Course:

CHM 440 (Entrepreneurship)

Group:

A FEASIBILITY REPORT ON LIQUID DETERGENT AND

BAR SOAP PRODUCTION
BY
GROUP A
SUBMITTED TO

CHEMISTRY DEPARTMENT
DELTA STATE UNIVERSITY, ABRAKA.

IN PARTIAL FULFILMENT OF THE BARCHELOR OF

SCIENCE DEGREE IN CHEMISTRY
APRIL, 2013

s/n

STUDENT NAME

MATRICULATION
NUMBER

INTRODUCTION
A feasibility study is an investigation (i.e gathering and analysing information) into the
potential outcome(viability) of a project. This helps the investors, sponsors, shareholders and
lenders to know if the project is feasible or possible. If a feasibility study is to be useful, the
techniques of data collection, evaluation and structure of the report must be objective, valid
and reliable.
A feasibility study is an evaluation and analysis of the potential of the proposed project
which is based on extensive investigation and research to give full comfort to decision makers.
Feasibility studies aim to objectively and rationally uncover the strength and weakness
of an existing business or proposed venture, opportunities and threats as presented by the
environment.
This report is trying to evaluate the features of entering into soap production as a
business enterprise. Soap is one of the most commonly used chemical products in everyday
endeavours. It has been produced in different forms: liquid, powder and bar; different colours,
different sizes, different textures, different quality; so as to meet with the increasing demand
for soap in Nigeria in particular and the world at large. Some soaps are mild and gentle on the
skin but tough on germs (medicated soaps), some are tough on stains and harsh to the skin
(particularly detergents) while some are gentle on the skin (toilet soap, liquid detergent etc.).
Homes, Industries, Offices, Hospitals, Hotels, e.t.c all use soap on a daily basis. Soap is
very essential in Medicine and the Pharmaceuticals where purity and cleanliness is very
important. This has made the soap industry a lucrative industry with maximum profitability
and minimal risk management. With the increasing demand for soap, there is a need for many
industries to be open so as to reduce importation of a product that can be produced without
much machineries and huge finance. With as little as N20,000.00, a soap business can be
established.
PURPOSE OF THE REPORT
i)
ii)
iii)
iv)

To determine the viability of the project or the project or the attractiveness of the
project.
To serve as a plan document indicating the series of choices or strategies for
realising the objectives of the project.
It serves as a guide during the implementation of the project.
It demonstrates to investors the existence of market for the product/service, the
liquidity of the project and potential revenue source for the project.

v)

The report serves as a control guide to the investor with regards to product
specifications and performance.

THE PRODUCT
The final product of the project is liquid detergent and bar soap (produced either by the
cold process or the hot process). The liquid soap is canned in various transparent containers
of 1litre and 2litres, while the bar soap is cut into various shapes and sizes to satisfy
customers needs.
These two products are meant for both domestic and industrial uses. The Standard
Organisation of Nigeria has maximum parameter limits and these are strictly adhered to.

RAW MATERIALS
The raw materials required for soap making are listed below
1. Palm Kernel Oil (PKO)
2. Soda Ash
3. Caustic Soda
4. Sodium Sulphate
5. Sulphonic Acid
6. Sodium Lauryl Sulphate
7. Texapon
8. Nitrosol
9. Fragrance
10. Colour
11. Preservative

SOURCES OF RAW MATERIALS

The raw materials for this project can easily be purchased in almost every
chemical shop. Raw materials of proven standards can be purchased from certified
chemical laboratories and petrochemical industries.

PROJECT LOCATION
The project shall be located in Campus 2 area of Abraka,Ethiope East Local
Government Area of Delta State. It is sited in this area because it will be the first soap
industry in this part of the state. This location is also highly populated as a higher
institution is located in this area. Many banks are located in this area also. This location for
the business is a very good one since it has access to the students campus and the main
market in the area. It is also close to the Oil City, Warri. This location also makes for easy
partnership with hospitals, restaurants, offices and even the University. There is also
abundant supply of both skilled and unskilled manpower for the operation of the project.
Getting sales personnel is also very easy because of the high level of unemployment in the
area.

PROJECT PROMOTER
In association with Delsu Investment Limited, this project is to be funded by the Niger
Delta Development Commission.

COST OF PROJECT
This project which is a small scale project will cost about N11,795,000.00 (eleven
million, seven hundred and ninety five thousand naira only).Delsu Investment Limited
contributed N795,000.00, while the NDDC contributed N11M to the completion of this
project.
MACHINERIES AND PROCESS DESIGN
1. Chips Making Machine: This is used to make chips of soap bars. It is necessary to
convert soap bars to chips for proper drying.
2. Mixer Machine: Soap mixer machine is used for mixing all the additives with raw soap
and makes a hard paste form.
3. Roller Machine: Soap roller machine is used for rolling soap for better mixing process
of all raw materials as well as some more shinning of final soap. After the soap rolling
process, output soap will be in thin ribbon form.
4. Vacuum Duplex Plodder Machine: The plodder is used for the compression of soap.
The final output will be in bar form.
5. Circular Bar Cutting Machine: This is used for cutting of soap bars automatically.

6. Stamping Machine: Soap stamping process gives the exact shape and size of final soap.
The final stamped soap will be fine finished with the required shape, size and brand
name as per customers need. Finally, soap will be ready for packing.
7. Measurement Instruments: These include pH meter, photometers of various types.
Measuring cylinders to measure the quantities required are also needed.
8. Thermometer.
9. Canning Machine

QUALITY CONTROL
This product may likely be exported, so, efforts shall be made to meet the
internationally accepted standards with regards to scent, effect on skin, impurities, and
thickness. To achieve this, testing kits shall be purchased and a mini-quality control laboratory
shall be established. This entails employing a quality control officer that will be in charge of
the mini laboratory. Also, independent quality control laboratories certified by the right body,
shall be used to analyse products to obtain an objective quality certificate of analysis.
Raw materials, the manufacturing process and the finished product shall undergo series
of test to ensure the safety of the customers. The most important test is the test to ensure the
product is not carcinogenic and eco-friendly raw materials are used in the manufacturing and
packaging process.

MARKETING OF PRODUCT
1. The products (liquid detergent & bar soap) shall be sold directly to buyers at the project
site.
2. Sales outlets shall be opened in Warri, Agbor, Asaba, Onitsha, Benin City, Sapele to
enhance easier contact with the customers.
3. The distributor system shall also be employed
4. Continuous effort shall be made to secure international market for the product
5. The sales force shall be headed by an experienced marketing manager assisted by a
team of enthusiastic salesmen.

ADVERTISING AND PROMOTION

The products shall be continuously advertised in both local and national newspapers,
and other printed media. Electronic media such as radio and television both at the local and the
national levels shall be extensively used topublicise the product. The company shall also
engage in shows promotions to advertise the product.

PRICING SYSTEM
Because of the price influence of raw materials, market demand and the volume of
importation, the factory prices for the products are listed below.
N80.00 for half litres of liquid soap
N200.00 for 1 litre of liquid soap
N250.00 for 2 litres of liquid soap
N75.00 for big bar soap
N35.00 for small bar soap
The price of raw materials at the time of this report was investigated was N600,000.00 but the
project is based on N0.5m, to account for any upward rise in price.

PRODUCTION TURNOVER
The project shall run in a single shift (8.00am-6.00pm) system with a minimum
production of 1,500 litres daily for liquid soap. By working for 24days in a month including
Saturdays, a minimum of 36,000 litres of liquid soap shall be produced in a month.
For the bar soap, a minimum of 1000 bars of 0.12kg and 0.10kg will be produced daily
and by working for 24days, 24,000 pieces will be produced.
As demand of the product increases, the company shall improve on its turnover and two
or three shift system shall be employed.

PRODUCTION CALCULATION
75% of the raw materials is realized as the finished product. The percentage recovery
may be more depending on the efficiency of the machines.
If the cost of raw materials to produce 1litre of liquid soap is N140.00,
Therefore 1,500 litres will cost

= N120 1500
= N180,000

Therefore, one month

= N180,000 24 = N4,320,000

If one litre is sold at N200.00

1,500 litres will cost:

1,500 N200.00 = N300,000.00

For one month, the cost will be = N300,000.00 24 = N7,200,000.00

The gross profit for the daily production

= N300,000.00 N180,000.00
=N120,000.00

Therefore, for 24 working days a month including Saturday,

Gross profit:

= 24 N120,000.00
= N2,880,000.00

If the raw materials for producing 1 bar of soap is N20.00,

Therefore, 1,000 bars of soap

= 20 1000
=N20,000.00

For one month,

= N20,000 24= N480,000.00

If one bar is sold for N40, 1000 bars

= 1000 N40.00= N40,000.00

For one month, the cost will be

= 24 N40,000.00 = N960,000.00

The gross profit for daily production is

= N40,000.00 N20,000.00

= N20,000.00
Therefore, for 24 working days in a month, including Saturdays,
Gross Profit

= N20,000.00 24
= N480,000.00

MANAGEMENT STRUCTURE
This project shall be managed by Delsu Investment Limited (DIL) and the Niger Delta
Development Commission (NDDC). Specialized management personnel would be provided
by DIL and NDDC while the bulk of labour will be provided by the community. In order to
avoid conflict in areas of employment, management of funds and operations, a memorandum
of understanding shall be entered into by Abraka Community and the project financer- DIL
and NDDC.

LIMITING FACTORS
Here, it is important to highlight some of the practically experienced and envisaged
factors that may occasionally have a relative impact on the project. Some of these factors are
listed below.
1. Competition from other soap industries already in existence. However, the project shall
handle this situation by producing at the lowest possible price and constantly being
abreast with marketing information so as to respond to market fluctuations through
appropriate adjustment of prices. This problem of competition shall also be resolved by
constantly rebranding the product, constantly improving on the quality and through
adequate advertisement.
2. Variations in the raw materials supplied. This could be due to ban on importation of the
raw materials as a result of failing quality tests or as a result of transportation problems
making the raw materials not to get to the manufacturers on time. This project shall
solve this problem of variations in the availability of raw materials by bulk buying and
proper storage of the raw materials
3. Price variation of the finished product. There is always price variation for finished
goods which may be as a result of government policies or a new company entering into
production. One cannot sell a product below its production cost. Therefore, this project

shall anticipate and forecast any price variation and then make adjustments before the
forecast materialize.
4. Power problem. Because of the large output, machines are required for production and
these machines are electrically operated. Electricity supply in this area is poor so this
project shall acquire generator in case of power failure.
5. Taxation. As the income is increasing, government taxation increases. This company
will ensure it hires good tax consultants to deal with the issues of heavy taxation.
6. Natural calamities. In this part of the nation, the predominant natural calamity is
flooding. To ensure that this does not occur, this project has been set on a highland and
should in case it happens, the company is to be insured by a good insurance company.

RISK ANALYSIS
From the limiting factors analysed, it is clear without reasonable doubt that the risk
factors are at a minimal level. Thus, this project has about 89% chances of success if
embarked upon.

JUSTIFICATION OF THIS PROJECT

1. The raw materials are abundantly available locally.
2. All the machineries are available at a snap of the finger. The spare parts are also readily
available.
3. There is a large and expansive market nationwide for sale and distribution of the
product.
4. It provides a much needed raw materials for other industries.
5. It will provide employment opportunities for a teeming population of unemployed
youth in the area thereby reducing the level of poverty and crime rate.
6. It will help in skill acquisition for people in the area.
7. It will increase the National Gross Domestic Product (GDP).
8. It will reduce foreign exchange expenditure on the importation of soap.
9. For the fact that this project is rural based, it will reduce rural-urban migration/drift thus
reducing over population in the urban areas.
10. The production of soap is a simple process. It does not require highly trained and
expensive personnel to operate.
11. This project will bring development to the area because this project will open doors to
other industries.

CONCLUSION
From the above analysis and subsequent computation, it is very clear without
reasonable doubt that soap production for both domestic and industrial uses is a very
possible and viable project. Abraka in Ethiope East Local Government Area of Delta State
is a perfect location for this project because of access to various parts of the state and
nearness to Benin City. This project being partly funded by Delsu Investment Limited
(DIL), has electricity suppy from the Delta State University Campus. This project in
Abraka is also very close to Warri, where raw materials are easily purchased. The
community is willing to contribute her quota in terms of a favourable working environment
for the project.
This feasibility report is based on practical experience of the management firm that
wrote it. This firm has been practically involved in similar projects from the stage of
acquiring raw materials up to the stage of marketing and distribution. These products are
already being sold all over the country especially in Benin City and Onitsha. The facts and
figures presented in this report are therefore very practical and authentic. This project is
bound to succeed greatly if established.

COST ESTIMATE
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.

ITEMS
Machines
Vehicle
Land
Factory Structure
Bore hole
Electrification
Safety Equipment
Office Equipment & Furniture
Quality Control Laboratory
Machines Installation
Measuring Equipment
Total

COST (N)
2,000,000.00
2,000,000.00
400,000.00
1,500,000.00
300,000.00
250,000.00
125,000.00
502,000.00
1,000,000.00
553,000.00
370,000.00
9,000,000.00

MACHINERIES QUOTATIONS OBTAINED FROM:

1.
2.
3.
4.

Uyi Technical, Benin City

Okeyson Chemicals, Onitsha
Jonah West Engineering, Warri
Sam Whyte Chemical Industry, Ikeja

PRELIMINARY EXPENSES
1. Feasibility Studies
2. In co-operation of company
3. Transportation
Total

N190,000
N120,000
N85,000
N395,000

This preliminary expenses of N395,000.00 (three hundred and ninety five thousand naira only)
was spent by Delsu Investment Limited.

FINANCIAL STRUCTURE
DESCRIPTION
1.
2.
3.
4.

Value of land
Fixed Assets
Preliminary Expenses
Working Capital

NDDC LOAN
(N)
9,000,000.00
2,000,000.00
11,000,000.00

EQUITY (N)

TOTAL (N)

400,000.00
395,000.00
795,000.00

400,000.00
9,000,000.00
395,000.00
2,000,000.00
11,795,000.00

FUNDING OF INVESTMENT
1. Delsu Investment Limited Equity
2. NDDC Loan

N795,000.00
N11,000,000.00
N11,795,000.00

LABOUR COST
Number Description
Required
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.

1
1
1
1
1
1
1
1
2
10
3
2
2

Monthly
Salary Per
Person(N)
General Manager
40,000
Production Manager
30,000
Purchasing Manager
30,000
Sales Manager
30,000
Quality Control Manager 30,000
Accountant
25,000
Mechanical Engineer
25,000
Electrical Engineer
25,000
Driver
8,000
General Labour
8,000
Security Men
6,500
Messenger
5,000
Cleaner/Gardener
5,000
267,500

Total Salary
Per Month
(N)
40,000
30,000
30,000
30,000
30,000
25,000
25,000
25,000
16,000
80,000
19,500
10,000
10,000
370,500

Total Salary
Per Annum
(N)
480,000
360,000
360,000
360,000
360,000
300,000
300,000
300,000
192,000
960,000
234,000
120,000
120,000
4,446,000

Labour cost shall increase at the rate of 5% annually.

PROJECTED MONTHLY OVERHEAD COSTS

ITEM
Sales outlets rent
Transportation
Maintenance & Repairs
Advertisements
Electricity
Miscellaneous

COST PER MONTH (N)

1.
10,000.00
2.
12,000.00
3.
8,000.00
4.
10,000.00
5.
10,000.00
6.
10,000.00
60,000.00
Projected overhead cost shall increase at the rate of 5% annually.

PROJECTED MONTHLY PRODUCTION COST

DESCRIPTION
AMOUNT (N)
1. Raw Materials for liquid detergent
4,320,000.00
2. Packaging Cost
35,000.00
3. Salaries
185,250.00
4. Overhead Cost
30,000.00
Total
4,570,250.00
Projected production cost shall increase at the rate of 5% per annum.

PROJECTED MONTHLY PRODUCTION COST

DESCRIPTION
AMOUNT (N)
1. Raw Materials for bar soap
480,000.00
2. Packaging Cost
15,000.00
3. Salaries
185,250.00
4. Overhead Cost
30,000.00
Total
710,250.00
Projected production cost shall increase at the rate of 5% per annum.

PROJECTED MONTHLY SALES AND PROFIT

If the cost of raw materials to produce 1litre of liquid soap is N140.00,
Therefore 1,500 litres will cost

= N140 1500
= N210,000

Therefore, one month

= N210,000 24 = N5,040,000

Therefore, one month

= N210,000 24 = N5,040,000

If one litre is sold at N200.00

1,500 litres will cost:

1,500 N200.00 = N300,000.00

For one month, the cost will be = N300,000.00 24 = N7,200,000.00

Therefore, projected monthly gross profit

= N7,200,000 N 5,438,500
= N1,761,500.00

PROJECTED YEARLY TURNOVER AND PROFIT MARGIN

At the production capacity of 1,500 litres per day and 36,000litres per 24 working days
in a month will yield 432,000 litres per annum.
RAW MATERIALS
1.

Quantity

576,000 litres

FINISHED PRODUCT (75%

OF RAW MATERIALS)
432,000 litres

2.

Cost

N69,120,000.00 at N120.00
per litre

N86,400,000.00 at N200.00 per

litre

Gross Profit

= N86,400,000 N69,120,000 = N17,280,000.00

Overhead Cost is N5,280,500

NET PROFIT

= N17,280,000 N4,600,000 = N12,680,000.00

Thus, the project of liquid soap can make an annual profit of close to N13,000,000.00

At the production of 1,000 bars of soap per day, 24,000 bars will be produced per
month and 288,000 bars per annum.
RAW MATERIALS

1.

Quantity

384,000 bars

2.

Cost

N7,680,000.00 at N20 per bar

Gross Profit

FINISHED PRODUCT
(75% OF RAW
MATERIALS)
288,000 bars

N11,520,000.00 at N40
per bar
= N11,520 N7,680,000 = N3,840,000.00

Overhead Cost is N710,250.00

NET PROFIT

= N3,840,000 N710,250 =N3,129,750.00

Thus, this project will make an annual profit of about N3,000,000.00

APPENDIX 1: CASH FLOW PRPJECTION FOR 5 YEARS PLAN PERIOD

S/
N

DESCRIPTION

YEAR 0

A.
1.
2.

CASH INFLOW
NDDC Loan
Delsu Investment
Limited
Sales

N
11,000,000
795,000

Total Cash Inflow

11,795,000

3.

B
1.
2.
3.
4.
5.
6.
7.
8.

CASH OUTFLOW
Machines
Vehicle
Land
Factory Structure
Bore hole
Electrification
Safety Equipment
Office Equipment
& Furniture
9.
Quality Control
Laboratory
10. Machines
Installation
11. Measuring Tools
12. Raw Materials
13. Labour Cost
14. Packaging Cost
15. Loan Interest
(5%)
16. Loan Repayment
17. Preliminary
Expenses
18. Contingencies
TOTAL CASH OUTFLOW
NET CASH FLOW

YEAR 1

N
-

YEAR 2

YEAR 3

YEAR 4

YEAR 5

N
-

N
-

N
-

N
-

13,746,52
5
13,746,52
5

16,271,715

16,700,500

17,900,500

18,500,000

16,271,715

16,700,500

17,900,500

18,500,000

5,544,525
4,446,000
420,000
550,000

5,821,751.25
4,668,300
441,000
440,000

6,112,838.80
4,901,715
463,050
330,000

6,418,480.70
5,146,800.75
486,202.50
220,000

6,739,404.70
5,404,140.80
510,512.60
110,000

2,200,000

2,200,000

2,200,000

2,200,000

2,200,000

100,000
12,711,07
5
1,035,450

110,000
13,681,015.2
5
2,590,700

120,000
14,127,603.8
0
2,572,396.20

130,000
14,601,483.9
5
3,299,016.05

140,000
15,104,057.7

2,000,000
2,000,000
400,000
1,500,000
300,000
250,000
125,000
502,000
1,000,000
553,000
370,000
5,280,500

395,000
200,000
14,875,500

3,395,942.30

RE
MA
RK

APPENDIX 2: PROJECTED PROFITABILITY FOR THE PLAN PERIOD

DESCRIPTION
Sales
OPERATING
EXPENSES
Raw
Materials
Cost
Labour Cost
Packaging Cost
Maintenance/Rep
airs
Interest on Loan
(5%)
Depreciation
Contingencies
NET PROFIT

ROI

YEAR 1
N
13,746,525

YEAR 2
N
16,271,715

YEAR 3
N
16,700,500

YEAR 4
N
17,900,500

Year 5

5,544,525

5,821,751.25

6,418,480.70

6,739,404.70

4,446,000
420,000
96,000

4,668,300
441,000
96,000

6,112,838.8
0
4,901,715
463,050
96,000

5,146,800.75
486,202.50
96,000

5,404,140.80
510,512.60
96,000

550,000

440,000

330,000

220,000

110,000

70,000
100,00
11,226,525
2,520,000

70,000
110,000
11,647,051.2
5
4,624,663.75

70,000
130,000
12,567,483.9
5
5,330,016.05

70,000
140,000
13,070,058.1
0
5,429,941.90

2,250,000
11,000,000
20.45%

4,624,663.75
11,000,000
42.04%

70,000
120,000
12,093,603.
80
4,606,896.2
0
4,606,896.2
0
11,000,000
41.88%

5,330,026.05
11,000,000
48.45%

5,429,941.90
11,000,000
49.36%

N
18,500,000