A FEASIBILITY STUDY ON KIEL’S NET CAFÉ IN BARANGAY MAGDUM, TAGUM

CITY

Presented to the Faculty of

Department of Accounting Education of
UM Tagum College
Tagum City

In Partial Fulfillment of the Requirements

For the course STRATEGIC BUSINESS ANALYSIS
(ACC 223)

Alipio, Jean Michel

Baclayo, Jonna Mae

Dupla, Rose Ann

Harding, Danver

Romeo, Christine Joy

March 2022
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ACKNOWLEDGEMENT

The researchers would like to thank with all sincerest gratitude to those following

people that gave a moral support to make our feasibility study.

To our beloved parents, the one who give us financial support and guide in every

step of our life. They also inspire us to continue our journey even if we encountered some

difficulties.

Special acknowledgement to our Prof. Maria Teresa Ozoa. CPA, MBA, who has

the patience in guiding and correcting the research for it to become better, and for sharing

her knowledge in making this feasibility study.

To the researchers’ classmates, relatives, and friends, who are always there to

share ideas, giving comments, warmest support, and love gives the researchers the

motivation in making this feasibility study.

Most importantly, The Almighty Father, the source of our strength, knowledge, and

wisdom throughout in making this feasibility study.

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PREFACE

Feasibility study is important, not only for the completion of the subject but also to

determine the viability of the business. A feasibility study will minimize the risk of failure

of business ventures. This study is designed to provide essential information to assist

interested businessmen or normal people who has the plan in taking the venture.

This study covers the important and critical aspects of a feasibility study, the

marketing aspect, technical aspect, financial aspect, and economic aspects. Each

chapter in this study stands independently but is linked to the others. The chapters should

be read sequentially to appreciate and understand the assumptions and estimates used

by the researchers. Understanding a feasibility study is essential as making a business

plan.

Feasibility study offers help to project managers determine the viability of a project

or business venture by identifying the factors that can lead to its success and shows the

potential return on investment and any risks associated to the success of the venture.

Our sincere appreciation goes to our family for their unwavering love and support.
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TABLE OF CONTENTS

TITLE………………………………………………………….……………….…COVER PAGE
ACKNOWLEDGEMENT.…………………………………………….…….……………..........i
PREFACE………………………………………………………...……….…………………….ii
TABLE OF CONTENTS………………………………………………………….…………... iii
LIST OF TABLES……………………………………………………………………………... vi
LIST OF FIGURES…………………………………………………………………………... viii

Chapter

I. INTRODUCTION 1

A. Rationale 1
B. Objectives of the Study 1
C. Scope and Limitation of the Study 1

II. EXECUTIVE SUMMARY 2

A. Brief Description of the Project 2

B. Brief Profile of the Proponents 2
C. Project Contribution to Economy 3
D. Project Summary 3
i. Market Summary 3
ii. Production Summary 3
iii. Management and Organizational Summary 4
iv. Financial Summary 4

III. MARKETING PLAN 5

A. Description of the Business 5

B. Location 5
C. Main Customers 5
D. Market Area 6
E. SWOT Analysis 7
F. Demand 8
i. Historical Demand 8
ii. Projected Demand 9
G. Supply 9
i. Main Competitors 9
ii. Historical Supply 10
iii. Projected Supply 10
H. Demand and Supply Gap Analysis 11
I. Market Share Analysis 11
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i. Market Share Analysis of the Competitor 12

ii. Market Share Analysis of the Business 12
J. Projected Selling Price 13
K. Sales Revenue Projections 14
L. Summary of Sales 14
M. Marketing Strategies 15
i. Service Strategies 15
ii. Place Strategies 15
iii. Pricing Strategies 16
iv. Promotion 16
N. Marketing Budget 17
i. Summary of Promotional Expense 17

IV. PRODUCTION PLAN 18

A. Service Process 18
B. Fixed Assets 20
C. Life of Fixed Assets 21
D. Service Capacity 21
E. Operating expense 23
i. Rent Expense 23
ii. Salaries Expense 23
iii. Projected Salaries Expense 23
iv. Projected Employee Benefit Expense 24
v. Permit Taxes and Licenses 25
vi. Projected Permit Taxes and Licenses 25
vii. Store Supplies 26
viii. Projected Store Supplies 26
ix. Utilities Expense 27
x. Projected Utilities Expense 27
xi. Honorarium Expense 27
xii. Depreciation 28
xiii. Projected Operating Expense 29
F. Channels of Distribution 30

V. MANAGEMENT AND ORGANIZATIONAL PLAN 31

A. Forms of Business Enterprise 31

B. Vision 31
C. Mission 31
D. Management and Organizational Structure 32
E. Management Qualifications and Functions 33
F. Accounting System 33
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VI. FINANCIAL PROJECTIONS 35

A. Major Assumptions 35
B. Total Projected Cost 36
C. Projected Income Statement 37
D. Projected Cash Flow 38
E. Projected Balance Sheet 39
F. Projected Statements of Owner’s Equity 40
G. Financial Ratio 41
i. Net Profit Ratio 41
ii. Return on Investment/assets 41

VII. ANNEXES 42

ANNEX A (HISTORICAL DEMAND) 43

ANNEX B (PROJECTED DEMAND) 44

VIII. APPENDICES 45

APPENDIX A (MARKET SURVEY REQUIREMENT) 46

APPENDIX B (LEGAL REQUIREMENT OF THE BUSINESS) 48
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LIST OF TABLES

Table

1 Brief Profile of the Proponents 2

2 SWOT Analysis 7

3 Historical Demand 8

4 Projected Demand 9

5 Historical Supply 10

6 Projected Supply 10

7 Demand Supply Gap Analysis 11

8 Market Share Analysis of the Competitor 12

9 Market Share of the Business 13

10 Projected Service Price 13

11 Sales Revenue Projections 14

12 Summary of Sales Revenue 14

13 Marketing Budget 17

14 Summary of Promotional Expense 17

15 Fixed Assets 20

16 Depreciation of Fixed Assets 21

17 Service Capacity 22

18 Rent Expense 23

19 Salaries Expense 23

20 Projected Salaries Expense 24

21 Employee Benefits Expense 24

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22 Permits, Taxes and Licenses 25

23 Projected Permits, Taxes and Licenses 26

24 Store Supplies 26

25 Projected Store Supplies 26

26 Utilities Expense 27

27 Projected Utilities Expense 27

28 Honorarium Expense 28

29 Depreciation of Fixed Assets 28

30 Projected Operating Expense 29

31 Organizational Job Description and Specification 33

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LIST OF FIGURES

Figure

1 Vicinity Map 6

2 Business Process 19

3 Floor Plan 22

4 Level Channel 30

5 Organizational Chart 32
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Chapter I

INTRODUCTION

Rationale

The researchers choose to study the feasibility of a net café in Barangay

Magdum, due to the lack of internet hubs in the area, due to COVID, people are

working and studying online, and some individuals have limited gadgets, and

acknowledging the technical limitations of Android phones. It is frustrating at times

when performing tasks that necessitate the use of a PC or a laptop. The

proponents saw this as an opportunity and seeks to determine if the undertaking

is profitable. These are the reasons why there is a need for the researchers to

conduct a feasibility study.

Objectives of the study

The feasibility study aims to determine the profitability of engaging into

Pisonet business and to achieve the following objectives: (a). To determine the

cost benefit of the business (b). The business viability in the area (c). To determine

if it is favorable to pursue the said business.

Scope and Limitation

The feasibility study is primarily focused into four (4) four important aspects:

Economic, Technical, Management, and Financial Aspects of business industry.

Moreover, the analysis is only limited to the location of the said undertaking and

the data gathered by the proponents of the study.

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Chapter II

EXECUTIVE SUMMARY

Brief Description of the Project

The project is a feasibility study of a piso net café located at Barangay

Magdum, Tagum City. The project will determine the viability of the said business

in terms of Economic, Technical, Management, and Financial Aspects.

Brief Profile of the Proponents

Table. 1 Brief Profile of the Proponents

Name Age Gender Educational Address

Background
Alipio, Jean Michel 19 Female 2nd Year BS in Prk. 4
Accountancy Magkidong,
Brgy.
Mankilam,
Tagum City
Baclayo, Jonna Mae 20 Female 2nd Year BS in Suico
Accountancy Compound,
Brgy. San
Miguel, Tagum
City
Dupla, Rose Ann 28 Female 2nd Year BS in Prk. 12,
Accountancy Kapatagan,
Laak, Davao
de Oro
Harding, Danver 20 Male 2nd Year BS in Prk 4-a Brgy.
Accountancy Magdum,
Tagum City
Romeo, Christine 20 Female 2nd Year BS in Prk. 6 Brgy.
Joy Accountancy Canocotan,
Tagum City.
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Project Contribution to Economy

The contribution of the project to the economy are the following:

A. Creation of Jobs

B. Government Contribution through Taxes

C. Bringing growth to the community

Project Summary

Market Summary

The proponents named the business “Kiel’s net café” the business

was strategically located at Barangay Magdum, Tagum City with a

population of 12,948 as of 2021. The business target market is 10-30 years

old, student or out of school youth who are engaged in education and

gaming. Based on the projections and analysis of demand and supply

presented in chapter three (3). The researchers found out that there is an

unsatisfied demand hour for internet café service in the area and the

business can supply the market, based on projected supply capacity of each

unit expressed in hours. In this aspect the business is feasible because its

target market is willing and capable to pay the service.

Production Summary

In this aspect, analyzing the cost of the equipment and fixed asset,

also considering the expenses that are assumed to be incurred in the daily
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operations of the business. Production aspect is feasible because the

service revenues can cover up the cost and expenses of the business.

Management and Organization Summary

Kiel’s Net Café is a form of sole proprietorship. The business is easy

to undertake and manageable that the owner will only hire one (1) shop

attendant and subcontract a computer technician. The business will follow

the standards prescribed by PFRS for micro entities and the method of

accounting is accrual approach. In this sense, the business is feasible in

this aspect.

Financial Summary

In this aspect, the business is feasible because the business net

income from the first up to the two consecutive years shows promising

amounts of profits. The financial ratio analysis particularly, return on

investment shows promising percent of returns on investments and net

profit ratio on the other hand, shows an increasing percentage of profitability

each year.
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Chapter III

MARKETING PLAN

Description of the Business

Kiel’s net café is a Piso internet business where users pay minimum of one

peso for every six (6) minutes of use rather than the typical hourly cost. With

pisonet, a customer is given the freedom of paying depending on time he

demands. This creates an advantage to children and teenagers who don’t have a

lot of money. Furthermore, pisonet business offers the benefit of a basic marketing

strategy which simplifies the process of starting and expanding the business.

Location

Kiel's Net Cafe is located at Brgy. Magdum, Tagum City. It is one of the top

ten most populated barangay with 12,948 population as of 2021. It is located near

Iglesia ni Cristo church, Magdum Ice Plant, and a mini mart. Because of the

location's exposure, it will be more convenient for the targeted market,

encouraging more people to visit Kiel's Net Cafe.

Main Customers

Kiel's Net Cafe's target market age's 10-30 years old of Brgy. Magdum,

Tagum City. The student population and out-of-school youth are the main

customers of Kiel's Net Cafe. Students who rely on internet connectivity to attend

online classes or do research, as well as out-of-school youth who engage in

gaming or social networking.

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Market Area

The red area is where the business will be located. Kiel's Net Cafe is located

at a neighborhood who intends to cater to people who desire to work or study in a

comfortable environment. The location is ideal for the target market because it is

easily accessible without having to travel far, which is a significant benefit for the

café.

Figure 1. Vicinity Map

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SWOT Analysis

SWOT Analysis is a common framework used by companies to evaluate

their competitive position in the market.

Table 2.

SWOT Analysis

Strength Weakness

1. Easy to manage 1. Possible computer problems

2. Approachable staffs 2. Headphone will smell bad due to
3. Well ventilated different people using it
4. Well trained staff 3. Coins shortage
5. Strictly following and 4. Business can be interrupted
implementing quarantine during brownout
protocols

Opportunity Threat

1. Invest in printing for additional 1. Rise of a new competitor

revenue 2. Low revenues when there is an
2. Sell school supplies for additional internet issue
income 3. Fortuitous events
3. Invest in a generator to avoid 4. Changing alert levels due to
business interruptions during COVID
brownout
4. Give promos during special
holidays
5. Invest in peso Wi-Fi for additional
revenue
 8

Demand

This section presents the statistical computation of historical and Projected

Demand.

Historical Demand

The table below shows the demand hours for the past three (3) years. The

researchers used the data provided by the barangay to determine the population

of ages ten (10) to thirty (30) years old over the past three (3) years. A survey

within the Barangay was also conducted to determine the population’s estimated

average hours spent in piso net cafes. The said survey has a total of 50

respondents. After gathering recording all the data, it shows that the estimated piso

net users are 78%.

Table 3

Historical Demand

Average Total
Total Hours Hours
Population Spent on Number Spent
Year of Ages Target the of Weeks on the
10 -30 Market Internet per Year Internet
Years Old (78%) per per Year
Week
2019 5,164 4,028 11.2 52 2,345,907

2020 5,166 4,029 11.2 52 2,346,489

2021 5,168 4,031 11.2 52 2,347,654

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Projected Demand

Table 4 shows the projected demand for the next three (3) years. On the

other hand, demand as shown in the previous table, is increasing on an average

of 0.074% using the moving average method.

Table 4

Projected Demand

Projected

Year Based Year Increase in Demand (in

(In Hours) Demand (0.074%) Hours)

1 2,347,654 1,737 2,349,391

2 2,349,391 1,739 2,351,130

3 2,351,130 1,740 2,352,870

Supply

This section presents the statistics and statistical computation of historical

and projected supply.

Main Competitors

The researchers of this study have identified a single competitor throughout

the area. Table 5 shows how much have they been supplying throughout the

Barangay for the past three (3) years.

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Historical Supply

Table 5 shows the competitor’s estimated supply over the past three (3) years

Table 5

Historical Supply

Name of 2019 2020 2021

Competitor (In Hours) (In Hours) (In Hours)

Competitor 1 43,680 48,048 56,784

Projected Supply

Using the average increase of 14% in the supply over the past three (3) years, the

researchers have estimated how much will the competitors’ supply for the next three (3)

years. Table 6 shows the computed demand for the next three years.

Table 6

Projected Supply

Year Base Year Increase in Projected

Supply (14%) Supply

1 56,784 7,950 64,734

2 64,734 9,063 73,797

3 73,797 10,332 84,129

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Demand Supply Gap Analysis

The gap here refers to the unsatisfied demand, it is obtained by subtracting

the projected demand to the projected supply. The difference will show the number

of hours that the business needs to supply to meet the demand for internet café

service.

Table 7

Demand Supply Gap Analysis

Demand (In Supply Unsatisfied

Year Hours) (In hours) Demand

Historical Value

2019 2,345,907 43,680 2,302,227

2020 2,346,489 48,048 2,298,441

2021 2,347,654 56,784 2,908,870

Projected Value

1 2,349,391 64,734 2,284,657

2 2,351,130 73,797 2,277,151

3 2,352,870 84,129 2,268,741

Market Share Analysis

Market share analysis determines the market share of the competitor and

the business.
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Market Share Analysis of the Competitor

Presented in table 8 is the market share of the competitor. The

market share of the competitors is based on the estimated supply that

they produce annually to serve their customers.

Table 8.

Market Share Analysis of the Competitor

Year Historical Market Share Historical

Demand Supply

2019 2,345,907 1.86% 43,680

2020 2,346,489 2.05% 48,048

2021 2,347,654 2.42% 56,784

Market Share Analysis of the Business

Presented in table 9 is the market share of the business. The market

share of the business is determined by the assumed projected supply

capacity per year (in hours) of the business divided by the unsatisfied

demand each year.

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Table 9

Market Share Analysis of the Business

Supply Capacity

Year Unsatisfied Market Share Per Year (in

Demand hours)

1 2,284,657 2.30% 52,416

2 2,277,151 3.07% 69,888

3 2,268,741 3.46% 78,624

Projected Service Price

The projected service prices would be a rate of six (6) minutes per one (1)

peso, Thirty (30) minutes per five (5) pesos, and sixty (60) minutes per ten (10)

pesos.

Table 10.

Projected Service Price

Particulars Year 1 Year 2 Year 3

6 minutes Php 1 Php 1 Php 1

30 minutes Php 5 Php 5 Php 5

60 minutes Php 10 Php 10 Php 10

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Sales Revenue Projections

The assumed sales revenue projections were based on the number of units

multiplied by the service price per hour. Assuming that there is no idle unit and all

their maximum service capacity per day is used.

Table. 11

Sales Revenue Projections

Service Year 1 Year 2 Year 3

Description Quantity Sales Quantity Sales Quantity Sales
(In hours) Revenue (In hours) Revenue (In hours) Revenue

Internet
Café 52,416 P524,160 69,888 P698,880 78,624 P786,240
Service

Summary of Revenue

Presented in table 12 is the summary of revenue for the next three (3)

years

Table 12

Summary of Sales Revenue

Year Revenue

1 Php 524,160

2 Php 698,880

3 Php 786,240
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Marketing Strategies

Service Strategies

The public needs access to the methods of communication and vast

amounts of information now available on the Internet, and a place to

socialize and share these experiences with friends and colleagues. Kiel's

Net Cafe provides fast and reliable internet connection with a very

affordable price. Kiel's Net Cafe also offers a comfortable environment and

well-built equipment that will continue to improve to meet the needs of its

consumers.

Place Strategies

Place strategy plays a fundamental role in every business strategy.

It specifies how and where a company's products and services will be

distributed to increase market share and consumer purchases. Brgy.

Magdum, Tagum City is the best location to put up the physical store for

Kiel's Net Cafe. It is one of the most populated barangays in the area, with

12,948 residents as of 2021; it is close to church, workplace, and stores and

it is the next Pisonet cafe in the area, which is beneficial to the business

because it will help harbor customers, particularly students working on

research, assignments, projects, and other school works, as well as other

residents engaged in social media and gaming who are looking for a fast

and reliable internet connection with good customer service in a very

affordable price.
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Pricing Strategies

Kiel’s piso net café have a cheaper value because they can pay by

minutes. The user has unlimited amount of time, usually one (1) peso for

every six (6) minutes. In that time, you can access internet to play games

and to do your schoolwork with quality equipment plus good environment.

Pisonet is a budget friendly, in ten (10) pesos you can access internet for

one hour.

Promotion

Promotional measures are a marketing tactic used by a business to

encourage the sale of products or services and build demand. Kiel's Net

Cafe will employ sales promotions to attract new customers, retain existing

ones, and keep up with the growing competition. To promote the business

the proponents decided to offer a free one (1) hour to first ten (10)

customers in the opening day. The promotion is not limited only to that date,

it is also applicable to special holidays like new year and Christmas.

Moreover, the business will distribute fliers at the target area, and

even in the marketplace which is near the business location. A tarpaulin will

also be placed outside the building and to some selected areas. The

proponents believe that these promotional and marketing strategies are the

best ways to make the business known throughout the neighborhood and

to penetrate the target market.

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Marketing Budget

Table 13

Marketing Budget

Particulars Quantity Unit Cost Total Cost (Php)

Flyers 300 2 600

Tarpaulin 4 100 400

TOTAL 304 102 1000

Summary of Promotional Expense

The expense for promoting the business is expected to increase five

percent annually.

Table 14

Summary of Promotional Expense

Year Total Amount

1 ₱1,000

2 1,050

3 1,102.5
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Chapter IV

Production Plan

Service Process

The service process is defined as the sequence of events that must take

place to execute a service transaction. In providing the service, from the selection

of supplier the delivery of the service to customers, a step-by-step process is

followed.

The Kiel's Net Cafe's selling method is simple because the entity simply

needs to buy its equipment straight from suppliers. Furthermore, clients commonly

use the internet for their daily tasks.

Figure 2 on the next page shows the service process of Kiel’s Net Café.
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Go to casheir to
Start :ENTER THE Straight into
exchange bills to
CAFE unoccupied unit
coins

Straight into
unoccupied unit End

Figure 2. Business Process

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Fixed Assets

Presented in Table 14 are the fixed assets needed to operate in the

proposed business. In the Initial operation of the business, a total of ₱ 274,180.00

for the fixed capital is needed.

Table 15

Fixed Assets

Particulars Quantity Unit Cost Amount

Package PC’s 12 ₱20,000 ₱ 240,000

Modem DSL 2 5,000 5,000

Fire Extinguishers 1 1,200 1,200

Aircon 1 15,000 15,000

Mouse 12 150 1,800

Mouse Pad 12 15 180

Headphone 12 250 3,000

Total ₱266,180.00

Furnitures and Fixtures

Cashier desk 1 ₱ 1,000 ₱ 1,000

Monoblock chairs 15 300 4,500

Extension Cords 5 500 2,500

Total ₱ 8,000.00
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Life of Fixed Asset

Presented in table 15 is the yearly depreciation of the fixed assets in the

business

Table 16

Depreciation of Fixed Assets

Est.
Assets Qty Amount Useful Year 1 Year 2 Year 3
Life
Equipment
Package PC’s 12 ₱ 240,000 5 ₱48,000.00 ₱48,000.00 ₱48,000.00
Modem DSL 5,000 4 1,250.00 1,250.00 1,250.00
Fire 1 1,200 5 240.00 240.00 240.00
Extinguishers
Aircon 1 15,000 10 1,500.00 1,500.00 1,500.00
Mouse 12 1,800 5 360.00 360.00 360.00
Mouse Pad 12 180 5 36.00 36.00 36.00
Headphone 12 3,000 5 600.00 600.00 600.00
Sub-Total ₱266,180.00 ₱51,986.00 ₱51,986.00 ₱51,986.00
Furniture and Fixtures
Cashier desk 1 1,000 5 200.00 200.00 200.00
Monoblock 15 4,500 5 900.00 900.00 900.00
chairs
Extension 5 2,500 5 500.00 500.00 500.00
Cords
Sub-Total ₱8.000.00 ₱1,600.00 ₱1,600.00 ₱1,600.00
TOTAL ₱274,180.00 ₱53,586.00 ₱53,586.00 ₱53,586.00

Service Capacity

Presented in table 16 shows the service capacity of the business for the

next three (3) years. Presented in Figure 3 is the Floor Plan of the proposed

business.
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Table 17

Service Capacity

Year Service Capacity (in hours)

1 52,416

2 69,888

3 78,624

Figure 3. Floor Plan

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Operating Expense

Rent Expense

Table present the amount of rent expense the business will incur. Based on

the data gathered, the rent expense is ₱8,000.00 per month.

Table 18

Rent Expense

Year Monthly Rent Annual Rent

1 ₱8,000.00 ₱96,000.00
2 ₱8,000.00 ₱96,000.00
3 ₱8,000.00 ₱96,000.00

Salaries Expense

Table shows the salaries expense for the employee in first year business

operation. The basic rate of ₱396.00 per day is based on the minimum wage.

Table 19
Salaries Expense
Position Number of Basic rate per Total Annual Cost
Employees month
Shop Attendant 1 ₱11,880.00 ₱142,560.00

Projected Salaries Expense

Table shows the projected labor cost for the next three years. It is

assumed that there will be an increase of 5% per year.

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Table 20
Projected Salaries Expense
Year Total Amount
1 ₱142,560.00
2 ₱149,688.00
3 ₱156,172.40

Projected Employee Benefits Expense

Presented in the Table is the Projected Employee Benefits Expense for

three years.

Table 21
Employee Benefits Expense
Employee Shop Attendant
Year 1 Year 2 Year 3
SSS ER ₱11,640.00 ₱12,120.00 ₱12,600.00
PhilHealth ER 2,851.20 2,993.76 3,143.448
Pag-ibig ER 2,400.00 2,400.00 2,400.00
TOTAL ₱16,891.20 ₱17,513.76 ₱18,143.448
 25

Permits, Taxes and Licenses

Presented in the table is the breakdown of expenses before a business can operate.

Table 22
Permits, Taxes and Licenses
Office Requirements Amount
Department of Business Name Registration Certificate ₱2,000.00
Trade and Industry
Bureau of Internal Registration Fee 500.00
Revenue TIN Registration Fee 500.00
Business Permit 2,000.00
Sanitary Permit 90.00
Police and Health 905.00
Clearance
Garbage Collection 1,200.00
Local Government Mayor’s Permit Fee
Unit Electrical Inspection 2,380.00
Certificate
Fire Safety 649.00
Inspection
Certificate
Barangay Clearance 500.00
Barangay Hall Cedula 100.00
TOTAL ₱10,824.00

Projected Permits, Taxes and Licenses

In the following years, the business will only pay for the renewal of Mayor’s

Permit. The costs of permits, taxes and licenses will decrease to ₱7,224.00.
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Table 23
Projected Permits, Taxes and Licenses
Year Total Amount
1 ₱10,824.00
2 ₱7,224.00
3 ₱7,224.00

Store Supplies

Presented in the Table are the store supplies needed in business operation.

Table 24
Store Supplies
Particulars Unit Cost Quantity Annual Cost
Brooms ₱45.00 2 ₱90.00
Dustpan 50.00 1 50.00
Trash Cans 85.00 2 170.00
Doormats 35.00 2 70.00
Mops 190.00 1 190.00
Alcohol 500ml 92.00 5 460.00
TOTAL ₱1,030.00

Projected Store Supply

Table shows the projected store supplies that the business will incur during

its operation. It is assumed to have a 5% increase each year.

Table 25
Projected Store Supply
Year Annual Cost
1 ₱1,030.00
2 ₱ 1,081.50
3 ₱1,135.575
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Utilities Expense

Kiel’s Net Café will need the electricity and internet connection. Table 8

present the monthly utilities expense to be incurred by the business.

Table 26
Utilities Expense
Utility Monthly Expense No. of Months Annual Expense
Electricity ₱5,000.00 12 ₱60,000.00
Internet Connection 2,000.00 12 24,000.00
TOTAL ₱7,000.00 ₱84,000.00

Projected Utility Expense

Presented in the table is the projected utility expense for three years. It is

assumed to have a 5% increase each year.

Table 27
Projected Utility Expense
Year Annual Cost
1 ₱84,000.00
2 ₱88,200.00
3 ₱92,610.00

Honorarium Expense

Presented in Table is the honorarium expense of the on-call computer

technician who will be employ by the business for their service. The entity will pay

₱500.00 per visit for the computer technician who is expected to visit twice a

month.
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Table 28
Honorarium Expense
Position Monthly No. of Year 1 Year 2 Year 3
Honorarium Months
Computer ₱1,000.00 12 ₱12,000.00 ₱12,000.00 ₱12,000.00
Technician

Depreciation

Table 10 presents the depreciation for the equipment and furniture and

fixtures for three consecutive years of operations. The annual depreciation is

computed using the straight-line method where cost is divided by its estimated

useful life.

Table 29
Depreciation of Fixed Assets
Est.
Assets Qty Amount Useful Year 1 Year 2 Year 3
Life
Equipment
Package PC’s 12 ₱ 240,000 5 ₱48,000.00 ₱48,000.00 ₱48,000.00
Modem DSL 5,000 4 1,250.00 1,250.00 1,250.00
Fire 1 1,200 5 240.00 240.00 240.00
Extinguishers
Aircon 1 15,000 10 1,500.00 1,500.00 1,500.00
Mouse 12 1,800 5 360.00 360.00 360.00
Mouse Pad 12 180 5 36.00 36.00 36.00
Headphone 12 3,000 5 600.00 600.00 600.00
Sub-Total ₱266,180.00 ₱51,986.00 ₱51,986.00 ₱51,986.00
Furniture and Fixtures
Cashier desk 1 1,000 5 200.00 200.00 200.00
Monoblock 15 4,500 5 900.00 900.00 900.00
chairs
Extension 5 2,500 5 500.00 500.00 500.00
Cords
Sub-Total ₱8.000.00 ₱1,600.00 ₱1,600.00 ₱1,600.00
TOTAL ₱274,180.00 ₱53,586.00 ₱53,586.00 ₱53,586.00
 29

Projected Operating Expense

Table shows the Projected Operating Expense for three years of its

operations.

Table 30
Projected Operating Expense
Particulars Year 1 Year 2 Year 3
Rent Expense ₱96,000.00 ₱96,000.00 ₱96,000.00
Salaries Expense 142,560.00 149,688.00 156,172.40
Employee Benefits Expense 16,891.20 17,513.76 18,143.45
Permits, Taxes and 10,824.00 7,224.00 7,224.00
Licenses
Store Supplies Expense 1,030.00 1,081.50 1,135.58
Utilities Expense 84,000.00 88,200.00 92,610.00
Honorarium Expense 12,000.00 12,000.00 12,000.00
Promotional Expense 1,000.00 1,050.00 1,102.50
Depreciation Expense 53,586.00 53,586.00 53,586.00
TOTAL ₱417,891.20 ₱426,343.26 ₱437,973.93
 30

Channels of Distribution

Distribution system is the sequential flow of procedures, methods, and

activities intended and integrated to enable and monitor the movement of goods

and services from the source to the consumer. It is essential since it ensures that

a customer's goods or services are delivered in a timely manner. Kiel's Net Cafe

is a service business catering a market age's 10-30 years old, residing at

Barangay, Magdum, Tagum City. The manner of distribution is a 1 level distribution

channel which contains one selling intermediary, the retailer. Here the

manufacturer of a Pisonet sells the equipment to the retailer which is Kiel's Net

Cafe who in turn provides services using the equipment to the customers.

Figure 4. Level Channel

 31

Chapter V

MANAGEMENT AND ORGANIZATIONAL PLAN

Forms of Business Enterprise

A sole proprietorship is formed by only one individual who has the control

and authority over the business. The proponents assume that a sole proprietorship

will be a fit choice for the business because the business is manageable. The main

benefits of the sole proprietorship are tax advantage, and the low fees of

establishing and maintenance also the income. On the other hand, whatever the

losses incurred, the proprietor will shoulder it alone.

Vision

To become the leading internet Cafe with a commitment to meet or even

exceed customers need and satisfaction. Like any internet Cafe aspires to be

known as a reliable and well-run cafe.

Mission

To deliver excellent quality services, operate in a responsible manner being

up to date with the upgrading Information Technology and provide fast internet

access in a homelike environment for a highly reliable and consistently satisfying

customer experience.
 32

Management and Organizational Structure

There are only three (3) personnel involve in the business. The business

operation is just simple, the shop owner will only need one (1) regular shop

attendant. Furthermore, an on-call computer technician will be subcontracted.

Figure 5 presents the organizational chart.

Shop Owner

Computer Technician

Shop Attendant

Figure 5. Organizational Chart

 33

Management Qualifications and Functions

Table 31. Organizational Job Description and Specification

Position Qualifications Functions

 High School  Assist the

Undergraduate/Graduate customers
 Senior High School  Accept payments
Undergraduate/Graduate  Maintain
 Out of School youth cleanliness and
Shop Attendant  Must have basic knowledge orderliness of the
about computers shop
 Must be self-motivated, have  Help conserve
a high degree of integrity, utilities
honesty, and a strong work consumption
ethic.  Supervised the
 Must have an outgoing shop
personality and quick learner
 Ascertain customer’s needs
and wants

Accounting System

An accounting system is a set of accounting processes with integrated

procedures and controls. The entity will follow the standards prescribed by

PFRS under Micro entities and, the accounting method that the entity will use

is Accrual Approach.

The business by nature is a service business, the process of recording

the transactions in the business will require source documents like bills or

receipts for objectivity purposes. These source documents will be recorded in

the journal and posted to ledgers to keep tract of income and expenses or
 34

outflows and inflows of cash. This information will be stored in a secure file

cabinet. The data recorded may come from an internal (employees) and

external (customers) sources. In terms of internal sources, the data that will be

collected are payroll information, timekeeping, and general ledger. The data

collected for external sources are purchase receipts, tax information, and

invoices. The fixed assets are depreciated over their useful lives under straight

line method with zero (0) estimated residual value.

In terms of internal control, the entity will make sure that sensitive

information like Social Security Number, Customer Information, Salary

Information, and entity financial data are treated with utmost confidentiality and

protected.
 35

Chapter VI

FINANCIAL PLAN

Major Assumptions

1. Projections are computed using moving average method.

2. Depreciation is computed using the straight-line method without residual value.

3. Rent Expense will be based on the date gathered.

4. Salaries expenses are assumed to increase by 5% per year.

5. There will be no increase on Employee Benefits Expense.

6. The costs of permits, taxes and licenses will decrease.

7. Store supplies are assumed to increase by 5% each year.

8. Utilities expenses are assumed to have 5% increase each year.

9. There will be no increase in honorarium expense.

10. Operating expense will be based on its three years operation.

11. Income tax rate is 8% of operating income.

12. Amounts in the financial statements are assumed.

 36

Total Projected Cost

The proposed business of the proponents needs ₱400,000.00 for the

operation.

Pre – Operating Expenses

Permit, Taxes and Licenses ₱10,824.00
Prepaid Rent (3 months) 24,000.00 ₱34,824.00
Initial Fixed Cost
Equipment ₱266,180.00
Furniture and Fixtures 8,000.00 ₱274,180.00
Operating Expenses (1st month of operation)
Salaries Expense ₱11,880.00
Employee benefit expense 1,407.60
Promotional Expense 1,000
Store Supplies Expense 1,030.00
Utilities Expense 7,000.00
Honorarium Expense 1,000.00 ₱23,317.60
Total ₱332,321,.60
Cash on Hand 67,678.40
Beginning Capital ₱400,000.00
 37

Projected Income Statement

Kiel’s Net Café

Projected Income Statement

Year 1 Year 2 Year 3

Service Revenue ₱524,160.00 ₱ 698,880.00 ₱ 786,240.00

Less: Operating Expenses

Rent Expense 96,000.00 96,000.00 96,000.00

Salaries Expense 142,560.00 149,688.00 156,172.40

Employees Benefit Expense 16,891.20 17,513.76 18,143.45

Permits, Taxes & Licenses 10,824.00 7,224.00 7,224.00

Store Supplies Expense 1,030.00 1,081.50 1,135.58

Utilities Expense 84,000.00 88,200.00 92,610.00

Honorarium Expense 12,000.00 12,000.00 12,000.00

Promotional Expense 1,000.00 1,050.00 1,102.50

Depreciation Expense 53,586.00 53,586.00 53,586.00

TOTAL 417,891.20 426,343.26 437,973.10

Income Before Tax 106,268.80 272,536.74 368,266.07

Income Tax Expense 8,501.50 21,802.94 27,861.29

Net Income ₱ 97,767.30 ₱250,733.80 ₱320,404.78

 38

Projected Cash Flows Statement

Kiel’s Net Café

Projected Cash Flows

Year 1 Year 2 Year 3

Cash flow from operating activities

Cash received from customers ₱524,160.00 ₱ 698,880.00 ₱ 786,240.00
Payment for Rent 96,000.00 96,000.00 96,000.00
Payment for Salaries 142,560.00 149,688.00 156,172.40
Payment for Benefits 16,891.20 17,513.76 18,143.45
Payment for permit and licenses 10,824.00 7,224.00 7,224.00
Payment for store supplies 1,030.00 1,081.50 1,135.58
Payment for utilities 84,000.00 88,200.00 92,610.00
Payment for honorarium 12,000.00 12,000.00 12,000.00
Payment for promotion 1,000.00 1,050.00 1,102.50
Payment for income tax 8,501.50 21,802.94 27,861.29
Net cash provided by operating activities ₱ 151,353.30 ₱ 304,319.80 ₱ 373,990.79

Cash flow from investing activities

Purchased of fixed assets (274,180.00) - -
Net cash used by investing activities (274,180.00) - -

Cash flow from financing activities

Cash withdrawal by owner (20,000.00) (48,500.00) (100,000.00)
Net cash used by financing activities (20,000.00) (48,500.00) (100,000.00)
Net increase (decrease) in cash (134,325.20) 250,869.80 263,093.12
Add: Cash balances, beginning 400,000.00 353,173.30 604,043.10
Cash balance, End ₱ 257,173.30 ₱ 512,993.10 ₱ 786,983.88
 39

Projected Balance Sheet

Kiel’s Net Café

Projected Balance Sheet

Year 1 Year 2 Year 3

ASSETS

Current Assets

Cash ₱ 257,173.30 ₱ 512,993.10 ₱ 786,983.88

Non – Current Assets

Equipment ₱ 266,180.00 ₱ 266,180.00 ₱ 266,180.00

Furniture and Fixtures 8,000.00 8,000.00 8,000.00

Total 274,180.00 274,180.00 274,180.00

Less: Accumulated

Depreciation 53,586.00 107,172.00 160,758.00

Net Book Value 220,594.00 167,008.00 113,422.00

TOTAL ASSETS ₱ 477,767.30 ₱ 680,001.10 ₱ 900,405.88

OWNERS EQUITY ₱ 477,767.30 ₱ 680,001.10 ₱ 900,405.88

 40

Projected Changes of Owners Equity

Kiel’s Net Café

Projected Changes of Owners Equity

Year 1 Year 2 Year 3

Beginning Capital ₱ 400,000.00 ₱ 477,767.30 ₱ 680,001.10

Add: Net Income 97,767.00 250,773.80 320,404.88

TOTAL ₱ 497,767.30 ₱ 728,501.10 ₱ 1,000,405.88

Less: Withdrawals 20 ,000.00 48,500.00 100,00.00

Ending Capital ₱ 477,767.30 ₱ 680,001.10 ₱ 900,405.88

 41

Financial Ratio Analysis

Financial ratios are useful tool that will help management understand

financial results and trends over time and provide indicators of performance.

Net Profit Ratio

The net profit ratio of the first three (3) years of the proposed business are

18.65%, 35.88%, and 40.75% which reflects the profitability of the proposed

business. The results shows that the business will be able to convert revenues into

profit in the long run.

Year 1 Year 2 Year 3

Net Profit ₱ 97,767.30 ₱ 250,773.80 ₱ 320,404.88

Divide: Revenues 524,160.00 698,880.00 786,240.00

18.65% 35.88% 40.75%

Return on Investment

The return on investment for the first three (3) years of the of the proposed

business are at 20.46%, 36.88%, and 35.58%. Which indicates the ability of the

proposed business to regain its investments with its profits.

Net Profit ₱ 97,767.30 ₱ 250,773.80 ₱ 320,404.88

Divide: Total assets 477,767.30 680,001.10 900,405.88

20.46% 36.88% 35.58%

 42

ANNEXES
 43

ANNEX A. (HISTORICAL DEMAND)

Table 3
Historical Demand
Average Total
Total Hours Hours
Population Spent on Number Spent
Year of Ages Target the of Weeks on the
10 -30 Market Internet per Year Internet
Years Old (78%) per per Year
Week
2019 5,164 4,028 11.2 52 2,345,907

2020 5,166 4,029 11.2 52 2,346,489

2021 5,168 4,031 11.2 52 2,347,654

The data in Table 3 was computed by the following formula:

Historical demand =Population x Target Customer x Average Hours Spent

x No. of weeks per year.

5,164 x 78% x 11.2 x 52 = 2,345,907

5,166 x 78% x 11.2 x 52 = 2,346,489

5,168 x 78% x 11.2 x 52 = 2,347,654

 44

ANNEX B. (PROJECTED DEMAND)

Table 4
Projected Demand
Projected

Year Based Year Increase in Demand (in

(In Hours) Demand (0.074%) Hours)

1 2,347,654 1,737 2,349,391

2 2,349,391 1,739 2,351,130

3 2,351,130 1,740 2,352,870

The data in Table 4 was computed by using the moving average method
Computation of Average % Increase

1. Annual Increase = Y2 – Y1
Y1
= 2,349,391_-_2,347,654
2,347,654
= __1,737__
2,347,654
= 0.000739
2. Annual Increase = Y3 – Y2
Y2
= 2,351,130 -_2,349,391
2,349,391
= 0.000740
3. Average Increase = Annual Increase in 2019_+_Annual Increase in 2020
2
= 0.000739_+_0.000740 x 100
2
= 0.074%
 45

APPENDICES
 46

APPENDICES A. (MARKET SURVEY REQUIREMENT)

February__, 2022

Maria Teresa Rey Reambonanza.

Barangay Captain
Barangay Magdum,
National highway, Tagum City

Dear Kapitana,

Greetings!!

The undersigned students are enrolled at University of Mindanao and conducting their feasibility study entitled “A feasibility study
on Kiel’s Net Café at Barangay Magdum, Tagum City" as a requirement for their feasibility study.

In line with this, the undersigned students would like to ask permission from you to allow them to conduct a survey and for the census
of the years 2021,2020, and 2019, and the population by age group of the year 2021. This study aims the feasibility of the said
business.

The utmost confidentiality to all data gathered shall be observed.

Your approval greatly contributes to the accomplishment of this study.

Thank you very much.

Yours truly,

Danver Harding

Jonna Mae Baclayo

Christine Joy Romeo

Jean Danean Alipio

Rose Ann Dupla

The researchers

Noted by:

Maria Teresa Ozoa, CPA, MBA,

Class Adviser
 47

Feasibility Survey Questionnaire

Name (optional): Educational Attainment: student

Gender: Employment Status:

Age:

Civil Status:

1. Are you willing to avail the service of a Piso net café?

Yes No

2. Is there a Piso net café close to your area?

Yes No

3. Do you find Piso net café as budget friendly?

Yes No

4. How frequent do you go to a Piso net café?

Everyday Once a week Twice a week More than twice

Never

5. How long do you spend every time you go to a Piso net café?

1 hour or less 2 hours 3 hours 4 hours

5 hours or more

6. How much do you spend in a Piso net café?

Php 5 or less Php 10 Php 15 Php 20

Php 20 above

7. When do you usually go to a Piso net café?

Morning Afternoon Evening when free

8. What is your purpose why you go to Piso net café?

Education or School Related Web Surfing Gaming

Others; specify: ________

9. Problems you don’t want to face in Piso net Café?

Connection Virus Attack Ventilation Computer Failures

Others; specify: ________

 48

APPENDIX B. (LEGAL REQUIREMENT OF A BUSINESS)

A. City of Tagum

 Business Permit

 Barangay Business Clearance

 Lease Contract

 Location Clearance

 Picture of Establishment

 Fire Clearance

 Sanitary Permit

B. BIR

 2316 Form – form certificate of Compensation Payment/Tax Withheld for

Payment with or Without Tax Withheld.

C. SSS

 R-5 - This form is submitted monthly together with the SSS form R3.

 R-1 - An employer must pay your contributions and member loans monthly

in accordance with the prescribed schedule of payment which is according

to the 10th digit of the Employer's ID Number.

 R-1A – The Social Security System is a social insurance program for

employees/workers in the Philippines. Members can avail of benefits for

the following: sickness, maternity, and retirement among others. Members

can apply for salary loans.

D. DTI

 Certificate of Registration