BIRHANU TEKLU WASHED COFFEE SUPPLIER

SUMMARY

- The initiative motives of the investment code and the integrative activities of
government organization changes the attitudes of the society towards economic
development through a great increase in saving. In addition to, the accessibility of
credit mechanism in the country.
- FDRE is the one in the history of Ethiopian states change that has brought such
economic mass mobilization at anywhere in the in the country without a selective
nationality views. Kokossa woreda is the first in the oromiya with endowment of
nature that shows exciting changes in infrastructures, investment development and
population density.
- The overall effects of the country movement, moreover , initiates the Birhanu Teklu
Washed coffee supplier in the kokossa woreda , his final destination place
Shashemene town .
- The major objective of the project is to establish with a cost incurring 805,384.46
Ethiopian Birr.
- Some profit in the long run. It has social concerns that any citizen has to do through
which the society benefits in the implementation of the coffee supply that creates
job opportunities to the surrounding unemployed.
- Finally, supplying consumption goods from different places such as Shashemene ,
Hawassa , Ziway , Adama and Adiss Ababa with high shortage of transportation
vehicle except only the one we have .
- The project appraisal treated by BCR& NPV shows positive signals to run the
project. It has no visible environmental negative impact. And also the project is
feasible and having market access.

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2. INTRODUCTION

2.1. GENERAL CONDITION

Our country Ethiopia as well as the oromiya regional Government have understood
the fact that private sector investment has a key role to the development of of an
individual and the society at large through employment creation, capital formation, tax
revenue generation and the likes. With this understanding, the government has been
private investment and has been creating enabling conditions for private micro,
medium and large business to actively play their role in the economic development of
the oromiya in particular and the nation in general. Some of these include stable
political climate, liberalized free market economy, attractive macroeconomic policies,
establishment of means of finance, attractive incentive packages for infrastructure
development and the likes. From the fact of this many service providers have been
entering in many business sectors in the country nevertheless; the construction
industry sector needs huge capital and the shortage has constrained the activities.

Entrepreneurs like this has a well come vision and needs to accomplish the vision,
running family life & to support the country development activities so the financial
sector & other stakeholders’ support is very mandatory.

The owner of this project has intended to enter in to this business after conducting a
thorough preliminary market survey coupled with the practical long year experiences
in coffee supply works.

In this light of the above facts the owner planned to establish the Coffee supplier
works where he has experienced in Kokossa Woreda and firmly believe that prompt
supports will be offered and also the financing of the projects will be positively
considered.

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3. THE NEW PROJECT JUSTIFICATION

Business is always dynamic in its nature so it needs changes. Globalization &

Urbanization on the other hands increase the exchanges of technologies in the societies
and the demands of development. Coffee Supplier of housing & road networks are the
major part in development especially in the urban areas that enhance other part of
development. To pay in this dynamic world as competent, there is a must of fitness in
the field of the ride the owner runs. Meanwhile; your organization could understand the
problem of finance and legal ground for that he has been facing to establish his business
to play in the development works in the need of transformation in the strategic years
and at large to support our country. It is greater than 805,384.46 eth. Birr to this
business as he needs as the feasibility shows for this he is confident and presenting the
project proposal.

4. VISION, MISSION, OBJECTIVES AND BE NEFITS OF THE PROJECT

4.1. VISION

The owner wants to see him self by establish sustainable quality outputs of Coffee
Whole Supplier works with affordable costs to kokossa Woreda neighbours where
advantageous entrepreneurs could reach.

4.2. MISSION

 The major mission of this business is to prepare sustainable quality outputs of

coffee SupplY for kokossa Woreda and shashemene Town vicinities. That
needs reasonable costs and makes them satisfied.
 To employ ourselves & others & others in the business.

4.3. GOAL

Business goal is the direction where the business organization moves at the end of
the project and the goal is as follows.

 Annually, earning 1,030,000 birr profit

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 Creating job opportunities to 12-20 temporarily and 2 permanently

employed work seekers. And also there are plenty of highly temporary
employments at the time of coffee Supplier project handling.
 To become economically free in the coming four years .

4.4. BENEFITS OF THE BUSINESS

The movement of this business has direct and indirect benefits to its stakeholders
accordingly; there are the following benefits.

 Earnings/ profits to the owner

 It is the means of further investment
 Means of income generation to unemployed
 Means of tax revenue to government
 Developing healthy competition among competitors.

5.STRENGTH, WEAKNESS, OPPORTUNITIES AND THREATS ANALYSIS

5.1. STRENGTH

 Strong work experiences

 The presence of knowledge
 Prides and famousness in related fields
 Selected competent in the customers
 The presence of the necessary and different care and skill

5.2. WEAKNESS

 Financial shortage for business expansion

 The presence of dependency on capital .

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5.3. OPPORTUNITIES

 Presence of relative work opportunities, residential area expansion, development

and expansion and the increment of the Nansebo Woreda infrastructures are a
good advantage to the envisaged business
 Governmental cost for sustainable development
 The expansion of investment
 The presence of investment appreciation

5.4. THREATS

 Un alarmingly, continuous rise of capital & input price.

 The very slow growth of employment
 Mismatch of work and its payment

6. MARKETING PLAN

6.1. DEMAND ANALYSIS

Kokossa woreda where 110 kms away East from Shashemene city . Moreover; there
are hospitals, higher clinics, and many Coffee processing Industry . This situation by its
self, favors for the sake of the envisaged business and many firms haven’t simply been
engaged. Such situation by itself brings about the creation of sustainable and quality
oriented enterprises in the business of coffee supply. Moreover; the mismatch of demand
and supply, there is zonation of villages to commercial centers. In general, there is an
opportunity of competition in that there are changes of quality and price. Finally, since
there are open simplicity to establish the business.

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6.2. COMPETITORS’ OVERVIEW

All these condition were observed when he privately studied the demand situation from
his previous experiences in this related business. There is a greater gap b/n demand from
customers and the suppliers of the services along with the development of the as well as
the region as a whole .

The plan of development and transformation set by government for creation of

employment and industrializations. But there is a risk of inflation and the speed of
employment which may affect. More or less, the situation continues so there is no threats
that come through time because; it is understood from the situation. Moreover; his long
experiences in the related business, respect to his customers and his pride given from
customers will help him to succeed the competition smoothly since there is open entrances
to investors. In addition, there is preparation of comment box which supports generally
support him to pass hard problems as trend has showed him so with the help of your
organization, the society and him so with the help of your organization, the society and him
families & relatives, he is sure that he passes with a special rank in the field of Cereal
Supply works.

This business has been one of those businesses which are still insignificant in a case of
Kokossa Woreda in one way direction & wide competitions in the coffee which are the
additional supply to the People will do individually that support the project attract those
customers it is with a shortage of finance and the service is based on customers’ needs. If
we get further finance and expand this business he still continues with good
performance in the business.

In general the service given compared with rivals

 He is with a good performance to run the business .

 He respects the promise .
 Quality is our indicative.
 Strong members support in the business .

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 Transparent and reasonable costs to win the business game are his bases in the
competition.

6.3. MAJOR CUSTOMERS

Customers’ differentiation and identification are the basis of business to give the service
as the need of them and to survive in the business game sustainably so there were efforts
exerted to differentiation customers .

6.4. DEMAND MONITORING AND EVALUATION MECHANISMS

One of the methods to monitor and evaluate the business is as follows

 An assessment of national and regional condition

 Gathering customers satisfaction feedback information
 Identify the last users descriptions

Based on the present situation and the above evaluation criteria, the rising of population
growth and the expansion of industrialization and more the agriculture is hold by small
farmers in the future, the societies go to stick with industrialization so it is believable that
the need of coffee supplier increased.

6.5. Market share

There are factors which need to be clearly determined by the firm who run the business
like us/ Coffee Supplly which embrace

 The capacity of rivals

 The number of rivals
 Presentation system

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 Facilities to customers in service delivery and costs are mentioned.

As the preliminary study shows, 50% of the demand of higher level Coffee Supply are still
not covered by business entrant even we only cover 10% from the remaining market share.
Through time we will increase our share up to 40% by expanding our business.

7. SERVICE PROVISION PLAN

The development of infrastructures and the attraction of the kokossa town increase the
numbers of investors who need to build hotel & apartments and contractors who are
employed for. In general, the rises of migrants of our business.

8. BUSINESS STRATEGY

Quality services and efficiency care will be a vital role in promoting the image and all the
services of the organization to this end therefore, various promotion tools will be employed
to communicate with the potential clients so as to maximize the services and the profits
obtained thereof. In order to achieve the envisaged service and rent plan per annum, it
would be necessary to employ various techniques and the business will be utilizing the
following marketing strategic. The unique renting proposition for the firm is that it will be
known as a caring trust worthily firm.

8.1. PROMOTION ACTIVITIES

Advertising as one of its marketing strategy and the firm will advertise its services
through mass media, posters, personnel selling’s, brochures, publicity, community support
services, south FM radio, flying papers and letters to written to various organizations and a
total of birr 20,000 will be allocated to accomplish this task.

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8.2. DIFFERENTIATION STRATEGY

To stay sustainably in the market, the business will pursue a differential strategy. It is by
servicing customers with sustainable supply and setting reasonable costs, customer
demand focus coffee supply outputs which satisfies customers.

The firm is not the first time to get in this business and no representative is assigned so it
helps him to see the need and satisfaction of customers and by which he will continue to
reach to the tip of customers serving in this business.

9. ORGANIZATION AND ITS MANAGEMENT

9.1. STAFFING / EMPLOYEES NEED/

Nothing in business is accomplished without the right numbers, qualification, and

attitude of personnel staffing, in this context it refers to the personnel that will be hired in
the organization during its operation period. The firm, therefore; has decided to hire
necessary labour forces that could carry out the entire business operation smoothly and
successfully. The total number of workers shall be 12 out of which two permanent .

Their salaries and number and professions are given below in the table.

s/n Title No Monthly salary Annual salary

1 Manager 1 6000 72,000
2 Driver 1 6000 72,000
3 Purchaser 1 1500 18,000
4 Accountant 2 3500 84,000
5 Store keeper 2 2000 48,000
6 Cashier 1 1000 12,000
7 Janitor 2 800 19,200
8 cleaner 1 800 9,600
8 Guard 2 800 19,200
Total 12 354,000

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9.2. ORGANIZATIONAL STRUCTURE

This business is not as such a complicated business entity and hence it requires a very
simplified structure with the manager on the top and other workers under her/his.
Nevertheless there shall be amendments where and when the objective situation requires
so, because flexibility has now become the norm of this day to serve customers in a
customized way.

10. FINANCIAL PLAN

OFFICE FURNITURE COST

S/no Descriptions Unit Amount Unit cost Total cost
1 Table No 1 1,200 1,200
2 Shelf No 1 1,500 1,500
3 Chairs No 5 200 1,000
4 Calculating machine No 1 1500 1,500
5 File cabinet No 1 1,500 1,500
6 Cash box No 1 5,00 5,000
11,700

10.2. INITIAL WORKING CAPITAL

Most the time entrepreneur couldn’t convert their assets to cash when they are facing
shortage of operating costs in their businesses. These conditions bring about the failure of
many micro and small enterprises. But entrepreneurs, who have adequate knowledge of
their working capital management in the previous businesses, trusting that respectable
organization shall provide adequate financial support has already assigned amount in
order to meet obligation when they fall due so that the business can survive adverse
periods and day to day operation of renting individuals and organizations continue
undisturbed.

Generally, it is advisable to keep three to six months’ salary of workers operating expenses
and certain amount of cash on hand to meet current liabilities when they fall due. Hence,
the initial working capital estimated as part of the project cost is give below.

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10.3DEPRECIATION COSTS
A straight line method has been applied to compute the depreciation cost of project which
amounts to be birr 2340.00 per annum as it is described below. The life span is expected as
of ten years in which they are going to be salvaged age.

S/no Descriptions Costs % Depreciation costs

Amount
1 Office furniture 11,700 20% 2,340.00
Total 2,340.00

10.4 REPAIRS & MAINTENANCE, INSURANCE COSTS

S/no Descriptions Costs Depreciation costs Insurance Total
% Amount %
1 Office 11,700 2 234.00 2 234.00 234.00
furniture
Total 234.00 234.00 234.00

10.5 OTHER OPERATING COSTS

S/no Cost description 1st year 2nd year 3rd year
1 Water 1,800 1980 2,178
2 Electric power 1,200 1,320 1,452
3 Telephone and postal 10,000 11,000 12,100
4 Uniform 5,000 5,500 6,050
5 Promotion 20,000 22,000 24,200
6 Housing rent 2,400 2,640 2,904
7 Fuel & lubricant 500,000 550,000 605,000
Total 540,400 594,440 653,884

NB:

 furniture insurance is estimated by 2%

 Total annual costs progress is estimated by 2%

10.6INITIAL WORKING CAPITAL

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N Kind of cost Project year (000)

o 1 2 3 4 5 6 7 8 9 10
1 Salary 354 361 368 376 383 391 325 398 406 415
2 Depreciation 260 265 271 276 281 287 293 298 304 310
3 Repair & maintenance 52 53 54 55 56 57 59 60 61 62
4 Insurance 52 53 54 55 56 57 59 60 61 62
5 Other operating cost 540 551 562 573 585 596 608 620 633 645
Total
1258 1283 1309 1335 1361 1388 1344 1436 1465 1494

The total initial working cost needed to run the business smoothly is about birr
1.258,000.00 birr but we don’t need the entire amount at once. We need only half of this so
that it can be circulated two or more times per year depending upon the market situation
and we trust your organization to allow us obtain the estimated amount and help us
achieve our vision.

11. SOURCE OF FINANCE

The project is planned to be financed by the investor own capital and loans from
local banks. Although the final allocation of equity and loan will depend on the
outcome of negotiation with the bank, reasonable apportionment will be an equity
capital of 50% and remain 50% to financing plan is indicated in the table below.

s/ Total amount Owner’s equity Bank loan

no
3,000,000.00 1,500,000.00 1,500,000.00
100% 50% 50%

11.1 Total revenue summary

The total annual revenue from Vehicle profits are expected as 20% . for different
customers mentioned in the marketing section.

Profit and loss statement

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The firm will get a gross profit from the percentage profit from Vehicle Income : Annual
revenue is expected to grow 5% on the basis of the last year revenue.

Descriptions Years distribution in million birr

1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th
Vehicle income 1.48 1.55 1.63 1.71 1.80 1.89 1.98 2.08 2.19 2.30
profit
Total revenues 1.48 1.55 1.63 1.71 1.80 1.89 1.98 2.08 2.19 2.30

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The whole descriptions of revenues are as follows in the table below.

s/no Expense Year (000000) birr

descriptions 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th
year Year year Year Year year year year year year
1 Revenues 2.809 2.896 2.985 3.082 3.181 3.291 3.4 3.51 3.631 3.762
2 Minus
Operating costs 1.530 1.527 1.526 1.525 1.524 1.524 1.453 1.518 1.519 1.521

3 Profit before tax

1.279 1.369 1.459 1.557 1.657 1.767 1.947 1.992 2.112 2.241
 Tax 35%
0.44765 0.47915 0.51065 0.54495 0.57995 0.61845 0.68145 0.6972 0.7392 0.78435
4 Net annual profit
0.83135 0.88985 0.94835 1.01205 1.07705 1.14855 1.26555 1.2948 1.3728 1.45665

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b. Project cash flow statement

Description Year (birr million)

0 1 2 3 4 5 6 7 8 9 10
Initial owner 1.163
equity
Bank 1.5
loan
Net income - 1.58 1.66 1.74 1.1895 1.248 1.313 1.378 1.443 1.5145 1.5925
Depreciation - 0.260 0.265 0.271 0.276 0.281 0.287 0.293 0.298 0.304 0.310
Total inflow 3.882 1.84 1.925 2.011 1.4655 1.529 1.6 1.671 1.741 1.8185 1.9025
Out flow -
repayment of
loan 0.203 0.203 0.203 0.203 0.203 0.203 0.203 0.203 0.203 0.203
Out flow of
bank interest 0.271 0.244 0.217 0.19 0.162 0.135 0.108 0.081 0.054 0.027
Investment 3.882 - - - - - - - - - -
Total outflow 3.882 0.29 0.27 0.26 0.24 1.00 0.86 0.71 0.57 0.43 0.28
Net inflow - 1.84 1.925 2.011 1.4655 1.529 1.6 1.671 1.741 1.8185 1.9025
Cumulative
cash 2.13 2.20 2.27 1.71 2.53 2.46 2.38 2.31 2.25 2.19

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11. Externalities

Social cost benefit analysis

The project of coffee Supply doesn’t make the society to cost, in fact invisible cost as any
particles creates. But when the real activities become operational, there will be a social
benefits depending up on the size of projects.

The project may benefit the surrounding society with work /job/ opportunities. Once the
activities are operational, the owner employees a minimum of 2 persons in a permanent
and 12-20 Person temporary manner.

Environmental assessment

The project Vehicle is once commenced, it’s environmental impact is very minimum/null
since there is a septic tank for sewages for if there is discharges released from destination.

12. Financial appraisal of the project

The project constriction Hotel must be appraised by the financial analysis results. It is to
determine the viability of the project, likewise, the financial approval of this project is
calculated by the method of benefit cost ration (BCR) & NPV. When BCR> 1 and NPV>, the
project is accepted.

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Net present value of the project at 10 &15 percents (000)

DF factor

DF factor

000 birr
(million

(million

(million
Benefit

benefit

NPV at

NPV at
at 10%

at 15%

15% in
Year

Cost
birr)

birr)

10%
Net
0 0 -2.048 -2.048 1 -2.048 -2.048
1 2.809 1.229 1.58 0.90909091 1.44 0.86956522 1.37391304
2 2.896 1.236 1.66 0.82644628 1.37 0.75614367 1.25519849
3 2.985 1.245 1.74 0.7513148 1.31 0.65751623 1.14407824
4 3.082 1.252 1.83 0.68301346 1.25 0.57175325 1.04630844
5 3.181 1.261 1.92 0.62092132 1.19 0.49717674 0.95457933
6 3.291 1.271 2.02 0.56447393 1.14 0.4323276 0.87330174
7 3.4 1.280 2.13 0.51315812 1.09 0.3759704 0.80036996
8 3.5 1.29 2.22 0.46650738 1.04 0.32690177 0.72572194
9 3.228 0.231 1.94 0.42409762 0.82 0.28426241 0.55090055
10 3.545 0.223 3.31 0.38554329 1.28 0.24718471 0.81917012
12 10

IRR = 15+10 (0.24718471)

IRR= 15+2.4718471

= 17.4718471

IRR = 17.47%

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At the opportunity cost of capital that is at the 16.5 % interest rate, the NPV is above zero
i.e. 10 million birr and hence the project proposal is accepted according to the criteria that
all projects should be accepted for NPV values greater than zero. NPV is in turns reduce
above 15.47% opportunity cost of capital showing that up to that range the project work is
acceptable.

This is a discount rate which equates the present value of future cash flow with the initial
investment. As the graph shows above IRR for this project that makes NPV zero is 15.47%
and this amount are by far greater that the current interest rate (the opportunity cost of
capital) & hence the project is accepted

BCR = NPB/I

12
= = 5.86
2.048

NPV at 15% = 10 – 2.048 = 7.952

Where; B = benefit, c = cost, R = ratio, N=Net, p = present,

V= value, I = initial investment cost

Accordingly; BCR > 1 and NPV > 0 at 15% discount rate; this indicates that the project is
viable at 15% interest rate.

13. CONCLUSION AND RECOMMENDATIONS

We have seen from earlier sections that there is a huge gap in the demand and the supply
for the Vehicle categories planned in this particular project. In fact with the improvements
in the living standard of the people and the growth of regional as the national economy, the
need for high class quality and standard services for various customers shall continue to
increase much more that the present state. This clearly implies that market will not
saturate in the short run due to pressure from competition and also from lack of market
demand.

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However; due to capital shortage & the license, the company could not achieve my strong
ambition to do successful business. If I could obtain support from you, I could easily solve my
problems and the operation of this business activity shall contribute its share to the growth
of the city and furthermore, it will hire 22 employees thereby helping them to become food
secure. I assure you that I am determined to show maximum effort for collective success and
firmly believe that your organization shall officer due support.

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