WHOLESALE OF CONSTRUCTION MATERIALS, RENTAL OF CONSTRUCTION MACHINERY & BUILDING CONTRACTOR

BUSINESS PLAN

FOR

ABDELA YIMAM SEID

(WHOLESALE OF CONSTRUCTION MATERIALS, RENTAL OF
CONSTRUCTION MACHINERY & BUILDING CONTRACTOR)

BUSINESS PROMOTER: ABDELA YIMAM SEID

CONTACT PERSON: ABDELA YIMAM SEID, TELE: +251910-08-00-04
BUSINESS LOCATION: AFAR REGION, SEMERA CITY, BURAYU TOWN
CONSULTANT FIRM:
HASHIM TUNE AUTHORIZED ACCOUNTANCY AND MANAGMENT CONSULTANCY SERVICE
Consultant Name: Hashim Tune (Asst. Professor)
PHONE NO: +251913-31-50-38/+251917-73-10-52 Email-hashimtune@gmail.com

JUNE, 2024
SAMARA, AFAR, ETHIOPIA
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Table of Contents
Executive summary ...................................................................................................................................... iii
1. Introduction ....................................................................................................................................... 1
2. Background and Description of the Business ................................................................................... 2
2.1 Product Description ...................................................................................................................... 2
2.2 Business Type ............................................................................................................................... 1
2.3 Operational History of the Promoter & Business ......................................................................... 1
2.4 Vision, Mission and Goal of the business ..................................................................................... 2
2.5 Business Keys to Success ............................................................................................................. 2
2.6 Rationale for this Business............................................................................................................ 3
2.7 Credit history and Status of the Promoter ..................................................................................... 3
2.8 Purpose and Amount of Loan Requested ...................................................................................... 4
2.9 Products and Services Application ............................................................................................... 4
2.10 Infrastructure Facilities ................................................................................................................. 4
2.11 Economic Contribution of the business ........................................................................................ 4
3. Industry Overview or Synopsis of the sector .................................................................................... 4
4. Market Analysis .............................................................................................................................. 13
4.1 Marketing strategy ...................................................................................................................... 14
4.2 Business Competition Analysis .................................................................................................. 14
4.3 Pricing and Distribution .............................................................................................................. 15
4.4 The target consumers and suppliers to the Business ................................................................... 15
4.5 Risk Analysis .............................................................................................................................. 15
5. SWOT Analysis .............................................................................................................................. 16
6. Technical Study (Capital Assets owned by the business) ............................................................... 17
6.1 Office Equipment ........................................................................................................................ 17
6.2 Fixed Asset and Machinery......................................................................................................... 17
7. Organization and Management Plan ............................................................................................... 18
7.1 Managerial personnel .................................................................................................................. 18
7.2 Organizational structure .............................................................................................................. 19
7.3 Human Resource Requirement ................................................................................................... 19
8. Financial Study ............................................................................................................................... 20
8.2 Important Assumptions on Financial Plan .................................................................................. 20
8.3 Financial Requirement ................................................................................................................ 20
8.3.1 Purchase and Revenue Plan ................................................................................................ 21
8.3.2 Operating Expense .............................................................................................................. 22
8.3.3 Depreciation Expense ......................................................................................................... 23
8.3.4 Loan Repayment Schedule & Interest Expense .................................................................. 23
9. Financial Analysis/ Feasibility ....................................................................................................... 24
9.1 Projected Income Statement........................................................................................................ 24
9.2 Projected Balance Sheet .............................................................................................................. 25
9.3 Projected Statement of Cash Flow .............................................................................................. 25
10. Overall Project Investment Decision .............................................................................................. 26
11. Socio-economic Benefits of the Project .......................................................................................... 28
12. Conclusion ...................................................................................................................................... 28
13. Recommendation ............................................................................................................................ 28

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Executive summary

This business plan is prepared by Abdela Yimam Integrated business in order to expand the
existing Integrated Business and provide quality product and services by getting loan from
Commercial Bank of Ethiopia (CBE) in Afar Regional State, Samara City Administration. The
owners will use the loan to buy different construction materials from importers and
manufacturing company and sale to wholesalers, retailers, contractors and use in own
construction service by the promoter and additionally plan to purchase own vehicles which will
be used in wholesale of construction materials.

In order to do so, the business will require a working capital of Br. 92,035,534.38. Out of this
cost, 33% (Br. 30,000,000.00 Term Loan) will be obtained from commercial bank of Ethiopia at
yearly interest rate of 14.5%, while the remaining 67% (Br. 62,035,534.38) will be handled by
the owner i.e the owner will manage the cash shortage by frequently re-using the money because
the businesses is liquid in its nature.

The ideal ecological and geographical area of the business; abundantly availability of skilled,
semi-skilled and unskilled human resource, existence of demand for the product and service in
the business area, accessibility of utilities like telephone and water, proximity and availability of
all needed facility to undertake the business in the area is the main opportunities.

The market analysis of the project carried out in line with need of construction materials by
householders, contractors, retailers, wholesalers and others are flourishing from time to time
which indicates that there is good demand for high quality construction materials in the area.

Regarding the economic contribution of the business, it will create job opportunity for 30
permanent employee and 100 daily laborers for the construction service from local communities
and generate an average income tax of Br. 8,701,109.29 for the government which has significant
contribution to the economic growth of the country.

Finally, it is highly recommended to implement the business by obtaining the loan from
commercial bank of Ethiopia being the business is financially, economically, and socially
feasible.

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1. Introduction
This business plan envisages on the expansion of the existing business (wholesale trade of
construction material, building contractors & construction materials & vehicles renting service)
geographically, increase product & service volume and market share. The current increments on
demand of wholesale trade of construction material, building contractors & construction
materials & vehicles renting service motivate the business owner to expand the business
operation to different area of the country and to provide quality product & service to the local
and international customers.

The current fast and dynamic economic growth of Ethiopia especially in urban area necessitates
equivalent growth of building and construction sector. The sector should expand rapidly to
support the overall economic development sustainable.

The country’s decentralized state based economy, privatized and free market economy; good
governance creates a favorable environment for the development of investment for private
investors on construction which increase the demand of construction materials, contractors and
rent of construction machinery (Vehicles).

A construction material is any substance used in building a structure. There are many types of
building materials used in construction such as Concrete, Steel, Wood and Masonry. Each
material has different properties such as weight, strength, durability and cost which makes it
suitable for certain types of applications. The choice of materials for construction is based on
cost and effectiveness to resisting the loads and stresses acting on the structure.

The construction industry is rapidly growing, and so is the need for building materials, building
contractors & construction machineries rent. There are, therefore, many modern construction
materials & construction machinery adopted to make a Business successful. Construction
planners need to analyze their choice of building materials to find which material works best
during a Business’s planning phase. Suppliers also play a vital role in the quality of materials,
and you should choose a good supplier and work with them for the timely delivery of your
materials. Building materials can generally be divided into two categories: Natural building
materials such as stone and wood, and Man-made building materials such as concrete and steel.
Both categories usually require a certain level of preparation or treatment before the use in a

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structural application. So, the promoter is engaged in wholesale trade of man-made construction
materials, renting of construction materials and building construction service.

The most commonly provided & used construction materials are Cement, different size of
reinforcing bar and others. The construction machineries which are provided to contractors
through rents are water tanks truck, cobra car and other machineries. Additionally the promoter
of the business is professionally licensed building contractor since 2009 E.C
Since there is few such kind of business station in the City to accommodate the existing demand
of these products and service in the City and the surrounding areas. The mismatch between the
demand for and supply of such kind of products & services is easily observed in the City.
Therefore, the existing shortage or absence in the supply of the products & services, along with
its quality and quantity, better location and infrastructure access, escalating trend of urbanization
and business activities, thus it is with such reason that this business is identified and proposed
and assumed to be more profitable.

Therefore the promoter of this business Abdela Yimam coming to the industry and working more
to reduce the gap and currently plan to expand the operation and market of the product & service
to different local area and international market.
2. Background and Description of the Business

2.1 Product Description

The enterprise’s products & services are wholesale trade of construction material, general
contractor, construction machinery & vehicles renting service. Abdela Yimam Integrated
business provides the following major product to the market. This includes:
i. Wholesale trade of Construction materials:
Locally Produced (Cement) Imported (Reinforcing bar)
ii. General Contractor:
Building Road
Bridge & dam Others
iii. Rental of Construction Machineries & Vehicles
Water tank truck (Bote) Other machinery
Vehicles (Pickup & cobra car)

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2.2 Business Type

Abdela Yimam Integrated businesses are established and operating in Afar Region, samara
Town. The businesses are initially started by the young entrepreneur Abdela Yimam, which was
now grown to a large business scale with a huge capital investment in engaging different
business sectors. The business is a soleproprietership which is established by the Owner namely;
Abdela Yimam and currently undertake the following licensed business type:
 Wholesale trade of Construction materials
 General Contractor
 Rent of Construction Machineries & Vehicles
In the long run the promoter has planned and in process to undertake the following business:

 Import of Construction Materials

 Mining of Salt
 Dry Transportation Service & Others

2.3 Operational History of the Promoter & Business

Mr. Abdela Yimam is an educated domestic investor in Ethiopia and he is Nile Insurance
Manager in Afar Samara town and additionally participating on different business. He has been
engaged in the business since the last 8 years. During the last 8 years the business under take
construction materials wholesale trade, general contractor, rent construction machinery &
vehicles to the needy in afar region and Ethiopia. Now he/the promoter has a plan to increase the
volume of product/service and broaden the market share to the country level and to launch
different type of business in different area of the country. Accordingly, the business promoter
has invested a huge capital in the above listed business and others.

Undertaking several business types primarily will contribute to the enhancement of own capital
appreciation and country economy. Therefore Abdela Yimam Integrated business is flourished
and is currently operating at profit. Currently the owner plan to expand the existing business to
new market and new improved products. So, to finance the above listed business bank loan is
requested/expected from commercial banks of Ethiopia.

By this time this business plan is prepared in order to clearly provide the business future
operational plan in reference with the above business activities.

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2.4 Vision, Mission and Goal of the business

2.4.1 Vision of the Business

Abdela Yimam Integrated business aspires to be one among the top suppliers of quality
construction materials, sufficient construction machinery & vehicles provider through rent and
competent general contractor in Afar & other Ethiopia market.

2.4.2 Mission of the Business

Abdela Yimam Integrated business mission is to provide high quality product & service through
committed workers in an environmentally sustainable manner to ultimately satisfy the need of
domestic and international markets and finally generate profit to the wealth of the firm.

2.4.3 Goal of the Business

The goal of this business is
 To generate sustainable profit by boosting the wholesale trade of construction materials in
most part of Ethiopia and increases the number of customers served by the firm.
 To generate sustainable profit by boosting the rent of construction machineries & vehicles in
most part of Ethiopia and increase the number of customers served by the firm.

 To expand the boundary of construction work throughout the country and increase the
number of customers served by the firm
 Thereby to create employment opportunity for individuals residing in and around the district
and other areas based on the availability of expertise and experts.
 Pooling an individual who have investment imitative and capital and professionals come
together for mutual benefit and community as well
 To make chains products of the business with others all over the tertiary and other places
where there is shortage.
 To provide different products to customer at fair and affordable price

2.5 Business Keys to Success

The keys to success for Abdela Yimam Integrated business were:
Create a comfortable environment at which market of different product & service of the
above listed business type is reached to domestic customers

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Provide high quality products and services to the domestic customer

Establish a loyal core to the domestic customer
Providing a high quality product by using the local and international inputs
Providing a high quality & fast service by using modern construction materials, vehicles
and highly competent professional employees
Seek to motivate and energize the customer base to generate their own culture and events
on our products & service
Hiring highly competitive and professional staffs that bring an overall organizational
performance to be enhanced
Updating the organization timely to the market and the likes.

2.6 Rationale for this Business

How your housing, infrastructure, and other facilities are grown or raised can have a major
impact on your mental and emotional health as well as the environment. Thus, engaging in
construction sectors business will be a luqirative business where the owner will benefit himself
and his country at large.

In order to smoothly run the above stated licensed business type and to meet the stated objective
the promoter has set to expand the existing business operation and add additional business
venture through additional loan based financing.

2.7 Credit history and Status of the Promoter

Abdela Yimam Integrated business is a Sole proprietorship business. It has a vision to be the
leading construction material distributor and supplier, contractors and construction machineries
& vehicles in Ethiopia. The promoter of the business has credit history with many other banks
and has good payment performance but has no credit history with commercial bank of Ethiopia
here before but currently he want to be the customer of commercial bank of Ethiopia. To check
further the credit history of the promoter, the financier will request CIC report from National
bank of Ethiopia Credit center.

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2.8 Purpose and Amount of Loan Requested

The loan is requested for further expansion of the current business operation and thereby deemed
to satisfy the current market need of the country. The total financial requirement of
30,000,000.00 is deemed to be financed from commercial bank of Ethiopia.

2.9 Products and Services Application

Abdela Yimam integrated business has engaged in different domestic and international trading
activities. The business primarily purchases construction materials from foreign and local
manufacturer and sell to the local markets. The business need to purchase and sale different
construction materials and other inputs from the supplier’s and finally sale to the wholesalers,
retailers, and use for own construction service and other organizations so that maximize their
yield. The business also makes the market channel conducive in supplying construction material
for private, government and non-governmental organizations. The business access to market and
distribute material like, cement, reinforcing bar & etc. to customer.

2.10 Infrastructure Facilities

Abdela Yimam Wholesale trading of construction materials requires a conductive infrastructural
facility that may be contributed from the government body and the community at large. All basic
public services can be obtained as a basic input for further enhancement of this Construction
Material Trading.

2.11 Economic Contribution of the business

This business benefits the community as well as other micro enterprises by providing quality
product & service at optimum cost on timely basis. On the other hand this business will grow to
country level and international and will hire or give job opportunity to others. Similarly, it will
pay tax to the government, accumulate/adapt new technologies that may improve the life
standard of the local community by providing quality merchandise and improved technology
output.

3. Industry Overview or Synopsis of the sector

The construction industry is a vast and multifaceted sector that encompasses the planning,
design, financing, construction, renovation, and maintenance of buildings, infrastructure, and

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various civil engineering projects. The construction industry has grown more strongly in recent
time, after previous year’s technological advancement. This was primarily due to the fact that the
previously used construction is out dated or the use of backward tools and no one is using them.
The industry is expected to experience remarkable growth following an increase in the number of
beneficiaries using the product & service, which is due to a rise in per capita income as well as
corporate profit.

It is a cornerstone of economic development, playing a pivotal role in shaping the built

environment and supporting various industries. Let’s clarify what we mean when we talk about
the building business and how experts and governing authorities have characterized it. Learn
about the numerous dynamics and difficulties in the engineering and construction industry’s
domain knowledge. The construction industry comprises various sectors, each with its own
characteristics, specialties, and project types. These sectors collectively contribute to the
development of the built environment.

Some of the key sectors within the construction industry are; residential construction,
commercial construction, industrial construction, institutional and government construction, civil
engineering and infrastructure projects, institutional and public construction, infrastructure
upgrades and rehabilitation

In conclusion, the construction business is a diverse sector that has a big impact on economies
and communities all over the world. Each type of construction project has unique requirements,
challenges, and considerations. Successful completion relies on effective project management,
skilled labour, compliance with regulations, and adherence to safety practices.

The major companies in this industry have created strong brand awareness and therefore enjoy
its recognition. This helps in retaining customers for these businesses, and creating difficulty for
new production start-up towards getting customers and retaining them as well. Also, major
companies constantly need to produce fleets to meet up with customers’ demand, a feat that
smaller companies cannot match up with, and yet regardless of the number of output in one’s
fleet, production cost, storage, and then staff the production location.
The major restraint in this industry especially globally has been the increase in the
implementation of environmental regulations around the world. The high amount of

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environmental pollutants that is released by company machineries is highly responsible for these
environmental regulations.

Over and above, construction materials wholesale trade, construction materials rent and
contractors businesses is the back bone of construction sector all over the world and are still
enjoying good patronage particularly if they are well positioned and if they know how to reach
out to their target market.

Construction materials wholesale trade, construction machineries rent and contractors are often
cited as among the types of businesses with the better profit margins. It's true. The profit margins
typically range from 20 percent to 40 percent, depending on the items & services. The Business
makes their money on volume, hours and contractual agreements.

Participating on construction materials wholesale trade, construction machineries rent and

construction contractors business comes with its own fair share of challenges, but that does not
rule out the fact that it is indeed a profitable business, especially if you locate the business in
good location, service quality, use competent professionals, technology and you know how to
source for quality product & service that are used in the construction sectors in location where
you have your wholesale outlet.

4. Market Analysis
Construction materials trade unquestionably has large domestic markets. The size of Ethiopian
population is currently estimated above to 120 million. And the samara town is highly populated
in which its center for the Afar region and many households want to live in the town because of
that the need for construction materials in the town is too high.
As we also observe that as Ethiopian economy keeps developing over the past ten years;
urbanization and preference for modern construction materials are growing. The number of
householders, institutions and college/university, Hospitals, real estate and other construction
sectors are increasingly flourishing in the town specifically and in the country in general which
needs construction materials to construct residential and commercial Buildings, real state, dam,
office, and etc. There is no doubt that such development and the corresponding changes in
preference for such products drive demand for the Business’s products.

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4.1 Marketing strategy

Abdela Yimam Wholesale trading of construction materials, contractor & rental of construction
machinery marketing is considered to be of significant importance. The Construction Material
Trading marketing parameters are very limited and usually in some degree associated with the
different sector. Some of the marketing promotion activities which should duly be carried out are
given below:

 Draw linkages with material suppliers to the material user industry.

 Establish contacts with international, local, individuals and professionals.
 Linking with agents who work on commission basis
The marketing strategy of the promoter will be to establish a base of project area zone
community customer first, and using these customers to bring in other town residents as friends.
To that, end; the following tactics will be employed.
 Seeking mention in blogs for the local area
 Pitching the story of its concept and opening to national cultural and language
publications specifically, and newspapers and magazines in general
 Advertising with posters and flyers in the different towns
 Promoting commission-based sales
 And the others.

4.2 Business Competition Analysis

Abdela Yimam integrated business competitive edge will be established through its community
organizing ability via its quality products and service. This quality products and service will
present an interface for users to connect with each other. The promoter has a plan to be
competent in different business sectors especially in construction industry and distribution of the
above listed product. Some of the promoter plan includes: -
 Plan promotional events to propose for the sectors in hand in plan calendar.
 Send out invites for these events or service/product.
 Organize groups to attend the products promotional events.
 Establishing sales outlets at different areas of the country
 Follow rules and regulations of each operations currently in operation and underway

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4.3 Pricing and Distribution

Pricing a product/service is an important and critical activity since it is the major factor in
determining revenue. If a lower price is fixed, it will affect the profitability of the company, and
if a higher price is fixed, the company will not be able to stand in market competition and may be
forced out of the market. Therefore, the envisaged company’s business strategy is always using
the right and competitive price technics and prices of every product line will essentially be
determined by market conditions.

With regard to distribution, Abdela Yimam Wholesale trading of construction materials, will sell
its product directly to wholesalers, retailer and construction sector. Based on customer order, it
also aims to deliver the products through own transportation service.

4.4 The target consumers and suppliers to the Business

The supply chain for the construction materials trade involves the following institutions with
which to work:
i. For the Supply of the business outputs:
 Producer distributers and whole sellers in and around Addis Ababa & Afar region
 Wholesalers in and around the area,
 Producer distributers and wholesalers from abroad/foreign(Importer)
ii. For the consumption of the businesses output :
 Wholesalers, Retailers, Construction sectors, IMX, University, Hospitals
 Householders and others in need of the construction materials in lump sum
 The owner himself because he engaged on Construction service (Contractor)

4.5 Risk Analysis

We had conducted risk analysis that may face us in the future. During our analysis we gather
information from existing trader, producer and customers and identified the following risks
 Lack of market or decline of demand
 Lack of Finance to handle increasing Demand
 Political instability
 Entrance of High competitors
 Lack of quality input and shortage of supply

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Strategies to minimize Risks

 Forecasting market
 Having optimum amount of Products in store
 Using and creating own competitive advantages
 Using any cost minimizing opportunities
 Making network/relationship/ agreement with suppliers and customers
Competitive advantages
 Being Visionary
 Having startup capital
 Having Knowledge and Experience

5. SWOT Analysis

5.1 Strength
Abdela Yimam Wholesale trading of construction materials and other service is located along
one of the best ways to samara town where it is convenient for transportation to any area in the
country and outside.
 Tough entrepreneurial competency of the promoter
 Long experience of the business owner and experienced staff
 Overcoming challenges and improving business operation
 Dynamic management
 Strong collaboration of the owner with stakeholders
 High educational level knowledge & skill of the business owner

5.2 Weakness
 Shortage of capital/finance

5.3 Opportunities
 Conducive investment environment and low cost
 Increased demand of the construction product related with country development
 Available Credit facility and government investment incentives
 Cheap trainable labor, utilities and power cost

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 No strong competition
 Unsatisfied market demand
 Having enough quality products
 Availability of market for the envisaged business
 Availability of Road infrastructure

5.4 Threat
 instability of peace in the country
 Foreign currency exchange rate fluctuation
 Market volatility, due to Inflation and Political instability & other factors

6. Technical Study (Capital Assets owned by the business)

6.1 Office Equipment

The major office equipment to be used for the smooth operation of the businesses are as listed
below which contains office furniture and equipment’s. The detail business furniture and
equipment is presented below:

Table 1: Office Equipment

No Description Unit Quantity Unit. Cost T. cost
1 Manager Table No 3.00 10,500.00 31,500.00
2 Manager chair No 5.00 6,500.00 32,500.00
3 Table No 3.00 4,500.00 13,500.00
4 Chair No 6.00 2,500.00 15,000.00
5 Shelf No 2.00 10,000.00 20,000.00
6 Computers No 2.00 28,125.00 56,250.00
7 Printer No 2.00 30,000.00 60,000.00
8 Construction tools lump sum 478,150.00 478,150.00
Total 706,900.00

6.2 Fixed Asset and Machinery

The major machinery, Vehicles and other fixed assets owned & to be used for the smooth
operation of the businesses are as listed below which contains Vehicles, Machineries, Building
and other machineries. The detail business machinery and other fixed assets are presented below:

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Table 2: Fixed Asset and Machinery

No Description Unit Quantity Unit cost Total cost

1 Water tank truck (Bote) No 6 2,550,000.00 15,300,000.00
2 Other car No 2 2,500,000.00 5,000,000.00
3 Other Machinery No lump 1,436,717.28 1,436,717.28
4 Building No 3 12,796,328.13 38,388,984.38
Total 60,125,701.66

7. Organization and Management Plan

7.1 Managerial personnel

The list of managerial personnel along with their roles, responsibilities, experience and
educational qualifications are described here under:

Table 3: List of Managerial Personnel

S.No. Name Educational Level Position Experience Monthly salary

1 Abdela Yimam BA Degree General Manager 9 years 15,000.00

2 Kumnager Tagegn BA Degree Sales Representative 5 years 10,000.00

3 Tamir Seid BA Degree Finance Officer 3 years 7,500.00

We want to build a business of dedicated workforce who will go all the way to ensure that our
customers are satisfied and they get value for their money. In other to achieve this, we aware that
it takes a business with the right employees and structure to achieve all what we have set to
achieve, which is why will be putting structures and standard operating processes in place that
will help us deliver excellent services and run the business on auto pilot. The success of business
will be anchored on the team not on any individual.

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7.2 Organizational structure

7.3 Human Resource Requirement

The promoters of the project himself will take the position of manager and assisted by a monthly
salaried assistant. Monthly Salary scale for both the owner and the assistants are also estimated
as follows. An average annual increment to the salaries of the permanent workers is planned to
stand at 10%. Pension contribution from the firm will be calculated at 11% of the salary expense
based on the Federal and regional government pension regulation. Other employees’ benefit is
planned to be 10% of the salaries they earn. The summary is presented in the following table.

Table 4: Employees Requirement with their Gross Salaries

Total
Salary Total Annual
S.No Position No Educational Monthly
scale salary
Lev el Ex perience Salary
1 General Manager 1 BA Degree 10 years 10,000.00 10,000.00 120,000.00
2 Marketing Manager 1 BA Degree 6 years 6,000.00 6,000.00 72,000.00
3 Finance and Administration Head 1 BA Degree 4 years 6,000.00 6,000.00 72,000.00
6 Driver (Machinery Rent) 8 Licensed 6 years 8,000.00 64,000.00 768,000.00
7 Store keeper 2 Level 4 & above 4 years 3,000.00 6,000.00 72,000.00
8 Accountant 1 Level 4 & above 4 years 4,000.00 4,000.00 48,000.00
9 Cashier 1 Level 4 & above 4 years 3,500.00 3,500.00 42,000.00
10 Marketing and Sales Specialist 4 Level 4 & above 5 years 4,000.00 16,000.00 192,000.00
11 Technical Staff 7 Level 4 & above 6 years 3,000.00 21,000.00 252,000.00
12 Cleaner 2 grade 8 & above 5 years 2,000.00 4,000.00 48,000.00
13 Guard 2 grade 8 & above 6 years 2,000.00 4,000.00 48,000.00
Sub-Total per month 30 144,500.00 1,734,000.00
Pension contributions (11%) 15,895.00 190,740.00
Employee Benefit 10% 14,450.00 173,400.00
Daily Laborers for construction works 100 300 per day work for 26 day per months 780,000.00 9,360,000.00
Grand T otal for a y ear 130 954,845.00 11,458,140.00

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8. Financial Study
The business is expected to grow significantly in its operation especially in the coming five years
as it meets the market need for an alternative to local community-oriented users. Organization
growth to other location will occur at the end of the second year, which is expected to be
financed by the cash reserves of the business

8.2 Important Assumptions on Financial Plan

The following are assumed to forecast revenue, cost and expenses depending on past business
experiences.

 The business will operate for 300 days per year and purchase and sale 10,000 quintals of
Cement & 210 baldes of reinforcement bar of different size per year.
 90% of the inventories available for sales & use during the year are assumed to be sold
out & used.
 Both the cost of purchase and selling price for the year following the 2024 G.C is assumed
to increase by 5% ( normal inflationary scenario)
 Both purchase and Sales for the year following 2024 G.C is assumed to increase by 20%
respectively.
 The selling prices of all the merchandise category is assumed to be of 20% margin on the
purchase price.
 Working capital loan will be obtained from Commercial Bank of Ethiopia. The bank loan
will be repayable within three years. Bank loan and interest will be paid on semiannually
bases over three years and 14.5% interest rate is assumed on outstanding loan- balance.
 It is assumed that 50% of the cash flow before investing and financing is used for
investing in fixed asset only when excess cash balance exists.
 The Promoter can withdraw when there is surplus cash and invest from own others source
when there is a deficit.

8.3 Financial Requirement

This part summarizes the overall financial requirements for purchase, operating expense and
non-operating Expenses as described below.

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8.3.1 Purchase and Revenue Plan

Purchase and Sales plan is a summary of cost incurred to purchase the inventory and income
generated by the firm from sales made to the customers.

The estimated purchase cost and sales revenue of the business for the first year and continual
20% growth estimation is presented in the following table:

Table 5: Composition of construction material purchase & Sales Plan for the 1st year

Average Total
Business Quantity Total Sales
NO Description Measurement Purchase Purchase Cost Selling price Gross Profit
Category /Year Reveneue/Year
price /Year
8mm reinforcing bar Balde 40 245,000.00 9,800,000.00 294,000.00 11,760,000.00 1,960,000.00
10mm reinforcing bar Balde 40 240,000.00 9,600,000.00 288,000.00 11,520,000.00 1,920,000.00
Conistruction 12mm reinforcing bar Balde 30 240,000.00 7,200,000.00 288,000.00 8,640,000.00 1,440,000.00
Materials 14mm reinforcing bar Balde 30 234,000.00 7,020,000.00 280,800.00 8,424,000.00 1,404,000.00
1 (Reinforcement 16mm reinforcing bar Balde 30 235,000.00 7,050,000.00 282,000.00 8,460,000.00 1,410,000.00
Bar & Cement) 20mm reinforcing bar Balde 20 232,000.00 4,640,000.00 278,400.00 5,568,000.00 928,000.00
Wholesale Trade 24mm reinforcing bar Balde 20 230,000.00 4,600,000.00 276,000.00 5,520,000.00 920,000.00
Cement-National Quintals 5,000 1,480.00 7,400,000.00 1,776.00 8,880,000.00 1,480,000.00
Cement-Masobo Quintals 5,000 1,300.00 6,500,000.00 1,560.00 7,800,000.00 1,300,000.00
TOTAL 10,210 63,810,000.00 76,572,000.00 12,762,000.00

NB: The business planned to acquire the material to be supplied to the market from importers
and local supplier that are factory, Factory Agent (importer of reinforcement bar, Messebo
cement & National cement factory & factory agent) and other manufacturer.

Table 6: Purchase and Revenue plan for the five years

Abdela Yemam Integrated business cost of purchase and sales plan from all
S.no. Item business over the coming five years (2024/25 to 2028/29 G.C)
2024/25 2025/26 2026/27 2027/28 2028/29
Purchase of Construction
1 63,810,000.00 76,572,000.00 91,886,400.00 110,263,680.00 132,316,416.00
Materials (for sale & use)
Revenue Projection from:
1 Sales construction materials 56,829,093.75 65,353,457.81 75,156,476.48 86,429,947.96 99,394,440.15
2 Rental construction machinery 14,400,000.00 14,544,000.00 14,689,440.00 14,836,334.40 14,984,697.74
3 Construction Service 42,366,585.94 46,603,244.53 51,263,568.98 56,389,925.88 62,028,918.47
Total Sales 113,595,679.69 126,500,702.34 141,109,485.47 157,656,208.24 176,408,056.37

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8.3.2 Operating Expense

Abdela Yimam integrated business will require the following operating expenses such as salary
& wage, transportations, loading unloading, insurance, utility, repair & maintenance, per-diem &
travel, Fuel & Lubricant, Supply & Stationery, commission and other Expenses. The detail of
each part is presented in the table below

Table 7: Operating Expense

No De s cription Total Cos t in Birr
1 Transportation Expense 1,914,300.00
2 Loading unloading Expense 1,276,200.00
3 Storage & commission 638,100.00
4 Salary & Wage Expense 11,267,400.00
5 Pension Contribution 190,740.00
6 Fuel & Lubricant Expense 2,448,000.00
7 Utility Expense 90,215.13
8 Insurance Expense 186,779.25
9 Perdiem & Travel Expense 4,506,960.00
10 Repair & maintenance Expense 2,007,390.00
11 Supply & Stationery Expense 2,348,200.00
12 Other Expenses 1,351,250.00
13 Depreciation Expense 4,201,968.45
TOTAL 32,427,502.82

Table 8: Total Working Capital required over 5 years

No Description 2024/25 2025/26 2026/27 2027/28 2028/29
1 Purchase of Construction Materials (for63,810,000.00
sale & use) 76,572,000.00 91,886,400.00 110,263,680.00 132,316,416.00
2 Transportation Expense 1,914,300.00 2,297,160.00 2,756,592.00 3,307,910.40 3,969,492.48
3 Loading unloading Expense 1,276,200.00 1,531,440.00 1,837,728.00 2,205,273.60 2,646,328.32
4 Storage & commission 638,100.00 765,720.00 918,864.00 1,102,636.80 1,323,164.16
5 Salary & Wage Expense 11,267,400.00 13,520,880.00 16,225,056.00 19,470,067.20 23,364,080.64
6 Pension Contribution 190,740.00 228,888.00 274,665.60 329,598.72 395,518.46
7 Fuel & Lubricant Expense 2,448,000.00 2,692,800.00 2,962,080.00 3,258,288.00 3,584,116.80
8 Utility Expense 90,215.13 108,258.15 129,909.78 155,891.74 187,070.08
9 Insurance Expense 186,779.25 224,135.10 268,962.12 322,754.54 387,305.45
10 Perdiem & Travel Expense 4,506,960.00 5,408,352.00 6,490,022.40 7,788,026.88 9,345,632.26
11 Repair & maintenance Expense 2,007,390.00 2,208,129.00 2,428,941.90 2,671,836.09 2,939,019.70
12 Supply & Stationery Expense 2,348,200.00 2,817,840.00 3,381,408.00 4,057,689.60 4,869,227.52
13 Other Expenses 1,351,250.00 1,553,937.50 1,787,028.13 2,055,082.34 2,363,344.70
TOTAL 92,035,534.38 109,929,539.75 131,347,657.93 156,988,735.91 187,690,716.57

NB: The Commercial Bank of Ethiopia is expected to finance 33% (30,000,000.00) of the whole
working capital at a rate of 14.5% per annum and the promoter of the business is planning to
repay the loan amount and the interests there of over the coming five years on semi-annual bases.

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The collateral offered by the business promoters are the 3 buildings avail in Samara town and the
document related to the collateral will be presented by the promoter to the bank.

8.3.3 Depreciation Expense

To determine the periodic depreciation, the consultant adopted useful life of fixed assets
according to Ethiopian standard and hence used depreciation rates for each asset category
accordingly. The periodical depreciation charge is estimated to be Br. 4,201,968.45 for the 1st year.

Table 9: Depreciation Schedule

S. No Item Unit Estmated cost Depreciation cost

1 Water tank truck (Bote) 6 15,300,000.00 1,530,000.00
2 Other car 2 5,000,000.00 500,000.00
3 Other Machinery lump sum 1,436,717.28 143,671.73
4 Building 3 38,388,984.38 1,919,449.22
5 Office & Construction Equipments lump sum 650,650.00 97,597.50
Computers 2 56,250.00 11,250.00
Total 60,832,601.66 4,201,968.45

8.3.4 Loan Repayment Schedule & Interest Expense

The working capital loan required by the firm is about 30,000,000 birr at interest rate of 14.5 which is
repayable in five years on semi-annual bases. The loan repayment schedule is presented as follow.

Table 10: Loan Repayment Schedule & Interest Expense

periodic periodic Total Periodic

semiannual Balance of Loan Balanece Ending balance
Year Amortization Amortization loan
Period at the begenning (Principal) of loan (Principal)
(Principal) (Interest) Amorization
period-1 30,000,000.00 30,000,000.00 2,145,818.79 2,175,000.00 4,320,818.79 27,854,181.21
1 period-2 27,854,181.21 2,301,390.65 2,019,428.14 4,320,818.79 25,552,790.56
period-1 25,552,790.56 2,468,241.47 1,852,577.32 4,320,818.79 23,084,549.08
2 period-2 23,084,549.08 2,647,188.98 1,673,629.81 4,320,818.79 20,437,360.10
period-1 20,437,360.10 2,839,110.18 1,481,708.61 4,320,818.79 17,598,249.92
3 period-2 17,598,249.92 3,044,945.67 1,275,873.12 4,320,818.79 14,553,304.25
period-1 14,553,304.25 3,265,704.23 1,055,114.56 4,320,818.79 11,287,600.02
4 period-2 11,287,600.02 3,502,467.79 818,351.00 4,320,818.79 7,785,132.23
period-1 7,785,132.23 3,756,396.70 564,422.09 4,320,818.79 4,028,735.52
5 period-2 4,028,735.52 4,028,735.52 292,083.33 4,320,818.79 (0.00)
Total 30,000,000.00 13,208,187.96 43,208,187.90

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9. Financial Analysis/ Feasibility

The business is expected to grow significantly in its operation especially in the coming five years
as it meets the market need.

9.1 Projected Income Statement

Profit and loss statement is prepared to summarize the revenue and expense of the business for
specific period. The envisaged business is financially profitable as shown by the projected profit
and loss statement. The net income is progressively increasing. There is a positive net income
provided by the business over the five years business period implying that the business could run
profitable business venture provided that it maintained the required competitive quality with fair
price.
So, the gross Sales, Cost of Sale and Expense for the five years are summarized here under:

Table 11: Projected Profit and Loss Statement (2024/25, to 2028/29 G.C)

Discription 2024/25 2025/26 2026/27 2027/28 2028/29

Sales -Revenue 113,595,679.69 134,874,815.63 160,265,778.75 190,576,534.50 226,775,201.40
Total Sales 113,595,679.69 134,874,815.63 160,265,778.75 190,576,534.50 226,775,201.40
Less: Cost of Goods Sold & Used
Beginning Inventory 3,315,030.47 3,356,251.52 3,996,412.58 4,794,140.63 5,752,891.03
Purchases 63,810,000.00 76,572,000.00 91,886,400.00 110,263,680.00 132,316,416.00
Available for sales & use 67,125,030.47 79,928,251.52 95,882,812.58 115,057,820.63 138,069,307.03
Ending Inventory 3,356,251.52 3,996,412.58 4,794,140.63 5,752,891.03 6,903,465.35
Less: Cost of Goods Sold & Used 63,768,778.95 75,931,838.95 91,088,671.95 109,304,929.60 131,165,841.68
Gross profit 49,826,900.74 58,942,976.68 69,177,106.80 81,271,604.90 95,609,359.72
Less: Operating Expence
Transportation Expense 1,914,300.00 2,297,160.00 2,756,592.00 3,307,910.40 3,969,492.48
Loading unloading Expense 1,276,200.00 1,531,440.00 1,837,728.00 2,205,273.60 2,646,328.32
Storage & commission 638,100.00 765,720.00 918,864.00 1,102,636.80 1,323,164.16
Salary & Wage Expense 11,267,400.00 13,520,880.00 16,225,056.00 19,470,067.20 23,364,080.64
Pension Contribution 190,740.00 228,888.00 274,665.60 329,598.72 395,518.46
Fuel & Lubricant Expense 2,448,000.00 2,692,800.00 2,962,080.00 3,258,288.00 3,584,116.80
Utility Expense 90,215.13 108,258.15 129,909.78 155,891.74 187,070.08
Insurance Expense 186,779.25 224,135.10 268,962.12 322,754.54 387,305.45
Perdiem & Travel Expense 4,506,960.00 5,408,352.00 6,490,022.40 7,788,026.88 9,345,632.26
Repair & maintenance Expense 2,007,390.00 2,208,129.00 2,428,941.90 2,671,836.09 2,939,019.70
Supply & Stationery Expense 2,348,200.00 2,817,840.00 3,381,408.00 4,057,689.60 4,869,227.52
Other Expenses 1,351,250.00 1,553,937.50 1,787,028.13 2,055,082.34 2,363,344.70
Depreciation Expense 4,201,968.45 5,591,968.45 5,654,718.45 5,730,018.45 5,946,882.45
Total Operating Expense 32,427,502.82 38,949,508.20 45,115,976.37 52,455,074.36 61,321,183.02
Net Income Before Interest &Tax 17,399,397.92 19,993,468.48 24,061,130.43 28,816,530.54 34,288,176.70
Interest Expense 4,194,428.14 3,526,207.12 2,757,581.73 1,873,465.56 856,505.41
Net Income Before Tax 13,204,969.78 16,467,261.36 21,303,548.70 26,943,064.98 33,431,671.29
Less : Tax 6,071,789.27 6,979,713.97 8,403,395.65 10,067,785.69 11,982,861.85
Net Income After Tax 11,327,608.65 13,013,754.51 15,657,734.78 18,748,744.85 22,305,314.86

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Note: that the term loan amount will be settled within five years period ( the principal and
interest will be paid at the end of every six month, whereas the interest expense for the first year
is computed Starting here after June 2024.

9.2 Projected Balance Sheet

Balance sheet is prepared to show the financial position of the company over projection period.
As depicted below the total assets owned, obligations owed and equity of the promoters shows
the capability of the company collateral coverage. So, the balance sheet for the five years are
prepared us depicted below on a yearly basis for the five years.

Table 12: Projected Balance sheet (2023/24 to 2027/28 G.C)

Year JUNE 30 2025 JUNE 30 2026 JUNE 30 2027 JUNE 30 2028 JUNE 30 2029
Current Asset:
Cash 19,576,451.08 23,313,568.97 28,353,513.53 34,930,724.65 43,348,534.72
Inventory 3,356,251.52 3,996,412.58 4,794,140.63 5,752,891.03 6,903,465.35
Total Current Assets 22,932,702.60 27,309,981.55 33,147,654.16 40,683,615.68 50,252,000.07
Fixed Asset:
Total Fixed Asset Values 56,589,657.74 52,252,689.30 48,103,970.85 44,181,152.40 40,402,909.96
Total Assets 79,522,360.34 79,562,670.84 81,251,625.01 84,864,768.08 90,654,910.02
Liability and Capital:
Bank Loan 35,844,804.04 25,552,790.56 20,437,360.10 14,553,304.25 7,785,132.23
Repayment (10,292,013.48) (5,115,430.46) (5,884,055.85) (6,768,172.02) (7,785,132.23)
Net Loan Liability 25,552,790.56 20,437,360.10 14,553,304.25 7,785,132.23 (0.00)
Current income tax Payable 6,071,789.27 6,979,713.97 8,403,395.65 10,067,785.69 11,982,861.85
Total Liability 31,624,579.83 27,417,074.07 22,956,699.90 17,852,917.92 11,982,861.85
Capital:
Partners Capital 5,000,000.00 5,000,000.00 5,000,000.00 5,000,000.00 5,000,000.00
Retained Earning 42,897,780.52 47,145,596.77 53,294,925.11 62,011,850.16 73,672,048.18
Total Capital 47,897,780.52 52,145,596.77 58,294,925.11 67,011,850.16 78,672,048.18
Total Liability and Capital 79,522,360.34 79,562,670.84 81,251,625.01 84,864,768.08 90,654,910.02

9.3 Projected Statement of Cash Flow

Cash flow statement is prepared to summarize the cash transactions (cash inflow and cash
outflow) occurred during the accounting period on a yearly basis hence the loan repayment is
done on semi-annual bases. The statement indicating that the project will not face liquidity
constraint to finance its operational cost and can meet its debt obligation. So, the cash flow
statement for the five years are prepared us depicted below on a yearly basis for the five years.

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Table 13: Projected Statement of Cash Flow (2024/25 to 2028/29 G.C)

Year of Operation
Cash flows from operating activities
2024/25 2025/26 2026/27 2027/28 2028/29
Cash Received From
Sales of Construction Materials 56,829,093.75 68,194,912.50 81,833,895.00 98,200,674.00 117,840,808.80
Other Operating Income 56,766,585.94 66,679,903.13 78,431,883.75 92,375,860.50 108,934,392.60
Total Cash Inflow 113,595,679.69 134,874,815.63 160,265,778.75 190,576,534.50 226,775,201.40
Cash Payment For
Purchase of Construction Materials 63,810,000.00 76,572,000.00 91,886,400.00 110,263,680.00 132,316,416.00
Operation Expense 28,225,534.38 33,357,539.75 39,461,257.93 46,725,055.91 55,374,300.57
Interest 4,194,428.14 3,526,207.12 2,757,581.73 1,873,465.56 856,505.41
Taxes 6,071,789.27 6,979,713.97 8,403,395.65 10,067,785.69 11,982,861.85
Total Cash Outflow 102,301,751.78 120,435,460.84 142,508,635.30 168,929,987.16 200,530,083.83
Net cash from operating activities 11,293,927.90 14,439,354.78 17,757,143.45 21,646,547.34 26,245,117.57
Cash flows from investing activities
Acquisition of investment security
Proceed from disposal of investment security
Purchase of property, plant and equipment (13,900,000.00) (1,255,000.00) (1,506,000.00) (1,807,200.00) (2,168,640.00)
Net cash used in investing activities (13,900,000.00) (1,255,000.00) (1,506,000.00) (1,807,200.00) (2,168,640.00)
Cash flows from financing activities
Payment of borrowing (10,292,013.48) (5,115,430.46) (5,884,055.85) (6,768,172.02) (7,785,132.23)
Receipt of borrwoing 30,000,000.00
(Owner Withdrawal) Additional Investment (3,388,178.37) (4,331,806.43) (5,327,143.03) (6,493,964.20) (7,873,535.27)
Net cash used in financing activities 16,319,808.15 (9,447,236.89) (11,211,198.89) (13,262,136.22) (15,658,667.50)
Net increase (decrease) in cash and cash equivalents13,713,736.05 3,737,117.89 5,039,944.56 6,577,211.12 8,417,810.07
Cash and cash equivalents at start of year 5,862,715.03 19,576,451.08 23,313,568.97 28,353,513.53 34,930,724.65
Cash and cash equivalents at end of year 19,576,451.08 23,313,568.97 28,353,513.53 34,930,724.65 43,348,534.72

10.Overall Project Investment Decision

The overall financial performance of the project is appealing as shown by the above projected
financial statements. When evaluated in terms of its profitability, there is steady increase in after
tax net income showing that the project would remarkably contribute towards wealth
maximization of the owner. Similarly, when viewed in terms of the sources and uses of money
(cash flow statements), there is steady increase in the net cash provided by the project cash
receipts after covering the cash payments required to sustain the project. Furthermore, the
project has the following financial performance measured in different investment decision
criteria.

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Table 14: Investment Evaluation

Year Cash Flow PVF Total PVCF CPVCF CCF
0 92,035,534.38 1.96801 46,765,771.66
1 19,576,451.08 1.145 17,097,337.19 17,097,337.19 19,576,451.08
2 23,313,568.97 1.31103 17,782,703.59 34,880,040.77 42,890,020.05
3 28,353,513.53 1.50112 18,888,193.52 53,768,234.30 71,243,533.58
4 34,930,724.65 1.71879 20,322,898.52 74,091,132.82 106,174,258.22
5 43,348,534.72 1.96801 22,026,575.83 96,117,708.64 149,522,792.94
149,522,792.94 96,117,708.64
NPV 4,082,174.27
PBP 3 Years and 7 months
DPP 4 Years and 10 month
BCR 1.04
IRR 16%
NBCR 0.09
Net Present Value (NPV):- is the sum of present values of all the cash flow both positive and
negative that are expected to occur over the life of the project. The formal selection criterion for
the NPV measure of project worth is to accept all independent projects with a positive NPV
when discounted at the opportunity cost of capital. In our case, given the project has positive
value of Birr 4,082,174.27; it means that the project would contribute Birr 4,082,174.27
towards the wealth maximization of the owner wealth and hence it is viable.

Internal Rate of Return (IRR): This is the discount rate that makes the present value of all
expected future cash flows equal to zero; or, in other words, the IRR is the discount rate that
causes NPV to equal Br.0. It is a yield—what we earn, on average, per year. The internal rate of
return (IRR) of the project is 16% after tax discounted at 14.5%. The project is viable being 16%
is greater than 14.5%.

Benefit Cost Ratio (BCR):- The benefit-cost ratio is defined as the ratio of the discounted values
of benefits to the discounted value of costs. A ratio of at least one is required for acceptability
and the ratio of one indicates that the NPV of zero at a particular discount rate. In this case BCR
of Birr 1.04 shows, for every one Birr invested in this project, the return would be 1.04 Birr,
which remarkable and acceptable figure.

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Net Benefit Cost Ratio (NBCR): - NBCR is the ratio of net present value to the present value of
cost. A ratio greater than zero (0) is needed for the business to be financially acceptable; in this
business, the ratio of 0.09 is in excess of the hurdle rate required to make the business financially
feasible.

Payback Period: - In terms of payback period the project will cover its initial investment within
3 Years and 7 months and in terms of discounted payback period the project will cover its initial
investment with 4 years and 10 months. Therefore the project would be advised for
implementation.

11.Socio-economic Benefits of the Project

The socio-economic significance of implementation of this business can be seen from its
contribution to employment opportunity, its contribution to government revenue in the form of
tax. Accordingly, this project creates job opportunity for 30 permanent workers and 100 daily
laborers for construction work. Likewise, it contributes to government revenue in the form of
income tax (average profit taxes of birr 8,701,109.29 per year) which in turn helps to insure
distribution of resources among citizens.

12. Conclusion
The engagement in to wholesale of construction materials, rental of construction machinery &
vehicles and construction work has got promising benefit for the promoter as well as the country
in creating work opportunity, generate income tax & maximize wealth of the promoter.

13. Recommendation
Based on facts discussed above, expansion of this business will have positive contribution to the
overall development of the country as it enables the country to exploit idle economic resources
more wisely at a large scale and optimally. Thus, the project deserves to get the necessary loan
and technical assistance from the bank, Commercial Bank of Ethiopia.

BUSINESS PLAN FOR ABDELA YIMAM SEID INTEGRATED BUSINESS Page 28