“BUSINESS PLAN GUIDE FOR AN ONLINE HERBAL POWDER SMALL SCALE

ENTERPRISE”

By
Group 9
120- Aakriti Dua
121- Himanshu Ghai
122-Puneet Kochhar
123-Siddharth Upadhyay
124- Manav Sachdeva
125-Pallavi Sethi
12- Smriti Tiwari

LAL BAHADUR SHASTRI INSTITUTE OF MANAGEMENT, DELHI

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 ACKNOWLEDGEMENT

In performing our assignment, we had to take the help and guideline of some respected
persons, who deserve our greatest gratitude. The completion of this assignment gives us
much pleasure. We would like to show our gratitude Mr. Hitesh Manocha for giving us a
good guideline for assignment throughout numerous consultations. We would also like to
expand our deepest gratitude to all those who have directly and indirectly guided us in
writing this assignment. Many people, especially our classmates and team members itself,
have made valuable comment suggestions on this proposal which gave us an inspiration to
improve our assignment. We thank all the people for their help directly and indirectly to
complete our assignment.

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Table of Contents

S. No. Key Contents Page No.

1. Executive Summary 4

3. About the Organisation- Vision and Mission, Offering, Product 5

Range

4. About the product 7

5. Industry Analysis 8

6. Major Players in the Industry 11

7. SWOT Analysis 13

8. Industry Trends 14

9. Market Growth Drivers 15

10. Competitive Analysis 16

11. Porter’s Five Force Analysis 18

12. PESTEL Framework 20

13. Competitive Advantage 21

14. Strategic Posture 22

15. Digital Marketing Strategy to boost sales and build brand image 23

16. Financial Projections 24

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 Executive Summary
The aim of the project is to devise a business plan guideline for a small scale
online enterprise that is in the business of herbal powder sales and production
and further propose the best strategic posture in order to enter the herbal
products market by conducting the external, industry and competitive analysis
using tools namely- Porter’s five force analysis, PESTEL, SWOT, value chain
analysis, identifying competitive advantages and carrying out financial analysis
and future projections for estimating growth prospects of the enterprise.

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 About the Organisation

Mission
Roman Chamomile envisions itself as a company that is dedicated to humanity’s quest for
longer, healthier, happier lives with competence to offer only the best with the products they
craft and modernization of Herbal Medicine.

Vision
The company’s vision is to take Ayurveda to a global level and establish it as the best in the
field.

Roman Chamomile LLP was registered on 12 December 2018, it offers various herbal
powders under the brand name BASIL BOTANICS, and it wishes to enter the beauty segment
as well.
The company doesn’t have own a farm or production factory , it buys herbal powders from a
number of contract manufacturers. Since all herbal leaves are not grown at one place, the
company ships these leaves from different states.
The company has made sure that these leaves are organically cultivated and there are no
artificial element involved in processing and packaging of the product. Roman Chamomile
LLP is only involved in marketing and packaging of the powders. So far the company only
sells its product online only through its website and Amazon only.
The company has opted for the AMAZON FBA membership so that it can gain the customers
trust.
As part of our project we were advised to take a SME and Roman Chamomile presents itself
as a perfect option
Herbal Powders offered by Roman Chamomile:
1. Amla Powder
2. Indigo Powder
3. Brahmi Powder
4. Licorice Root Powder
5. Rose Petal Powder
6. Hibiscus Powder (Rosa Sinesis)
7. Reetha Powder
8. Shikakai Powder
9. Neem Lead Powder

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 10. Hibiscus Sabadriffa Powder
11. Bhringraj Powder
For the purpose of the project we have only taken a single Herbal powder for now and
projections has been done only on that and not on the whole business unit.
As for the strategy part, it’ll be applicable to the whole business.
Few things that needs to be keep in mind is that the company doesn’t have a huge capital
backing. So for the sake of the project we have assumed that the company takes loan under
Pradhan Mantri Mudra Yojna and a loan schedule for the same has been made.

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 ABOUT THE PRODUCT

Product Name – Basil Botanicas Brahmi Powder

ITS UNIQUE SELLING POINT (USP)

❖ The product is Raw, pure and 100% natural, it is organically grown and harvested on
the finest organic farms in India.
❖ It is free from GMO (genetically modified organism), gluten, and artificial
ingredients, and is naturally healthy and suitable for both vegetarians and vegans.

BENEFITS
❖ HIGH POTENCY AYURVEDIC HERB: Used in ancient Indian medicines for centuries,
Brahmi Powder is a powerful medicine herb believed to support memory function,
improve concentration and mind clarity, relieve stress, and encourage a balanced
emotional state.
❖ PROMOTES HEALTHY SKIN & HAIR: In addition to its medicinal benefits, organic
Brahmi powder nourishes the scalp to strengthen hair follicles, encourage hair
growth, and may help prevent hair loss. It also aids skin cell regeneration and treats
common skin condition.

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 Industry Analysis

Herbal Skin Care Products

Introduction – Skin Care

The global skin care products market size was valued at 134.8 billion in 2018 and is
projected to expand at a CAGR of 4.4% from 2019 to 2025 on account of the rapidly
expanding global cosmetics industry. Escalating demand for face creams, sunscreens, and
body lotions across the globe is expected to have a positive impact on the market over the
forecast period. Moreover, the growing e-commerce sector is anticipated to boost the
market growth further. Technological and product innovations have led to an increased
demand for skincare products.
There is a wide variety of products available on the market including sunscreens, anti-aging
creams, body lotions, and skin brightening creams. Rising awareness regarding the various
benefits of using personal care products has resulted in a rise in their demand over the last
few years. This has also boosted the demand for natural and organic skincare products,
making it a major sector in the cosmetics and wellness industry. Organic products are
derived from natural resources and are free from harmful chemicals. Growing awareness
regarding the adverse effects of synthetic counterparts has contributed to an increase in the
demand for these products.
India skin care market stood at $ 1.6 billion in 2017 and is projected to grow at a CAGR of 9%
to reach $ 2.7 billion by 2023, on the back of rising disposable income, increasing demand
for skin care products across all age groups, especially young population, and growing
awareness among consumers about various skin care products. Moreover, rising number of
working women is leading to higher demand for personal care product. Emergence of online
brands such as Nykaa and Purplle along with increasing internet users is resulting in growing
presence of online retail in the country’s skin care market.

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Introduction – Herbal Skin Care
Herbal cosmetics are formulated using different herbal ingredients to form the base. One or
more ingredients are added to this base to develop a range of products which can be used
to cure various skin ailments. Herbal cosmetics are free from chemical ingredients, which
can be toxic for the skin. Herbal cosmetics are considered to be safer than those with
chemical ingredients. Many naturally available herbs are used to manufacture skincare, hair
care, and baby care products. Demand for herbal products is increasing at a rapid across the
world.

Rise in standard of living of consumers and boom in the e-commerce industry are increasing
the reach of herbal cosmetics to the customers. Ingredients such as coconut oil, sunflower
oil, jojoba oil, olive oil, heena, and neem are used to manufacture herbal cosmetics. Use of
these antiseptic and anti-oxidant rich ingredients to manufacture herbal cosmetics drives
the market. The supply of raw material used to prepare cosmetics is limited and costly. This
is likely to hamper the herbal cosmetics market during the forecast period. Presently, herbal
medicines are used for the treatment of skin and hair problems. These medicines have less
side effects and are cost-efficient. Increase in trend of using herbal medicines with natural
ingredients is projected to create opportunities in the herbal cosmetics market during the
forecast period.

The global herbal cosmetics market can be segmented based on product, distribution,
physical state, and region. In terms of product type, the global herbal cosmetics market can
be segregated into skincare, hair care, oral care, baby care, make-up products. Based on
distribution channel, the herbal cosmetics market is divided into supermarket, departmental
stores, salon and spa, pharmacy, concept stores, pharmacy, and e-commerce websites. In
terms of physical state, the herbal cosmetics market can be categorized into solid, semi-
solid, and liquid.

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The Global Herbal Skincare Products Market is projected to grow with a significant growth
rate of 5.6% from 2019 to 2024 and reach a market value of USD 2.31 billion by the end of
2024. Environmental factors such as pollution and harmful UV rays of the sun lead to
symptoms of quick aging, skin dryness, and allergies, among others. Growing health
consciousness and the importance of maintaining physical appearance are further driving
the demand for herbal skin care products globally. However, the growing number of
counterfeit products and private labels are expected to hinder the overall herbal skincare
products market growth during the forecast period.

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Major Players in Herbal Skin Care Products

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 Indirect Competitors:
Indirect competition, also known as substitutes, is when two or more businesses offer
different products or services and compete for the same market to satisfy the same
customer need.

Dabur Herbal Products – Dabur Chyawanprash (Immunity Booster), Fairness Natural Gold
Bleach (Skin Fairness enhancer), Dabur Gulabi Rose Powder (Skin toner), Dabur Amla Hair
Oil (Hair Growth and strengthen)
Patanjali Herbal Products – Patanjali saundarya aloe vera gel (for glowing skin), Patanjali
kesh kanti oil (hair growth and strengthen), Patanjali Chyawanprash (Immunity Booster),
Patanjali rose water (for skin glow)
Himalaya Herbal Products – Himalaya Ashvagandha (for wellness), Himalaya complete
care toothpaste (for better gums and teeth), Himalaya Neem and Turmeric Soap (for better
skin), Himalaya Anti dandruff shampoo (for healthy hairs)
Baidyanath Herbal Products – Baidyanath Neem oil (for health hairs), Baidyanath Aloe
vera Shampoo (for better hairs), Baidyanath Ananta Salsa Syrup (for glowing skin),
Baidyanath dant manjan (for healthy teeth)
Hamdard Herbal Products – Hamdard Arq gulab (for healthy skin), Hamdard Imyoton
(Immunity Booster), Hamdard Almond Oil (Relieves tension), Hamdard Safi (for healthy
skin)

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 SWOT ANALYSIS

STRENGTH WEAKNESS

• The products are inherently safe. • Patent issues

• Strong community base to provide • Available online in the initial years
consistent supply of herbal products
• Information available in various
traditional manuscripts

OPPORTUNITY THREAT

• Creation of employment • Poor government regulations and

• Consumers are moving towards healthier management
lifestyle • Competitive pressure (Global and
• International programmes are recognizing Local)
and supporting use of herbal products • Increasing pressure to provide
scientific evidence that supports
quality, safety and efficacy

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 Industry Trends – Herbal Skin Care

• Rising Herbal Personal Care Sales:

Demand for natural, herbal and Ayurvedic
products was on the rise in 2015 due to
launch of a number of new products and
variants backed by strong promotional
campaigns carried out by top players in the
industry to tap into the potential of natural,
herbal and Ayurvedic products.

• Industry Dominated by International Brands

the Indian beauty and personal care sales
were dominated by international players
with diverse product portfolios catering to
the mass customer segment with good
distribution channels. The domestic players
managed to do well by launching new
products with aggressive marketing
campaigns

• Demand Expected to Remain Strong

The beauty and personal care market in India has huge growth potential as a large
number of products still have only limited penetration in the country. The demand
will be driven by a number of factors, including rising disposable incomes, increasing
product penetration, the growth of modern retailers, increasing awareness of beauty
and personal care products, the rising aspirations of consumers, and strong
economic growth. As a result, overall beauty and personal care constant value
growth over the forecast period is expected to be higher than during the review
period.

• Grocers Remain Preferred Distribution Channel

Independent small grocers remain the primary channel for sales of beauty and
personal care products in India due to the fact that products such as bar soaps, body
lotions, shampoos and hair oils tend to be purchased within smaller neighborhood
independent grocery stores. However, while internet retailers, beauty specialist
retailers and modern grocery retailers currently have smaller sales shares, they are
rapidly growing in popularity and recording strong sales growth

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 Market Growth Drivers

Organic skin care products are gaining fast traction in the

Indian markets as well as APAC region, with notable brands
making a beeline into the segment.
Rising concerns for health, safety, increasing go green
consciousness and growing consumer awareness towards
hazards of synthetic chemicals has fuelled the demand for
organic personal care products in these regions. With the
emergence of a young urban elite population, rising
disposable incomes and increase in working women looking for lifestyle- oriented and luxury
products, the market for organic skin care is expected to grow as more people shun
chemical products in favour of organic ones.
Driven by the increasing awareness towards beauty & wellness, and rapidly changing life-
style, herbal beauty sector is one of the fastest growing segment in the global personal
beauty product industry. Organic living is seen as an established trend in developed
countries and the concept is fast catching up in India with consumers opting for organic
products for daily life. The trend of 'Go Organic' or 'Live Organic' is catching up in the
skincare segment too.

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 Competitive Analysis

The identification of the firms that provide the same services as our company, is the most
essential aspect of this research as it paves the way for the most suitable strategy required
to position the company in the market. Our competitors can be segmented on the basis of
the following aspects:

Demographic Segmentation:
Demographically, the main focus will be on primarily young girls and women belonging to
middle or higher section of the society.

Product Category: Product Category: Product Category:

Body Care, Hair Care, Skin Care and Hair Skin Care, Make Up &
Skin Care, Make Up & Care Cosmetics
Fragrances Speciality: Speciality:
Speciality: Skin Facials, Body Lotions, Skin
Body Butters, Born Pigmentation, Anti- Toners, Face Washes
Lippy Gloss & Hemp Acne etc & Hair Serums etc
Hand Protector

Geographic Segmentation:
Geographically, our primary focus will include Delhi NCR region. Based on our target
region, our closest competitors are:

Product Categories: Body Care, Hair Care & Skin

Care

Speciality: Skin Cleansers, Fruit Skin Scrubs, Body

Lotion, Anti-Acne Cream

Product Categories: Skin care, Hair Care, Body

Care, Make Up & Lip Care

Speciality: Sunscreen Lotions, Scrubs, Moisturizers,

Lip Balms & Shampoos
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Psychographic Segmentation:
Our primary focus will be young girls and women who prefer herbal beauty products over the
chemicals, women who care about nature and mother earth. Based on these aspects are closest
competitors are:

Product Category: Skin care, Hair Care, Bath and body

care.

Specialities: Skin Toners, Hair Vitalizer, Bath Oils, Beauty

Elixir, Body Lotions etc

Product Category: Bath & Body Care, Hair Care & Skin
Care

Specialities: Fruit face wash, Hair Oil, Shampoo & Gels

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 PORTER’S FIVE FORCE MODEL

THREAT ENTRY: LOW

• No Barrier for new entry

• Huge growth
opportunities in herbal
beauty industry
• Initial Capital investment
is Huge

SUPPLIER BARGAINING POWER: RIVALRY: HIGH BUYER BARGAINING POWER:

HIGH
LOW • Stiff Competition
• FDI in B2C can fuel up the • Multiple Options to
• Large number of suppliers
competition choose from
• Large supply of diverse
• Low switching cost
products
• Price information easily
available

THREAT SUBSTITUTE: HIGH

• Lot of Alternatives
available
• Low switching cost for
the buyer

Threat of New Entrants

We can see that Herbal Beauty product industry has a LOW threat to new entrants due to
huge cost of entry. Developing unique beauty products require a lot of resources both in
terms of research and development and the actual manufacturing process. Another factor
which discourages entry into this industry is huge competition present in the industry.

Bargaining Power of Customers

The herbal beauty industry has a HIGH bargaining power of customers due to increase in
competition and availability of herbal beauty products from a variety of manufacturers.

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Bargaining Power of Suppliers
The herbal beauty products industry has a LOW bargaining power of suppliers due to the
high number of market players and large supply of diverse products to the market. There
are many herbal beaty products which are developed by both large and small scale
manufacturers. Due to the huge supply, consumers have the power to influence the market
prices as opposed to the suppliers.

Threat of Substitutes
The presence of many competitors makes the threat of substitute HIGH. If manufacturers sell their
products at higher prices, or if the products are of low quality, then consumers are able to purchase
substitutes from the many competitors who are present in the market environment.

Rivalry Within Industry

With high threat of new entrants and no entry barriers, the competition in the herbal
beauty industry is so intense and getting more intense day by day. Business have to come
up with new unique herbal beauty products every often and spend more in research &
development and marketing to be in the competition.

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 PESTEL MODEL

POLITICAL FACTORS
• The present political scenario is beneficial for the Herbal Beauty products industry.
• The manufacturing of the herbal beauty products are eligible for tax deduction under
the Section 80IA of the Income Tax Act, 1961.
• The herbal beauty products have to meet the minimum industrial safety regulations
as laid down by the authorities in order to be manufactured and marketed.

ECONOMIC FACTORS
• There is increasing customer demand for the herbal beauty products as compared to
other types of products in this category.
• The growing use of herbal beauty products has led to more government intervention
in this industry.
• Herbal beauty products are less costly than the other synthetic beauty products.

SOCIAL FACTORS
• The citizens of India have become more health conscious resulting in the
consumption of more herbal products than synthetic ones.
• Women use herbal products more than men.

TECHNOLOGICAL FACTORS
• The GOI (Government of India) has created a favourable environment for Research
and Development in the country.
• Modern technologies have helped in the industrial growth of the herbal beauty
products industry.

ENVIRONMENTAL FACTORS
• Herbal beauty products have to go through various environmental policies and laws
which are applicable in the processing of these products.
• The problem which this industry faces is that there are many herbs which are not
available in the winter, autumn or summer season, so, the manufacturing of these
products depends on these environmental factors.

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LEGAL FACTORS
• The GOI has made tough laws regarding import, manufacturing, sale and distribution
of herbal beauty products through the Drugs and Cosmetics Act, 1940.
• The French certification body ESOCERT has some control over the certification of
natural/herbal products in India.

Competitive Advantage of this industry

1. The awareness towards organic/natural products is increasing rapidly, so this is a big
competitive advantage for this industry’s participant’s as they have to spend less
time and money on the marketing and promotion of their products as compared to
others.
2. This industry follows a low cost provider strategy which is anticipated to drive the
growth of the herbal beauty products market with noteworthy revenue by the end
of 2024.
3. The industry’s products or services are differentiated from that of its’ competitors.
They do so by delivering health conscious high quality products with the requisite
safety standards.
These competitive advantages distinguish the industry participants from others contributing
to higher prices, brand loyalty and more customers.

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Strategic Posture
We plan to be a market challenger. As market challenger, we are capable to attack the
leader and other competitors. Sometimes, capable challengers can overtake the leader, too.
There are two approaches that we plan to follow
a. Diversifying into New Geographical Markets:
It involves launching the products in such areas where competitors are absent.
b. Leapfrogging into New Technologies to Replace Existing Products:
It involves researching and developing patiently new technologies and launching an attack
with superior products.

Strategies against market leader

1.Price-Discount Strategy:
It consists of offering a comparable product at a lower price. Success of price-discount
strategy works successfully if (1) the challenger can convince that products and services are
comparable to that of leaders, (2) buyers must be price- sensitive and feel comfortable to
buy, and (3) market leader must not cut its price in spite of challenger’s attack.
2.Cheaper-good Strategy:
It consists of offering average or low-quality products at much lower price. The strategy
works successfully only when there are sufficient number buyers who are interested in the
low-priced and low-quality products.
3. Product-innovation Strategy:
It consists of adopting product innovation to attack leaders’ position.
4. Improved-services Strategy:
It consists of offering the customers new and better services with same products. Such
strategy is widely practiced in consumer durables.
5. Distribution-innovation Strategy:
It consists of attacking leaders by discovering new ways or channels of distribution. A
challenger can apply door-to-door selling, online selling, direct selling, opening stores at
convenient places, etc., instead of tradition way of distribution.

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Digital Marketing Strategy To Boost Sales And
Build Brand Image

1. Creating Useful Guides

The best way to do this is to provide extensive information for all the product
offerings. In addition to this focus should be on addressing consumer questions such
as:
-How should I use this herb? Can I drink it or use it as aromatherapy?
-How much can I use at one time?
-Are there any side effects?
-Can I use it with certain medications?
Going into this level of detail not only establishes your credibility—it also protects you and
your customers from potential harm.

2. Starting a Newsletter
After initiating a relationship with the customer, regular email correspondence
allows to share news and updates and provide special deals to loyal customers.
It’s cheaper, faster, and easier to track than direct mail, and considering that it’s only
sent to people who have willingly signed up, one can be confident that the firm is
reaching people who actually want to hear from you.

3. Run Pay-Per-Click (PPC) Ads

Running PPC, or pay-per-click ads, for keywords related to searches for herbal
products clicks can be generated from people looking for exactly what you’re selling.

4. Social Media Advertising

Posting content and updating social media channels regularly has the potential to be
shared by hundreds or even thousands of followers. Each of those recipients can
then share it with their networks, reaching a larger audience than a traditional
marketing campaign ever could.

5. Search engine optimization- SEO for Mobile

Optimize the online property of business through mobile and tablets as it helps
reach a wider target audience in a cost effective manner. Once visitors are already
on the firm’s site, being mobile-friendly can help them find the online store in the
first place. Moreover, Considering that mobile-friendliness is now a major ranking
factor for Google, it will help the firm rank above its competitors that aren’t
compliant—and stand a chance at competing with the ones that are.

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 Financial Projections

The financial projections has been done for the next 10 years for only the Brahmi Powder.
There are various types of expenses which has been taken into account while preparing the
P&L

Assumptions
• We have taken an assumption that the company will be able to get a loan of
₹9,00,000 under PMMY.

FACTS
• Only Grinder has been used for the processing of leaves into powder. Rest all the
processes require manual labour
• The company owns a small place where all the processes could be done. So no
factory rent needs to be paid.

FIXED COST:
1. EQUIPMENT (Grinder) - ₹1,50,000
2. ORGANIC CERTIFICATION - ₹50,000 for a year
3. OFFICE SUPPLIES - ₹30,000 per year
4. WAGES – 2 employees for manual process. ₹7500 per employee per month
5. ANNUAL INSURANCE - ₹42000
6. ACCOUNTING AND BOOK KEEPING COST - ₹10,000 per month
7. ADVERTISEMENT COST - ₹3,00,000 annual contract to an advertising agency
8. EMI- ₹29,464 per month (ANNEXURE 1)

Since the company maximum sales is expected to come from amazon only. A 29% Amazon
FBA fees is deducted from every unit sold. In order to sell its product with the organic label.
Company got the required certification from ‘The Agricultural and Processed Food Products
Export Development Authority (APEDA)’ for an amount of Rs. 50000.

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Company applied for loan under Pradhan Mantri mudra yojana (PMMY). Under the Pradhan
Mantri MUDRA Yojana scheme (PMMY), the Government of India has designed MUDRA
loans to help small business owners in the country and help them meet capital expenses as
well as operating costs. Interest rates on MUDRA loans are between 8.40% and 12.45% p.a.
The maximum amount that can be borrowed through this loan is Rs.10 lakh. Business
owners who require amounts in excess of Rs.10 lakh can avail other business loans offered
by banks and financial institutions.
There are 3 schemes under PMMY.
• Shishu: scheme offers loans up to Rs.50,000
• Kishor: scheme offers loans more than Rs.50,000 and less than Rs.5 lakh
• Tarun: scheme offers loans more than Rs.5 lakh and below Rs.10 lakh

A loan amount of Rs. 900000 was approved from the bank for a period of 3 years at 11% per
annum interest rate.

The following table shows the loan taken under the Tarun category of the Pradhan Mantri
Mudra Yojana:

Loan taken 900000

interest rate p.a 11%
Tenure 3
Payments per year 12
EMI ( at the end of
month) ₹29,464.85

Company has decided to outsource its social media handling and marketing to a digital
agency, Grapes digital. The agency has provided a package that includes 1 year social media
accounts handling with an average of 2 posts per day, paid promotions on Amazon website
and two video based advertisement that’ll run on its social media accounts. The total
package cost is Rs. 3,00,000 per annum.

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Although the paid promotions on Amazon is a variable cost, but here, we have already
added a lump-sum amount to the package.

The Selling price for the product is ₹349 for 150 grams.

Particulars Brahmi
Sales after taking out 29% owed to amazon 247.79 per unit
variable cost 71.5 per unit
contribution margin 176.29 per unit
total fixed cost 90819.012 per month

With the above fixed cost keeping in mind and the company would break even if it manages
to sell 367 units of the Brahmi powder within the month.

SALES BUDGET

Sales budget for 1st quarter July August September 1st quarter total October November
BRAHMI
Expected sales 50 55 61 166 67 74
Expected sales price 349 349 349 349 349 349
Total sales 17450 19195 21289 57934 23383 25826

The company is expected to Sell 67 and 74 units for the month of October and November
respectively on Amazon. The growth in Sales unit has been kept at 10% initially with the
investment company has at its disposal for the Brahmi powder.

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PRODUCTION BUDGET
20% of next month's unit sold is desired to be left in ending inventory as a safety cushion

BRAHMI POWDER UNITS

July ending Inventory 10
August ending Inventory 11
September ending inventory 12
October ending Inventory 13

Number of units expected to be produced is equal to Number of units expected to be sold

+ Safety stock
Total units needed
- beginning finished goods inventory
units needed to be produced

PRODUCTION BUDGET- 1ST QUARTER July August September 1st quarter total October
BRAHMI
Number of units expected to be sold 50 55 61 166 67
ADD. Safety stock 10 11 12 12 13
Total units needed 60 66 73 178 80
LESS. beginning finished goods inventory 0 10 11 12
units needed to be produced 60 56 62 178 68

The company has decided to keep an extra stock just in case of the surge in the order
numbers.

Direct Material Budget

Raw Material (Leaves) budget 1st quarter

Particulars July August September 1st Quarter total October

BHRAMI
Expected production 50 55 61 166 67
Material required per unit (in grams) 150 150 150 150 150
Material required for expected production 7500 8250 9150 24900 10050
ADD desired ending inventory (in grams) 1500 1650 1800 1800 1950
Total Grams available 9000 9900 10950 26700 12000
LESS beginning inventory (in grams) 0 1500 1650 0 1800
Total Grams needed (without wastage) 9000 8400 9300 26700 10200
Total Grams needed after 5% wastage taken into account 9450 8820 9765 28035 10710
Round off figure of Brahmi leaves to be purchased 9450 8820 9765 28035 10710
Cost per gram 0.38 0.38 0.38 0.38 0.38
Total cost of brahmi leaves to be purchased ₹ 3,591.00 ₹ 3,351.60 ₹ 3,710.70 ₹ 10,653.30 ₹ 4,069.80

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Assumption Wastage 5%

The assumption has been taken that grinding of the leaves will cause 5% wastage in the raw
material. So that has been taken into account.
Another major assumption is that the company orders the product in bulk initially but we
have appropriated cost for each month on the basis how much grams of that leaves is
required in that month.

Operating Budget

Operating budget - 1st quarter

Particulars July August September Total
License for organic certification 4166.66667 4166.666667 4166.666667 12500
EMI ₹29,464.85 ₹29,464.85 ₹29,464.85 ₹ 88,394.54
Advertisement expense 25000 25000 25000 75000
Accounting and book keeping cost 10000 10000 10000 30000
Wages 15000 15000 15000 45000
office supplies 2500 2500 2500 7500
TOTAL FIXED COST 86131.5121 86131.51207 86131.51207 258394.5362

NOTE Assumption is operating budget is fixed

MANUFACTURING OVERHEAD BUDGET - 1st quarter

Particular July August September Total
Depreciation Grinder 1187.5 1187.5 1187.5 3562.5

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Profit and Loss Statement

The period taken for the forecast has been from July 2020 to July 2021 and so on.
Detailed quarter wise projection has been done for the initial year only after that year wise
projections has been done.

Income Statement 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 2020-21
Number of units sold 166 244 407 766 1583
Selling price per unit 349 349 349 349 349
Total Sales ₹ 57,934.00 ₹ 85,156.00 ₹ 1,42,043.00 ₹ 2,67,334.00 ₹ 5,52,467.00
M-o-M Change
Cost of goods sold ₹ 10,653.30 ₹ 15,751.54 ₹ 26,189.06 ₹ 43,532.17 ₹ 96,126.07
% of Sales 18.39% 18.50% 18.44% 16.28%

Sales ₹ 57,934.00 ₹ 85,156.00 ₹ 1,42,043.00 ₹ 2,67,334.00 ₹ 5,52,467.00

Less: Cost of goods sold ₹ 10,653.30 ₹ 15,751.54 ₹ 26,189.06 ₹ 43,532.17 ₹ 96,126.07
Gross Profit (PBDIT) ₹ 47,280.70 ₹ 69,404.46 ₹ 1,15,853.94 ₹ 2,23,801.83 ₹ 4,56,340.93
Gross Margin 82% 82% 82% 84% 83%

Expense (G&A, Marketing&Sales, Others) ₹ 2,65,064.54 ₹ 2,67,964.54 ₹ 2,67,964.54 ₹ 2,67,964.54 ₹ 10,68,958.14

Depreciation ₹ 3,562.50 ₹ 3,562.50 ₹ 3,562.50 ₹ 3,562.50 ₹ 14,250.00
Operating Expenses ₹ 2,79,280.34 ₹ 2,82,659.14 ₹ 2,82,659.14 ₹ 2,82,659.14 ₹ 11,27,257.74
Operating Income ₹ (2,21,346.34) ₹ (1,97,503.14) ₹ (1,40,616.14) ₹ (15,325.14) ₹ (5,74,790.74)
Income tax expense (benefit) (25%) ₹ (66,403.90) ₹ (59,250.94) ₹ (42,184.84) ₹ (4,597.54) ₹ (1,72,437.22)
Net Income ₹ (1,54,942.44) ₹ (1,38,252.20) ₹ (98,431.30) ₹ (10,727.60) ₹ (4,02,353.52)
-267% -162% -69% -4% -73%

In the initial year the company will face loss. Net profit margin will be at negative 73%.
We have taken a conservative approach and kept are expectation for Sales low in the initial
year. The company will face a loss of ₹4,02,353. The operating expense for the year will be
₹11,27,257

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Income Statement 2020-21 2021 e 2022 e 2023 e 2024 e 2025 e
Number of units sold 1583 3166 4749 7123.5 10685.25 16027.875
Selling price per unit 349 349 349 349 349 349
Total Sales ₹ 5,52,467.00 ₹ 11,04,934.00 ₹ 16,57,401.00 ₹ 24,86,101.50 ₹ 37,29,152.25 ₹ 55,93,728.38
M-o-M Change
Cost of goods sold ₹ 96,126.07 ₹ 1,11,775.40 ₹ 1,23,087.07 ₹ 1,35,543.48 ₹ 1,49,260.48 ₹ 1,64,365.64
% of Sales 10.12% 7.43% 5.45% 4.00% 2.94%

Sales ₹ 5,52,467.00 ₹ 11,04,934.00 ₹ 16,57,401.00 ₹ 24,86,101.50 ₹ 37,29,152.25 ₹ 55,93,728.38

Less: Cost of goods sold ₹ 96,126.07 ₹ 1,11,775.40 ₹ 1,23,087.07 ₹ 1,35,543.48 ₹ 1,49,260.48 ₹ 1,64,365.64
Gross Profit (PBDIT) ₹ 4,56,340.93 ₹ 9,93,158.60 ₹ 15,34,313.93 ₹ 23,50,558.02 ₹ 35,79,891.77 ₹ 54,29,362.74
Gross Margin 83% 90% 93% 95% 96% 97%

Expense (G&A, Marketing&Sales, Others) ₹ 10,68,958.14 ₹ 11,22,406.05 ₹ 12,34,646.66 ₹ 14,81,575.99 ₹ 19,26,048.79 ₹ 25,03,863.42
Depreciation ₹ 14,250.00 ₹ 14,250.00 ₹ 28,500.00 ₹ 28,500.00 ₹ 28,500.00 ₹ 57,000.00
Operating Expenses ₹ 11,27,257.74 ₹ 12,48,431.45 ₹ 13,86,233.72 ₹ 16,45,619.47 ₹ 21,03,809.26 ₹ 27,25,229.06
Operating Income ₹ (5,74,790.74) ₹ (1,43,497.45) ₹ 2,71,167.28 ₹ 8,40,482.03 ₹ 16,25,342.99 ₹ 28,68,499.32
Income tax expense (benefit) (25%) ₹ (1,72,437.22) ₹ (43,049.23) ₹ 81,350.18 ₹ 2,52,144.61 ₹ 4,87,602.90 ₹ 8,60,549.79
Net Income ₹ (4,02,353.52) ₹ (1,00,448.21) ₹ 1,89,817.09 ₹ 5,88,337.42 ₹ 11,37,740.09 ₹ 20,07,949.52
Net Profit margin -73% -9% 11% 24% 31% 36%

2026 e 2027 e 2028 e 2029 e 2030 e

24041.8125 30052.26563 33057.49219 34710.3668 36445.88514
349 349 349 349 349
₹ 83,90,592.56 ₹ 1,04,88,240.70 ₹ 1,15,37,064.77 ₹ 1,21,13,918.01 ₹ 1,27,19,613.91

₹ 1,80,999.44 ₹ 1,99,316.58 ₹ 2,19,487.42 ₹ 2,41,699.55 ₹ 2,66,159.54

2.16% 1.90% 1.90% 2.00% 2.09%

₹ 83,90,592.56 ₹ 1,04,88,240.70 ₹ 1,15,37,064.77 ₹ 1,21,13,918.01 ₹ 1,27,19,613.91

₹ 1,80,999.44 ₹ 1,99,316.58 ₹ 2,19,487.42 ₹ 2,41,699.55 ₹ 2,66,159.54
₹ 82,09,593.12 ₹ 1,02,88,924.12 ₹ 1,13,17,577.35 ₹ 1,18,72,218.46 ₹ 1,24,53,454.37
98% 98% 98% 98% 98%

₹ 32,55,022.45 ₹ 42,31,529.18 ₹ 55,00,987.94 ₹ 71,51,284.32 ₹ 92,96,669.61

₹ 57,000.00 ₹ 57,000.00 ₹ 57,000.00 ₹ 57,000.00 ₹ 57,000.00
₹ 34,93,021.89 ₹ 44,87,845.77 ₹ 57,77,475.36 ₹ 74,49,983.87 ₹ 96,19,829.16
₹ 48,97,570.67 ₹ 60,00,394.94 ₹ 57,59,589.42 ₹ 46,63,934.15 ₹ 30,99,784.76
₹ 14,69,271.20 ₹ 18,00,118.48 ₹ 17,27,876.82 ₹ 13,99,180.24 ₹ 9,29,935.43
₹ 34,28,299.47 ₹ 42,00,276.46 ₹ 40,31,712.59 ₹ 32,64,753.90 ₹ 21,69,849.33
41% 40% 35% 27% 17%

We have taken into account that the company will again require a new machinery for the
production in 2022. So the depreciation amount has been doubled. Another pair of
machinery will be required in 2025 to meet the growth that takes the number of machinery
to 4.

30
The cost of good sales to the sales percentage will go down as the company approaches
towards economies of scale. The company will be able to buy in bulk and will be in a better
position to bargain with the suppliers.
We have assumed that the company will reach its peak in 2027 and after that the growth
will decrease while the expenses will remain same.
Gross profit margin is high because the amazon’s commission has been taken under
expenses. The assumption is that the company will only operate online for the next 10
years.

ANNEXURE 1
Loan Amortisation Schedule

31