BUSINESS PLAN FOR ENE TAFERE GEBREHIWOT

MENAFESHA PROJECT

By:
Ergetie Temeche
Mobile:+251913811560/0914056448

October 30/2015
Wereileke, Edagarbi, Tigray
 Table of Contents
Title page

Table of Contents.......................................................................................................i
1. Executive Summary.............................................................................................1
2. Background of the Enterprise............................................................................2
2.1. Brief History of the Proprietor and the Enterprise....................................................................2
2.2. Mission, Vision, and Objectives of the Business.....................................................................3
2.3. Business Location.....................................................................................................................3
2.4. Guiding Principles....................................................................................................................4
2.5. Product / Service Description...................................................................................................4
2.7. Strength, Weakness, Opportunity, and Threat (SWOT) Analysis............................................5
3. Market and Marketing.......................................................................................6
3.1. General Analysis of the Market for Project..............................................................................6
3.2. Competition..............................................................................................................................6
3.3. Demand Analysis......................................................................................................................8
3.4. Market Segmentation................................................................................................................8
3.5. Supply Analysis........................................................................................................................9
3.6. Demand-Supply Gap................................................................................................................9
3.7. Marketing Strategy...................................................................................................................9
4. Technical Study.................................................................................................10
4.1. Project location.......................................................................................................................10
4.2. Land and the House layout.....................................................................................................11
4.3. Types of Machineries & Capacity..........................................................................................11
4.4. Availability of Utilities (water, power) and Infrastructural Conditions.................................11
4.5. Physical & Natural Conditions of the Project Area (Climate of Adawa town)......................12
4.6. The Cafe and Restaurant Input Availability & Cost...............................................................12
4.7. Production process..................................................................................................................12
4.9. Project Implementation Schedule...........................................................................................12
5. Management and Organization Structure of the Project..............................13
6. Financial Plan....................................................................................................14
6.1 Cost structure...........................................................................................................................14
6.1.1. Fixed Assets.............................................................................................................................14

6.1.2 Operating Costs (5 years projections).......................................................................................14

6.1.3. Working Capital.......................................................................................................................15

6.2. Total Financial Requirement..................................................................................................15

6.2.1. Loan Repayment Schedule......................................................................................................15

6.3. Revenue (5 Years Revenue Forecast).....................................................................................15

6.4. Profit and Loss Statement (five year projections)..................................................................16
6.5. Cash Flow Statement (Five Year Projection).........................................................................17
6.6. Balance Sheet Statement (Five year Projections)...................................................................18
6.7. Ratio Analysis for Production................................................................................................19
6.8. Socio Economic Benefits of the Project.................................................................................20
7. Conclusions & Recommendations....................................................................20
7.1. Conclusion..............................................................................................................................20
7.2. Recommendation:...................................................................................................................21
8. Assumptions..............................................................................................................................21

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1. Executive Summary

The enterprise: this business is found in Tgray Region of Wereileke town. It is a private business which is
operated or managed by Ene Tafere. The main purpose of the project is providing Bar and Restaurant products
and services (starting from 2016 up to 2020) and will continue to expand its production.

Market opportunities: Food ingredients and beverage suppliers are adequately available in Wereileke;
growing demand of beverage & relaxation; existence of experienced professionals on the job market; existing
untapped market; and there is no hard competitors.

Product/ Service: The main products of this business organization are all kind of foods (modern and
traditional), different drinks( soft drinks, beer, coffee and tea, and milk) and Refreshment Kerbula, table tense,
and pull are the main service which will be given with best quality.

Management: the business is fully managed by the business owner. The accounting and the general managerial
activity will be done by the owner until the scope of the business grows. Initially the bar will hire 1 manager, 2
baristas, 9 waiters, casher and 2 part time servers. In year 2, the bar plans to hire 1 additional full time barista

Financial condition: the project requires birr 897, 000 for fixed assets and birr 973,000 for working capital.
Totally, birr 1,870,000 will be required to implement the proposed plan.

Sources and uses of finance: the owner contributes 30.5 %( birr 570000) of the total requirement and the rest
69.5% (birr 1,300,000) will be covered by debt from commercial bank of Ethiopia. The equity capital will be
fully applied to working capital purpose. The borrowed money will be used for fixed assets and working capital
which will not be covered by equity finance.

Revenue of the project: the 1st and the 5th year expected revenue of the business is birr 1,382,620 and birr
1,382,620 respectively

Profit of the project: the expected profit of the business for the 1 st and 5th year is birr 48,142.7 and 115,302.7
respectively.

Cumulative cash inflow of the project: there will be birr 1,020,451 and birr 3,243,961 inflow in to the
business at the 1st year and 5th year respectively.
2. Background of the Enterprise

2.1. Brief History of the Proprietor and the Enterprise

History of the Proprietor of the Business

The business promoter are EeTafere Gebrehiwot; we have enough information about Menafesha services as
well as recreational activities since we have undertaken this activity and we lead our life still now for more than
ten (10) years in different towns. As family, we have different experiences how to satisfy our customers. We
have taken business plan development training and project based entrepreneurship development training by
different development agents.

Currently, the work land is our living place. This living place is center to any business activity and we have
shared important information from different business organization regarding to customer handling,
improvement of quality services, and response of customer complaints in appropriate manner.

Now, we are totally committed to run our own business for a number of years and believe we now have the
necessary experience and expertise regarding to café and restaurant to make that objective real and successful.

Address: - Woreda: Wereileke Town: Wereileke Kebele: - House No.:

Mobile: - +25191381560 E.Mail:

History of the Business

The name of the business is ‘EneTafere Menafesha’. Its legal form is private limited Company. The type of
the business is Service provider. The proposed years of the plan are five years from 01/01/2016- 01/01/2020.
And this is business is a new business.

Keys to Success

This business stands out from the competition. Below are their Keys to Success:

 Hire Quality Baristas: – Pay employees rates similar to the larger chains with opportunities for long term
careers and opportunities for advancement with long term plans to open a second facility,

 Convert Customers to Connoisseurs: - Only some portion of the nations coffee drinkers consume premium
ground and whole bean coffee and other drinks as well as cafeteria foods. This will aid in continued growth,

 Product quality:- Food, coffee, tea and other beverages with a comfortable environment,

 Service: - Our patrons are paying for high quality food, delivered in a short timeframe in a comfortable
environment. Their experience will suffer if service is not of the highest standard and each member of the
staff will be courteous, efficient, and attentive,
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 Marketing: - We will need to target our audience early and often. While the business is located in a central
and accessible location, many people will have to be re-introduced to the Meneafesh,

 Management: - We maintain a firm grasps on costs, such as food, beverage and labor costs. Stock is
maintained by a dedicated stock system by employee management, and quality control is critical.

The belief that the business will be successful based on the private owners’ knowledge, experience, and
determination to proceed. Additionally, this business is one of the expanded service industries in Ethiopia. It
refreshes those who have tired and depressed by different unwanted phenomenon. The highly growing
refreshment or recreational demand and very low service delivery of foods, soft drinks, beer, and other fluid
drinks as well as pull and other game stations in a well designed and standardized place, the nearer market,
ability to formulate the newly fashioned as well as traditional foods, existence of skilled labors in a job market,
and the town is the destination of tourists who are going to Aksum Tsion and existence of the required inputs as
well as suitable infrastructures and markets make the project sustainable in the future.

2.2. Mission, Vision, and Objectives of the Business

2.2.1. Mission

By using improved machines, qualified labors, effective and efficient mechanized technologies, preparing
reliable foods, drinks, and game stations to satisfy the target customers as well as gaining reliable return to the
owner and attractive incentives to the employees is our mission.

2.2.2. Vision

Seeing improved living standard and food security with a great satisfaction of the customers and the project
owner’s by preparing an improved foods, drinks and game stations.

2.2.3. Objectives

The primary objectives of the business plan for this project are below:
 To increase revenues by 10% after the end of the first five years,,
 To achieve a net profit birr 48,142.70 at the first year the project, and birr 168,234.90 at the 5th year
 Be the Menafesha of Choice in the Wereileke area and recipient of the best menafesha award

2.3. Business Location

The business site is located at the center of Wereileke Town which is 1001 km far from Addis Ababa. It is
bordered by Temben (South), Adgrat (East), Aksum (West), and Ertirea(North).

The Following Conditions Make the Site to Be Preferable:

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Proximity to raw materials like locally made machines, crops, and to the newly proposed , Aksum Tsion and
etc; Proximity to markets and distribution channels like individual urban dwellers, retailers, academic
institutions & etc. Availability of transport facilities; the product is easily transported to the customers;
Availability of efficient and cheap skilled labor. Skilled & technical advisers can be gained from the town. The
road is suitable to transport the raw materials from Mekele and Addis Ababa & electricity is not a problem
here, and the town has been in a fast growth status; Accessibility to post office, telephone, fax, email; and
affordable Cost and conditions of having land on hand.

2.4. Guiding Principles

This business is committed to values such as excellence, passion, quality, integrity and leadership which allow
them to navigate challenges and provide for future opportunities. These core beliefs start with their commitment
to their products and their employees. It rewards excellence and cherishes loyalty. The business and restaurant
will work with its employees to build strong businesses and a secure future.

2.5. Product / Service Description

The main products of this business organization are all kind of foods (modern and traditional), different
drinks( soft drinks, beer, coffee and tea, and milk) and Refreshment Kerbula, table tense, and pull are the main
service which will be given with best quality.

Based on the foregoing concept, the proposed firm intends to invest on foods, beverages, and refreshment
service which always both basic and luxurious in human life. After five years long, this firm will extend its
service from food and beverage to pension and a swimming pull.

2.6. Product/Service Sourcing

EneTafere G/hiwot’s Menafesha will negotiate supplier agreements with several local food-service wholesalers,
beverage industries and coffee wholesalers in the area that have a reputation for quality and reliability: food inputs,
beverages, and other required services.

In the event that one of the aforementioned specialty suppliers cannot meet their needs, the following national
suppliers can both provide all of the food and service products that they require. In addition, the following
wholesalers will supply the café with general restaurant supplies:

 Selam and Skafer food complex,

 Dashen, Walia, BGI, Raya, Meta and other Brewery Companies,

 Moha soft drink and other natural spring water producers

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Young families which comprise the third largest market share in Wereileke town are often overlooked in the
café and restaurant market. This menafesha traditionally have not been considered ‘kid’ friendly. To overcome
this hurdle, this firm has long term plans (5 years) to open menafesha: A combination indoor play area / coffee
bar. This concept allows parents and caregivers an opportunity to meet and relax with other adults while the
children can enjoy the indoor playground amenities.

Additional future services will include in-store sales for home purchase as well as an online store. The website
will have an option to purchase prepaid gift card program, prepaid gift cards not only provide immediate cash,
but also reduce credit card transaction charges and draw new customers to the business.

2.7. Strength, Weakness, Opportunity, and Threat (SWOT) Analysis

As indicated below, the owner can controls and improves the internal weaknesses by training and searching
different alternative solutions. There will be also a full preparation to resist the external future threats by
diversifying the business as much as possible. More or less the existing or the current strengths are enough to
start the proposed poultry project by exploiting the external opportunities. The following table summarizes in
short what are the current Strengths and weaknesses (internal factors) and the future Opportunities and threats
(external factors).

Strengths Opportunities

1. Existence of some sort of initial capital
2. Good leadership comprising of specialists,
3. Creative and good selling techniques,
4. Trade secrets,
5. Strong business initiative,
6. Having A suitable land
7. Team work and documented standard 5. There is no hard competitors;
operational manual
8. Bottom up approach of sharing information
and communication.
Weaknesses
1. Food ingredients and beverage suppliers are adequately
available in Wereileke;
2. Growing demand of beverage & relaxation;
3. Existence of experienced professionals on the job
market;
4. Existing untapped market;
6. Sufficient infrastructure
Threats

1) Lack of fulfilling the demand of the 1. Water and electricity may be interrupted
customers at the beginning period of the 2. Little demand fluctuation during the fasting periods,
project. 3. Most of the customers may use this services and
2) Low level of product differentiation (Food, products from traditional markets,

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 beverage and game station) at the beginning 4. Natural disasters may retard the supply of this required
of the project, inputs,
3) Delay of time to implement the decision. 5. Inflation

3. Market and Marketing

3.1. General Analysis of the Market for Project

Based on the market survey (2006E.C), the population the following information is gathered from different
business organizations. As CSA of 2007 national population census, Wereileke has more than 85,367
populations. The majority of the inhabitants are Orthodox Christianity followers.

From this point, it is possible to conclude that, food consumption and beverage drinking is affected by fasting
periods that protects eating meat and meat related foods.

The market survey was conducted in Wereileke town and data is gained from primary and secondary data
sources by using structured questionnaires, interview, and observation. Especially for the 15 consecutive days,
observation was employed to gather information about the current demands and supplies of fast food, lunch,
dinner, and different kind of beverages. Primary data was collected from selected individuals and managers of
business organizations. While secondary data was taken from Wereileke town trade and industry office, A
Wereileke dawa town Promotion and Communication office and from related documents.

As 60 % of the selected respondents said, they have not satisfied and provided the products and services based
on the customers’ demand.

Based on the market observation, single males and females have mostly used their food and beverages from
cafe and restaurants. If they want to prepare the food in their house, they loss their time and the quality of the
food they want.

3.2. Competition

From small up to large hotels, more than 246 registered business organizations are found in Wereileke town.
The main competitors are Hotels, small fast food processors and cafe and restaurants and their weakness and
strength is as follow:

Strength of Hotels: they have a strategic and known place and they fulfill the required instruments.
Weakness of Hotels: the existing hotels in Wereileke are focusing their service on pension and expensive foods
and beverages that can not consider the purchasing power of the middle income or lower income
earners. Even their customer handling mechanism is not good. They cannot provide a relaxed
environment and alternative entertainment conditions like game stations.

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Strength of Small Fast food processors: they have a lower price package. And they have expanded throughout
the town and can block the new comers before they reach in this café and restaurant.
Weakness of Small Fast food processors: these business organizations do not have a well qualified personnel
and training. Due to that reason, they provide their services in irregular customer treatment. They
cannot produce a qualitative and a healthy food rather they focus on quantity.
The Strength of Cafe and Restaurants: - holding a strategic place and be known by their age as a long lived
life. They know the behavior of the existing customers want and they may be hard competitors to the
future.
Weakness of Cafe and Restaurants: These business organizations have high price package without a complete
service and product delivery. Most of the Cafe and restaurants have done the work of small fast food
processors. They cannot fulfill the criteria of café and restaurant business status.
Competitive differentiation

Most of the cafeteria equipments will be locally produced to minimize the cost of production without losing the
quality and quantity of the product which is produced by the modernized equipments. If the cost of production
is minimized, the price of the product will be minimized and attracts the customers’ attitude. This also initiates
the small industry owners of our country.

Based on the market survey result, the current average price of beer is 13birr, soft drink 10 birr, non fasting
food (key wot birr 40, tibs 75) and fasting food 25birr in hotels and Cafe and restaurants. But this business
organization will set a reasonable price and will make the price of beer 10 birr, soft drink 8 birr, tibs 50 birr,
keywot 35 birr with a comfortable environment.

Generally, in order to win the market competition and to get a good return and good public image, the project
follow ‘always four ways’ concept which means: “always select good services and products, always maintain
good housing, always look after health needs, and always follow the right pricing system”. And the business
will deliver free WI-FI services. The existing Cafes, restaurants and hotels have lower employment
opportunity(on average from 3 up to 5) but this business organization will have 14 employees at the very
beginning of the its work and will add through time based on its business capacity.

3.3. Demand Analysis

The population growth rate of Wereileke is 3.2%. This growth rate determines the demand of the food and
beverage and other services intake.

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Based on this market survey result (2014), all respondents said that since the awareness and the improvement
the daily income of the society growth, having got refreshment and selecting the best food and service suppliers
is increased from time to time.

Before now, most of the population wanted a cafe and restaurant product services during religious festivals and
holidays. But now, every household uses theses products and services to fulfill the protein and other nutritional
requirements if they do not prepare them in their house.

Cafe and restaurants customers, by nature, are looking for something special that’s why they are willing to pay
so much for such products and services. Many customers of the big national chains, while satisfied with their
daily services would be intrigued to find a local food and beverage that is different.

3.4. Market Segmentation

Most adult cafe users said their lifelong habit began during their teenage years. In fact, 54% said they began
drinking coffee and tea between 13 and 19. Another 22% responded their coffee cravings started between the
ages of 20 and 24. This means that 76% of adult coffee drinkers began drinking coffee by the time they were
24. So, despite the large amount of marketing and advertising directed at the younger age groups, savvy coffee
shop owners will not forget to cater some of their offerings to the adult and senior market.

Thus, the main market segments are the youth, civil servants, and new comers (guests) to Wereileke town and
individuals (from lower income earners to large income earners).

3.5. Positioning

The Russet Mug will position itself as a local café and restaurant house providing a sanctuary for those in the
‘barbs’ without the hassle of having to drive downtown.

By charging similar prices as the large chains – the service and quality of the product will commensurate
with the price
This business is genuinely unique place to gather and meet friends, and enjoy coffee
Amenities such as free WIFI, chess games, comfy overstuffed chairs, create a relaxing environment
The market does not need a café offering fast food breakfasts or another after hours bar
It will position itself as the alternative to the chain/franchise/fast food coffee house.

3.5. Supply Analysis

According to the selected respondents saying, most of the cafe and restaurants in Wereileke town were coming
from different rural farmers. The existed business organizations have emphasized only those who have high
income. The youth, civil servants and individuals who have lower income source cannot refresh and use café

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and restaurant products and services. This business will solve such problems by supplying the required services
with a fair price.

It is untapped business in Wereileke town since there is no hard competitor.

3.6. Demand-Supply Gap

The market survey indicates that this business in Wereileke town is untapped business. Since this business is
small business, it shares only from 20% to 50% from the unfulfilled market.

3.7. Marketing Strategy

The Business utilizes a focus strategy on its market. By specifically targeting three primary segments they can
cater specifically to their needs.

Senior Market (age 45+):- The business will target this market simply by its well selected location. Although
this demographic group could readily drive downtown, they prefer a local café to unwind and relax and
historically become some of the most loyal patrons.

Newly Hired Employees: - The business will attract regular customers (weekly or more) - particularly the
newly employed (first job) by providing free WIFI services and providing interesting games in the customer
area.

Younger Families: - The third targeted markets, younger families, often find that coffeehouse are not ‘kid’
friendly. The company has long term plans to create a combination coffee shop / play area so that parents and
caregivers will have a place to meet with other adults while the children can enjoy the bounce houses, slides and
indoor playground equipment.

Product/Services:
Unique products (specialized roasts local ingredients, locally themed or named drinks and foods, custom drinks
by the barista, etc.). Games, puzzles, mind benders and other activities that encourage customers to linger over
their coffee, hosting or sponsoring local events (entertainment, readings, book clubs, etc.), using technology to
creatively compete in marketing with the big chains services like four square, yelp, and Google places can
increase visibility in the local market. Delivering amazing service from knowledgeable baristas, spend lots of
time training staff and utilize online services. Selling coffee-related items (and track down any co-marketing
opportunities with a local community college or other student-related group in the area).

Distribution: This project will sell all products and services directly to beneficiaries who are coming in the
cafe and restaurant. The end users should purchase directly when they come on the spot.

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Pricing Strategy: to set the price of the product, direct material cost, direct labor cost, and overhead costs,
customers’ purchasing power, and the competitors’ price will be taken in to consideration. Having the lowest
price is not a good strategy unless quality product and service cannot be delivered. The business believes that
setting a reasonable price is competitive price since it prioritizes costs and customers’ willingness and ability to
pay for the eggs and meat.

Promotional Strategy: advertise regularly on popular social media sites, such as Facebook. Compared to
traditional print advertising, this is a cost effective tactic that will allow them to reach prospects in a highly
targeted way (e.g., based on criteria such as age, gender, geography, etc.).

Web Site: - the business will develop a simple Web site, which will provide basic information about the
business, the menu, and links to their presence on the aforementioned social media channels.

Radio Advertising: - During the first six months of operation, and during the busy holiday shopping season, the
business will advertise on local radio stations.

Rather leaflets, posts on public notice board & face to face communications with bulky buyers. Website,
preparing large reclaims on the main passages of the public is an additional method of the market promotion.

4. Technical Study

4.1. Project location

As it is described in detail in the background section of this paper, this business project is located at the center
of Wereileke town.

4.2. Land and the House layout

It is estimated that the enterprise will be established to a pieces of land measuring 42mX53m which is 2226
meter square. This land is already within the shareholders hand and easily applied to the intended purposes.

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 The main
house

Meeting
hall

The house will contain all necessary equipments such as baristas’ rest room, bathing room, office of the staff,
kitchen, toilet, living room, gust house, in service and other operational rooms.

4.3. Types of Machineries & Capacity

There are machineries that are available on the hand of the project owner are tea and coffee machine, coffee
grinding machine, pull and kermbula, 20 cup of coffee, 50 watering glasses, 30 tea glasses, 15 knifes and etc.

4.4. Availability of Utilities (water, power) and Infrastructural Conditions

Water and electric power is easily accessible. Since interruption is inevitable, water will be purchased and
generator rent also available in Wereileke town. Whatever the required amount of water and electricity is
sufficient at the project area.

As it is stated in the background section of this paper, the availability of infrastructure in the town is reliable.

4.5. Physical & Natural Conditions of the Project Area (Climate of Wereileke town)

According to Adawa Agricultural Report (2013), the total area of the district is above 2180 hectare, of which
Woina Dega, Dega, Kolla, Wurch, & Berha

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It also states that Wereileke has two (Bimodal) rainy seasons (summer from June to September & Spring from
February to April). The average annual rainfall varies from 900mm to 1038mm. The average annual
temperature is 20.5oc (minimum 2.95oc & maximum 33oc).

Generally, as the previous experience shows that the climatic condition of the town is suitable for the café and
restaurant business.

4.6. The Business’s Input Availability & Cost

The required inputs such as teff, wheat, meat, egg, better, bean, beans, hen, beverage, coffee, sugar and etc are
the main inputs to run this business organization. The construction materials can be obtained in Wereileke town
from different suppliers and local producers.

4.7. Production process

All the required materials will be fulfilled. Based on the product nature and the order of the customers, the
required amount and quality of the product will be produced with a fast service.

4.9. Project Implementation Schedule

The project will be implemented based on the following table5 schedule

Table 1: Implementation Schedule of the Project
Activities Time taken
Seeking legal counsel and accounting services From 01/01/2016- 19/02/2016
Completion of research and development efforts From 22/02/2016- 30/02/2016
Preparing business plan documents From 01/03/2016-19/03/2016
Asking investment place from Adawa town administration From 01/04/2016- 15/04/2016
Completing the construction/ getting shade From 01/12/2016- 30/01/2017
Ordering raw material suppliers From 10/02/2017- 30/02/2017
Recruitment and selection of personnel From 01/03/2017- 10/03/2017
Beginning production process ( on average day old layers start to lay At 11/03/2017
after 5 21 weeks or five months)
First order sales and payments 01/09/2017
5. Management and Organization Structure of the Project

Management: the business is fully managed by the business owner. The accounting and the general
managerial activity will be done by the owner until the scope of the business grows. Initially the bar will hire 1
manager, 2 baristas, 9 waiters, casher and 2 part time servers. In year 2, the bar plans to hire 1 additional full
time barista.
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Table 2: proposed labor requirements and their salary per month and per year
Personnel Qty Qualification Experience Responsibilities Salary Total Salary
General 1 Management 6 years Guiding the general
manager direction of the business 3000 3000
Casher 1 Diploma in 3 year Recording all financial
accounting transactions and prepare the
financial statement 2000 2000
Waiters 9 Grade >=8 1 year Supervising and directing
the production activities 1000 9000
Baristas 2 Grade >=6 1 year Carryout Business 800 1600
transaction
Guard 1 Above >= 10 0 year Ensure security on the farm 800 800
Total 14 16,400
Excess labor force is available in Adawa town with affordable cost.

Organizational structure of the Bar and Restaurant:

General Manager

Casher Barista Waiters Guard

Employees (casher, barista, waiters, and guard) are accountable to the general manager (owner manger). The
general manager supervises the overall activities of the business and gives the required direction to the
employees.

6. Financial Plan

6.1 Cost structure

6.1.1. Fixed Assets

Table 3: Fixed Assets

No Item Unit Quantity Unit price Total price
1 Building No 2 301000 600000
11 Tools and Equipments No 295,000
Total Fixed cost 897,000

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6.1.2 Operating Costs (5 years projections)

As the following table 5, the value of teff per quintal will be expected birr 1650 and five quintals per month will
be wanted by this business. Different beverages also considered birr 10 per bottle and calculated on average
basis. The cost of the average soft drink will be 10 birr per bottle and 10 beer boxes per day will be used, the
same is considered to forecast operational cost of the five consecutive years. The operational cost of the project
is shown in the following table 5:-
Table 4: Operating cost of five years forecast
No Item 2015 2016 2017 2018 2019
1 Teff 99,000 99,000 99,000 99,000 99,000
2 Alcohol 230,400 230,400 230,400 230,400 230,400
3 Soft drink 86,400 86,400 86,400 86,400 86,400
4 Coffee 64,800 64,800 64,800 64,800 64,800
5 Sugar 21,600 21,600 21,600 21,600 21,600
6 Milk 27,000 27,000 27,000 27,000 27,000
Meat 243,000 243,000 243,000 243,000 243,000
7 Direct labor 196,800 196,800 196,800 196,800 196,800
8 Pre-operative expense 4,000 4,000 4,000 4,000 4,000
Subtotal of Variable costs 973,000 973,000 973,000 973,000 973,000
9 Overhead expenses
9.1 Utilities 1,835.10 1,835.10 1,835.10 1,835.10 1,835.10
9.2 Telephone (25 birr per month) 300 300 300 300 300
9.3 Depreciation cost 2,290 2,290 2,290 2,290 2,290
9.4 Maintenance ( building &equip) 550 550 550 550 550
9.5 Indirect labor (12x1000) birr) 12,000 12,000 12,000 12,000 5,000 12,000
Subtotal 16,975.10 16,975.10 16,975.10 16,975.10 16,975.10
10 Marketing cost 300 300 300 300 300
11 Administrative cost 210 210 210 210 210
12 Miscellaneous 600 600 600 600 600
Grand Total 991,085.1 991,085.1 991,085.1 991,085.1 991,085.1
6.1.3. Working Capital

The average starting egg laying period of one pullet is 5 months.

Table 5: working capital plan for 1 year

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 No Item Total price 6.2
1 Teff 99,000 .

2 Beer 230,400
3 Soft drink 86,400
4 Coffee 64,800
5 Sugar 21,600

6 Milk 27,000
7 Meat 243,000
8 Direct labor 196,800
9 Other expense 4,000
Total 973,000
Total Financial Requirement

Table 6: Sources, the Total Financial Requirements, and fund Allocation of the Project
Source Amount Use Amount
Equity Birr 570,000 Working capital Birr 570,000
Loan Birr 1,300,000 Working capital Birr 403,000
Fixed Asset investment Birr 897,000
Total 1,870,000 1,870,000

6.2.1. Loan Repayment Schedule

Table 7: loan repayment plan (the yearly loan repayment capacity of the project)
Year Principal Installment due Interest due (10%) Total payment
1 1,330,000 266,000 133,000 399,000
2 1,064,000 266,000 106,400 372,400
3 798,000 266,000 79,800 345,800
4 532,000 266,000 53,200 319,200
5 266,000 266,000 26,600 292,600

6.3. Revenue (5 Years Revenue Forecast)

In the following table9, the expected revenue of the projected is shown:-

Table 8: The Five Year Revenue Projection

Years 2015 2016 2017 2018 2019
Food 620,000 620,000 620,000 620,000 620,000

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 Beverage 758,000 758,000 758,000 758,000 758,000
Kerenbula 1620 1620 1620 1620 1620
Pull 3000 3000 3000 3000 3000
Total Revenue 1,382,620 1,382,620 1,382,620 1,382,620 1,382,620

Note: the above total sales are computed by using the average sales which was collected during the market
survey. Food and meat total sales are summed together since they cannot be separated. The same is true for
beverages.

6.4. Profit and Loss Statement (five year projections)

Table 9: Profit and Loss Statement for 12 months

Item 2015 2016 2017 2018 2019
Sales 1,382,620 1,382,620 1,382,620 1,382,620 1,382,620
Less: Cost of Goods Sold:

Raw material cost 973,000 973,000 973,000 973,000 973,000

Labor cost 196,800 196,800 196,800 196,800 196,800

Over head 16,975.10 16,975.10 16,975.10 16,975.10 16,975.1

Total CGS 1,186,775.1 1,186,775.1 1,186,775.1 1,186,775.1 1,186,775.1

Gross profit 195,844.9 195,844.9 195,844.9 195,844.9 195,844.9

Less Marketing cost 200 200 200 200 200
less: Administrative Cost & 810 810 810 810 810
Miscellaneous Cost
Operating Profit 194,834.9 194,834.9 194,834.9 194,834.9 194,834.9
Less: Interest Expense 133,000 106,400 79,800 53,200 26,600
Net Profit Before Tax 61834.9 88,434.9 115,034.9 141,634.9 168,234.9
Income Tax (35%) 13,692.2 23002.2 32,312.2 41,622.2 50,932.2
Net Profit After Tax 48,142.7 65,432.7 82,722.7 100,012.7 117,302.7

6.5. Cash Flow Statement (Five Year Projection)

Table 10: Five Year Cash flow Projections

Year 0 2016 2017 2018 2019 2020

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 Cash Inflows:
Equity 540,000
Loan 1,330,000 1,330,000 1,064,000 798,000 532,000 266,000
Net Income 48,142.7 497,526.8 82,722.7 100,012.7 117,302.7
Depreciation 55,000 55,000 55,000 55,000 55,000
Total Inflows 1,433,143 1,616,527 935,723 687,013 438,303
Cash Outflows
Loan Repayment 266,000 266,000 266,000 266,000 266,000
Interest Payment 133,000 106,400 79,800 53,200 26,600
Income Tax 13,692.2 65,432.7 32,312.2 41,622.2 50,932.2
Total Out flows 412,692 437,833 378,112 360,822 343,532

Net Cash Inflows 1,870,000 1,020,451 1,178,694 557,611 392,434 94,771

Cumulative inflow 1,020,451 2,199,145 2,756,756 3,149,190 3,243,961

6.6. Balance Sheet Statement (Five year Projections)

Table 11: Projected Balance Sheet Statement for five Years

Assets Year 0 2015 2016 2017 2018 2019
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Current Assets:
Cash 973,000 540,743 724,127 1,026,677 1,275,387 1,524097
Total Current
Assets 973,000 540,743 724,127 1,026,677 1,275,387 1,524097
Fixed Assets
Building 602,000 602,000 602,000 602,000 602,000 602,000
Less: 30,100 30,100 30,100 30,100 30,100
Accumulated
Depreciation
Tools &Equips 295,000 295,000 295,000 295,000 295,000 295,000
Less: 29,500 29,500 29,500 29,500 29,500
accumulated
depreciation
Total Fixed 897,000 837,400 837,400 837,400 837,400 837,400
Assets
Total Assets 1,870,000 1,810,400 1,810,400 1,907,400 1,907,400 1,907,400
Liabilities & Capital
Current Liability
Long Term Debt 1,330,000 1,330,000 1,064,000 798,000 532,000 266,000
Total Liability 1,330,000 1,330,000 1,064,000 798,000 532,000 266,000
Capital:
Profit After Tax 48,142.7 497,526.75 82,722.7 100,012.7 117,302.7
Equity 570,000
Total Capital 65,432.7 65,432.7 65,432.7 65,432.7 65,432.7
L+C 1,870,000 1,378,143 1,561,527 880,723 632,013 383,303

6.7. Ratio Analysis for Production

Table12: Computation of Financial Internal Rates of Return (Birr) For the Years Ending June 30, 2020

Project Revenu Fixed Working Total Investme Operatin Total Net Income Net
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 Costs
Asset Capital Benefit Benefit
Excluding
Years e Recover Recover Benefits nt Costs g Costs Before Tax After
Income
y y Tax Tax
Tax
(187000
0       0 1,870,000   1870000 (1870000)   0)
1 1382620     1382620 991085 991085 391535 13692 377843
2 1382620     1382620   991085 991085 391535 23002 368533
3 1382620     1382620   991085 991085 391535 32312 359223
4 1382620     1382620   991085 991085 391535 41622 349913
5 1382620 897000 973000 3252620   991085 991085 2261535 50932 2210603

FIRR before tax 21%

FIRR after tax 19%

NPV at 10% 599,602

Table 13: Sensitivity Test For the Years Ending June 30, 2020 When Benefit Decreases by
10% and Cost Remain Constant ( Birr)
Total
Net
Fixed Working Costs Net
Project Total Investment Operating Benefit Income
Revenue Asset Capital Excluding Benefit
Years Benefits Costs Costs Before Tax
Recovery Recovery Income After Tax
Tax
Tax
0         1,870,000   1870000 (1870000)   (1870000)
1 1382620     1382620   991,085 991085 391535 13692 377843
2 1382620     1382620   991,085 991085 391535 23002 368533
3 1382620     1382620   991,085 991085 391535 32312 359223
4 1382620     1382620   991,085 991085 391535 41622 349913
5 1382620 897000 973000 3252620   991,085 991085 2261535 50932 2210603
Total 6913100 897000 973000 8783100 1870000 4955425 6825425 1957675 161560 1796115

FIRR before tax 21%

FIRR after tax 19%
NPV (10% DF) 599,602

Sensitivity Test
For the Years Ending June 30, 2020
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 When Costs Increases by 10% and Benefit Remains Constant (in '000 Birr)

Total
Net
Fixed Working Costs Net
Project Total Investmen Operating Benefit Income
Revenue Asset Capital Excluding Benefit
Years Benefits t Costs Costs Before Tax
Recovery Recovery Income After Tax
Tax
Tax
0       0 1870000   1870000 (1870000)   (1870000)
1 1382620     1382620   1090194 1090194 292427 13692 278735
2 1382620     1382620   1090194 1090194 292427 23002 269425
3 1382620     1382620   1090194 1090194 292427 32312 260115
4 1382620     1382620   1090194 1090194 292427 41622 250805
5 1382620 897000 973000 3252620   1090194 1090194 2162427 50932 2111495
Total 6913100 897000 973000 8783100 1870000 5450968 7320968 1462133 161560 1300573

FIRR before tax 16%

FIRR after tax 14%
NPV (10% DF) 258,057
6.8. Socio Economic Benefits of the Project

The project can create employment opportunities to the surrounding communities. In addition to the supply of
the domestic needs, the project will generate tax revenue at each year as it is shown in the profit and loss
statement part. This business also has backward linkage effect on animal feed processing industries and a
forward linkage effect on food processing industries.

7. Conclusions & Recommendations

7.1. Conclusion

Poultry farm is one of the best business areas which have not been still exploited in Ethiopia. In our country in
general and Adawa town in particular, there is no bar and restaurant place fulfill the growth demand
refreshment and quality restaurant products and services. Most of the producers are following the traditional
ways of production which is low in quality and quantity.

The price of most of the existing producers is unaffordable since they set their price emotionally and they do not
have access to information and no further written materials they get.

In Wereileke town small bar and restaurants are existed. But their service is not similar with this proposed
project. It only shares from 20% up 50% of the market since it is small business.

7.2. Recommendation:

The following conditions are recommended to the readers of this business plan:

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 Poultry production is easily achievable business in Ethiopia in general and Adawa town in particular. So
having done as such area is profitable.
 The existed government sectors that are responsible to hotel and tourism development should pay their
responsibility to awake the young labor towards this business area.
 Different useful materials about the restaurant should be released to the readers through internet & other
medias
8. Assumptions
 The financial figures are taken conceptual based on the field survey data.
 Excess ingredients are also available in Wereileke,
 The bank interest assumed to 10%
 Source of finance is 30.5 % from the owner and 69.5% from debt
 Income tax is based on Ethiopian trade tax i.e. if the net income is more than 60,000 birr 35% is taxed and
7950 birr will be deducted,
 Repair and maintenance is 1% of the equipment’s cost
 Accounts receivable 30 days if any
 Raw material local 15 days
 Working capital is considered by taking the first year cost,
 Accounts payable per year is not considered since there are no suppliers by credit.
 Up until five year the business operates its business in a constant way and will expand its business scope
after the end of the 5th year(2020) in a better way,

Appendix I: Market Survey Interview Questionnaires to the Business Organizations

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1. How do you see the current demand of the Adawa town bar and restaurants service beneficiaries?
2. How many reliable bar and restaurants here?
3. What is their weakness and strength?
4. What do you use their and by what price you get the service?
5. How much quintals or kilo gram of teff, sugar, coffee, meat and others per day, per week, per month,
and per year?
6. When the consumption of food and beverage is lowered?

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