A FEASIBILITY REPORT ON TOPIC AUTO REPAIR AND SERVICE WORKSHOP
SCHOOL OF MANAGEMENT STUDIES, NU SUBJECT: ENTREPRENEURSHIP AND SMALL BUSINESS MANAGEMENT.
EVALUATOR:
L DOREN SINGH HEAD OF DEPARTMENT, SMS
SUBMITTED BY:
THOUNAOJAM DISCOV SINGH ROLL NU/MN-15/09 IV SEM MBA
1.1 Introduction about the Study: This study is developed to provide the entrepreneur with potential investment opportunity in setting up and operating an Auto Repair & Service Workshop o ffering various services. This feasibility gives insight into various aspects of a Workshop setup including both technical and general information for each particular service o ffered. In this study, the research was considering five of the already existing auto repa iring points of Dimapur, Nagaland. The feasibility analysis is to provide all relevant det ails to facilitate the entrepreneur in making the correct decision providing various technological as well as business alternatives by analyzing the product, market, technical, and financial aspects. This shows the viability of using the technology considering the financial viability, profitability, personal and socio-economic aspects.
1.2 Objective of the Study: The objective of the study is to determine whether there will be po ssibility of introduction of new technologies in auto repairing workshop in Dimapur. The specific objectives of the st udy are: (i) (ii) (iii) (iv) (v) (vi)
Quick and quality repair & maintenance services; Wheel Alignment and Balancing Facilities: High Pressure Cleaning Services; Easy access to new and used ret ail parts to meet the demands of the customer: To determine the personnel feasibility and To determine the socio economic feasibility of the unit.
1.3 Methodology The method applied to carry out the project is exploratory and descriptive in nature. It is exploratory in nature as its aims to achieve new insight into the demand o f the different services. It is descriptive in nature as the study has been based on the performance on some ofthe auto workshop points in Dimapur. The data were analyzed with simple terms using simple calculations and accounting methods
1.4 Research Design It is more concerned with primary data some of the existing auto workshops and also designed with that available secondary data from are collected by personal interview and other sources like internet etc.
1.5 Limitation: The feasibility study may have the following limitations (i) (ii)
If the respondent(s) is/are bias in supplying information, the result could be inaccurate. Time constraint and reluctant of the respondents to give correct data.
2.1 Location Feasibility: Dimapur is a district of Nagaland state in India..It is flanked by Assam, Manipur, Arunachal Pradesh and international border with Burma. It is a commercial hub of economic growth connecting different states through roads, air and ra ilways with Assam. The District has a heterogeneous population with the majority comprising Naga tribes from all over Nagaland. The tot al population of the district is estimated at 3,08,382. There is a good potential of establishing an auto repair and worship unit as most of the transport system are through vehicles like small and medium sized trucks. The raise in income generation and demand o f quality services will create more demand of such unit.
2.2 Service Feasibility: With the increase in urban population and number of vehicles and raise in income, one would feel to get the best service or repairing of their vehicles. Atypical Auto Repair and service Workshop is assumed to provide the following four major services: (i) (ii) (iii) (iv) (i)
Mechanical-maintenance services and major repa irs. Denting & Painting like cosmetic repair, accidental repair a nd body restoration services. Wheel Alignment & Balancing High Pressure Cleaning Sublet services- Air Conditioner Repair & Coolant Replenishment, Machine S hop Items, Radiator Repairs, Silencer Repairs, Road Spring Repairs, Upho lstery Items (seats, bumpers, plastic repairs etc.), Wheel Alignment /Balancing, Axle End / Tire Rod Repair & replacement etc.
2.3 Market Feasibility: Market feasibility analysis is to evaluate the projects feasibility in terms of the market. It includes the analysis of demand and supply condition etc.
2.3.1 The market: Dimapur is the place where most of the people in Nagaland try to settle here. Most of the tribes have improved their standard of living within few decades. It is the new trend that every house hold has a car or vehicle. Lots of vehicles are coming in this hub for various business purposes and stay here and need the good repairing of their automobiles. It connects different states, districts of Nagaland and there is demand o f good services of repairing of their vehicles. A number of shopping centers and markets have sprung up in Dimapur, with the New Market, Hong Kong Market, Circular and NL roads serving as the main co mmercial areas in the city. The city's markets are well known for imported goo ds from Thailand, China and Burma. Restaurants in the city serve multi-cuisine food, including ethnic Naga delicacies. Plaza, Breeze and Aroma continue to be the most popular restaurants in the city. Dimapur is the only place in Naga land that does not require the inner line permit but one needs the restricted area permit to go beyond the city. Formalities can be co mpleted in the Office of the deputy commissioner.It remains the gateway to the states of Nagaland and Manipur. Recentlythe Government of Nagaland has relaxed restriction on ownership of land in Dimapur and has permitted non-Nagas to purchase land as well. So there is high potential market for auto repair and service workshop in Dimapur.
2.4 Technical Feasibility: The equipment required for running an auto workshop would relate to the demand condition of the better service activities that tend to undertake. The various equipment would be as follows 2.4.1 Mechanical Repairs & Maintenance: Complete Mechanical Toolbox. Work Bench, Vice, Tool Box Cupboard, Voltmeter / Ammeter Timing Light, Battery Charger, Compression Gauge. 2.4.2. Denting equipment: Denting Toolbox, Mechanical Too lbox, Pressure Jack (Large), Gas Cylinder, Carbide Tank, Welding Kits, Drill Machine (Hand), Puller Jack. 2.4.3 Painting: Painting Compressor, Spray Gun (Small), Spray Gun ( Large), Pipe. 2.4.4 High Pressure Cleaning: High Pressure Cleaner (including Piston Pump), Piston Pump . 2.4.5 Wheel alignment and balancing: Complete Computerized Alignment Equipment (Including Heads, Disc plates etc.) ± A Class, Computerized Wheel Balancing Machine
2.4.6 Technical knowledge: It is needless to say that a proper technical knowhow has to cover the following aspects 1. The knowledge of handling the equipment is necessary. 2. Experience in the field of painting and use of the equipment. 3. Supervising of the entire design,engineering, machinery installation etc. 4. Arrangements are made for training of selected personals to the workshop after the recruitment. 2.4.7 Process of mechanical Services
The above diagram illustrates the basic process flow for mechanical repairs. The customer comes in with the mechanical problem wherein a job card is prepared based on the problems faced by the customer. The foreman then checks the car to check for any additional problems. The customer is then provided with t ime and cost estimates depending on the whether the parts need to be repaired or replaced. On agreement of the customer the job is allocated by the foreman. It is necessary to test run the car before it is finally delivered to the c lient. 2.4.8 Denting and Painting Process:
The above diagram illustrates the basic process flow for denting and painting. The body is then painted and left for drying after which finishing touches andwaxing is done to ensure proper shine. In case of accidents, irreparable parts are replaced before making the final delivery to the customer. However subletting activities can also take place during this process on need basis. 2.4.8 Covered Area Required The workshop is assumed to be totally covered with around 95% of the total area catering to technical works and the re maining 5% for General Office and Stores. It is recommended t hat minimum space be utilized for office and store setup to allow maximum number of cars w ithin
the workshop vicinity. The covered area for workshop operations would be divided between the proposed services and would assume the following break up (including parking for standby / waiting customers): Mechanical Works ± 292 Sq. meters Denting & Painting ± 250 Sq. meters Wheel Balancing & Alignment ± 125 Sq. meters High Pressure Cleaning ± 125 Sq. meters
2.5Personal Feasibility: The Auto Workshop is a labor intensive industry where the labor cost constitutes a considerable portion of the cost of sales. The following table gives a breakup of the total administrative manpower required to operate the proposed setup. General management: Designation/type Owner Accountant Purchaser Store keeper Guard
Number 1 1 1 1 1
Monthly salary(Rs) 5000 4000 2500 2000
The following table gives the details for the proposed technical labor that forms the integral part of the cost of sales: Job/duty allocation Designation/type Number Monthly salary(Rs) Foreman 1 4000 Mechanics skilled 1 6000 Assistant mechanic 2 4000 Helpers 3 2000 Denting Head denter ustad 1 6000 Denters 2 4500 Assistant denters 1 4000 Helper 2 2000 Painting Painter ustad 1 6000 Assistant painters 2 4000 Helper 2 2000 Total 23 57000
Wheel alignment and balancing Operator 1 High pressure cleaning Cleaner 1 Total 2
6000 5000 11000
The total monthly salary of the technical staff would amount to Rs. 68,000 and isassumed to increase by 10% per annum.
2.6 Financial Feasibility: The project cost estimates for the proposed Auto Workshop have been formulated on the basis of discussions with relevant stakeholders and experts. The co st projections cover the cost of land, building, inventory, equipment including office furniture etc. The specific assumptions relating to individual cost components are given as under: Rent cost: The rent for the assumed premises will be Rs. 35,000/- per month. It is assumed that Rs.300,000 will be given in advance before possession of premises. This will include 3 months deposit and 3 month advance rent. The rent would be payable on a monthly a basis and is expected to increase at the rate of 10% per annum for the projected period. The Auto Workshop involves construction cost which translates into three main components as follows: Machineries: Rs 2200,000 4KKNHJHTSXYWZHYNTSHTXY7XQFPMX
Utilities like water, electricity, telephone, entertainment-Rs 60.000. Labor cost-Rs 68.000 Travelling & miscellaneous office expenses-Rs 200 per day Depreciation: 10% per annum 2.6.1 Working capital & operating cost: It is estimated that an additional amount o f approximately Rs. 384,000 will be required as cash in hand to meet the working capital requirements / contingency cash for the initial stages. The requirement is based on t he utilities and salaries expenses for at least three months. 2.6.4 Cost of Capital: The cost of capital is explained in the following table Required return on the capital 20.0% Cost of finance 15.0% Weighted average cost of capital 17.0% Estimated profit of the project is 2 lakhs per month with the gross margin of 27%.
Projected Balance Sheet: for auto workshop Year 1
y2
y3
384,000 0 15,000 35.000 4,34,000
400,000 10,000 20.000 35,000 4,65000
450,000 20,000 30,000 35,000 5,30,000
1400,000 220,000 200,000 2200,000 38400,000
1200,000 200,000 100,000 200,000 1700,000
1000,000 150,000 50,000 200,000 ,1400,000
Assets Current assets Cash and bank balance Account receivables Lubricants and spare parts Prepaid rent Total current assets Fixed assets Building and workshops technical equipment office furniture machinery total fixed assets intangible assets pre-operating cost total assets owners equity long term liability total equity and liability
20,000 39134000 3000,000 50,000 3050,000
10,000 10,000 21,75,000 2030,000 3200,000 3400,000 40,000 35,000 3240,000 3435,000
net cash flow from op. activities net cash flow from fin.activities net cash flow from invest activities net cash flow
y1 0 6047000 5495000 552000
y2 1013869 (738990) 0 274879
y3 1354234 (809559) 0 544675
cash at beginning period cash at the end period
0 552,000
552,000 826879
826,879 1371,554
projected statement of cash flow:
Since the flow of current is increasing after every year, it show that there is viability of the project.
2.7 SWOT analysis: A SWOT analysis is a tool for auditing an organization and its environment. It is the first stage of planning and helps the organization to focus on key issues. This analysis helps in deciding whether to invest or disinvest to the firm comparing the internal and external factors.
STRENGTH AND WEAKNESS OF THE FIRM: 1. Strengths are ±high demand o f technically sound servicing Centre, workers will be employed throughout the year, market is vast 2. Weakness are-unavailability of the spare parts o f the machineries, plant would be costly. OPPORTUNIES AND THREAT: 1. Opportunies are-it will develop socio economic development, there will be no off season, employ will have goo d source of earning. 2. Threats are- numerous numbers of repairing and servicing centers.
2.8 Social and Cost Benefits: The study of this feasibility will provide the benefits to the people of the society , considering all the necessary conditions, such as the area of location, it was found out that it will not give any constraint to do the business in Dimapur. It will facilitate the process of development, production, employment, and income generation to the people. New repairingcenters will come up to provide necessary items. Companies will come up to supply equipment as well as necessary items. Most importantly, men and women who are deprived of having any earning may start a better life Conclusion:
Every proud owner of a new car is willing to have the best service for the maintenance of their car and vehicles. The number of buying the car and vehicles are increasing every day and most of the owners of them want to have the best service in the town. A careful study of these information it is concluded that Auto repairing and service workshop would be economically, technically and socially viable in Dimapur. In the profitability analysis it shows that there are high opportunities to earn profit as well as for providing good services for customers.
