%4th year and 7.1% 5th year. That shows a positive sign of the
company Sustainable Growth.

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 Sustainable Growth
10.0% 7.1%
5.2%

0.0%
1 2 3 4

-10.0%
-15.2%

-20.0%

-30.0%

-40.0%
-46.1%

-50.0%

Figure 9-2Authors work based on Sustainable Growth

10. Conclusion
Before beginning a business, it is very important to prepare a proper business plan and assess the
company's ability to meet its objectives. It is also clear from the study that the financial
component of the BareBeauty Cosmetics business strategy for the new manufacturing company
is a sound business strategy and has been successfully designed to help the other aspects of the
business plan.

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11. References
https://rapidbi.com/writeamissionstatement/

https://www.wallstreetmojo.com/ratio-analysis/

http://www.smusolvedassignments.com/nmims

http://us.studybay.net/cosmetics-in-china-consumer-behaviour/

https://www.marketresearchreports.com/skin-care?page=7

https://www.businesswire.com/news/home/20110424005017/en/Skin-Care-Shoppers-Dead-Sea-
Formula-Beauty

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http://www.roopsinghar.com.pk/

http://www.ecosmetics.com.br/en-us/mission-vision-and-values/

Adaptation and Translation in the Digital Heterogossia - Richard Berger - March 2005

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