PART I.

Executive
Summary
MATIGAS Gasoline Station
is a fully registered and
licensed standard gas
station that
will be
located along the busy
highway in Kolambog,
National Highway, Isulan,
Sultan Kudarat. The
gasoline stations that will
be built will adopt full
service, minimum service
and possibly self-
1
service as it suits the
location and consumers.
The gasoline station will
provide high quality
productss at competitive
prices, excellent customer
service that
will promote customer
loyalty.
Lastly, it will be located
within an area with no big
competitors and an
area that commuters and
travellers frequently stop

BUSINESS PLAN FOR

(TEXTILE MANUFACTURING)
2
 OWNERS OF THE BUSINESS

GMM PLC

Addis Ababa

December
2024

Table of Contents

1. Executive Summary.....................................................................................................................5
2. Background and Description of the Business.....................................................................8
2.1 Service Description of the Business................................................................................9
3
 2.2 Location...................................................................................................................................10
2.2.1 Land Facility...............................................................................................................10
2.2.2 Building Facility.......................................................................................................10
2.2.3 Fixed Asset.................................................................................................................10
2.3 Objective of the business..................................................................................................11
2.4 Mission, Vision and goal.....................................................................................................11
2.5 Purpose of the Business.....................................................................................................12
3. Human Resource Requirement of the Business...............................................................12
3.1 Organizational Structure....................................................................................................13
...........................................................................................................................................................13
3.2 Human resource List...........................................................................................................13
3.3 Training requirement..........................................................................................................13
4. Marketing Plan.............................................................................................................................14
4.1 Industry analysis...................................................................................................................14
4.2 Marketing Strategy..............................................................................................................15
4.3 Market Size, needs, trends...............................................................................................15
4.4. Competitive Advantage....................................................................................................16
4.5 Product Promotion...............................................................................................................16
4.6 SWOT Analysis.......................................................................................................................17
4.6 Pricing and Distribution......................................................................................................18
4.7. Sales forecast assumptions.............................................................................................18
4.8 Cost Of Raw Material...........................................................................................................18
4.9 Suppliers and Customers...................................................................................................19
5. Stock Management System................................................................................................19
6. Financial Plan...............................................................................................................................19
6.1 Credit Information with Bank...........................................................................................20
6.2 Working Capital Loan Requirement...............................................................................20
6.4 Collateral Offered.................................................................................................................23
6.5 Financial Projection..............................................................................................................23
6.5.1 Sales forecast and assumptions..............................................................................23
6.5.2 Projected Profit and Loss Statement......................................................................24
6.5.3 Projected Cash flow Statement................................................................................25
6.5.4 Projected Balance sheet.............................................................................................26
4
 6.5.5 Financial Analysis...................................................................................................27

Business plan Summary

Business Name GMM PLC

Business owner GMM PLC

Type of Establishment Garment Manufacturing

Nationality Ethiopian

5
 Legal form Private limited company

Location Addis Ababa Lebu

Job opportunity A total of 350 employees

Target Market Local market.

sources of Financial Working capital Term loan which is 25 million

Financial viability
The Business is highly attractive with positive
cash flow.

1. Executive Summary

The need for business plan in our business dealing is becoming very
imperative in today’s dynamic and complex marketplace. As everyone
knows, business plan is one of the integral steps in fulfilling one’s business
targets. Accordingly, this plan is developed with the intent of ensuring
effective preparation for the implementation and positioning of our
programs and allied activities that best achieve our long term and short-
term goals.
Purpose of this business plan the company have a plan to further expand
the business through additional financing. Therefor the business planned to

6
have a working capital loan for the business from the bank. Thus this
business plan explains a detail of future business operation plan.
Ethiopian economy had been consistently growing by over 10% in the past
until it was disrupted by the civil war in the country. The unprecedented
economic development that was registered has resulted in change in the
people’s life style, consumptions, work culture, and the overall life style.
This growth in demand was mainly supplied by the import of goods. But
after the war the country’s foreign reserve has depleted and the import
business was severely hurt. On top of this the government gave priorities
for manufacturing locally and imposes high tax on imported good causing a
high price on imported goods.
This creates a good opportunity for the local manufacturing business, which
has created fertile ground for business. Besides, the government’s
unabated effort in establishing conducive business environment, its effort
to provide efficient public service and build development infrastructures are
major factors that affirms availability of brighter future for trade and
investment in the country.
It is within this business and economic background that GMM PLC is
attracted to engage in textile and related business by establishing its
manufacturing in Addis Ababa.
The Company is owned and managed by Ethiopians citizen who are highly
professional with commendable business experience in the sector. The
Company’s business is manufacturing and distributing of high quality
garments. The Company has good knowledge of the Ethiopian textile
sector, well established business relation with manufacturers and retailers.
In order to exploit this relationship and to capitalize on the sector’s
weakness of inability to supply quality garment as demanded by retailers
both with respect to specification and quantity, the Company established a
garment factory that can produce high quality garments.

GMM Garment PLC is a Private Limited Company established by three

women entrepreneurs in September, 2004, with a total paid-up capital of

7
Birr 1,260,000. The factory is located in Addis Ababa, Lebu Industrial Zone,
Woreda12, and Block 15. The factory has 1,970 square meters of land
leased from the Addis Ababa City Government on which a 500 square As of
October, 2014, three new shareholders have joined the company with an
additional capital of Birr 9,740,000.00. This brought the registered and
paid-up capital of the company to Birr 11,000,000.00. Currently, new share
holders have been accepted and the capital has increased to Br
68,886,000.

This increase in capital has created a new exciting opportunity for the
company to work on. Firstly, the company's capacity to develop export
market will be significantly improved and as a result GMM is working with
foreign companies. Secondly, the company's ability to introduce a new
product line in its operational system will enhance considerably the
company's financial profitability, due to the new capital injection.

By 2020 GMM has built additional building with G+2 stories. New machines
were invested on. The production capacity increased. Working environment
was made more conducive to productivity increment. The investment on
additional buildings was continued to 2022. A larger building with G+4
stories was built..

GMM Garment PLC currently, has had over 350 skilled workforces. The
workers are trained in different skills of garment production. The new
project however will require 1132 employees. The required land area to
accommodate the production facilities and social services (clinic, canteen,
changing room, training halls, toilet facilities and other services) is 10,000
m² This includes 3900 m² of production hall. Additional 2,500 m² of stores
are part of the design.

The Company is planning to increasing income and Improving profitability

of the business, to grow its current business location to satisfy the current
market need of the country and enhance sales income and profitability and
8
securing sessional cash shortage. the company requires additional Working
Capital Finance for covering its Purchase of Raw Material stock items and
operational costs and the plan indicate that working capital loan from
Leander institution will be obtained in order to avoid financial strain and
sessional cash shortage in order to run at the expected level.

According to the short-term strategy, the company must finance a total of

ETB 25 million to cover its operating costs and the purchase of stock items
and this purchase cared out direct cash transaction. Due to this fact the
company needs additional finance. From this additional amount, ETB 25
million will come from a bank credit facility in terms of term loan which will
be fully repaid in four years at an estimated interest rate of 15.5%. The
operating income is used to pay back the loan Beside to this, the promoter
believes the loan will strengthen the relationship between the investor and
the bank.

For this loan, the property provided as a collateral is a Company building

and Machineries.

Profitability: The financial analysis of the envisaged business plan is

carried out for four years. Based on the four years financial projections
using the income statement, cash flow statement the following results
are obtained.
Income statement: According to the projected income statement, the
business will generate profit beginning from the first year of operation.
Based on the financial projections the business average annual net profit
after payment of bank interest, depreciation and tax amounts to birr
1,353,906.61 million.

 Cash flow statement: The cash flow statement also shows a

substantial amount of cash surplus right from the first year of
the business operation life. The cash balance shows positive
grows in the first year this indicating the capacity of the business
to finance itself and generate cash surplus for further
investments.
9
  Socio economic benefits: The socio-economic benefit of the
business is also very high. The business will provide - 350
employs, generate revenue to government in the form of
taxes, environmentally friendly and will create backward
linkage with suppliers and forward linkage with the sub
sectors.
Conclusion and recommendation: The business is found to be
operationally profitable, viable & has significant socio-economic benefits.
We recommended that according to this attractive financial and economic
benefit of the business all concerned offices & financial institutions should
give their support to facilitate the implementation of this short-term
strategy.

2. Background and Description of the Business

The Business plan realistically asses the Business potential and takes into
account of both the positive and negative issue that will impact on the
business.

We prepared without assistance from a professional, the strategies and fore

casts that are contained in the plan are those of the promoters. The
primary purpose of the business plan is to identity the strengths and
weakness of the business and give a realistic assessment of the
most probable performance of the business over the period for the plan is
drawn up.

GMM Garment PLC is a Private Limited Company established by three

women entrepreneurs in September, 2004, with a total paid-up capital of
Birr 1,260,000. The factory is located in Addis Ababa, Lebu Industrial Zone,
Woreda12, and Block 15. The factory has 1,970 square meters of land
leased from the Addis Ababa City Government on which a 500 square As of
October, 2014, three new shareholders have joined the company with an
additional capital of Birr 9,740,000.00. This brought the registered and
10
paid-up capital of the company to Birr 11,000,000.00. Currently, new share
holders have been accepted and the capital has increased to Br
68,886,000.

2.1 Service Description of the Business

The Company has engaged in different textile products to wide variety

of purposes. It is involved in Manufacturing of made-up textile
articles, spinning and weaving. We are aware of the fact that having
multiple sources of income will improve the bottom line of our company
and ensure that we remain in business for a long time while also
growing and expanding at our pace. Therefore, we intend to make as
much profit. Listed below are some of our products and services.
1. Polo Shirts
2. Men and Boy Shirts
3. Ladies Shirts
4. Underwear
5. Nightwear
6. Jackets
7. Trousers Etc..
The unique features of our products are quality and best fits the needs
of our customers. The production currently runs 16 hours with two
shifts for 6 days a week. The non• production day is utilized for
routine maintenance and servicing of equipment and housekeeping.
There are 9G working hours with one week (G days per week).
The company maintains strict quality control over its products.
Hence, there is a good demand for its products among traders and
garment manufacturers. Our customer are mainly garment companies
and wholesalers in domestic market.

2.2 Location
The factory is located in Addis Ababa, Lebu Industrial Zone, Woreda12, and
Block 15
11
2.2.1 Land Facility
The factory has 1,970 square meters of land leased from the Addis Ababa
City Government on which a 500 square As of October, 2014

2.2.2 Building Facility

By 2020 GMM has built additional building with G+2 stories. New machines
were invested on. The production capacity increased. Working environment
was made more conducive to productivity increment. The investment on
additional buildings was continued to 2022. A larger building with G+4
stories was built

2.2.3 Fixed Asset

GMM have sufficient fixed asset that is estimated at 13,400,000.00 ETB.
Building - 1,080,253.65

Warehouse - 85,436.46

Building new - 13,395,385.29

Other assets in pool (3.1) - 2,536,803.64

Computer & related in pool - 101,977.46

(3.2

Computer and accessories - 190,807.32

new

Machinery and Equipment - 10,201,196.75

new
furniture and fixture new - 585,113.04

New motor vehicle - 3,636,325.79

Office equipment new - 7,886.11

Other assets new - 1,661,445.29

Other Asset - 2,638,840.64
Construction in progress 9,765,180.40

Total 45,886,651.84

2.3 Objective of the business

GMM PLC primary business objective is to maximize the wealth of the

12
business owner, create employment opportunity and thereby enhance and
contribute to the country economy at large.

In addition, this Company has the following specific objectives

 Expanding production capacity to include various types of appreal

for women,men and children

 Producing medium and high quality appreals

 Exporting finished goods appreals for the foreign markets

2.4 Mission, Vision and goal

GMM PLC mission is to provide high quality different products to Local and
International business at a profit.

Goal

Objectives are the goals toward which activities of the business are
directed and one of the most important functions the business owner must
perform is setting objectives. These important aims of this business among
others include the following highly interrelated general goals with each
other.

Long-term term goal

GMM PLC goal are:

◆ 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.
◆ Providing different products to customer at fair and affordable
price.

Short term goal

13
  To secure ETB 25,000,000 bank loan facility, partially to cover
purchase of stock item for resale and fulfill the additional working
capital requirement from Leander institution will be obtained in
order to avoid financial strain and sessional cash shortage.

2.5 Purpose of the Business

As it is known any business plan or project proposed is designed to benefit
anyone who is likely to be benefited. Therefore, the beneficiaries of the
business include:
1) The Shareholders
2) The workers of the business
3) Customers of the business
4) The government
5) The community in general

3. Human Resource Requirement of the Business

Multi business trading like GMM is a labour intensive industry. therefore, a

total of 350 employees will he hired including the current employees to
handle the overall operation. The business unit will work on one shift basis
(8 hours daily). All the workers were sourced locally as they are adequately
available. With the objective to retaining workers for long, the salary
structure planned has seriously considered the prevailing salary structure in
the same sector and therefore, it is competitive. The average yearly
increment of the salary for the employees is assumed at 10% for the next 5
years by considering changes in the external and internal environment. In
line with the requirements of the private organization's social security
organization, the pension scheme will be installed and the contribution
from the organization is considered to be 11% of the salary and businesses
to increase in proportion to the annual salary increment. Other employee
benefits and unforeseeable costs are considered in the 10% contingency.

14
 Other employee benefits are also assumed at 2% of the total salary
expenses. Accordingly, the following table shows the existing and future
workers' requirement with qualifications and the first year's monthly and
annual salary levels and associated costs.

3.1 Organizational Structure

General Manger

Purchaser Marketing Manager Customer Relation Operational

Finance and Admin
manager
Manager

Purchaser Accountant Sales Store Man Secretary Other

3.2 Human resource List

The company have 350 employees

Area of
No Specification Annual Wage
14,6
1 Direct Labor 38,329.77
4,
2 Indirect labor 320,991.87
5,
3 Employe Benefit 066,000.05
Selling and
4 Distribution 419,428.43
5 Admin 2,254,933.96
Total 26,699,684.08

3.3 Training requirement

For our business trained manpower is available in the market. The company
will give facilitate professional trainings related with customer relation
service and product quality courses.

15
4. Marketing Plan

4.1 Industry analysis

In Ethiopia, there are a number of textile and garment factories who

operate at different capacities. The amount of investment in the sector is
increasing and it is still deemed to increase both in quantity and in
quality. Yet, the country is still importing textile fabrics that reach over 38
thousands metric tons annually investing about ETB 2 billion in foreign
currency. Considering the value of domestic production of ETB 1.1 billion,
the country is almost covering some 50-60% of its demand from import.
Moreover, following the growing economy, the country’s per capital fiber
consumption is expected to grow from less than one kg per annum (which
is too low as compared to the African Average of 3.2 kg and world
average of 8.7 kg) that increase the volume of import unless the
domestic production grows rapidly.

On the other hand, domestic firms are said to operate below their capacity
and are regarded as inefficient owing to lack of market for local products
among others. Close evaluation to the sector however shows that the
factories can produce better quality that is readily consumed by the local
market and even that can be exported if they apply supply chain
management concept that requires coordination and collaboration among
the supply chain actors.

Coordination and collaboration is required for the sector since some

factories have high quality machinery but lack capacity to access quality
raw material while others have these raw materials but produce poor
quality products owing to lack of skill and technology. If the factory with
quality raw material shares the finishing work with the factory with
advanced technology in the area both factories will yield quality product.
The other factor for the poor performances of the factories is lack of
specialization and striving to do all things under a roof almost starting

16
from ginning to finishing. Although this strategy is to seek for economies
of scale, the factories however eventually found themselves inefficient, as
they couldn’t specialize in any of the process. For instance, factories that
have end-to-end process specializing in cotton cannot flexibly shift to
polyester at least some of their processes as the factories are designed for
cotton and not to interchangeably work. Even some of such factories find
themselves in difficulty to finish semi processed raw materials by other
factories unless the raw materials are processes as per their specification.

The distribution business is also less coordinated as the factories

manufacture and supply to the few wholesalers in Merkato that hold the
products and charge high margin to retailers. The factories also produce
similar type of products in bulk that narrows option for customers and
discourage consumption of domestic products. Therefore, the distribution
system is inefficient in that it fails to supply variety of products in small
quantities.

4.2 Marketing Strategy

The main business strategy of the company is customer driven approach

and focused to address the need and want of their valuable customers.

The Company’s strategy is therefore to supply products and service

required by customers at the quality and quantity level they demanded.
The Company can also compete on prices besides the flexibility and quality
factors as it will only trading on demand and hence can significantly reduce
the stock carrying costs.

4.3 Market Size, needs, trends

The marketing strategy of the promoter will be to establish a base of

project area zone community customer first, and using these customers to

17
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

4.4. Competitive Advantage

The Company 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 textile 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 operation currently in operation and
underway.

4.5 Product Promotion

In a competitive market, trade promotion should be made to persuade or

to make a product attractive for end users. Such trade promotional tools
include; credit and discount with the volume of products sold etc. The

18
envisaged company is recommended to offer discounts with the volume of
product bought and credit for one to two months. The other promotional
strategy, is selecting of the media channel that involves choosing among
available advertising media and deciding how they can be used; given the
type of message, target audience and the budget available. To that end,
the company has a plan to develop an extensive sales brochure that will
showcase the business ability to supply products to domestic market. This
brochure will provide all necessary contact information and preliminary
pricing information for the customer. The company will also use an
internet-based strategy. Finally, the Company will maintain a modest level
of print and media advertising within local trade publications. In this
regard, the company will have financial budget of 1.5% of annual profit for
promotion costs.

4.6 SWOT Analysis

During its business engagement, GMM PlC business
has its own strength, Weakness, opportunity and Threats (SWOT) in the
business transaction. Due to that there is an internal and external strength
and weakness face in each business year.

Strength

 Has reach and experienced staff in each field

 Ample fixed assets
 The company employed high caliber, diligent, motivated,
experienced and customer-oriented staff and professionals
 Easily trained labor
 Considerable resource base
 Established strong market
 Up to date technology installed
 Good reputation of customer handling
 Good supply chain with supplier

Weakness
19
  Shortage of finance
 Underutilized capacity
 Shortage of resource
 Shortage of foreign currency

Opportunities

 There is a high demand of the products

 The company has known consistent customers
 Ability to grow because of increase in market demand
Threat

 GMM PLC may be affected by inflation, political instability and other

factor

4.6 Pricing and Distribution

Penetration Pricing will be the pricing strategy for our business, as our
business is at the high street of Addis Ababa city where competition is
huge, so we try to give good quality at low price to penetrate in the market
and try to achieve higher sales volume to set low price and better-quality
strategy. Once we achieve this objective then try to charge higher price for
our customized service for value addition.

4.7. Sales forecast assumptions

Sales forecast assumption is based on internal factors include things like

sales history, product mix, marketing strategy, and sales team in addition
External factors include things like the overall economy, industry trends,
and competitor activity. It is also important to be realistic when making
assumptions forecast.

4.8 Cost of Raw Material

The cost of Raw material of the product is determined by the market itself.
In this regard the price by category of product will be given in current value

20
of in the world market. So, this price will vary in times. Average price by
category of product is given in table below:-

Unit
RM Cost Quantity TOTAL

Fabric Mts 1.5 180 105,456.00 28,473,120.00

Iining Mts 0.09 208 102,852.00 1,925,389.44

Sub
TOT 30,398,509.44

Sewing Threade cone 0.063 94 25,000.00 148,050.00

gros
Botton s 0.12 83 45,000.00 448,200.00

Collar stay Pcs 2 1.18 2,500.00 5,900.00

Lable Pcs 1 3.8 47,000.00 178,600.00

Poly bag Pcs 1 7.5 58,962.00 442,215.00

Collar band paper 1 4 7,452.00 29,808.00

Collar Band PVC 1 6.5 25,896.00 168,324.00

Shirt supporter 1 12 105,741.00 1,268,892.00

Butter fly 1 2.7 52,325.00 141,277.50

White clip single 2 1.7 78,945.00 268,413.00

White clip square 1 5.24 7,412.00 38,838.88

Paper Hang tag logo 1 5 65,456.00 327,280.00

String with locker 1 3 32,145.00 96,435.00

Silver headed pin 1 0.05 78,956.00 3,947.80

Staffing paper 1 3.7 21,456.00 79,387.20

Shirt Ribbon paper type 1 2.8 21,456.00 60,076.80

0.001
Masking Tape 1/32/36 3 220 17,500.00 5,005.00

Carton 1/18 0.056 110 15,446.00 95,147.36

21
 Sub
TOT 3,805,797.54
TOTAL 34,204,306.98

4.9 Suppliers and Customers

Since its establishment, the company has had a good relationship with
various exporters and importers.

5. Stock Management System

The company have stock management systems that are designed to

monitor and control stock consumption. They accurately measure and track
inventories and how stock is issue. This information is then stored in
systems and reported to the manager through the use of web portals to
provide this useful data.

6. Financial Plan

The Company is planning to increasing income and Improving profitability

of the business, to grow its current business location to satisfy the current
market need of the country and enhance sales income and profitability and
securing sessional cash shortage. the company requires additional Working
Capital Finance for covering its Purchase of Raw Material stock items and
operational costs and the plan indicate that working capital loan from
Leander institution will be obtained in order to avoid financial strain and
sessional cash shortage in order to run at the expected level.

According to the short-term strategy, the company must finance a total of

ETB 25 million to cover its operating costs and the purchase of stock items
and this purchase cared out direct cash transaction. Due to this fact the
company needs additional finance. From this additional amount, ETB 25
million will come from a bank credit facility in terms of term loan which will
be fully repaid in four years at an estimated interest rate of 15.5%. The

22
operating income is used to pay back the loan Beside to this, the promoter
believes the loan will strengthen the relationship between the investor and
the bank.

For this loan, the property provided as a collateral is a Company building

and Machineries.

6.1 Credit Information with Bank

In order to improve business performance, the company secured loans from

CBE and Awash Bank and paid it off on a regular basis.

6.2 Working Capital Loan Requirement

Estimated
working capital
Description Loan
Annual Purchase plan 34,204,328.37
Cost of Purchase Raw
material stock items
covered by Bank Loan 20,000,000
Salary and wages Covered
bay Bank Loan 3,000,000
Utility Covered bay Bank
Loan 1,000,000
Other Administration Cost 1,000,000
Total Requirement 25,000,000

Note:- From The total working capital requirement 25 million covered by bank loan and the
remaining fund covered by owners’ equity.

Purchase Plan
As we Discus earlier in the plan stock items for, particularly those procured
locally, play a pivotal role in ensuring the smooth and uninterrupted
functioning of the business.
It is known that the price of these stock items and operating cost has
increased significantly. However, recently the company competed with
different customers, so it is necessary to purchase more stock items in
23
order to deliver the service to the customers in a timely manner It is
necessary to get a loan from the bank to overcome this lack of purchase.

Basic assumption in forecasting our Purchase costs is the following:

Unit
RM Cost Quantity TOTAL

Fabric Mts 1.5 180 105,456.00 28,473,120.00

Iining Mts 0.09 208 102,852.00 1,925,389.44

Sub
TOT 30,398,509.44

Sewing Threade cone 0.063 94 25,000.00 148,050.00

gros
Botton s 0.12 83 45,000.00 448,200.00

Collar stay Pcs 2 1.18 2,500.00 5,900.00

Lable Pcs 1 3.8 47,000.00 178,600.00

Poly bag Pcs 1 7.5 58,962.00 442,215.00

Collar band paper 1 4 7,452.00 29,808.00

Collar Band PVC 1 6.5 25,896.00 168,324.00

Shirt supporter 1 12 105,741.00 1,268,892.00

Butter fly 1 2.7 52,325.00 141,277.50

White clip single 2 1.7 78,945.00 268,413.00

White clip square 1 5.24 7,412.00 38,838.88

Paper Hang tag logo 1 5 65,456.00 327,280.00

String with locker 1 3 32,145.00 96,435.00

Silver headed pin 1 0.05 78,956.00 3,947.80

Staffing paper 1 3.7 21,456.00 79,387.20

Shirt Ribbon paper type 1 2.8 21,456.00 60,076.80

Masking Tape 1/32/36 0.001 220 5,005.00
24
 3 17,500.00

Carton 1/18 0.056 110 15,446.00 95,147.36

Sub
TOT 3,805,797.54
TOTAL 34,204,306.98

Note: From the total purchase projection, plan of 34,204,306.98

birr 20,000,000 obtained and covered by Bank loan.

 Salary and Wage

It is computed taking the following assumptions regarding the
required number of staff, basic salary
Table 1- Staff Salary and Wage Plan: -

Area of
No Specification Annual Wage
14,6
1 Direct Labor 38,329.77
4,
2 Indirect labor 320,991.87
5,
3 Employe Benefit 066,000.05
Selling and
4 Distribution 419,428.43
5 Admin 2,254,933.96
Total 26,699,684.08

 This shows that the Company’s annual salary and benefit

expense will be Birr 26,699,684.08 offering competitive
salary and employing adequate staff.

Note: from the total annual Salary and wage of 26,699,684.08 birr
3,000,000 obtained and covered by Bank loan.

 Utility-

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 The company used a lot of Utility expense include cost incurred-for
water, electricity bills lubricants and telephone According to the
company's forecast, the yearly Utility expense will be birr 1,700,000
based on past usage.

Note: from the total annual Utility expense of 1,700,000 birr

1,000,000 obtained and covered by Bank loan.

Interest Expenses: - It is planned that the Company will obtain bank term
loan of ETB 25 million to be repaid in 4 years. The loans are expected to
be obtained at annual interest rate of 15.5% and the company repayment
ability is income from sales is used

6.4 Collateral Offered

For this loan, the property provided as a collateral is a Company building

and Machineries

 Repayment Ability:

The business has a strong repayment ability backed by a stable customer

base, consistent cash flow from regular operations, and a proven track
record of profitability. Financial projections and historical performance data
attest to the business's ability to service the proposed loan.
This loan application is submitted to the Commercial Bank of Ethiopia with
the aim of securing financial support to propel the business to new heights
of efficiency and service quality. The collateralization of the loan provides
security for the bank, and the business is committed to a transparent and
collaborative relationship, ensuring the fulfilment of all financial obligations.
Any significant changes in the business's financial status will be promptly
communicated to the bank.

6.5 Financial Projection

6.5.1 Sales forecast and assumptions

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Sales forecast assumption is based on internal factors include things like
sales history, product mix, marketing strategy, and sales team in addition
External factors include things like the overall economy, industry trends,
and competitor activity. It is also important to be realistic when making
assumptions forecast.

Year 2024 2025 2026 2027 2028

Item

Sales Income 26,060,440.66 45,605,771.16 63,848,079.62 92,579,715.44 138,869,573.17

Gross Rate 75% 40% 45% 50%

Total Sales 26,060,440.66 45,605,771.16 63,848,079.62 92,579,715.44 138,869,573.17

Note: - Previous period, which is 2024 sales revenue, was taken as base
year for comparison.

6.5.2 Projected Profit and Loss Statement

The Company is planning to increasing income and Improving profitability

of the business and to grow its current business location and enhance
service income and profitability. It also hopes to attract more consumers, in
order to meet sales targets for the following four years.
Expected profit and loss projection from the next four Consecutive years
are as follows:-

Profit and Loss

Projection
Year 2017 2018 2019 2020 2021
Sales Revenue 26,060,440.66 45,605,771.16 63,848,079.62 92,579,715.44 138,869,573.17
Total revenue 26,060,440.66 45,605,771.16 63,848,079.62 92,579,715.44 138,869,573.17
Gross rate 0% 75% 40% 45% 50%
Cost of Good sold
Cost of Good Sold 26,048,413.00 34,204,328.37 46,609,098.12 66,657,395.12 97,208,701.22
Total Cost of Sales 26,048,413.0 34,204,328.3 46,609,098.12 66,657,395.1 97,208,701.22
0 7 2

Gross Profit 12,027.66 11,401,442.79 17,238,981.50 25,922,320.32 41,660,871.95

Gross margins 0% 25% 27% 28% 30%
Expense 8,496,547.13 9,346,201.84 12,617,372.49 18,295,190.11 27,442,785.16
Total Administration 8,496,547.13 9,346,201.84 12,617,372.49 18,295,190.11 27,442,785.16

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Expense
Operating margins 32.6% 20.5% 19.8% 19.8% 19.8%
Net Profit/Loss -8,484,519.47 2,055,240.95 4,621,609.01 7,627,130.22 14,218,086.79
Before Tax
Profit tax 35% 0.00 701,334.33 1,599,563.15 2,651,495.58 4,958,330.38
Net Profit after tax -8,484,519.47 1,353,906.61 3,022,045.86 4,975,634.64 9,259,756.41
Net margins -33% 3% 5% 5% 7%

Relevant assumptions
The following relevant assumptions are considered to draw profit and loss
projections.

 The profit and loss plan are prepared taking into account the
internal capability, overall economy, industry trends, and
competitor activity as well environmental opportunities and
threats.
 The previous year's financial performance serves as the key
forecasting basis for the years under consideration.
 The fiscal year refers to a period of 12 months covering from
Hamle 1 to Sene 30 of Ethiopian Calendar.
 To the growth in sales, it is projected that, the company will
secure additional loan in the form of term loan from banks.
 Interest rate on the loan is assumed to be 15.5% per annum
 Previous period sales revenue was taken as base year for
comparison. Based on this scenario, the 2016 E.C sales will
grow by 75% as per critical assumptions explained previously in
this paper.
 For long-term assets, the business employed the straight-line
deprecation method.
 Administrative expense is expected average amount of 1.5%
from annual sales.
 Gross margin is Assumed as average 25%.
 Administrative expense is significantly increase when sales is
increase.

6.5.3 Projected Cash flow Statement

Year 2025 2026 2027 2028

Cash Inflow
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Beginning Cash 571,078.92
45,605,771.1 63,848,079.6 92,579,715.4 138,869,573.
Income
6 2 4 17
25,000,000.0
Loan
0
71,176,850.0 63,848,079.6 92,579,715.4 138,869,573.
Total Inflow 8 2 4 17
Cash outflow
34,204,328.3 46,609,098.1 66,657,395.1 97,208,701.2
Cost of Sales
7 2 2 2
Administration 12,617,372.4 18,295,190.1 27,442,785.1
9,346,201.84
Expense 9 1 6
Profit tax 701,334.33 1,599,563.15 2,651,495.58 4,958,330.38
44,251,864.5 60,826,033.7 87,604,080.8 129,609,816.
Total Outflow
4 6 0 75
26,924,985.5
Net Cash Flow 3
3,022,045.86 4,975,634.64 9,259,756.41

The cash flow projection is made assuming that:

● The Company will obtain ETB 25,000,000 loan finance at the

beginning of operation,
● Interest rate assumed 15.5 %
● Beginning cash balance taken from Previous year Audited financial
statement.
● All purchases are on cash basis.
● The annual sales of the company will be collected in the current year,
● Profit tax of the fiscal year will be paid in the same year.
Overall, the projected cash flow shows that the Company will generate
series of surplus cash flows after covering all operational and financial
commitments that confirms its liquidity.

6.5.4 Projected Balance sheet

STATEMENT OF PROJECTED BALANCE SHEET

Currency in Ethiopia
Birr
Beginning of the
Year 2025
ASSETS
Current assets
Cash and cash equivalent 571,079 20,458,963
Debtors and pre payment 8,522,365 15,745,852
Inventories 27,792,214 40,298,711

Total current assets 36,886,076 0 76,503,526

Non-current assets

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 -

Property, plant and equipment 21,875,210 21,875,210

21,875,210 21,875,210

Total non-current Assets 21,875,210 21,875,210

Total assets 58,761,286 98,378,736

Liabilities and equity

Current liabilities
Trade payable 10,788,209 12,406,441
Tax 840,600 701,334
Total current liabilities 11,628,810 13,107,775

Non-current liabilities

Lease 241,838 241,838

19,539,66 44,539,66
Bank Loan 3.82 3.82
19,781,501. 44,781,501.
Total non-current liability 50 50

Total liabilities 31,410,311 57,889,277

Equity
Capital 109,448,000 109,448,000
Custom variance 2,604,306 2,604,306
Retained Earning -84,719,331 -71,562,846

Total equity 27,332,975 40,489,460

Total equity and liabilities 58,761,286 98,378,736

Notes and Explanations

 Given the information from the above balance sheet table, where the
total assets of The Company are 98,378,736, and the sum of total
liabilities is 57,889,277 ETB, the balance sheet implies a positive
net worth. In this case, the company has a surplus of assets over its
total liabilities.
 This positive net worth provides a cushion against financial risks and
indicates the potential for the business to weather economic
challenges.

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  The company financial position indicates that the company has
sufficient current asset to cover its short-term financial obligation.

6.5.5 Financial Analysis

A financial analysis is used to calculate a company’s financial status or

production against other firms. It is a tool used by investors to analyse and
gain information about the finance of a company’s history or the entire
business sector. To calculate financial ration, numbers are taken from the
balance sheet, income statement, and cash flow statement. The financial
ratio is not a calculation but an explanation of the economic status of a
company, in terms of profit, liquidity, leverage, and market valuation. A
ratio may serve as an indicator, red flag or clue for various issues.

0.033438
Return on Equity = Net Profit before tax 1,353,906.61 5
Net Equity 40,489,459.41
5.836499
Current ratio = Current asset 76,503,525.72 7
Current Liability 13,107,775.11

Quick ratio = Current asset- Inventory 36,204,815.00 2.762087

Current Liability 13,107,775.11

Debit to Equity = Total Liability 57,889,276.61 1.429737

Net Equity 40,489,459.41

General conclusions

Based on the forecast assumptions for the company, the financial outlook
appears positive, with strong indicators of profitability. The positive net
income and healthy gross profit margin are encouraging signs for the
business's financial stability.

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