Estimations Approach:
I along with my entrepreneur friend walked into a sweets store in a prime location based in Hyderabad.
While we made the purchase and were waiting for the check.
We tumbled upon the question — Is this business really sustainable?
We did little math with a few assumptions:
We witnessed at least 4 to 5 customers walking in the 15 minutes we stayed at the store.
Assumptions (with lowest common denominator in mind):
Number of people walking in 20*10 hours working = 200 prospective customers per day
Let’s say 50% of customers actually buy = 100 potential customers
Average buy per customer (1 kg sweets = 650 rupees) = 500[Rounding off]
Totals Sales: 500*100 = 50,000
Weekly Sales = 50000*7 = 3,50,000
Monthly Sales = 350000*4=14,00,000
Yearly Sales = 1400000*12=1,68,00,000
Costs :
We saw like 2 people were working = 2*20000 = 40,000
Sweets making and raw materials etc = Let’s say per Kg it would be around 200
And on an average day let’s say they sell like 50 kgs = 50*200=16,000
Total costs = 40000*12 +16000*7*4*12=58,56,000
Other misc charges to maintain a central team to prepare sweets and logistics = 20 employees *20000*12 = 48,00,000
Rent for the shop = 1,00,000*12 = 12,00,000
Total savings = 1,68,00,000–58,56,000–48,00,000–12,00,000 = 49,44,000 /- (Rounding off to approx. 40 LPA)
[Other costs include electricity, Municipal corp fees etc]
Now we enquired a few more details from the people who were assisting there in the store.
Number of employees working in a store: 4
Salary per month = 15k
Per year salaries = 15000*4*12 = 7,20,000
Central Team and maintenance = They did not have actual insights into it.
Also, they revealed they only had at most 1.5 to 2 kgs of a similar sweet to reduce spillage.
Now the biggest reveal of that discussion was that they had 28 stores operating in Hyderabad.
So total revenue from the business = 40,00,000*28 = 11,20,00,000 Rounding off to 10 crores /-
Even if we are way off by let’s say about 25 to 30% on our calculations that is still a bottom line of 7 Crores /-
Now the next question: Should you venture into sweet business in Hyderabad?
Do let us know your thoughts on the same!
P.S: Any calculation errors do let me know for correction.
#ProductManagement #Estimations #Business #KPKR
