SOAP MAKING BUSINESS PLAN

DIRE DAWA UNIVERSITY

INSTITUTE OF TECHNOLOGY

SCHOOL OF MECHANICAL AND INDUSTRIAL ENGINEERING

DEPT. INDUSTRIAL ENGINEERING

BUSINESS PLAN

LOUNDRY AND ALOVERA SOAP PRODUCTION

Name ID No
1.Abdiaziz Hassan ………………. 1104423
2.Dagim Asafa ……………….. 1103151
3.Abdisalam Musse ……………… 1102715
4.Yerusalem Etafa ………………. 1103267
5.Mohamed Ebrahim ……………… 1001639
6.Lelise Getahun ……………… 1103266

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Contents

1.EXECUTIVE SUMMARY ................................................................................................................... 3

2.Management Team................................................................................................................................. 3

3.COMPANY DESCRIPTION................................................................................................................. 4

4.Product and Service Plan ....................................................................................................................... 5

5.Vision and Mission Statement ............................................................................................................... 5

5.1 Vision .................................................................................................................................................. 5

5.2 Mission................................................................................................................................................ 5

6.Industry Overview ................................................................................................................................. 5

7.Competitive Analysis ............................................................................................................................. 6

8.Market Analysis ..................................................................................................................................... 7

9.Marketing Plan ....................................................................................................................................... 8

10. Operational Plan.................................................................................................................................. 9

11.Organizational Plan............................................................................................................................ 12

12.Financial Plan..................................................................................................................................... 13

13. Growth Plan ...................................................................................................................................... 19

14. Contingency Plan .............................................................................................................................. 19

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1.EXECUTIVE SUMMARY
Soap is a mixture of sodium salts of various naturally occurring fatty acids. Air bubbles
added to a molten soap will decrease the density of the soap and thus it will float on water.
If the fatty acid salt has potassium rather than sodium, a softer lather is the result. Soap is
produced by a saponification or basic hydrolysis reaction of a fat or oil. Currently, sodium
carbonate or sodium hydroxide is used to neutralize the fatty acid and convert it to the salt.
Soap produced from different raw materials by adding different additives and chemicals.
The basic raw materials used are plants and animal products. There are three basic
processes of soap production. These are:
1. Cold process
2. Semi-hot process
3. Hot process
Our company will produce LOUNDRY AND ALOVERA SOAP. Aloe Vera plant soap
has many applications in pharmaceutical, cosmetics, and food production. Currently, the
demand for aloe Vera soap is increasing due to its value for skin care. Because of the
increasing demand in this soap their shortage in the market. Beside this aloe Vera soap is
costly in the market due to high foreign currency to import into the country. So, our aim is
to produce and distribute aloe Vera soap locally by fair price

2.Management Team
The Industry will be owned by six persons of industrial engineers in this owners deeply
knows the processes of working industry which they will applied their knowledge.

 Abdiaziz Hassan, as the general manager

 Mohamed Ebrahim, as the production manager
 Yarusalem Etafa and Lelise Getahun as the marketing and accounting manager
 Dagim Asefa, as the Production supervisor
 Abdisalam musse, as the quality control
Initially the owners will fill in many of the management gaps. Over time, they have plans
to hire a production manager, a general manager, marketing and accounting manager,
Production supervisor, quality control, guards, cleaners, sale staf.

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3.COMPANY DESCRIPTION

sun shine industry will produce laundry and aloe vera soap. The company is started by
six undergraduate industrial engineers with the assistance of our entrepreneur advisor
Tigist Dagachew . Soap produced from different raw materials. These raw materials can
be plant or animal products. However, our company will focus on the production of laundry
and aloe vera soap plant. Aloe Vera has many advantages for our skin. Because of its
natural component’s aloe vera plant protect our skin from damages. In addition to that it is
also used for medicinal value.

Aloe Vera (Aloe barbadensis Miller) is a perennial plant of liliacea family with turgid green
leaves joined at the stem in a rosette pattern. Aloe Vera plant is applicable for many
products as additives of raw material. some properties of aloe vera plant are pharmaceutical
(medicinal), food cosmetics. aloe Vera used for helping digestion, increase blood levels,
build immunity and reduce inflammation. Typically, Aloe Vera known for its soothing and
powerful skin healing properties making it a popular ingredient in soaps. Aloe Vera is
known for its soothing and powerful skin healing properties, making it a popular ingredient
in soaps. Aloe Vera is good for dry skin and in helping treat burns.

Sun shine industry will be organized as partnership, it will be owned and operated by six
undergraduate industrial engineers. S SH I will registered in the state of dire dawa a
community property state.
In this business we have legal structure agreements in case of profit and loss sharing
process we have equal profit and lost sharing system. In this business there are other person
who help us or participate in this business like guards, cleaners, farmer.

The appropriate locations for this project based on the availability of raw materials Also
less transportation cost for import raw materials as well as for getting big chance for export
our product to the neighbor countries such as Djibouti ,Somalia and Kenya also having
infrastructures, as well as for the market is any rural area our plant location will be in Dire
Dawa.

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4.Product and Service Plan

sun shine Soap Production Company is going to operate a standard and licensed soap
production company whose product will not only be sold in Dire Dawa. We are in the soap
production line of business to make profits and also to give our customers value for their
money and we are going to do all that is permitted by the law of the Ethiopia country to
achieve our corporate goals.

Our product is :- laundry Soap(Bar soap)

Aloe Vera Soap (Bar soap)
It can be use our product Pharmaceuticals, Supermarkets and shops, Beauty salons,
Society.

5.Vision and Mission Statement

5.1 Vision

 Our vision is to establish a standard Soap Production Company whose product will not
only be sold in Dire Dawa, but also throughout all the states in Ethiopia and in other parts
of World.

5.2 Mission

 Our mission is to establish a standard and world class Soap Production Company that in
our own capacity will favorably compete with leaders in the industry.
 We want to build a soap production business that will be listed amongst the top 10 soap
and detergent brands

6.Industry Overview
Soap is a universal product that can be found in all homes, canteen, laundries, hotels and
toilets et al. Soaps are used for washing and bathing hence the demand for soap is hardly
affected by economic meltdown due to the important role the product plays in our daily
lives.
In Ethiopia, there are more than 70 soap and detergent factories and more than 80 percent
of them are found in Addis Ababa. but till now There is a gap of opportunity in Alvera
soap production.

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Soap production companies are involved in making bar soaps, liquid soaps, and detergent
et all with different scent and packaging. Major players in the soap production industry do
not just serve the market within the State or country they operate from, but also
international markets.

The equipment needed for soap making include;

Soap is a mixture of sodium salts of various naturally occurring fatty acids. Air bubbles
added to a molten soap will decrease the density of the soap and thus it will float on water.
If the fatty acid salt has potassium rather than sodium, a softer lather is the result. Soap is
produced by a saponification or basic hydrolysis reaction of a fat or oil. Currently, sodium
carbonate or sodium hydroxide is used to neutralize the fatty acid and convert it to the salt

Laundry and Alvera soap produce from different raw materials. There is different raw
material will come from outside of the country and others we will get in our country the
active raw materials are soap noodles and aloe vera plant also additives, fillers, water and
other constituents than are responsible for odor, color, viscosity, adsorption dust and
brightness.

The Soap Production industry is indeed a growing and thriving sector of the economy of
most countries of the world and they generates several millions of US dollars annually
from several registered and licensed small – scale, medium scale and big soap production
companies scattered all around Ethiopia. The industry is responsible for the employment
loads of people directly and indirectly all around the world.

7.Competitive Analysis
We are quite aware that there are several soap production companies both large and small
in Ethiopia, whose products can be found in every nooks and crannies of the country, which
is why we are following the due process of establishing a business so as to compete
favorable with them.

Sun shine Soap Production Company employed the services of an expert HR and Business
Analyst with bias in start – up business to help us conduct a thorough SWOT analysis and

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to help us create a Business model that will help us achieve our business goals and
objectives. This is the summary of the SWOT analysis that was conducted for sun shine
Soap Production Company;

Strength:

Aside from quality and variety of soaps and detergents that we make, part of what is going
to count as positives for sun shine Soap Production Company is the vast experience of our
management team, we have people on board who are highly experienced and understands
how to grow business from the scratch to becoming a national phenomenon.

Also we are not only produce laundry soap but also our company will produce in aloe vera
soap, aloe vera soap is a new in our country so it gives us an opportunity to take the market.

Weakness:

A major weakness that may count against us is the fact that we are a new soap production
company and we don’t have the financial capacity to engage in the kind of publicity that
we intend giving the business.

8.Market Analysis
Present local demand and supply, At the current situation the demand for aloe Vera soap is
met through import. There are some Small firms in the market but they can’t have met the
required demand by the society.

The future demand for aloe vera soap very much depends on the growth of the industrial
Sector. The growth of industries is related with the growth of the urban population growth
rate, Population based forecast can be made.

The opportunities for soap production companies are enormous. This is due to the fact that
soap is a universal product that can be found in all homes, canteen, laundries, hotels and toilets
etc.
As a result of that, we were able to conduct a thorough market survey and feasibility studies
so as to position our business to take advantage of the existing market for soaps and detergents

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and also to create our own new market. We know that it is going to requires hard work, and
we are ready to give all it will take to achieve it.

Target Customer
When it comes to selling soaps, there is indeed a wide range of available customers. In
essence, our target market can’t be restricted to just a group of people or organization, but all
those who resides in our target market locations.

In view of that, we have conducted our market research and we have ideas of what our target
market would be expecting from us. We are in business to engage in the production and
wholesale distribution of soaps to the following groups of organizations;

 Hotels
 Pharmaceuticals
 Supermarkets and shops
 Beauty salons
 Society
 Laundry Owners

9.Marketing Plan

Before choosing a location to launch sun shine Soap Production Company we conduct a thorough
market survey and feasibility studies in order for us to be able to penetrate the available market in
our target market locations.

We have detailed information and data that we were able to utilize to structure our business to
attract the numbers of customers we want to attract per time and also for our soap to favorable
compete with other leading brands in Dire dawa and throughout Ethiopia.

In order to continue to be in business and grow, we must continue to sell our soaps to the available
market which is why we will go all out to empower or sales and marketing team to deliver our
corporate sales goals. In summary, sun shine Soap Production Company will adopt the following
sales and marketing approach to sell our soaps;

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 Introduce our soap brand by sending introductory letters to households, retailers,

supermarkets, hotels, laundries, merchants and other stakeholders.
 Open our soap production company with a party so as to capture the attention of residence
who are our first targets
 Engage in road show in targeted communities from time to time to sell our products
 Advertise our products in community based newspapers, local TV
 List our business and products on yellow pages ads (local directories)
 Leverage on the internet to promote our soap brands
 Engage in direct marketing and sales

Our product price is not expensive than other soap companies because first to gate and consume
more communities we need to balance our product and prices

Direct costs margin = Sales price – Total direct costs.

Direct costs margin % = Direct costs margins / Sales price x 100%

Break-even volume = (Fixed costs / Direct cost margin %) / Selling price.

Break-even price = Direct costs / unit + Fixed costs / volume.

10. Operational Plan

Aloe vera gel Extraction
The entire process involves washing the freshly harvested Aloe Vera leaves in a suitable
bactericide, followed by processing of the leaves to mechanically separate the gel matrix from the
outer cortex. The separation of the gel from the leaf could be facilitated by the addition of cellulose
dissolving compounds, e.g., cellulose. Thus, the aloe liquid obtained is treated with activated
carbon to decolorize the liquid and remove aloin and anthraquinones, which have laxative effects.
Soap production process

We have to add all raw materials into the mixer until the mixture homogenize and makes hard
paste form then the soap coming from the mixer will milled by rolling mill for better mixing
process of all the raw materials as well as some more shining of final soap after the soap rolling

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process out soap will be in thin ribbon form. After the soap form in the ribbon form transports the
material of soap from one-unit operation to the next in the soap process industry by using labor
force. this transported material is interred into soap vacuum duplex plodder machine, the plodder
is used for compression of soap .this is double plodder in which the first is noodles form and which
will automatically Feed in to the second plodder then the final output will be in bar form after this
the cutter cut the soap the same length/gram the last step the same soap is packaged by the packing
machine.

mixer

Roller Packing machine

Plodder
miller cutter

DETAIL OF PLANT AND MACHINERY

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Machinery and Equipment Quantity

Mixer 1

Roller miller 1

Aloe Vera gel extracting machine 1

Plodder 1

Cutter 1

Packing machine 1

Table 1 list of plant and machinery

SUPPLIERS OF RAW MATERIALS

We will get our raw materials like soap noodles from Shemu Company which is locate in
dire dawa other ingredients we will supply from merkato found in Addis Ababa.

SUPPLIER OF PLANT AND MACHINERY

Different suppliers of machinery could be requested for their offer. For example, the
following company is interested to supply the turn-key plant

B/R Instrument Corporation

E-mail: [email protected]

Fax. 4108208141

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MAN POWER REQUIREMENT

Position No Monthly Total Annually

required salary salary
Production manager 1 5200 62400

Accounting and marketing manager 2 5200 124800

Production supervisor 1 3500 42000

Quality control 1 3500 42000

Guards 1 2500 30000
Cleaners 2 2000 48000

Sale staf 3 2000 72000

General manager 1 7000 84000
Total 12 42100 Birr 505200 Birr

Tabele 2: List of required manpower for the plant

11.Organizational Plan

Sun shine industry will be organized as partnership, it will be owned and operated by six
undergraduate industrial engineers. S SH I will registered in the state of dire dawa a
community property state.

In this business we have legal structure agreements in case of profit and loss sharing
process we have equal profit and lost sharing system. In this business there are other person
who help us or participate in this business like guards, cleaners.
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organizational structure

Genaral manager

production Accounting and

supervisor marketing manager

Production manager Quality control

Sale staff guards cleaners

12.Financial Plan

1. Land and building cost

The total area of the project is 200m2. The cost of building is estimated at Birr96,000. The lease

value of land (at a rate of 1 Birr per m2 for 50 years) is about Birr 10,000.

2. plant and machinery cost

The machineries and equipment required for producing aloe vera soap are detailed in

table.

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Machinery and Equipment Quantity Cost

Mixer 1 105000

Roller miller 1 154000

Aloe Vera gel extracting machine 1 210000

Plodder 1 300000

Cutter 1 45000

Packing machine 1 114000

Table 3: List and quantity of equipment for aloe Vera soap production
The total cost of machinery is estimated to be 828000 birrs.

3. raw material cost

The full capacity requirement of material and utilities and the associated cost are presented in

table below.

Material and input Quantity Cost(birr)

Soap noodles 16455.6kg 394934.4

Aloe vera plant 644 kg 12392.8
Fillers 3656.8 4388.16
Additives 6527kg 92526.6

Total cost 504241.96

Table 4: Annual requirement and cost of raw materials and utilities

A) Installation cost :( 35-45% of PEC), Assume 35% PEC= 289800Birr.

B) Piping installation cost: (10 - 80% of PEC), Assume 10% PEC= 82800 Birr.

C) Electrical installation cost: (10 - 40% of PEC), Assume 10%PEC = 82800Birr.

D)Building process and auxiliary: (10-70% of PEC), Assume 10% PEC = 82800 Birr.

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E) Yard improvement :( 10 - 15% of PEC), Assume 10%PEC = 82800Birr,

F) land :( 4 - 8% of PEC), Assume 5% = 41400 Birr.

Therefore direct cost =662400Birr.

Indirect cost: Expenses which are not directly involved with material and labor of actual

installation or complete facility.

Engineering and supervision: (5 - 15% of PEC), Assume 5% PEC = 41400 Birr.

Contingency: (8 - 20 % PEC), Assume 10% PEC = 82800Birr

Therefore total indirect cost =124200birr

Fixed capital investment:

Fixed capital investment (FCI) = DC + IC = 786600 birr

Working capital investment: (10 - 20 % of FCI), Assume 15% FCI = 117990birr

Total capital investment = FCI + WC = 904590 birr

Estimation of total product cost (TPC)

Fixed charges:

a) Depreciation: (10% of FCI) = 78660 birr

b) Insurances: (0.4 -1 % of FCI), Assume 0.4%FCI=3146.4birr

c) Rent :( 8 - 12% of FCI), Assume 8%FCI =62928 birr

Therefore total fixed charge = 144734.4birr

But, fixed charge = (10 - 20% of TPC), Assume 10%

Therefore total production cost = 1447344birr

Direct Production cost:

Raw material: (10 - 50% of TPC), =578937.6 birr

Operating labor (OL): (10 - 20% of TPC), Assume 10%TPC = 289468.8birr

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Utility :( 10 - 20% of TPC), Assume 15% TPC = 144734.4 birr

Maintenance :( 2 - 10% of FCI), Assume 2%FCI= 15732birr

Operating supplies (OS9): (10 - 20% of maintenance), Assume 10% = 1573.2birr

Laboratory charge :( 10 - 20% of OL), Assume 10%OL = 28946.88birr

Direct Production cost = 1059392.88birr

Therefore manufacturing cost (MC) = direct product cost + fixed charge =2506736.88 birr

General expense:

Distribution and selling price: (2 - 30% of TPC), Assume 10%TPC=144734.4birr

Therefore general expense (GE) = 144734.4birr

Total operational cost:

TOC = MC + GE = 2651471.28birr

Gross earning and rate of return:

Selling price of aloe vera soap = 50 birr / 100grm

Selling price of laundry = 25 birr/250grm

Annual production of aloe vera soap = 6255.5kg

Annual production of laundry= 22400kg

 Gross earning and rate of return:

The company is assumed to run three consecutive years and it operates at 80% ,90% and 100%

for the first ,second years and third years respectively and works at full capacity for the

remaining years.

For the first year

Total annual income of aloe vera soap = selling price*annual production = 2502200birr

Total annual income of laundry = selling price*annual production =1792000birr

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Total annual income = 4294200birr

Gross annual income = total annual income –total operational cost = 1642728.72birr

Income tax=0 (1 year tax holiday)

Net profit = 1642728.72birr

For the second year

Total annual income = 4830975birr

Gross income =total income- total operational cost = 2179503.72birr

Tax 30%= 653851.116birr

Net profit = gross income – tax

NET profit=1525652.604birr

At the third year and above

Total annual income = 5367750birr

Gross income = Total Income-Total operational cost = 2716278.72 birr

Tax 30%= 814883.616birr

Net profit = gross income – tax

NET profit=1901395.104 birr

Average net profit=1689925.476

Profit Analysis

Return on investment (ROI) = (average net profit/total capital investment)*100% = 186%

%/year

Payback period: it is the time period required for the investment to return or payback the total

capital invested and it is calculated as:

PP = (total capital investment/ annual net return) = 1years

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This shows that it takes 1 years so as to return the capital investment

For the first year

Turnover= growth annual sales/|fixed –total capital investment|

= 4294200birr/| (786600 -904590 birr) |=36.39

For the second year

Turn over= 4830975birr /| (786600 -904590 birr) |=40.94

For the third year

Turn over=5367750birr/| (786600 -904590 birr) |=45.49

Break-even Analysis

The break-even point of the project including cost of finance when it starts to operate at

full capacity (year 3) is estimated by using income statement projection.

BE = Fixed Cost/sales –variable cost

786600/ 5367750birr -1059392.88birr =18.2%

Resources of finances

Our sources of finance will be loan we traying to get the loan in bank not only bank but also we
will participating the organizations those investment the youth. (eg:- HarHub, shaqodoon
organization, microfinances etc)

Cash flow statement

Assuming an interest rate of 10%

NPV= -904590+1642728.72/(1+0.1)+1525652.604 /(1+0.1)^2+

1901395.104/(1+0.1)^3+1274195.1/(1+0.1)^4+1901395.104/(1+0.1)^5

From this calculation we can see that the net present value (NPV) is a large positive number. So

it is likely to say that the project is feasible.

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Balance sheet

Production cost

Items Cost(birr)
Raw material and input 578937.6
Utilities 14473.4
Wages and salaries 300000
House rent 69928
Spare and maintenance 15732
Investment

Item Cost(birr)
Direct cost 662400
Indirect cost 124200
Total fixes charge 144734.4
Working capital 117990
Total capital investment cost 904590
Purchased equipment cost 828000

13. Growth Plan

As we know the soap is necessary in our life for every time we use in every day also the use of
soap it is increasing day in day out so that in our company we hopefully the future to make the
second branch of our company those we will make in the suitable place for our country.

14. Contingency Plan

A major risks that may count against us is the fact that we are a new soap production company so
as when we buy it the machines my be they will defect less time also when we make the product
may be it don’t be sale on time because of we are new in the market so it cause to expire date and
the changing the rate of dollar because the cost of raw materials depends on the rate of dollar.

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For the first risk in the machines we can solve to check it when we buying also to take the guarantee
of one or two years

The second risk of selling production we will solve to seen it the situation if we see it the small
movement market we will give as a loan for our distributers to makes a marketing

Another risk of dollar rate exchanges every day we must realize the movement or the changes of
the dollar to decide our selling price.

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