Important Information for Those Looking to Enter the World of Electrical and Electronic Devices Trade

One of the programs funded by the Social Development Bank is the "Haal" program. Since I have received many inquiries about the Electrical and Electronic Activities project (number 7) in the funding program, I would like to share the following points with you.

This is a general study of global rates in the home appliances and electronics sector, which are considered types of projects that do not require high technical skills, require a small number of employees, but need good capital.

For example, this type of project needs sales staff, as well as staff for loading and unloading. Additional services can also be added to boost sales through cross-selling, such as delivery, installation, maintenance, extended warranties, and insurance.

However, this type of project is considered an industry and requires proper management of financial matters and inventory to achieve excellent results.

Here, we will provide some financial indicators for guidance. This is not a complete study but highlights the key points that, in my opinion, should be used by the project founder as performance indicators for managing the project.

The source of this information comes from various feasibility studies that have been carried out, along with our knowledge of the development of some medium-sized projects in this field, in addition to reports from the U.S. Census Bureau databases.

In the name of God, we begin:

The average cost of goods sold is 70%-75%. Be careful not to let your cost of goods exceed this percentage to ensure the sale price is not lower than expected.

Thus, the gross profit in this field ranges from 25% to 30%. Of course, we are talking about gross profit, not net profit.

The total direct salaries should not exceed 9.5%.

Rent for this type of project should be around 3% of the expected income.

Administrative and general expenses for this type of project are 6.5%, ranking third after goods and salaries. Therefore, this should always be taken into account, and it includes the costs of supporting services.

Advertising expenses should not exceed 1.8%, which is considered an excellent rate given the high income value.

Incentives are around 1% of the expected income.

The net profit in this type of project, on average, is around 3% to 4%, and in the best cases, for small projects with excellent management and the best market conditions, it may reach 8%. However, this percentage requires the availability of several conditions to achieve it.

The following indicators should be considered: (0.25% represents uncollected amounts, knowing that sales are cash, but there may be delays or pending amounts, 0.5% for maintenance costs, 0.5% for customer satisfaction provisions).

The important question for inventory efficiency management is: what is the appropriate average inventory percentage for this field? The study indicates that the average inventory should ideally be around 22% of total assets.

As for cash, which is very important, it should be 7.5% of total assets. Here, increasing the percentage is considered a strength in terms of cash availability, but it can sometimes be a weakness if the project has cash that is poorly managed or invested.

Fixed assets should not exceed 21% of total assets.

As for the financial indicators in general, they are as follows: (Net profit in this field is an average of 3.78%).

Inventory turnover rate is around 9.83.

A final note: These financial indicators are for guidance when studying, managing, or developing the project. They are not complete studies, but you can compare your project with the market's average performance and identify weaknesses and areas for improvement. May Allah grant success.