Water ATM : Is it a sustainable "Business" Model ?

In a true sense, Water ATM is the best, very less discussed solution to all the growing concerns on Pure Drinking Water. Why am I saying so ?

1. It doesn't require a container ( In a Bottle of Packaged Drinking Water, water is the minimum cost ), most of it is the packaging : Bottle.
2. It omits plastic 100% , so it goes well with the 17 SDG ( Sustainable Developement Goals) Deviced by the UN. 
3. It provides local water at places without drilling the land
4. It will provide employment at local level 
5. It's the cheapest Water available

The threat to this model is the intervention of the govt itself. It should be taken out of the "Welfare" agenda. In this, these Water ATMs are not maintained & the whole thing goes to junk. 

We have created certain Videos through our Youtube Channel to explain the Business Model in depth, there is a complete playlist :-

==> https://www.youtube.com/playlist?list=PLUVSB_771ek1HhQF3P2CX-hRP4MZH0gxr

Some basics about "Profit"

When people talk about "Profit"; it's actually an enterprise level term. Every business having same category, product may still have different 'profits' though the general industry level profit "margin" may be same or equal.

For example, in Bottled Water in India, the production cost per bottle may be appx Rs 5 per bottle. This becomes 60 per case of 12 bottles. The same case is sold by the business owner at (general trend) Rs. 80 per case.

Revenue 80 * 10000 ( Cases sold per month ) = 8 Lakh

Less Prd cost 60 * 10000 = 6 Lakh 

Gross Profit  = 8-6 = 2 Lakhs ( 25% ) : 25% is the Margin

But the operating profit is something else. You need to deduct expenses such as :

S& GA ( Sales & Gen Admin Expenses ) , then you will get the Operating Profit, which is called as EBITDA : Earning before Interest, Tax, Depreciation & Ammortisation.

This will vary from business to Business

After this, EBIT will appear, by deducting Depreciation &/ ammortisation. 

Still this is NOT the Net Profit. Net profit will come after deducting Interest & Tax from the EBIT.

All of these ( After EBITDA ) don't tell you the operational efficency. The business might be loading unnecessary equipment costs or might be investing in certain non-business assets, on which it might have procured certain loans & paying interest, it might reflect here.

Point is : Never judge a business from its NET profit, look at the EBITDA first.

Why you need to calculate Financial Projections ?

Every entrepreneur comes out with his set of ideas. And truly, Idea IS the catalyst for a business to take existence. However, it's continuous cash-flow/ profit awareness which makes the business succeed. For this, every business should get their Financial Projections done after the initial built up of Business Model Canvas.

What are financial projections, and why they are vital ?

An idea is an imagination. A Business Model Canvas is a little detailed imagination. Once you actually document the revenue-expenses on each of the component, it gives you a near-true picture as to where do you stand financially. So you can adjust factors.

How long should one project ?

Minimum 3 years and ideally 5 years. As any business is expected to go through some hi-lows during the period. After this passage, the business owner knows the tricks of the trade. I would recommend to make 5 year projections for 1-gen entrepreneur and 3 year projections for 2nd,3rd gen entrepreneurs.

Standardized Project Reports are useless

There are many available on the internet. However, I would suggest you to get it done from a chartered accountant who will need inputs from you, for your project. There can't be a standard project report for a 2000 LPH plant. True, it can give you a nearby cost, but finally your overheads are different. Other costs like distribution cost, admin expenses will be different in each area.

Myth of a standard "Per Bottle Costing"

 "What is the manufacturing and selling cost per bottle"

This is a usual question posted by so many people on youtube, since we have many videos on various aspects of packaged drinking water business. No fault of them. However, let me clarify this aspect through a post below :-

Manufacturing Costs are costs incurred while producing the packaged drinking water till a particular point in the whole business process. Let us assume that it starts with Groundwater extraction process and ends when the bottle is inspected for quality after producing & packaging in its required quantity, say 1 Ltr or 1/2 Ltr, and kept in ready condition for despatch.

Similar Way, Selling Costs are costs incurred right from leaving the factory, distribution through various points and ends when payment realizes in the account.

All the instances, where the business pays out something, is COST to the business.

Here, to calculate the exact, non-varying cost per bottle, we need following inputs :

1. How many bottles are produced in the time-cycle
2. What were the pay-outs during the same

In these cost components, certain are Fixed ( Indirect Expenses ) while certain are varying ( Direct Expenses ). Usually Indirect Expenses are constant irrespective of your production whereas direct expenses vary, change with the quantity of bottles produced.

To take an example; Admin/Office Expenses, Financial payouts are constant, whereas Preform, Label, Packaging Supplies payouts will change, vary as per the quantity of bottles produced during the day/ cycle/batch.

You may clearly understand that there is 1 component in the costing is non-varying, and another is varying. To match this cost, you will need :-

• A fix production plan ( irrespective whether you have own plant or get it done )
• This plan has to be flexible, which replies to changing market conditions
• A non-defying commitment to execute this plan till we achieve first set of results, say 1st quarter.

Otherwise this blanket rule of "Per bottle Cost" is a pure shallow market pulling myth.