CREATIVE ART CLUB

CREATIVE ART CLUB 2017

1 EXECUTIVE SUMMARY The proposed business would deal with canvas painting as well as the normal paintings. Art paintings would have three categories, viz., Abstract painting, Landscape painting and Realistic painting.

The prices of the art works would vary depending on the complexity and time duration. Every painting would depend on the time duration and complexities of the paintings which is why the Abstract painting is charged higher than the other two paintings. The Abstract painting is charged at Nu. 12,000, while the Landscape painting would be charged at Nu.10,000 and Realistic Painting at Nu. 9,000. Although the price of every category of paintings is given in the financial statement however the price may vary depending upon the needs and demands of the customers.

The report presents the justification of the project, market analysis, resources required, plant location, environmental aspects, implementation of the project, cost presentation and financial analysis.

1. Justification of the project: People’s exposure to outside countries and its lifestyle is encouraging the people to have attention and interest in arts and its expressions. The arts not only beautify the surroundings and home but also it soothes one’s mind and soul.

2. Market analysis: Many artists are expressing themselves today and in the capital alone, within the last 10 years, the number of art galleries has increased from one to five. Some of the artist showed this through photography and visual displays while others show it through art, architecture and crafts.

3. Resource required: The main raw materials required for the creative art club is paint brushes, carpentry equipments and Artist palette which should be present for the artist to continue with the art.

4. Plant location: Considering the density of the population and the potential customers in the market, the Art club would be located in , a place which is one of the active places in the country.

5. Environmental aspects: The production of the Arts may cause odors which would affect the 1 Compiled by IBEST consultancy Services

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environment and the left over products and waste can be problematic, however it would be disposed of properly.

6. Implementation of the project: The implementation of the project would take 4 months.

7. Cost presentation and financial analysis

Fixed Cost 189,345

Working Capital 158,455

Total Investment 347,800

Break Even point 143 Units

Return On Investment(ROI) on Sales 500% Return On Investment(ROI) on Total 117% Investment Payback Period 3years and 3 months

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TABLE OF CONTENTS 1 EXECUTIVE SUMMARY ...... 1 1.1 Business Model Canvassing ...... 5 2 Justification of the project ...... 6 2.1 The need of the project ...... 6 Critical Success Factors ...... 6 STRENGTH ...... 7 WEAKNESS ...... 7 OPPORTUNITY ...... 7 THREAT ...... 7 2.2 Competition Analysis ...... 7 3 Market Analysis...... 8 3.1 Structure of the industry ...... 8 3.2 Demand vs. Supply ...... 8 3.3 Pricing and Marketing Strategies ...... 8 Promotional Strategy ...... 9 3.4 Competitiveness of the project ...... 9 3.5 Special attributes desired by target customers ...... 9 3.6 Terms &conditions and product specifications desired by target customers ...... 10 3.7 Assessment of Comparative Advantage ...... 10 4 Resources ...... 11 4.1 Sources of raw material ...... 11 4.2 Assess the availability of manpower & skills ...... 11 4.3 Assess the need for skill development ...... 11 5 Environmental aspects- Regulation & environment issues ...... 11 6 Project Implementation Schedule ...... 12 7 Financial Analysis ...... 13 7.1 Total Project capital Costs ...... 13 7.2 Working Capital Costs...... 14 7.3 Cost of Production per unit ...... 14

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7.4 Human Resource cost ...... 15 7.5 Marketing Cost ...... 15 7.6 Project profit and Loss Statement ...... 16 7.7 Projected Cash flow statement ...... 17 7.8 Projected Balance sheet statement...... 18 8 Financial Ratio analysis ...... 19 8.1 Interest on loan ...... 19 8.2 Break Even Point ...... 19 8.3 Return on Investment ...... 19 8.4 Net Present Value and Internal Rate of Return...... 19 9 Final Finding and Recommendation ...... 20 10 Conclusion- Is project feasible ...... 21 11 References ...... 22 12 Annexure ...... 22 13 ...... 22

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1.1 Business Model Canvassing

Key Partners Key Activities Value Customer Customer Propositions Relationship Segments  Wood Paintings industries Abstract  In-person  Art Lovers

 Enterprises painting which  Telephone  Museums  Art is new to the Galleries country. Key resource Channels

 Artist  Online and offline medias

Cost structure Revenue Streams

 Raw materials  Sponsors  Salaries  Marketing

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2 Justification of the project

2.1 The need of the project is comprised of an eclectic assortment of paintings, , dance and drama predominantly based on religious themes. Developed over centuries with meticulous care, and practiced with dedicated fervor. They are mostly of spiritual significance and serve to promote religious beliefs rather than aesthetic purposes. However with the exposure to the world outside , people are moving more towards aesthetic purposes that could bring peace and satisfaction to one’s mind (Bhutan Jurmill Travels).

Although the Bhutanese art has played one of the major contribution in achieving one of the goal of GNH i.e., “Preservation and Promotion of culture and tradition”, the fusion of such paintings with the canvas painting would further help the country in achieving the goal since this type of painting is not only eye-catching but also very popular in ex country.

Contribution to GNH One of the important components that play a major part in the feasibility of proposed business is its contribution towards one of the pillar of GNH in promoting and preserving the culture and tradition.

Increase in interest of Art People’s exposure to outside countries and its lifestyle is encouraging the people to have attention and interest in arts and its expressions. The arts not only beautify the surroundings and home but also it soothes one’s mind and soul. Art is one of the way through which the artist brings out his/her expression on the surroundings and its being which is the main reason of arts growing in the country since the people believe in inner peace and expressions. Moreover the country itself being in the peaceful surrounding encourages people into arts.

Critical Success Factors

 Be service-oriented when working with our customers  Achieve order fulfillment excellence  Align incentives & rewards with employee roles for increased employee satisfaction

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SWOT ANALYSIS

STRENGTH WEAKNESS  Accessibility to the target markets  Inadequate knowledge on the market  People interest in Arts

OPPORTUNITY THREAT  To become pioneer in art distribution  Existing Art Galleries  To diversify the business (in country and  Entrance of new Art companies. ex-country)

One of the main strength of the business could be the easy access to the market, since there is growing number of people’s interest in arts however; due to lack of adequate knowledge on the market would be one of the weaknesses for the business which can be overcome through customer demands and feedbacks. There is not much art clubs in the country, so the business aims on becoming one of the pioneer in art distribution and diversify its products to the ex- country.

2.2 Competition Analysis

Some of the art based organizations include VAST, Choki Traditional Art School (CTAS), National institute of Zorig Chusum, Royal Textile Academy. They conduct their Art exhibitions as well as held the products in museums for display.

Some of the students that are passed from Zorig Chusum and Art Schools also paint and sell the products in the market.

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3 Market Analysis

3.1 Structure of the industry Producer

Dealer

End User

3.2 Demand vs. Supply The Bhutanese art has played one of the major contributions in achieving one of the goals of GNH, i.e., “Preservation and Promotion of culture and tradition”. The fusion of such paintings with the canvas painting would further help the country in achieving the goal since this type of painting is not only an eye-catching but also very popular in other part of the world.

People’s exposure to outside countries and its lifestyle is encouraging the people to have attention and interest in arts and its expressions. The arts not only beautify the surroundings and home but also it soothes one’s mind and soul. Art is one of the way through which the artist brings out his/her expression on the surroundings and its being which is the main reason of arts growing in the country since the people believe in inner peace and expressions. Moreover the country itself being in the peaceful surrounding encourages people into arts.

Bhutanese today reflects the change that the country has undergone over few decades. Many more artists are expressing themselves today and in the capital alone, within the last 10 years, the number of art galleries has increased from one to five. Some of the artist showed this through photography and visual displays while others show it through art, architecture and crafts.

Some of the art based organization includes VAST, Choki Traditional Art School (CTAS), National institute of Zorig Chusum, Royal Textile Academy. They conduct their Art exhibitions as well as held the products in museums for display.

3.3 Pricing and Marketing Strategies Pricing strategy

The proposed business would charge the price considering the time duration and complexity of the paintings while some of the simple and pre-painted painting that are done during off period(without any order) would be charged at fixed price. However the range of price would depend on the price given below: 8 Compiled by IBEST consultancy Services

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Price Per Product Abstract Painting Landscape Painting Realistic Painting 12,000 10,000 9,000

Promotional Strategy The proposed business will utilize media such as broadcasting service, newspapers, Facebook as well through Instagram to introduce the products, announce on new arrival and information on the products.

3.4 Competitiveness of the project Canvas painting is a new concept for Bhutan. The proposed business will produce three categories of paintings which includes Abstract painting, Landscape painting and Realistic painting. It would be done by the three artists and the price would depend upon the time duration and complexity of the paintings. The following are the details of the paintings:

1. Abstract painting: it is based upon the ideas and views that the artist has in mind so the complexity of this painting is more compared to the other two paintings.

2. Landscape painting: This type of art includes the beautiful and eye catching views of nature and scenarios which however is not too complex compared to Abstract paintings.

3. Realistic painting: it can include the paintings that the customers have in mind or the picture that the artist wants to art as well.

3.5 Special attributes desired by target customers Creating an admirable work of art is not that easy. Giving shape and colors to what is on your mind is a challenge for every artist; they have to tackle up and proceed through the adventurous journey of creating the artwork they always wanted to relish. Therefore, every customers look for a painting that would:

a. Art that is relatable to a person who is watching the art b. It would break the barrier of language, caste and class c. Beautify the surrounding or the environment they are living in d. The art has the element of glamour, dignity and fortune since most people prefer showing off the wealth and luxury that they own

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3.6 Terms &conditions and product specifications desired by target customers The proposed business is not only focused to empower youth through art, but also to restore and maintain the basic social structure of Bhutan through projects that enhance awareness of social problems like poverty, hunger, pollution as well as spiritual deprivation. In this way, the artists themselves find a deeper dimension within themselves and are better able to express themselves in their art.

3.7 Assessment of Comparative Advantage

The production will be distributed in Thimphu majority of the population are settled in the capital city. The business will conduct its operation in the main town where the accessibility and awareness of the product can be created. Moreover, Thimphu is a place which is visited by the tourist so it makes the business accessibility easier.

The existing Art companies and agencies that includes VAST, Choki Traditional Art School (CTAS), National institute of Zorig Chusum, Royal Textile Academy does the painting and sell the Arts with simple feature of painting however, the purposed painting would be dealing with Canvas painting which is a new concept for the country.

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4 Resources

4.1 Sources of raw material All the necessary inventory items for the painting will be purchased from Kuenga Tshongkhag, Thimphu Main town while the woods and the plywood would be purchased from Chhundu Sawmill in Changzamtog, Thimphu.

4.2 Assess the availability of manpower & skills Unemployment Rate in Bhutan decreased to 2.50 percent in 2016 from 2.60 percent in 2015. Unemployment Rate in Bhutan averaged 2.56 percent from 1995 until 2016, reaching an all time high of 4 percent in 2010 and a record low of 1.15 percent in 1997.

With the given availability of the unemployment person in the market, the proposed business would be able to render the skills and knowledge of the manpower.

(Source: Trading economics, 2016)

4.3 Assess the need for skill development The highly skilled artists are trained for several years under the careful guidance of accomplished masters. The labors needed for the Creative Art Club should be well experienced and should have certificate on passing from Art school which is available in the country since many students are now opting for Art schools. If they are joining with no relevant experience training in their respective functional area would be mandatory.

5 Environmental aspects- Regulation & environment issues

The production of the Arts may cause odors which would affect the environment and the left over products and waste can be problematic, however it would be disposed off properly.

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6 Project Implementation Schedule PROJECT TIMELINE

2016 Activities 1st 2nd 3rd 4th Month Month Month Month

Feasibility study and development of the project proposal

If the project is going to be funded:

Purchase of Inventories and Start of Production

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7 Financial Analysis

7.1 Total Project capital Costs COMPONENTS OF PROJECT COST Amount in Nu. Forex. Domestic PARTICULARS Componen Total Cost Component Remarks t

Rent (Security Deposit) 40,000 40,000 Plant & Machinery Total - -

Miscellaneous Fixed Assets: Paint Brushes 1,140 Carpentry Equipments 1,500 laptop 40,000 Printer 20,000 Stationeries 105 Artist Pallette 600 Furnitre 66,000 Apron 1350 Total Cost 129,345 129,345

Preliminary Expenses 20,000 20,000

Total Project Startup Cost 189,345

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7.2 Working Capital Costs

Particulars Monthly Yearly Advertising 1,000 12,000 Bank Charges - - Credit Card Fees - - Delivery Expenses - - Health Insurance - - Insurance - - Interest

Inventory Purchases 20,455 245,460 Miscellaneous 1,500 18,000 Office Expenses - - Payroll 81,000 972,000 Payroll Taxes - - Professional Fees - - Rent or Lease 20,000 240,000 Subscriptions & Dues - - Supplies - - Taxes and Licenses - - Utilities & Telephone 500 6,000 Others: 34,000 408,000 0

Total 158,455 1,901,460

7.3 Cost of Production per unit

Year 1 Year 2 Year 3 Year 4 Year 5

Total Units 204 214 225 236 248

Cost of Production 1,505,856 1,581,129 1,660,166 1,743,154 1,830,292 Unit Cost of Production 7,381.65 7,381.55 7,381.47 7,381.38 7,381.30

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7.4 Human Resource Cost

MANPOWER COST Particulars Monthly Year 1 Year 2 Year 3 Year 4 Year 5

Direct Labor 33,000 396,000 415,800 436,590 458,420 481,340

Salary & Allowances 48,000 576,000 604,800 635,040 666,792 700,132

Wages - - - - -

Total 81,000 972,000 1,020,600 1,071,630 1,125,212 1,181,472

7.5 Marketing Cost

The annual advertising cost of Nu 12,000 would be incurred for using media such as broadcasting service, newspapers, Facebook as well through Instagram to introduce the products, announce on new arrival and information on the products.

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7.6 Project profit and Loss Statement

INCOME STATETMENT PROJECTION FOR 5 YEARS

YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5

Revenue 2,088,000 2,192,400 2,494,010 2,664,876 2,938,026

Cost of Goods Sold 653,460 686,133 720,440 756,462 794,285

Gross Profit / (Loss) 1,434,540 1,506,267 1,773,571 1,908,414 2,143,741

Expenses 852,396 894,996 939,726 986,693 1,036,007 Net Operating Income / (Loss) 582,144 611,271 833,845 921,722 1,107,734

Less: BIT (30%) 174,643 183,381 250,153 276,517 332,320 Net Income / (Loss) after BIT 407,501 427,890 583,691 645,205 775,414

Additional Information:

Depreciation Expenses 396 396 396 396 396 % of Net Income / (Loss) - 5.00 36.41 10.54 20.18 % of Average Net Income / (Loss) 10.30

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7.7 Projected Cash flow statement Projected Cash Flow Statement Year 1 Year 2 Year 3 Year 4 Year 5 Beginning

Cash 344,995 540,862 938,513 1,402,211 Balance Accts. Rec. Collections 208,800 219,240 249,401 266,488 293,803 Loan

Proceeds 347,800 Sales & Receipts 1,879,200 1,973,160 2,244,609 2,398,388 2,644,223 Other: Total Cash Inflows 2,435,800 2,192,400 2,494,010 2,664,876 2,938,026 Available

Cash 2,435,800 2,537,395 3,034,872 3,603,389 4,340,237 Balance Advertising 12,000 12,600 13,230 13,892 14,586 Inventory 245,460 257,733 270,620 284,151 298,358 Purchases Miscellaneou 18,000 18,900 19,845 20,837 21,879 s Payroll 972,000 1,020,600 1,071,630 1,125,212 1,181,472 Rent or Lease 240,000 252,000 264,600 277,830 291,722 Utilities & 6,000 6,300 6,615 6,946 7,293 Telephone Other: 408,000 428,400 449,820 472,311 495,927 Subtotal 1,901,460 1,996,533 2,096,360 2,201,178 2,311,237

Capital 189,345 Other Cash Purchases Out Flows: Other: Subtotal 189,345

Total Cash

Outflows 2,090,805 1,996,533 2,096,360 2,201,178 2,311,237 Ending

Cash 344,995 540,862 938,513 1,402,211 2,029,000 Balance

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7.8 Projected Balance sheet statement

Projected Balance Sheet For 5 Years Year 1 Year 2 Year 3 Year 4 Year 5

Assets

Cash & Bank 344,995 540,862 938,513 1,402,211 2,029,000 Accounts Receivable 208,800 219,240 249,401 266,488 293,803 Inventory

Prepaid Expenses 58,650 Total Current 1,187,91 1,668,69 612,445 760,102 Assets 4 9 2,322,803

Net Fixed Assets 2,244 1,848 1,452 1,056 660 Other Assets

Total Assets 1,189,36 1,669,75 614,689 761,950 2,323,463 6 5

Liabilities & Capital

Accounts Payable (71,052) 125,380 466,554 954,989 1,548,049 Taxes Payable

Total Current (71,052) 125,380 466,554 954,989 1,548,049 Liabilities

Long-Term Notes 278,240 208,680 139,120 69,560 (0) Payable Total Long-Term 278,240 208,680 139,120 69,560 (0) Liabilities

1,024,54 Total Liabilities 207,188 334,060 605,674 1,548,049 9

Owner's Equity

Net Profit 407,501 427,890 583,691 645,205 775,414

Total Capital 407,501 427,890 583,691 645,205 775,414

Total Liabilities & 1,189,36 1,669,75 Capital 614,689 761,950 2,323,463 5 4

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8 Financial Ratio analysis

8.1 Interest on loan

Year 1 Year 2 Year 3 Year 4 Year 5 Interest 38,829 31,980 24,261 15,564 5,763 Loan Principle 54,010 60,860 68,578 77,276 87,076 Loan Balance 293,790 232,930 164,352 87,076 0 EMI 92,839 92,839 92,839 92,839 92,839

8.2 Break Even Point

Unit Unit Unit Cost Total Fixed Time Unit Price Start Increment Variable Costs

Month - 30 10,235 9,321 130,695

BREAK EVEN X BREAK EVEN Y LABEL

143 1,463,647 break even unit =143

8.3 Return on Investment

ROI from Total Sales 500% 530% 617% 666% 745%

8.4 Net Present Value and Internal Rate of Return

Net Present Value (NPV) 894,150 Internal Rate of Return (IRR) 64%

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9 Final Finding and Recommendation

Since the early 1990s, the development of a well-to-do urban class and tourism, have encouraged some artist to take their art as a full time profession. International agencies, NGOs and government institutions such as specialized schools encourage the artists to promote their work, like the Seal of Excellence introduced in 2009. (Source: Zorig Chusum)

Although arts and architecture plays an important function in the Bhutanese culture, the practice of canvas painting has been rare in Bhutan which is the main reason on proposed business aiming for canvas painting with the fusion of traditional art and design with modern touch on it. Additional to the traditional paintings the art would be also be done on the basis of creativity and demand of the customers. The paintings would not only be available in one frame but also the same scene/ paintings can be segmented into many frames.

Although the price of every category of paintings (Abstract Painting, Landscape Painting and Realistic Painting) is given in the financial statement however the price may vary depending upon the needs and demands of the customers and also on the time duration and complexity of the paintings. Nevertheless, the price of the abstract painting would be charged higher comparing to the other two categories of painting since it includes more creativity and brainstorming.

The production will be distributed in Thimphu majority of the population are settled in the capital city. The business will conduct its operation in the main town where the accessibility and awareness of the product can be created. Moreover, Thimphu is a place which is visited by the tourist so it makes the business accessibility easier.

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10 Conclusion- Is project feasible

The project is feasible since:

1. Arts and Architecture is one of the growing sector in the country, both demanded by the in-country people as well the tourist who are visiting the country, due to the uniqueness of the design.

2. Among the paintings, Canvas painting is a classified growing painting in the world recognized for its innovation and creativity. By introducing canvas painting in the country, it would not only help in encouraging the artist in increasing their productivity and skills but also help the nation as a whole in “self Reliance” since many of the arts and architecture are purchased from ex-country.

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11 References Tourism Council of Bhutan:Government of Bhutan. Retrieved 2017-05-16

Thimpu Dzongkhag". Government of Bhutan. Retrieved 2017-06-01

12 Annexure

Misc. Fixed Assets Sl. No. Particulars Units Cost Amount 1 PAINT BRUSHES a Flat Brush 3 200 600 b Brush(1) 3 25 75 c Brush(3) 3 25 75 d Brush(5) 3 55 165 e Brush(7) 3 75 225 Total 1,140 2 Carpentary Equipments a Hand Planer 1 800 800 b Hammer 1 200 200 c Saw 1 200 200 e Try Square 1 150 150 f Measuring Tape 1 150 150 Total 1,500 3 Stationeries a Pencil(Packet) 1 75 75 b Eraser (Piece) 3 5 15 c Sharpener (Piece) 3 5 15 Total 105 4 Furniture a Chair 10 3000 30,000 b Table 8 4500 36,000 Total 66,000 Grand Total 68,745

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