Financial Projections and Risk Assessment of Himalayan Beauty

This assignment is about Himalayan Beauty, a start-up business that plans to import and sell Nepali handicrafts, specifically rugs, pashmina, and carpets, in Australia. The business will operate from Sydney and also have an online presence. The market research shows that there is a scope for this industry in Australia, but the target customers are limited. The company's financial projections indicate a steady growth over the next three years, with net profits increasing from AUD 13,200 to AUD 32,400. However, the business will face several critical risks, including market risks, financial risks, and competitive risks.

Running head: ENTREPRENEURSHIP
Entrepreneurship
Topic: A Business Plan
Student’s name:
The name of the university:
Author’s note:

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Executive Summary
Himalayan Beauty is a start up venture of Australia and this business is going to open its first
outlet in Sydney. The start up business will import deluxe rugs, pashmina and carpet from Nepal
and sell these in Australia. They also sell their products through online e-commerce platform
also. In the Australia, there are some organisations which already sell rugs, carpet and pashmina
and the growth of the industry has not been bright in the last five years. The market size is
limited; however, global perspective shows the picture of high growth in Asia-Pacific sector in
rugs and pashmina industry. Moreover, Himalayan Beauty offers various textures and colours
products to the customers and they will be selling the products in high-pricing strategy. The new
venture is going to take cost-effective promotional strategies of social media marketing and
newspaper marketing. The financial decision of the new business is given with three years
projection and the organisation aims to capture 3% market share by the end of next year. There
are critical risks associated with the business venture of products, financial and marketing.
Finally, if the business can move right way with choices of perfect decisions, it can have
profitable future.

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Table of Contents
1. Introduction..................................................................................................................................4
2. Background of business venture..................................................................................................4
3. Mission........................................................................................................................................5
4. Products offering.........................................................................................................................5
5. Market analysis............................................................................................................................6
Market size:.................................................................................................................................6
Market growth:............................................................................................................................7
Market profitability:.....................................................................................................................7
Market trends and channels:........................................................................................................7
6. Industry analysis..........................................................................................................................8
External factors:...........................................................................................................................8
Approach to correct industry:......................................................................................................8
Demand and supply scenario.......................................................................................................9
7. Competition...............................................................................................................................10
Porter’s five forces:....................................................................................................................10
8. Primary Target market...............................................................................................................11
9. Marketing...................................................................................................................................12
a) Product...................................................................................................................................13

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b) Pricing...................................................................................................................................14
c) Distribution............................................................................................................................14
d) Promotions.............................................................................................................................14
10. Financial plan...........................................................................................................................15
11. Critical risks.............................................................................................................................16
12. Conclusion...............................................................................................................................17
Reference list.................................................................................................................................18

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1. Introduction
Starting a new business is always a risky decision and it is related to the calculative
venture for the entrepreneurs. Entrepreneurs choose their business ventures and make them
successful. Moreover, the business plan must be good enough and this must show the sense of
projection for the business. In this report, a business plan of launching a new business in rugs
and pashmina selling products in Australia will be described and these products will be imported
from Nepal. The aim of the report is to describe business plan and scope of business in Australia
with describing market, industry analysis and marketing plan for the business. In the first part,
the background of the business will be discussed and mission statement of business will be
narrated. In the later part, competition, industry and market analysis will be done based on
startup company.
2. Background of business venture
The business is about selling the deluxe rugs, carpet and pashmina in Australian market
which would be imported from Nepal. The new business organisation named Himalayan Beauty
is going to launch its business in Sydney. In Sydney, the organisation is opening its first outlet
near Seven Hills Business hub and they will mainly sell imported deluxe rugs, carpet and
pashmina. The main attraction of the products would be handmade rugs and pashmina from
Nepal. Himalayan Beauty has made up a tie with Nepal based handicrafts organisation which is
running by women and this handicrafts organisation will be the main suppliers of rugs, pashmina
and carpet. Himalayan Beauty is thinking to be selling their products through online also. In
order to satisfy the market need, Himalayan Beauty has to increase the supply from Nepal.

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Figure 1: Himalayan Beauty products
(Source: Concept logo of Himalayan Beauty)
3. Mission
 To provide Australians with pashmina, deluxe rugs and carpet
 To showcase the quality products in Australian market from prominent handicrafts in
Nepal
 To offer variety of fashionable carpet, rugs and pashmina
 To create a buzz in Australian market through online presence and sales through
exclusive delivery services
4. Products offering
Himalayan Beauty will import Nepali quality products and they will sell the products in
the Australian market. Himalayan Beauty is going to offer deluxe rugs, pashmina, carpet, Nepali
pashmina, rugs with Persian inscription and antique carpets. In pashmina, the fabric is used from

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Mountain Goat (Changra) to give a look of glossy fur. Quality products will be sold and
customers can expect large ranges of a collection of rugs, pashmina and carpet.
Figure 2: Deluxe rugs from Nepal
(Source: Google image)
5. Market analysis
Market size:
In order to assess the market size, Himalayan Beauty has to take up the cue of
approaching the local market analysis at first. It is needed that organisation can segment the
market. In Australia, the Nepali products of rugs, pashmina and carpet are not available that
much. People can buy these products through Alibaba.com as Alibaba sells these products
through sellers. Outlets and shops of Nepali rugs and pashmina are not available in Sydney area.
Market revenue in Australia from rugs, pashmina and floor covering carpet was $785 (AUD) in
the year 2016 (Strategyr.com 2017). In the Australia, the total number of rugs, carpet and
pashmina stores are 130.

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Market growth:
Pashmina and rugs shops in Australia are not famous and Himalayan Beauty is going to
capture the market. The market growth in 2017 to 2020 is expected to have 1.7% high from the
previous time (Ibisworld.com 2017). However, this growth can be accelerated through marketing
and market presence of the products. Almost 2000 people are employed in this sector in
Australia. The success factors of the products are high as the products are unique in the
Australian market and these have access to the channel of distribution also.
Market profitability:
In order to judge the profitability in the market, it is necessary to understand the potential
customers. In rugs, pashmina and carpet, the business entity must understand the market value of
the products and market value of Nepali products are high as these are rare in Australia (Namgali
et al. 2013). Himalayan Beauty can demand high price as the inimitability and rareness of the
products are high. Profitability is depended on buyer powers and barriers to entry in the market
also, however, Nepali products are so much available in the Australian market.
Market trends and channels:
In new business launching, distribution for products in Australian market must be set
correctly, existing distribution channel in the market is a complex and new channel is creating by
online marketers. In case of a new brand, the retailers and distribution channel negotiate to
capture more margins (Skywaker et al. 2014). In addition, market trends in rugs, pashmina
market is price sensitivity as in online, most of the products are available by Alibaba.com with
low price, however, the quality of the products are not high. Demands of the products are
increasing in popularity of the products is enhancing.

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6. Industry analysis
External factors:
Political factors
 Current legislation and plan of future
legislation is helpful in starting a
business in rugs and pashmina
 Findings and other initiatives are
helpful
 Local as well as internal trading
situation provide assistance
Economic factors
 Economic growth of industry
 Trade cycle
 International economic factors
Social factors
 Consumer trend as customers like to
decorate rooms and offices
 Media opinion
 Demographics benefits
Technological factors
 Innovation and automation
 Digital economy
 Telecommunication and manufacturing
 Technology development of insulation
properties helps Nepal to have carpet
fibre
Table 1: PEST factors in industry
(Source: Analysed by author)
Approach to correct industry:
In case of global perspective, rugs, pashmina and carpet market is projected to touch
US$41 billion by the end of 2020. The customers want now more modular carpet for floor

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covering. Most importantly, Asia-Pacific region is the fastest growing rugs and carpet market in
the world. The main reason behind the growth of rugs and pashmina industry in Australian
region is the customers’ preferences, rapid urbanization, increase of office decoration and the
middle-class population now prefer rugs and pashmina. 23 million Australians use carpet and
deluxe rugs in their houses. The statistics also showed the figure that 46m sq of average carpet is
used in each of house (Rubin et al. 2015). In most of the rugs and carpet based organisation to
focus on mainly specialised high valued products. In case, products are made in Australia, the
manufacturers make it as export-oriented. However, high product substitution is observed that
can affect the negative margin over the period to the organisation. In rugs and pashmina market,
it is observed as the industry is opting for differentiation of the products. Moreover, in rugs and
carpet industry in Australia for last five years, it is seen that the industry is characterized as
falling revenue. The industry has been observing the lower employment; production rate is low
and rising competition in Australian urban sectors.
Demand and supply scenario
In the last five years, the industry of rug and pashmina has not been smooth for the
organisations. However, in global perspective, the industry in Asia-Pacific region has enough
scope to flourish in carpet, rug and pashmina products. In Australia, an exclusive and extensive
collection of rugs and carpets are available, customers must know about this. The demand for the
rugs and pashmina is average in Australia and maximum manufacturers target the foreign
market. In Australia, the Nepali rugs and pashmina have enough potential customers as near
Sydney, Nepali market 4 Corner Bazaar is already there. This bazaar provides various types of
products to local Nepali community (Haines 2016). Therefore, Nepali products have demanded
in the market; the supply should be good in order to meet the market demand. The products

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should give the unique experience to the customers and Himalayan Beauty is trying to innovate
the rugs and carpet in order to customise these according to market needs.
7. Competition
Porter’s five forces:
Bargaining power of buyers’:
In rugs and pashmina industry in Australia, the buyers' price sensitivity is low as the
buyers' don't get enough opportunity to buy these products from the open market. In opening a
business of rug and pashmina, the organisations are highly depended on distribution channels
(Manalo et al. 2015). However, in Asia-Pacific region, large numbers of customers are there for
purchasing carpet and deluxe rugs. The force is low.
Suppliers’ power:
In rugs, carpet and pashmina products, the suppliers play an important role as in
Australia; there are a few suppliers who supply these products. Most of the cases, organisations
import these products. Large numbers of substitute's products are there in the market which can
be used instead of rugs and carpet. Moreover, high numbers of competition in suppliers are seen
as suppliers are limited. One of the major factors in rugs and pashmina industry; it is seen on
diverse distribution channel from the suppliers. Himalayan Beauty is going to import the
products from Nepal by aeroplane. In case of switching the suppliers, business entities may not
have cost benefits as the low cost of switching suppliers (Ali et al. 2017). This force is high.
Industry rivalry:

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The market rivalry is medium in this industry as exit barriers are low with industry size is
not large. In fashion clothing, the industry size is large; however, this is a limited market with
limited customers. In addition, organisations enjoy low storage cost as they can supply large
production from the suppliers. In this regard, Himalayan Beauty can face industry rivalry from
existing companies. The rivalries are Hali, Eastern Silk, Otto & Spike, Rug Emporium, Alpaca
and much more. Moreover, the new organisations can face the issue of online market that is
Alibaba.com as this e-commerce supplies the rugs and pashmina products from foreign
companies.
The threat of new entrants:
In this industry, the threat of new entry is medium as the scope is high, however, the
limited customers are the barrier. New venture may not need to invest a large amount of money
in starting a new business. Strong distribution of network is needed for the business to deliver the
products to the customers at right time. However, in new entrants, customers do not trust the
companies to buy products; string brand names can solve the issues.
Threats of substitutes:
Substitute ranges of the rugs and carpets are high. There are various types of rugs are
there in the market. Nylon, pashmina, cotton, Terylene and much more types of carpets are
available for the customers. Customers can opt to choose different product, not the exact one
which is offering the business. This force is high.

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8. Primary Target market
For an organisation, the market can be segmented into four different categories. In
demographic segmentation, age, gender, socioeconomic condition and occupation are the main
factors for the organisation to choose (Azizul and Jain 2013). In geographical segmentation,
location, region, the rural or urban sector of the customers is the target. In behavioural
segmentation, the business organisation can choose the customers based on benefits sought by
customers, loyalty status, readiness to purchase ad rate of usages of the products. Lastly, the
organisation can choose psychographic segmentation of the market. The customers who buy the
products according to lifestyles, personality and attitudes are the main targets for psychographic
segmentation.
Himalayan Beauty business venture can target the geographic and demographic
segmentations for their business. As this business is going to open an outlet in Sydney, the
primary target customers should be near Sydney areas. Urban people will be the main target for
the business. In today's life, rugs, pashmina and carpet are not only used by customers to utilise
in a house, however, in many educational institutions and offices use these products for
decoration. Himalayan Beauty can target the niche and high-income customers for their products
who live in Australia and have the taste of decoration. Himalayan Beauty will take premium
pricing strategy as the products will be imported from Nepal and upper-middle class people and
business class can afford these products.
9. Marketing
The marketing objectives of the Himalayan Beauty Company will be:
 To capture 3% of market share by the end of 2018 in rugs and pashmina industry

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 To grab a loyal customer base in the Australia
 To open three more outlets in next two years across Australia
 To reach break-even point and start making profit in next year
a) Product
Himalayan Beauty is going to offer premium quality rugs, pashmina and carpet to the
Australian customers. The business venture will also offer Persian rugs, antic rugs and Nepali
handmade carpet. All the products will be imported from Nepal and the products will be
handmade by the women in Nepal. The rugs and carpet will be from finest wool and animal skin
with various ranges of textures and colours. Products will be available in woven, tufted and
knotted kinds with both residential and non-residential purposes. In non-residential purposes, the
customers can get healthcare, education, hospitality, retail and office type carpet and decorated
materials.

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Figure 3: Kashmiri Pashmina
(Source: Google image)
b) Pricing
Himalayan Beauty is going to take premium pricing strategy at the starting of the
business. In Australia, there are not so many brands are available which sell rugs, carpet and
pashmina, therefore, prestige pricing would be helpful. Keeping the price high can encourage the
customers to buy the products and it creates the favourable perception among customers (Swift
and Sanchez 2017).
c) Distribution
Himalayan Beauty is going to open its first outlet in Sydney and the distribution channel
the organisation takes is based on intermediaries. The products will be made in Nepal and then
the products will come to distributors of the organisation. The business entity will take the
products from distributors. In case of online distribution of the products to the customers, the
organisation will take help of intermediaries or third parties.
d) Promotions
Himalayan Beauty will be the start up the organisation and the promotion strategies of the
organisation must be cost-effective. Himalayan Beauty is going to follow social media marketing
strategies on Facebook and Twitter. According to Haines (2016), content marketing strategy will
also be helpful for the organisation as this can attract more customers. The poster on the streets
of Sydney and newspaper advertisements will also be helpful for the business. Public Relation
will also be needed and the organisation can take ‘viral’ marketing on social media pages by
making videos and images.

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Figure 4: Advertisement leaflet of Himalayan Beauty
(Source: Concept advertisement of Himalayan Beauty made by entrepreneurs)
10. Financial plan
Expenditure Year 1 Year 2 Year 3
Sales AUD 465,530 AUD 510,300 AUD 542,200
Direct costs AUD 267,450 AUD 292,300 AUD 315, 200
Gross margin AUD 197,200 AUD 217,300 AUD 235,800
Gross margin % 43% 43% 43%
Payroll AUD 94,100 AUD 102,560 AUD 104,870
Rent AUD 24,100 AUD 24,100 AUD 24,100
Marketing AUD 23,100 AUD 23,000 AUD 32,100

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Leased
equipment
AUD 1800 AUD 2200 AUD 3200
Utilities AUD 1500 AUD 1500 AUD 1500
Insurances AUD 900 0 0
Benefits AUD 23,000 AUD 25000 AUD 26000
Total operating
expenses
AUD 168,320 AUD 181,320 AUD 186,320
EBITDA AUD 29,430 AUD 35,700 AUD 49,400
Depreciation AUD 12,300 AUD 12,300 AUD 12,300
Interest AUD 2,100 AUD 1,600 AUD 1,300
Taxes (including
import taxes)
AUD 1900 AUD 2100 AUD 3200
Net profit AUD 13,200 AUD 19,300 AUD 32,400
Profit/sales 3% 4% 6%
Table 2: Financial projection of next three years
(Source: Estimated by author)
11. Critical risks
A new venture always has risks with it. Himalayan Beauty can face regarding the
products of Nepal handicrafts as Nepali women may produce low-quality products. Market risks
will be high in rugs and pashmina industry as the target customers are limited through the scope
is high. Financial risks will be there as the business is start-up business and entrepreneurs do not

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have enough money. Poor investment and lending policies can pose threat to a business.
Moreover, competitive risks are competing with the existing companies in the market.
12. Conclusion
It can be concluded that rugs, pashmina and carpet industry has scope to flourish in
Australia, however, the target customers are limited. Moreover, in last five years, this industry
has been facing with low employment and financial objections. Himalayan Beauty is going to
start its business in Sydney and also through online and they are going to import rugs, carpet and
pashmina from Nepal. The competitors are there in the market and the business is going to take
premium pricing strategy and promotional activities to grab the market share.

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Reference list
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Haines, T., 2016. Developing a startup and innovation ecosystem in regional
Australia. Technology Innovation Management Review, 6(6), p.24.
Ibisworld.com.au, 2017. Carpet and Textile Floor Covering Manufacturing in Australia Market
Research | IBISWorld. Ibisworld.com.au. Available at: <https://www.ibisworld.com.au/industry-
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floor-covering-manufacturing.html> [Accessed on 10 Sep. 2017].
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economy. Economic Modelling, 47, pp.53-62.
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Resources Forum, 34(3), pp.222-230.
Rubin, T.H., Aas, T.H. and Stead, A., 2015. Knowledge flow in technological business
incubators: evidence from Australia and Israel. Technovation, 41, pp.11-24.