BUSINESS PLAN ON THE ESTABLISHMENT

OF SOAP AND DETERGENT PLANT

 TABLE OF CONTENTS
EXCUTIVE SUMMARY.....................................................................................................................................1
1. INTRODUCTION........................................................................................................................................ 3
1.1 Background of the Owner....................................................................................................................3
1.2 Business Model and the Business Objective........................................................................................4
1.3 Vision and Mission..............................................................................................................................4
1.3.1 Vision..........................................................................................................................................4
1.3.2 Mission........................................................................................................................................4
1.4 Products and Services of the Envisaged Business...............................................................................4
1.5 SWOT Analysis...................................................................................................................................5
1.5.1 Strengths..................................................................................................................................... 5
1.5.2 Weakness.................................................................................................................................... 6
1.5.3 Opportunity.................................................................................................................................6
1.5.4 Threats......................................................................................................................................... 6
1.5.5 Actions in line with the SWOT analysis results..........................................................................6
2. MARKETING ENVIRONMENT ANALYSIS...........................................................................................8
2.1 PESTL Analysis...................................................................................................................................8
2.1.1 Political factors...........................................................................................................................8
2.1.2 Economic environment...............................................................................................................8
2.1.3 Social factors.............................................................................................................................10
2.1.4 Technological factors................................................................................................................10
2.1.5 Legal factors..............................................................................................................................11
2.2 Market Structure and Analysis...........................................................................................................11
2.2.1 Supply analysis.........................................................................................................................11
2.2.2 Demand analysis.......................................................................................................................12
2.3 Target Market and Customer Base.....................................................................................................14
2.4 Market Size and Potential..................................................................................................................14
2.5 Competitors Analysis.........................................................................................................................15
2.5.1 Major competitors.....................................................................................................................15
2.5.2 The five – forces model of competition....................................................................................16
2.6 Key Success Factors..........................................................................................................................18
3. MARKETING STRATEGIES (4PS).........................................................................................................19
3.1 Products............................................................................................................................................. 19
3.2 Promotions......................................................................................................................................... 19
3.3 Distribution /Places............................................................................................................................21
3.4 Pricing Strategies...............................................................................................................................22
4. OPERATIONAL PLAN.............................................................................................................................23
4.1 Civil Work and the Physical Layouts................................................................................................23
4.1.1 Location and site.......................................................................................................................23
4.1.2 Building and civil work.............................................................................................................23
4.2 Technology and Engineering.............................................................................................................24
4.2.1 Plant capacity............................................................................................................................24
4.2.2 Technology............................................................................................................................... 24
4.2.3 Engineering...............................................................................................................................28
4.3 Commencement Plan.........................................................................................................................28
4.3.1 Project management..................................................................................................................32
4.3.2 Project implementation schedule...............................................................................................33
4.3.3 Project implementation cost......................................................................................................33

5. ORGANIZATION AND HUMAN RESOURCES PLAN.........................................................................35

 5.1 Governance Structure........................................................................................................................35
5.2 Manning / Staffing.............................................................................................................................36
5.3 Organizational Systems.....................................................................................................................36
6. FINANCIAL FEASIBILITY.....................................................................................................................37
6.1 Financial Assumptions.......................................................................................................................37
6.1.1 Project life.................................................................................................................................37
6.1.2 Repair and maintenance cost.....................................................................................................37
6.1.3 Depreciation and amortization..................................................................................................37
6.1.4 Working capital.........................................................................................................................38
6.1.5 Discounting...............................................................................................................................38
6.1.6 Investment.................................................................................................................................39
6.1.7 Source of finance......................................................................................................................39
6.1.8 Income tax.................................................................................................................................39
6.1.9 Production cost..........................................................................................................................40
6.2 Projected Financial Statements..........................................................................................................40
6.2.1 Projected profit and loss statement............................................................................................40
6.2.2 Projected balance sheets............................................................................................................40
6.2.3 Cash flows for planning............................................................................................................40
6.2.4 Breakeven analysis....................................................................................................................41
6.3 Investment Decision Ratings.............................................................................................................41
6.3.1 Net present value.......................................................................................................................41
6.3.2 Internal rate of return................................................................................................................41
6.3.3 Payback period..........................................................................................................................42
6.4 Economic Benefits.............................................................................................................................42
FINANCIAL SCHEDULES............................................................................................................................... 43
ANNEXES.......................................................................................................................................................... 52
EXCUTIVE SUMMARY
Soap is a cleansing agent or detergent, made from animal and vegetable fats, oils and
greases; chemically, the sodium salt of a fatty acid, formed by the interaction of fats and
oils with alkali. Soaps can be classified based on their usage. However, keeping in view the
market demand and characteristics “Premium Grade Home Care Soap - 200g, Medium
Grade Home Care Soap - 200g, and Personal Care Soap - 70g” is recommended to be the
final product of the proposed business.

The country’s requirement of soap is met through both local production and imports. The
project uses total supply as a proxy method for effective demand as it avoid the potential
errors associated with the end use method since it is based on actual supply data or
apparent consumption of the product. Accordingly, the demand for soaps is forecasted to
grow from 175,246 tons in 2022 to 499,939 tons in 2036.

Based on the unsatisfied demand projection for soap in the market study and the minimum
economic scale, the annual production capacity of the envisaged plant is proposed to be
12,000 tons per annum (2 tons per hour). This capacity is proposed on the basis of a three
shifts of 8 hours per day and 300 working days per annum.

The direct raw materials used for the production of soap are oil, caustic soda, filers,
additives, colors, scents and skin protecting agents. Electric power and water are the major
utilities required for the plant.

Technically, the promoter believes the use of automated machines would be instrumental
in terms of efficiency and effectiveness of the manufacturing sectors. The project bases
itself on the use of high technology production lines to better meet the current needs in the
domestic market.

The proposed organization structure of the envisaged factory suggested that there
will be a Board of Directors to oversee the performance of the Company. The day – to –
day activities of the Company will be managed by the GM of the factory. About 139
employees will be required when the plant operates in full capacity. Out of the total
employees 55 are production workers and the rest 84 persons are support staff. The annual
salary and fringe benefit of these employees are Birr 30,607,200.
It is estimated that about five months would be required for the implementation of the
project, assuming project activities will be undertaken as planned. The activities on the
critical path of the implementation are applying and approval of loan; delivery and erection
of machinery and equipment; and plant commissioning.
The project is estimated to cost Birr 178.8 million including fixed investment, pre-
operation expenditures and working capital. The investment requirement of the project is
assumed to be financed both from bank loan and equity capital. It is assumed that the
initial working capital (Birr 75.7 million) is financed by bank loan. At full capacity, the
factory will generate gross sales revenue of Birr 1.7 billion, and a net profit after tax of Birr
394 million (5th year). The internal rate of return (IRR) of the project is calculated to be
223% on total investment. When discounted at a rate of 24%, the project generates a net
present value (NPV) of above Birr 950 million on total investment. The simple payback
period of the project is less than a year.

The financial analyses show that the project is highly profitable and viable. The entire
components of the project are designed to be socially and economically friendly that
benefit the promoter and the country.

1. INTRODUCTION
1.1 Business Model and the Business Objective
The whole purpose of this project is to have soap and detergent producing factory targeting
mainly local market and start exporting in the near future.
1.2 Vision and Mission
1.2.1 Vision
 Become one of the top five soap and detergent manufacturers in Ethiopia by
2026.
1.2.2 Mission
 To exceed our customers’ expectations in quality, delivery, and cost
through continuous improvement and customer interaction
1.3 Products and Services of the Envisaged Business
The products and services of the envisaged business is production and supply of soap and
detergents.
Soap is a cleansing agent or detergent, made from animal and vegetable fats, oils and
greases; chemically, the sodium salt of a fatty acid, formed by the interaction of fats and
oils with alkali.

People use soap to make their skin clean. Dirt and other impurities are easily removed from
the skin whenever one uses soap. Ingredients present in soap are strong; this is why
eliminating dirt becomes easier with the use of soap.
Soap can be used for general situations such as bathing, cleaning and washing. On top of
that, soap is a key component in most lubricants.
There are two different categories of soap including bar and liquid soap. Bar soap is
recommended over liquid soap because they are less expensive and their ingredients are
stronger for cleaning than those of liquid soap.
Therefore, keeping in view the market demand and characteristics, the recommended final
product of the proposed business is Bar Soap with the following product mix:
- Personal Care Soap: 70 gm
- Premium Grade Home Care Soap: 200 gm
- Medium Grade Home Care Soap: 200 gm
1.4 SWOT Analysis
The SWOT analysis explores both the internal and external environment for the owners’
and their current business and applies in relation to both existing and potential competitors
towards meeting the goals of the envisaged project. The SWOT analysis outlines the
identified strengths, weakness, opportunities and threats in light of executing the soap
manufacturing project.
1.4.1 Strengths
 The project has been initiated by an experienced management engaged in
different activities. The promoter can capitalize its experience for the successful
implementation and management of the envisaged project.
 The promoter has strong presence on the project site
 The promoter network will be valuable for the anticipated marketing of the
product.

1.4.2 Weakness
 Being new entrant to market
1.4.3 Opportunity
 Conducive and encouraging economic environment.
 The soap business has been promising.
 Priority sector: Increased attention and focus given by the government for
manufacturing and value additions.
 Social acceptability: Good social acceptability of the promoter.
 Unsatisfactory demand for soap: there exists unmet demand for soap in local
market.
 A number of investment incentives available.
1.4.4 Threats
 Volatility in the price of raw material may impact on the pricing structure of the
products.
 Generally undeveloped working culture of the society
 Power Interruption: If the current power interruption continues, it may affect the
 profitability of the project by reducing the level of capacity utilization or by
increasing the cost of power for using alternative power source.
 Foreign Exchange Shortage: not getting the foreign currency on time to opening
of LC for procurement of machine and inputs may delay the project
implementation timing and affect the profitability of the project.
1.4.5 Actions in line with the SWOT analysis results
The project will plan to address its weaknesses, and minimize the potential threats through
devising appropriate mitigation strategies. It will have aggressive marketing initiative to
reach more potential customers.

The following are actions to be taken as part of the project implementation process to
minimize the effect of weaknesses and threats identified in the SWOT analysis.
 Developing a customer oriented marketing strategy to win the competition “Fair
price with best quality”.
 Designing the appropriate sales strategy in which the objective of ensuring
dependable customer relationship.
 Adopt modern, waste avoiding and technology enabled operations
 Strengthen the networking and communication with the concerned governmental
administration bureaus (woreda, district and zonal) to assure the importance of the
project and other planned strategic moves of the organization.
 Working in advance with Banks and other concerned governmental organization to
get loan on time.
 Strengthening linkage with all value chain actors in the industry and create
favorable environment for the production.

2. MARKETING ENVIRONMENT ANALYSIS

2.1 PESTL Analysis
The PESTL analysis offers an insight of the various macro environmental factors that the
business needs for the successful implementation of the business plan.
2.1.1 Political factors
Commitment of the federal and local governments towards achieving the vision of the
country, rural capacity building strategic plan, power decentralization, security and stability
of the country, etc. have desirable effect on business environments. The private sector is
given recognition as allay in the government’s economic development program playing key
role particularly in small, medium and huge industries.
The Ethiopian government new prosperity plan re-emphasizes the importance of agriculture
in country overall growth and industrial development. Hence, the government strongly
promotes agro- processing industries. A number of international donors are providing support
to strengthen the sector.
There are also incentives including providing of land with lease free provision for the
organization involving agro-processing sector and building industry zone in different part
of the country for giant projects with fair rent.
In general, the political environment is conducive to operate lucrative business and the
influence of the government is very minimal in trading and pricing.
2.1.2 Economic environment
In Ethiopia as a result of the appropriate policy adopted by the government in recent years
the country’s economy is on a higher growth trajectory. According to the National Bank of
Ethiopia the Ethiopian economy continued to register a notable growth even when the
world faces challenging macroeconomic and social conditions owing to the outbreak of
COVID-19 pandemic. In 2019/20 fiscal year, real GDP grew by 6.1 percent compared to
3.5 percent average growth estimated for Sub - Saharan Africa (World Economic Outlook
Update, June 2019).

This growth in real GDP was attributed to 9.6 percent growth in industry, 5.3 percent in
service and 4.3 percent in agriculture sectors. Thus, nominal GDP per capita rose to USD
1,080, showing a 9.6 percent year-on-year growth.
Generally, the Ethiopian economy recorded 8.2 percent average growth rate per annum
during the GTP II period (2015/16-2019/20) which was 2.8 percentage point lower than the
average growth target set for the plan period.
The structure of the Ethiopian economy is divided into three major sectors; namely, the
agriculture, industry and service sectors. In 2019/20, the share of agriculture in GDP went
down to 32.7 percent from 33.3 percent last year and 33.5 percent GTP target for the year.
The contribution of agriculture to GDP growth was 22.9 percent of which crop production
accounted for 65 percent, followed by animal farming & hunting (25.9 percent) and
forestry (8.8 percent). In terms of growth, crop production expanded by 4.7 percent, animal
farming & hunting by 3.3 and forestry 3.9 percent.
Industry showed 9.6 percent annual growth and constituted 29 percent of the total GDP.
The sector contributed 42.6 percent to the overall economic growth during the fiscal year
and its performance was far below the 18.4 percent target set in the GTP II though its share
was higher than the 22.3 percent target.
Manufacturing sector increased by 7.5 percent and constituted 23.9 percent of the industrial
output. Construction industry, on the other hand, contributed more than half (72.6 percent)
to industrial sector and it expanded by 9.9 percent signifying its leading role in roads,
railways, dams and residential houses construction. The mining and quarrying sector has
reversed its downward trend of the past few years and registered 91.4 percent growth over
the previous year. Policy improvements, especially in boarder areas as well as the closure
of borders due to COVID-19, can be cited as the main reasons for the robust growth
although its contribution to industry production was still minimal (0.9 percent). Electricity
& water had 2.6 percent contribution to industrial production.
Service sector continued to dominate the economy as its share in GDP was about
39.5 percent and its contribution to GDP growth stood 34.4 percent. The 5.3 percent annual
growth in service sector was largely attributed to the increase in real estate, renting and
business activities (9.5 percent), others (7.5 percent), whole sale and retail trade (6.4
percent) and public administration and defense (2.3 percent).

2.1.3 Social factors

Ethiopia, with a population of nearly 110 million is the second most populous country in
Africa next to Nigeria. Almost 25% of Ethiopia’s population is under the age of 18 and
83% resides in the country side. A look in to some human development indicators reveals
that primary school enrolments have quadrupled, child mortality has been cut in half, and
the number of people with access to clean water has more than doubled.
Ethiopia’s agriculture contributes to less than 33% of the national GDP whereas provides
80-85 percent of employment for the population plays a central role in the economic and
social life of the nation. In recent years, the role played by services and manufacturing
sector is also showing improvement from time to time. Along with this dynamics,
population growth, growth of urbanization, improved income of farmers, and growing
urbanization have contributed to the expansion of consumer market as well as sourcing the
human resource requirement needs of the project.
2.1.4 Technological factors
With the massive public expenditure going on in the country especially in roads, train air
and port facilities and improvements in utilities such as electricity, the import and export
activities in the country is showing improvements. The project area, where movements of
commercial and industrial products take place, is benefiting from construction and road
networks.

With regards to communication services, there are technological developments in the area
of ICT mainly in the mobile network. This has greatly contributed to enhance access to
information. Most organizations have now mobile access that would enable them to access
market information and active network with their fellow trading partners, information to
and from production areas up to export outlets. The introduction of electronic payments,
including mobile payments will also facilitate payment transactions.
The choice technologies specific to soap production depends on the requirements of
capacity, level of sophistication, cost, efficiency and quality. As a result, there is more
preference to imported technology mainly from Asian countries. European machineries are
known for better efficiency and durability than machineries imported from Asian countries
but with regard to cost, the Asian brand is cheaper than the European ones.
2.1.5 Legal factors
The new commercial code of Ethiopia Proclamation No.979/2008 is incorporates modern
business legal frameworks. The Ethiopian Government has a package of incentives under
Regulation No.270/2012 for domestic and foreign investors which are a priority sector for
the country. Among the incentives are tax holidays, export guarantee schemes, duty free
privileges for importation of machinery. Export is zero tax rates where exporters can claim
for rebate for value added tax paid for their inputs. Moreover, exemptions from customs
duties or other taxes levied on imports are granted for raw materials and packing materials
necessary for the production of export goods. All other goods and services destined for
export are exempted from any export and other taxes levied on exports.

The other regulation conducive to the export is the Income Tax Exemption and Loss Carry
Forward privileges. Accordingly, any income derived from an approved new
manufacturing, agro-industrial or agricultural investment is exempted from the payment of
income tax ranging from 2-8 years depending on the area of investment, export volume and
the location in which the investment is undertaken. On the other hand, business enterprises
that suffer losses during the tax holiday period can carry forward such losses for half of the
income tax exemption period, after the expiry of such a period. There are also other export
incentive packages (which help to boost the export activities) following various agreements
that the country has made with bilateral and multilateral organizations, in the form of duty
exemption for inputs of exports, export credit guarantee schemes and bonded warehouse.
2.2 Market Structure and Analysis
2.2.1 Supply analysis
The country’s requirement of bar soap is met through both local production and imports.
During the period 2011 – 2020, the maximum total supply (apparent consumption) of bar
soap to the local market was 153,246 tons (year 2019), while the minimum 67,243 tons was
registered in year 2012. In the remaining years, apparent consumption was fluctuating
between these two extremes, around a mean figure of 108,918 tons. During the period under
consideration (2011 – 2020) apparent consumption of bar soap though characterized by a
noticeable growth trend exhibits fluctuations from year to year. In 2012, total supply has
decreased by about 4.3% as compared to 2011. However, in 2013 total supply has increased
by 22.4% compared to the previous year.
During the same period (2011 – 2020), the maximum market share local production managed
to capture was 87% in 2015 and the minimum was 73% in 2019. On average during the
period under consideration, the overwhelming share (80%) was accounted by local
production.
2.2.2 Demand analysis
Demand is defined as the quantity of a good or service consumers are willing and able to
buy at a given price in a given time period. Only when the consumers' desire to buy
something is backed up by willingness and an ability to pay for it than we speak of demand.
[Link] Factors that influence the demand for soap products
There are many factors affect the demand for Soap products. The most important ones are
sustainability of supply, price and overall economic development level.
Quality: - Product quality is the basic and most important marketing mixes that affect the
success of a product. Product quality has two dimensions, i.e., level and consistency. Level
means the producer must first choose a quality level that will be acceptable in the target
market and in a level that comply with the quality of competing products. Consistency
refers to the consistent delivering of ones established quality through strict quality control
measures.
The envisaged project would thus install modern machineries and safe guarded production
process with a system of optimally combined machine operations and control of them by
qualified and trained technicians and quality control will be given top priority.

Product price: - price is the other major factor that influences the demand for soap
products. If the price of a product is cheaper and its quality is inferior, lower income groups
are often used it. If it has good quality and high price, it is only affordable to high income
groups. The project has taken this information as good insight to develop best pricing
strategy affordable to all income groups.
Performance of the Ethiopian Economy – The demand for soap is strongly related to
Economic development. Therefore, the demands for soap may also be expected to increase
as economic expansion accentuates the demand for the product.
In Ethiopia as a result of the appropriate policy adopted by the government in recent years
the country’s economy is on a higher growth trajectory. According to the National Bank of
Ethiopia the Ethiopian economy continued to register a notable growth even when the
world faces challenging macroeconomic and social conditions owing to the outbreak of
COVID-19 pandemic. In 2019/20 fiscal year, real GDP grew by 6.1 percent compared to
3.5 percent average growth estimated for Sub - Saharan Africa (World Economic Outlook
Update, June 2019).
This growth in real GDP was attributed to 9.6 percent growth in industry, 5.3 percent in
service and 4.3 percent in agriculture sectors. Thus, nominal GDP per capita rose to USD
1,080, showing a 9.6 percent year-on-year growth.
Generally, the Ethiopian economy recorded 8.2 percent average growth rate per annum
during the GTP II period (2015/16-2019/20) which was 2.8 percentage point lower than the
average growth target set for the plan period.
[Link] Projected demand and supply for soap products
As we noted above, there is huge demand by domestic production. On top of this positive
performance of the economic development will obviously bring huge demand for soap
products. The supply for soap has been increasing since 2012 with an average rate of 12%.
Demand is expected to be higher than the actual supply.
In this case, the demand and the market share projection are computed based on the results
of SWOT analysis. As per the SWOT analysis, it is assumed that the opportunities will be
counter balanced by the threats so that with conservative estimate the project will capture a
market share of 7% which is less than the average annual growth rate (9.27%) of the
country’s total demand in the past ten years. Accordingly, the market size for soap product
by the project is as shown in Table 2.1.
TABLE 2.1: PROJECTED DEMAND AND MARKET SHARE OF THE PROJECT

Projected Demand Market Share of

Year for Soap Products proposed
2022 175,246 12,267
2023 189,959 13,297
2024 205,561 14,389
2025 222,131 15,549
2026 239,757 16,783
2027 258,531 18,097
2028 278,557 19,499
2029 299,948 20,996
2030 322,827 22,598
2031 347,330 24,313
2032 373,606 26,152
2033 401,818 28,127
2034 432,143 30,250
2035 464,779 32,535
 2036 499,939 34,996
As can be seen from the above Table, the total market share of the project is forecasted to
grow from 12,267 tons in 2022 to 34,996 tons in 2036.
2.3 Target Market and Customer Base
The targets for the project are local and export market. However, in the early project
period, the project will more focus on local market. In latter year of the project period (after
increasing production capacity and securing raw material sources) it will try to reach some
neighboring countries with affordable price.
Therefore, strong marketing initiatives, enhancing of contract management skill, ability of
providing quality supplies and overall customer handling matters to increase market share
in any part of the country. The project will actively work towards achieving the utmost
market share.
2.4 Market Size and Potential
The different types of market segments for soap products can be classified as:-
1) Wholesaler and Retailers
2) Household consumers
3) Organizations
4) Farmers’ Cooperative and Unions
All the segments except household consumers buy the product from producers to get the
product with reasonable price. These customers are often professional buyers and orders
may be won by a competitive tendering process. The main factors of interest to these
buyers are that they require the product to be delivered in bulk, at a low price, and with a
proven ability to meet delivery requirements. The project should therefore take these
factors into account when deciding if this is a market sector that they can successfully
target.
2.4.1 The five – forces model of competition
1. Threat from Substitutes
A substitute for soap products does not exist. However, there are generic products and
complementary products such as herbal soap, sanitizers, and detergents which can be used
instead of soap products. Furthermore, the buyer propensity to switch brands is low; since
consumers on the market are brand loyal to the soap brands they are currently using and the
fact that soap products often have complementary products. However, the buyer switching
costs remain relatively low except when switching from mass soap products to professional
soap products.
2. Rivalry from Existing Competitors
• Concentration, Diversity of Competitors – There are many small and medium
 scale manufacturers in Ethiopia and they are similar in their cost structure and
strategies thus no price competition as it is difficult for prices coordination
• Product Differentiation - There is no product differentiation other than
differences in product offerings
• Cost Conditions - The price competition from excess capacity is not
aggressive as fixed costs are low relative to variable costs
3. Threat from New Entrants
• Capital requirements – The cost of setting up soap production plant is high,
• Economies of scale – Entry into the industry has to be on a large scale in order
to make a meaningful profit. There is currently excess capacity as the market
penetration rate is very low.
• Absolute cost advantages – No absolute cost advantage unless the new entrant
has its own input source.
• Access to distribution channels – Key distribution channels is by appointing
sufficient number of agent.
• Regulatory and legal barriers – There is no legal barriers
• Retaliation by established competitors – There can be retaliation by
competitors as there are many competitive manufactures.
4. Bargaining Power of Customer
• Market Type - The industry is combination of inputs and outputs; with inputs
being the dominant market. The main input is fat and oil. Output is soap
products.
• Price Sensitivity - There is little price sensitivity and there is no product
switching due to price changes; hence largely dictates prices.
• Relative Bargaining Power - There are a number of buyers, who make large
purchases. There is awareness on manufacturer’s costing methods. Appointing
sufficient number of agent which are manageable in size for supervision and
control, feedback exchange purposes and facilitating the selling process of the
project would be attractive for soap producers.
5. Bargaining Power of Suppliers
 The suppliers of inputs are usually small number chemical companies. Hence
these suppliers may be said to have high bargaining power.
 It is difficult for manufacturer’s to integrate backward to produce inputs by
themselves to reduce their dependence on the suppliers.

Combined Impact of the Forces

The five forces model competitors’ analysis indicates an industry marked high bargaining
power of supplier, high barriers to entry, high customer power and no price rivalry between
competitors as no product differentiation.
2.5 Key Success Factors
The commercial viability of the envisaged plant depends on the following factors:
 Production processes need to be monitored very carefully.
 Advance sale orders can ensure the success of the business.
 Quality maintenance will play an important role as it is evident from the
behavior of consumers that they are more specific towards quality issues.
 Cost accounting system should be strengthened so as to monitor the entire
process and determine the reasons for major variances in the process such as
Material, Labor and Factory Overhead Variances.
 Selection of technical / skilled staff would be very crucial decision to be made
by the management.
 Continuous efforts should be made for up-gradation of the technology.
3. MARKETING STRATEGIES (4PS)
Based on the detailed analysis presented in this business plan, the project has designed
marketing strategies to ensure its competitiveness and return on investment. It is also the
objective of the project to ensure the highest level of customer satisfaction in the targeted
market segment. Strategic relationship with major buyers is one of the key success factors in
each selected market segments (institutional buyers and consumers). The marketing strategy
explains the sub strategies with the four marketing components (4Ps) and additional customer
oriented strategy.
3.1 Products
The project plan is to produce standard quality soap products i.e. a product which has good
quality parameters such as pH, foam height, hardness, moisture content, free fatty acid (FFA),
and total fatty matter (TFM). In addition to this, the soap products will available in required
amounts and qualifies acceptable national and international quality standards.
3.2 Promotions
The project will use different promotional strategies, which are essential to support attainment
of its marketing and profit objectives. Its main promotion strategies, therefore, include
personal selling, product dedicated marketing personnel, maintaining healthy and strong
networking brochure and flyers, web presence, organizing annual events, attending at national
and international trade fairs, most of which are discussed here below.
 Inauguration: the project will have inauguration ceremony soon after the
completion of the commission phase. Relevant governmental officials, sector
representatives and the media will be invited. The event will enable the project to
 get publicity.
 Personal selling: The project will deploy personal selling approach to potential
buyers through door to door visit. Popular trade shows in connection with
cleaning will be used as an opportunity to create opportunities for networking and
personal communication with buyers.

 Assigning product oriented marketing personnel: A marketing representative

or management staff will be recruited and assigned to handle product specific
marketing activities.
 Networking activities: The management has to promote the hugeness and
positive impact of the project on overall soap market of the country to appropriate
government bodies. The management will watch closely national level events in
the sector and involve whenever applicable to tap opportunities to follow from
such events.
 Web presence: The project will develop a website, which will contribute towards
the visibility of the project and its products in the soap market. The website allows
potential customers and collaborators to get to know the project and reach it
through contact information to be provided on the site. In addition to website, it is
planned to intensively use different information systems to promptly communicate
and closely work with potential customers, collaborators and other interested
parties.
 Brochure and flyers: The project plans to develop an informative brochure to be
distributed to various stakeholders and buyers. The brochures and flyers will be
distributed national association, chamber of commerce and during networking
events.
 Annual events: The project will have annual events where corporate customers
and stakeholders will be invited. The session will be used as a promotional event
to acknowledge employees, partners and corporate customers who did excellent
jobs during the year.
 Trade fairs: the project will attend national and international trade fairs to
promote its products. International trade fairs are excellent opportunities to reach
as many customers as possible and also to understand the competition
environment and the customers’ requirements.
 Sample: As part of the promotional strategy, the project will prepare
representative soap products and send to potential buyers and distributers.
  Advertisement and sponsorship: Regular advertisement will be conducted on
local Medias. The advertisement will target end consumers and retailers. The
project will sponsor TV and radio programs where large audience is expected to
attend.
The types of promotion that are selected are different for each market segment. For example,
rural customers are unlikely to have access to television, radio or to newspapers. Posters or
signboards in villages and special leaflet promotions in village shops are likely to reach more
people. In urban markets the project will use personal contacts with buyers and provide free
samples.
3.3 Distribution /Places
The envisaged project adopted two-tier system with the distribution channel as follow:
The Factory Agents Consumers
The system is working by appointing sufficient number of agent which are manageable in
size for supervision and control, feedback exchange purposes and facilitating the selling
process of the project and by assign to each agent a well- defined market segments.
In this case the agents receipt the product from the Promoter at factory gate with their own
truck and then supply to consumers in their market segment.
According to the distribution experience of convenient goods manufacturers such as
beverage and water manufacturers, the market should have to be segmented by broad
market territory if the factory chooses two-tier system. The following six market territories are
proposed for the implementation of a distribution system for the products of the factory:
 Central Territory consisting of Addis Ababa, North Shewa, West Shewa, East
Shewa, Arssi Region and Gurage and Hadiya Zones in SNNP.
 North Western Territory comprising North Gondar, South Gondar, East
Gojjam, West Gojam and its surrounding.

 Western Territory consisting of West Wellega, East Wellega, Illubabor,

Jimma, Gambella and Benishangul-Gumuz.
 Northern Territory covering SNNP Region, Bale, and Borena.
 Eastern Territory containing West Harerge, East Harerge, Harar Region, Dire
Dawa, Somali Region and Afar Region.
 Northern Territory covering South Wello and surroundings, North Wello, and
Tigray Region.
3.4 Pricing Strategies
The price of soap products will be set based on the cost of production and the price of
competing products supplied in the Ethiopian market. Soap products produced by the project is
expected to attract better price than other types of soap due to standard quality acceptable by
all type of customers. However, the project has a plan to install a price well below the current
market price of high standard price to reach all type of customers. Unless there is a significant
cost variation during the purchase of inputs, the project will try to maintain a uniform and
stable selling price.

4. OPERATIONAL PLAN
4.1 Civil Work and the Physical Layouts
4.1.1 Location and site
The envisaged plant is proposed to be located in Yirgalem town where basic infrastructures
are readily available. The availability of reliable electrical power supply is vital for the
smooth operation of the plant.
The site is a lease permitted land of the promoter. The site covers 20,000 square meter area.
The lease price for land is 120 Birr/m2. The advance payment of Birr 683,070.00 is settled
and the unpaid balance shall pay periodically within 30 years. Therefore, the total lease
payment is Birr 2,400,000 and the unpaid balance is Birr 1,716,930. The payments shall
make every year, and the yearly payment shall amount to the average price of the
remaining lease payment divided over the period of payment; and interest shall pay over
the remaining payment as per the rate of interest on loan offered by banks.
Yirgalem is located 45km south of Hawassa (275 km south of Addis Ababa) on the main
road to southern Ethiopia. It is linked to other cities by all-weather asphalt road and the
nearby express road connecting the city of Hawassa to Addis Ababa and port of Djibouti. It
is recommended to establish the factory in Yirgalem town mainly due to availability of
electricity, water supply, trained manpower, public institutions, postal and
telecommunication services.
4.1.2 Building and civil work
The envisaged plant requires building for production and packing, ware houses, and
management buildings. The space requirement of the plant is determined by the total area
each production equipment occupy, adequate space required in between the equipment
/machineries, space required for the workers and that needed to handle work in progress.
Finished product store will also have enough building space to store a minimum of one
month finished products.

Site development and landscaping are one of the important functions of civil works for the
envisage plant. They include green space and trees; fencing; lighting systems; and surface
drainage systems. In the plant compound there exist construction of asphalt road as part of
infrastructural development to ease circulation of raw materials, products, byproducts, and
people.
The cost of building and civil works is estimated on the basis of the current average
construction costs. The total cost of buildings and civil works for the envisaged project is
estimated at Birr 55.1 million.
4.2 Technology and Engineering
4.2.1 Plant capacity
Having considered the investment cost, management and administration complexity as well
as the business, the capacity of the plant is selected to be 12,000 tons of bar soap per annum
(2 tons/h). This capacity is proposed on the basis of a three shifts of 8 hours per day and
300 working days per annum.
4.2.2 Technology
[Link] Process description
The production processes for selected technology are briefly discussed as follow:
1) Treatment of Oil and Fats
a. Bleaching
The majority of good quality oils and fats do not require bleaching. Only palm oil and to a
lesser extent tallows require bleaching where toilet soap is manufactured from second-
grade raw materials.
In the selected technology bleaching of oils and fats is generally carried out by oxidation,
achieved by heating the oil and passing a current of hot air through it at a high temperature
(90 to 120° C).
b. Hydrogenation
Hydrogenation by catalysis makes palm oil and tallow more resistant to oxidation and
rancidity, and improves their properties. However, the production of hydrogenated fats and
oils with the desired properties requires a degree of technical expertise and practical
experience.
2) Continuous Saponification Process
This process is based on a system of dosing pumps which continuously supply the
saponification reactor with raw materials (fats, soda lye, electrolyte, water) in precisely
specified proportions. This stage is followed by counter-current washing and separation
(particularly by centrifugation) of the niger (partly recycled) and the neat soap.
3) Cooling and Drying
Vacuum spray drying of the liquid soap in an expansion chamber. This method allows the
liquid soap to be cooled and dried simultaneously until the desired fatty acid concentration
has been obtained.
4) Finishing
a. Mixer-blender - "Amalgamator"
The soap, in the form of chips mixed with additives - dyes, perfumes, fillers, antioxidants
etc. The process allows the mixture to be perfectly homogenized and changes the
crystalline structure of the soap, which improves its lathering properties.
b. Plodder And Extruded
The plodder can be of the simplex, duplex or even triplex type (with a single, double or
triple screw) to refine and perfect the homogenization of the soap. The plodder can also
work under vacuum to remove trapped air and to complete drying.
c. Packing and Stamping
The extruded soap is then cut, and if necessary molded, stamped, and packed.
[Link] Production program
Considering the experience of similar plant, it is assumed that owing to probable
technological, production and commercial difficulties, the envisaged project will initially
experience problems that can take the form of only a gradual growth of sales and market
penetration, on the one hand and a wide range of production problems such as acquaintance
of technical manpower with the selected technology and equipment on the other hand.
Accordingly, the plant starts production at 45% of its installed capacity which will grow to
60% in the second year, 75% in the third year and 90% in the fourth year. Full capacity
production will be attained in the fifth year and onwards.
Thus the annual production programme for the project has been formulated based on the
proposed plant capacity. The production program for the life of the project is shown in the
Table 4.2 below.
TABLE 4.2: PRODUCTION PROGRAMME

Production Year th
Unit of
No Description 5 and
Measure 1st
2nd
3rd th
4 onwards
1 Capacity utilization % 45 60 75 90 100
2 Bar soap
PG Home Care Soap - 200g Carton 243,000 324,000 405,000 486,000 540,000
MG Home Care Soap - 200g Carton 189,000 252,000 315,000 378,000 420,000
Personal Care Soap - 70g Carton 214,286 285,714 357,143 428,571 476,190

[Link] Materials and inputs

A. Direct Materials
The direct raw material needed for making bar soap is oil, alkaline, water and secondary
products (fillers, additive colors, scents etc.).
B. Auxiliary Materials
The major auxiliary materials required for the plant are packing materials. Bar soap is
 packed in a carton box and plastic sheet. All packing material can be available locally.
Utilities
Utilities required for the production of soap are steam (fuel oil), water, electricity, and
compressed air.
Steam is used to generate heat for production process. Water is used for production,
cleaning and for human consumption. Electricity is used for running machineries and
lighting purpose. Compressed air is for operation of pneumatic instruments. The source of
water and electricity is ground water and national grid respectively.
The estimated annual requirement for raw materials and packing materials at 100%
capacity of production are given in table 4.3 below.
TABLE 4.3: LIST OF RAW MATERIALS AND COST AT FULL CAPACITY
Unit Cost Total Cost (000 Birr)
No. Description UoM Quantity
(Birr) L.C FC Total
A. Direct Raw Materials
1 RBD tons 4,407.68 106.30 - 520,581.78 520,581.78
2 PFAD tons 2,193.11 95.16 - 231,887.67 231,887.67
3 Caustic soda tons 1,548.31 80.99 - 139,327.78 139,327.78
4 Silicate tons 552.65 52.00 31,930.80 - 31,930.80
5 Hydrogen per Oxide tons 40.75 153.00 6,928.28 - 6,928.28
6 Calcium Carbonate tons 1,433.38 10.00 15,926.40 - 15,926.40
7 Calcium Carbonate - 25 tons 207.36 11.00 2,534.40 - 2,534.40
micron
8 Perfume tons 43.20 2,304.00 110,592.00 - 110,592.00
9 Optical Brightener tons 0.86 3,388.75 3,253.20 3,253.20
Sub Total 1 171,165.08 891,797.23 1,062,962.31
B. Auxiliary Material
1 Carton box for PG Home Pcs 486,000 22.00 11,880.00 - 11,880.00
Care Soap
2 Carton box for MG Home Pcs 378,000 22.00 9,240.00 - 9,240.00
Care Soap
3 Carton box for Persona Pcs 428,571 20.00 9,523.81 - 9,523.81
Care Soap
4 Wrapping Film for PG tons 38.88 590.00 25,488.00 - 25,488.00
Home Care Soap
5 Wrapping Film for tons 40.11 560.00 24,960.00 - 24,960.00
Personal Care Soap
6 PE Bag for MG Home tons 10.58 215.00 2,528.40 - 2,528.40
Care Soap
7 Glue tons 5.40 295.65 1,773.90 - 1,773.90
Sub Total 2 85,394.11 - 85,394.11
C. Utilities
1 Electrical Energy Kwh 2,400,000.00 1.76 4,226.64 - 4,226.64
2 Fuel Oil Liters 180,000.00 32.00 5,760.00 - 5,760.00
3 Water 641.32 11.60 7.44 - 7.44
M3
Sub Total 3 9,994.08 - 9,994.08
Grand Total 266,553.27 891,797.23 1,158.350.50

4.2.3 Engineering
The detail of recommended machinery and equipment along with their costs is given in the
Table 4.4.
TABLE 4.4: DETAILS OF MACHNERY AND EQUIPMENT REQUIREMENTS OF
THE PROJECT AND THEIR RESPECTIVE COSTS
 Price in Total Cost
No. Name Model Qty
USD in
Birr
I Oil Mixing & Melting: Mix kinds of oil together on the basis of the formula. Deposit and take
out the unsaponifiables.
1 Caustic Soda Melting Pool Melt solid caustic soda to soda solution. Volume: 5 m3. 1 1,300.00 73,114.47
2 Soda Solution Submerged 3 kW. 1 650.00 36,557.24
Pump
3 Soda Solution Automatic Autostop. 1 800.00 44,993.52
Control Meter
4 Oil Automatic Control Meter Autostop. 1 800.00 44,993.52
5 Storage Tank for Refined Oil Size: φ2000X2600, 8.2 m3; 1 6,800.00 382,444.92
Feature: With coiler inside.
6 Oil Pump 5.5 kW. 1 1,500.00 84,362.85
7 Seamless Tube, Valves, Flange, (φ76X3.5) (φ57X3.5), etc. 6,500.00 365,572.35
screw, elbow, gasket.
Sub Total 1 18,350.00 1,032,038.87
II Oil & Caustic Soda Saponification: Oil and caustic soda do reaction
in the saponification cauldrons.
8 High-placed Soda Tank 1. Size:5 m3. 1 3,200.00 179,974.08
2. δ=6mm.
3. Marked measuring scale.
9 Saponification Cauldron Saponification between oil and NaOH. Sufficient 3 64,500.00 3,627,602.55
reaction. Save water.
Size: φ1800 X 2000, 5 m3;
Feature: with heating pipe liner and blender;
Power: 11 kW/set, frequency conversion
motor.
10 Soap Pump Spherical rotor pump. Power: 5.5 3 4,500.00 253,088.55
kW/set.
11 Seamless Tube, Valves, (φ76X3.5) (φ57X3.5), etc. 10,800.00 607,412.52
Flange, screw, elbow, gasket.
Sub Total 2 83,000.00 4,668,077.70
II Vacuum Drying system: Dry and cool the hot liquid soap base to soap noodles. Total fat
I matter of soap noodles can be adjusted from 50% to 80%.

12 Soap Base Feeding Pump Spherical rotor pump, used for pump high-temperature and sticky 1 2,600.00 146,228.94
liquid soap base to heat exchanger.
Power: 7.5 kW, Beide frequency conversion motor.
13 Heat Exchanger Heat the liquid soap rapidly. Size: φ325 X 4000. 2 37,000.00 2,080,950.30
14 Steam Trap 1 200.00 11,248.38
15 Vacuum Spray Dryer The vacuum dryer makes the soap flakes thinner and evener, and 1 32,500.00 1,827,861.75
cools them down more quickly, to improve the quality of soap
noodles.
The whole set of vacuum system can make soaps with fatty acid
content from 55% to 80%.
Adopt hard-teeth reduction gear and frequency conversion
motor.
1. Type: XTD-1500;
2. Capacity: 1000-2000 kg/hr;
3. Barrel Diameter: Φ 1200 mm;
4. Mouth Diameter: 10 mm;
5. Speed: 13 r/min;
6. Power: 3 kW.
16 Fine Separators Separate the soap powder from the water when vacuum 2 10,600.00 596,164.14
drying.
17 Barometric Condenser Condense steam water from the soap. 1 3,200.00 179,974.08
18 Water pump Water pump: For water circulating. 1 1,000.00 56,241.90
Power: 5.5 kW.
19 Multi-Stage Vacuum Pump Two grades, combined with a water ring vacuum pump, and a 1 9,200.00 517,425.48
roots pump.
Speed: water ring vacuum pump 12 m3/min, roots pump 18
m3/min.
Ultimate vacuum: -0.099 Mpa; Power: 18 kW;
Materials: Parts touched with water is stainless steel.
 20 Buffer Tank of Vacuum Protect the vacuum pump from steam water. 1 1,000.00 56,241.90
Pump Size: φ600 X1200.
21 Cooling Tower It is used to cool down circulating water for vacuum drying 1 2,500.00 140,604.75
system.
1. Capacity: 60 m3/hr;
22 Submerge water pump Power: 7.5 kW/set. 1 1,100.00 61,866.09
23 Pelletizer It is used to press the vacuum-dried soap materials into soap 1 28,300.00 1,591,645.77
noodles.
1. Type: XTN-1500;
2. Capacity: 1500-2000 kg/hr;
3. Screw diameter: Φ 230 mm x 2;
4. Power: 18.5 kW.
24 Seamless Tube, Valves, (φ76X3.5) (φ57X3.5), etc. 4,600.00 258,712.74
Flange, screw, elbow,
gasket.
Sub Total 3 133,800.00 7,525,166.22
IV Finishing Line: Mill soap noodles twice, vacuum extruding soap bar, cut soap cakes, at the
same time stamp logo on soap cakes.
25 Mixing Agitator Mix soap noodle and other additives sufficiently. Double Z blenders 1 20,800.00 1,169,831.52
can crush soap materials into small granules or powders to mix well.
Adopt famous brand hard-teach gear reducer for a long-life span.
1. Model: XSMZ-500;
2. Capacity: 500 kg/batch;
3. Mixing time: 5-10 min;
4. Blender: Sigma;
5. Power: 22+22+1.1 kW;
6. Discharging way: electric.
26 Three Roller Mill It’s used to mix soap noodle sufficiently, make the soap structure tight 2 22,000.00 1,237,321.80
and improve soap’s density and quality.
1. Type: S405;
2. Roll diameter: Φ405;
3. Roll length: 810 mm;
4. Motor power: 22 kW;
5. Roll speed ratio: [Link].
27 Vacuum Plodder Vacuum Plodder is used to grind, refine and press soap material into 1 46,800.00 2,632,120.92
soap bar. The above and below screws and two orifice plates press
and refine the soap material and make the soap bar tight and the
surface bright.
Adopt hard-teeth reduction gear and frequency conversion motor.
1. Type: XT-1500;
2. Material: Parts that touch the soap are made by stainless steel
304;
3. Capacity:1500~2000 kg/hr;
4. Diameter of screw: 230 mm x 2;
6. Power: top:18.5 kW; bottom: 22 kW. [Link]:
5370x1300x1990mm
[Link]: 4500kg
28 Vacuum pump & buffer For vacuum plodder. Power: 2.2 kW. 1 1,100.00 61,866.09
tank
29 Electr Soap electronic cutting machine is used to cut soaps into cakes and 1 13,500.00 759,265.65
onic stamp patterns on the soap. Adopt Yaskawa servo motor and
Cuttin converter, voltage stabilizer and precision purified AC voltage
g stabilizer, to protect motor and electrical components and to keep high
Machi accuracy.
ne [Link] and Weight: Adjusted by customer’s requirements;
[Link]: 2 kW, 380 V, 50 HZ;
3. Capacity: In step of vacuum plodder; [Link]: 1 set.
30 Vertical Stamping It is an fully automatic design and equipped with PLC control system. 1 46,000.00 2,587,127.40
Machine High efficiency, simple and stable structure, and easy mould changing
maintenance. Yaskawa SERVO system, Omron PLC, FESTO
pneumatic parts, and Shangyin linear guide. All these spare parts
combining together and ensure the machine would performance stable
with high efficiency.
[Link]: XDA-1500;
[Link]: 50-70 times per minute; [Link]: (70-200g) x 3;
[Link]: 3 kW;
 [Link] parts equipped:
1) conveyor belt: 0.37kw x3 pcs; 2)Vacuum pump: 15L per
second, 7.5kw;
3) Air compressor: 0,8m3 per minute, 2.2kw;
4) Mould: one set.
31 Refrigerator Matched cooling unit of XDA-1500 stamping machine. It is used to 1 6,300.00 354,323.97
make the mould cold so that the soap can demould easily with a
very smooth surface.
1. Compressor: French “Maneurop”, 2.5 kW;
2. Cooling capacity: 1978kcal/h;
3. Temperature: -25 centigrade;
4. Water pump power: 0.75 kW.
32 Chiller Water chiller is used to cool soap machines’ circulating water. 1 7,000.00 393,693.30
[Link]: LG brand, 4.4 kW x2;
[Link] pump power: 1.5 kW; [Link] capacity: 24940
Kcal/hr;

[Link]: 5-35 centigrade;

33 Conveyors Appearance is good and operation is stable, non-noise and anti- 6 8,400.00 472,431.96
dust.
Famous decelerator is used. Motor: 1.5kw/pcs
Sub Total 4 171,900.00 9,667,982.61
V Accessories
34 Equipment Support, Operating Used in saponification cauldrons and vacuum system. 15,800.00 888,622.02
Platform, Ladder, etc.
35 Distribution Box 4 6,000.00 337,451.40
Sub Total 5 21,800.00 1,226,073.42
VI Additional Machines
36 Automatic arranging & Connect the soap production line with the packing system Get 1 8,700.00 489,304.53
setting machine soap ready for flow packing automatically; Dimension:
3.35*0.1*0.8m
Capacity: Well matched with the present soap production
line
37 ZH-500 Flow Packing ZH-500 pillow packaging machine is used to pack toilet soap, 1 8,900.00 500,552.91
machine laundry soap, and other regular shape products. It has simple
structure, less wear and long-life span. Can automatically shift to
use another roll of packing film when the present roll finish.
It can adjust the bags’ size and speed automatically. Sealing
temperature is controlled separately and the seal is tight and
beautiful. The tracking system cuts the bags accurately after set-up.
Positioned stop function let the film not stick the knife. Its fault
diagnosis function makes the maintenance convenient.
Equipped the date printing device and hole making device.
[Link]: ZH-500;
[Link]: 35-350 bag/min; [Link] film width: 65-280 mm;
[Link]: OPP/CPP、PT/PE、KOP/CPP
、ALU-FOIL
[Link] size: (85-220)×(30-140)×(5-45) mm;
[Link]: 4.4 kW;
[Link]: 750 kg;
38 Cable All wires from each machine to the four distribution boxes. The 2,500.00 140,604.75
main wire from the four distribution boxes to the main distribution
box and sleeves are not
Included.
39 Heat Insulating Material Thermal insulation for saponification tanks, exchange heater and the 2,000.00 112,483.80
pipes.
Including rock wool, aluminum foil, etc.
40 Welding Rod 2,300.00 129,356.37
41 Sodium Silicate Motor: 7.5kw; 1 31,500.00 1,771,619.85
Solution Capacity: 5.5 ton/batch; Production: 4~5 ton per batch;
Equipment thickness of tank: 20mm boiler plate; Steam requirement: 0.5
ton, 0.8Mpa;

42 Steam Boiler Material: Furnace oil. Rated Power: 2000 KG/H 1 64,600.00 3,633,226.74
Rated Pressure: 1.0 MPa.
Including all accessories for the boiler, and the boiler connecting
 with the soap line.
43 Generator 500KVA, Diesel oil as fuel, including silence box,Cummins 1 85,500.00 4,808,682.4
C550D5/400KW brand 5
Sub Total 6 206,000.00 11,585,831.4
0
Total Amount (FOB 634,850.00 35,705,170.2
Qingdao) 2
Freight, insurance, 190,455.00 10,711,551.0
bank charges, port 6
handling, inland
transport and
contingency (30%)
Total (Cost at site) 825,305.00 46,416,721.2
8

4.3 Commencement Plan

4.3.1 Project management
The implementation of the proposed plant constitutes medium scale project. A large
number of activities will have to be carried out in order to bring the project into successful
operation. Like all other management functions, the management of the project involves
planning, organizing, staffing leading and controlling activities. Time and cost control will
be the most important aspect of the project management since the implementation of the
project will involve several parties including the owner, consultant, suppliers, contractor
and governmental authorities, adequate mechanisms should be in place for coordinating the
various project sectors.
Project engineering involves the definition of the project scope; the preparation of designs,
specification and bill of quantities; assistance in tendering and contracting; and
incorporating, as necessary change and modifications in the process of the project
implementation.
Procurement is at the center of the implementation of the project as all other activities are
meant to facilitate it. The installation of plant will involve procurement of equipment and
materials both from local and foreign sources. The implementation aspect will involve
installation of plant and machinery; and lying of infrastructure.
In order to ensure the project will ultimately fulfill the intended purpose, it is important to
exercise adequate quality control throughout the implementation of the project. Quality
control involves inspection, supervision, commissioning and taking over completion of
various components of the project

4.3.2 Project implementation schedule

The implementation schedule covers the activities starting from the project evaluation and
approval up to and including the trial-run and commissioning. It is envisaged that the
complete implementation program requires a total of 5 months.
The finishing work of the ongoing construction will continue and requires 3 months for
completion.
Equipment delivery, that requires 3 months for completion, will start parallelly with the
construction work. Erection of machinery and equipment will start as their delivery is
completed and will take 1.5 months.
Recruitment and training of manpower will start 1month before the erection of machinery
and equipment starts and will continue up to the completion of erection and
commissioning. Commissioning startup will commence immediately after completion of
erection of machinery and equipment and continues for 0.5 month. The plant operation will
start immediately after commissioning at the end of the 6 th month from approval of the
study. Details of the implementation schedule are shown in Figure 4.1.
FIGURE 4.1: IMPLEMENTATION SCHEDULE

Months
No Activity
1 2 3 4 5
1 Preparatory period
1.1 Financial arrangement

2 Machinery procurement and errection

2.1 Finalize the construction work

2.2 Delivery of machinery and equipment to factory site

2.3 Erection of machinery and equipment

3 Manpower recruitment and training

4 Trial - run and commissioning
5 Start of operation

4.3.3 Project implementation cost

It is assumed some costs will be incurred such as for project engineering; production know-
how transfer (training of workers); and start-up cost. These costs are as follow:

TABLE 4.5: SUMMARY OF IMPLEMENTATION COST (000’BIRR)

Local Foreign
No Description Total
Cur. Cur.
1 Project engineering (1% fixed investment) - 464 464
2 Training 100 - 100
3 Start-up and commissioning expenditures 500 - 500
4 Other expenditures (sales promotion, sales network, etc.) 500 - 500
Total 1,100 464 1,564
All these costs are amortized over the project years. Consequently, the annual amortization
amount would be Birr 156,400.

5. ORGANIZATION AND HUMAN RESOURCES PLAN

5.1 Governance Structure
Taking in to account the supply chain management system, the whole on-site and off-site
operations, product demand and marketing functions, human resources management,
financial and resources control functions, the following organization structure is proposed
for the envisaged plant.
The proposed organization structure of the envisaged plant (as depicted in Figure
5.1 below) suggested that there will be a Board of Directors to oversee the performance of
the Company. The day –to –day activities of the Company will be managed by the GM of
the factory.
The GM of the factory will be responsible for the overall operation and will be supported
by Department Heads of Production and Technical, Administration and Finance, Sales and
Marketing, Purchasing and Property Administration, and ICT. Each Department Head is
provided with his own supporting staff for the proper functioning of the department. The
chart depicts the proposed organizational structure for the factory when completed and
becomes fully operational.
FIGURE 5.1 PROPOSED ORGANIZATIONAL STRUCTURE

Board of Directors

GM

Legal Service Audit and Inspection

Service

Quality Control and ICT Service

Assurance Service

Production and Technical Sales and Marketing Finance and Administration Procurement Department
Department Department Department

Production Division Sales and Distribution Finance Division

Division

Plant Maintenance Marketing Division Administration Division

Division

5.2 Manning / Staffing

The total personnel requirement for both the production plant and administration has been
estimated at 139 persons on the basis of functional requirements of a modern plant and
summarized in Table 5.1 by skill category together with costs. The table shows annual
salaries during full capacity plant operation based on current labor market estimate. A
detailed list is also provided in Annex 4.

TABLE 5.1: PERSONNEL REQUIREMENT AND ANNUAL COSTS

Head Direct labor Indirect

No Description Count
Total
cost labor cost
1 Manager's Office 4 1,908,000 1,908,000
2 ICT Division 2 408,000 408,000
3 Administration & Finance 36 4,896,000 4,896,000
4 Sales & Purchasing 42 6,504,000 6,504,000
5 Production & Technical 55 4,692,000 5,136,000 9,828,000
Total 139 4,692,000 18,852,000 23,544,000
5.3 Organizational Systems
The project will develop organization system procedures and operational manuals to
enhance the efficient and effective use of resources and to ensure the appropriate level of
internal control and for the overall achievement of its objectives. These include
development of HR, financial management, marketing, procurement, and production and
operation manuals.

6. FINANCIAL FEASIBILITY
6.1 Financial Assumptions
6.1.1 Project life
According to the implementation plan of the project, the construction period allotted for the
entire project from the start of applying for loan to the final commissioning is five months.
With regard to operational life of the project, a standard assumption of 10 years is
considered. Hence, the costs and benefits of the project are computed over 11 years.
6.1.2 Repair and maintenance cost
The annual cost of spare parts, repair and maintenance usually increases with the increase
in the service life of machinery and equipment and other facilities. In the present study,
considering the heavy wear and tear of some of the machines a value equivalent to 3% and
5% of the cost of machinery and equipment is assumed for the annual cost of spare parts
during the first three years and the remaining years of the project life, respectively. The
same assumption is also used for the annual cost of repair and maintenance of the
production plant. The annual cost of repair and maintenance of other facilities is taken to be
2% of the cost of fixed assets other than land, machinery and equipment during the first
three years, and 3% of the same thereafter.
6.1.3 Depreciation and amortization
Based on the Federal Income Tax Proclamation No. 979/2016 and Council of Ministers
Regulations 2017, the following depreciation rates are applied to depreciate the assets of the
project under the straight-line method:

 Buildings and associated civil works 5%, linear to scrap value

 Machinery and equipment 15%, linear to scrap value
 Computer and software products 20%, linear to scrap value
 Pre-production expenditure 10%, linear to scrap value
6.1.4 Working capital
The working capital requirement of the project during operation is calculated on the basis
of the minimum days of coverage needed for the different elements of the working capital.
Hence, the minimum days are specified as follows:-
TABLE 6.1: MINIMUM DAYS OF COVERAGE

No Item Minimum Days of Coverage

1 Raw Materials
- Local 10 days
- Foreign 30 days
2 Work in progress 1 day
3 Finished product 10 days
4 Cash in hand 30 days
5 Accounts receivables 10 days
6 Accounts payable 0 days
6.1.5 Discounting
The cash flows expected to be generated by a business are discounted to their present value
equivalent using a rate of return that reflects the relative risk of the investment, as well as
the time value of money. Our approach is to use the weighted average cost of capital
(WACC) as the appropriate rate at which to discount future free cash flows. The WACC is
calculated by weighting the required returns on interest-bearing debt and common equity
capital in proportion to their estimated percentages of total invested capital.
We have used the Capital Assets Pricing Model to estimate the cost of equity. The CAPM
gives an estimate of an equity investor's required rate of return for a given risk level
associated with an investment. The model estimates an equity investor's expected return by
adding the country’s risk free rate and estimated equity market premium.
The estimated nominal long-term risk free rate of return for Ethiopia is derived by adding
the Ethiopia inflation and the country risk premium. The country risk premium has been
estimated by using credit ratings of countries prepared by Moody’s, S&P, EIU and
Euromoney. The risk free rate of Ethiopia has been estimated to be 11 – 12%.
Although Ethiopia does not have developed capital markets from which to estimate an
empirical equity risk premium, we estimate that its equity risk premium by using the credit
ratings of countries prepared by Moody’s. The equity risk premium for Ethiopia markets
has been estimated to be between 12-13%.
Therefore the total investment and equity capital of the project are discounted with the
average cost of capital at 24 percent over the life of the project.
6.1.6 Investment
The total investment cost of the project is estimated at Birr 178.8 million (See Table 6.3).
From the total investment cost the highest share (Birr 101.5 million or 57%) is accounted
by fixed investment cost followed by initial working capital (Birr 75.7 million or 42%) and
pre operation cost (Birr 1.5 million or 1%).
TABLE 6.2: TOTAL INVESTMENT COSTS IN 000 BIRR

Cost ( in
Item % Share
000 BIRR)
Machinery and equipment 46,417 25.96%
Building and construction 55,100 30.81%
Pre-production expenditures 1,564 0.87%
Working capital, initial 75,737 42.35%
Grand Total 178,818 100.00%
6.1.7 Source of finance
The investment requirement of the project is assumed to be financed both from bank loan
and equity capital. It is assumed that the initial working capital is financed by bank loan.
The type of loan is further assumed to be a constant principal bank loan, with a loan
repayment period of 5 years. The annual interest rate including the various fees is taken to
be 17.5 percent.
6.1.8 Income tax
According to the Investment Incentives and Investment Areas Reserved for Domestic Investors
Council of Ministers Regulations No.270/2012, the project is entitled to the following
incentives:
 Income tax exemption for 4 years
 Losses carry forward for 2 years, and
 Exemptions from payment of custom duty on machineries and equipment For the
rest of project’s life, a 30% tax rate is applied on the taxable income.
6.1.9 Production cost
The total cost of production at 100% capacity utilization is estimated at Birr 1.2 billion.
Table 6.3 shows the total costs of production for a selected year. The costs of production
for the other years of operation are shown in Annex 1.
TABLE 6.3: COSTS OF PRODUCTION (YEAR FIVE IN 000’ BIRR)
 Item Cost % share
Raw material 1,148,356 94.20%
Utilities 10,458 0.86%
Repair and maintenance 3,249 0.27%
Labour 10,221 0.84%
Labour overhead costs 2,555 0.21%
Administrative costs 17,080 1.40%
Depreciation 7,119 0.58%
Financial costs 2,651 0.22%
Marketing costs 17,371 1.42%
TOTAL 1,219,061 100.00%
6.2 Projected Financial Statements

6.2.1 Projected profit and loss statement

Based on the projected profit and loss statement shown in Schedule 4, the project will
generate a profit throughout its operation life. Annual net profit after tax increases from
BIRR 229 million to BIRR 401 million. Net profit as percent of sales revenue lies between
22 to 31 %. Net profit to equity and net profit to total investment or return on investment
(ROI) are also attractive.
6.2.2 Projected balance sheets
The positive financial performances are manifested in the balance sheet. As can be seen
from the projected Balance sheet depicted in Schedule 8, the net worth of the project at the
start, which is about BIRR 103 million, will rise to BIRR 3.9 billion at the end of the
project life.
6.2.3 Cash flows for planning
The projected cash flow of the envisaged project shows that the project would generate
positive net cash flows throughout the operation years. Cumulative cash flow generated by
the project towards the end of the first operation year will amount to BIRR 223 million. At
the end of the project life, this amount will rise to BIRR 3.9 billion. Details are shown in
Schedule 5.
6.2.4 Breakeven analysis
The break-even analysis establishes a relationship between production costs and revenues.
It indicates the level of production at which costs and revenue are in equilibrium. To this
end, using full capacity operation costs of year five, the break- even point for capacity
utilization and sales value is computed as followed.
Brake Even Sales Value = Fixed Cost + Financial Cost = Birr 130,134.147
Variable Margin ratio (%)

Brake Even Capacity utilization = Brake even Sales Value X 100 = 7.30%
Sales Revenue
6.3 Investment Decision Ratings
6.3.1 Net present value
Net present value (NPV) is defined as the total present (discounted) value of a time series of
cash flows. NPV aggregates cash flows that occur during different periods of time during the
life of a project in to a common measuring unit i.e. present value. It is a standard method for
using the time value of money to appraise long-term projects. NPV is an indicator of how
much value an investment or project adds to the capital invested. In principle a project is
accepted if the NPV is non-negative.
Accordingly, the net present value of the project at 24% discount rate is found to be Birr 950
million which is acceptable. (See Schedule 7)
6.3.2 Internal rate of return
The internal rate of return (IRR) is the annualized effective compounded return rate that can be
earned on the invested capital, i.e., the yield on the investment. Put another way, the internal
rate of return for an investment is the discount rate that makes the net present value of the
investment's income stream total to zero. It is an indicator of the efficiency or quality of an
investment. A project is a good investment proposition if its IRR is greater than the rate of
return that could be earned by alternate investments or putting the money in a bank account.
Accordingly, the IRR of this project is computed on capital invested to be 223% indicating the
viability of the project. (See Schedule 7)

6.3.3 Payback period

The payback period, also called pay – off period is defined as the period required recovering
the original investment outlay through the accumulated net cash flows earned by the project.
Accordingly, based on the projected cash flow it is estimated that the project’s initial
investment will be fully recovered within a year, which is a reasonably short period of time.
6.4 Economic Benefits
As a result of the envisaged project employment opportunities will create for 139 persons.
Moreover, during the life of the project Birr 1 billion will generate in terms of corporate
tax.
 FINANCIAL SCHEDULES
Schedule 1& 2: Initial Investment Costs
000’ BIRR
Year 0 Year 1 Total Grand Own Bank
Items
Loc. C. For. C. Loc. C. For. C. Loc. C. For. C. Total Financing Financing
Machinery and equipment - 46,417 - - - 46,417 46,417 46,417 -
Building and construction 55,100 - - - 55,100 - 55,100 55,100 -
Pre-production expenditures 1,100 464 - - 1,100 464 1,564 1,564 -
Working capital, initial - - 42,638 33,099 42,638 33,099 75,737 - 75,737
56,200 46,881 42,638 33,099 98,838 79,980 178,818 103,081 75,737
Total
103,081 75,737 178,818 100.00% 57.65% 42.35%
 Schedule 3: Production Programme and Sales Revenue
000’ BIRR
Selling Production Years
No. Description
Price/unit 1 2 3 4 5 6 7 8 9 10
Capacity utilization 45% 60% 75% 90% 100% 100% 100% 100% 100% 100%
1 Production Programme
PG Home Care Soap - 200g Carton 243,000 324,000 405,000 486,000 540,000 540,000 540,000 540,000 540,000 540,000
MG Home Care Soap - 200g Carton 189,000 252,000 315,000 378,000 420,000 420,000 420,000 420,000 420,000 420,000
Personal Care Soap - 70g Carton 214,286 285,714 357,143 428,571 476,190 476,190 476,190 476,190 476,190 476,190
2 Sales Revenue 802,431 1,069,909 1,337,386 1,604,863 1,783,181 1,783,181 1,783,181 1,783,181 1,783,181 1,783,181
PG Home Care Soap - 200g 1,370.00 332,910 443,880 554,850 665,820 739,800 739,800 739,800 739,800 739,800 739,800
MG Home Care Soap - 200g 1,050.00 198,450 264,600 330,750 396,900 441,000 441,000 441,000 441,000 441,000 441,000
Personal Care Soap - 70g 1,265.00 271,071 361,429 451,786 542,143 602,381 602,381 602,381 602,381 602,381 602,381
 Schedule 4: Proforma Profit & Loss Statement

000’ BIRR
Production Years
Description
1 2 3 4 5 6 7 8 9 10
Total Sales Revenue 802,431 1,069,909 1,337,386 1,604,863 1,783,181 1,783,181 1,783,181 1,783,181 1,783,181 1,783,181
Less Cost of Goods Sold 536,447 712,116 887,785 1,064,846 1,181,959 1,181,959 1,179,638 1,174,997 1,174,997 1,174,997

Gross Profit 265,985 357,793 449,601 540,016 601,222 601,222 603,543 608,184 608,184 608,184
Gross Profit Margin 33% 33% 34% 34% 34% 34% 34% 34% 34% 34%

Less Adminstrative Expenses 11,228 12,824 14,421 16,017 17,080 17,074 17,068 17,062 17,057 17,051
Profit (loss) before Interest, Sales Cost & Tax 254,756 344,968 435,180 523,999 584,142 584,148 586,474 591,122 591,128 591,133

Less Interest (Financial Costs) 13,254 10,603 7,952 5,302 2,651 0 0 0 0 0

Profit (loss) before Sales Cost & Tax 241,502 334,365 427,228 518,698 581,491 584,148 586,474 591,122 591,128 591,133
Less Selling & Dist'n Costs 12,467 13,805 15,142 16,480 17,371 17,371 17,371 17,371 17,371 17,371
Profit (loss) before Tax 229,035 320,560 412,085 502,218 564,120 566,777 569,103 573,751 573,756 573,762
Less Income Tax (30%) * * * * 169,236 170,033 170,731 172,125 172,127 172,129

Net Profit (Loss) 229,035 320,560 412,085 502,218 394,884 396,744 398,372 401,626 401,630 401,634
Cumulative Net Profit (Loss) 229,035 549,595 961,681 1,463,899 1,858,783 2,255,527 2,653,899 3,055,525 3,457,154 3,858,788

Profit (loss) before Tax (w.o. ex. financing) 242,289 331,163 420,038 507,520 566,771 566,777 569,103 573,751 573,756 573,762
Less Income Tax, w.o. ex. Financing (30%) * * * * 170,031 170,033 170,731 172,125 172,127 172,129

Net Profit (Loss), w.o. External Financing 242,289 331,163 420,038 507,520 396,740 396,744 398,372 401,626 401,630 401,634

Cumulative Net Profit (Loss) 242,289 573,453 993,490 1,501,010 1,897,750 2,294,494 2,692,866 3,094,491 3,496,121 3,897,754

* Tax holiday period

Ratios (%)
Return on sales (net income by revenue) 29% 30% 31% 31% 22% 22% 22% 23% 23% 23%

Return on equity (net profit divided by equity) 222% 311% 400% 487% 383% 385% 386% 390% 390% 390%
Return on assets (operating income divided by 68% 51% 41% 34% 31% 25% 22% 19% 17% 15%
assets)
Return on total investment (Net profit + interest to 235% 543% 941% 1425% 1806% 2188% 2575% 2964% 3354% 3743%
investment)
 Schedule 5: Cash Flow for Financial Planning (Source and Application of Funds)
000’ BIRR
Book
Description Impl. Yr. Production Years Value
0 1 2 3 4 5 6 7 8 9 10 11
Total Cash Inflow 103,081 314,646 330,434 421,959 512,092 404,758 406,618 405,925 404,537 404,541 404,545 170,072
1. Inflow of funds 103,081 75,737 - - - - - - - - - -
Total equity 103,081 - - - - - - - - - - -
Borrowing (term loan) - 75,737 - - - - - - - - - -
Borrowing (medium term) - - - - - - - - - - - -
Borrowing (working cap.) - - - - - - - - - - -
Increase in overdraft - - - - -
2. Inflow from operation - 238,909 330,434 421,959 512,092 404,758 406,618 405,925 404,537 404,541 404,545 -
Profit after tax - 229,035 320,560 412,085 502,218 394,884 396,744 398,372 401,626 401,630 401,634 -
Depreciation - 9,874 9,874 9,874 9,874 9,874 9,874 7,553 2,911 2,911 2,911 -
3. Other income - - - - - - - - - - - 170,072
Salvage value of assets - - - - - - - - - - - 2,755
Recoverable assets - - - - - - - - - - - 167,317
Total Cash Outflow 103,081 90,885 40,092 40,092 40,210 31,777 (0) (0) (0) (0) (0) -
4. Investment
Fixed investment 101,517 - - - - - - - - - - -
Pre-Production expenditures 1,564 - - - - - - - - - - -
Incremental working capital - 75,737 24,944 24,944 25,062 16,629 (0) (0) (0) (0) (0) -
5. Loan repayment
Term loan (Principal) - 15,147 15,147 15,147 15,147 15,147 - - - - - -
Overdrft (Principal) - - - - - - - - - - - -
Net cash flow - 223,762 290,343 381,868 471,882 372,981 406,618 405,925 404,537 404,541 404,545 170,072
Cumulative Net cash flow - 223,762 514,104 895,972 1,367,854 1,740,835 2,147,453 2,553,378 2,957,915 3,362,456 3,767,001 3,937,074
 Schedule 6: Discounted Return on Equity Capital Invested
000’ BIRR
Book
Impl. Yr. Production Years
Description Value
0 1 2 3 4 5 6 7 8 9 10 11
Total Cash Inflow - 314,646 330,434 421,959 512,092 404,758 406,618 405,925 404,537 404,541 404,545 170,072
1. Inflow of funds - 75,737 - - - - - - - - - -
Borrowing (long term) - 75,737 - - - - - - - - - -
Borrowing (short term) - - - - - - - - - - - -
2. Inflow from operation - 238,909 330,434 421,959 512,092 404,758 406,618 405,925 404,537 404,541 404,545 -
Profit after tax - 229,035 320,560 412,085 502,218 394,884 396,744 398,372 401,626 401,630 401,634 -
Depreciation - 9,874 9,874 9,874 9,874 9,874 9,874 7,553 2,911 2,911 2,911 -
3. Other income - - - - - - - - - - - 170,072
Salvage value of assets - - - - - - - - - - - 2,755
Recoverable asset - - - - - - - - - - - 167,317
Total Cash Outflow 103,081 90,885 40,092 40,092 40,210 31,777 (0) (0) (0) (0) (0) -
4. Investment
Fixed investment 101,517 - - - - - - - - - - -
Pre-Production expenditures 1,564 - - - - - - - - - - -
Incremental working capital - 75,737 24,944 24,944 25,062 16,629 (0) (0) (0) (0) (0) -
5. Loan repayment
Long term loan (Principal) - 15,147 15,147 15,147 15,147 15,147 - - - - - -
Short term loan (Principal) - - - - - - - - - - - -
Net cash flow (103,081) 223,762 290,343 381,868 471,882 372,981 406,618 405,925 404,537 404,541 404,545 170,072
Cumulative Net cash flow (103,081) 120,681 411,023 792,891 1,264,773 1,637,754 2,044,372 2,450,297 2,854,834 3,259,375 3,663,920 3,833,993
Net present value (@ 24%) 945,988
Internal rate of return (IRR) 245%
 Schedule 7: Discounted Return on Total Capital Invested

000’ BIRR
Book
Impl. Yr. Production Years
Value
Description
0 1 2 3 4 5 6 7 8 9 10 11
Total Cash Inflow - 252,163 341,037 429,912 517,394 406,614 406,618 405,925 404,537 404,541 404,545 170,072
1. Inflow from operation - 252,163 341,037 429,912 517,394 406,614 406,618 405,925 404,537 404,541 404,545 -
Profit after tax without - 242,289 331,163 420,038 507,520 396,740 396,744 398,372 401,626 401,630 401,634 -
external financing
Depreciation - 9,874 9,874 9,874 9,874 9,874 9,874 7,553 2,911 2,911 2,911 -
2. Other income - - - - - - - - - - - 170,072

Salvage value of assets - - - - - - - - - - - 2,755

Recoverable asset - - - - - - - - - - - 167,317

Total Cash Outflow 103,081 75,737 24,944 24,944 25,062 16,629 (0) (0) (0) (0) (0) -
3. Investment

Fixed investment 101,517 - - - - - - - - - - -

Pre-Production expenditures 1,564 - - - - - - - - - - -
Incremental working capital - 75,737 24,944 24,944 25,062 16,629 (0) (0) (0) (0) (0) -
Net cash flow (103,081) 176,426 316,093 404,968 492,331 389,984 406,618 405,925 404,537 404,541 404,545 170,072
Cumulative Net cash flow (103,081) 73,345 389,438 794,406 1,286,737 1,676,721 2,083,339 2,489,264 2,893,801 3,298,342 3,702,887 3,872,959
Net present value(@ 24%) 950,132
Internal rate of return (IRR) 223%
 Schedule 8: Projected Balance Sheet

000’ BIRR
[Link]. Production Years
Description
0 1 2 3 4 5 6 7 8 9 10
Fixed assets
Fixed investment 101,517 101,517 101,517 101,517 101,517 101,517 101,517 101,517 101,517 101,517 101,517
Pre-production expenditures 1,564 1,564 1,564 1,564 1,564 1,564 1,564 1,564 1,564 1,564 1,564
Total Fixed Assets 103,081 103,081 103,081 103,081 103,081 103,081 103,081 103,081 103,081 103,081 103,081
Less acc. Depr'n & ammortiz'n - 9,874 19,748 29,622 39,496 49,370 59,244 66,797 69,708 72,619 75,531
Net fixed assets 103,081 93,207 83,333 73,459 63,585 53,711 43,837 36,284 33,373 30,461 27,550
Current assets
Cash on hand & at bank - 225,300 515,916 898,056 1,370,211 1,743,374 2,149,992 2,555,917 2,960,454 3,364,995 3,769,540
Debtors (recievables) - 21,984 29,313 36,641 43,969 48,854 48,854 48,854 48,854 48,854 48,854
Stocks - 52,214 69,557 86,901 104,362 115,924 115,924 115,924 115,924 115,924 115,924
Total current assets - 299,499 614,785 1,021,597 1,518,542 1,908,153 2,314,770 2,720,696 3,125,233 3,529,774 3,934,319
Less Current liabilities
Creditors (payables) - - - - - - - - - - -
Overdraft - - - - - - - - - - -
Total current liabilities - - - - - - - - - - -
Total working capital - 299,499 614,785 1,021,597 1,518,542 1,908,153 2,314,770 2,720,696 3,125,233 3,529,774 3,934,319
Total net assets 103,081 392,706 698,119 1,095,056 1,582,127 1,961,864 2,358,608 2,756,980 3,158,605 3,560,235 3,961,869
Financed by
Paid-up capital 103,081 103,081 103,081 103,081 103,081 103,081 103,081 103,081 103,081 103,081 103,081
Loan and Credit - 60,590 45,442 30,295 15,147 - - - - - -
Retained profits (Losses) - 229,035 549,595 961,681 1,463,899 1,858,783 2,255,527 2,653,899 3,055,525 3,457,154 3,858,788
Total 103,081 392,706 698,119 1,095,056 1,582,127 1,961,864 2,358,608 2,756,980 3,158,605 3,560,235 3,961,869
 Schedule 9: Repayment of Loan (Debt Financing Schedule)
000’ BIRR
Impl.
Description Yr. Operation Years
0 1 2 3 4 5 6 7 8 9 10
1. Borrowing - 75,737 - - - - - - - - -
Long-term loan - Initial working capital - 75,737
Medium-term loan - -
2. Repayment of Principal - 15,147 15,147 15,147 15,147 15,147 - - - - -
Long-term loan - 15,147 15,147 15,147 15,147 15,147 - - - - -
Medium-term loan - - - - - - - - - - -
3. Repayment of Interest - 13,254 10,603 7,952 5,302 2,651 - - - - -
Long-term loan 17.5% - 13,254 10,603 7,952 5,302 2,651 - - - - -

‐ ‐ ‐ ‐ ‐
Medium-term loan 0.0% - - - - - - - - - - -
4. End of Year Balance - 60,590 45,442 30,295 15,147 -
Long-term loan - 60,590 45,442 30,295 15,147 - - - - - -
Medium-term loan - - - - - - - - - - -
ANNEXES
Annex 1: Annual Costs of Production & Expenses
000’ BIRR
Production years
Cost item
1 2 3 4 5 6 7 8 9 10
Capacity utilization 45% 60% 75% 90% 100% 100% 100% 100% 100% 100%
I. Costs of Goods Manufactured 536,447 712,116 887,785 1,064,846 1,181,959 1,181,959 1,179,638 1,174,997 1,174,997 1,174,997
1. Direct and auxiliary materials 516,760 689,014 861,267 1,033,521 1,148,356 1,148,356 1,148,356 1,148,356 1,148,356 1,148,356
2. Spare parts 1,393 1,393 1,393 2,321 2,321 2,321 2,321 2,321 2,321 2,321
3. Utilities 4,497 5,996 7,496 8,995 9,994 9,994 9,994 9,994 9,994 9,994
4. Labour, direct 2,745 3,660 4,575 5,490 6,100 6,100 6,100 6,100 6,100 6,100
5. Factory Overheads 11,052 12,053 13,055 14,521 15,188 15,188 12,867 8,226 8,226 8,226

Salaries & wages (+ benefits) 3,005 4,006 5,008 6,009 6,677 6,677 6,677 6,677 6,677 6,677

Repair & maintenance 557 557 557 928 928 928 928 928 928 928

Depreciation & amortization 7,119 7,119 7,119 7,119 7,119 7,119 4,798 156 156 156

Insurance (0.5% of M/C) 232 232 232 232 232 232 232 232 232 232

Supplies & services 139 139 139 232 232 232 232 232 232 232
II. Selling & Dist'n (Marketing) Costs 12,467 13,805 15,142 16,480 17,371 17,371 17,371 17,371 17,371 17,371
Salaries & wages (+ benefits) 8,455 8,455 8,455 8,455 8,455 8,455 8,455 8,455 8,455 8,455
Marketing costs (0.5% sales) 4,012 5,350 6,687 8,024 8,916 8,916 8,916 8,916 8,916 8,916
III. General & Adm. Expenses 24,482 23,428 22,373 21,319 19,730 17,074 17,068 17,062 17,057 17,051
1. Administrative Overheads 11,228 12,824 14,421 16,017 17,080 17,074 17,068 17,062 17,057 17,051
Salaries & wages (+ benefits) 3,980 5,307 6,634 7,961 8,845 8,845 8,845 8,845 8,845 8,845
Land lease payment 220 215 209 204 199 193 188 182 177 171
Repair & maintenance 1,102 1,102 1,102 1,102 1,102 1,102 1,102 1,102 1,102 1,102
Depreciation 2,755 2,755 2,755 2,755 2,755 2,755 2,755 2,755 2,755 2,755
Insurance (0.5% of Building) 276 276 276 276 276 276 276 276 276 276
Fuel & lubricants 937 937 937 937 937 937 937 937 937 937
Travelling and perdiem 597 796 995 1,194 1,327 1,327 1,327 1,327 1,327 1,327
Supplies & services 827 827 827 827 827 827 827 827 827 827
Miscellaneous 535 611 687 763 813 813 813 812 812 812
2. Financial costs (interest) 13,254 10,603 7,952 5,302 2,651 0 0 0 0 0
Total Operating Costs 573,396 749,348 925,300 1,102,645 1,219,061 1,216,404 1,214,078 1,209,430 1,209,425 1,209,419
 Annex 2: Net Working Capital Requirement
000’ BIRR
Days of Production Years
Description Coverage
1 2 3 4 5 6 7 8 9 10
1. Current assets 75,737 100,681 125,626 150,688 167,318 167,317 167,317 167,317 167,317 167,317
1.1Accounts receivable (debtors) 10 21,984 29,313 36,641 43,969 48,854 48,854 48,854 48,854 48,854 48,854
1.2Inventory 52,214 69,557 86,901 104,362 115,924 115,924 115,924 115,924 115,924 115,924

a) Materials

- Local materials 10 3,163 4,217 5,272 6,326 7,029 7,029 7,029 7,029 7,029 7,029

- Imported materials 30 32,984 43,979 54,974 65,969 73,298 73,298 73,298 73,298 73,298 73,298

b) Spare parts in stock 30 114 114 114 191 191 191 191 191 191 191

c) Work-in-Progress 1 1,450 1,931 2,413 2,898 3,219 3,219 3,219 3,219 3,219 3,219

d) Finished Products 10 14,502 19,315 24,128 28,979 32,187 32,187 32,187 32,187 32,187 32,187
30 1,539 1,811 2,084 2,357 2,539 2,539 2,539 2,539 2,539 2,539
1.3Cash-in-hand
2. Current liabilities - - - - - - - - - -

2.1 Accounts payable (creditors) - - - - - - - - - - -

3. Working capital

3.1 Net working capital (1) - (2) 75,737 100,681 125,626 150,688 167,318 167,317 167,317 167,317 167,317 167,317

3.2 Increase in working capital 75,737 24,944 24,944 25,062 16,629 (0) (0) (0) (0) (0)
3.3 Foreign component (%) 43.7% 43.8% 43.9% 43.9% 43.9% 43.9% 43.9% 43.9% 43.9% 43.9%
 Annex 3: Depreciation & Amortization of Fixed Assets
000’ BIRR
Book
Production Years
Description val.
1 2 3 4 5 6 7 8 9 10 11
A. Fixed Investment

1. Machinery and equipment 6,963 6,963 6,963 6,963 6,963 6,963 4,642 - - - -

2. Building and construction 2,755 2,755 2,755 2,755 2,755 2,755 2,755 2,755 2,755 2,755 2,755

Sub-total of A 9,718 9,718 9,718 9,718 9,718 9,718 7,397 2,755 2,755 2,755 2,755

Cumulative Sub-total 9,718 19,435 29,153 38,870 48,588 58,305 65,702 68,457 71,212 73,967 76,722

B. Pre-production expenditure 156 156 156 156 156 156 156 156 156 156 -

Cumulative 156 313 469 626 782 939 1,095 1,251 1,408 1,564 1,564

Total A & B 9,874 9,874 9,874 9,874 9,874 9,874 7,553 2,911 2,911 2,911 2,755

Cumulative 9,874 19,748 29,622 39,496 49,370 59,244 66,797 69,708 72,619 75,531 78,286
 Annex 4: DETAILED PERSONNEL REQUIREMENT AND ANNUAL COSTS
No. Monthly Salary (Birr) Annual
No. Description
Required Rate Total Salary (Birr)
Manager's Office 4 159,000.00 1,908,000.00
1 General Manager 1 70,000.00 70,000.00 840,000.00
2 Executive Secretary 1 15,000.00 15,000.00 180,000.00
3 Legal Service Head 1 37,000.00 37,000.00 444,000.00
Audit and Inspection 1 37,000.00 37,000.00 444,000.00
Service Head
Quality Control and 11 192,000.00 2,304,000.00
Assurance Service
1 Quality Control Service Head 1 37,000.00 37,000.00 444,000.00
2 Chemist 2 20,000.00 40,000.00 480,000.00
3 Junior Chemist 1 16,000.00 16,000.00 192,000.00
4 Sampler 2 4,000.00 8,000.00 96,000.00
5 Research and Development 1 23,000.00 23,000.00 276,000.00
Expert
ICT Unit 2 34,000.00 408,000.00
1 ICT Coordinator 1 26,000.00 26,000.00 312,000.00
2 Information Desk Worker 1 8,000.00 8,000.00 96,000.00
Finance and Administration 35 371,000.00 4,452,000.00
Department
1 Finance & Admin Department 1 40,000.00 40,000.00 480,000.00
Head
2 General Accounts Division 1 26,000.00 26,000.00 312,000.00
Head
3 Senior Accountant 1 23,000.00 23,000.00 276,000.00
4 Cashier 1 10,000.00 10,000.00 120,000.00
5 Cost & Budget Division Head 1 26,000.00 26,000.00 312,000.00
6 Cost & Budget Senior 1 23,000.00 23,000.00 276,000.00
Accountant
7 HR Development Division 1 23,000.00 23,000.00 276,000.00
Head
8 Nurse 1 20,000.00 20,000.00 240,000.00
9 Safety and Environmental Officer 1 16,000.00 16,000.00 192,000.00

10 General Service Section Head 1 20,000.00 20,000.00 240,000.00

11 Head Security 1 12,000.00 12,000.00 144,000.00
12 Security Shift Leader 2 8,000.00 16,000.00 192,000.00
13 Security Guard 14 5,000.00 70,000.00 840,000.00
14 Driver 4 8,000.00 32,000.00 384,000.00
15 Gardner 2 3,500.00 7,000.00 84,000.00
16 Messenger & Cleaner 2 3,500.00 7,000.00 84,000.00
Purchasing and Property 24 247,000.00 2,964,000.00
Admin. Dept.
1 Purchasing and Property 1 40,000.00 40,000.00 480,000.00
Admin. Head
2 Purchasing Division Head 1 26,000.00 26,000.00 312,000.00
3 Senior Purchaser 1 23,000.00 23,000.00 276,000.00
4 Junior Purchaser 1 16,000.00 16,000.00 192,000.00
5 Property Admin Division Head 1 26,000.00 26,000.00 312,000.00
 6 RM Store Keeper 1 14,000.00 14,000.00 168,000.00
7 Spare Part Store Keeper 1 14,000.00 14,000.00 168,000.00
8 General Items Store Keeper 1 14,000.00 14,000.00 168,000.00
9 Finished Product Store 1 14,000.00 14,000.00 168,000.00
Keeper
10 Laborers 15 4,000.00 60,000.00 720,000.00
Production and Technic 44 627,000.00 7,524,000.00
Department
1 Production and Technic Dept. 1 55,000.00 55,000.00 660,000.00
Head
2 Production Supervisor 2 26,000.00 52,000.00 624,000.00
3 Production Forman 2 23,000.00 46,000.00 552,000.00
4 Operator 10 10,000.00 100,000.00 1,200,000.00
5 Assistant Operator 10 4,000.00 40,000.00 480,000.00
6 Packing Coordinator 2 8,000.00 16,000.00 192,000.00
7 Production Data Clerk 2 7,000.00 14,000.00 168,000.00
8 Mechanical Maintenance Head 1 26,000.00 26,000.00 312,000.00
9 Senior Welder 1 23,000.00 23,000.00 276,000.00
10 Junior Welder 1 16,000.00 16,000.00 192,000.00
11 Senior Mechanic 2 23,000.00 46,000.00 552,000.00
12 Boiler Man 2 16,000.00 32,000.00 384,000.00
13 Satellite Store Keeper 2 8,000.00 16,000.00 192,000.00
14 Electrical Maintenance Head 1 26,000.00 26,000.00 312,000.00
15 Senior Electrician 2 23,000.00 46,000.00 552,000.00
16 Shift Electrician 2 18,000.00 36,000.00 432,000.00
17 Electro Mechanical Engineer 1 37,000.00 37,000.00 444,000.00
Sales and Marketing 18 295,000.00 3,540,000.00
Department
1 Sales and Marketing 1 40,000.00 40,000.00 480,000.00
Department Head
2 Sales Division Head 1 26,000.00 26,000.00 312,000.00
3 Sales Coordinator 1 23,000.00 23,000.00 276,000.00
4 FSR Driver 4 14,000.00 56,000.00 672,000.00
5 FSR Driver Assistant 4 8,000.00 32,000.00 384,000.00
6 Sales Person 4 16,000.00 64,000.00 768,000.00
7 Data Clerk 1 8,000.00 8,000.00 96,000.00
8 Marketing Division Head 1 26,000.00 26,000.00 312,000.00
9 Sales Promotion Officer 1 20,000.00 20,000.00 240,000.00
Total, monthly/annual salary 139 1,962,000.00 23,544,000.00