Starting a business is not an easy task for the entrepreneur, you must have the mettle to make a company work, prepare yourself mentally and financially and be fully convinced that it is not a bad idea to achieve what you set out to do. In principle, you will need all the support possible from the people you trust the most, such as your brothers, wife, children, relatives, who if they lend you money do not charge you interest and will be willing to work exhaustively without benefits, breaks on holidays or Sundays days.
Also, you must be convinced that the new company will not generate profits for at least a year, that it will require a lot of work from everyone and will partially start generating money for salaries when it begins to have reasonable sales. Knowing that 9 out of 10 companies do not reach 2 years will keep the entrepreneur in constant fear, who must be constantly prepared for unforeseen events and new investments in the business that sometimes seems to be a bottomless sack.
This work, which includes the emergence of the idea, the market analysis, the technical analysis, the financial analysis and the legal analysis, is a guide that can be useful for those who have set out to start a business and for those undecided as a alternative to create your own job. All business involves sacrifices in time, family life, shocks in the face of the unexpected, high risk of bankruptcy and, in the beginning, little money.
This work is not a magic recipe to avoid the emotions that new entrepreneurs will have to suffer, however, if it proposes a coherent and easy-to-handle structure that allows them to be forewarned and aware of the problems to be faced and as far as possible know what alternatives to take to overcome them.
Emergence of the idea
The emergence of the idea is not the product of sitting down to think that we can produce and that we can sell. It is the result of observing the needs of society in different aspects: firstly, if our interest is to offer a product directly to the consumer or if our objective is to sell to companies.
If the objective is to sell to the consumer, it is necessary to know if it is the lady of the house, the father of the family, the daughters, the sons, if they are children, adolescents, young people, adults, if they study, if they work, in what type of school they study or work.
Observe their needs and make a list of the products they demand from when they get out of bed until they decide to go to bed at the end of the day.
This will lead us to identify a huge number of products that they require to meet their daily needs ranging from the bedroom, bathroom, toilet, clothing, footwear, home accessories, breakfast, pocket accessories, cosmetics, diapers, bottles, accessories to meet the needs of office, school and daycare, private transportation (spare parts and accessories for cars) or public, food, products that are in demand on the street, dinner and recreation and sports.
If you want to sell to companies, you need to at least work in one to identify their needs, which are basically controlled by the purchasing area. In any area, the products that are demanded more or less frequently can be identified and in some cases, it is convenient to be involved as a personal applicant in areas such as sales (of transport equipment, automotive parts, forklifts, pallets, stationery), offices (which generally demand stationery, furniture and equipment, computers, accessories, telephony), plant (applicant for raw materials, materials, services, accessories), Production (raw material, materials, packaging, industrial parts, motors, belts, materials of construction, electrical equipment, etc.), finance (computers, peripherals, cables, stationery, folders, clips,staples, paper, pens, rubbers, telephones, filing cabinets, drawers, and all kinds of office supplies).
Generally, companies demand quality products and services from reliable suppliers who are willing to meet their requirements in a timely manner, so as not to alter their processes and the time of their production standards due to lack of materials and raw materials; demand that few meet and that represents an excellent opportunity for suppliers willing to commit and fulfill this task.
After knowing the applicant who is the client or person who will buy my product, the next step is to consciously evaluate the selected products, with which I feel most identified and know at least what I need to do and what I should invest in their process. of elaboration. It is likely that a product interests me due to its strong demand, however the investment amounts may be too high or are out of my budget to participate in the market and compete, or that the client demands a very high quality and that I initially it is difficult to comply.
After doing a product elimination, it is convenient to select the ones that present the best chances of success for the present and for the future. It must be remembered that the correct identification of the product is decisive for the success or failure of the company. Once the investment is started, it is difficult to go back at the risk of losing the progress made. Choosing the wrong product implies failure even before starting.
Should we compete with products that already exist in the market? Or create a new one?
The risk of investing in a product that already exists in the market is high when competing with companies that are already positioned and have a population segment loyal to their brand and product, however as new competitors we have the advantage of having a educated consumer with consumption habits of the reference product. If we hope to enter the market with a very attractive new product, it is likely that it can attract the attention of the consumer with sales strategies, after carrying out advertising campaigns or home visits to make it known.
These expenses are difficult to carry out since new companies generally have limited resources. If you have a lot of confidence in the new product, you should budget promotional expenses. It is also possible to enter with differentiated products to the market. They are the products that already exist but with improvements in design (perfecting the characteristics of the product and design through R&D, as well as product development), quality (requires greater reliability, durability and operation of the product in relation to with the price) the supply (the company can consciously promote a set of products around its basic products, fully fulfilling the needs of the consumers within a segment) and the non-differentiation of the product (it may have no basis to differentiate,or deliberately follows a strategy of copying what already exists) (Mintzberg, 1988, p. 1-67). These products, if they have the acceptance of the client, may be sold at higher prices than the standardized ones.
Market analysis
The market study requires basically defining four aspects (Baca UG 2002, p. 13-82): the product to be sold, the customers who will buy the product, the sale price in the market, the competition and the channels of distribution that make the product available to the consumer.
a) Product
The definition of the product tells us what it is expected to offer the customer and must contain the brand (commitment to maintain a constant quality in each product), the packaging (protects the product towards the consumer, is part of the industrial marketing program and marketing directed to consumers), label (it is the part that gives information about the product and the seller and can appear on the product, on the packaging), product design and color (arrangement of elements that together constitute a good or service and that improve their appearance and differentiation), quality (which characterizes the ability to meet customer needs), warranty (assures buyers that they will be compensated in case the product does not meet their reasonable expectations),legal liability (legal action that affirms that an illness, accident or death is caused by the product being harmful, deficient or having an inadequate label), warning labels (clear indications to the consumer about the way of using the products), and service after-sales (offered to customers to comply with the warranty and to maintain their products even after it has expired). (Stanton, JW Etzel, JM, Walter, J: B;, 1996). The characteristics of the product must be perfectly described to the extent that they allow us to establish the differences in a very clear way with the competition, as well as the similarities that allow us to evaluate who our direct competitors will be.warning labels (clear indications to the consumer on the way of using the products), and after-sales service (offered to customers to comply with the stipulations of the warranty and to maintain their products even after it has expired). (Stanton, JW Etzel, JM, Walter, J: B;, 1996). The characteristics of the product must be perfectly described to the extent that they allow us to establish the differences in a very clear way with the competition, as well as the similarities that allow us to evaluate who our direct competitors will be.warning labels (clear indications to the consumer on the way of using the products), and after-sales service (offered to customers to comply with the stipulations of the warranty and to maintain their products even after it has expired). (Stanton, JW Etzel, JM, Walter, J: B;, 1996). The characteristics of the product must be perfectly described to the extent that they allow us to establish the differences in a very clear way with the competition, as well as the similarities that allow us to evaluate who our direct competitors will be.Etzel, JM, Walter, J: B;, 1996). The characteristics of the product must be perfectly described to the extent that they allow us to establish the differences in a very clear way with the competition, as well as the similarities that allow us to evaluate who our direct competitors will be.Etzel, JM, Walter, J: B;, 1996). The characteristics of the product must be perfectly described to the extent that they allow us to establish the differences in a very clear way with the competition, as well as the similarities that allow us to evaluate who our direct competitors will be.
b) Clients
The full description of the product that I hope to sell and even conducting personal interviews with buyers with samples for the complete identification of the client, will allow me to clearly know who the claimants are, what their income level is, what their preferences are, their tastes, their economic position, life status, customs, prices they would be willing to pay for the product, regularity of purchase, quality, what they expect from the product, but above all, if they would be willing to buy it.
It is convenient to observe that when selecting a product, the type of demand that we will face is taken into account, since some products present a stunted response to changes in prices (inelastic demand) and when trying to enter the competition that generally it is strong and difficult to access, sales are low and the profit margin is limited. There are products that enjoy low competition and strong demand where the entry of new competitors is accepted without major problems and generally with a relatively low price sacrifice (elastic demand). (Ferguson, CE, 1971).
c) Prices
The price at which I must sell my products generally obeys two types of strategies:
Standardized products. They are products that are already sold in the market and with strong competition. For the client it is indifferent to buy it in my company or with the competition as it is an equal product or a very close substitute that fulfills a certain function. In this market I can sell at lower prices, but not at higher prices, at the risk of losing clients if they have full knowledge of the market and the product. Differentiated products offer the customer substantial alternatives between my product and those of the competition. In this market I must value my product sufficiently to set a reasonable price at the height of the competition and within the reach of the consumer (Ferguson CE, 1971).Something that should not be forgotten is that the consumer is always attentive to compare the price of the product he is buying with the value he expects to receive when he uses the product. If you feel disappointed you will not return to our business. (Roy, KR 2001).
d) Competition
The definition of the product and its characteristics will facilitate the identification of the competition. By knowing the potential customers for our products we will also meet the competition that currently meets their needs. It is very important to know the production capacity of the competition and the market coverage they serve to know who we will face and how and where we will enter. It is recommended to buy sample products from the competition to know them and if possible, visit their companies as customers or visitors. If our product is well defined, we will clearly know our competitors. A poorly made description of the product will lead us to assume competition where there is none or to study competitors that we will not face in the market.
For our market entry we must determine:
If the demand that we will face is elastic or inelastic, If the products we will sell are standardized or differentiated.
The investment capacity we have, according to the availability of funds and
The volume of production that we can generate and the market share that we can reach.
e) Distribution
Consideration should be given to how to distribute the product and place it within reach of the consumer. This strategy implies defining whether it will be done through distributors, direct house-to-house sales, through shopping centers, plant sales and any other convenient means to accomplish this task. As part of this strategy, the place where the facilities can be established, the type of clients that will be served and the point of sale where our market is located must be located. The distribution method used by the competition must be analyzed, it is probable that the clients are used to their already established forms.
Technical analysis
The technical study is the second most important part of the project. We have already discovered that the selected product can be sold, now we must know if it can be manufactured, if the quality demanded by the client can be met and if we will have the possibility of bringing it to the consumer at competitive prices and in the required quantity. To manufacture it we need to know the following: the necessary machinery and labor with which the product can be made, the type of process that will be used, (depending on the production volume and its standardization), manufacturing, distribution of facilities to produce it with greater efficiency, product design, inventory management, location of facilities and quality control.
a) Machinery
The machinery required in the manufacture of unusual products does not exist. The one that exists can be very expensive and generally only partially performs the task or must be completed with multiple accessories to make it functional. In most cases the design of the plants must be the entrepreneur's own creation. What is achieved in the market are motors and the adaptation corresponds to the designers in the plant to make them functional and suitable for the tasks to be carried out. The integration of processes is the responsibility of the company seeking functionality, cost savings, quality and efficiency. The measurement of the speed of work and the standardization of processes so that the health of the workers is taken care of will be evaluated by the plant personnel, after carrying out tests that guarantee safety and minimal risk.
Experienced companies have advanced over time in the continuous improvement of processes and have been able to progressively correct their mistakes seeking to continuously improve technology and quality. If the machinery that is needed exists in the market, it should be carefully selected considering the production volume that we hope to achieve in the present and in the future. It is also possible to get used machinery in good condition at relatively low prices that comply with tax requirements and may be suitable for immediate use.
b) Labor
For the beginning of the work it is always convenient to have personnel who already have experience in the processes of the product that is expected to be manufactured. To avoid failure in the processes, the quality and the finished product it is necessary to personally know each step of the process in detail, or failing that, seek advice from people who know the process, who have done it, if possible, who have worked with the competition on these tasks. Learning is very expensive and especially when money is tight. It takes a lot of tenacity to carry out a new business and all kinds of surprises are expected, however these will be less if you have the necessary experience in the staff at our service.
The hiring of staff should be the minimum necessary, since staff payments cannot be postponed. In the same way, the expenses that accompany it such as INFONAVIT, the IMSS, vacations, work accidents, wage subsidy, per diem, payroll tax regardless of whether or not sales were achieved in the period. To avoid as much as possible the expenses that are not related to the manufacture of the product and that are generally not recoverable, the investor prefers to personally deal with them at the start of the business until the liquidity conditions stabilize.
c) Raw material
Raw material is a fundamental factor in the creation of businesses. There may be cases where the demand for some products is poorly served in the market and we assume high possibilities of entry for new competitors, however one of the problems may be the shortage of raw materials in the region or the low profitability that can be obtained by bringing it from other markets. This point should be carefully analyzed before continuing with the study, as it would be pointless to invest in a project that is doomed to failure.
d) Type of process according to the volume of production and standardization
There must be a direct relationship between the demand for the product expected to be served in the market, the volume of production expected to be achieved with the selected machinery, and the type of production process to be installed at the plant. Except in the case of artisan products where production is done by the owner and piece by piece as in the case of carpentry, blacksmiths, lathe, services, etc., there are two types of production processes: online or continuous and intermittent. (Schroeder, RG1992).
Online. For very large batches of standardized and mass-produced products with high investment amounts.
Intermittent. Production in small batches, according to customer needs and with low investment amounts.
The market demand for the product is decisive in deciding what type of process to use. Except in cases of artisan production where the process is in the worker's head, online and intermittent production require the organization of the process on production lines by workstations where each worker does a part of the task. The number of workstations will depend on the complexity in the elaboration of the product and the production volume. In both cases quality and low costs are required, which is achieved with greater speed in the processes, however for intermittent production it is necessary to also take care of idle times, since their production is on request.
e) Plant location
To define the place where the plant should be established, it is necessary to consider the legal aspects of construction, land use, sanitation, fiscal incentives, electricity, water, drainage, telephone, access roads to the facilities, personnel transportation, security public, hospitals, fire, space availability. (Hernández, H: A. and Hernández VA, 1998,). Some services will be more important than others so it will be necessary to highlight their relevance in the choice. Raw materials and labor, due to their scarcity or abundance, can be determining factors in the choice, however the final decision will be made in favor of the site that represents the lowest present and future costs for the project (Schroeder, RG, 1992).
f) Distribution of facilities
The costs in the handling of materials (distance loading) as a consequence of a bad distribution of the workstations can be eliminated by adjusting the production lines simulating continuous processes from the entrance of raw material, sequence of the process, organization of supplies and exit of finished product. Line balancing represents an important tool to avoid idle times and cut costs. (Gaither N., Grazier G., 2000).
g) Manufacturing
The manufacture of the product requires the planning of the itinerary that contemplates the sequence of processes, operations, transportation, storage, machines, tools, auxiliary equipment that will be used for the production of a part, product or batch. (Velásquez M., 2000). See example in the itinerary sheet and process diagram below.
| ITINERARY SHEET Making A ChairPart or Part Number: 137512 | ||||||
| Requirements for its manufacture. | ||||||
| Raw material (part) | Number of pieces | Process | Standard time (minutes) | Machine that performs the process | Used tools | Auxiliary materials used |
| Crossbar Legs Cover Shaft Seat
Painting Glue nails |
44141
one one one |
Cut pieces Sand pieces Assemble, nail and glue legs Assemble nail and glue backrest Assemble nail and glue sorry
Assemble, nail and glue saddle Paint chair |
3030151515
fifteen fifteen |
Cutting bench Sanding bench Air pump for painting. | Cutting discs Sandpaper Presses Paint guns Brushes.
Automotive wrenches and calipers |
Electric energy |
The times of each activity should be standardized to avoid idle times.
If the costs of the process are high, the times and movements of the workers must be measured to reduce the time per unit produced and even think about changing technology to be competitive.
Inventory management
In order to compete on costs, inventories of raw materials, production in process, finished products and materials must be minimized. Excess inventories cause losses, thefts, waste, plant space and warehouses with high financial costs. For its control, the reorder point techniques, MRP and JIT systems can be used in the planning of materials requirements and Just in Time with the capacity to reach optimum levels of low cost (Chase, Jacobs, Aquilano, 2005).
QA
Product design is done in accordance with consumer preferences, and every detail of the product must be consulted with the customer before mass production. Convinced that the selected product is suitable, it will become the prototype of plant production.
From this moment on, quality becomes an agreement between the producer and the client, who is guaranteed that all the products manufactured comply with the conditions established in the original design of the product and that after the client accepted a product with the agreed quality, the following products will be the same.
This commitment must be followed by the manufacturer to the letter if it is interested in maintaining customer loyalty. The proximity of the manufacturer to the consumer will allow permanent consultations capable of knowing their preferences, which will make it possible to improve the product or diversify it continuously. It is probable that some clients prefer the original product and others with variants according to their tastes, which will allow them to more closely meet their expectations (Gaither N., Grazier G., 2000)
Financial analysis
Financial analysis aims to measure the value of money over time. If a peso is invested today we must have in the future a greater amount that includes the peso invested, the loss of purchasing power of that peso over time plus the gain based on risk in order to recover it. In the absence of profits, the project must be discarded, since the risk and the work of the entrepreneur are meaningless if there are no benefits that make the company grow.
Raw material cost per piece:
Depending on the product to be manufactured, raw material costs can be determined from the itinerary sheet and the manufacturing process. An example is the chair that was described in the manufacturing process.
The raw material required to manufacture a chair is purchased from lumberyards and hardware stores according to standardized presentations for all audiences. The pieces of wood are generally handled in boards, polines, plywood sheets and other presentations according to the needs of the client.
The hardware products can be purchased by buckets of paint, liters of glue, sheets of sandpaper and nails per kilo.
To calculate crossbar costs (Tr) the price of a table (TA) must be quoted, determine the number of crossbars that can be obtained per piece after discounting the waste parts and divide the price of the table by the number of crossbars to obtain (TA / Tr):
To calculate the cost of the legs (Pt), the price of a pole (PL) must be quoted, determine the number of legs that can be obtained per piece after discounting the waste parts and divide the price of the pole by the number of legs to obtain (PL / Pt).
To calculate deck costs (Cb), the price of a plywood sheet (TR) must be quoted, determine the number of covers that can be obtained per piece after discounting the waste parts and divide the price of the plywood sheet between the number of covers to obtain (TR / Cb)
To calculate axle costs (Ex), the price of a pin must be quoted, the number of axles that can be obtained per piece must be determined after discounting the waste parts and the price of the pin must be divided by the number of axles to obtain (PL / Ex).
To calculate seat costs (As), the price of a plywood sheet (TR) must be quoted, the number of seats that can be obtained per piece must be determined after discounting the waste parts and the price of the plywood sheet must be divided. enter the number of seats to obtain (TR / As)
To calculate the cost of painting per chair (Ps), the price of a paint bucket (CP) must be quoted, determine the number of chairs that can be painted per bucket and divide the price of the paint bucket by the number of painted seats to obtain (CP / Ps)
To calculate the cost of glue per chair (Pg), the price of a can of glue (LP) should be quoted, the number of chairs that can be glued per can should be determined, and the price of the can of glue divided by the number of chairs glued to get (LP / Pg)
To calculate the cost of nails per chair (Cv), the price of a box of nails (CC) must be quoted, the number of chairs that can be nailed per box must be determined, and the price of the box of nails must be divided by the number of chairs to nail (CC / Cv)
Raw material cost per piece:
Crossbar costs (Tr) = 4 (TA / Tr):
Leg costs (Pt) = 4 (PL / Pt).
Cover costs (Cb) = 1 (TR / Cb)
Axis costs (Ex) = 4 (PL / Ex).
Seat costs (As) = 1 (TR / As)
Paint per chair (Ps) = 1 (CP / Ps)
Glue per chair (Pg) = 1 (LP / Pg)
Nail cost per chair (Cv) = 1 (CC CV)
Piece labor
The cost of labor can be determined by fixing the integrated daily wage (including benefits) (S) of the workers according to the risk that each task implies and the specialization required in each activity.
Daily salary of cutting workers = (S1)
Daily salary of assembly, gluing, nailing and sanding
workers = (S2) Daily salary of painting workers = (S3)
Average active minutes of workers in a working day = (Ma)
Salary paid per chair = (S1 / Ma) (30) + (S2 / Ma) (90) + S3 / Ma (15)
In cases where labor is provided by any member of the family, including the employer or wife and due to liquidity problems it is not possible to pay them, it is always convenient to calculate their salary and incorporate it into costs and record them as liabilities to pay later when there is liquidity in the company. In this way, misunderstandings are avoided that can generate conflicts with third parties who feel like owners but who do not know how much.
Machinery costs per chair produced
Cutting bench.
The required cutting bench time is 30 minutes. Working at 100% of its capacity, it can produce 16 chairs per working day for 25 working days per month, its production will be 400 chairs per month and 4800 per year. If the expected life of the cutting bank (BC) is 5 years. The production in its useful life will be 24,000 chairs. If the cost of the installed cutting bench is = (CBC)
The cost per chair will be (CBC / 24000)
The required time of the sanding bench (BL) is also 30 minutes. If its expected life is 5 years, its production will also reach 24,000 chairs. If the cost of the sanding bench is = (CBL)
The cost per chair will be = CBL / 24000
The time required for the air pump and painting equipment (BP) is 15 minutes. If its expected life is 5 years, its production will reach 48,000 chairs. If the cost of the painting equipment is = (CEP)
The cost per chair will be = CEP / 48000
The assumed production volume for sanding and cutting benches is 24,000 units in 5 years and 48,000 units for painting equipment. The production of the plant will be based on demand. If the market requires 48000 units in 5 years, 2 sanding benches and two cutting benches can be installed. If the demand is 24000 units, there will be an idle capacity in the painting area of 50%, affecting the painting unit costs twice as much on the chairs produced.
Additional tools such as Cutting Discs (DC), Sandpaper (LI), Presses (PR), Paint Guns (PT), Brushes (BR), Wrenches (LL), and Automotive Tweezers (PZ) will all bear the unit cost of each chair if its individual costs are divided (C) by the number of chairs in which each tool has participated in the process (V).
Cost per chair: = (CDC / (V1).) + (CLI / V2), (CPR / V3) + (CPT / V4) + (CBR / V5) + (CLL / V6) + (CPZ / V7)
The cost of electrical energy per piece can also be calculated by dividing the bi-monthly payment (EE) by the number of chairs produced in the period (V8).
Cost of electrical energy per piece = (EE) / V8
Income and Administration Expenses
In some cases, businesses start by occupying part of the owner's house or some borrowed land where rent is not paid, in the same way, if the owner manages the business at the beginning, he does not receive a salary and it may seem like a free service for the business. It is convenient to assign an income and establish the cost of administration expenses. If it is difficult at present to withdraw that amount of business income due to the precarious situation in which it is found, that amount can be accounted for in favor of the interested parties, hoping for better times when such amounts are paid to the interested parties. When the business improves, it will be possible to cover these expenses without affecting its solvency. It will be up to the business owner to keep these amounts as capital contributions or withdraw them if he deems it convenient.
When the business is started as a mercantile company, it must be clear that the shareholders are not employees of the company and their rights are linked only to the profits of the business. The partners who work for the company due to their preferences or abilities must receive the same as any worker with the capacity to carry out the same task if there is liquidity in the company or register the corresponding liabilities for their subsequent collection or addition to capital. The earnings received from the investment in shares should not be mixed with the salary or fees for work performed in the service of the company.
Product costs should include these costs, which can be calculated by dividing the rent (RT) plus selling and administrative expenses (GA) by the production volume per unit time (VT), (generally one month).
Administration income and expenses per unit produced = (RT) + (GA) / (VT).
Total costs and expenses per unit produced can be fixed as long as the sales volume does not change. Any variation in demand will alter costs mainly upward, since the lower the production volume the fixed costs per unit will increase, and the higher the volume, the variable costs and probably the fixed costs, depending on the installed production capacity, will suffer the same consequences. (Ferguson, CE, 1971).
Returning to the example described, the costs per unit produced, total costs, and the useful life for the entire project, necessary for the construction of the costs that make up the cash flows, are detailed below.
| BASIC INFORMATION OF COSTS TO BUILD CASH FLOWS | |||
| Costs and expenses | Unit costs | Total costs | Investment lifetime |
| Raw material cost per piece: Crossbar costs (Tr)
Feet costs (Pt) Cover costs (Cb) Axis costs (Ex) Seat costs (As) Painting per chair (Ps) Glue per chair (Pg) Nail cost per chair (Cv) |
4 (TA / Tr)
4 (PL / Pt). 1 (TR / Cb) 4 (PL / Ex). 1 (TR / As) 1 (CP / Ps) 1 (LP / Pg) 1 (CC / Cv ) |
4 (TA / Tr) Q
4 (PL / Pt). Q 1 (TR / Cb) Q 4 (PL / Ex).Q 1 (TR / As) Q 1 (CP / Ps) Q 1 (LP / Pg) Q 1 (CC / Cv ) Q |
|
| Salary paid by type of worker: court workers = (S1)
assembly, gluing, nailing and sanding workers (S2) painting workers = (S3) |
(S1 / Ma) (30) (S2 / Ma) (90) S3 / Ma (15) | (S1 / Ma) (30) Q
(S2 / Ma) (90) Q (S3 / Ma) (15) Q |
|
| Fixed costs per piece: Cutting bench (BC)
Sanding bench (BL) Painting equipment (EP) Cutting discs (DC), sandpaper (LI), presses (PR), paint guns (PT) brushes (BR) keys (LL) automotive calipers (PZ) |
(CBC / V8)
(CBL / V9) (CEP / V10) (CDC / (V1) (CLI / V2) (CPR / V3) (CPT / V4) (CBR / V5) (CLL / V6) (CPZ / V7) |
(CBC / V8) Q
(CBL / V9) Q (CEP / V10) Q (CDC / (V1) Q (CLI / V2) Q (CPR / V3) Q (CPT / V4) Q (CBR / V5) Q (CLL / V6) Q (CPZ / V7) Q |
PR1
PR2 PR3 PR4 PR5 PR6 PR7 PR8 PR9 PR10 |
| Operating expenses : Electric energy expenses per part (EE)
Income (RT) Selling and Administrative Expenses (GA) |
(EE) / V8
(RT / V9 (GA / V10) |
(EE / V8) Q (RT / V9) Q
(GA / V10) Q |
|
| Total cost per unit | CTU | CT = (CTU) Q | |
| TA = Table, PL = Polín, TR = Triplay, CP = Bucket of paint, LP = Liter of glue, CC = Box of nails, Ma = Minutes per working day, Vi = Volume of units that can be produced with the equipment or corresponding tool during its useful life. Q = Number of units to be produced during the year Source: Own elaboration. |
Initial investment
The amount to invest (II) to start the project must be that necessary to pay for the equipment and tools that appear in the fixed costs plus the operating expenses of at least two months of working capital that includes payments of raw materials, labor, electricity and administration expenses.
Currently, the first-tier banks, the Federal government and the
Development Bank have proposed to offer money to finance investment projects, however their payment schedule plus interest should start almost immediately without considering that most businesses lack the capacity to payment in its first year of life for its high costs or low sales. If this alternative is chosen, the ability to pay must be previously evaluated without affecting the growth of the business.
Annual income
Annual income (IT) will be obtained by multiplying the sale price (PV) by the number of units sold (Q)
IT = (PV) Q
Annual Profits
Annual earnings (UA) will be calculated by subtracting from annual earnings (IT), total costs (CT), taxes (TX = (IT-CT)% TX) and workers' profit sharing (PTU =% PTU (IT-CT):
UA = (IT) - (CT) - (TX) - (PTU)
Annual Cash Flows
The annual cash flows (FEi) are calculated by adding to the annual profit (UAi) the impairment suffered by fixed assets per year and which in the present case may be represented by the unpaid costs incurred on fixed assets, which are: (Q).
FE = UA + (Q).
Value of money over time
The value of money over time (NPV) can be calculated by comparing the initial investment (II) with the annual cash flows expected to be received over the life of the investment (Schroeder, RG, 1992).
r = represents the expected return on investment plus the deterioration of money over time as a consequence of inflation.
If the NPV or net present value is positive, it is an indicator that the project is profitable and the option of investing in it can be considered.
Legal analysis
If the procedure that is carried out to make the decision to invest in a business is long and complicated, we must still consider the importance of complying with Mexican laws.
First.- Register the new business to obtain the RFC that allows us to print invoices. Necessary condition to be able to invoice sales to our clients and charge them the corresponding amount.
Second. Obtain the corresponding authorization from the secretariats linked to our activity to avoid sanctions, fines or even the closure of our business after having spent our money on it.
Third. Ensure that our business does not contribute to environmental pollution since sooner or later we will receive the corresponding sanctions that affect our weak economy.
Fourth. If we rent the premises where we are established, we must guarantee our stay in that place for a reasonable time, since our clients get used to a certain location and changes of address can scare them away.
Fifth. Immediately assure our workers if the company's activity is high risk, since any accident can leave us without workers and with the commitment to pay them medical expenses, benefits and wages during the time they are disabled.
Sixth. Take the necessary measures to minimize accidents and avoid work risks, since the savings that we may have promoting security can be expensive at any time in the life of the company.
Seventh. Promptly comply with our tax obligations to avoid fines and surcharges.
The new business requires sacrifices, however these do not include the breach of legal obligations, since their costs are excessively expensive and generally put the life of the company at risk. Lastly, it must be taken into account that the personnel represent the strongest commitment in the business, so their hiring must be done as the company increases its activities and justifies the new positions.
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