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Archive for the ‘Finance’ Category

I guess it would be interesting to blog about my second venture.

Remembered Angels & Mentors? After going through the venture, I could say that starting up a business from an idea is not easy and that’s the reason why there are not many angel investors in Malaysia.

Perfect Fresh & Frozen is a company dealing in frozen food and meat supplies (cow, lamb, goat, rabbit, yeap whatever you name it as long as it’s in our sijil HALAL JAKIM) and is a local franchisor registered with KPDNKK.

I joined in as one of the partners to try and stimulate the business model. Get things up and running to ensure it reaches profitability. It is not an easy task.

However, below is our re-engineered business model:

  • Targets both retailers and restaurants.
  • Wholesale prices for all, even lower prices for everyone for above 5KG.
  • Customer service without extra cost. We think about you and your customers. We always do followup to ensure we can provide products according to your requirements.
  • We are expanding our Yeehaa Kiosk model where entrepreneurs could set up a hybrid of western food + grab and bite food at only 11k (including working capital!)

Wish me luck on my business.

To know more, login at http://www.perfectfreshfrozen.com

Or you can visit us at No 15, Jalan Impian Murni 1/5, Saujana Impian, 43000 Kajang, Selangor. We are open from 9am – 10pm, everday!

It’s near to TESCO Kajang by the way.

Or call us at +603 8739 3042

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For those not in finance, you would ask, what is the purpose of Net Present Value (NPV) for your business? Well it has many usage. Let me translate NPV in easy understanding:

  • To measure the profitability of acquiring an asset or investment. (example: how do you determine whether the premix plant you purchase today will give you profit or loss?)
  • Difference between cash inflow and cash outflow (example: the cash you get from your premix plant less the maintenance cost needed,etc)

What is the formula of Net Present Value?

23

The following formula is taken from wikipedia in which R = cash inflow – cash outflow, i = discount rate (rate of return), t= time period.

So where is the NPV calculator?

You can download it here (click on the download now button). I made this in excel file for one of the clients we consult when I was in wesolve.info.

How do I use the calculator?

You only need to key in these 2 items:

  • Cost of Technology Acquisition (the cost you wanna buy that property, plant or equipment)
  • Recurring Cost Per Year (the cost you have to maintain that property,plant or equipment)

What information do I get from the calculator?

  • Net Present Value of All Costs for 5 years
  • Decision factor whether you want to invest or acquire the asset or not through (NPV > 0)
  • Cash flow analysis for break even (when you get all your money back after purchasing that asset)

For advanced users, you may ask about the discount rate. You may notice that I set here 12% discount rate and for every year there is a formula in terms of 0.812. This is a tabulated formula. Should you wanna change the discount rate %, just key in the amount into the “Discount Rate” column.

What is a discount rate?

Interest rate Bank Negara charges to the financial institution from the amount it borrows.

How does it effect me, purchasing an equipment then?

The higher the interest rate, the more you gotta pay, hence it could be riskier and your cash flow NPV can be less.

How do you determine discount rate for your OWN NPV? (depends on your value judgement entirely)

  • Weighted average cost of capital which is after tax is used for companies to make management decision
  • Direct comparison. For example: you want to buy photostat machine A and B. Use the discount rate from B to compare whether A gives you better return or not.

When do I decide whether I should purchase the equipment or invest in something?

When your NPV>0, it shows positive return. If your NPV=0 it’s breakeven. If your NPV<0, then better dont buy buat rugi jer.

For more information on NPV, check out these sites:

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