CHAPTER I

BACKGROUND
1.1 INTRODUCTION
Dhulikhel Hostel is a private hostel which is under partnership. It will be situated at Budol,
Dhulikhel near Kathmandu University and owned by 8 of the members. It will have 3 types of
services: Boys Hostel, Girls Hostel and Home stay( Targeted for tourists). Since Kathmandu
University provides hostel services only for the students of outside the valley, we are targeting
the students of Kathmandu, Lalitpur and Bhaktapur and also tourists who choose home stay
rather than hotels services. We have Rs. 1 crore budget and be established to provide the basic
necessary facilities to the students from Plus 2 level. It will have 3 complexes with only 3
supervisors for each buildings (Boys, Girls and Home stay)
1.2 NATURE OF BUSINESS
Dhulikhel Hostel is a service oriented business. It will focus on fulfilling the basic needs of the
students and other extra facilities. The major services provided by Dhulikhel Hostel are as
follows:

Hygienic feeding and lodging facilities

Clean drinking water facilities
Laundry facilities
Homely environment with well decorated rooms and clean rest room facilities
24-hour internet and electricity facilities
Locker system for the safeguard of students' valuable assets

1.4 OWNERSHIP STRUCTURE

The tentative initial investment of Kantipur Boys Hostel is Rs. 10,000,000. Out of the total
capital required 65% of the capital will be fulfilled by owner ourselves and remaining 65% will
be borrowed from Nabil Bank Limited as Bank Loan at the interest rate of 10% for 5 years.
Sources of capital

Amount (Rs)

Portion
1

Debt
6,500,000
0.65
Equity
3,500,000
0.35
The bank loan will be fully paid making payment annually for five years.

1.5 BUSINESS STRATEGY

Dhulikhel Hostel will follow service leadership strategy for the first five years that it will try to
provide wide range of services with reasonable price. It will not buy any fixed assets and it will
not invest anywhere for the five years. But after the five years the hostel will follow the
strategies which are listed below:

General strategies which includes growth strategy by expansion of capacity of hostel and

its products and services.

Competitive strategy which includes providing the same level of services with low price.
This is possible when a hostel will expansion its services and become the market leader .

1.6 MISSION
The mission statement of Dhulikhel Hostel is "To provide efficient, effective and quality services
at reasonable price".
1.7 OBJECTIVES
Our business is profit oriented business so the main objective of Dhulikhel Hostel is to earn
profit and to increase the owner's value. Along with profit, other objectives of the hostel are as
follows:

To provide timely and quality services to customers(students)

To provide satisfaction to students at reasonable prices
To receive feedback from students and take action according to them
To meet the basic demand of students according to situation
To increase the facilities and services to the students demanded by the situation

CHAPTER II
ORGANIZATION AND MANAGEMENT TEAM
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2.1 COMPANY STRUCTURE

Dhulikhel Hostel will be operated under sole proprietorship and this is small size hostel so there
are only few member involved in management of the Hostel. The organization structure of
Dhulikhel Hostel is given below:

Owner

Hostel warden

Cook

Helper

Part Time Workers

Laundry Staff

Extra Labor

The Job description of management team of Dhulikhel Hostel is as follows:

a. Owner:

Owner is one who provides fund for the operating of the hostel. He provides needed
funds to the hostel warden for fulfilling the expenses of the hostel. He has just passed
MBA from Pokhara University and he is capable of supervising his investment in proper
way.
b. Hostel Warden:
Hostel warden is responsible for overall operations of the hostel. He/she will look after
the activities of cook and helper that they are fulfilling the needs of the students. He/she
will responsible for fulfilling the basic demands of the students. He/she will manage the
cook, helper and other part time workers for the efficiency of the hostel.
c. Cook:
Cook is fully responsible for the feeding facilities to the students. He/ she will provide
hygienic foods to the students and have skill of making tasty and quality foods and new
kind of taste as per the increasing demand.
d. Helper:
Helper is not specific to any work but he/she will be responsible to help both warden and
cook and perform any type of work needed in the hostel.
e. Part-time workers:
Part time workers are those who work only partially for hostel. He/she will responsible
for various works like for laundry, for marketing the pamphlets etc.

2.2 FUTURE PLANNING OF HOSTEL

For the first five years Dhulikhel Hostel will have capacity of 27 students but after that the hostel
will have planned to increase the capacity as well as provide various facilities also. The hostel
has planned to provide hot water and heater especially for winter season after five years. The

hostel is also thinking about to provide a small playground after five years which can help
students for recreation facilities.

CHAPTER III
SITUATIONAL ANALYSIS
5

For achieving the success and to achieve the goal every organization has to do the situational
analysis. It is systematic collection and evaluation of data to identify the internal and external
forces that influence the organization performance

and assessment of strengths, weaknesses,

opportunities and threats to the organization. Situational analysis is mainly composed of two
factors: internal and external. In this business development plan we have used SWOT analysis
for the purpose of situational analysis. Strengths and Weakness falls into internal factors and
Opportunities and Threats falls into external factors. Internal factors are within the control of the
organization whereas external factors are beyond the control of the organization.
2.1 STRENGTHS

Varieties of the rooms including all the needed materials inside the room
Pleasant environment for the students and hygienic food items
Recreational and laundry facilities
A well scheduled timing for entrance and feeding
Wide compound and enough parking space for motorcycles

2.2 WEAKNESS

Limited capacity as it has only capacity of 28 students

2.3 OPPORTUNITIES

Increasing number of educational institutions and students yearly in Kathmandu valley.

Lack of appropriate room with reasonable price in Kathmandu valley
Located near the big cities like New Baneshor, Old Baneshwor etc

2.4 THREATS

The level of competition among hostels is high

Frequent bandas, strikes and shortage of ram materials

CHAPTER IV
PRODUCTS AND SERVICES

Hostel is the service oriented business so Dhulikhel Hostel will provide mainly lodging and
feeding facilities to the students. As per the demand and necessity of the students hostel will also
provide various kinds of facilities to all kinds of students. Hostel will provide quality services at
reasonable prices. The expected students of our hostel will be of various levels like higher
secondary level students, college students both bachelor and master and entrance preparation
students so hostel will provide pleasant environment to the students for study. Hostel will try to
provide efficient services for the satisfaction of the customers. The basic services provided by the
Dhulikhel Hostel are as follows:
a. Lodging Services:
The basic need of students is lodging services. Dhulikhel Hostel will provide well
managed room with various facilities like cupboard facilities where students can keep
their valuable documents. Each room of the hostel will be decorated by carpet; curtain in
windows etc. Hostel will provide appropriate size of bed according to students.
b. Feeding Services:
The main concern of any hostel business is about feeding services. Nowadays in hostel or
any where people want hygienic food as people have became more concern about their
health. So by taking the health of the students into consideration, Dhulikhel Hostel will
provide hygienic food which will be characterized by fresh food, food with more mineral
and protein. Dhulikhel Hostel will provide meal four times a day, at first hostel will
provide light breakfast, then lunch, snacks in day time and dinner.

c. Internet Facilities:
Internet has also become a basic need for students nowadays. So Dhulikhel Hostel will
provide internet facilities for 24 hour which helps to students to check their mail, to
search anything and to entertain them also.
d. Laundry Facilities:

Dhulikhel Hostel will also provide laundry facilities to the students. As students have
always lack of time for cleaning their clothes so considering this hostel will laundry
facilities two times a week.

CHAPTER V
MARKET AND COMPETITON
5.1 INDUSTRY AND BUSINESS OUTLOOK
In the current scenario, Hostel industry is also one of the profitable industries where there are
more opportunities for hostel business to grow up. The demand of private hostel is increasing
day by day due to various reasons. Due to the more colleges and entrance preparation centers in
Kathmandu valley, more and more students are coming to Kathmandu valley from all areas of
Nepal for further education.

Dhulikhel Hostel will be located at Katyani Chowk, Old Baneshwor which is also a prime
location of students due to higher secondary schools and colleges. The opportunities of
Dhulikhel Hostel are as follows:

Situated as near the Baneshwor area which is one of the prime location of Kathmandu

valley
More educational institutions in this area like Global college, Apex College so there is

more chance of students coming to the hostel

More financial institutions near the area of hostel so there is more chance of job related

students
High fare for room in the area of hostel so that students prefer hostel instead of room
Location of the hostel will be also an advantage because there is peace and pleasant
environment and free from crowded people in the area of Hostel.

5.2 MARKET SIZE AND CHARACTERISTICS:

Hostel business is service oriented business which provides lodging, feeding and other facilities
to the students, so as being service oriented business the market size of Dhulikhel Hostel is not as
big as manufacturing business. But Dhulikhel Hostel will try to cover New Baneshwor, Old
Baneshowor, Mid baneshwor, Bhimshengola and Maitidevi as its market.
Talking about the characteristics of the market, the market is full higher secondary schools,
colleges and entrance preparation centers. The market of hostel is increasing day by day due to
involvement of more students in higher secondary schools and colleges.

5.3 MARKET SEGMENTATION AND POSITIONING

Dividing the whole market of hostel is very necessary to fulfill the same needs and
characteristics of the students. Dhulikhel Hostel will segment its market on the basis of
following:
a. Geographical Segmentation:

According to geographical segmentation, Dhulikhel Hostel will segment its market only
in the urban area which includes New Baneshwor, Old Baneshowor, Mid baneshwor,
Bhimshengola and Maitidevi. Due to more educational institutions and more students,
Dhulikhel Hostel will segment its market only in urban area.
b. Demographic Segmentation:
This segment of market deals about the age, gender, income, education, occupation and
others demographic factors. According to demographic segmentation Dhulikhel Hostel
will segment its market on the basis of:
Gender:
Dhulikhel Hostel is fully hostel for boys so it will target for male students only.
Age:
Dhulikhel Hostel is for students only so it will target following age level students:
-Age (16-18) for higher secondary level students
- Age (19-27) for bachelor and master level students
- Age (16-20) foe entrance preparation students
Occupation:
On the basis of occupation Dhulikhel Hostel will target students only.
c. Psychographic Segmentation:
According to psychographic segmentation Dhulikhel Hostel will target those kinds of
students who are intelligent and love to study.
d. Behavioral Segmentation:
According to Behavioral Segmentation Dhulikhel Hostel will segment its market on the
basis of:
Occasions:
Dhulikhel Hostel will target regular students who will stay hostel at least 3
months.

5.4 MARKET TARGETING

For achieving the objective of achieving profit, Dhulikhel Hostel will target the following
market:

New Baneshwor
Mid baneshwor
Old Baneshwor
10

Bhimshengola
Maitidevi

The target customers of Dhulikhel Hostel are those students who have no time for cooking food,
cleaning their clothes etc. The target customers of hostel will be:

Higher secondary level students

College students(bachelor and master level students)
Entrance preparation students

5.5 POSITIONING
Positioning is the process by which marketers try to create an image or identity in the minds of
their target market for its product, brand, or organization. As Dhulikhel Hostel is in initial phase
we are going to position our service on the basis of:
a. Hygienic Food:
Dhulikhel Hostel will provide hygienic food to the students. It will not provide that kind
of food which affects the health of students. It will provide fresh foods, vegetables, bread
and prepare lunch and dinner with the help of organic raw materials.
b. Pleasant Environment:
The location of Dhulikhel Hostel will be at Katyani Chowk where there is pleasant
environment which is the supportive environment for students to study.
c. Appropriate Location:
Dhulikhel Hostel will be located near the Baneshwor area where there are more
educational institutions. Baneshwor is one of the prime locations of Kathmandu valley
form where students can travel to any places of Kathmandu valley easily.

5.6 COMPETITION
The level of competition of hostel in Baneshwor area is very high as there are many boys hostel
in this area. Some of our main competitors are:

Aayush Boys Hostel

11

Blue Bird Boys Hostel

Education.com Boys Hostel
Hilton Boys Hostel

As by seeing the level of competition Dhulikhel Hostel will gain the competitive advantage
from the following ways:

By providing hygienic foods to the students and four times meals per day
By providing the taste variety in foods
By providing the quality of services
By providing various facilities like 24 hour internet, laundry etc.
By receiving the feedback of students and take action actions according to feedback
The competitive advantage of Dhulikhel Hostel will be known more easily from the
given competitive grid:
Competitive Grid
Facilities

Kantipur Boys

Aayush Boys

Blue Bird Boys

Laundry
Internet
Environment
Room size

Hostel
2 times a week
24 hours a day
Pleasant
Large

Hostel
1 time a week
Only in day time
Crowded
Medium

Hostel
1 time a week
24 hours a day
Crowded
Medium

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CHAPTER VI
MARKETING AND SALES PLAN

The level of competition inside the hostel industry in the Kathmandu valley is very high. More
and more hostels are mushrooming day by day to meet the demand of customers. In the Old
Baneshwor area there are also many hostel providing the variety of services to attract the
students. So Dhulikhel Hostel will be also facing more competition from other hostels. To be
competitive in the competitive market marketing about the hostel is most.
So to gain the competitive advantage and to increase the sales of the hostel, Dhulikhel Hostel
will follow the given marketing strategy:
a. Product strategy:
The main product of Dhulikhel Hostel is service that is lodging, feeding, laundry, internet
and other facilities. This hostel will provide mainly two kinds of room to the students that
are double students' room and triple students' room. The hostel will try to provide basic
services plus extra services to the students.
b. Pricing Strategy:
Dhulikhel Hostel will follow the competitors based pricing that it will charge price to the
students same as competitors. It will try to pro vide extra services than competitors with
the same price as competitors. The hostel will charge mainly two kinds of price according
to the size of room and the capacity of students in that room. The schedule of price
according to room is given below:

Types of Room
Single students room
Double students room

Price per Students (Rs)

12000
8000

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c. Distribution (Place) Strategy:

Dhulikhel Hostel will be located at Katyani Chowk, Old Baneshwor. It is about 200
meters from Global College of Management, 400 meters from the Apex College and
many educational institutions are proximity to the hostel so it will be easy for students to
go to their educational institutions. The location of hostel will be near to the Baneshwor
area so that the students can easily get the transportation facility from the hostel and also
students can get other infrastructure facilities.
d. Promotional Strategy:
Dhulikhel Hostel is small size hostel with only capacity of 28 students so it will use few
promotional tools to promote the product (service). For the first five years it will use
following types of promotional tools:

Word-of-mouth advertisement:
One of the effective means of promoting the hostel is word-of-mouth
advertisement. Through this tool students will know about our hostel via their

friends, teachers and faculty members.

Pamphlets:
Dhulikhel Hostel will also use more pamphlets to promote its product. By
distributing the pamphlets to the people and by sticking the pamphlets in
electricity pole and public wall it will provide information about hostel to the

public and this is one of the cheaper form of promoting the product.
Billboard:
Dhulikhel Hostel will also follow the billboard advertisement which will be
located about 400 meters from the location of the hostel and this type of

advertisement will be used only once a year.

Free advertisement on Facebook:
By considering the crowded of people especially students in the social networking
sites we will open the free page of our hostel in facebook and invite our friends to
like that page. In this way many facebook friends will know about our hostel.

7.4 ENVIRONMENTAL RISKS

14

Dhulikhel Hostel will face various kinds of risk while operating its business. In current scenario
of Nepal every organization has to face different kind of environmental risk. The following are
the types of risk that our hostel will face:

a. Political Risk:
The political conditions of Nepal in the current scenario is not so good, there is always
strikes, bandas which affect the hostel business also. Due to the strikes hostel will face
the shortage of raw materials like rice, oil, fresh vegetables and other necessary items for
preparing food.
b. Economic Risk:
Dhulikhel Hostel will also face economic risk like inflation which affects the price level
of goods and services. Due to the increase in price of goods and services the direct costs
and operating costs of the hostel will be high which affects the profitability of the hostel
business.
c. Socio-cultural Risk:
Changing perception of the people towards the hostel that hostel will not provide
hygienic food, will provide only average level of services may provide threats to the
hostel.
d. Technological Risk:
Nowadays the pace of technology is increasing day by day which make students more
expectation about the latest technology so it provides challenge to the hostel to update
with the latest technology.

CHAPTER VIII
FINANCIAL PLANNING

15

8.1 INITIAL INVESTMENT

The initial investment is the investment made before the operation of the hostel which includes
investment on fixed cost like furniture and fixtures, machinery and equipments and kitchen
accessories and preliminary expenses like legal expenses, marketing and set up expenses. Total
capital required for the Dhulikhel Hostel in Rs.10,000,000. Out of this 65% is raised from the
long term loan and 35% from the equity. The details of initial investment are shown in Annex 1.
8.2 REVENUE GENERATION
The capacity of the Dhulikhel Hostel is of 40 students and the revenue of hostel is fee of
students. It will generate revenue from the two kinds of fee charges to the students. The hostel
will charge Rs12500 for the single students' room and Rs. 8000 for the double students' room.
From the second year the revenue is expected to increase by 10% for coming years.
8.3 START-UP EXPENSES
The start-up expenses of Dhulikhel Hostel will include preliminary expenses, purchase of fixed
assets and prepaid rent that should be paid before operating of the hostel.
8.3 EXPENSES
The expenses of the hostel will be categorized into two types. The first one is direct expenses
which includes direct costs of goods like expenses occurred in purchase of rice items, vegetable
items and others necessary items for preparation of food. The second one is operating expenses
which includes expenses occurred in daily operation of the hostel. From the second year the
direct of services sold is also expected to increase according to revenue that is by 10%.
8.4 PRO FORMA INCOME STATEMENT
The pro forma income statement shows the projected profitability of the hostel for five years. In
income statement, revenue and direct cost of goods sold are expected to increase by 10% per
year and other expenses are expected to increase according to the condition and business
environment. Dhulikhel Hostel will expect to earn profit the initial year and the profit margin
will go on increasing.

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Particulars
Service Revenue
Less: Cost of Services
Direct materials

Year 1
2236000

Total cost of goods sold

Contribution Margin
Less: Operating expenses
Rent
Electricity
Internet & telephone
Marketing Expenses
Salary
Depreciation
Repair & maintenance
Gas
Written off preliminary expenses
Miscellaneous
Total Operating expenses
EBIT
Less: Interest
EBT
Less:Tax@25%
Net Income

815760
1420240

815760

540,000
24000
24000
24000
348000
118650
12000
54000
7600
6000
1158250
261990
91307
170683
42671
128012

8.5 CASH FLOW STATEMENT

Cash Flow Statement shows the amount of cash inflows to the hostel and outflows from the
hostel. Following cash flows statement shows the cash flows from mainly three types of
activities. The first one is Cash flows from operating activities which shows the cash flows from
the operation of the business. The second one is Cash flows from investing activities which
shows the amount of cash for the investment of fixed assets and cash inflows from the sale of
fixed assets and investment. The third one is Cash flows from financing activities which shows
the cash inflows from the long term debt and equity and cash outflows for the payment of long
term debt. Following table shows the Cash flow statement for the first year:

17

Particulars
Cash flow from operating activities
Net Income
Add: Depreciation
Add: Written off preliminary expenses
Add: Increase in short term loan
Add: Increase in accounts payable
Add: Decrease in accounts receivable
Add: Decrease in prepaid rent
Less: Increase in accounts receivable
less: Increase in inventory
less: Increase in prepaid rent
Net cash flow from operating activities

247500
-247500

Cash Flow from Investing activities

Purchase of furniture
Purchase of machinery and equipments
Purchase of Kitchen Accessories
Preliminary expenses
Net cash flow from investing activities

285000
168000
36000
38000
-527000

Cash flow from Financing Activities

Receive from equity
Short term equity
Receive from bank loan
Payment of bank loan
Repayment of short term loan
Net cash flow from financing activities
Net change in cash or equivalent to cash items
Add: Opening balance of cash
Closing balance of cash

Year 0

350000
650000

1000000
225500
0
225500

8.6 PRO FORMA BALANCE SHEET

The pro forma balance sheet shows the condition of total assets which includes current assets,
intangible assets and fixed assets and total liabilities and equities which includes current
liabilities, long term liabilities and stockholders' equity. The following table shows the pro forma
balance sheet:
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Assets
Current Assets
Cash
Prepaid rent
Accounts receivable
Inventory

Year 0

Total Current assets

473000

225500
24 7500

Intangible Assets
Preliminary expenses
Less: written off@20%
Total Intangible assets

38000
38000

Fixed Assets
Furniture & fixtures
Less: Acc. Depriciation@25%

285000

Machinery and Equipments

Less: Acc. Depriciation@25%

168000

Kitchen Accessories
Less: Acc. Depriciation@15%

36000

Total Fixed assets

489000

Total Assets

1000000

Liabilities and equities

Current Liabilities
Accounts payable
Short term bank loan
Less: Repayment

Year 0

Total Current Liabilities

Bank Loan
Less: Repayment

650000

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Total Liabilities
Stockholders' Equity
Equity capital
Short term equity
Net Income
Retained Earnings

350000

Total Stockholders' Equity

350000

Total Liabilities and Equities

1000000

8.8 Payback Period, NPV & IRR

Payback period is the time in which the initial cash outflow of an investment is expected to be
recovered from the cash inflows generated by the investment. It is calculated by:
Payback Period=Minimum year+ (Amount to be recovered/ Cash flow of next year)
Net present value is the present value of net cash inflows generated by a project including
salvage value, if any, less the initial investment on the project. It is calculated by:
NPV=Total present value of cash inflows-Initial investment
Internal rate of return (IRR) is the discount at which the net present value of an investment
becomes zero. It is the discount rate which equates the present value of the future cash flows of
an investment with the initial investment.
Following table shows the payback period, net present value and internal rate of return of
Kantipur Boys Hostel:

Financial
Indicators
Payback Period
Net Present Value

Value
3.24 years
297871
20

Internal rate of
Return

19.95%

Interpretation

Payback period:
The payback period of Dhulikhel Hostel is 3.34 years which is favorable sign and
indicates that the hostel will recover its initial investment in just 3.34 years.
Net Present Value:
The net present value shows how much the value of the company will increases. The
NPV of Dhulikhel Hostel is Rs.297871 which is positive and it shows the total value of

the hostel will increase by Rs.297871.

Internal Rate of Return:
Internal rate of return shows the return from the business and it is compared with cost of
capital. Above table shows the IRR of Dhulikhel Hostel is 19.95% which is more than the
cost of capital (10%) so it indicates that Dhulikhel Hostel will be desirable business.

SUMMARY

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