Business Plan For Truck vehicle

To: Abay Bank share company

Business plan for vehicle

Prepared BY: MTZ Trading PLC

(Tewodros Zergaw Aschalew, General Manager)

Addis Ababa, Ethiopia

December, 2023
 Business Plan For Truck vehicle

Contents
Executive summary...................................................................................................................1
INTRODUCTION...........................................................................................................................1
Current Transport business in Ethiopia.........................................................................2
GENERAL BACKGROUND OF TRANSPORT BUSINESS...............................................3
STREANGTH, WEAKNESS, OPPORTUNITIES AND THREATS OF THE
BUSINESS.........................................................................................................................................3
ABOUT THE PROMOTERSS......................................................................................................4
OUR VALUES...................................................................................................................................4
VISSION, MISSION AND GOALS...........................................................................................4
OBJECTIVES.....................................................................................................................................5
ORGANIZATIONAL STRUCTURE............................................................................................5
KEY RISK FACTORS.....................................................................................................................5
FINANCIAL ANALYSIS................................................................................................................6
FINANCIAL RESULTS..................................................................................................................6
APPENDIX........................................................................................................................................8
RECOMENDATION......................................................................................................................9
 Business Plan For Truck vehicle
Executive summary
MTZ Trading PLC is a share company business which is established to engage in dry cargo
transport business. In Ethiopia 90% of freight transportation both in the import and export
sectors and 95% of the public transportation services are provided by the road transport
branch.
The Ethiopian government imports on average 2.5 to 4 million tons of dry bulk cargo (grain,
Fertilizer, coal, and sugar) annually. The Country spends about ETB 6 Billion on average for
sea transport, port service and haulage to inland destinations.
The country annual import cargos have reached 14 million tons. This amount can be
classified as; Containerized: 3.2 million metric tons, which is 23%, Dry bulk: 4 million tons,
28% , Petroleum products: 4.1 million tons, 29%, Steel and other general cargoes: 2.9 million
tons, which is about 20%. Ethiopia's export cargo has reached 2 million tons annually, with
an estimated annual export cargo of 65,000 containers or 1.3 million tons through the port of
Djibouti. But the government of Ethiopia is strongly working to diversify the import and
export gateway other than Djibouti port with different ownership modality.
This will diversify the sol transport corridor, Addis Ababa-Djibouti, in to multiply ways. In
addition the recently china- Africa road belt project is also under progress that will increase
the connectivity of different nations of Africa through road way.
As a result, the applicant decided to participate in the transport sector considering the
untapped market share.
INTRODUCTION
Ethiopia is now going through a constant multifaceted economic growth and
transformation. Ethiopia is improved economic infrastructure, abundant and affordable
labor along with its excellent climate and fertile soil remains the country comparative
advantage attracting investors.
Transport system is a key element in logistics chain it join the separated activities. Freight
dry transportation is the processes of conveying different types of goods from one point to
another using a Varity of transport modes. Freight transportation plays a vital role in the
economy because it connects suppliers, distributors, and vendors. It also strengthens the
business competitiveness of a country. In supply chain and logistics activities inefficiency is
one of the activities which can be exhibited in terms of higher cost, delay and
unpredictability in delivering the product and service to the customer in turn impacts
economic growth of a country. Freight delay happens when time taken to transport good

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from one point to another exceeds what is reasonable under the circumstances and this problem
has been an increasingly severs issue. Reasonable time is the amount of time which is
meant for the transport of good from the point of departure to the point of destination,
considering normal condition and using concrete means of transportation.
A deviation from normal conditions can be force majeure or some other reason, not caused
by the carrier times saving during transportation lead to a reduction in the resource required to
perform a given volume of output. The underdevelopment of logistics management system,
inadequate fleets of vehicle or means of transport for good, cargo and trucks congestions,
lack of coordination of good transport, organization and management tools that are required to
promote intermodal system and due to lack of conceptual understanding of how an
intermodal system should operate the unavailability of well —equipped garages, the
inability of taking immediate action for maintenance of roads. Shortage of different
facilities, poor cargo handling and cargo transport equipment shortage within the port, lack of
efficiency of customs office and inadequate and unavailable infrastructure are some of the
causes of freight delay while transporting from the origin to some other destination. In
addition to direct costs to trucks, time delays in logistics can create indirect costs
The investment cost which includes the purchase cost and other cost necessary to make the
Sino Truck Howo available for operation will be 7,400,000.00 This investment cost will be
financed from internal (equity) and external (bank loan) sources with a share of 3,700,000.00
respectively.
As a result of the favorable policies and attractive incentive of the government on the one
hand and un end business opportunity of the transport sector on the other hand the owner
MTZ Trading PLC engaged in the transport business to fulfill its demand by acquiring Sino
truck
Based on the financial viability, economic acceptability and social desirability, it is
advisable that the project be implemented and commendable for financing.
The general objective of this study is to assess the gap between demand and supply of
transport sector and measure profitability of investing on the sector mainly on irrigational
activities.
Current Transport business in Ethiopia
As it was stated in the above discussion the transport sector is yet protected for Ethiopian
investors. But recent practices and the national logistics strategy clearly put to liberate the
sector for foreign investors also. Especially the intervention of a private multimodal agent
with possibly in different business relationship modalities and the government work to allow
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the inland dry port service in line with the multimodal operation may have a great
contribution towards making the freight transport sector more efficient through creating a
competitive business environment.
Currently the cross border freight transport operation with multimodal agreement is
monopolized by the governmental organization, ESLSE. All enterprises engaged on the cross
border freight transport are dealing with the sol multimodal agent as far as the movements are
under multimodal agreement for destinations to the dry port facilities or bonded warehouses.
This is not the same in case of uni modal agreement.
Currently there are 12,766 number of truck with average carrying capacity of 40 tons and
around 57% of them are more than 10 years life time. The country imported goods amount to
be reached more than 16 million ton and it's believed to go beyond it in the year afterward.
The current operational measurement indicators of the freight transport like the average turn
round and annual distance coverage are 2.5 and 50,000KM consecutively as per the UNDP
report. To satisfy the current market requirement of trucks with the current import amount is
estimated to be more than14, 000 trucks. This number is subjected for change as the freight
amount increases and the more the life time of trucks in the industry increases the less the
GENERAL BACKGROUND OF TRANSPORT BUSINESS
In a country with so much great potential like Ethiopia, much more economic, and
social development is expected .With the government five year strategic plan it would be
wise to be part of the economic development so as to contribute as much a person can and
get benefited in the process.

MTZ Trading PLC engaged in transport business; which highly demand business
activities. Thus, the acquired cargo truck become input for the established business and will
have a great business return.
STREANGTH, WEAKNESS, OPPORTUNITIES AND THREATS OF THE
BUSINESS
Generally, every business has its own strength and weakness to its internal-environment
and opportunities and threats to the external environment.
Strength:-The promoters grew up in a family that has strong business background in
diversified business like transport business. So managing this and other business is simple to
the business.
Weakness:-It is expected that limited financial resource that limits the promoters from having
more diversified business in order to provide more service and a better share in the business.

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Opportunities;-Government has been devising various conducting working environment
towards private investment. So since the government policies in transport and the like are
attractive the project is feasible.
Threats: Political instability at different site of the country.
ABOUT THE PROMOTERSS
The owner licensed and engaged in the business after assessing the positive return of
the sector the short term of the plan promoter is to buy one unit cargo Sino truck to
develop and facilitate in this business. Strong business relationships will establish with
client in the future makes the company profitable. More to the point currently the new
government policy on the business is also conductive.
OUR VALUES
 Quality
 Continuous Improvement
 Customer focused
 Stability and Flexibility
The promoter has committed to undertake business with the following core value
Quality: We have no reservation for quality. Qualities have no end and always strive for
-

the best
Continuous Improvement: In all aspects of the business we strive to innovate, improve
-

and apply the best possible practicable principles.

Customer focused: Customer is our primary concern because we know we can only
-

survive so long as our efforts to satisfy customers at last to the extent of their minimum
expectations.
Stability and Flexibility: We ensures both stability to keep consistent excellence in the
-

business and. flexibility to adjust the operation in accordance with the prevailing changes
VISSION, MISSION AND GOALS
VISSION
To be a prominent and very successful in the transport business by delivering better
production at a very reasonable price to the market Play a great role in filling the gap
between demand and supply is part of the development process along with good marketing
strategies.
MISSION
The mission of the business is to be the leading transport servicing of the country.
Continuing what we have started, showing the society that it is possible to get individual

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benefit while contributing to the nations development endeavor and improve the living
standards of the society by creating more jobs.
OBJECTIVES
Knowing goals and objectives is about where like to the company in some future time. So
that would take the correct direction and set off action that would take us to where we would
like to be in the lowest possible cost and high level of production so as to satisfy the existing
demands.
The general objectives of this study is to assess the gap between demand and supply of
transport business and measure profitability of investing on the sector mainly on investing on
transport sector through both irrigation and through rain base activities. This study is aimed
to show the gap between demand and supplies of the transport business and to become
confident on investing such business.
SPECIFIC OBJECTIVES
The business was established by aiming the following specific objectives:-
 To become profitable on the sector
 To contribute something for the country growth
 To create job opportunities
 To increase transport service Excellency to reduce poverty
 To support the government for the new five year growth and transformation plan.
ORGANIZATIONAL STRUCTURE

Organizational structure of MTZ Trading PLC business is structured in simple way so as to

minimize the cost. The promoter is the general manager of the business. The general manager
is responsible for the overall operation.
KEY RISK FACTORS
FINANTIAL RISK

One of the factors that determine the success of any business is finance which is considered
to be the major one. Since source is from internal equity and bank loan such risk would be
easily minimized.
MANGAMENT RISK

Management ability to direct the activity of the business and make decision that determines
the success of the entity.

BUSINESS RISK

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The sector and type of service supplied determine the success of any business. Because
sector dictates the type of government support needed and provided; with its major role in
the development of a nation and social development it brings to the society, business is
highly government supported and currently it is highly booming.
OPERATIONAL RISK

We recognize the fact that there is an inherent risk in vehicle operation. Any damage to
vehicle may undermine the profitable of the company. To reduce this risk we maintain all
necessary insurance.
COLLATERAL
The collateral will be the acquired SINO TRUCK from the supplier Yilkal yenesew import
&export, which has total Pro forma Value of Birr 7,400,000.00

FINANCIAL ANALYSIS
He has planned to cover about 50% of the cost of the Truck for the assumed Freight dry
Truck purchase and the remaining is assumed to get loan from local Bank.
FINANCIAL RESULTS
In order to see the financial viability of the project, the operating costs, projected income
statement and the projected cash flow tables are prepared and presented
(See Appendix for all computations)
Profitability
The financial statement, which is prepared based on the projected financial statements,
reveals that the project would generate a net profit throughout its five year life ranging from
Birr 456,574.54 in the first year to Birr 1,357,883.29 at the five years end. The net cash flow
is also positive throughout the project years. Therefore, we can conclude that the project will
not face any cash shortages throughout its life.
Cash Flow Statement for Financial Planning

The financial performance of the project shows good financial capacity and positive cash
balance. The net cumulative cash flow of the project increases from Birr 840,940.47 in the
first year to Birr 7,455,990.80 By the end of five year. The project is liquid throughout its
projected life and it can meet debt obligation from the profit it generates.
Assumptions and facts
Project life assumed is 5 years

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The investment required is assumed to be financed by equity and bank loan; birr
3,700,000.00 from take and the rest 3,700,000.00 from own source.
Income tax of 35% is assumed in line with the tax proclamation Fuel expense is assumed to
be 25% of the total revenue.
Average repair and maintenance cost is assumed to 230,000 per year with 5% annual
increase. This cost include tire and inspection fee.
Annual insurance premium is assumed to be 1.5% of the total investment.
Salary for main driver and assistance is assumed to be birr 9,500.00 and 7,000.00. In
addition, daily allowance is Birr 200 and 150 per day for the driver and respectively with 5%
annual increment.
The economic life of the truck is assumed to be five years; i.e. truck will depreciate at 20% of
the original cost per year.

Interest is assumed to be 19.75 % per annum and Quarterly loan repayment is assumed.
The bank loans are to be paid back in 20 quarterly installments.
Revenue
 The economic life of the vehicle is assumed to be 5 years.
 The vehicle is assumed to be work for 11 months in a year, six trips per month,
 The vehicle income for single trip assumed to Birr 48,000.00. Therefore, income from
the truck for the first operating year is Birr 3,168,000.00. Income is assumed to
increase at 11% per year though the project life.

APPENDIX
MTZ Trading PLC Transport Business
Depreciation and amortization schedule

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Cost Item Original cost Rate Year 1 Year 2 Year 3 Year 4 Year 5

Heavy truck 7,400,000.00 20% 1,480,000.00 1,480,000.00 1,480,000.00 1,480,000.00 1,480,000.00

Total 1,400,000.00 1,480,000.00 1,480,000.00 1,480,000.00 1,480,000.00 1,480,000.00

MTZ Trading PLC Transport Business

Projected Income/Loss Statement
Years

1 2 3 4 5
Description
Revenue From Vehicle 3,168,000.00 3,516,480.00 3,903,292.80 4,332,655.01 4,809,247.06

Total Revenue 3,168,000.00 '1,516,480.00 3,903,292.80 4,332,655.01 4,809,247.06

Expenses

Repair & Maintenance 230,000.00 241,500.00 253,575.00 266,253.75 279,566.44

Fuel, oil and lubricant 792,000.00 879,120.00 975,823.20 1,083,163.75 1,202,311.76

Salary and Perdium 325,750.00 342,037.50 359,139.38 377,096.34 395,951.16

Insurance 46,500.00 46,500.00 46,500.00 46,500.00 46,500.00

Depreciation expense 760,000 760,000 760,000 760,000 760,000

Interest expense 339,019.94 287,785.67 226,248.16 152,335.40 63,558.79

Total expense 2,493,269.94 2,556,943.17 2,621,285.74 2,685,349.24 2,747,888.15

Profit before tax 674,730.06 959,536.83 1,282,007.06 1,647,305.77 2,061,358.91

Less: Tax 218,155.52 317,837.89 430,702.47 558,557.02 703,475.62

Net Income 456,574.54 641,698.94 851,304.59 1,088,748.75 1,357,883.29

MTZ Trading PLC Transport Business

Cash Flow Statement for Financial Planning

Description 1 2 3 4 5

Profit 3,168,000.00 3,516,480.00 3,903,293.00 4,332,655.00 4,809,247.00

Equity 3,700,000.00

Bank Loan 3,700,000.00

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Depreciation 760,000.00 760,000.00 760,000.00 760,000.00 760,000.00

Total Cash In Flow 7,728,000.00 4,276,480.00 4,663,293.00 5,092,655.00 5,569,247.00

Cash Out Flow

Fixed Asset 7,400,000.00

Cost Of sales -

Operating Expenses 2,493,269.94 2,556,943.17 2,621,285.74 2,685,349.24 2,747,888.15

Loan Repayment 254,769.65 306,003.93 367,541.44 441,454.18 530,230.80

Interest Payment 339,019.94 287,785.67 226,248.16 152,335.40 63,558.79

Total Cash Outflow 6,887,059.53 2,937,356.67 3,016,411.24 3,098,946.89 3,164,621.70

Net Cash Flow 840,940.47 1,125,747.23 1,448,217.66 1,813,516.18 2,227,569.26

Cumulative Cash Flow 840,940.47 1,966,687.70 3,414,905.36 5,228,421.54 7,455,990.80

RECOMENDATION
The projected income statement indicates that the project is profitable throughout its life.
The projected financial performance of the project also shows excellent financial capacity
and positive cash balance. Besides, the discounted cash flow shows cash surplus
throughout the project life and the financial internal rate of the project is higher than the
cost of capital.
The project gauged against various parameters was assessed by varying the most
significant parameters and the result shows that the project can accommodate any price
or cost variations without significant implication on the profitability of the project.
Therefore, based on the forecasted overall financial analysis, we conclude that MTZ
Trading PLC freight dry transportation business that shall results improvement of
the development sector is supported and viable and worthwhile for implementation.

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