Kumenger Lembore Retail Trade in Agricultural Product

Business Plan

Owner: Kumnger Lembore

Addis Ababa, Ethiopia

April, 2023

Contents Pages
1. Business Plan Summary.............................................................................................................................4

2. The Future..................................................................................................................................................4

3. Performed Activities and Plan....................................................................................................................5

4. Business details..........................................................................................................................................5

5. The Market.................................................................................................................................................5
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6. Competitors Analysis.................................................................................................................................6

7. S.W.O.T. Analysis......................................................................................................................................7

8. Advertising & sales....................................................................................................................................7

9. Technical Analysis.....................................................................................................................................8

i. Main resources......................................................................................................................................8
11. The Finance................................................................................................................................................9

i. Assumptions..........................................................................................................................................9
ii. Start-up costs for [2023].....................................................................................................................10
iii. Working Capital..............................................................................................................................10
iv. Profit and loss forecast....................................................................................................................11

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1. Business Plan Summary

Business Name Kumneger Lembore Retail Trade in Agricultural Products

Project owner Dembelo Demeke
Type of Establishment Retail Trade Company
Nationality Ethiopian
Legal form Sole proprietorship
Project location Kolfe Keraniyo ,Addis Ababa, Ethiopia
Premises required 75M2
Product Type Distributing and Selling different agricultural products , especially
grains such as Teff, wheat & other products
Target Market The company is intended to sell the products for flour factories
and different grain retail stores companies and individual in Addis
Ababa
Demand projection 30 million tons or 7.34% annual demand growth rate
Investment capital and sources 30 million Birr of total investment out of which 30% from
of Financial promoter’s equity and 70% from long term bank loan.

2. The Future
 Vision statement
“Being number one choice for factories and retail stores in supplying quality agricultural product in
Addis Ababa”
 Mission statement
Providing quality and pure agricultural products for flour factories and retail stores at reasonable price.
 Goals/objectives
The business has the following basic goals in the coming five years.
i. Generating birr 12 million amount of profit on average each year
ii. Having 0.0012% of demand gap market share

3. Performed Activities and Plan

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 Performed activities and action plan

Milestone Date of expected completion Person Responsible

Owning land Own land Owner
Building G+4own building Owner
Licensing Taken Owner
Transport Vehicle Immediate after loan Owner
Suppliers Identified and left making contract Owner

4. Business details
i. Location
Location of the proposed business should be in Addis Ababa at Kolfe Keraniyo sub city and
through time in central and various places of Addis Ababa.

ii. Products/services

The company will distribute and sell various types of agricultural products especially grain products
such as Teff, Wheat and other cereal products with transportation service.

5. The Market
i. Target Market
The target market for our business are all flour factories and retail stores.

ii. Demand projection

Addis Ababa the central market for agricultural products and it took 90% the total
production of grain in Ethiopia. The demand for agricultural products in Addis Ababa is
derived from the price of and the number of family size. The demand the city's
requirement for grain agricultural product is met through domestic production. The
quantity of production during the period 2017 - 2023 is shown in the following Table.
During the period under reference, the supply of grain agricultural which constitutes only
domestic production, exhibited considerable increase averaged at 62.2 million tons with
an average increment rate of 12% a year.

Supply, Demand & Gap (in million tons)

5
 Year Domestic Production Shortage
Actual Demand or Gap
2017 45 52 7
2018 54 62 8
2019 58.5 69 10.5
2020 63 73 10
2021 72 78 6
2022 67.5 91 23.5
2023 75.42 102.00 26.59
Average 62 75 13
Source: CSA, Statistical Abstract, various years
Based on this fact the projected demand for the product is presented in the following table.
Projected Production, Demand & Gap (in million tons)
Year Projected Projected Shortage
Production Projected Demand or Gap
2024 80.01 102.00 26.58
2025 84.61 106.25 26.24
2026 89.20 114.00 29.39
2027 93.79 121.75 32.55
Average 84.6 114.7 30.1
As can be seen from the above Table both the production and demand of products steadily
increasing overtime, but the rate at which production increment is on average 7.8 % while
demand outweighs it by 1.8% which is 9.6 %. Thus, current soar in price of agricultural
products might be as the result of this; considering non-market factor is vital, however.

In estimating the present demand for the product it is assumed that the recent three years
average (2021 – 2023) is a reasonable approximate of current level of demand. Accordingly,
current (2023) demand is estimated at about 102 million tons.

6. Competitors Analysis
Agricultural products the main source of income for rural families in Ethiopia. The main
competition will be from the various existing whole traders at different locations of Addis
Ababa and there are also a lot of small scale enterprises sellers. The main competitors’
strength and weakness is stated below.
It is envisaged that the proposed project shall be able to supply the different agricultural grains
for flour factories and retail stores by cutting transaction cost arising from dealers at
economical prices due to lower cost of transport through own vehicle.

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 Competitor Strengths Weaknesses
Many Existing market experience Weak financial capacity & lack of
Companies transportation

7. S.W.O.T. Analysis
The following table stipulates the SWOT analysis, i.e. strength, weakness, Opportunity and
Threats in the context of Kumneger Lembore Retail Trade in Agricultural Products.
Strengths Weaknesses
 Competent management  Shortage of capital
 Clear Business Strategy  New experience
 Strategic Marketing and Sells plan
 Strong Financial systems
Opportunities Threats
 Conducive government policy  Conflict and Instability
 Country development  Similar new entrant
 Availability bank loan

8. Advertising & sales

The main marketing strategy begins as a provide quality, unique and full package services;
deliver to the needs of potential customers, that will fill the needs of them. We are planning
our marketing strategy so that we ensure excellence product with affordable price.
Our promotion channels include print ads in the form of business card and banners that keep
the owner name, phone and address of the company in front of the customer. Further, we will
use digital promotions such as face book, and telegram by posting the link at our compound.
All marketing decisions with regard to specific media choices, frequency, size, and
expenditures will be conducted on an on-going basis with careful considerations of returns
generated.

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9. Technical Analysis
i. Main resources
The major resources of the business include:
a. Land and building

The location of the business will be in Addis Ababa the land and it is found in the first
grade of urban areas. For different area of activities the lease price of urban land in Addis
Ababa is presented in the following table.

Area of activity Grade of City Plot grade Price (Birr/m2/year)

Residential 1st 2 199
st
Commerce 1 2 217
Comprehensive/Any other 1st 2 199
2
So, the lease prices for this land will be 217 birr/m /year.

 Plot and built up area

Total land requirement 75m2
Constructed area for Warehouse-ground part of the building 50 m2
Parking, green area, other store, road & residential building 25m2
 Land Lease Cost: Land on lease @ Birr. 217 /m2 per a n n u m .
b. Utilities
S.N Description Consumption/ Measurement Cost(Birr) Total Cost
year
1 Electricity (kWh) 3000 kWh 1.22 43,920
2 Water (M3) 13,000 m³ 25 325,000
3 Fuel Oil (litters) 48,000 Litter 54 2,592,000
4 Lubricating oil (Litters) As required As required - 50,000
Total Annual Cost 3,037,920
c. Skilled and unskilled manpower- the company create 3 permanent and 5 temporal job
opportunity

ii. Business Deliverable Capacity-the business planned to operate at full capacity next
month. We plan to sell above 300 Kuntals agricultural grains every month.

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10. Organization and Management

a. Organization Chart
The Organization structure below shows the working relationship in Kumneger Lembore
Retail Trade in Agricultural Products. The CEO of the business will be the owner Mr.
Kumneger Lembore. Under each division heads there are employees who will undertake day to
day activities.

Owner

Sales & Service Delivery Office Manager

Marketing
b. Management & Ownership
Kumneger Lembore Retail Trade in Agricultural Products is formed as a sole proprietorship
owned by Mr. Kumneger Lembore. The CEO of the company is also Mr. Kumneger Lembore.
The overall profile of the owner and the general manager of the company are summarized in
the following form:
 Owner & CEO : Kumneger Lembore
 Has 7 staffs: 1 sales and marketing officer, 1 office manager, and 5 service delivery and
wage laborer

11. The Finance

i. Assumptions
The following assumptions are taken in to consideration throughout the financial analysis.
All finance are expressed in terms of Birr, and fractions are rounded to the next digit.
Particulars Measure
Rate of Interest (Bank) 9%
70% Loan
Source of finance
30% Equity
Depreciation (Building) SLM* 20 years
Depreciation(furniture & fixtures) SLM 20 years
Tax 30%

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 Repayment period of Debt 10 years
Capacity Utilization 100%
Working Capital Cycle 1 month
ii. Start-up costs for [2023]

S.No Description Amount

1. Miscellaneous Fixed Assets (a) 4,500,000.
2. Pre-operating Expenses (b) 158,475
Total 4,651,475
Detail breakdown

a. Miscellaneous Fixed Assets & Expenditures

S.No Descriptio Measurement Amount Unit Price Total price
n
1 Furniture & office equipment LS 500,000
2 Truck Vehicles No 2 2,000,000 4,000,000

Sub Total (a) 4,500,000

b. Pre-Operating Expense
S.No Description Measurement Amount Unit Price Total price
1 Registration and formation of the LS 15,000
company
2 Consultant fees while business preparation LS 50,000
3 Salary, travel expense, legal expense etc LS 70,000
4 Cost of Advertising & Promotion 7000
5. Cost of owning land 200
5 Cost of Land lease m2 75 217 16,275
Subtotal (b) 158,475
Total Fixed Cost a+b 4,651,475
iii. Working Capital
It is the difference between current assets and current liabilities. The amount of working capital
represents the net additional investment necessary to operate a business over and above the cost of
purchasing fixed assets. The total amount of fund required for this business to operate is 30million
and the owner contribute some 30% which is nine million. From which 4.5 million is used to purchase
fixed asset while the rest 4.5 million were expensed for pre-operating expenses of the business. Since
the business want to operate at its full capacity which is 3600 Kuntal per year it needs a working
capital of 21 million birr. The following table shows the breakdown of working capital requirement

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for each agricultural grain products.
Working Capital Requirement
Total Amount
S.N Specificatio Unit Required money
Type of Product Purchased
o n /Year
/Year in Kuntal Buying Price
White 900 8000 7,200,000
1 Teff
Mixed 800 6500 5,200,000
Brown 700 5000 3,500,000
2 Wheat 600 5000 3,000,000
Other agri.
3 600 3500 2,100,000
Product
Total Operating Revenue 3600 35000 21,000,000

iv. Profit and loss forecast

The income prepared based on the company’s revenue and cost. The detail for each part and
the summary of income statement is stated below
a. Operating Revenue
The company plans to produce and sell three types of products. The demands for these
services are forecasted based on detail analysis of the construction sector and the future of the
country. The price and the number of units produced and considered to be constant in the
normal operation of the company. The detail of this part is presented in the following table.

Operating Revenue
Total Sales Unit
S.No Type of Product Specification Measurement /Year in selling Total sales/year
Kuntal Price
White 900 10000 9,000,000
1 Teff Mixed No 800 8000 6,400,000
Brown 700 6000 4,200,000
2 Wheat No 600 6500 3,900,000
Other agri.
3 No 600 4500 2,700,000
Product
Total Operating Revenue 3600 35000 26,200,000
b. Production Cost
The operation requires different inputs, like raw material, manpower, utilities e.t.c. and the
cost of materials are assumed to be the same throughout the project life. The main reason is

11
 that we neglect the impact of inflation during operation, by assuming that, if the price of the
inputs increase the company will increase the output price and this two will offset one another.
The current costs are set by collecting data from different market sources and by taking the
current market price of inputs.
Salary and Wages
Salary per
S. No Position Number of Workers Monthly Salary annum
1. Manager 1 35,000 420,000
Marketing Executive &
2. Accountant 1 10,000 100,000
3. Office's Manager 1 8000 96,000
4 Unskilled Labor 5 2500 12,500
Total salary 8 628,500
Utilities
S.N Description Consumption/ Measurement Cost(Birr) Total Cost
year
1 Electricity (kWh) 3000 kWh 1.22 43,920
2 Water (M3) 13,000 m³ 25 325,000
3 Fuel Oil (litters) 48,000 Litter 54 2,592,000
4 Lubricating oil (Litters) As required As required - 50,000
Total Annual Cost 3,037,920

Interest cost

Paymen Payment Beginning Payment Principal Interest Ending

t No . Date Balance Balance
1 6/11/2023 20,000,000.00 2,083,424.57 1,933,424.57 150,000.00 18,066,575.43
2 6/11/2024 18,066,575.43 2,083,424.57 1,947,925.26 135,499.32 16,118,650.17
3 6/11/2025 16,118,650.17 2,083,424.57 1,962,534.70 120,889.88 14,156,115.47
4 6/11/2026 14,156,115.47 2,083,424.57 1,977,253.71 106,170.87 12,178,861.76
5 6/11/2027 12,178,861.76 2,083,424.57 1,992,083.11 91,341.46 10,186,778.65
6 6/11/2028 10,186,778.65 2,083,424.57 2,007,023.74 76,400.84 8,179,754.91
7 6/11/2029 8,179,754.91 2,083,424.57 2,022,076.41 61,348.16 6,157,678.50
8 6/11/2030 6,157,678.50 2,083,424.57 2,037,241.99 46,182.59 4,120,436.51
9 6/11/2031 4,120,436.51 2,083,424.57 2,052,521.30 30,903.27 2,067,915.21
10 6/11/2032 2,067,915.21 2,083,424.57 2,067,915.21 15,509.36 (0.00)

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Depreciation cost
The calculation of depreciation is based on the straight line method. In order to calculate the residual
value of the project at the end of the period we calculate the remaining life of the business building
office equipment and vehicles. The calculation shown below,
Book value
Deprecation=
Useful life of Equipemnt , Builing ,Vehicles

Office Total
Deprecation
Equipmen Building Vehicles Deprecation
Year t @ 20% @ 5% @ 15%
25,000,000.0
1 500,000.00 0 4,500,000.00 100,000.00 1,250,000.00 675,000.00 2,025,000.00
25,000,000.0
2 500,000.00 0 4,500,000.00 100,000.00 1,250,000.00 675,000.00 2,025,000.00
25,000,000.0
3 500,000.00 0 4,500,000.00 100,000.00 1,250,000.00 675,000.00 2,025,000.00
25,000,000.0
4 500,000.00 0 4,500,000.00 100,000.00 1,250,000.00 675,000.00 2,025,000.00
25,000,000.0
5 500,000.00 0 4,500,000.00 100,000.00 1,250,000.00 675,000.00 2,025,000.00
25,000,000.0
6 500,000.00 0 4,500,000.00 100,000.00 1,250,000.00 675,000.00 2,025,000.00
25,000,000.0
7 500,000.00 0 4,500,000.00 100,000.00 1,250,000.00 675,000.00 2,025,000.00
25,000,000.0
8 500,000.00 0 4,500,000.00 100,000.00 1,250,000.00 675,000.00 2,025,000.00
25,000,000.0
9 500,000.00 0 4,500,000.00 100,000.00 1,250,000.00 675,000.00 2,025,000.00
25,000,000.0
10 500,000.00 0 4,500,000.00 100,000.00 1,250,000.00 675,000.00 2,025,000.00

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Income Statement

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 Income Statement of Kumneger Lembore Retail Trade in Agricultural Products values (‘000 birr)
Year 1 2 3 4 5 6 7 8 9 10

Sales Revenue 26,200.00 26,200.00 26,200.00 26,200.00 26,200.00 26,200.00 26,200.00 26,200.00 26,200.00 6,200.00

Utilities 3,037.92 3,037.92 3,037.92 3,037.92 3,037.92 3,037.92 3,037.92 3,037.92 3,037.92 3,037.92

Salary & Wages 628.00 628.00 628.00 628.00 628.00 628.00 628.00 628.00 628.00 628.00
Land Lease & Land Holding
cost 16.48 16.48 16.48 16.48 16.48 16.48 16.48 16.48 16.48 16.48
Cost of Adverting &
Promotion 7.00 6.50 6.00 2,000.00 - 3.00 3.50 - - -
Other Pre-operating
Expense 135.00 - - - - - - - --
EBITDA
22,375.61 22,511.11 22,511.61 20,517.61 22,517.61 22,514.61 22,514.11 22,517.61 22,517.61 22,517.61

Cost of debt (Loan Rep) 2,083.42 2,083.42 2,083.42 2,083.42 2,083.42 2,083.42 2,083.42 2,083.42 2,083.42 2,083.42

Deprecation 2,025.00 2,025.00 2,025.00 2,025.00 2,025.00 2,025.00 2,025.00 2,025.00 2,025.00 2,025.00

Profit Before tax 18,267.18 18,402.68 18,403.18 18,404.18 18,409.18 18,406.18 18,405.68 18,409.18 18,409.18 18,409.18

Tax 30% 5,480.15 5,520.80 5,520.95 5,521.25 5,522.75 5,521.85 5,521.70 5,522.75 5,522.75 5,522.75
Net Profit 12,787.03 12,881.88 12,882.23 12,882.93 12,886.43 12,884.33 12,883.98 12,886.43 12,886.43 12,886.43