Fiberglass Reinforcing Business Plan

* The calculations use the average data for the World

1. SUMMARY OF THE PROJECT

The goal of the project is the organization of an enterprise manufacturing fiberglass reinforcement. Location - pos. Reconstructor of the Rostov region. Sales are carried out directly to construction and installation organizations, as well as wholesale bases of building materials.

Production is located on leased premises, equipment is acquired. The production technology is transferred along with the equipment by its supplier. The project is notable for its high profitability and medium risk, which is associated primarily with the relative novelty of the product for the Russian market. In addition, the high profitability of the business is ensured by the simplicity of the manufacturing technology of this product.

Integral performance indicators of the project make it possible to judge its high investment attractiveness (Table 1).

Table 1. Integrated project performance indicators

Discount rate (r), %

ten%

Discount rate (r-month), %

0.797%

Payback period (PP), months

17

Discount payback period (DPP), months

17

Net present value (NPV), rub.

17 540 595

Return on Investment (ARR), %

13.59%

Internal rate of return (IRR), %

9.06%

Profitability Index (PI)

5.27

2. COMPANY DESCRIPTION AND INDUSTRY

Armature is one of the most used materials in construction. It is used to reinforce concrete building parts and structures. Concrete structures reinforced with reinforcement are called reinforced concrete. Historically, steel reinforcement has been used for this, the production of which is quite material- and capital-intensive. At the same time, it has a number of weaknesses: corrosion resistance, high mass, etc. Fiberglass reinforcement is a modern alternative - it is much lighter, not subject to negative environmental influences, and the cost of its production is minimal.

The production, in order to reduce the cost of renting the premises, is located within 10 km from the city of Rostov-on-Don, in the village. Reconstructor. Sales region - Rostov region. Given the fact of stable growth in construction volumes, even in the face of difficult economic conditions, the sales market for valves is very wide. According to Rostovstat, in 2015, more than 575, 000 m2 of housing was commissioned in the Rostov Region, which is 13% more than in 2014. 52% of this volume is in individual housing construction. Industrial construction and the construction of public buildings do not show such growth rates, but the volume of construction is stable.

Widespread today, the technology of frame-monolithic construction involves the use of reinforcement in large volumes. Thus, the main sales channel is the supply of material directly to construction sites by agreement with the construction and installation organization performing concrete work. In addition, about 10% of the total volume is planned to be sold through building materials databases, where private individuals can purchase them for individual construction.

The level of competition in the segment is quite high. In addition, this type of product does not have pronounced consumer properties; there are analogues and substitutes on the market. The most commonly used traditional steel reinforcement, it accounts for at least 70% of the market. Nevertheless, due to the high-quality processing of the regional market, one can go beyond the remaining 30% attributable to fiberglass, thus expanding the boundaries of the market.

To achieve the targets for revenue, an enterprise must have partnerships with a number of construction organizations. At the moment, the owner of the enterprise has established relations with a number of design and construction organizations, which, according to preliminary estimates, can guarantee sales of up to 50% of the planned volume of production of valves. To ensure the required level of sales, the company’s staff includes two sales representatives who are constantly processing the market, searching for objects and partners.

The project is not limited in time, but strategic planning is carried out for a five-year period. According to the owner’s main vision, according to the results of five years of work, the enterprise’s market share should be at least 10% of the volume of fiberglass reinforcement and at least 3% of the total regional market.

An appropriate legal form for this enterprise is an individual entrepreneur. Based on the results of comparing various options, a simplified taxation system with the object “income minus expenses” was chosen. The amount of required investment costs is 3.33 million rubles, a significant share of which is the acquisition of equipment and the formation of working capital until the return on payback. Also, an initial purchase of raw materials worth 1.5 million rubles is expected.

Table 2. Investment costs

NAME

AMOUNT, rub.

The property

one

Production facility preparation

30, 000

Equipment

2

Set of equipment

670, 000

Intangible assets

3

Production technology

300, 000

four

Certificate of conformity

30, 000

Current assets

five

Current assets

800, 000

6

Primary procurement of raw materials

1, 500, 000

Total:

3 330 000 ₽

Own funds:

1 000 000, 00 ₽

Required borrowed funds:

2 330 000 ₽

Rate:

18.00%

Duration, months:

24

The owner invests 1.0 million of own funds in the project, the remaining funds are planned to be attracted in the form of a bank loan for a period of 24 months at 18% per annum. Repayment is carried out by annuity payments, credit holidays - three months.

3. DESCRIPTION OF GOODS

The only products of this production are fiberglass reinforcement of various sections - 4, 6, 8 and 10 mm. The supplier of equipment for its production also transfers certificates and test results for products manufactured using the proposed technology. Fiberglass reinforcement is characterized by: low specific gravity, resistance to aggressive environments, low thermal conductivity and lower modulus of elasticity.

In appearance, the reinforcement is a bar of periodic section, similar to steel reinforcement. According to research results, fiberglass reinforcement can be used:

- for reinforcing concrete structures both independently and together with metal reinforcement;

- in reinforced structures used in aggressive environments that cause corrosion of steel reinforcement;

- when repairing reinforced concrete structures damaged by aggressive media;

- for thin-walled structures in which it is impossible to provide the necessary thickness of the protective layer;

- in concrete with a high content of active mineral additives;

- in monolithic concrete when making frost-resistant chloride additives;

- in porous and porous concretes;

- for reinforcing masonry, primarily with the introduction of anti-frost additives.

Thus, we can conclude that the scope of fiberglass reinforcement is even wider than steel. It can be used both with rods and nets with ligation with polymer thread and processing of knots with epoxy resin.

Table 3. Comparative characteristics of metal and fiberglass reinforcement

No.

Characteristic

Steel 35GS, 25GS, etc.

Non-metal (fiberglass "fittings

one

Tensile strength, MPa

360

1200

2

Modulus of elasticity, MPa

200, 000

55, 000

3

Relative extension, %

25

2.2

four

Density, t / m3

7

1.9

five

Corrosion resistance to aggressive environments

Corrodes with the release of rust products

Corrosion-proof material of the first group of chemical resistance

6

Thermal conductivity

Heat conductive

Non-conductive

7

Electrical conductivity

Conductive

Non-conductive - dielectric

eight

The released profile, mm

6-80

4-20

9

Length m

6-12

Any length on demand

According to the physical and mechanical characteristics, it is allowed to reduce the profile of fiberglass reinforcement compared to metal by 1 size step: the diameter of 6 mm of a metal bar can be replaced with a diameter of 4 fiberglass, etc. This has a significant positive effect on the cost of the finished concrete structure.

For the production of fiberglass reinforcement, two main components are used: glass roving and compound as a binder. The type of roving is selected depending on the environment and the conditions in which the concrete structure will be used. The cost of this raw material forms the production cost of the reinforcement. Variable costs per unit of production are given in Table. four.

Table 4. Variable costs and formation of sales prices

GOODS / SERVICES

COSTS UNITS, rub.

TRADING VALUE, %

UNIT COST, rub .

one

ASP-4

3

230%

eight

2

ASP-6

6

120%

13

3

ASP-8

ten

90%

18

four

ASP-10

15

60%

24

Total:

64 ₽

The company's products are supplied in bays - for small diameters and rods for large ones. A specification with basic technical characteristics is attached to each batch, as well as a copy of the certificate of conformity.

An important point is the need to use personal protective equipment when working with fiberglass reinforcement to prevent glass dust from entering the skin and respiratory system.

4. SALES AND MARKETING

The main sales channel is direct supply of material to the construction sites of the city and the region (90% of sales). Secondary - retail sales through building materials databases (10% of sales).

This niche is not diversified by price; competitors' prices are approximately at the same level. Physicomechanical properties also practically do not differ. Therefore, it is necessary to provide the necessary additional service, as well as flexible terms of delivery and payment. Also important are the connections within this market, partnerships with its participants.

Personal ties of the owner of the enterprise with construction and installation organizations in the region, developed over many years, can provide from 40 to 50% of the planned sales. The remaining sales are carried out by sales representatives of the company, processing the markets of civil, industrial and road construction. For such products, project sales are important, in which each construction object is processed from all possible sides. Work is underway with:

- design organizations;

- construction organizations (general contractor);

- installation organizations (subcontractors).

To provide additional service, a technical specialist is introduced into the company’s staff, who can, at the request of the designer or contractor, calculate and provide a technical justification for replacing non-metallic steel reinforcement.

Direct shipment is carried out by a sales specialist who issues invoices, monitors their payment and compliance with the agreed payment terms. Transportation of goods is carried out by the customer, or with the involvement of a transport company.

Competition in this segment is quite high. An analysis of open sources shows the presence of more than 70 organizations at the request of “Fittings Rostov” and about 20 at the request of “Fittings fiberglass Rostov”. Direct competitors can be considered organizations that implement both types of reinforcement. However, they have a different approach to marketing.

Steel rebar suppliers typically offer a wide range of other steel building materials and structures. Often these are large factories or trading companies. Due to the integrated supply, they are able to conclude profitable contracts. The work is carried out mainly with representatives of the supply departments. Suppliers of non-metallic fittings are small businesses specializing in the production of one type of product. Neither the first nor the second, as a rule, conduct serious design work. For this reason, to ensure maximum competitiveness, the concentration of the company's specialists on it is required.

Particular attention should be paid to industrial facilities with the presence of chemically aggressive industries. In some cases, large specialized design and construction organizations from other regions are involved in the construction of such projects. Work is also being conducted with them, for which business trips of sales representatives and a technical specialist are organized.

Demand has a pronounced seasonality, coinciding with the general construction seasonality. Peaks occur in the spring and the end of summer - the beginning of autumn.

The organization’s pricing policy is regulated by the market, and is at the mid-market level. At the same time, the recommendations of the equipment supplier with experience in the development of such business projects are taken into account. However, a flexible discount policy is provided depending on the volume of purchases, as well as on the status and importance of the construction site. Cash discount is also provided for full prepayment.

For passive promotion of goods, placement is used in the printed and online catalogs of the region with periodic priority allocation of the advertising module - immediately before the start of the construction season and during it. Advertising costs are calculated averaged by year for each month.

5. PRODUCTION PLAN

Equipment is purchased from its direct manufacturer, which has extensive knowledge in the production and marketing of non-metallic fittings. Production equipment is also acquired with a set of equipment. If there are several proposals for equipment on the market, the choice is due to the broadest warranty and service support program, as well as the quality of the equipment, even at a slightly higher cost of equipment.

At the conclusion of the supply agreement to the equipment manufacturer, an advance payment of 20% is made, the remaining amount is transferred upon delivery of the equipment. Delivery time is 7 calendar days. The manufacturer carries out installation and configuration of equipment, as well as conducts training of personnel at the workplace. This stage also takes about 7 calendar days. The required dimensions of the production premises are 15x5 m (75 m2). There are no special room requirements.

The line capacity (in two bars) is about 10, 000 m of ASP-6 fittings for an 8-hour shift. As the bar diameter increases, productivity decreases proportionally. The advantage of the purchased equipment is the possibility of round-the-clock operation, as well as the possibility of reconfiguring the diameter of the bar without stopping the line.

In parallel with the training phase, the purchase of the first batch of raw materials for production takes place. The main components are: glass roving (thread) and a binder (epoxy resin, hardener, catalyst, plasticizer). The supplier of raw materials is selected on the basis of the best ratio of price and quality, while the convenience and cost of logistics plays an important role.

The production line allows the production of two reinforcing bars simultaneously. Two operators are required to service the line. To carry out auxiliary work - control of winding coils, transportation to a warehouse, moving goods in a warehouse - an auxiliary worker is present in the staff.

Production is planned in accordance with the sales plan, seasonality. Also, given the possibility of a trouble-free reconfiguration of the line, it is possible to produce a certain volume of products to order if urgent equipment is required.

A detailed production plan is given in Appendix 1.

6. ORGANIZATIONAL PLAN

Management of the enterprise is carried out directly by the owner. The owner has experience in the building materials market, has established relationships with market participants; has business experience.

The organizational chart of the enterprise is shown in Fig. 1. The staffing of the enterprise is reflected in Table. five.

Figure 1. The organizational chart of the enterprise

Table 5. Staffing and payroll

Position

Salary, RUB

Number of people

PHOT, RUB

Administrative

one

Accountant

25, 000

one

25, 000

Industrial

2

Line operator

25, 000

2

50, 000

3

Technical Specialist

27, 000

one

27, 000

Trade

four

Sales Manager

25, 000

one

25, 000

five

Sales Representative

30, 000

2

60, 000

Auxiliary

6

Maintenance worker

20, 000

one

20, 000

Total:

₽ 207, 000.00

Social Security contributions:

62 100, 00 ₽

Total deductions:

269 ​​100, 00 ₽

The senior production operator is responsible for adhering to production technology and industrial safety. In his submission is the operator of the production line and the auxiliary worker. The remaining employees are directly subordinate to the individual entrepreneur.

Sales representatives provide the head with a report on the work done and planned measures for processing the market. Events are agreed and approved. Requirements for sales representatives when hiring - experience in the field of trade in building materials for at least 3 years.

Requirements for a technical specialist - the presence of secondary specialized or higher building education, work experience in the specialty for at least 1 year.

7. FINANCIAL PLAN

The financial plan is calculated on the basis of all basic costs and planned revenues. The financial plan is calculated for a five-year perspective. The achievement of the planned revenue is planned for the second year of the project, from the beginning of the peak of the construction season.

A full statement of cash flows is provided in Appendix 2. Monthly fixed costs are shown in Table. 6. Revenues are determined on the basis of the planned production volume at 5 working days a week and an 8-hour shift.

Table 6. Fixed costs of the enterprise

NAME

AMOUNT PER MONTH., Rub.

one

Rent

10, 000

2

Advertising

50, 000

3

Communal payments

5, 000

four

Telephony and Internet

10, 000

five

Depreciation

16 500

6

Selling expenses

20, 000

7

Management expenses

10, 000

Total:

121 500 ₽

8. EVALUATION OF EFFICIENCY

Evaluation of the effectiveness of the project is carried out on the basis of the calculation of integrated performance indicators adopted in global practice. To account for the future value of invested funds, the discount rate used for this project at the level of 10% is used, since the product and technologies are known and are not, in fact, innovative; the market is also sufficiently explored and not subject to sharp fluctuations.

The calculated integral indicators of the project are given in Table. 1. Their analysis shows the high investment attractiveness of the project. The payback period of the project is 17 months, and the net profit for five years will amount to 26.4 million rubles.

9. RISKS AND WARRANTIES

The main risks associated with the implementation of the project include:

- decrease in construction volumes;

- rise in price of raw materials;

- failure to fulfill the sales plan.

The first two factors are not subject to regulation by the enterprise. It is only possible to conclude a long-term contract with the supplier indicating the conditions for fixing the price for a certain period.

Failure to fulfill the sales plan has a low probability of implementation, since the sale of the bulk of the products is, in fact, guaranteed. However, the creation of a reserve fund of the enterprise should be envisaged, as well as considerable attention should be paid to the selection of sales representatives.

Table 7. SWOT analysis of the project

S

W

- The presence of relations and partnerships in the construction market

- High quality products due to high-quality equipment and raw materials, as well as adherence to technology

- Conducting systematic design work on construction projects in the region

- New enterprise

- Lack of a formed customer base

O

T

- Work with the most interesting and targeted projects for this type of reinforcement (aggressive environments)

- Establishing partnerships with key players in the regional construction market

- Increase in production without the need to modernize the equipment park

- Reaching planned sales will take longer

10. APPLICATIONS

08/18/2019

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