1. A
BUSINESS PLAN ON
PAPER BAGS
PREPARED BY:
Vadher Bhavesh J.
(ENRL. NO. 117360592053)
M.B.A. Sem.-III
Year- 2012-13.
SUBMITTED TO:
Prof. Dr. Rajesh Patel.
INSTITUTE:
N.R. Vekaria Institute of Business Management Studies, Junagadh.

2. STUDENT DECLARATION
I the undersigned Vadher Bhavesh J. student of M.B.A. (Sem-III of N.R. Vekaria
Institute of Business Management Studies – Junagadh), hereby declare that this
BUSINESS PLAN is the record of authentic work carried out by my own efforts, under the
guidance of Prof. Dr. Rajesh Patel during the academic year 2012-13.
Place:-Junagadh.
Date: -
Your sincerely,
(Vadher Bhavesh j.)
2

3. INDEX
SR. P ARTICULAR P AGE
NO. NO.
1 Executive summery
2 Business plan at a glance
3 Management setup
4 Vision
5 Mission
6 Justification of location
7 Raw materials
8 Machines
9 Product details
10 Market potential
11 Manufacturing process
12 Organization structure
13 SW OT analysis
14 Production capacity schedule
15 Staff and labour
16 Total fixed assets
17 Cost of production
18 W orking capital
19 Sources of finance
20 Interest of capital
21 Depreciation
22 Fixed and variable cost
23 Break even analysis
24 Cost of capital
25 Profitability analysis
26 Conclusion
3

4. Executive summery
A business plan is an essential tool for anyone trying to obtain funding
for an innovative project, regardless of the type of funding, be it a grant
application, approaching a bank for a loan, getting in contact with a ventur e
capitalist.
The business plan should be well developed as this will be your way
of presenting the current state of our company and detailed strategy of how
you plan to carry out your project. The business plan will need to convey
the strength of your idea and how it can be implemented successfully.
In this business plan to use totally eco-friendly papers. To make the
product popular in every place of Gujarat and gradually cover all nearby
states. To make the firm a medium scale industry and then a large scale. If
possible I would expor t my product, as they are highly in demand in foreign
countries. Let’s hope for the best and work hard to make all future plans
come true.
W ith the expectation of high profitability it is assumed that it would be
the perfect product to be manufactured in today’s environment. AFTER ALL
IT’S AN ENVIRONMENTAL FRIENDLY PRODUCT! !! Its Save-“E” paper
bags.
Today market of paper bags is expanding; demand for the product is
increasing day by day. The return on this business is also satisfactory.
4

5. BUSINESS PLAN AT A GLANCE
Name of the Unit Paper Bags
Registered Office Plot No. 228, GIDC,
Lodhika,
Kalawad Road,
Metoda,
Rajkot-360 005.
Location of the Unit Plot No. 228, GIDC,
Lodhika,
Kalawad Road,
Metoda,
Rajkot-360 005.
Form of Organization Sole proprietor Firm
Name of Owner Vadher Bhavesh j.
Name of Product Paper Bags
Size of the Unit Small Scale
Cost of Project Rs. 40,00,000
Means of Finance SIDBI,HDFC
Own Capital
5

6. MANAGEMENT SETUP
(Owner’s Background)
Name Vadher Bhavesh J.
Age 22 Years
Address “At- Olvan, TA-Una,
Dist- Junagadh.
Academic Qualification MBA (Finance)
Role in the Unit Finance
Financial Contribution 40% of Owned Capital
6

7. VISION
Vision is a picture of what a firm want to be in broad terms what it
come to altimetry achieve it is what ultimately the firm or person would like
to become. Therefore vision statement articulate the ideal description of
origination give shape to it interr elated future
“Vision is a description of something (an organization, corporate
culture, a business, a technology) in the future “
Following vision of paper bags
 To use totally eco -f riendly papers, which are made not tree.
 To make the product popular in every place of Gujarat and gradually
cover all nearby states.
 To offer continuous value added product to our customer .
 To make the firm a medium scale industry and then a large scale.
 If possible I would export my product, as they are highly in demand in
foreign countries.
Let’s hope for the best and work hard to make all vision come true.
7

8. MISSION
Mission is what an organization is and why it exists. Organization relates their
existence to satisfying particular need of the society. They do this in term of their mission.
Thus, Organization finds a role for its self to pay in the society in by playing this role
organization meet the requirement of so city. The role organization play whether it is
producing a product or services that role describe by strategic mission.
“Mission is a statement which defines the role that an organization plays in a
society “
The Eco friendly paper bags manufacturing industry is poised for a higher growth
with a bright future.
Now a day’s paper bags have become the way of the modern world. It is eco-
friendly and attractive as well. Paper bags are proffered more today because it makes a
style statement and adds to your appearance.
Due to the increasing awareness of the hazards of plastic bags to the environment
among the public and the ban imposed on plastic bags throughout India and abroad by
the government, there is a great demand for eco-friendly paper bags.
So, I prepared plan of own eco- friendly paper bags manufacturing unit at nominal
investment, and to provide employment opportunity to decrease unemployment in the
country, to earn profit and save the environment in our own respective way.
8

9. GENERAL INFORMATION
JUSTIFICATION OF LOCATION
Location plays an important role in starting industry. Before starting
any industry entrepreneurs have to take a decision about the location of
industry. They have to select that location where all the facilities must be
available. They have to take right decision about the selection of location
because once a location selected it cannot be changed in the near future.
The following should be taken into consideration.
1. Availability of market: -
Market plays an important role in the selection of location. Market
should be near to the industry so; t he immediate sale of product is possible.
It also help in reduction of cost by reducing storing of finished goods, avoid
the cost of transportation etc.
2. Availability of Labour: -
W ithout manpower no one can start his or her industry. If you have a
machine but not manpower you cannot start your industry. So, Labour
should be available at cheap rate.
3. Availability of transport: -
It is required for assembling of raw material & distribution of finished
product. So, all type of transportation facility should be available.
4. Availability of pow er & w ater: -
Power & water is pre -requirement of an industry. So, the facility of
power & water use to be sufficiently available.
Thus, all the above factors justif y the selection of the location. So, t he
selection would definitely contribute to the profitability.
9

10. RAW MATERIALS
The raw material i s the base for the production. The required raw
material is paper in roll, gum, printing ink, string and misc. chemicals.
The raw material of this unit is easily obtained from the market and from
the paper mills. The raw materials required in this unit are:
Paper in roll
Gum
Printing ink
Misc. chemical
String
MACHINES
Automatic paper bag machine - 3 Nos.
Stereo Press - 2 Nos.
Stereo Grinder - 2 Nos.
Roll Slitter motorized with 2 HP packing machine - 2 Nos.
Testing equipment - 1 No.
Punching Machine - 1 No.
10

11. PRODUCT DETAILS
PRODUCT:-
The people regularly use paper bag now a days. If we go to the
shopping center & purchase some goods the shopkeeper gives the good in
the paper bag. The option is also to use a polythine or plastic bag but they
are harmful to use because we can produce the plastic bag but we cannot
destroyed it.
PRODUCT’S FE ATURS: -
There are many features of paper bag are as fol lows.
 It is very economical. : -
Paper bags are very economic in nature. It is cheaply available in the
market.
 It is eco-friendl y in nature. : -
It is very easy to produce a paper bags and we can also easily
destroyed it. So, it is less harmful to nature as compare to plastic
bags.
PRODUCT’S USES : -
Paper bags are common packing ma terial being used by bakers ,
grocers, textile and cloth merchant, dry cleaner, sweet shopkeeper etc. Due
to lower price, paper bags are used even by hawkers and vendors on th e
footpath for packing fruits and vegetables etc.
BRAND NAME:-
Brand also plays an important role in marketing. Good brand has to
face less competition in the increasing market.
11

12. MARKET POTENTIAL
Just consider the sheer size of the existing market for plastic carry bags. It amounts
to 600 billion bags. Many governments today are increasingly becoming environment-
sensitive and at least project themselves to be so. Big business too wants to be seen as
eco-friendly.
Several local government bodies such as city municipal corporations and town-
planning bodies have banned usage of plastic bags. In fact in all hill stations in India, the
use of plastic bags has been banned. Also Before some time people are using
plastic bags. But now a day’s people are realize that plastic bags are
harmful to the nature. Because we can produce plastic bags but we cannot
destroy it. So, now a day people are moving toward to use a paper bags
rather than plastic bags. So it is highly demanded and profitable product.
The introduction of shopping complexes & consumer stores in the
semi-urban & rural areas are creating additional demand for paper bags,
paper bags manufacturer, therefore, may be taken up as a profitable
manufacturing activity in selected areas.
Paper bags can be used for
 Carrying household articles
 Garments, toys
 Stationary items
 Foods & vegetables
 Medicines
 Cosmetic items etc.
12

13. MANUFACTURING PROCESS
Raw Material (Paper Roll)
Cutting through Automatic Machine
Stereo pressing with the help of gum & chemical Grinding
Printing through ink
Punching
Packing
Testing
MANUFACTURING PROCESS IN DETAIL
The required raw material is in the form of roll, the cutting of roll is
done through the automatic paper bag machine according to the size, and
then pressing of required size is done through stereo pressing machine with
the help of gum & chemical. Then side grinding of paper bag is done. Then
the process of printing is done and after that punching is done and after thi s
string is tied in these holes and at last they are tested for bursting pressure
and packing is done.
13

14. ORG ANIZATION STRUCTURE
The organization is establishing of effective authority relationship among selected
works, persons and work places in order for the group to work together efficiently.
Organization is a basic activity of any business firm.
Ow ner
Production Personnel Marketing Finance
Manager Manager Salesman Accountant
W orkers
14

15. SWOT ANALYSIS
Every existing firm has their own strength, weakness, opportunities and threat.
There four aspects have their importance in each and every existing business. It is
possible that strength of one unit may be weakness for another and opportunity for one
becomes threat for another.
As every company, PAPER BAGS also have their own strength, weakness,
opportunity and threats.
STRENGTHS
 It is eco-friendly in nature.
 lower price
 less competitors
 Quality of product.
 Use of modern technology.
 Current fashion trend
WEAKNESSES
 Plant capacity.
 It is not useful in monsoon season
 Less advertising effort
15

16. OPPORTUNITIES
 Increasing awareness of hazards of plastic
 Ban imposed on plastic bags in many states
 It is opportunity to in a normal market purchase comes with a packaging and a bag
Form a stall on the road to superstore in big malls, everywhere bags are provided.
 This is something which will never end packaging and visibility provides companies
the added advantage.
THREATS
 Government policies
 Introduce new product similar to plastic bags.
 Increase raw material price.
16

17. STAFF & LABOUR
No. Staff & Labour No.
1. Factory Staff
Skilled 4
Unskilled 6
2. Technical Supervisor 1
3. Clerk cum typist 1
4. Accountant 1
5. Peon cum W atchman 1
6. Salesman 2
7. Manager 1
17

18. TOTAL FIXED ASSETS
NO. P ARTICULAR AMOUNT
1. Land (400 Sqm @ Rs.1100) 4,40,000
2. Building (275 Sqm @ Rs.1800) 4,95,000
3. Boundary W all & Gate 35,000
4. Plant & Machinery
Automatic Paper Bag 15,00,000
Stereo Press 5,00,000
Stereo Grinder 7,00,000
Roll Slitter 2,50,000
Testing Equipment 80,000
Punching Machine 50,000
5. Furniture & Fixtures 1,50,000
6. Electrification & Installation Charges
75,000
7. Computer, Telephones & Fax Machine 1,00,000
Total 43,65,000
18

19. COST OF PRODUCTION
Raw Material
Particulars RatePerkg. Req.perda y Req.permonth Req.per year
Paper in roll 10 2,950 73,750 8,85,000
Total (Rs.) 29,500 7,37,500 88,50,000
Gum 8 35 875 10,500
Total (Rs.) 280 7,000 84,000
Printing Ink 65 20 500 6,000
Total (Rs.) 1,300 32,500 3,90,000
Misc.
4 40 1,000 12,000
Chemical
Total (Rs.) 160 4,000 48,000
String 7 50 1,250 15,000
Total (Rs.) 350 8,750 1,05,000
Net Total 7,89,750 94,77,000
Staff & Labour
Particulars No. Rate P.M. P. A.
Factory Staff
Skilled 4 2,000 8,000 96,000
Unskilled 6 1,800 10,800 1,29,600
Technical Supervisor
1 5,000 5,000 60,000
Salesman 2 3,000 6,000 72,000
Manager 1 7,000 7,000 84,000
Clerk cum typist 1 2,500 2,500 30,000
Accountant 1 3,500 3,500 42,000
Peon cum W atchman 1 2,000 2,000 24,000
Total 44,800 5,37,600
19

20. OTHER EXPENSES & UTILITIES
Sr. Particulars P.M. P. A.
1. Electricity 17,000 2,04,000
2. W ater Charges 1,500 18,000
3. Postage & Telegram 2,000 24,000
4. Stationery 1,200 14,400
5. Repairs 2,000 24,000
6. Telephone Expense 1,800 21,600
7. Transport
inward 2,000 24,000
outward 2,000 24,000
8. Packing 3,000 36,000
9. Miscellaneous Exp. 2,000 24,000
10. Audit Fees 21,500
11. Professional Tax 1,000
12. Legal Fees 15,500
13. Insurance 1,02,000
14. Selling Exp. 16,750 2,01,000
Total 51,250 7,55,000
TOTAL COST OF PRODUCTION
Sr. Particulars P.M. P. A.
1. Raw Material 7,89,750 94,77,000
2. Staff & Labour 44,800 5,37,600
3. Other Expenses 51,250 7,55,000
Total 8,85,800 1,07,69,600
20

21. TOTAL WORKING CAPITAL REQUIREMENT
Working capital is very important for every business unit; either it might be
small scale or large scale. Working capital is capital which is invested for daily use
of the firm. Mainly working capital is used for salary purpose, rent, and repair work
& for paying off allowances.
Sr. Particulars P.M. P. A.
1. Raw Material 7,89,750 94,77,000
2. Staff & Labour 44,800 5,37,600
3. Other Expenses 51,250 7,55,000
Total 8,85,800 1,07,69,600
TOTAL PROJECT FUND
Sr. Particulars Amount
1. Fixed Cost 43,65,000
2. W orking Capital (2 months) 16,75,550
Total 60,40,550
SOURCES OF FINANCE
Sr. Particulars Rate Amount
1. Own Capital (40%) 30,00,050
2. Borrowed Capital (60%)
HDFC 12% 22,50,000
SIDBI 10% 22,50,000
Total 75,00,000
21

22. INTEREST ON CAPITAL
Sr. Particulars Rate Amount
1. Own Capital (40%) 8% 2,40,000
2. Borrowed Capital (50%)
HDFC 12% 2,70,000
SIDBI 10% 2,25,000
Total 7,35,000
DEPRECI ATION
Sr. Particulars Value Amount
1. Building (10%) 4,50,000 49,500
2. Plant & Machinery (25%) 30,80,000 7,70,000
3. Other Fixed Assets (15%) 3,10,000 46,500
4. Computer (40%) 40,000 16,000
Total 8,82,000
ANNUAL COST OF PRODUCTION
Sr. Particulars Amount
1. Raw Material 94,77,000
2. Recurring Expenses 12,92,600
3. Depreciation 8,82,000
4. Interest on Investment 7,35,000
Total 1,23,86,600
22

23. SCHEDULE OF FIXED & V ARI ABLE COST
Variable cost Fixed cost
Particulars
Amount Amount
Depreciation - 8,82,000
Int. on capital - 7,35,000
Salary 3,22,560 2,15,000
Other expenses 4,53,000 3,02,000
Raw Materials 94,77,000 -
TOTAL 1,02,52,560 21,34,000
FIXED COST
Particulars Amount
Depreciation 8,82,000
Interest on capital 7,35,000
Salary (40%) 2,15,040
Other Expenses (40%) 3,02,000
Total 21,34,040
Fixed cost/unit
= Total Fixed Cost/Total no. of units
= 21,34,040/1,06,20,000
= 0.20 ps. /unit
23

24. V ARI ABLE COST
Particulars Amount
Raw Materials 94,77,000
Salary (60%) 3,22,560
Other Expenses (60%) 4,53,000
Total I,02,52,560
Variable cost/unit
= Total Variable Cost/ Total no. of units
= 1,02,52,560/1,06,20,000
= 0.96ps. /unit
Contribution/unit
= S.P./unit -V.C./unit
= 1.25 -0.96
= 0.29 ps. /unit
24

25. BREAK EVEN ANALYSIS
Break-even point is that point of achieving, where total revenue and
total expenses are equal. It is the point of zero profit. If the sales exceed
BEP the business will earn profit and if it decreases from BEP the business
will incur loss. Thus, BEP may take, as the minimum level of production
and sales and company must attain in order to be economically viable.
B.E.P. (%)
= {Fixed Cost / (Fixed Cost + Profit)} X 75
= 21,34,040/ (21,34,040 + 12,09,900) X 75
= 47.86%
B.E.P. (units)
= Fixed Cost/ (Contribution/unit)
= 21,34,040/0.29
= 73,58,759 bags
B.E.P. (Rs.)
= B.E.P. x S.P./unit
= 73,58,759 x 1.25
= Rs.91,98,449
25

26. P. V. Ratio
= Contribution per unit / Sales X 100
= 0.29 / 1.25 X 100
= 23.2%
Gross Profit Ratio
= Profit (EBIT) / Sales X 100
= 31,10,100/ 1,28,61,500 X 100
= 4.18%
Net Profit Ratio
= Profit after Tax / Sales X 100
= 4,44,770 /1,28,61,500 X 100
= 3.46 %
Fixed Assets Ratio
= Fixed Assets/ Sales X 100
= 43,65,000/1,28,61,500 X100
= 33.94%
26

27. PROFITABILITY ANALYSIS
Particulars Amount
Sales 1,28,61,500
Less: Cost of Production 1,61,51,600
E.B.I.T. 12,09,900
Less: Interest on Capital 7,35,000
E.B.T. 4,74,900
Less: Tax 88,970
Net Profit after tax 3,85,930
27

28. CONCLUSION
In the product project report on paper bags I have discussed all
financial data and other relevant information .
The market of paper bags is expanding; demand for the product is
increasing day by day. The return on this business is also sati sfactory.
W ith the expectation of high profitability it is assumed that it would be
the perfect product to be manufactured in today’s environment. AFTER ALL
IT’S AN ENVIRONMENTAL FRIENDLY PRODUCT! !!Its Save-“E” paper
bags.
At last it can be said that future of this product is very bright.
28