Feasibility study for resuming and expanding Novel's professional training and consultancy operations
Novel Consultancy & Training Co. Ltd.
Novel Consultancy & Training Co. Ltd. was established in 2014 with the vision of becoming a strategic Centre of Excellence in education, research, and training. Since 2015 the centre has trained and provided internationally accredited professional certificates in accounting and finance to over 500 participants from government and private commercial bodies, as an approved centre for ICBC, CIMC and Edexcel BTEC (Pearson). This study sets out the capital, revenue and profitability case for resuming normal operations: a total capital requirement of US$141,302 is projected to generate US$131,500 in first-year revenue and US$86,121 in net profit, growing 15% annually over a five-year plan, with a positive NPV of US$202,532, an IRR of 47%, and a payback period of two years and seven months.
- Sector
- Education and training
- Location
- Sudan
- Established
- 2014
- Total capital requirement
- US$141,302
- Year 1 revenue
- US$131,500
- Year 1 net profit
- US$86,121
- Net present value (NPV)
- US$202,532
- Internal rate of return (IRR)
- 47%
- Payback period
- 2 years and 7 months
Executive Summary
Novel consultancy center established in 2014 with the vision of becoming a strategic Centre of Excellence in education, research, and training.
For this purpose Novel's main objectives are to:
- Undertake collaborative research in administration, management and planning across the educational and industry Sectors in Sudan.
- Lead the training and facilitation of continuous professional development to improve the competencies of educational and industry administrators, managers and planners in Sudan.
- Provide technical assistance through policy advice to government's agencies and companies on matters relating to investments and financing of projects.
- Promote professional standards in education sector administration, management and planning through advocacy and experiential sharing with professional bodies and International Organizations.
Capital Requirement and Returns
To resume normal operations Novel requires fixed assets amounting to US$112,850 and working capital of US$28,452 (US$11,092 fixed costs and US$17,360 direct accreditation cost), i.e. a total capital of US$141,302.
The business is expected to generate revenue of US$131,500 in the first year of operation leading to gross profit of US$114,140 and net profit of US$86,121 (profit margin of 65%) as shown on the proforma income statement.
Profits are projected to grow by 15% over the planned period of five years. This projection will generate a stream of cash flows of US$45,714, US$100,751, US$162,969, US$254,863, US$398,282 respectively over the five year plan.
The feasibility of the business is measured by the NPV, IRR, and payback period. The discount rate used is 20% to compensate for the risk of the future cash flows. The result is a positive NPV of US$202,532, an internal rate of return (IRR) of 47% and a payback period of two years and seven months.
A sensitivity analysis of the NPV was conducted using higher discount factors of 25% and 30% to give a positive NPV and IRR of 47% (i.e. NPV is zero).
The business will breakeven at a sales value of US$203,893, a sales quantity of 767 courses/programs. The contribution at breakeven point amounts to US$168,115.
The present value of the future cash flows amounts to US$444,834. This represents the current market price of the business today.
Current Market Situation
Since 2015 Novel centre trained and provided international accredited professional certificates in accounting and finance to over 500 participants from different government and private commercial bodies. Due to the state of instability, political unrest and Corona virus in Sudan since 2018, Novel center did not run any promotion or advertising campaign during this time and was depending mainly on word of mouth to attract its clients.
Opportunity Issue Analysis
Novel is a representative and learning provider centre in Sudan for a wide range of accredited certificates and professional business courses (management, accounting, marketing and finance), offered by the Institute of Certified Business Consultants (ICBC) and the Chartered Institute of Management Consultants (CIMC) in Canada and the United States of America.
Novel is also an approved centre in Sudan for Edexcel BTEC (Pearson), UK, offering a number of educational and professional training certificates such as level 4 and level 5 diplomas in business leading to top up in any UK university to get a Bsc honors certificate in business, as well as Level 7 diploma leading to MBA in any UK university.
In the field of consultancy Novel offers Investment appraisal, Feasibility studies, financial planning, Performance measurement, review of operational procedures & Capital reconstruction for all types of business organizations, including arrangement of finance and foreign trade facilities, arrangements for confirmation by international banks for L/Cs issued by Local banks, Credit management and credit analysis as well as Risk evaluation and risk management.
Novel also provides systems of internal control for all levels of management, including cash flow (working capital / capital expenditure), expenditure control (budgeting & standard costing), and production control (input/process/output controls).
Resources Needed
The business requires the following amounts of capital: Fixed assets US$112,850; Fixed costs US$11,092; Accreditation costs US$17,360; Total capital requirement US$141,302.
Details of fixed assets, fixed cost, accreditation cost, intake and revenue in addition to other forecasts are shown on the following tables.
Funding Methods
Capital can be raised by:
- Bank Decreasing Musharaka
- Interest Bank Loan
- Partnership
Novel Management
The centre is run by a steering committee which plans the broad financial and management policies. The team of management includes a general manager, deputy manager, a program manager, a registrar and secretary. The total working capital required amounts to US$11,092 as shown below.
Annual Sales Forecast
Building on past experience, intakes are projected for the 1st year of operation to be 530 students: CCFC certificate 6 courses of 10 students each (60 students), Certificate in financial analysis 6 courses of 10 students each (60 students), certificate in risk management 5 courses of 10 students each (50 students), and courses for the students sitting for ACCA, CFA and CIMA exams (120 students each) as shown on the following table.
Annual total revenue in value in 2022 is expected to be US$131,500 as shown in the following table, given last year's fees and charges.
Profit Forecast Over 5 Years
Profits are projected to increase by 15% annually over 5 years, while fixed cost increases by 5%, as shown on the following table.
Growth rate = 15% p.a. Profit margin = 65%, Return on assets = 61%, Return on capital = 61%.
Feasibility Indicators
Performance analysis of cash flows, payback period, discount factor, NPV and IRR over the five-year plan.
Fixed Assets (Amounts in US Dollars)
| S.No. | Assets | Qty | Value | Total | G.Total |
|---|---|---|---|---|---|
| 1 | Building (two flats: 15 seats room x1, 20 seats room x2, 30 seats room x2, Staff offices x4, Meeting room x1, Reception x1, Bathrooms x4) | - | 50,000 | 50,000 | US$ |
| 2 | Furniture & Fittings | - | - | 15,550 | 15,550 |
| 3 | Equipments | - | - | 27,300 | 27,300 |
| 4 | Vehicles (Small van) | 1 | 20,000 | 20,000 | 20,000 |
| Grand Total | 112,850 |
Furniture & Fittings detail (Amounts in US Dollars)
| Item | Qty | Value | Total |
|---|---|---|---|
| Tables | 65 | 25 | 1,625 |
| Chairs | 65 | 25 | 1,625 |
| Complete Managers Office | 4 | 250 | 1,000 |
| Computer chairs | 6 | 25 | 150 |
| Computer tables | 6 | 25 | 150 |
| Cabinets | 10 | 100 | 1,000 |
| Shelf/side boards/wall units | 10 | 100 | 1,000 |
| Sitting sets for reception | 3 | 1,500 | 4,500 |
| Meeting Room furniture set | 1 | 2,500 | 2,500 |
| Kitchen set | 1 | 2,000 | 2,000 |
| Total | 15,550 |
Equipments detail (Amounts in US Dollars)
| Item | Qty | Value | Total |
|---|---|---|---|
| Desktop computers | 6 | 100 | 600 |
| Air conditions (split units) | 10 | 500 | 5,000 |
| Refrigerator | 1 | 2,000 | 2,000 |
| Coolers | 5 | 500 | 2,500 |
| Projectors | 4 | 2,000 | 8,000 |
| TV screens | 6 | 800 | 4,800 |
| Smart Boards | 3 | 800 | 2,400 |
| Reception decoration | 1 | 2,000 | 2,000 |
| Total | 27,300 |
Fixed Costs (Amounts in US Dollars)
| S.No. | Item | Monthly | Annually |
|---|---|---|---|
| 1 | Staff Salaries | 770 | 9,240 |
| 2 | Staff N.I. | 69 | 832 |
| 3 | Electricity & Water | 5 | 60 |
| 4 | Advertising | 5 | 60 |
| 5 | Insurance | 5 | 60 |
| 6 | Travel Expenses | 5 | 60 |
| 7 | Fuel | 20 | 240 |
| 8 | Telephone & Fax | 5 | 60 |
| 9 | Stationary & Postage | 5 | 60 |
| 10 | Bank Charges | 5 | 60 |
| 11 | Maintenance | 10 | 120 |
| 12 | Legal Charges | 5 | 60 |
| 13 | Entertainment | 10 | 120 |
| 14 | Establishment Costs | 5 | 60 |
| TOTAL | 924 | 11,092 |
Annual Sales Forecast — Number of Students per Course by Month (Year 1)
| S.No. | Training Programs & Courses | M1 | M2 | M3 | M4 | M5 | M6 | M7 | M8 | M9 | M10 | M11 | M12 | Total |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 1 | CCFC | 10 | 0 | 10 | 0 | 10 | 0 | 10 | 0 | 10 | 0 | 10 | 0 | 60 |
| 2 | CFA | 10 | 10 | 0 | 10 | 0 | 10 | 0 | 10 | 0 | 10 | 0 | 0 | 60 |
| 3 | Certificate in Risk Management | 10 | 0 | 0 | 10 | 0 | 0 | 10 | 0 | 0 | 10 | 0 | 10 | 50 |
| 4 | ACCA courses | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 120 |
| 5 | CFA courses | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 120 |
| 6 | CIMA courses | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 120 |
| TOTAL | 60 | 40 | 40 | 50 | 40 | 40 | 50 | 40 | 40 | 50 | 40 | 40 | 530 |
Revenue Forecast by Course by Month (Year 1, Amounts in US Dollars)
| S.No. | Courses | M1 | M2 | M3 | M4 | M5 | M6 | M7 | M8 | M9 | M10 | M11 | M12 | Total |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 1 | CCFC | 3,500 | - | 3,500 | - | 3,500 | - | 3,500 | - | 3,500 | - | 3,500 | - | 21,000 |
| 2 | CFA | 3,500 | 3,500 | - | 3,500 | - | 3,500 | - | 3,500 | - | 3,500 | - | - | 21,000 |
| 3 | Risk MG. | 3,500 | - | - | 3,500 | - | - | 3,500 | - | - | 3,500 | - | 3,500 | 17,500 |
| 4 | ACCA courses | 2,000 | 2,000 | 2,000 | 2,000 | 2,000 | 2,000 | 2,000 | 2,000 | 2,000 | 2,000 | 2,000 | 2,000 | 24,000 |
| 5 | CFA courses | 2,000 | 2,000 | 2,000 | 2,000 | 2,000 | 2,000 | 2,000 | 2,000 | 2,000 | 2,000 | 2,000 | 2,000 | 24,000 |
| 6 | CIMA courses | 2,000 | 2,000 | 2,000 | 2,000 | 2,000 | 2,000 | 2,000 | 2,000 | 2,000 | 2,000 | 2,000 | 2,000 | 24,000 |
| TOTAL | 16,500 | 9,500 | 9,500 | 13,000 | 9,500 | 9,500 | 13,000 | 9,500 | 9,500 | 13,000 | 9,500 | 9,500 | 131,500 |
Accreditation Cost by Course by Month (Year 1, Amounts in US Dollars)
| S.No. | Training Programs & Courses | M1 | M2 | M3 | M4 | M5 | M6 | M7 | M8 | M9 | M10 | M11 | M12 | Total |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 1 | CCFC | 1,000 | - | 1,000 | - | 1,000 | - | 1,000 | - | 1,000 | - | 1,000 | - | 6,000 |
| 2 | CFA | 1,000 | 1,000 | - | 1,000 | - | 1,000 | - | 1,000 | - | 1,000 | - | - | 6,000 |
| 3 | Certificate in Risk Management | 1,000 | - | - | 1,000 | - | - | 1,000 | - | - | 1,000 | - | 1,000 | 5,000 |
| 4 | ACCA courses | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 120 |
| 5 | CFA courses | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 120 |
| 6 | CIMA courses | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 120 |
| TOTAL | 3,030 | 1,030 | 1,030 | 2,030 | 1,030 | 1,030 | 2,030 | 1,030 | 1,030 | 2,030 | 1,030 | 1,030 | 17,360 |
Projected Income Statement — 1st Year of Operation (US$)
| Item | US$ | US$ |
|---|---|---|
| REVENUE | 131,500 | |
| LESS COST OF SALES (Accreditation fees) | 17,360 | |
| GROSS PROFIT/LOSS | 114,140 | |
| Staff Salaries | 9,240 | |
| Staff N.I. | 832 | |
| Electricity & Water | 60 | |
| Advertising | 60 | |
| Insurance | 60 | |
| Travel Expenses | 60 | |
| Fuel | 240 | |
| Telephone & Fax | 60 | |
| Stationary & Postage | 60 | |
| Bank Charges | 60 | |
| Maintenance | 120 | |
| Legal Charges | 60 | |
| Entertainment | 120 | |
| Establishment Costs | 60 | |
| Depreciation of fixed assets | 16,928 | |
| LESS FIXED/RUNNING COSTS (total) | 28,019 | |
| NET PROFIT/LOSS | 86,121 |
Balance Sheet — As at the End of the 1st Year of Operation (US$)
| Item | Cost | Dep'n | N.B.V. | Total |
|---|---|---|---|---|
| Bank balance (Net Current Assets) | 45,714 | |||
| Buildings | 50,000 | 7,500 | 42,500 | |
| Equipments | 27,300 | 4,095 | 23,205 | |
| Furniture & Fittings | 15,550 | 2,333 | 13,218 | |
| Vehicles | 20,000 | 3,000 | 17,000 | |
| TOTAL FIXED ASSETS | 112,850 | 16,928 | 95,923 | 95,923 |
| TOTAL ASSETS | 141,637 | |||
| LESS LONG-TERM LOANS | 84,781 | |||
| TOTAL NET ASSETS | 56,856 | |||
| OWNER'S CAPITAL | 35,325 | |||
| PROFIT/LOSS (less partners share 64,591) | 86,121 | 21,530 | ||
| NET CAPITAL FUND | 56,856 |
Profit Plan Over Five Years (US$)
| Details | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| REVENUE | 131,500 | 146,687 | 163,925 | 183,511 | 205,785 |
| LESS DIRECT COSTS | 17,360 | 18,228 | 19,139 | 20,096 | 21,101 |
| CONTRIBUTION | 114,140 | 128,459 | 144,786 | 163,415 | 184,683 |
| LESS FIXED COSTS | 28,019 | 29,420 | 30,891 | 32,436 | 34,057 |
| NET PROFIT | 86,121 | 99,039 | 113,895 | 130,979 | 150,626 |
Feasibility Indicators — Performance Analysis
| Year | Cash flows (US$) | Payback period | Discount Factor (%) | NPV (US$) | IRR (%) |
|---|---|---|---|---|---|
| 0 | -242,302 | 0.20 | 202,532 | 0.46875 | |
| 1 | 45,714 | 45,714 | |||
| 2 | 100,751 | 100,751 | 0.25 | 141,673 | |
| 3 | 162,969 | 95,837 | |||
| 4 | 254,863 | 2 year & 7 months | 0.30 | 94,738 | |
| 5 | 398,282 | 0.468748 | 0 |
Break Even Analysis (Amounts in US Dollars)
| S.No. | Program/Course | Price/Unit | D.Cost/Unit | Contribution | Fixed Costs at B/E | Sales Qty at B/E | Sales Value at B/E | D.Cost at B/E | Total Cost at B/E | Contribution at B/E | Mix T.Cost at B/E |
|---|---|---|---|---|---|---|---|---|---|---|---|
| 1 | CCFC | 350 | 100 | 250 | 28,019 | 112 | 39,227 | 11,208 | 39,227 | 28,019 | 11,208 |
| 2 | CFA | 350 | 100 | 250 | 28,019 | 112 | 39,227 | 11,208 | 39,227 | 28,019 | 11,208 |
| 3 | Risk Management | 350 | 100 | 250 | 28,019 | 112 | 39,227 | 11,208 | 39,227 | 28,019 | 11,208 |
| 4 | ACCA courses | 200 | 5 | 195 | 28,019 | 144 | 28,738 | 718 | 28,738 | 28,019 | 718 |
| 5 | CFA courses | 200 | 5 | 195 | 28,019 | 144 | 28,738 | 718 | 28,738 | 28,019 | 718 |
| 6 | CIMA courses | 200 | 5 | 195 | 28,019 | 144 | 28,738 | 718 | 28,738 | 28,019 | 718 |
| TOTAL | 1,335 | 168,115 | 767 | 203,893 | 35,778 | 203,893 | 168,115 | 35,778 |
Selected work
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