Business Plan for Sino

Cargo Truck

By: Gebeyaw Tebeje Kassaw

Business Plan for Sino Cargo Truck Gebeyaw Tebeje Kassaw

February, 2021

2
Business Plan for Sino Cargo Truck Gebeyaw Tebeje Kassaw

Table of Contents
Executive Summery.........................................................................................................................1

1. General Back Ground...............................................................................................................2

1.1. Establishment and Shareholders of the company.............................................................2

1.2. Aim of the Owner.............................................................................................................2

1.3. Goal of the owner..............................................................................................................2

1.4. Objective of the business..................................................................................................2

2. PRODUCT AND SERVICE....................................................................................................3

3. MARKETING PLAN...............................................................................................................3

4. MARKET ANALYSIS............................................................................................................4

5. DEMAND ANALYSIS............................................................................................................4

6. ASSUMPTION ON OPERATION..........................................................................................4

6.1. General Assumption..........................................................................................................5

6.2. Cost Assumptions(one unit)..............................................................................................5

7. OPERATIONAL FORECASTS..............................................................................................7

7.1. Revenue forecast:..............................................................................................................7

7.2. Operational Expense Projection:.......................................................................................7

8. FINANCIAL PLAN AND ANALYSIS...................................................................................8

Table -1 Investment cost to acquire one Sino truck trucker.......................................................9

Table-2 Depreciation amortization schedule...............................................................................9

Table-3 Project sales Forecast.....................................................................................................9

Table-4 Human Resource Requirement.....................................................................................10

Table-5 Determination of working Capital Requirement..........................................................10

Table-6 Projected Profit and loss statement.............................................................................11

0
Business Plan for Sino Cargo Truck Gebeyaw Tebeje Kassaw

Table-7 Cash Flow Statement....................................................................................................12

1
Business Plan for Sino Cargo Truck Gebeyaw Tebeje Kassaw

Executive Summery
Road freight transport, or trucking, is essential to modern economies,
occupying a unique socioeconomic position linking supply to demand
and linking many industrial sectors. As the mode of transport that brings
most goods to their final destination, it is indispensable to trade and the
well-being of any economy, and is a primary indicator of economic health
generating a significant portion of GDP, employing millions of people,
and offering the primary means for moving domestic, trans-border, and
international cargo. Road transport represents more than 70% of the
land freight service at origin and destination points, connecting
businesses to world markets. Road transport is the backbone of the real
economy. This clearly portrayed that involving in this sector is much
more profitable.

Therefore, to join this profitable industry Ato Gebeyaw Tebeje, herein

after called the owner has established this sole proprietorship. The
company intends to inter in to this fertile market through acquiring one
Sino Cargo truck with a unit price of Birr 3,900,000.00 of which 50% is
from own contribution and the remaining 50% is from bank finance.
Moreover, the owner has the ambition to add more trucker in the future
through mobilizing funds from various sources such as raising the paid-
up capital, income generating from the business in caption as well as
bank finance.

The financial analysis and facts shows that the business will have a
positive cash flow through the project period.

1
Business Plan for Sino Cargo Truck Gebeyaw Tebeje Kassaw

1. General Back Ground

1.1. Establishment and Shareholders of the company

The company will have a sole-proprietor for of business
establishment, which is owned and established by one person.

1.2. Aim of the Owner

The aim of the owner is to provide dry freight transport service to own
export and import duties, private as well as governmental institutions
that are involved in different business activities that involve
transportation of goods, especially import and export institutions.

1.3. Goal of the owner

The goal of the owner is to have a good deal of annual sells which can
at least enable him to add one truck every year with additional
ownership investment.

1.4. Objective of the business

1.4.1. General Objective
The short term objective of the owner is establishing a
successful dry freight transport service business, giving
sustainable and reliable services to its clients. As a long term
objective, the owner will enter in to transit, logistics and port
handling service along with transportation service.

1.4.2. Specific Objectives

Generate attractive income for the owners;

2
Business Plan for Sino Cargo Truck Gebeyaw Tebeje Kassaw

Use well trained and devoted staffs;

Increase the number of truck at least by one annually;
Create permanent and temporary job opportunities for the
surrounding community and;
Maintain sustainable and reliable healthy relationship with its
customers through providing efficient and effective services.
1.4.3. Mission
Provide transport service along with transit, logistics and port
handling services on a sustainable basis and at a reasonable
price.
1.4.4. Vision
The vision of the company is to be a leader in the along with
transit, logistics and port handling services activities in
Ethiopia.

2. PRODUCT AND SERVICE

The company’s major activity is delivering dry freight transport service to
local firms, both private and governmental, which require cargo
trafficking from different point or origins to their destinations.

3. MARKETING PLAN
Dry freight transport service, plays a significant role within the economic
development of Ethiopia, in terms of national distribution of goods as
well as facilitating international trade. By far the highest amount of
national traffic is facilitated between the port of Djibouti and the capital
Addis Ababa. It comprises urban, national, regional and international
import, export and transit flows of goods.

3
Business Plan for Sino Cargo Truck Gebeyaw Tebeje Kassaw

4. MARKET ANALYSIS
The demand for the services rendered by the Dry freight transport
company has an increasing trend as a result of both growing
export/import and the related growth in the internal economy. The
nation’s economy is highly focused on the different international trading
activities that will pay its own role towards the fulfillment of the
country’s growth and transformation plan (GTP), the business’s potential
customers are different local and international transportation companies
owned by both governments and private sectors.

5. DEMAND ANALYSIS
As many other developing countries, Ethiopian road infrastructure and
the freight transport vehicles in terms of size, age and capacity, are not
sufficient to support the growth in the economic activities. With
economic growth, the demand for freight transport soared and
consequently shortages and congestion problems surfaced.

The demand is very high with regard to the current Ethiopian fast
growing economy, since it will create a big opportunity to towards the
transportation of good to different destinations that play an important
role for the continuity of the growing economy.

6. ASSUMPTION ON OPERATION
This part is mainly devoted to investment outlay, projected financial
results and viability and others measures of the worthiness of the
investment. To proceed with, it is important to begin with the
assumptions employed in to financial projection.

4
Business Plan for Sino Cargo Truck Gebeyaw Tebeje Kassaw

6.1. General Assumption

 The price offers from importer for one unit of Sino Truck cargo at a cost
of Birr 3,900,000.00 and total value of acquisition will be birr
3,978,000.00 after 2% ownership transfers.
 300 working days per year is assumed for the projection.

 Annually one Sino cargo is expected to travel 74,000KM.

 At a time one Sino cargo can carry 200 quintals
 Average monthly income is Birr 130,000.00 per Sino cargo and it will
work ten months in a year.

6.2. Cost Assumptions

6.2.1. Fuel Cost
Using one litter fuel one Sino cargo can cover at least 2KM distance.
Therefore, in each round trip on tracker will consume 925 litters. Thus in
each month one Sino cargo will consume 3,700.00 litters and 37,000.00
litters in a year.
Assuming that average fuel cost per litter is birr 16.32 for the first year of
operation and will grow by 10% in coming years. Accordingly, in the first
year of operation annual fuel cost Sino cargo will be birr 603,840.00.
6.2.2. Oil& lubricant

Motor oil will be changed in every 10,000KM and it needs 29 liters in

each replacement. Thus, motor oil will be changed 8 times in a year and
average unit price is birr 90.00 per litter. Therefore, motor oil for the first
years is birr 20,880.00 for one Sino cargo.
Differential oil of 10 litters will be changed every year, and its unit cost is
expected to be birr 100 per litter. Therefore, the average annual
consumption for one tracker is birr 1,000.00.

5
Business Plan for Sino Cargo Truck Gebeyaw Tebeje Kassaw

Gear box oil of 10 litters will be changed every year, and its unit cost is
expected to be birr 100.00 per litter. Hence, the average annual
consumption is birr 1,000.00 for one Sino cargo. Therefore, the annual
total oil & lubricant consumption is birr 22,880.00
Oil & lubricants costs are expected to increase by 10% per annum.
Salary and Wage
At a start-up stage the project will have 2 employees
A. Driver
Monthly salary is expected to be birr 5,000.00
Per diem is expected to be birr 300.00/per day
B. Assistant
Monthly salary is expected to be birr 1000.00
Per diem is expected to be birr 150.00/per day
Per diem is expected to be paid for 300 in year
Salary and wage presumed to increase by 10% per annum
Maintenance and repair: supposed to be 1.5% of the initial
investment to acquire Sino cargo and presumed to increase by
10% every year.
Tyre: One Sino cargo has 12 tyres and will be replaced every year.
The cost for one tyre is expected to be birr 14,500.00. Accordingly,
the total cost for one time will be birr 319,000.00 per year for one
trucker. The cost is also presumed to increase by 10% per annum.
Depreciation
 Method – Straight line
 Rate – 20%
 Sino cargo Truck life 5 years
Insurance 1.5% of the value of Sino cargo per year.

6
Business Plan for Sino Cargo Truck Gebeyaw Tebeje Kassaw

The loan is expected to be repaid over a period of five years at annual

interest rate of 16%.
Miscellaneous expenses it is presumed to be 0.5% of total income.
Tax is computed at 35% of the annual income before tax /for simplicity
purposes/.

7. OPERATIONAL FORECASTS

7.1. Revenue forecast:

The company mainly derives its revenue from providing dry freight
transport service. The projected revenue for five years assuming only
one Sino cargo Truck is presented below.
The 1st year revenue calculated considering Birr 130,000.00 per
month and it works for ten months in a year. The price will increase
by 10% which offset the assumption in the increase of inputs at 10%.
Therefore; the five years revenue project is presented below.

Year Operational Monthly income Annual sales Annual total

months/year growth rate revenue in Birr
1st 10 130,000.00 - 1,300,000.00
2nd 10 143,000.00 1.10 1,430,000.00
3rd
10 157,300.00 1.10 1,573,000.00
4th 10 173,030.00 1.10 1,730,300.00
5th 10 190,333.00 1.10 1,903,330.00

7.2. Operational Expense Projection:

To secure the aforementioned sales volume, the operation estimated
to spend about Birr 1,374,488.50 on the first year of operation and is
assumed to increase to Birr 2,012,388.61on fifty year, details of the
cost projection is presented on Table-5

7
Business Plan for Sino Cargo Truck Gebeyaw Tebeje Kassaw

8. FINANCIAL PLAN AND ANALYSIS

The profit and loss statement forecast depict that the project is profitable
and promising to generate profit of birr 495,465.00 during the first year
of operation and extends to 1,117,860.17 in the fifth year of operation.
The project will generate profit right from the commencement of
operation throughout the project period under review. Table-6

8.1. Cash Flow Forecast: the cash flow forecast in table-7 depict
that the liquidity position of the business is found to be sound
with net cash inflow of birr 709, 639.5 in the first of the
operation and it extends to birr 768,581.22 at the end of the fifth
year. This analysis shows that the business remains surplus in
cash flow throughout the period under review, which indicates
that it can easily meet its banking obligation.

8.2. Payback Period: the Payback period measures the length of

time, months or years, required to recoup initial investment in
the project. Accordingly, the assessment of the project from this
perspective depict that the project will be able to pay back the
total loan invested before loan maturity period after the
commencement of the operation.
8.3. Source of Fund: to realize project, the applicant has planned to
secure the resource from his own source and bank loan. Table-1

Table -1 Investment cost to acquire one Sino cargo truck

No Description Source Amount
1 50% of Sino cargo Owner 1,950,000.00
truck
2 Ownership cost Owner 78,000.00
3 50% of Sino cargo Bank Loan 1,375,000.00
truck
Total 3,978,000.00

8
Business Plan for Sino Cargo Truck Gebeyaw Tebeje Kassaw

Table-2 Depreciation amortization schedule

Initial cost Dep/Year Year
1 2 3 4 5
3,978,000.00 795.000.00 795.000.00 795.000.00 795.000.00 795.000.00 795.000.00

Table-3 Project sales Forecast

Year Operational Monthly Annual sales Annual total
months/year income growth rate revenue in Birr
1st 10 130,000.00 - 1,300,000.00

2nd 10 143,000.00 1.1 1,430,000.00

3rd 10 157,300.00 1.1 1,573,000.00

4th 10 173,030.00 1.1 1,730,300.00

5th 10 190,333.00 1.1 1,903,330.00

Table-4 Human Resource Requirement

Description Number Annual Pension Per diem for Annual
Required Salary Contribution 300 days salary &
Benefits in
Birr
Driver 1 50,000.00 5,500.00 90,000.00 145,500.00

Assistance 1 10,000.00 1,100.00 45,000.00 56,100.00

Total 201,600.00

9
Business Plan for Sino Cargo Truck Gebeyaw Tebeje Kassaw

Table-5 Determination of working Capital Requirement

No Items Year
1st 2nd 3rd 4th 5th
1 Repair & 70,125.00 77,137.50 84,851.25 93,336.38 102,670.01
maintenances
2 Oil & Lubricant 626,720.00 689,392.00 758,331.20 834,164.32 917,580.75

3 Tyre cost 319,000.00 350,900.00 385,990.00 424,589.00 467,047.90

4 Insurance 67,320.00 74,052.00 81,457.20 89,602.92 98,563.21

5 Salary & benefits 201,600.00 221,760.00 243,936 268,329.60 295162.56

6 Miscellaneous exp 12,080.00 13,288.00 14,616.80 16,078.48 17,686.33

Sub Total 1,296,845.00 1,426,529.50 1,569,182.45 1,726,100.70 1,898,710.76

Contingency/10%/ 129,684.50 142,652.95 156,918.25 172,610.07 189,871.08

Total 2,671,333.50 2,938,466.85 3,232,313.54 3,389,231.79 3,728,154.95

Increase in Working   267,133.35 293,844.69 156,918.25 338,923.70

Capital

10
Business Plan for Sino Cargo Truck Gebeyaw Tebeje Kassaw

Table-6 Projected Profit and loss statement

Item Year
st nd
1 2 3rd 4th 5th
Sales 1,300,000.00 1,430,000.00 1,573,000.00 1,730,000.00 1,903,333.00
Operating Cost
Deprecation 99,450.00 99,450.00 99,450.00 99,450.00 99,450.00
Repair & 29,250.00 32,175.00 35,392.50 38,931.75 42,824.93
maintenances
Direct Labor 153,510.00 168,861.00 185,747.10 204,321.81 224,753.99
Cost
Sub Total 282,210.00 300,486.00 320,589.60 342,703.56 367,028.92
Gross Profit 2,133,790.00 2,357,114.00 2,602,770.40 2,872,992.44 3,170,236.68
General and
Administrative
Exp
Oil and 707,380.00 778,118.00 855,929.00 941,522.78 1,035,675.06
Lubricant
Tyer cost 274,000.00 291,400.00 310,540.00 331,594.00 354,753.40
Insurance 29,853.00 28,343,25 26,851.50 25,359.75 23,868.00
Miscellaneous 22,080.00 23,288.00 25,616.80 26,078.48 27,686.33
Interest on loan 147,930.22 124,313.33 96,684.90 64,363.55 26,552.13
Sub Total 1,181,243.22 1,217,119.33 1,315,622.20 1,388,918.56 1,468,534.92
Net profit 1,052,546.78 1,239,994.67 1,387,148.20 1,584,073.88 1,801,701.76
before tax
Profit tax (35%) 358,641.37 424,248.13 475,751.87 544,675.86 620,845.62
Net Income 693,905.41 815,746.54 911,396.33 1,039,398.02 1,180,856.14
after tax

11
Business Plan for Sino Cargo Truck Gebeyaw Tebeje Kassaw

Table-7 Cash Flow Statement

Items Year
0 1st 2nd 3rd 4th 5th
Cash in flow            
Owners’ equity          
2,028,000.00
Bank loan Net          
income 1,950,000.00
Depreciation 795.000.00 795.000.00 795.000.00 795.000.00 795.000.00
 
Total Cash in 322,052.25 408,269.24 503,731.75 609,464.12 726,609.11
flow  
Cash out flow
3,978,000.00 1,117,052.25 1,203,269.24 1,298,731.75 1,404464.14 1,521,609.00
Investment on          
fixed asset 3,978,000..00
Increase in          
working capital  
Profit tax 35% 173,412.75 219,837.29 271,240.17 328,172.99 391,251.06
 
Total Cash out   96,186.14 105,659.43 116,151.86 127,776.83
flows  
Net cash inflows 173,412.75 316,023.43 376,899.60 444,324.85 519,027.89
(Out flows) 3,978,000.00.00
Cumulative cash   709,639.50 653,245.82 687,832.14 726,139.27 768,581.22
net inflows(Out
flows)

12