Feasibility Study

Project name: General Construction Work

Project Promoter: Saketa Temesgen General Construction PLC
Contact Person: Saketa Temesgen +251911898294
Project Location: Finfinne City
Administration, Finfine NSLKK

Consulting firm: ____________________ Consultancy

Contact Address: Tel +251 ____________
Manager Name and Signature _______________

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This feasibility study evaluates the viability of establishing a construction work service in Ethiopia,
focusing on the acquisition and utilization of construction machinery. The study assesses market demand,
technical requirements, financial projections, legal considerations, and potential risks. The primary
objective is to determine whether purchasing or leasing construction machinery is the most viable option
for Saketa Temesgen General Construction. The findings suggest that the project is financially feasible,
with a strong potential for profitability, given the growing demand for construction services in Ethiopia.
Recommendations include a phased approach to acquiring machinery, focusing on high-demand
equipment, and securing financing through a mix of equity and loans.

Ethiopia's construction industry has experienced significant growth in recent years, driven by
infrastructure development, urbanization, and government-led projects. The demand for construction
services is expected to continue rising, particularly in sectors such as housing, roads, and industrial
parks. This growth presents a lucrative opportunity for construction companies to expand their
operations by investing in modern machinery.

The purpose of this study is to assess the feasibility of establishing a construction work service, focusing
on the acquisition of construction machinery. The study will evaluate market demand, technical
requirements, financial viability, and potential risks associated with the project.

The study covers the following areas:

 Market analysis to determine demand for construction services.

 Technical feasibility of acquiring and operating construction machinery.
 Financial analysis, including cost projections, revenue forecasts, and funding requirements.
 Legal and regulatory considerations for operating construction machinery in Ethiopia.
 Risk assessment and mitigation strategies.
 Social and environmental impact of the project
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The demand for construction machinery in Ethiopia is driven by several factors, including:

 Infrastructure Development: Government-led projects such as roads, railways, and industrial

parks.
 Urbanization: Rapid urban growth leading to increased demand for housing and commercial
buildings.
 Private Sector Growth: Expansion of private construction companies and real estate developers.

The local market for construction machinery is competitive, with several suppliers and leasing companies
offering a range of equipment. Key competitors include established construction firms and machinery
rental companies. However, there is still room for new entrants, particularly those offering specialized
services or high-quality equipment.

The primary target market includes:

 Government Projects: Large-scale infrastructure projects funded by the government.

 Private Developers: Real estate developers and construction companies.
 International Organization: NGOs and international agencies involved in development projects.

The following machinery is essential for the proposed construction work service:

 Excavators: For digging and earthmoving.

 Bulldozers: For land clearing and grading.
 Cranes: For lifting heavy materials.
 Concrete Mixers: For on-site concrete production.
 Compactors: For soil compaction

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  Pros: Lower upfront costs, flexibility to upgrade equipment, reduced maintenance responsibilities.
 Cons: Higher long-term costs, limited control over equipment.

 Pros: Full ownership, potential for long-term cost savings, ability to rent out equipment.
 Cons: High initial investment, responsibility for maintenance and repairs.

Availability of spare parts and technical support is critical for the smooth operation of construction
machinery. Local suppliers and service centers should be identified to ensure timely maintenance and
repair services. Additionally, training programs for operators and technicians will be necessary to ensure
safe and efficient use of the equipment.

The total cost of acquiring construction machinery (either through purchase or leasing) is estimated at
10,000,000 (ten million). Operational costs, including fuel, maintenance, and labor, are projected to be 3,
000, 000, (three million) annually.

Revenue will be generated through:

 Renting Out Machinery: Income from leasing equipment to other construction companies will be
expected at 5,000,000 (Five million)
 Project Contracts: Revenue from using the machinery for in-house construction projects will
expected at 10,000,000 Ten Million)

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The total investment required is estimated at 8,000,000. Potential sources of funding include:

 Equity: Owner's investment…. 2,400,000

 Loans: Bank loans or other financing options… 5,600,000

The break-even point is expected to be reached within 15,000,000 (fifteen millions), based on projected
revenue and costs.

The project is expected to generate a profit margin of 35%, with a return on investment (ROI) of 70%
over 5 years

Operating construction machinery in Ethiopia requires various licenses and permits, including:

 Business License: Issued by the relevant local authority.

 -Equipment Registration: Registration of machinery with the appropriate government agency.

Tax obligations include:

 Income Tax: On profits generated from construction services.

 VAT: On equipment purchases and rental income.

The project must comply with local construction and environmental regulations, including:

 Safety Standards: Ensuring safe operation of machinery.

 Environmental Regulations: Minimizing the environmental impact of construction activities.

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  Fluctuations in Demand: Changes in government policies or economic conditions could affect
demand for construction services.
 Competition: Increased competition from other construction companies.

 Machinery Breakdowns: Equipment failures could lead to project delays and increased costs.
 Lack of Skilled Operators: Difficulty in finding trained operators could impact project efficiency.

 *Currency Fluctuations: Changes in exchange rates could affect the cost of imported machinery.
 Inflation: Rising costs of fuel and labor could impact profitability.

 Insurance: Comprehensive insurance coverage for machinery and operations.

 Maintenance Plans: Regular maintenance to prevent equipment breakdowns.
 Diversification: Offering a range of services to reduce reliance on a single revenue stream.

The project is expected to create employment opportunities for:

 Operators: Skilled and semi-skilled operators for construction machinery.

 Technicians: Maintenance and repair technicians.

The project will implement measures to minimize environmental impact, including:

 -Emissions Control: Using machinery with low emissions.

 Waste Manage waste Proper disposal of construction waste

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The project will be implemented in phases over with the following key milestones:

 Phase 1: Acquisition of machinery From March to April/2025.

 Phase 2: Recruitment and training of operators Up to May 2025
 Phase 3: Commencement of operations will be started from May 2025

The project will require the following resources:

 Human Resources: Operators, technicians, and administrative staff.

 Financial Resources: Funding for machinery acquisition and operational costs.
 Technical Resources: Maintenance and repair facilities.

Key performance indicators (KPIs) will be used to track progress, including:

 Revenue Growth: Monthly and annual revenue targets.

 Equipment Utilization: Percentage of machinery in use.

**Customer Satisfaction: Feedback from clients.

The feasibility study concludes that the establishment of a construction work service is a viable and
profitable venture, given the growing demand for construction services in Ethiopia. The project is
expected to generate significant revenue and create employment opportunities.

 -Proceed with the Project: The project is financially feasible and aligns with market demand.
 Focus on High-Demand Machinery: Prioritize the acquisition of machinery that is in high demand,
such as excavators and Sino Truck.
 Secure Financing: Explore a mix of equity and loans to fund the project.

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  Implement Risk Mitigation Strategies: Ensure comprehensive insurance coverage and regular
maintenance of machinery.

 Income Statement

Name: Saketa Temesgen General Construction

Income Statement 2025

Birr
Total Income & Loss

Income From Sale 49,000,000.00

Deduct. inventory 0

Total Income 49,000,000.00

Total Cost

Direct Labor cost 6,360,000.00

Direct Material Cost 10,000,000.00

Total 32,640,000.00
Indirect Cost 24,175,000.00

Indirect Labor Cost 18,000,000.00

Depreciation cost 300,000

Post -
Water 75,000.00

Office Rent 0

Other 5,800,000.00

Total 8,465,000.00

Laon Repayment 1,600,000.00

Income Before Tax 6,865,000.00

Tax Deducted 2,384,750.00

Net Profit
4,480,250.00

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  Cash Flow

Month 1 2 3 4 5 6 7 8 9 10 11 12
Cash on hund 300,000.00 89,000.00
Cash at Bank 2,500,000.00
Cash from sale 415,000 415,000 8,160,000 8,160,000 8,160,000 8,160,000 8,160,000 8,160,000 8,160,000 8,160,000 8,160,000 8,160,000
Other/Loan 6,000,000.00
Total 9,215,000.00 504,000.00 8,160,000.00 8,160,000.00 8,160,000.00 8,160,000.00 8,160,000.00 8,160,000.00 8,160,000.00 8,160,000.00 8,160,000.00 8,160,000.00
Direct material cost 116,000.00 116,000.00 116,000.00 116,000.00 116,000.00 116,000.00 116,000.00 116,000.00 116,000.00 116,000.00 116,000.00 116,000.00
Direct Labor cost 530,000.00 530,000.00 530,000.00 530,000.00 530,000.00 530,000.00 530,000.00 530,000.00 530,000.00 530,000.00 530,000.00 530,000.00
Indirect cost 480,000.00 480,000.00 480,000.00 480,000.00 480,000.00 480,000.00 480,000.00 480,000.00 480,000.00 480,000.00 480,000.00 480,000.00
Loan Repayment 384,000.00 384,000.00 384,000.00 384,000.00
Fixed asset cost 8,000,000.00
Total cost 9,126,000.00 1,126,000.00 1,510,000.00 1,126,000.00 1,126,000.00 1,510,000.00 1,126,000.00 1,126,000.00 1,510,000.00 1,126,000.00 1,126,000.00 1,510,000.00
Total Cash Folw 89,000.00 -622,000.00 6,650,000.00 7,034,000.00 7,034,000.00 6,650,000.00 7,034,000.00 7,034,000.00 6,650,000.00 7,034,000.00 7,034,000.00 6,650,000.00

 Bank Statement Attached

11.2 Legal Documents and Permits

Copies of relevant legal documents and permits required construction service was attached