Sithole Upholsterers

Presented by Bright Minds Joined At Kogod

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ryan

ary

ulissa

siya

eyonna

Loosing

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Maximize the wealth of Sithole

How can BMJAK help Sithole become a successful furniture

manufacturer?

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Recommendations

• Restructure organizational culture • Maximize production efficiency • Create multiple streams of revenue

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Restructure Model

Sithole

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Internal Obstacles

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• Unclear corporate objectives • Inefficient production• Aging leadership• Negative cash flow

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Financial Analysiscalculations 2008 2007

Liquidity

Current Ratio Current Assets/ Current Liabilities

8.25 9.1

Quick Ratio (Current Assets-Inventory)/Current Liabilities

4.23 4.33

Absolute liquidity Ratio

Cash/Current Liabilities 12% 40%

Solvency

Current Liabilities to Net Worth

8% 7%

Current Liabilities to Inventory

25% 21%

Total Liabilities to Net Worth

25% 26%

Fixed Assets to Net Worth

57% 62%

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calculation 2008 2007

Efficiency

Collection Period (days) 365 *average receivables/sales

86 Not available

Accounts Payable to Sales

20% 20%

Total Assets Turnover Ratio

Turnover/Assets 0.99 1.03

Profitability

Return on sales Operating Income/Revenue

20% 23%

Return on Assets Profit/Assets 10% 12%

Return on Net Worth Profit/Total Equity 12% 15%

External Obstacles

• Vulnerable currency• Decrease in consumption• Ethnic tension

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Ethnic groups

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Languages: Afrikaans, English, Southern Ndebele, Northern Sotho, Southern Sotho, Swazi, Tsonga, Tswana, Venda, Xhosa, Zulu

Phase 1: Business Plan

• Implement Mission• Declare Vision • Empower Organizational Culture• Manage risk

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Phase 2: Marketing Mix

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Sithole

Product

PlacePromotion

Price

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Four Revenue StreamsWholesalers

Retailers

Mass Market

Interior Designers

Revenue

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Porter’s Five Forces Model

Rivalry Among Competing Firms

HIGH

Potential development of

substitutesHIGH

Barganing power of consumers

HIGH

Potential Entry of New

CompetitorsHIGH

Barganing Power of Suppliers

HIGH

Phase 3: Financials

Increase cash flow

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Target unpaid receivables

Restructure the debt

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Phase 3: Finance options

• Microfinance – Benefits• Smoothes out consumption• Hedges against future risk• Lender provides credit guarantee• Repayment rate is > 95%

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Geographical Benefits of South Africa

Phase 4: Expansion/Relocation

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Second Level

First Floor

Loading Dock

Showroom Corporate offices

Manufacturing and storageAssembly Line

PARKING

1,200 Square Meter Property

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Conclusion

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Passion of Sithol

e Famil

y

Commitment of B.M.J.A.K.

Restructure

Success

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Questions

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Back-up slides

Phase 1: Business Plan• Mission and vision• Executive Summary• Business Overview• Service or Products• Industry Analysis• Market Analysis• Competitive Analysis• Sales & Market Strategy• Operations• Management• Risks• Equipment & Technology• Financials• Use of Funds

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Does Sithole Upholsterers Qualify for Microfinance with Khula?

Qualifications:• Owner-managed businesses - the owner

should be involved in the day-to-day running of the business on a full-time basis

• Business activity must be situated in the Republic of South Africa

• Business must be conducted with a profit motive and be economically viable

• The ability to repay the bank facility • Individual or person holding a controlling

interest must be a citizen of the Republic of South Africa

• Borrower must provide the required contribution

• Borrower with proven and sufficient entrepreneurship, knowledge, skills and experience directly related to the nature of the business

Participating Financial Intermediaries in South Africa

• ABSA Bank Ltd• First Rand Bank Ltd• Nedbank• Standard Bank of South

Africa Ltd

Yes!!!

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Training Options1. Furntech

a. Courses offered at Port Elizabeth Technikon's Saasveld Campus in George, South Africa1. Basic hand skills Introduction to wood technology2. Introduction to wood finishing3. Traditional woodworking techniques4. Production management5. Production supervision 6. Training the trainer

2. Department of Wood ScienceFour year BS in Wood Products

A. Science program offered by the University of Stellenbosch's Department of Wood Science.

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Distribution Channels

• 5.1 Million Internet users in South African• Southern Africa Development Community

Free trade agreements• Negotiations with US and

EU on Free Trade greements

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Financial RatiosRatio 2007 2008

Operating Margin 23% 20%

Return on sales 16% 18.8%

Current Ratio 9.1 8.25

Quick Ratio 4.23 4.33

Assets turnover 4.84 3.56

Networking Capital 0.89 0.88

Return on Assets 10.9% 9.7%

Return on Equity 14% 12%

Total Assets Turnover 1.04 0.99

Inventory turnover 3.81 3.81

Equity Multiplier 1.76 1.77