Business Plan - Broad-Ex

Hong Kong Social Enterprise Challenge 2008

Team Details Name of Leader:

BROAD-EX ĺ?šć˜“ Lau Ho Ming

Name of Member:

Lee Ka Kui

Name of Member:

Chan Kin On

Name of Member:

Wong Man Hang

Name of Member:

Liu Ka Shing

Project Title:

DISCLAIMER This business plan is confidential and is presented solely for the purpose of evaluation in the Hong Kong Social Enterprise Challenge. This plan may not be reproduced or redistributed in whole or in part. By accepting a copy of this plan, the recipient agrees not to reproduce or disclose the contents of this plan to third parties without the prior written consent of its authors.

CONTENTS 0

Executive Summary ......................................................................................................... 1

1

Background ....................................................................................................................... 2

2

Mission............................................................................................................................... 3

3

Our Business ..................................................................................................................... 4

4

Marketing research .......................................................................................................... 5

5

Our Action Plan Implementation.............................................................................. 11

6

Marketing Strategies .................................................................................................... 13

7

Our products ................................................................................................................. 15

8

Management Team ...................................................................................................... 16

9

Risk and Mitigation ...................................................................................................... 17

10

Evaluation of Business Success .................................................................................. 19

11

Financial ......................................................................................................................... 20

12

Appendix ........................................................................................................................ 21

0 EXECUTIVE SUMMARY Tin Shui Wai is being considered as a City of Sadness in Hong Kong. Family tragedies are particularly frequent. This is probably rooted from the difficulty in making the livelihood generally observed in this region.

We, BROAD-EX, are passionate to help alleviate the problem through providing cheaper goods to them as well as job opportunities to housewives and teenagers there.

Our Business  Blends the concept of barter and second-hand shop  Promotes environmentalism in the region  Provides on-job development to employees  Develops network among the needy With the store located in Yuen Long, we target housewives and the low-income class in Tin Shui Wai and Yuen Long.

Financial Highlights  Expected Net Present Value: $3,613,651  Break-even within 3 years  Double-digit growth rate afterwards As a social enterprise, we balance the aims of being self-sustainable and creating social value at the same time, fulfilling the goal of “Let the Needy help the Needy”.

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1 BACKGROUND Tin Shui Wai is located at the Northwestern part of Hong Kong, often being isolated and idled by other parts of the city.

At the end of December 2007, the population in this region is about 287,000.1 More than half of the residents live in the 11 public housing estates and the 6 HOS (Home Ownership Scheme) ones.

The large proportion of residents living in public housing estates suggests that the overall wealth level is not satisfactory in this region. In particular, in Tin Shui Wai North (north of Tin Wah Road), the ratio rises to 85%.1 In Yuen Long, the unemployment rate remains high (about 5.6%) over the years, most of them are from Tin Shui Wai. There, the median family income is only $13,750, the second lowest among the new towns; the number of Comprehensive Social Security Assistance (CSSA) cases is 13,947, 4.9% of the Hong Kong overall. About 50.4% are physically-healthy cases (single-parented 23.1%, low-income 10.9%, unemployed 16.4%), much higher than the 29.73% of Hong Kong overall.1 The general low income in Tin Shui Wai is probably due to insufficient local employment opportunities. The local market only provides 20,000 jobs in a region populated with 130,000

1

Development Bureau (Planning and Lands Branch), “天水圍第 112 區 B 用地邀請提交意向書”

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working force.2 On the other hand, the high travelling fee to the central business districts (about $30 per trip) discourages them from taking jobs outside.

Low income level reduces the purchasing power of residents. Nevertheless, the price level of goods in this region is significantly higher due to the fact that most stores are located at the shopping malls owned by the Link, who charges high rent. According to our interview with the District Councillor Yiu Kwok-wai and the Hong Kong Women Development Association Limited (HKWDA) – Tin Shui Wai branch, they both mentioned cases that housewives travel from Tin Shui Wai to Yuen Long, or even Shenzhen through the Western Corridor, to purchase bargain goods, like ingredients for dinner. They do pay great attention on the price of goods.

All in all, providing job opportunities to locals are vital. Most of the families there are new immigrants possessing little knowledge and job experience, increasing difficulty in finding jobs.

We hope to cater for both the need for cheaper goods and the low level of skills required for employees. In addition, tragedies are probably rooted from the lack of communication and understanding between different people or generations. A social project structured by the combination of the different generations, like housewives and teenagers, would benefit both.

2 MISSION We are devoted to promote environmentalism through the exchange of reusable goods, and to bring harmony to society by providing job opportunities to both teenagers and housewives. We aim

2

The Democratic Alliance for the Betterment and Progress of Hong Kong,“「希望之城」活化天水圍工程建議”

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at utilizing and developing teenagers’ potential and self-esteem, broadening their social network, and relieving the financial burden of housewives to improve their living standard.

Our Theory of Change If the goods that one household does not need are allowed to be sold to another household at a lower price through a barter or second-hand trading platform, the well being of buyers, sellers and the employees engaged in this platform will be improved.Â

3 OUR BUSINESS Overview BROAD-EX is a social enterprise which introduces the concept of barter and merges it with second-hand goods trading. We intend to let customers use little money plus goods that they do not want in exchange for items they need. In this way, customers can be benefited from low-price goods, and they can also help recycle goods to others in need. We aim at helping families living in Tin Shui Wai. We can provide them with job opportunities as well as a brand-new way to save expenses.

Our Social Value Job opportunities for teenagers and housewives People in Tin Shui Wai often find it difficult to get a job, not because of their abilities, but due to the fact that Tin Shui Wai is a remote area. Little industry or business can be found within the district, which in turn provide few job opportunities for residents. Yuen Long district is the closest HKSEC BROAD-EX

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area having a much higher level of economic activities, ensuring not only outlet of products but also works for people. We hope to provide jobs for them to self-sustain to some extent.

On-job development for employees Through the work in our shop or online platform, they will have chances to communicate with each other, and can thus form a close network to support each other. People, especially the new immigrants living in Tin Shui Wai, find it difficult to meet new friends and this worsens the problem there. We provide not only material support but also a chance for them to help each other outside their working positions. Besides, during the work, their self-esteem, working experience and skills are enhanced. They are vital elements to employees’ life and bring mental satisfaction to them.

Environmentalism Ironically in Hong Kong, people are renewing stuffs that are outdated while some people are in desperate need of daily necessities. Our shop provides a channel to link up the "supply" side and the "demand" side. Materials not needed by one can be effectively transferred to someone in need. This greatly reduces waste and promotes a concept of conservation. We not only assist people to make the best use of their belongings, but also advocate recycling to the whole society.

4 MARKETING RESEARCH Target Consumer markets Housewives in Yuen Long In Yuen Long, the situation is much better then in Tin Shui Wai. Fewer housewives take the CSSA. We hope to attract the housewives who are frequent customers in the Wet Markets to enter our stores.

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Housewives in Tin Shui Wai Housewives in this area are in great need to minimize their cost of daily living, as most of the local stores sell high-end products. As aforementioned, they may go to Yuen Long for shopping, for lower price goods. From no social network to advertisement through cooperation with district organization, about 3% annual rise in the number of potential customers in this sector is expected.

Others They comprise the other low-income people and elderly, under or not under the CSSA scheme.

Potential Customers

Growth

2009

2010 2011

2012 2013

CAGR

Housewives in Yuen Long

1%

2,790

2,818

2,846

2,874

2,903

1.00%

Housewives in Tin Shui Wai

3%

1,394

1,436

1,479

1,523

1,569

3.00%

Others (elderly &

6%

2,246

2,381

2,524

2,675

2,836

6.00%

3.25%

6,430

6,635

6,849 7,072 7,308

3.25%

low-income middle aged) Total

(The population of potential customers in 2009 is set as one-tenth of the women projected population in Yuen Long of age 35-59, one-tenth of the number of the CSSA cases in Tin Shui Wai, and one-thirtieth of the population above 60 in Yuen Long District. The growth rate is set as the projected one by the government.)3

The number of potential customers may change with the economic cycle: As second-hand goods are inferior to first-hand ones, part of them will switch to the later ones. However, the high unemployment rate in Tin Shui Wai is a structural problem (e.g. lack of local job opportunities, housewives lack of knowledge and skills) that cannot be resolved in a near future. Therefore, population of potential customers remains relatively stable over time.

Research on consumer market To better understand the market potential, our group has conducted 40 questionnaire surveys

3

Census and Statistics Department, “Projections of Population Distribution 2007-2016�

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(representing 40 families) with several interviews with housewives living in Yuen Long. The questions are enclosed in the appendix. Based on the results, we strongly feel that the set-up of shop combining both the functions of recycling and sale of second-hand goods is necessary. In this company, special attention is needed on the quality control on the goods sold to attract customers to buy. Discounts of our company may need to be given to customers to increase the incentive for donation.

Comparison with similar businesses in Hong Kong Barter shop and online bartering platform The barter-trade business is a rather new type of industry in Hong Kong. There is a shop called "屯屯愛物店" in Tuen Mun set up by Yan Oi Tong employing the credit system in the trading of goods, which is similar to barter trade. It is linked with a NGO and is a part of a bigger social project.

We intend to be self-sustainable and independent to increase flexibility to the changing market.

On the other hand, Tradeduck and Deetool.com pioneer the barter trading business in Hong Kong. Nevertheless, they offer only an online platform for surfers to propose a trade with others, which is rather passive in nature and leave the participants to deal on their own. We provide not only an interactive web-interface for our customers to check for their needs, but also a real store platform for them to assure the quality of goods.

Second-hand shops Second-hand shops are more common than barter ones nowadays. They promote the concept of recycling and make use of the used goods to create value for other consumers. Among them, private second-hand goods shops are usually smaller and specialized in a particular kind of goods,

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like Fans Club, Milan Station etc. Our company is more flexible in deciding what to trade as we can make adjustment to the items that customers want to trade. Moreover, these shops depend purely on money trade and they obtain their goods from customers with a higher cost than us.

Another kind of second-hand shops are run by NGOs, which can obtain charity donations with little cost. Examples include Salvation Army's Family Stores and the second-hand stores run by The Hong Kong Association for Democracy and People's Livelihood (ADPL, 民協). Shops linked with NGOs usually have larger source of funding and broader community networks. However, we place greater emphasis on the satisfaction of both sides of the transaction through introducing the concept of trade-in.

Our competitive advantage There is no direct competition for our goods in Yuen Long as there is no second-hand store. Our closest competitors are the groceries stores. In general, BROAD-EX has the following advantages.  A one-stop solution for any needs in households. BROAD-EX offers everything housewives need in home, including furniture and electronic appliances.  A more affordable price for everything households need. Every buck is important to them. We offer goods with the lowest price in the region.  A guarantee of quality. We have licensed electronic engineers to ensure the appliances we collected are of satisfactory quality. In case there is malfunction, our technicians will make repair.

Similar renovation will be applied to the furniture or toys collected.  A win-win situation for customers and donators. In our store, customers can bring in their

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unwanted goods in exchange to a discount on items sold in the store (or even get the goods free).

This unique mechanism enables our store to have a stable, sustainable and low-cost inventory for replenishing the store while customers can receive rewards (discounts for the goods they want) for giving out items to us, making an incentive for them to give unwanted items in the future. ď ˇ Customer-oriented principle: In BROAD-EX, customers are welcome to leave a message to the store on the items that they would like to buy. The store will try to contact the suppliers to check if any items of that kind are available. As soon as BROAD-EX gets such kind of goods, those customers can get a first look on them. By this unique way, BROAD-EX's goods are not only determined by the management team, but also the special request from customers. ď ˇ SWOT Analysis Strengths

Weaknesses

1. Negligible direct cost of goods sold.

1. Lacking reputation before starting.

2. Flexible pricing.

2. New towards the district.

3. Customer-oriented principle.

3. Seasonality of the items received.

4. Simple Structure.

4. Regional Location.

5. Nature of BROAD-EX.

5. Perception towards second-hand goods

Opportunities 1. Huge labour available in Tin Shui Wai. 2. Recent economic downturn leading to a surge of demand on inferior items.

Threats 1. Competition from other second-hand stores.

2. Potential fall in inventory collection.

3. Development in Area 112 in Tin Shui Wai. 4. Higher purchasing power in Yuen Long District.

5. Technological advancement HKSEC BROAD-EX

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Strengths Negligible direct cost of goods sold - This makes BROAD-EX easier to set lower prices.

Flexible pricing - Additional discount offered can attract potential customers..

Customer-oriented principle - As aforementioned.

Simple Structure - The business model and management team of BROAD-EX will be kept simple, reducing chances of managerial diseconomies of scale.

Nature of BROAD-EX - It is easier for BROAD-EX to get cooperation with other companies with her Social Enterprise nature.

Weaknesses Lacking established goodwill before starting - In developing a second-hand trading business, it is important for the management team to have a good reputation as with the residents before starting so that there will be a broader supplier and customer base.

New towards the district - Many NGOs and successful Social Enterprises are set in districts where they are familiar with (e.g. ADPL chooses to run an SE in Sham Shui Po). However, BROAD-EX’s management team may not be that familiar with the districts compared to organizations that rooted there for long. A possible solution can be building a stronger linkage with District Councilors.

Seasonality of the items received - Goods that BROAD-EX received vary and fluctuate over the months. This creates difficulties in storing items received and determining appropriate sales strategies.

Regional Location- BROAD-EX starts the business in Yuen Long, while the store can only focus regional customers in Northwestern part of the New Territories, making it comparatively difficult in catering the need of urban citizens.

Perception towards second-hand goods - People tend to think that second-hand goods are more inferior in quality and will not consider buying. We would provide a guanrantee of quality through sorting and renovation to them.

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Opportunities Huge labour supply in Tin Shui Wai - This provides the company a pool of labour force available with a relatively lower labour cost.

Recent economic downturn leading to a surge of demand on inferior items - When the economic is in a recession, people tend to reduce expense on buying goods. They may prefer second-hand items which are cheaper. Therefore, provided that the quality of items is improved through sorting and renovation by the workers, there will be a huge demand on the items sold in the business.

Development in Area 112 in Tin Shui Wai - The developing of Area 112 may lead to a new branch of BROAD-EX in Tin Shui Wai. Higher purchasing power in Yuen Long District - This can boost the sales of BROAD-EX. Technological advancement - Technology always runs fast. Affluent people may change to use newer products whenever they are available, leaving a number of reusable technology products.

Threats Competition from other second-hand stores - There are already small-scale non-profit stores selling second-hand goods in the Northwestern part of the New Territories. This will obviously result in resistance to BROAD-EX when trying to enter the market.

Potential fall in inventory collection – Due to the financial tsunami and the subsequent unemployment plight, the goods gathering through recycling and donation may decrease.

5 OUR ACTION PLAN IMPLEMENTATION Phase I In this phase, BROAD-EX aims at starting the business by launching a store in Yuen Long. It starts at the beginning of 2009 and ends in late 2010.

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Grocery store The shop will be located at Yuen Long, which is close to Tin Shui Wai. This lowers travelling fares for our employees. Consuming power in Yuen Long is greater. Also, residents in Tin Shui Wai often travel to Yuen Long for cheaper goods. They may purchase on discount or get coupons for future use if they put down an item on us (like barter), or they may buy at the listed price directly.

Website A list of selected goods available for trade in the shop will be available on the website. With the catalog, interested traders can search for the goods they need without visiting the shop. Photos of the goods in the store will be updated every week. In addition, there will also be a list of recommended items. Through this we hope to boost sales.

The website can serve as an alternative trading platform. Unlike the trading in the shop, visitors of the website can post messages to request for goods that they want or items that they do not need.

Once they found a match, they can contact each other to trade. Therefore, the shop will not be involved nor be responsible in any of these trades.

Phase II In Phase II, BROAD-EX will open another branch within the Northwestern part of the New Territories. Moreover, Area 112 Site B is set by the government to be used as a consolidated development area. BROAD-EX would like to start a booth there to enter the Tin Shui Wai north market. The preparation stage of the phase begins in late 2010 and the phase ends in June 2012.

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Future Development By the time being, BROAD-EX has established a regular customer base within the district. We would like to expand the business to other regions. Our target is the Northern District (e.g. Fanling).

Description Preparation Work Phase I Opening of First Store Research on Future Plans and Development Phase II - Preparation Phase II - Implementation Opening of Second Store

Starting Date 2009-02-01 2009-02-01 2009-07-01 2009-07-01 2010-10-01 2011-01-01 2012-04-01

Ending Date 2009-06-30 2010-09-30 2009-07-01 2012-12-31 2010-12-31 2012-12-31 2012-04-01

6 MARKETING STRATEGIES Positioning Statement For citizens in Northwestern part of the New Territories who cannot afford buying high-priced products, BROAD-EX offers value-added second-hand items in low price. Unlike other second-hand stores, we provide exchanging opportunities for customers having unwanted goods for items wanted.

Sales Strategy When the items collected that can be sold are selected, they will be showcased in the store.

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 For customers who have given out items to the store, they may choose to receive a favourable discount (about 50%) on the listed price or a BROAD-EX coupon for future purchase.  For customers who have no items for exchange, the items will be sold at listed price.

Meanwhile, throughout the sorting process, there may be items not meeting the quality for sale.

We will then act as a wholesaler and sell those goods to other recycling companies, for example the Sun Ngai Recycle Co.

Pricing Strategy We set the price of the second-hand goods as half of the market price of the first-hand ones.

Saleswomen are empowered to offer further discounts to customers.

Promotion Strategy Suppliers After getting our starting capital, we will promote our company to the recycling industry, schools and offices by phoning them or visiting their office. Also, we will search for potential donors.

Customers In the very beginning stage, we will distribute leaflets to the local residents near the LRT stations and big shopping malls in order to let our potential customers know more about our store.

Moreover, we will place advertisement on the Take Me Home Western N.T. newsletter. Meanwhile, we will keep in contact with regional District Councilors and social organizations and cooperate with them by organizing activities in order to let our store merge into society.

We will organize barter trade activities in regional shopping malls. Our future “Mega Barter-Trade” (Seasonal Barter activities) also contribute to better public relations.

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Strategic Alliances BROAD-EX will cooperate with Yiu Kwok-wai (DAB), a District Councilor serving Tin Shui Wai, and the Hong Kong Women Development Association Limited (HKWDA) – Tin Shui Wai branch. They will help recruit appropriate full-time and part time workers to be our staff. We will jointly hold sales activities in order to promote the store.

7 OUR PRODUCTS Our products are mostly second-hand goods from trading with customers. Expected goods include household products, toys, small decorations, electronic appliances, office equipments, clothes, furniture, etc. Trained employees will be responsible for sorting our goods with different qualities. Electronic appliances and furniture will be rejuvenated by contracted technicians before sold. Only the items that have market demand and in good condition will be put for sale.

Sourcing of products The main source of goods is our customers. Through our model, customer would use their unwanted goods as a trade-in for other second-hand goods they need. Domestic goods, clothes, electronic appliances and furniture are expected to be collected from them. Large-sized electronic appliances and furniture can be collected through our on-site service. As mentioned, every item collected will be checked by trained employee before put to sell, to ensure the quality.

During festival times like Lunar New Year, Valentine's Day and Christmas, a "Mega Barter-Trade" would be held. People often received gifts that they do not really want at festival times, HKSEC BROAD-EX

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"Mega Barter-Trade" offers a special opportunity for them to exchange for goods that they need. Also, it will be held at season-ends for trading seasonal clothing.

Another source of goods is the collection cages placed at public estates and roadside. Clothes and light-weighted goods will be collected in this way. Also, factories, wholesalers, large companies and organizations will be contacted to collect their unused items.

8 MANAGEMENT TEAM

Organization Structure The Chief Manager is responsible to handle all marketing, public relations and administrative matters, and to make decision.

2 teenagers will be hired to help maintain the website as IT technicians. They should come to the store, helping and teaching housewives how to use the computers and systems.

6 housewives will be employed from Tin Shui Wai to manage the shop. Four of them will be part-time shopkeepers. Their duty is to categorize the received items. They will be paid hourly in the form of subsidy as remuneration other than CSSA. The other two housewives will be full-time, taking care of all transactions and other administrative work in the shop. The housewives will be hired through HKWDA Tin Shui Wai branch.

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A contracted technician will be responsible for repairing and checking electronic appliances collected on piece rate. Driver and delivery workers will transport bulky goods from customers.

Mentors will give suggestions on improvement of our management and marketing strategy regularly. We will also coorporate with social workers in HKWDA to give us advices on our social value.

9 RISK AND MITIGATION In every business there are potential risk factors which may hinder its future development. As for BROAD-EX, several potential risks can be identified.

Potential Competitors Yuen Long and Tin Shui Wai are popular sites for recycling industry. Competitors may open shops selling similar kinds of goods as we do. Besides, recycling industry is getting more popular and well-accepted in Hong Kong, more second-hand shops are expected to be launched.

To tackle this risk, we would cooperate with regional community groups and District Councilors to promote our social value in order to attract customers. A good community network can ensure both the source and outlets of goods. Moreover, continuous quality check of goods is essential to build up our reputation.

Uncertainties in source of goods Since we rely on our customers as the major source of goods, in case of low shopping season like May – Aug, we may not have a stable supply of goods. To ensure enough goods for sale, we will adjust the amount of goods sold to the recycling companies. We would make regular call to

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corporations and schools to see if they have obsolete goods that can be given to us. In addition, highlight events like ‘Mega Barter-Trade’ would be organized regularly to expand our supply.

Overestimation of customers In case the general market price in Tin Shui Wai falls, we may face a huge loss of customers.

Our estimation of sales figure may be too optimistic. To mitigate this risk, we would try to develop a close relationship with our customers. A close network allows them to obtain items they want and meet each other, which in turn keep the second-hand trading community growing. Besides, the Tin Shui Wai Area 112 Site B would be one of our potential expansion sites. A branch located there can help retain our customers.

Change of consumer’s preferences In times of economic downturn, we can take the advantage of low-price goods to attract customers. However, when the economy goes up again, customers may turn to superior goods instead of second-hand goods.

We would like to promote that second-hand trading is not all about inferior goods, but a new type of consumption which makes the best use of every single item. Quality-ensured goods can also help develop customers’ loyalty and confidence to our company.

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10 EVALUATION OF BUSINESS SUCCESS In evaluating the performance of BROAD-EX during its business operation, the following indicators can be relied upon to access the extent of its mission fulfillment.

Net profit ratio As a second-hand trading shop incurring low cost of goods sold, our net profit ratio depends greatly on the efficient control of the operating expenses, like wages, utilities, etc. Minimization on the expenses is crucial to reach the break-even point (repaying the set-up fund) as soon as possible. A double-digit net profit ratio in the long term would be our target.

Customer reach & quality of goods Customer figures and opinion reflect the acceptance of Tin Shui Wai and Yuen Long residents to our idea and products, as well as the effect of our promotion campaign. They can be obtained from our front-line employees, i.e. housewives, who observe the flow of customers in the store and talk to them for their feedback. It will be considered an acceptable customer-times figure of 25,000 in the first year and 40,000 in the second year. Otherwise additional promotion may have to be taken. On the other hand, customers opinion on the variety and quality of goods sold can provide light for future development.

Social Value fulfillment BROAD-EX aims at promoting environmentalism, as well as providing job opportunities to the idle working force in the Yuen Long and Tin Shui Wai region. To measure the outcome, we may

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consult the District Council members and the HKWDA – Tin Shui Wai branch, our partners in the recruitment of housewives and teenagers, to know more about the response of the society to our work. If our idea is widely accepted and if we meet self-sustainability, we may consider expansion and recruitment of more people in need. As a social enterprise, it is important for us to balance profit making with social responsibilities.

11 FINANCIAL Sources of Capital The operating fund of the company will come from three ways. A $700,000 fund will be obtained by applying for the government’s Community Investment and Inclusion Fund. To increase the commitment in managing the business, we, the managers, will introduce $20,000 to the business.

Revenues and Expenses The revenue of the company mainly comes from the cash sales of the store and the proceeds from the sales to the recycling company. The cost of goods is about 7% of the sell price. For the recurrent expenses, the major two are the Wages and salaries (62%) and the rental expenses (28%).

Impact of the development plan It is estimated that the phase two expansion will double the amount of retail sales. The opening of the new store will also increase the barter and donation activities, which will bring positive influence to the sales from wholesale sector. The related expenses will be increased by 1.5 to 2 times, example are the utilities expenses, rent expenses and the wages and salaries.

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12 APPENDIX The pricing of our goods We would price out goods at 50% of the market price of first-hand goods.

Market Price Range

Listed Pricing

Discount Pricing

Sundry Clothes

$30 - $300

$20 / $30

$10

Backpacks and Handbags

$70 - $500

$40

$20

CDs, VCDs and DVDs

$20 - $150

$10

$5

Furnishing

$10 - $200

$5 / $20

$5

Books

$30 - $200

$15

$5

Toys

$40 - $400

$20 / $50

$10

Furniture Chair

$30 - $200

Teapoy

$400 - $1000

Dining Table

$1000 - $3000

Computer Table

$200 - $500

Cupboard

$1200+

Bed / Sofa

$1000+

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Information about Community Investment and Inclusion Fund (CIIF) Background In the 2001 Policy Address, the Chief Executive announced the setting up of a $300 million CIIF. This CIIF will provide seed money to support the collaborative efforts of community organizations and the private sector.

Fund Objectives ď ˇ promote community participation, mutual assistance, support and social inclusion provided through strengthened community networks in the community. ď ˇ encourage and facilitate cooperation between organizations of different nature as well as cross-sectoral collaboration in social networking and community support projects.

Financial Arrangement There is no pre-set level of maximum funding for individual projects. The project should not be launched primarily for making a profit. Any profit arise should be re-invested back. The period of funding sought for a project should be for no longer than three years. The project may operate for more than three years, but on a self-financing basis or with alternative sources of funding thereafter.

Any unspent amount of the grant over the recognized total expenditure of the project will be clawed back and returned to the CIIF.

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BROAD-EX Start-up Balance Sheet Assets Cash Motor Vehicle (second hand) Equipment Prepaid Rent Deposit in Utilities Company Account

$ 445,775 50,000 109,225 105,000 10,000 720,000

Equity 20000 Common Stock, $1 par value Liabilities Loan from CIIF Total Equity and Liabilities Explanations: 1. List of Eqipments (initial)

20,000 700,000 720,000

numbers Office Equipment multi-purpose shelf storage cabinet/ cupboard with door arms free chair computer office writing desk printer and scanner (with facsimile machine) 4 - drawer steel file cabinet Outlet & Storage Equipment tool box with tools cart folding/ stackable chair aluminum ladder (general ceiling) mirror CCTV System cash register washing machine plastic container Miscellaneous Equipment recycling cage air conditioner split type (36,000BTU) exhaust fan wall hung fan fire extinguisher (CO2/water) microwave oven refrigerator water boiler

unit price

total

20 3 5 3 5 1 4

1150 880 435 5000 865 2000 750

23000 2640 2175 15000 4325 2000 3000

2 2 6 1 1 1 1 1 20

320 805 160 340 275 5500 1300 3350 100

640 1610 960 340 275 5500 1300 3350 2000

4 2 2 4 2 1 1 1

1500 14000 730 465 320 500 2450 200

6000 28000 1460 1860 640 500 2450 200 109225 I ) Unless it is specifically stated, the price are extracted from the Price List of Common Furniture & Equipment of Lotteries Fund

II )

Items washing machine refrigerator

References http://www.price.com.hk/product.jsp?p=107247 http://www.2ceye.com/sales.htm?gclid=CPeYurOR4JcCFQsspAodhFohCw

microwave oven

http://shop.esdlife.com/b5/eshop/00SHOPEsdspecial/Shop2/ECatSubMain.jsp?ec at_code=microwave

Motor Vehicle

http://hk.88db.com/hk/Services/Post_Detail.page/Car_Boat_Bike/Buy_Sell/?PostI D=1037152

2. The prepaid rent is the 3-month deposit of the shop.

3. The company will apply for the government's Community Investment and Inclusion Fund (CIIF).

HKSEC BROAD-EX

23

BROAD-EX Income Statement

2009E

Sales Revenue Retail Wholesale Seasonal Less: Cost of Goods Sold Freight-in Repairing cost Gross Profit

2010E

2011E

2012E

2013E

$

$

$

$

$

746,400 653,100 90,000 1,489,500

806,112 698,817 94,500 1,599,429

1,559,876 768,699 165,780 2,494,355

1,598,873 795,603 169,925 2,564,401

1,638,845 823,449 174,173 2,636,467

19,200 74,475 1,395,825

20,617 79,971 1,498,841

32,427 124,718 2,337,211

33,337 128,220 2,402,844

34,274 131,823 2,470,370

940,400 420,000 36,000 9,600 15,923 3,065 20,000 4,800 18,000 2,600 5,000 1,000 18,000 (98,562)

959,208 420,000 36,000 9,600 15,923 3,320 25,000 4,800 18,000 2,600 5,000 1,000 19,328 (20,938) 0 (20,938) 79%

1,366,400 735,000 63,000 16,800 23,884 4,979 43,000 7,200 19,800 3,900 5,000 1,000 30,143 17,105 2,993 14,111 -167%

1,393,728 735,000 63,000 16,800 23,884 4,979 45,000 7,200 19,800 3,900 5,000 1,000 30,990 52,563 9,199 43,365 207%

1,421,603 735,000 63,000 16,800 23,884 4,979 47,000 7,200 19,800 3,900 5,000 3,000 30,990 88,214 15,438 72,777 68%

Expenses Wages and Salaries Rent Expenses Utilities Expenses Insurance Expenses Depreciation Expenses Repair and Maintenance Expenses Advertising Expenses Gasoline Expenses Parking Fee Business Registration Fee Audit Fee Decoration Expenses Miscellaneous Expenses Profit before tax Tax Net Profit Assumptions and Explanations: Wages and Salaries (initial)

Rent Expenses Utilities Expenses (per month) Depreciation Expenses Repair and Maintenance Expenses Miscellaneous Expenses BROAD-EX Cash Flow Statement Cash Outflow Capital Expenditure Total Cash Outflow

(98,562)

Numbers Monthly Salaries Manager 1 10,000 Driver 1 9,000 Delivery Worker 1 6,500 Saleswomen 2 6,000 Storekeeper 1 5,500 Part Time workers 4 2,000 Clerk 1 6,500 IT officer 2 6,000 Bonus (Extra one month salaries) MPF 12

Total 120,000 108,000 78,000 144,000 66,000 96,000 78,000 144,000 69,500 36,900 940,400

Rent a shop which its area is approximately 1500 sq. ft with a monthly rent of $35000 (management fee included).

Electricity: $2000, Water: $500, Telephone: $200, Broadband: $ 300 10% straight-line depreciation rate Assumption: about 2% of the cost Assumption: $1500/month

2009E

2010E

2011E

2012E

2013E

$

$

$

$

$

309,225 309,225

0 0

270,000 270,000

0 0

0 0

Cash Inflow Issued 20,000 Ordinary Share at par 20,000 Loan from CIIF 700,000 Net Profit (Adjusted) (82,640) (5,015) 37,995 67,248 Net Cash Inflow 328,136 (5,015) (232,005) 67,248 Cash Balance 328,136 323,120 91,115 158,363 Net Present Value $3,613,651 1. Assume the discount rate is 5% and the growth rate of the net cash flow is 2% from 2014 onwards.

HKSEC BROAD-EX

96,661 96,661 255,024

24

HKSEC BROAD-EX

25

Nov

Dec

$97,500

$90,000

Total Sales

$117,000

$54,400 $47,600 $15,000 $105,000

$56,000 $49,000 $112,500

$60,000 $52,500 $145,000

$64,000 $56,000 $25,000

1. The sales amount is estimated from figures of existing second-hand shop.

2. The seasonal sales is the amont from the "Mega Barter- Sale" held at festevial times.

Operating Expenses (Cash Outflow) Freigt-in 1,600 1,600 1,600 1,600 1,600 1,600 Repairing cost 6,206 6,206 6,206 6,206 6,206 6,206 Wages and Salaries 78,367 78,367 78,367 78,367 78,367 78,367 Rent Expenses 35,000 35,000 35,000 35,000 35,000 35,000 Utilities Expenses 3,000 3,000 3,000 3,000 3,000 3,000 Repair and Maintenance 255 255 255 255 255 255 Advertising Expenses 1,667 1,667 1,667 1,667 1,667 1,667 Gasoline Expenses 400 400 400 400 400 400 Parking Fee 1,500 1,500 1,500 1,500 1,500 1,500 Miscellaneous Expenses 1,500 1,500 1,500 1,500 1,500 1,500 Insurance Expenses 9,600 Business Registration Fee 2,600 Audit Fee Decoration Expenses Total Cash Outflow 141,695 129,495 129,495 129,495 129,495 129,495 Net cash flow (51,695) (31,995) (12,495) (24,495) (16,995) 15,505

$52,000 $45,500

$48,000 $42,000

1,600 6,206 78,367 35,000 3,000 255 1,667 400 1,500 1,500

$160,000

$72,000 $63,000 $25,000

Feb

129,495 129,495 (1,995) 30,505

1,600 6,206 78,367 35,000 3,000 255 1,667 400 1,500 1,500

$127,500

$68,000 $59,500

Jan

Oct

2010 Sep

Jul

Aug

2009

Sales (Retail) Sales (Wholesale) Sales (Seasonal)

Monthly Cash Flow Analysis Sales (Cash Inflow)

1,600 6,206 78,367 35,000 3,000 255 1,667 400 1,500 1,500

$124,500

$66,400 $58,100

Apr

1,600 6,206 78,367 35,000 3,000 255 1,667 400 1,500 1,500

$155,500

$69,600 $60,900 $25,000

May

129,495 129,495 129,495 (9,495) (4,995) 26,005

1,600 6,206 78,367 35,000 3,000 255 1,667 400 1,500 1,500

$120,000

$64,000 $56,000

Mar

5,000 1,000 135,495 (495)

1,600 6,206 78,367 35,000 3,000 255 1,667 400 1,500 1,500

$135,000

$72,000 $63,000

Jun

19,200 74,475 940,400 420,000 36,000 3,065 20,000 4,800 18,000 18,000 9,600 2,600 5,000 1,000 1,572,140 (82,640)

$1,489,500

$746,400 $653,100 $90,000

FY 2009

BROAD-EX Worst Case, with contingency plan Income Statement

2009E

2010E $

Sales Revenue Retail Wholesale Seasonal Less: Cost of Goods Sold Freight-in Repairing cost Gross Profit

2011E $

2012E $

2013E $

$

603,200 663,520 703,331 738,498 775,423 527,800 580,580 615,415 646,186 678,495 90,000 96,300 102,078 107,182 112,541 1,221,000 1,340,400 1,420,824 1,491,865 1,566,458 19,200 17,425 18,471 19,394 20,364 61,050 67,020 71,041 74,593 78,323 1,140,750 1,255,955 1,331,312 1,397,878 1,467,772

Expenses Wages and Salaries Rent Expenses Utilities Expenses Insurance Expenses Depreciation Expenses Repair and Maintenance Expenses Advertising Expenses Gasoline Expenses Parking Fee Business Registration Fee Audit Fee Decoration Expenses Miscellaneous Expenses Profit before tax Tax Net Profit Cash Flow Statement for the year ended 31 December Cash Outflow Repayment of the Loan Capital Expenditure Total Cash Outflow Cash Inflow Issued 20,000 Ordinary Shares at par Loan from CIIF Net Profit (Adjusted) Net Cash Inflow Cash Balance Net Present Value $1,758,002 HKSEC BROAD-EX

940,400 420,000 36,000 9,600 15,323 3,065 20,000 4,800 18,000 2,600 5,000 1,000 18,000 (353,037)

723,450 420,000 36,000 9,600 15,323 3,320 30,000 4,000 18,000 2,600 5,000 500 15,600 (27,437) (27,437)

723,450 420,000 36,000 9,600 15,323 3,320 35,000 4,000 19,800 2,600 5,000 500 16,380 40,340 7,060 33,281

737,919 420,000 36,000 9,600 15,323 3,320 35,000 4,000 19,800 2,600 5,000 500 17,199 91,618 16,033 75,585

824,677 420,000 36,000 9,600 15,323 3,320 42,000 20,000 19,800 2,600 5,000 500 18,059 50,893 8,906 41,987

(353,037)

2009E

2010E

2011E

2012E

2013E

$

$

$

$

$

0 309,225 309,225

0 0 0

0 0 0

0 0 0

0 0 0

20,000 700,000 (337,715) 73,061 73,061

(12,115) (12,115) 60,946

48,603 48,603 109,549

90,907 90,907 200,456

57,309 57,309 257,765

26

Contingency Plan 1. If the sales amount of the first year cannot reach at least 80% of the our target, the contingency plan will be implemented.

2. The bonus will be reduced to half-month salaries.

3. The numbers of part-time workers will be reduced to 3 and the number of saleswomen and IT Officier in the shop will be reduced to 1.

4. The decoration cost will be reduced.

5. The implementation of phase II will be delayed until the situation become favourable.

6. Reduce the budget for the miscellaneous expenses from $1500/month to $1300/month.

7. Advertising Expenses will be increased to promote our shop.

8. If the net profit raise over $72000, the situation will enable the company to hire one additional saleswomen.

Explanations: monthly Wages and Salaries (initial) numbers Total Amount salaries Manager 1 10,000 120,000 Driver 1 9,000 108,000 Delivery Worker 1 6,500 78,000 Saleswomen 1 6,000 72,000 Storekeeper 1 5,500 66,000 Part Time workers 3 2,000 72,000 Clerk 1 6,500 78,000 IT officer 1 6,000 72,000 Bonus (extra half-month salaries) 27,750 MPF 29,700 9 723,450 Miscellaneous Expenses

HKSEC BROAD-EX

Assumption: $1300/month

27

References 1. The Development Bureau (Planning and Lands Branch): http://www.devb-plb.gov.hk/ 2. The Democratic Alliance for the Betterment and Progress of HK: http://www.devb-plb.gov.hk/ 3. The Hong Kong Council of Social Service: http://www.hkcss.org.hk/ 4. Census and Statistics Department: http://www.censtatd.gov.hk/ 5. TradeDuck.com: http://www.tradeduck.com/ 6. 屯屯愛物店: http://www.delight.com.hk/web_demo/temp_yot/change2.htm 7. ADPL Social Enterprise Limited: http://www.adplse.com/index_topic.php?did=96392

Photos of Interviews Interview with the Hong Kong Women Development Association Limited

Interview with Yuen Long District Council member, Mr. Yiu Kwok-wai

HKSEC BROAD-EX

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Questionnaire questions and results 社會企業可行性問卷調查 1.

請問家中多否不需要的物品？如商店贈品、信用卡申請禮品、電訊服務贈品、減價

貨品等。 □少於 5 件 (33%) 2.

□5 至 10 件 (33%)

□10 至 15 件 (23%)

□15 件以上 (11%)

無用物品的種類包括？ □小型電器 (10%)

□日常耐用品(杯碟等) (30%)

□玩具/擺設 (60%)

□其他(請註明):_________________ 3.

家中無用或不需要的物品將如何處理？ □貯藏家中 (25%) □丟棄 (25%) □賣給回收商/放進回收筒 (20%) □贈予友人 (30%)

4.

假若有商戶專門回收此類物品，你會否有興趣將之捐贈？ □有 (95%) □沒有(請簡述原因) (5%)

5.

承上題，以下因素會否影響捐贈意欲？(請依重要性由高之低排上 1, 2, 3…) □同一商店二手貨品折扣回贈 □商店的性質(慈善/社會企業/普通回收商) □其他商店之優惠劵

6.

□商店之地點

□其他:_______________

如有社會企業提供以物易物的方式，以低於同類貨品市價一半提供二手物品，有何 因素影響你會否購買？(請依重要性由高之低排上 1, 2, 3…) □貨品質素

7.

□貨品外貎

□價錢

□貨品耐用程度

□其他:________

對二手商店的觀感是： □便宜 (50%)

HKSEC BROAD-EX

□物品無保障 (35%)

□寶物尋歸底 (15%)

□其他:_______

29