Бизнес-план: дистрибуция и продажа косметики в России

Table of Contents
1. Project Summary 7
2. SUMMARY OF THE PROPOSED PROJECT 9
2.1 General description of the project 9
2.2 Description of Eva Cosmetics products 9
2.3 Schemes for sale and distribution of products 12
2.4 Target audience of the project 13
3. Marketing plan 15
3.1 Overview of the situation on the market of cosmetic products in Russia 15
3.1.1 Classification of cosmetic products 16
3.1.2 General trends in the market of cosmetics and personal care in Russia 19
3.1.3 Price segments of the cosmetics market 20
3.1.4 The existing sales channels for cosmetics 22
3.1.5 The development of cosmetics e-commerce 23
3.2 Competitive analysis 26
3.2.1 Assessment of the competitive situation on the market of cosmetic products 27
3.2.2 Analysis of 2 significant competitors. Company profile (description of activities, products, representation region) 31
3.2.3 Competitors’ sales channels for each product segment 33
3.2.4 Comparison of competitors' products and prices to products of the Customer 36
3.3 Consumption analysis 39
3.3.1 Assessment of consumption dynamics in 2015-2017. 40
3.3.2 Consumption structure by product segment 42
3.3.3 Consumption structure by consumer type 43
3.3.4 The most promising consumer segments 44
4. ORGANIZATIONAL STRUCTURE 45
4.1 Staffing plan 45
4.2 Project scheduled plan 46
4.3 Sources, forms and conditions of financing 48
5. PRODUCTION PLAN 49
5.1 Estimation of marketing operations’ cost 49
5.2 Cost estimation for website creation and promotion 50
5.3 Estimation of expenses for offices and premises 52
5.4 Materials and components 52
5.5 Issues of goods logistics 52
6. FINANCIAL PLAN 54
6.1 Basic data and assumptions 54
6.2 Investment expenses 56
6.3 Need for initial current assets 57
6.4 Tax liabilities 58
6.5 Operational expenses (fixed and variable) 58
6.6 Sales plan 60
6.7 Revenue calculation 60
6.8 Profit and loss statement forecast 60
6.9 Cash flow forecast 61
6.10 Project performance analysis 62
6.10.1 Methods for project performance evaluation 63
6.10.2 Project performance indicators 64
6.10.3 Net present value (NPV) 65
6.10.4 Internal rate of return (IRR) 66
6.10.5 Profitability index (PI) 67
6.10.6 Payback period (PBP) 68
6.10.7 Discounted payback period (DPBP) 69
7. Project risks analysis 71
7.1 Quantitative risk analysis 71
7.2 Project breakeven point 71
8. ANNEXES 73
8.1 Cash flows on a monthly basis 73
8.2 Price-list for website creation and promotion services 74
8.3 The cost of Online store promotion in Internet Network 79
9. Information of project promoter 82

Appendices (diagrams, schemes, figures)
Figure 1.1 Project NPV profile 8
Figure 2.1 Scheme for direct sales through own online store 12
Figure 2.2 Scheme for sales to wholesale non-food warehouses 12
Figure 2.3 The structure of the population of Russia by residents using care cosmetics, % 14
Figure 3.1. Preferences of Russian consumers with respect to cosmetics classes, % 18
Figure 3.2. Structure of the Russian cosmetics market by price segment, % 20
Figure 3.3. Cosmetics sales structure by distribution channel, % 22
Figure 3.4. The share of cosmetics and perfumery in e-commerce, % 24
Figure 3.5. The share of online sales in the total cosmetics market, % 24
Figure 3.6. The ratio of import products to products manufactured in Russia on the cosmetics market, % 27
Figure 3.7. TOP 10 body care brands in the Russian market, % 30
Figure 3.8. Sales channels of Black Pearl products 33
Figure 3.9. Sales channels for Garnier products 35
Figure 3.10. Forecast of volume and dynamics of the Russian cosmetics market for 2015-2018 (in retail prices), bln rub. 40
Figure 3.11. Structure of consumption of cosmetic products by product segment, % 42
Figure 3.12. The structure of the consumers of body care cosmetics in the Russian market, % 43
Figure 4.1 Structure of monthly salary distribution 46
Figure 4.2. Project implementation schedule 47
Figure 4.3 Structure of investment project financing 48
Figure 5.1 Structure of expenses for first batch marketing, % 50
Figure 6.1 Structure of project investments, % 57
Figure 6.2 Annual dynamics of goods purchasing, % 60
Figure 6.3 NVP project curve 70
Figure 7.1 Project breakeven point, thousands of rubles 72

Appendices (tables)
Table 1.1 Project implementation schedule 7
Table 1.2 Key financial indicators 7
Table 2.1 The main groups of Eva Cosmetics products 9
Table 2.2 The population of Russia by age and sex, people. 13
Table 3.1. Classification of cosmetic products according to purpose 16
Table 3.2. The ratio of price category, class production and sales locations 20
Table 3.3. Major body care brands in the Russian market 28
Table 3.4. Basic information on the Black Pearl brand (CONCERN KALINA, LLC) 31
Table 3.5. Basic information on the Black Pearl brand (LOREAL, CJSC) 32
Table 3.6. Comparison of competitors’ products and prices to products of the Customer 36
Table 4.1. Formation of salary fund and staff schedule of the enterprise, thousands of rubles. 45
Table 4.2 Project implementation schedule 46
Table 4.3. Credit conditions 48
Table 5.1 The estimation of marketing operations for the first batch of goods, thousands of rubles 49
Table 5.2 Price-list for services on website creation and promotion, rubles. 50
Table 5.3 The cost of Online store promotion on the Internet 52
Table 5.4 Volume of imported cosmetics products from Egypt to Russia on a carriage-specific basis, 2015 53
Table 6.1. Defining of equity capital cost 55
Table 6.2. Defining of discount rate 55
Table 6.3 Project investment expenses, thousands of rubles 56
Table 6.4 6.3 Need for initial current assets, thousands of rubles 57
Table 6.5 Tax environment at GTS 58
Table 6.6 Fixed operational expenses, thousands of rubles 58
Table 6.7 Variable project expenses, thousands of rubles 59
Table 6.9 Profit and loss statement, thousands of rubles 60
Table 6.10 6.9Cash flow forecast, thousands of rubles 61
Table 6.11 Investment performance indicators 69
Table 7.1 Sensitivity analysis 71

Project Summary

The aim of this project is to study the cost-effectiveness and feasibility of the establishment of the company for the sale of the Egyptian body care products by Eva Cosmetics.

The basic idea of the project is to occupy a promising niche by selling Eva Cosmetics body care products in the Russian Federation, as well as to make a profit from its operations. Stages of the project are shown in Table 1.1:

Table 1.1 Project implementation schedule

Project stage	Commencement of works	Duration, days	Completion of works
Substantiation of the investment project and management decision
Obtaining funds
Office rental
Supply of equipment
Recruitment
Ordering and delivery of goods to a warehouse in Moscow
Creating an online store
Conclusion of wholesale distribution agreements
Start the company’s operation

Source: analysis and calculations by MegaResearch

Investments

The volume of investments in project implementation is 17.2 million rubles. The discounted payback period for the project under consideration is 2.8 years.

Key financial indicators of the project are given in Table 1.2:

Table 1.2 Key financial indicators

Investment performance indicators
Assessment period (planning horizon), months
Net value (NV), thousand rubles
Net present value (NPV), thousand rubles
Internal rate of return (IRR), % per annum
Profitability index (PI), units
Payback period (PB), months
Discounted payback period (DPB), months
Project investments, thousand rubles
Average rate of return on sales for the project, %
Net value (cumulative), thousand rubles
Discount rate, %

Source: Calculations by MegaResearch

* Definitions of financial indicators are presented in Section 7.12 of this business plan.

Figure 1.1 shows an NPV profile for the project over the years of its implementation. There is an increase in the net present value of the project over the years, as can be observed on the chart:

Figure 1.1 Project NPV profile

Source: Calculations by MegaResearch

The research data show that the project is profitable. The net present value of the project will amount to … rubles at the end of 2020. Project performance indicators demonstrate a high level.

SUMMARY OF THE PROPOSED PROJECT

General description of the project

The project is aimed at selling body care cosmetics of Eva Cosmetics Corporation based in Egypt in the territory of the Russian Federation. The main office of the Russian division of the company is planned to be established in Moscow.

It is expected to increase the volume of sales of cosmetics every year. The initial amount of goods procurement will be 7.5 million rubles. Purchase and delivery of goods is planned to be made twice a year. Markups on products will be about 70%. There will be no seasonality of sales.

The products are planned to be sold through retail stores, as well as through own online store. It is necessary to carry out an initial marketing campaign to promote sales, the cost of which will amount to approximately 1 million rubles.

Description of Eva Cosmetics products

Eva Cosmetics Corporation is a leading manufacturer and distributor of personal hygiene products in Egypt. The founder of the brand was Armanious Group, which has more than 100 years of experience in the market. The company's annual turnover is over 170 million Euro. Eva Cosmetics brand was established in 1972. The company's headquarters is located in Egypt, Eva Cosmetics products are represented in 18 countries.

The product range is wide enough. The main product groups are presented in the table below.

Table 2.1 The main groups of Eva Cosmetics products

Logo	Name	Product line
	Anti-aging	Fine lines filler; Deep lines filler; Restoration cream; Repairing serum; Collagen ampoules; Hand cream; Anti-cellulite cream; UVA and UVB protection cream.
	Skin care	Cream with glycerin, honey, yoghurt and cucumber, etc.; Deodorants.
	Hair care	Shampoos; Hair masks and balms; Hair styling products; Hair oils.
	Hair repair and treatment	Shampoo; Conditioner; Mask; UV protection serum.
	Make-up removal	Make-up remover with glycerin, yoghurt and cucumber, etc.; Make-up removing wipes.
	Whitening line (B-White)	Deodorant; Facial cream (day, night); Eye cream.
	Hair removal cream	Hair removal cream; Hair bleaching cream.
	Male grooming	Shaving products; Aftershave products; Deodorant.
	Men’s Hair Styling	Hair styling products
	Hand and foot care (Evasiline)	Hand and foot cream; Hand scrub; Body lotion; Cuticle remover.
	Suncare (Eva Sun&Sea)	UVA & UVB protection products; After sun products; Tanning cream.

Source: The project initiator, the official website http://www.eva-cosmetics.com

Thus, the range of the company is quite wide. It covers almost all types of body care products.

Schemes for sale and distribution of products

Sales of products within the framework of this project are expected to be carried out through 2 main channels:

Direct sales through own online store;

Sales to wholesale non-food warehouses.

The figure below shows a scheme for sales through own online store.

Figure 2.1 Scheme for direct sales through own online store

***

Source: MegaResearch analytics

The figure below shows a scheme for sales to wholesale non-food warehouses.

Figure 2.2 Scheme for sales to wholesale non-food warehouses

***

Source: MegaResearch analytics

Target audience of the project

As reported by Romir company, the most active consumers of perfumes are the respondents of middle age – from 25 to 45 years. According to surveys, more than 60% of women and more than 30% of men (mainly urban dwellers) in Russia use care cosmetics. The table below shows the population of Russia by age and sex.

Table 2.2 The population of Russia by age and sex, people.

Age	Number of males, people	Number of females, people

Source: Federal State Statistics Service of the Russian Federation

The figure below shows the ratio of the total population of Russia and the population using skin care cosmetics.

Figure 2.3 The structure of the population of Russia by residents using care cosmetics, %

Source: MegaResearch analytics

Thus, **% of Russia's population is …

Marketing plan

Overview of the situation on the market of cosmetic products in Russia

Classification of cosmetic products

Cosmetic products include skin, hair, nail and oral care products which are used to enhance a person's appearance, as well as substances used to impart freshness and beauty to a face and a body.

All cosmetic products can be divided into two major groups:

Care cosmetics;

Decorative cosmetics.

Care cosmetics are designed for facial, body, nail and hair care. They are used to keep the skin beautiful and youthful as well as for a variety of cosmetic problems – from oily skin to premature aging.

The function of decorative cosmetics is to hide the shortcomings and favorably emphasize the advantages of an appearance.

The most complete classification of cosmetic products into groups is presented in the table below:

Table 3.1. Classification of cosmetic products according to purpose

Group	Purpose	Types of products
Care	Face
	Body
	Oral care
	Hair and scalp
Decorative	Face
	Eyes
	Lips
	Nails

Source: open sources, MegaResearch analytics

In addition to the classification based on the purpose, cosmetics can be also divided into classes depending on the composition and price of products:

Mass market;

Middle market;

Premium cosmetics;

Professional beauty cosmetics;

Cosmeceuticals (medical cosmetics).

Mass market cosmetics are cheap cosmetics produced in huge quantities. They consist of artificial preservatives. The products are marketed using aggressive marketing techniques. 70% of product cost is spent on advertising, 20% - on packaging and 10% - on production. Such cosmetics do not give long-term effect (after stopping using them the skin becomes worse than it was before (aging effect), their application can cause an allergic reaction, in many cases, their composition is harmful to health). They are in demand due to cheapness. Cosmetics of this class include: Oriflame, Faberlic, Avon, Nivea, Eveline, Lumene, R One, Ruby Rose, Herbina, Belinda, Black Pearl, etc.

Middle market cosmetics are cosmetics of the middle class. This is a higher level. 30% to 60% of natural biologically active substances in these cosmetics are non-toxic preservatives - benzoates and parabens (from vegetable raw materials, but produced by chemical means). To avoid habituation it is not recommended to use cosmetics of one cosmetic line longer than 6 months. Cosmetics of this class include: Euro Shi, Revlon, Loreal, Mary Kay, Pupa, Borjois, Decleor, Lancome, etc.

Premium cosmetics involve the use of high technology, content of natural biologically active substances in these products is …%. These are selective cosmetics. Raw materials are environmentally friendly, without synthetic fertilizers, production involves the use of interactive enzyme technology. These cosmetics have no addicting property, the cessation of the use of these cosmetics does not cause accelerated aging. They contain only natural preservatives: colloidal silver, benzoic acid, purified propolis, tea tree oil, etc. Cosmetics of this class include: Elizabeth Arden, Yves Saint Laurent, Nina Ricci, Chanel, Estee Lauder, Сlinique, Helena Rubinstein, Givenchy, Christian Dior, Christian Lacroix, etc.

Professional beauty cosmetics for professional use are addictive because of their content of a series of hormones, the use of these cosmetics can disrupt the menstrual cycle, cause sweating, irritability. They have a fast (to impress the customer), but short-lived effect. Cosmetics of this class iclude: Academy, Garena, Lacrima, Janssen, GG, etc.

Cosmeceuticals are divided into three groups:

1. Level I cosmeceuticals are sold exclusively in pharmacies: Bioline, Kristina, Vichy, Phyto, Lierac, Uriage, Phytopharm, Pharmcosmetic, Solar, Green Line, etc. They work only in the basal layers of the epidermis down to the basement membrane, i.e. they cannot remove the problem located in the dermis.

2. Level II cosmeceuticals are able not only to provide the improvement of the skin at the aesthetic level, but work at the cellular level providing a therapeutic effect. These cosmetics are non-addictive (Cosmetics of II generation can be used for 3 months with a break for 7-8 months, which will not worsen the skin condition) and stimulate the natural processes in the skin, do not contain synthetic substances (i.e. nothing is imposed on the body). There are only 7 companies in the world market that produce products of this class. These companies include: NSP-Natria, Irwin Naturals, Neways, RBC, etc.

3. Level III cosmeceuticals were established in Japan in 2004. These are the molecular cosmetics created on the basis of the achievements of orthomolecular medicine with the use of nanotechnology. A method of cellular and molecular nutrition – multidimensional profiling – is used in the production of Level III cosmeceuticals. This technology is almost fully meets the nutritional needs of the skin, restores the alkaline balance, inhibits the infection and regenerates the epithelium, strengthens the structure of the skin – collagen and elastin fibers, which are responsible for youth and beauty of the skin. They have all the qualities and virtues of Level II cosmeceuticals, but are capable of more effective and profound effect on the skin layers. The very high cost of these cosmetics and ongoing clinical trials with a control group of volunteers do not allow consumers to choose this format of cosmetics for facial and body care as an integral part of everyday life.

According to “RBC. Market Research”, **% of cosmetics consumers in Russia buys mass-market cosmetics, **% prefer premium cosmetics, **% buy pharmacy cosmetics.

Figure 3.1. Preferences of Russian consumers with respect to cosmetics classes, %

Source: RBC. Market research

A characteristic feature of the Russian market is …

General trends in the market of cosmetics and personal care in Russia

The main trends that determine the present and future of the Russian cosmetics market are, in general, similar to the worldwide trends:

The globalization of markets. Manufacturers of many types of perfume and cosmetic goods develop their activity in global markets, achieving economic effect due to the scale of production and sales activities. The existence of separate national or regional markets becomes irrelevant.

Strengthening of the Russian producers due to the introduction of innovative formulations (to preserve youth and provide care), scientific research and improvement of product quality, reasonable pricing policy compared to competitors with a similar quality of cosmetics;

…

…

Anti-aging cosmetic products become a key market. Such products generally contain vegetable ingredients and biocomplexes and become increasingly specialized. Previously, the emphasis was on products allowing regenerating the withered skin, now anti-aging products dominate. And these creams are increasingly available to younger buyers.

…

…

…

…

Reduction in the share of direct sales. Experts attribute this not only to the expansion of networks, but also to a significant outflow of consultants, for whom it has become more profitable to work in other sectors of the economy. Competition between the major players at the federal level is increasing, drogerie networks are growing and sale of products through the Internet is rapidly gaining momentum.

…

Price segments of the cosmetics market

Products on the market can be divided into the following price segments:

The premium price segment (more than 1 500 rubles per unit);

The medium price segment (from 501 to 1 500 rubles per unit);

The low price segment (less than 500 rubles per unit).

The figure below shoes the structure of the Russian cosmetics market by price segments:

Figure 3.2. Structure of the Russian cosmetics market by price segment, %

Source: www.advertology.ru

Thus, the largest cosmetics segment of the Russian market is the medium price segment.

Below are details on the ratio of price, product class and the most popular sales locations in this category:

Table 3.2. The ratio of price category, class production and sales locations

Price category	Class	Sales locations
Premium	Premium	Specialty stores
Premium	Professional	Medical centers, beauty salons
Medium	Medical	Pharmacies
Low, medium	Mass market	Supermarkets, specialty stores, pharmacies

Source: MegaResearch analysis based on open sources

As can be seen from the table, the most common sales channel for mass market cosmetics are supermarkets, pharmacies and specialty stores. Premium cosmetics are usually sold in beauty salons and specialty stores.

The existing sales channels for cosmetics

The largest sales channel for cosmetics are specialized chains (L'Etoile, Rive Gauche, Ile de Beauté) – they account for about 49.9% of total sales.

Figure 3.3. Cosmetics sales structure by distribution channel, %

Source: RBC.Research, Euromonitor, Association of direct sales

The second place is ...

The development of cosmetics e-commerce

In general, the volume of online sales in Russia amounted to 760 billion rubles in 2015. According to the head of AKIT, 57% of Russians aged 12 to 64 years uses the Web, while women are more active than men.

The major trends shaping the Russian e-commerce market in 2015 are the following:

The tendency of the formation of niche players;

Expected decline in cross-border trade;

The major players continue to develop retail networks along with e-commerce, thereby implementing multi-channel sales strategy;

Rapid development of mobile applications for e-commerce;

The ongoing trend toward mergers and acquisitions among the large, medium and small market players;

There is an increase in services for online stores, from payment to full outsourcing in the form of fulfillment;

The growing number of online supermarkets offering buyers a mixed range of products;

The impressive growth of the Internet audience in Russia followed by the growth of online retail customers make the Russian market attractive for the Chinese online stores (alibaba.com, jd.com, etc.);

The spread of the Internet is the main factor in the development of e-commerce in Russia. This trend will continue approximately for the next 5 years.

The Nielsen study showed that among the variety of goods available for purchase online, the Russians most inclined to purchase:

Clothing and shoes for adults (31.8%);

Phones, tablets and other electronics (25.4%);

Cosmetics, perfumery (21.7%);

Household appliances (20.4%);

Books, music and software (19.6%).

Figure 3.4. The share of cosmetics and perfumery in e-commerce, %

Source: The Nielsen Company

Selling cosmetics on the Internet in Russia only begins to take shape as a full-fledged market: cosmetic products fall into the category of goods which require a certain level of consumer confidence for its purchase. However, in the future this segment may be a point for rapid e-commerce growth in general.

According to estimates by InSales analysts, the total number of online stores in the category of “Cosmetics and perfumery” in RuNet at the moment is about 1500, for comparison, in the category of “Electronics/household appliances” it amounts to 6000 stores, “clothing/shoes” – around 5000 stores on the Web. That is, the cosmetics online segment can still grow.

The share of online sales in the total cosmetics market is about 5.3%.

Figure 3.5. The share of online sales in the total cosmetics market, %

Source: MegaResearch analysis based on open sources

In 2015, some changes took place in the cosmetics online segment: it became more civilized, there was a reduction in sales of low-quality products, and the consumer became more literate. Today, there is a shift from quantity to quality, when many projects in the cosmetics segment are developed as a complete classic online store thought out to the last detail. The specific feature of the Russian cosmetics online stores is that many of them sell niche products, most of which can only be bought on the Web. In this regard, online stores become responsible for creating a culture of consumption of a product and educating the consumer.

Competitive analysis

Assessment of the competitive situation on the market of cosmetic products

The Russian cosmetics market is attractive for new companies. The current economic situation is favorable for Russian producers, as prices of foreign producers have risen and consumer sentiment has also changed – consumers are increasingly giving preference to Russian goods.

The Russian cosmetics market includes the products of both Russian and foreign manufacturers, the share of the latter are about 70% of the total market. At the same time, most major international companies have their own production units in the territory of the Russian Federation, in connection with which the total amount of cosmetic products manufactured in Russia is 75% of the market volume.

Figure 3.6. The ratio of import products to products manufactured in Russia on the cosmetics market, %

Source: RBC.Research

The Russian cosmetics market is …

Table 3.3. Major body care brands in the Russian market

No.	Trademark/brand	Country of manufacture	The representative (branch) in the Russian Federation	Market share, %	Cosmetics class	Price segment

Source: Federal Customs Service, Federal State Statistics Service, MegaResearch analysis

As can be seen the table, the most popular body care brands are …

Figure 3.7. TOP 10 body care brands in the Russian market, %

Source: Federal Customs Service, Federal State Statistics Service, MegaResearch analysis

Top 10 largest body care brands occupy about **% of the Russian cosmetics market.

Analysis of 2 significant competitors. Company profile (description of activities, products, representation region)

For the competitive analysis 2 body care brands have been chosen: Black Pearl (manufactured by CONCERN KALINA, LLC) and GARNIER (manufactured by LOREAL, CJSC and other foreign companies).

Black Pearl (manufactured by CONCERN KALINA, LLC)

T he trademark was established in 1996, when the first Black Pearl face cream was manufactured based on the most advanced cosmetic ingredients. A year later, in 1997, the Black Pearl brand was enlarged with other skin care products and became a full complex for daily skin care. The company positions its products as high-quality cosmetics.

Table 3.4. Basic information on the Black Pearl brand (CONCERN KALINA, LLC)

Parameter	Description
Trademark (brand)	Black Pearl
Web-site	https://www.myblackpearl.ru, http://www.kalina.org/
Country of manufacture	Russia
Manufacturer	CONCERN KALINA, LLC (owned by Unilever Rus, LLC)
Product segments	Facial care cosmetics, BB-creams, body care cosmetics
Specialization	Anti-aging facial cosmetics

Source: ,

C osmetic products of the Black Pearl brand are produced at the Russian factory CONCERN KALINA, LLC, which is a leading manufacturer of cosmetic products on the Russian market. The product range of Concern Kalina consists of more than 1 000 names of facial, body, hand, hair and oral care products, as well as children's cosmetics. The number of factory employees is 2 000. Kalina products are supplied to all former Soviet Union countries, including the Baltic states, Belarus, Ukraine, Kazakhstan, Uzbekistan. Since 2011 Concern Kalina has been part of the Unilever global company.

GARNIER (manufactured by LOREAL, CJSC and other foreign companies)

The brand was established in 1904 in the city of Blois (in Сentral France) by Alfred Amour Garnier. Since then, the brand has borne the name of its founder.

G arnier creates advanced and affordable cosmetics to satisfy a plurality of self-care needs. Today, Garnier is the second largest brand of L'Oreal Group, whose cosmetics are sold in 64 countries around the world.

French mass market cosmetics brand Garnier was created in 1904, when the barber and haberdasher from the provincial town of Blois Alfred Amour Garnier manufactured the first product – hair lotion. He founded a company called Laboratoires Garnier.

Table 3.5. Basic information on the Black Pearl brand (LOREAL, CJSC)

Parameter	Description
Trademark (brand)	Garnier
Affiliated trademarks	Fructis, Nutrisse, Ambre Solaire, Color Naturals, Color Shine, Belle Color
Web-site	http://www.garnier.com.ru, http://www.loreal.com.ru/
Country of manufacture	France, Poland, Russia
Manufacturer	Russia – Loreal, CJSC, foreign ‑ L'OREAL PRODUKTION DEUTSCHLAND GMBH&CO.KG, KOSMEPOL SP.Z.O.O., etc.)
Product segments	Facial and body care products, deodorants, sunscreens, shampoos, hair dyes, conditioners
Specialization	Products for all purposes

Source: ,

Since the acquisition of the company by L'Oreal concern, the experts have called the mass-market brand Garnier one of the symbols of innovations in the cosmetics world.

Competitors’ sales channels for each product segment

According to the analysis of the distribution system of the manufacturers of two major cosmetics brands, the competing companies use a single distribution system for all product segments.

Organization of distribution channels for Black Pearl products is presented below:

Figure 3.8. Sales channels of Black Pearl products

Source: MegaResearch analysis

As seen in the figure, CONCERN KALINA, LLC supplies its products to wholesale warehouses and distributors, and those, in turn, distribute them to retail sales channels.

The distribution system of ...

Figure 3.9. Sales channels for Garnier products

Source: MegaResearch analysis

Comparison of competitors' products and prices to products of the Customer

Comparison of products and prices of the Customer to those of competitors is presented in the table below:

Table 3.6. Comparison of competitors’ products and prices to products of the Customer

No.

Eva product name (English)

Eva product name (Russian)

Analogue

Prices (wholesale), rub./unit

Black Pearl

Garnier

Eva

Black Pearl

Garnier

eva collagen skin clinic

1 846,6

152,5

310,9

Sources: MegaResearch analysis

The analysis showed that the Customer's products are in a higher price segment, compared to competitors' products.

Consumption analysis

Assessment of consumption dynamics in 2015-2017.

According to many experts, the Russian cosmetics market is one of the most attractive and fastest growing in the world. Even despite the economic difficulties, the fall of the ruble and sanctions, the cosmetics market continues to grow, albeit at a slower pace. This can be attributed to several factors:

manufacturers instantly respond to crises, create a flexible system of discounts and bonuses, optimize their inventories, reduce advertising budgets and adjust their product range;

many companies realizing the decline of household incomes, entered the mass market, creating products at more attractive prices;

the main players in the market have powerful research departments, which create a host of new products using new technologies;

the target audience of cosmetic products are mostly women, who do not want to save on their beauty and in hard times buying cosmetics is a kind of antidepressant for them.

All these factors help the cosmetics industry to pass through times of crisis.

On the basis of the current market situation and trends MegaResearch analysts have drawn up a forecast of volume and dynamics of the Russian cosmetics market in 2015-2018 (in retail prices):

Figure 3.10. Forecast of volume and dynamics of the Russian cosmetics market for 2015-2018 (in retail prices), bln rub.

Source: MegaResearch analysis

It is expected that in connection with a reduction in the general purchasing power of the population and an increase in retail prices for cosmetics the Russian cosmetics market will grow by an average of 2-3% in 2016-2018. The main trends of development of the market in this period will be as follows:

a reduction in demand for premium products and an increase in demand for mass-market and medium-price products;

an increase in retail prices of cosmetic products due to an increase in prices of imported cosmetics and raw materials for its production due to an increase in exchange rates;

further strengthening of the influence of specialized and mono-brand stores selling natural cosmetics.

Consumption structure by product segment

Considering the cosmetics market, it is important to note how sales is distributed within a given market, that is by segments. The figure below shows the structure of retail sales of cosmetics by product segment in 2015:

Figure 3.11. Structure of consumption of cosmetic products by product segment, %

Source: Euromonitor, ADIndex

Thus, the most popular product segment among Russian consumers is …

Consumption structure by consumer type

The main categories of consumer of body care cosmetics are:

women – **%;

men – **%;

children – **%.

Figure 3.12. The structure of the consumers of body care cosmetics in the Russian market, %

Source: http://rosinvest.com/

At the same time, women are more likely to be responsible for the purchase of beauty products in the family. According to a survey conducted by FDFgroup, 76% of women consider themselves to be the main buyers of these products in the family. Among men, only 37% are responsible for the purchase of cosmetics in full, 31% of men are the buyers along with other family members, and 30% of men admitted that this part of expenses is borne by other family members.

The most promising consumer segments

The most promising consumer segments in terms of the frequency of consumption and purchasing power are women aged 25-45 years with an income above average. This type of buyer takes good care of its appearance and even in times of crisis is not willing to skimp on care products.

Another promising segment in terms of market participants are men aged 16-40 years: men's cosmetics are one of the fastest growing segments of the cosmetics market with annual growth of about 7-10%. The main consumers of cosmetics are students and office workers aged 16-25 years. Men aged 20-30 are more likely to buy tonics, face masks, and men over the age of 40 prefer lotions and sunscreens.

ORGANIZATIONAL STRUCTURE

Staffing plan

While establishing staff schedule of the production facility we have been guided by project concept, scope of main commercial and auxiliary procedures.

The following structural subdivisions have been created in the staff schedule:

Administartive and management personnel;

Sales personnel.

Salary fund has been formed in the calculations of business-plan based on working conditions of the departments related to above mentioned structural subdivisions:

Table 4.1. Formation of salary fund and staff schedule of the enterprise, thousands of rubles.

No.	Position description	Number of employees	Salary per one employee, thousands of rubles/month	Total salary fund, thousands of rubles
1	Administrative and management personnel
1.1	Director
2	Sales personnel
2.1	Purchasing manager
2.2	Sales manager
	Total

Source: analysis and calculations performed by MegaResearch

Thus, with total number of company’s employees – 4 persons, monthly salary fund will be equal to 175 thousands of rubles. Staff recruitment is being performed gradually starting from the middle of August, 2016 till the beginning of September, 2016. The structure of monthly salary accounting is indicated in figure below.

Figure 4.1 Structure of monthly salary distribution

Source: analytics of MegaResearch

Thus, 60 % of monthly salary fund is payment for labor of sales personnel.

Project scheduled plan

Project implementation stages are indicated in table below:

Table 4.2 Project implementation schedule

Project stage	Beginning of works	Duration, days	End of works
Reasoning of investment project and managerial solution
Receipt of financing
Office rental
Supply of equipment
Personnel recruitment
Goods order and shipment to warehouse in Moscow
Online store creation
Conclusion of wholesale agreements
Putting the enterprise in operation

Source: analysis and calculations performed by MegaResearch

The graphic form of project implementation schedule is shown in figure:

Figure 4.2. Project implementation schedule

Source: Customer’s data

Thus, according to the project the beginning of works is scheduled for …

Sources, forms and conditions of financing

Loan funds – bank credit (48%) as well as investors’ capital is planned to be used within the project. Credit is expected to be used for purchase and delivery of the first batch of goods and etc.

Figure 4.3 Structure of investment project financing

Source: analytics of MegaResearch

Bank interest rate on the credit is 15.00%. Loan funds are credit for the period of 3 years.

Table 4.3. Credit conditions

Credit conditions	Unit of measurement	Values
Annual interest rate, %	%	15.0%
Limit for credit payment	months	36

Source: analysis and calculations performed by MegaResearch

Total amount of accrued interest rates on the credit is 1 926 thousand of rubles.

PRODUCTION PLAN

Estimation of marketing operations’ cost

The main items of expenses while performing marketing operations of goods are:

Expenses on first batch purchasing;

Expenses on goods shipment from Egypt to Moscow;

Expenses on customs clearance, declaring, payment of state fees and VAT.

The estimation of marketing operations for the first batch of goods is indicated in table below:

Table 5.1 The estimation of marketing operations for the first batch of goods, thousands of rubles

No.	Expenses	Cost, thousands of rubles
1	Goods purchasing
2	Customs duty
3	Transportation services
4	Goods’ customs clearance, preparation of certificates
5	Salary
6	Marketing measures
7	Office and warehouse rental
8	Courier service
9	Accounting business services (outsorcing)
10	Website maintenance
11	Catalogues printing
12	Printing of labels
13	Stationery expenses
14	Free samples of goods to beauty-bloggers
15	Communication and Internet
16	Customs administration specialist
17	VAT for import
	TOTAL

Source: analytics of MegaResearch

Thus, the largest share of expenses falls to purchasing of goods batch. The structure of expenses is indicated in figure below:

Figure 5.1 Structure of expenses for first batch marketing, %

Source: analytics of MegaResearch

Consequently, item “Goods purchasing” comprises 69% of total structure of expenses. The second place takes - VAT – 14%.

Cost estimation for website creation and promotion

Costs for website creation are indicated in table below. Price-list was provided by DesignB2B-CMS Company. More detailed description of each item can be found in Annexes 8.2 and 8.3 to the present Business plan.

Table 5.2 Price-list for services on website creation and promotion, rubles.

No.	Description of services	Cost, rubles
1.	Development of technical requirement
2.	Hosting – represented by Contractor
3.	Domain name- Registration is required
4.	Website design – Individual design
5.	Section “News” – List of news
6.	Section “Products”- Online store
7.	Additional parameters for flypage – Latest offer, Bestseller, Bargain
8.	Additional parameters for flypage – Comparison of goods
9.	Additional parameters for flypage – Image Gallery
10.	Contact form - "ask a question"
11.	Feedback form - "send a request"
12.	Catalogue updating – based on downloading of Excel template
13.	Static text pages – text pages
14.	Copywriting – texts for site
15.	Integration with social networks - example: vkontakte, odnoklassniki, twitter
16.	Site map – Site structure
17.	Logotype – logotype development (single concept)
18.	Feedbacks – list of feedbacks
19.	Contact form - "call back"
20.	Publication of content on the website - Publication of content on the website (not more than 100 pages)
21.	Online consultation - Marva.ru
22.	Payment via payment systems - bank card.
23.	Responsive design - Responsive design for 320х240, 1024х768 (tablet, iPad)
24.	Inside website optimization – As a part of website creation
25.	Location map – Location map (Yandex or Google maps)
26.	Section “Questions and answers”- List of questions with answers
27.	Section "Certificates" – List of certificates’ photos
28.	Social networks widgets – Widgets of VKontakte Group
29.	Social networks widgets – Widgets of Facebook Community
30.	Social networks widgets- Widget Odnoklassniki
31.	Feedbacks writing in response to order - 8 feedbacks
32.	Integration with Yandex.Market – for Online store
33.	Opt-in – customer data base collection
34.	Favicon - Bonus
35.	Corporate e-mail – assistance in mail settings
36.	Access counter – Installation of Yandex.Metrika
37.	Social networks widgets – Widget Instagram
	TOTAL

Source: quotation from DesignB2B-CMS

Thus, total cost of investments for website creation is 330 thousands of rubles.

The cost required for Online store promotion on the Internet is shown in the table below.

Table 5.3 The cost of Online store promotion on the Internet

Service description	Expenses. rubles
Instagram tariffs - Tariff: Instagram Premium
Instagram tariffs - Tariff: Instagram VIP
Design Contract, Odnoklassniki – Market Package
Maintaining a Group in Odnoklassniki – Package Economy
Set a class Odnoklassniki.ru - 500
Maintaining a Group in VK – Package All inclusive Daily news publication in a group (from 3 to 5 publications a day)
Target campaign Vkontakte.ru
Target campaign Odnoklassniki.ру

Source: quotation from DesignB2B-CMS

Estimation of expenses for offices and premises

Premises rental for office and warehouse is a necessary item of monthly expenses for business administration. It has been revealed in the course of expert interviews with lessors of business premises that for the present project implementation an office premises with total area up to 60 m2 will be considered as sufficient one. A great number of offers on office rental are displayed on web portal https://realty.yandex.ru. An average cost of rental in Moscow is 90 thousands of rubles a month.

Materials and components

The main required components for the project are cosmetic products of Eva Cosmetics Company. Initially it is planned to purchase products of total cost about 7.5 millions of rubles. According to performed financial analysis the given volume of cosmetic products is considered as appropriate for putting an enterprise into operation and sales startup.

Issues of goods logistics

Corporate carriers offer a number of freight transport types from Egypt to Moscow:

Air transportation

Air transportation is the fastest and most convenient way of freight carriage upon delivery at long distances. It is possible to ship goods on a precise agreed date when transporting goods with the use of this means. However, air transportation is most expensive delivery method among other ones.

Transportation by sea

Transportation of goods by sea takes a longer period of time than air transportation. However, it is substantially cheaper. As a rule, transportation by sea is proposed alongside with air carriage (goods are transported by sea to a port in Russia, and afterwards delivery of goods to customer location is performed by freight cars.

Transportation by road

Freight carriage by automobile vehicles is the most time consuming delivery method.

In table below one can see the data on cosmetics products delivery from Egypt to Russia as per transportation means.

Table 5.4 Volume of imported cosmetics products from Egypt to Russia on a carriage-specific basis, 2015

Transportation method	Net weight, kg	Statistic cost, US dollars
Transportation by sea
Combination of transport vehicles (tractor-trailer or semitrailer)
Railway transport
Air transport

Source: Federal Customs Service of RF

As it is evident from table above the most popular transportation method is transportation by sea with a share of 85% in value form. It is worth mentioning that in volume terms the largest volume of imported products has been transported by automobile vehicles.

Within this project it has been expected to perform delivery using transportation methods by sea and road. Transport and logistics company “RUSWAYNORD” has evaluated the cost of initial carriage of goods at a cost of 5 770 US dollars (approximately 375 thousand of rubles). This cost has been included in project investments. Logistics average cost is about 5% from the goods cost.

FINANCIAL PLAN

Basic data and assumptions

Assumptions admitted in the project are described below.

Product assumptions

The main products of the project are cosmetic care products.

Price assumptions

An average retail margin for products in amount of 70% has been accepted in the project.

Assumptions on volume of purchases

It is expected to purchase goods twice a year within the project. Minimal batch size for enterprise startup is 7.5 million of rubles.

Assumptions on investment expenses

Investment expenses are divided into 5 categories:

Preparation works;

Website creation and promotion;

Machinery and equipment;

Additional expenses;

Current assets.

Forecast profit and loss calculation on current company activity up to the moment of financial viability has been carried out in order to define the amount of necessary initial current capital.

Assumptions on need for initial current assets

In order to calculate initial current assets an analysis of necessary resources list for entire activity within the project has been performed. The following types of expenses has been included in the list:

Cost of initial batch of goods;

Other expenses.

Assumptions on discount rate

Discount rate in amount of 15.88% a year has been accepted in the project. Below you will find the reasoning of such index calculation.

Build-up method is based on summing up of risk-free income rate and investment risk premium for the enterprise being evaluated. The method includes in the best way all risk types of investments related to factors of common for this branch and economics nature and for specific nature of evaluated enterprise as well. Calculations are made according to formula:

where r – discount rate; rb – basic (risk-free or least risky) rate; Ri – premium for i-type risk; n – number of premiums for risk. Let us introduce below the calculation with the use of described method.

Table 6.1. Defining of equity capital cost

Constituents	%
Amount of risk-free rate*
Amount of country risk adjustment
Amount of branch risk adjustment
Amount of other risk adjustment
Equity capital cost

Source: analysis and calculations performed by MegaResearch

Further a discount rate has been defined therefrom.

Table 6.2. Defining of discount rate

Constituents	%
Equity capital share
Loan capital share
Tax
Equity capital cost
Loan capital cost
Total discount rate

Source: analysis and calculations performed by MegaResearch

Thus, expert calculation of discount rate has comprised 15.88% of yearly amount.

Assumptions on revenues, profit and loss statements and cash flow

In order to formulate plans of revenue, profit and loss statements and cash flow all above indicators have been used.

Investment expenses

Capital expenses which will be required for business administration are indicated in table below:

Table 6.3 Project investment expenses, thousands of rubles

No.	Capital expenses	Price, thousands of rubles	Quantity	Cost, thousands of rubles
1	Preparation works
1.1	Development of project business plan
2	Website creation and promotion
2.1	Website development (Online store)
2.2	Website promotion
2.3	Initial marketing campaign
2.4	Preparation of working places
3	Machinery and equipment
3.1	Computer
3.2	Printer
3.3	Cash register
4	Additional expenses
4.3	Unforeseen expenses (10%)
5	Current assets
5.1	Initial purchase of goods, expenses on customs clearance, logisctis, VAT, customs fees
Total capital expenses
Cash flow deficiency payments
Total project investments

* Data are subject to changes in the course of project development and materials purchase.

Source: analysis and calculations performed by MegaResearch

The structure of investments types for project implementation in indicated in figure below:

Figure 6.1 Structure of project investments, %

Source: analysis and calculations performed by MegaResearch

As diagram shows expenses on purchasing, current assets (63%) and website creation and promotion make up the largest part of project investments.

Need for initial current assets

Need for initial current assets consists of expenses related to enterprise operation during the first month.

Table 6.4 6.3 Need for initial current assets, thousands of rubles

No.	Raw materials purchasing	Expenses, thousands of rubles
1	Printing of labels
2	Goods purchasing
3	Transportation services
4	Customs clearance, certificates preparation
5	Marketing measures
6	Courier services
7	Customs duty
8	VAT
	TOTAL

Source: data of Project promoter, analysis of MegaResearch

Current assets are included in investment expenses of the project and comprise 10 502 thousands of rubles, which makes for 33% of the aggregate amount of capital investments.

Tax liabilities

General taxation system is expected to be applied in the project (usually called as GTS), where it is taken to mean tax payment mode, established for organizations with different business legal structures. Enterprises which use GTS shall perform complete record-keeping with the use of all business accounts and analytics and sub-accounts as well. Besides, such organizations shall fill in tax registers in numbers not exceeding one hundred. The main taxes of the mode are shown in table 6.5:

Table 6.5 Tax environment at GTS

Period	Rate
Tax on income
Salary fund
Insurance contributions into pension fund of RF
Social insurance fund RF
Federal compulsory medical insurance fund
VAT
Customs duty

Source: Tax Code of RF

Besides, monthly contributions shall be made into pension fund, and individual data reporting shall be submitted not later than the 20th day of the month following the accounting month.

Operational expenses (fixed and variable)

Project expenses not influenced by changes in volume of sales and services rendering are considered as fixed operational expenses. They usually include maintenance and administration costs. The main fixed operational expenses are indicated in table:

Table 6.6 Fixed operational expenses, thousands of rubles

No.	Index	Expenditure	Thousands of rubles per a month
1	Salary	List “Personnel”
2	Accounting business services (outsourcing)	15 thousands of rubles per month
3	Customs administration specialist	40 thousands per year
4	Communication and Internet	7 thousands of rubles per month
5	Stationery expenses	10 thousands of rubles per month
6	Office and warehouse rental	In average 85 thousands of rubles per month
7	Catalogues printing	12 thousands of rubles per month
8	Free samples of goods to beauty-bloggers	10 thousands of rubles per month
9	Website maintenance	15 thousands of rubles per month
	TOTAL

Source: analysis and calculations performed by MegaResearch

Variable project expenses are expenses which are directly influenced by the volume of services rendered.

Table 6.7 Variable project expenses, thousands of rubles

No.	Raw materials purchasing	Calculation method	Annual expenses for 2021, thousands of rubles.
1	Label printing	0.7 rubles for a label
2	Goods purchasing	Retail margin for goods is 70%
3	Transportation services	Delivery from Cairo to Moscow costs 375 thousand of rubles (about 5%)
4	Customs clearance of goods, certificates preparation	About 3% from purchase volume
5	Marketing measures	4% from revenue
6	Courier services	2% from revenue
	Total

Source: analysis and calculations performed by MegaResearch

Variable expenses are adjusted according to volumes of sales and services rendered.

Sales plan

It is expected to purchase goods twice a year. It is expected to increase volumes of sales annually. Dynamics of goods purchase is shown in figure below.

Figure 6.2 Annual dynamics of goods purchasing, %

Source: analytics of MegaResearch

In future it is possible to increase the volumes of sales in similar way as for indicated years.

Revenue calculation

Revenue calculation is formed based on purchase plan of products. Revenue plan for the first years of sales is shown in table:

Table 6.8 Revenue plan by years, thousands of rubles.

Period
Revenue

Source: analysis and calculations performed by MegaResearch

In future it is possible to increase the volumes of revenue in similar way as for indicated years.

Profit and loss statement forecast

Profit and loss statement on annual basis is shown in table:

Table 6.9 Profit and loss statement, thousands of rubles

Item of incomes/expenses
Sales revenue
Variable expenses
Gross profit
Fixed expenses
Expenses during initial period
Taxes (exclusive of tax on income)
EBITDA
EBITDA, % (to the revenue) average
Fixed assets depreciation
EBIT
Payment of interests on credit and loans
Income (loss) prior to taxation
Tax on income
Retained profit
Retained profit on an accrual basis
Payment of credit debts
Net profit
Return on sales

Source: analysis and calculations performed by MegaResearch

Cash flow forecast

Cash flow forecast on annual basis is shown in table below. Cash flow forecast on monthly basis is shown in Annex.

Table 6.10 6.9Cash flow forecast, thousands of rubles

CASH FLOW FROM INVESTING (CFI)
Capital investments
CASH FLOW FROM OPERATIONS (CFO)
Total revenue
Total expenses
Variable expenses
Fixed expenses
Taxes and payments accrued
Payments of interests on credit
CASH FLOW FROM FINANCING (CFF)
Equity capital
Loaned capital
Payment of main debt
Net cash flow (NCF)
NCF on an accrual basis

Source: analysis and calculations performed by MegaResearch

Project performance analysis

Methods for project performance evaluation

Evaluation of investment projects is performed according to the following core indicators:

Net present value, NPV

Profitability index, PI

Payback period;PBP

Discounted payback period, DPBP

Internal rate of return, IRR

Project performance indicators

Performance indicators of investment project make it possible to define efficiency of capital investment in one or another project. The following performance indicators of investment projects have been used during the analysis of investment projects performance: Net discounted (adjusted) income (cash flow); Net present value, NPV; Payback period (term), PBP; Discounted payback period, DPBP; Internal rate of return (profitability), Internal rate of investment return IRR (modified internal rate of investment return), MIRR); Profit investment ratio, Profitability index, productivity index, PI.

Net present value (NPV)

Net discounted (adjusted) income (Net present value) (common abbreviation — NPV) is a sum of simultaneously discounted differences between benefits and costs of the project. NVP is the amount of cash flow (cash inflows and payments) related to operational and investment activity, which were adjusted upon the beginning of investments execution.

Net present value (NPV) shall be calculated according to formula 1.

(1)

where i — discount rate;

CFt – net cash flow for period t;

T – duration of the project in periods.

NPV calculation is a typical method of investment project performance evaluation. It indicates the estimation of project performance from investments, adjusted for the present moment and taking into account different time value of money. If NPV is higher than 0, then such investment is considered profitable, and if NVP is less than 0, then such investment is considered unprofitable.

NVP also can be used to estimate the efficiency of alternative investments (with similar initial investments a project with higher NVP is consider more profitable).

Advantages of NPV:

Well-defined decision-making criterion

Indicator includes time value of money (discount coefficient is used in formulas).

Disadvantages of NPV:

Indicator does not include risks.

Probable event results are not considered as all cash flows and discount coefficient are predicted values.

Internal rate of return (IRR)

When dealing with non-uniform cash flows as in the considered project a corresponding IRR analogue can be used - modified internal rate of investment return (MIRR).

According to calculation algorithm it is possible to perform several procedures. First of all an aggregate discounted sum of all outflows and aggregate accreted sum of all inflows are being calculated, where discounting as well as accretion is performed at a price of project financing source. Accreted inflow cost is called as terminal value. Afterwards we determine discount rate equalizing aggregate adjusted outflow value to terminal value, which in this case is exactly MIRR. Thus, common formula for calculation can be presented as:

(2)

where OF, — money outflow in N period (according to absolute value);

IF, — money inflow in N period;

г —value of the project financing source;

п — project duration.

Note that the formula has a meaning if terminal value exceeds the amount of discounted outflows.

Profitability index (PI)

Profitability index (PI) is a net present value of cash receipt from the project (NPV) per a unit of investments. It indicates relative project profitability.

Profitability index (PI) is calculated according to formula 3.

(3)

PI values:

PI shall exceed the value 1 in order the project will be effective.

Profitability indices of discounted expenses and investments exceed the value 1 if NPV is positive for this flow.

Payback period (PBP)

Payback period (PBP) is an expected period of initial investments return out of net cash receipts. It is the time required for receipts from enterprise business activities to exceed expenses on investments.

Payback period (PBP) is calculated using formula 4.

PBP= Investments/ACF (4)

where Investments – initial investments;

ACF – Annual Cash Flow (average annual net cash flow).

Discounted payback period (DPBP)

Discounted payback period (DPBP) is a period of return (see above) but taking into account discounting.

Discounted payback period (DPBP) is calculated using formula 5.

(5)

where t — , t + - period, during which negative and positive NVP was observed.

6.10.2 Project performance analysis

The main financial indicators are shown in table below.

Table 6.11 Investment performance indicators

Investment performance indicators
Calculation period (planning time-frame), month
Net value (NV), thousands of rubles
Net present value (NPV), thousands of rubles
Internal rate of return (IRR), % per year
Profitability index (PI), unit
Payback period (PBP), month
Discounted payback period (DPBP), month
Project investments, thousands of rubles
Average profitability of project sales, %
Net profit (accumulative), thousands of rubles
Discount rate, %

Source: analysis and calculations performed by MegaResearch

The results of the research show that the project is a profitable one. It’s payback period is 2.33 year. Net project value will be approximately 38 million of rubles till 2021. The curve of NVP of project is indicated in figure below.

Figure 6.3 NVP project curve

Source: analysis and calculations performed by MegaResearch

The curve shows the increase of net adjusted project value by years of its implementation.

Net present value, NPV, equal to 12.07 millions of rubles by the end of the period, demonstrates the cash value which will be received by investor from the project after cash inflows will cover his initial investments expenses and temporal cash outflows related to project implementation taking into account time value of money and project risks.

Internal rate of return comprised 74%, which is substantially higher than discount rate (15.88%). It is a good indicator for similar projects.

PI indicator, equal to 1.7 of unit means that by the end of 2020 each invested ruble of the Investor will be paid back for 1.7 rubles (taking into account discounting)

.

Project risks analysis

Quantitative risk analysis

Project sensitivity to changes of external market conditions is shown in table below:

Table 7.1 Sensitivity analysis

Indicator
Basic value
Deviations
Decrease of total revenue for 10%
Increase of investment expenses for 10%
Increase of variable expenses for 10%
Increase of fixed expenses for 10%

Continuation

Indicator
Basic value
Deviations
Decrease of total revenue for 10%
Increase of investment expenses for 10%
Increase of variable expenses for 10%
Increase of fixed expenses for 10%

Source: calculations of financial model

The results of performed analysis show that the project depends on total revenue and on changes of variable expenses. Project financial indicators are less dependable on changes in fixed expenses, which demonstrate a larger share of variable expenses in general expenses scheme.

Project breakeven point

Breakeven point defines the volume of sales necessary for loss-free enterprise operation so that it will be able to cover all expenses without profit receipt. In order to calculate breakeven point it is necessary to divide all expenses into three constituent parts:

Variable expenses — increase proportionally to production growth (volume of services rendered)

Fixed expenses — do not depend on the amount of services rendered ( (goods sold) and on the fact whether extent of business operation increases or decreases.

Social payments.

Breakeven point calculation for the present company will have the following view:

Figure 7.1 Project breakeven point, thousands of rubles

Source: analysis and calculations performed by MegaResearch

Breakeven point is held to be of great importance when considering the matters of company’s stability and financial solvency. Thus, the extent to which volumes of sales exceed breakeven point defines financial strength (stability factor) of the enterprise.

Thus, project breakeven point will comprise 1 108 thousands of rubles in value terms

.

ANNEXES

Cash flows on a monthly basis

Jan.16

Feb.16

Mar.16

Apr.16

May.16

Jun.16

Jul.16

Aug.16

Sep.16

Oct.16

Nov.16

Dec.16

CASH FLOW FROM INVESTING (CFI)

Capital investments

CASH FLOW FROM OPERATIONS (CFO)

Total revenue

Total expenses

Variable expenses

Fixed expenses

Taxes and payments accrued

Payments of interests on credit

CASH FLOW FROM FINANCING (CFF)

Equity capital

Loaned capital

Payment of main debt

Net cash flow (NCF)

NCF on an accrual basis

Cash balance at the beginning of period

Cash balance at the end of period

Net present value (NPV)

NPV on an accrual basis

Price-list for website creation and promotion services

No.	Service description	Cost, rubles
1.	Development of technical requirement Detailed description of website structure and services, CMS (management system) structure development
2.	Hosting - represented by Contractor Hosting is a service on website allocation on the server which is connected via fast communication channel to Internet Network with complete maintenance. Allocation on company hosting for the first year is provided FOR FREE.
3.	Domain name- Registration is required Domain (domain name) is your website name in Internet Network (for example, www.designB2B.ru). Domain name shall be of descriptive nature, i.e. reflects the business core, awakes interest therein and be focused thereon. The shorter domain name is, the better it is (easier to remember).
4.	Website design – Individual design portfolio: http://designb2b.ru/portfolio Example: http://designb2b.ru/
5.	Section “News” – List of news Format: data, name, photo, description
6.	Section “Products”- Online store Website services: registration before order sending, adding an item to the shopping cart, automatic recalculation of final cost based on the quantity.
7.	Additional parameters for flypage – Latest offer, Bestseller, Bargain
8.	Additional parameters for flypage – Comparison of goods
9.	Additional parameters for flypage – Image Gallery More than 1 photo to one good item.
10.	Contact form - "ask a question" Fields: full name, phone, e-mail, authentication code, question text The form is a list of fields for filling by website visitors. Requests/questions are sent by e-mails and duplicated in administrative section.
11.	Feedback form - "send a request" Fields: full name, phone, e-mail, authentication code, question text The form is a list of fields for filling by website visitors. Requests/questions are sent by e-mails and duplicated in administrative section.
12.	Catalogue updating – based on downloading of Excel template Template is used for prompt price updating, adding new goods, editing of previously posted goods in the catalogue. Customer creates a template of catalogue on his own in form of xls-file. Template shall contain the following data: item number of column/sub-column, part number of goods, goods description, notice, full text, price. Photos shall be downloaded to every good item by the Customer. Template view itself shall be agreed at the stage of technical requirement writing. Procedure for data updating: Updating of all goods according to part number in the xls (catalogue of goods has been updated in full, photo of goods therewith remain); If any part numbers are missing in the xls template, then such items remain on the site (they are deleted manually); 3) If new part numbers appear in the template, such items are added on the site (photos are downloaded manually).
13.	Static text pages – text pages Any number of text pages can be created in frame of this service (all information is posted on one page). It is possibly to create additional text pages by one own. All pages are simple text pages (for example, job opportunities: all job opportunities with description are posted on one page. Every job position does not occupy a separate page with a detailed description). Within the module the following pages are created: 1) About company 2) Our advantages 3) Price-list (file with prices) 4) Contacts 5) Other pages
14.	Copywriting – texts for site Writing, editing or retyping of texts for website pages. Our editor will prepare unique texts for website sections by his own. Total scope does not exceed 10 000 characters with spaces.
15.	Integration with social networks - example: vkontakte, odnoklassniki, twitter “Share” links are allocated on pages with description of goods (not more than 10 social networks).
16.	Site map – Site structure Website structure in tree view is displayed on the page (list of section links) with possibility to jump to certain page
17.	Logotype – logotype development (single concept) Logotype version is developed based on the brief filled by Customer. Introduction of improvements is possible. Brand book is created for logotype (recommendation on brand book use and application). Logotype is presented in ai format.
18.	Feedbacks – list of feedbacks List of feedbacks on company operation and products. All feedbacks are posted by website administrator. Feedback format: feedback text, full name of the person who leaves a feedback.
19.	Contact form - "call back Fields: full name, contact number, convenient type for calling. The form is a list of fields for filling by website visitors. Requests/questions are sent by e-mails and duplicated in administrative section.
20.	Publication of content on the website - Publication of content on the website (not more than 100 pages) All materials are provided by the customer. Format of data submission: Texts – DOC, XLS, TXT, HTML; Graphics - TIF, PSD, JPG, GIF, CD
21.	Online consultation - Marva.ru Information: http://marva.ru/products-ru/
22.	Payment via payment systems - bank card. The customer concludes an agreement with payment system on his own and provides codes for posting on the site together with instruction.
23.	Responsive design - Responsive design for 320х240, 1024х768 (tablet, iPad) Responsive design is a webpages design (website) ensuring good readability from different devices (smartphones, tablets, laptops). Responsive design is automatically adjusted to dimension (resolution) of the screen of the device used for accessing a website. In other words, if website is viewed from home computer, tablet or phone, webpages are seen in different ways. Therewith, there are no scroll bars and scaling problems. Resolutions: 320х240 (smartphone/phone), 1024х768 (tablet, Ipad)
24.	Inside website optimization – As apart of website creation Set of measures performed in accordance with requirements of search engines and designed for improvements of indexing movement and site visibility in search engine results.
25.	Location map – Location map (Yandex or Google maps) Posting of one office location
26.	Section “Questions and answers”- List of questions with answers Question text, answer text.
27.	Section "Certificates" – List of certificates’ photos When clicking on certificate preview a larger sized image is opened.
28.	Social networks widgets – Widgets of VKontakte Group Social networks widgets on the website can be used for different purposes. Among the most common widgets which are built up on the site are community widgets so that visitors can subscribe for updates or track company news and comments widgets – as most Internet users are registered in one or another social network, it doesn’t not require filling of additional fields, which is convenient while commenting the materials. Example: http://designb2b.ru/files/vk-group.jpg
29.	Social networks widgets – Widgets of Facebook Community Social networks widgets on the website can be used for different purposes. Among the most common widgets which are built up on the site are community widgets so that visitors can subscribe for updates or track company news and comments widgets – as most Internet users are registered in one or another social network, it doesn’t not require filling of additional fields, which is convenient while commenting the materials. Example: http://designb2b.ru/files/vk-group.jpg
30.	Social networks widgets- Widget Odnoklassniki Social networks widgets on the website can be used for different purposes. Among the most common widgets which are built up on the site are community widgets so that visitors can subscribe for updates or track company news and comments widgets – as most Internet users are registered in one or another social network, it doesn’t not require filling of additional fields, which is convenient while commenting the materials. Example: http://designb2b.ru/files/vk-group.jpg
31.	Feedbacks writing in response to order - 8 feedbacks There is a service on writing professional feedbacks and comments on the website of any subject-matter. Convincing and trustworthy post; Realistic and compact story; Text in volume up to 500 symbols; Plain colloquial, emotional language; Absence of over criticism of competitors.
32.	Integration with Yandex.Market – for Online store Integration of Web-shop with Yandex.Market is an excellent way to attract target customers. Your Online store settings and its integration with Yandex.Market system is an efficient way to offer products to target customers which have been by now ready to buy products online.
33.	Opt-in – customer data base collection Subscription form with fields: Full name* e-mail* phone city The form is used in order to collect subscribers’ data base.
34.	Favicon - Bonus Favicon (abbreviated from FAVorites ICON) — website or webpage icon. It is displayed by browser in address bar before URL of the page and as an icon near register tab in tab cards and other interface components.
35.	Corporate e-mail – assistance in mail settings Service “Assistance in setting of corporate ”Yandex Mail” includes: Creation of account on yandex.ru; Setting up of mail boxes at domain – not more than 10.
36.	Access counter – Installation of Yandex.Metrika
37.	Social networks widgets – Widget Instagram
	TOTAL

The cost of Online store promotion in Internet Network

Service description	Expenses. rubles
Instagram tariffs - Tariff: Instagram Premium Optimization and settings up of Instagram maintaining: - Daily publications – Spam cleaning – Creation of unique Instagram content plan – Copywriting - Competitor analysis and subscribers interception - Holding of 1 contest – Creation of one-page Instagram mobile website – Processing of potential target audience (number of persons) of 5000 persons
Instagram tariffs - Tariff: Instagram VIP Optimization and settings up of Instagram maintaining: - Daily publications – Spam cleaning – Creation of unique Instagram content plan – Copywriting - Competitor analysis and subscribers interception - Holding of 1 contest – Individual account creation - Creation of one-page Instagram mobile website – Processing of potential target audience (number of persons) of 7000 persons
Design Contract, Odnoklassniki – Market Package It structures a group in order to increase sales, design of avatar group, banner menu, design of main menu, interior page layout: pictures, tables, headings, contact data page
Maintaining a Group in Odnoklassniki – Package Economy News content, creation of discussions, answers to comments, spam cleaning, creation of market texts, survey holding, optimization of group in Odnoklassniki in order to increase sales
Set a class Odnoklassniki.ru - 500
Maintaining a Group in VK – Package All inclusive Daily news publication in a group (from 3 to 5 publications a day) creation of discussions, answers to comments spam cleaning creation of market texts, goods overview audience survey group optimization for sales increase development of sales promotion concepts, contest holding monthly reports of worked performed, recommendations SMM consulting
Target campaign Vkontakte.ru (scheduled 1000 jumps, 1000, scheduled 1 000 000 appearances)
Target campaign Odnoklassniki.ру (scheduled 1000 jumps, scheduled 5 000 000 appearances)
Target campaign service includes:
1. Development of custom-made offer for specified target audience. You can choose whom an advertisement will be shown: according to gender, age, city or region, interests, positions (VKontakte) and branches.
2. Development of announcements and its approval
3. Running an advertising campaign — announcement start, click and appearance analytics , CTR, post-analytics of advertising campaign, reporting on results and current process reporting
You will benefit:
1. Jumps to the website or group only from your target audience
2. Experiences specialist in targeted promotion. General experience rate: 800 000 jumps to website/customer groups.
3. Savings on advertisement — at the expense of automation aids (proprietary solutions tracking advertising campaign in online mode)

44