Financial Aspect: I) Ii) Iii) Iv) V)
Financial Aspect: I) Ii) Iii) Iv) V)
Financial Aspect: I) Ii) Iii) Iv) V)
INTRODUCTION
A feasibility study is an investigation (i.e gathering and analysing information) into the potential outcome(viability) of
a project. This helps the investors, sponsors, shareholders and lenders to know if the project is feasible or possible. If
a feasibility study is to be useful, the techniques of data collection, evaluation and structure of the report must be
objective, valid and reliable.
A feasibility study is an evaluation and analysis of the potential of the proposed project which is based on
extensive investigation and research to give full comfort to decision makers.
Feasibility studies aim to objectively and rationally uncover the strength and weakness of an existing business
or proposed venture, opportunities and threats as presented by the environment.
This report is trying to evaluate the features of entering into soap production as a business enterprise. Soap is
one of the most commonly used chemical products in everyday endeavours. It has been produced in different forms:
liquid, powder and bar; different colours, different sizes, different textures, different quality; so as to meet with the
increasing demand for soap in the Philippines in particular and the world at large. Some soaps are mild and gentle on
the skin but tough on germs (medicated soaps), some are tough on stains and harsh to the skin (particularly detergents)
while some are gentle on the skin (toilet soap, liquid detergent etc.).
Homes, Industries, Offices, Hospitals, Hotels, e.t.c all use soap on a daily basis. Soap is very essential in
Medicine and the Pharmaceuticals where purity and cleanliness are very important. This has made the soap industry a
lucrative industry with maximum profitability and minimal risk management. With the increasing demand for soap,
there is a need for many industries to be open so as to reduce importation of a product that can be produced without
much machineries and huge finance. With as little as ₱ 20,000.00, a soap business can be established.
i) To determine the viability of the project or the project or the attractiveness of the project.
ii) To serve as a plan document indicating the series of choices or strategies for realising the
objectives of the project.
iii) It serves as a guide during the implementation of the project.
iv) It demonstrates to investors the existence of market for the product/service, the liquidity of the
project and potential revenue source for the project.
v) The report serves as a control guide to the investor with regards to product specifications and
performance.
THE PRODUCT
The final product of the project is liquid detergent and bar soap (produced either by the cold process or the hot
process). The liquid soap is canned in various transparent containers of 1litre and 2litres, while the bar soap is cut
into various shapes and sizes to satisfy
customer’s needs.
These two products are meant for both domestic and industrial uses. The Standard Organisation of the
Philippines has maximum parameter limits and these are strictly adhered to.
RAW MATERIALS
The raw materials required for soap making are listed below
The raw materials for this project can easily be purchased in almost every chemical shop.
Raw materials of proven standards can be purchased from certified chemical laboratories and
petrochemical industries.
PROJECT LOCATION
The project shall be located in Elliptical Rd, Diliman, Quezon City, Metro Manila, Quezon City has
the largest population at 2.16 million. It is sited in this area because it will be the first soap industry in this part of
the state. This location is also highly populated as a higher institution is located in this area. Many banks are located
in this area also. This location for the business is a very good one since it has access to the student’s campus and the
main market in the area. This location also makes for easy partnership with hospitals, restaurants, offices and even
the University. There is also abundant supply of both skilled and unskilled manpower for the operation of the
project. Getting sales personnel is also very easy because of the high level of unemployment in the area.
PROJECT PROMOTER
In association with Soap King Inc., this project is to be funded by the Securities and Exchange Commission
(SEC).
COST OF PROJECT
This project which is a small-scale project will cost about ₱11,795,000.00 (eleven million, seven
hundred and ninety-five thousand pesos only). Soap King Inc., contributed ₱795,000.00, while the Securities
and Exchange Commission (SEC) contributed ₱11M to the completion of this project.
1. Chips Making Machine: This is used to make chips of soap bars. It is necessary to convert soap bars to
chips for proper drying.
2. Mixer Machine: Soap mixer machine is used for mixing all the additives with raw soap and makes a hard
paste form.
3. Roller Machine: Soap roller machine is used for rolling soap for better mixing process of all raw materials as
well as some more shinning of final soap. After the soap rolling process, output soap will be in thin ribbon
form.
4. Vacuum Duplex Plodder Machine: The plodder is used for the compression of soap. The final output will
be in bar form.
5. Circular Bar Cutting Machine: This is used for cutting of soap bars automatically.
6. Stamping Machine: Soap stamping process gives the exact shape and size of final soap. The final stamped
soap will be fine finished with the required shape, size and brand name as per customers need. Finally, soap
will be ready for packing.
7. Measurement Instruments: These include pH meter, photometers of various types. Measuring cylinders
to measure the quantities required are also needed.
8. Thermometer.
9. Canning Machine
QUALITY CONTROL
This product may likely be exported, so, efforts shall be made to meet the internationally accepted standards
with regards to scent, effect on skin, impurities, and thickness. To achieve this, testing kits shall be purchased and a
mini-quality control laboratory shall be established. This entails employing a quality control officer that will be in
charge of the mini laboratory. Also, independent quality control laboratories certified by the right body, shall be used to
analyse products to obtain an objective quality certificate of analysis.
Raw materials, the manufacturing process and the finished product shall undergo series of test to ensure the
safety of the customers. The most important test is the test to ensure the product is not carcinogenic and eco-friendly
raw materials are used in the manufacturing and packaging process.
MARKETING OF PRODUCT
1. The products (liquid detergent & bar soap) shall be sold directly to buyers at the project site.
2. Sales outlets shall be opened in Baesa Industrial Compound, Lot 4, First Metro, 125 Quirino Hwy, Quezon
City, 1106 Metro Manila to enhance easier contact with the customers.
3. The distributor system shall also be employed
4. Continuous effort shall be made to secure international market for the product
5. The sales force shall be headed by an experienced marketing manager assisted by a team of enthusiastic
salesmen.
The products shall be continuously advertised in both local and national newspapers, and other printed media.
Electronic media such as radio and television both at the local and the national levels shall be extensively used
topublicise the product. The company shall also engage in shows promotions to advertise the product.
PRICING SYSTEM
Because of the price influence of raw materials, market demand and the volume of importation, the
factory prices for the products are listed below.
The price of raw materials at the time of this report was investigated was ₱600,000.00 but the project is based on
N0.5m, to account for any upward rise in price.
PRODUCTION TURNOVER
The project shall run in a single shift (8.00am-6.00pm) system with a minimum production of 1,500 litres
daily for liquid soap. By working for 24days in a month including Saturdays, a minimum of 36,000 litres of liquid
soap shall be produced in a month.
For the bar soap, a minimum of 1000 bars of 0.12kg and 0.10kg will be produced daily and by working for
24days, 24,000 pieces will be produced.
As demand of the product increases, the company shall improve on its turnover and two or three shift system
shall be employed.
PRODUCTION CALCULATION
75% of the raw materials is realized as the finished product. The percentage recovery may be more
depending on the efficiency of the machines.
If the cost of raw materials to produce 1litre of liquid soap is ₱140.00, Therefore 1,500
= ₱180,000
= ₱120,000.00
= 24 × ₱120,000.00
= ₱2,880,000.00
=₱20,000.00
If one bar is sold for N40, 1000 bars = 1000 × ₱40.00= ₱40,000.00 For one
= ₱20,000.00
Therefore, for 24 working days in a month, including Saturdays, Gross Profit
= ₱20,000.00 × 24
= ₱480,000.00
MANAGEMENT STRUCTURE
This project shall be managed by Soap King Inc. and the Securities and Exchange Commission (SEC).
Specialized management personnel would be provided by SKI and SEC while the bulk of labour will be provided by
the community. In order to avoid conflict in areas of employment, management of funds and operations, a
memorandum of understanding shall be entered into by the project financer- SKI and SEC.
LIMITING FACTORS
Here, it is important to highlight some of the practically experienced and envisaged factors that may
occasionally have a relative impact on the project. Some of these factors are listed below.
1. Competition from other soap industries already in existence. However, the project shall handle this situation
by producing at the lowest possible price and constantly being abreast with marketing information so as to
respond to market fluctuations through appropriate adjustment of prices. This problem of competition shall
also be resolved by constantly rebranding the product, constantly improving on the quality and through
adequate advertisement.
2. Variations in the raw materials supplied. This could be due to ban on importation of the raw materials as a
result of failing quality tests or as a result of transportation problems making the raw materials not to get to the
manufacturers on time. This project shall solve this problem of variations in the availability of raw materials
by bulk buying and proper storage of the raw materials
3. Price variation of the finished product. There is always price variation for finished goods which may be as a
result of government policies or a new company entering into production. One cannot sell a product below its
production cost. Therefore, this project shall anticipate and forecast any price variation and then make
adjustments before the forecast materialize.
4. Power problem. Because of the large output, machines are required for production and these machines are
electrically operated. Electricity supply in this area is poor so this project shall acquire generator in case of
power failure.
5. Taxation. As the income is increasing, government taxation increases. This company will ensure it hires
good tax consultants to deal with the issues of heavy taxation.
6. Natural calamities. In this part of the nation, the predominant natural calamity is flooding. To ensure that this
does not occur, this project has been set on a highland and should in case it happens, the company is to be
insured by a good insurance company.
RISK ANALYSIS
From the limiting factors analysed, it is clear without reasonable doubt that the risk factors are at a
minimal level. Thus, this project has about 89% chances of success if embarked upon.
From the above analysis and subsequent computation, it is very clear without reasonable doubt that soap
production for both domestic and industrial uses is a very possible and viable project. Quezon City, Philippines is a
perfect location for this project because of access to various parts of the state and nearness to other Urban Cities.
This project being partly funded by Soap King Inc., This project in Quezon City is also very close to where raw
materials are easily purchased. The community is willing to contribute her quota in terms of a favourable working
environment for the project.
This feasibility report is based on practical experience of the management firm that wrote it. This firm has been
practically involved in similar projects from the stage of acquiring raw materials up to the stage of marketing and
distribution. These products are already being sold all over the country especially in Quezon City. The facts and
figures presented in this report are therefore very practical and authentic. This project is bound to succeed greatly if
established.
COST ESTIMATE
PRELIMINARY EXPENSES
Total ₱395,000
This preliminary expenses of N395,000.00 (three hundred and ninety-five thousand naira only) was spent by Delsu
Investment Limited.
FINANCIAL STRUCTURE
FUNDING OF INVESTMENT
₱11,795,000.00
LABOUR COST
If the cost of raw materials to produce 1litre of liquid soap is ₱140.00, Therefore 1,500
= ₱210,000
= ₱ 1,761,500.00
PROJECTED YEARLY TURNOVER AND PROFIT MARGIN
At the production capacity of 1,500 litres per day and 36,000litres per 24 working days in a month will yield
432,000 litres per annum.
Thus, the project of liquid soap can make an annual profit of close to ₱13,000,000.00
At the production of 1,000 bars of soap per day, 24,000 bars will be produced per month and 288,000
bars per annum.