Business plan for the Machine renting Service at Addia Abeba Town

To be presented to Commercial Bank of Ethiopia Addis Abeba

Promoter: Mahlet Amare

1/2/2023

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Contents
1. Introduction 3
2. Background of the company 4
3. Organization structure & Management Profile 7
4. Marketing Plan 8
5. Operational Process 11
6. Financial Plan 12

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 1. Introduction
In this era of blooming Ethiopian economy, wide range of infrastructures and business investments are
keep contributing great deal of inputs in the federal and regional states of the country. The construction
industry, integrated farming, the availability of transportation, truck stations, hotels and accommodations
are some of the sectors supporting our economy by generating foreign currencies and local revenue.
For the above mentioned economic sectors and any other sectors access for transportation and availability
of construction material renting service have got a great role in facilitating efficient Construction
business activities. In this regard the business owner who is already has enough knowledge in
construction service and its facilities, would like to expand the service by providing rent service for
construction heavy materials.
Thus, such observed gaps in the sector prompt Mahlet Amare Endewagaw the need for the
development of these Construction sector combine possible efforts with advanced wide-ranging
experiences.
Accordingly, Mahlet Amare Endewagaw works with the intention to slightly able to narrow the gaps
in the future through engaging construction machinery rental service for major contrator in Ethiopia.
Our head office is located in Nifas silk Lafto Subcity, we obtained renting service of machinery and
equipment from Addis Ababa Adminstration Nifas Silk Lafto subcity trade office and stared business on
2005 E.C with the purpose of construction machinery rental service
The vision of this business is to be an ironic Construction Machiney Rental company which largely
works on construction machinery rental for contrators . It also aims to create employment opportunity for
unemployed individuals and contribute to the country GDP.
This business will generate 23 million amount of sales from rental service and profit of 1.8 million, and
will pay bill 786 thousand for tax. The business would like to request loan to be obtained from
Commercial Bank of Ethiopia as a working capital term loan is birr 10,000,000(Ten million) to be repaid
within five year for the purpose solve its working capital shortage.

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 2. Background of the Company
Rent of Construction Machinery is crucial to serves the construction working in different areas of the
country, besides the contractors will be benefited from the rent service along with the Truck which the
promoter planned to rent and acquire in this growing town of Addis Abeba.
There are truck renting firms engaged in the country in the following categories:
 Truck renting
 Construction machinery renting
Truck renting are big service outlets with the capacity and facility to supply truck service. They are the
largest of the different categories listed above and services various materials consumed by Constructors.
Therefore it will be planned to provide standard rent services. Addis Ababa with recent development as
market area has been selected for the venture based on the preliminary demand assessment made by the
promoter with personal enquiries made to different construction sectors, which in fact are among the
target groups for the business and own through observation and the situation.
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 forecasts 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.
The Business plan is prepared to provide an overview regarding the realization of the Construction Sector
which we are engaged in construction machinery rental service for the past 10 years for almost china
contractors.
Company Profile
Name of Company Mahelet Amare Endewagaw

Type of Business Formation Sole Proprietorship

Nature of Business Construction Machinery Rental

TIN 0021016926

Trade License 14/666/9240/2005

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 Business Sector Rebting of service of machineries and equipment

Capital 2,000,000

Business start Date 2005E.C

Location of Business Ethiopia, Addis Ababa

Nifas Silk Lafto Sub city W.10
Contact Person MAHLET AMARE

Contacr Telephone 0911794634

Business Location and Positional

The location plan is important for every business because strategic location could bring success to the
business. It will affect the profit of the business whether to gain higher or lower profit. The location that
has been chosen must be near to the customers. The business also must be near to the other facilities such
as bank, bus station, institution and cafeteria to attract customers

The business is located at the Adis Ababa town, Nifas silk lafto subcity, where there good market is
anticipated considering the population density, traffic volume, safety and availability of space for the
proposed business.

The main head office is located around saris commonly known around ‘Buna Board’. The area is suitable
for the business since the location is construction area. It is also near to the city of the town.

Vision, Mission and Objective of the Company

Vision

“To be the most trusted and highly recognized Construction machinery rental service provider in
Ethiopia.”

Mission
The purpose of our business is to raising profit and created our own business and also
satisfying our customer by providing quality service on time with a fair price and exceeds
their expectations for service, quality and value

Objectives of the Business

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 ➢ To provide Construction machinery renting service in the area and generate income from the
business through providing attractive and competitive service.
➢ To fulfill the high demand of construction machinery rent in Ethiopia.

➢ To provide rental construction machiney service at affordable and reasonable price

➢ To participate in the development motto of government police for development through paying
taxes & reducing unemployment by recruit employee resides in the surrounding.

Company value and culture

The following are components of the company’s values and cultures.

 The company respects the values and contributions of every employee as essential for its success.
 The company communicates openly and honestly.
 Unethical and dishonest practices have no place in the company
 The company recognizes and rewards performance
 The company believes that staff development is integral part of its success
 The company strongly believes that teams, not individuals are the essential unit of the organization for
achieving high performance and accelerating growth.
 The company believes in societal support and community development; hence, all its personnel will
obey to this core value.

Keys to success
 Trading and management experience:
 Financial strength.
 Servive quality and customer satisfaction
 Improved manpower and fair labor cost:
Strategy
We aim to add value to our service by becoming dependable and professional partners. To do so we have the
following strategy:

 Ensure that we provide quality service to our customer

 Track the volumes, qualities and prices of our service being provided
 Develop a successful relationship with all the stakeholders of the construction companies & implement
an analytical service strategy based on all pertinent variables
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 3. Organization Structure and Management Profile

Organization Structure

General Manager
Mahlet Amare
Endewagaw

Adminsterative
Operational Manager
Manager
Million Shewaye
Tensay Ashenafi

Pofile Managment

SR Name of Position Main tasks

Management
To plan, implement and control the
1 Mahlet Amare General
overall management of the business.
Manager(owner)
To plan and monitor the strategic progress of the business.
To be accountable for the overall performance of the
business
To identify new market opportunities.
To develop marketing strategies for promoting services
to the targeted market.
Responsible in championing customer relationship
management.

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 To develop an operation strategy for the business.
2 Tensay Ashenafi Operation
To design the operation’s products, services and process of
Manager
the business.
To improve the performance of the operation in the
business.
To analyze sales, expenses and economic trends.
To evaluate data pertaining to costs in order to plan
budgets of the business.
To establish procedures for custody and control of assets,
records, loan collateral and securities for the business.
To maintain professional and technical knowledge in for
3 Million Shewaye Adminsterative
the business.
Manager
To plan, direct or coordinate supportive services of the
business.
To maintain administrative
staff by recruiting,
selecting, orienting and training new employees.

4. Marketing Plan
Mahlet Amare Construction Machinery rental business concept in marketing plan as an office
that give services in construction machinery rental whereby this will help to make the life of
contrators become easy and convenience in matter of construction. The core concept of our
business is to put our customer’s satisfaction first then profit which is considered a long-term
view to do business as a satisfied customer will most likely come back for more and continue
and contribute to the business sales and profit.
Market size also will be included so that we can know the amount of the target market spend
in the market.
We will discuss on the competition also, we will explain about the strength and weakness of
our product including the competitor’s product. We will also explain about our market share,
the before and after our own business enter the market.
Then we included the sales forecasting and we are going to calculate the forecasted sales in
the first year and assumption will be made for first three years. A marketing strategy is
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 important for marketing plan and it discuss about on how the owner of the business or
commonly called as an entrepreneurs will market their products and services. Last but not
list, is the marketing budgeting. We will calculate all the expenses in order to make our
business running very well.

Determination of Demand
The demand of construction services is determined on the base of the volume of trucks
services along with the new construction where all heavy trucks are used, of the town
arriving and exiting the town.
Since there is no reliable data on the past trend, it is difficult to analyze demand of
construction services previously and forecast the future. However, the presence of only
limited number of similar business for such huge area and assumption employed for the
determination of future demand which is based on the supposition taken to have contractors
utilize the services, the promoter believed that there is high demand of the proposed
business.
In this line of services, the future demand for construction service is expected to grow at
higher rate than what was observed historical for the following reasons. Firstly, the new road
network and different real-estate construction of the country is expanding relatively at higher
pace and secondly, the government has taken the measure such as creating conductive
environment for local and foreign investments. These factors are believed to set the economy
in motion that in turn triggers the consumption of consumers and industrial products
including that of services.
Marketing Objectives:
i) To maximize and get the optimum profits income
ii) To provide service of construction machinery rental
iii) To provide a good condition and best quality of construction machinery in order
to make contractors comfortable using it
iv) To offer a reasonable and affordable price to our customers as the marketing team
considers the priorities of customers

Marketing Strategy

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Marketing Strategies are strategies that strongly position the company against competitors and give
the company the strongest possible strategic advantage.

I. Overall Cost Leadership:- here the company work hard to acheve the lowest service
cost. Low cost let it price lower than its competitors and win a large market share.
II. Differentiation:- here the company concenterates on creating a highly differentiated
product line and marketing program so that it comes across as the class leader in the
industry.
III. Focus: here the company focuses its effort on serving a few market segments well rather
than going after the whole market

Value Disciplines

 Operational excellence: the company provide superior value by leading the industry in prive
and convenience. It works to reduce costs and to create a lean efficient value delivery system.
 Customer Intimacy : the company provides superior value by precisely segmenting its
markets and tailoring its products or service to match exactly the needs of targeted customers.
 Product Leadership: the company provides superior value by offering a continuous of
leading edge products or service.
SWOT Analysis
Strength
 Higher Barrier to Entry
 Highly Experienced Owner
 Maintained Established Market
 Working with China Construction company
 Easily trained labor

Weaknesses
 Competitors can offer similar business
 Limited flexibility in pricing

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 Opportunity
 Highly expansion for construction business
 Ability to rent additional machinery from owner and to acquire new
 Development of china’s construction company in ethiopia
Threat
 Increasing price of construction materials
 Insurance cost of machinery
5. Operational Process

OPERATIONAL PLAN
Operations management is the process of marshalling resources to produce output through
the transformation process. The operations process comprises of 3 main components, which
are business the business input, transformation system and output. This operational plan also
refers to the process of flow chart to identify the activity of a business. Meanwhile, for the
production schedule, it helps to ensure that the production are able to meet requirement and
needs of the business to increase production efficiency. In the material requirement planning,
it contains high percentage total cost of finished services. The operation layout is about the
layout based on product, layout based on process and layout based on marketing. The last
part for this plan is the operation overhead and budget.
Objectives:
To provide organization personnel with a clear pictures of task and responsibilities
To implement a better strategies in conducting the business
To increase total profit of production and services of a business

PROCESS FLOW CHART

A flow chart is a pictorial representation of a process that will allow for analysis, change,
and ultimately reaching solutions that will improve or enhance sales, marketing and
operations of a business. Below is the chart of Speed Up Car Rental that represent different
actions.

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 Leasing Constricion Machinery from machinery owner

Customer make booking through phone or in person

Accept rental request from customers

Customers choose types of machinery

Contract information (how long customers rent the car)

Check condition of the Machinery

Send the Machinery to customes

6. Finacial Plan

Rvenue

Revenue expected from construction machinery rental sales. Types of construction machinery that are
ready to be rented are:-

 Loader
 Roller
 Crane
 Low Bed

We have two major china customer (1) Sinohydro Operation Limited Ethiopian Branch and (2)Zhejiang
Bayong Highway Engineering Co.LTD. our major sales is from this two customers
Descripti Sales/ Sales/ Sales
Sales /year
on day week /month
Machiner 63,250. 442,750. 1,897,500 23,086,250
y rental 0 0 .0 .0

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 Direct Cost
Descripti Sales/ Sales/ Sales
Sales /year
on day week /month
cost of
50,600. 354,200. 1,518,000 18,469,000
Machiner
0 0 .0 .0
y rental

Utilities

- Marketing Birr 22,000 per annual

- Office rent Birr 180,000 per annual

Wages and Salary

Position No of Salary Annual salary

Employee /month
General Manager(owner 1 30,000 360,000
Operation Manager 1 25,000 300,000
Adminsterative Manager 1 20,000 240,000

- Miscellaneous expense 10,000/month

Financial Analysis
Basic Assumptions
The following assumptions are developed considering the historical performance of the business and other
market parameters
 The plan life is assumed to be 5 years
 The production volume of the business is expected to double in the first year from the performance of
2014E.and increase by 20% on wards from the first year and, the cost of service to increase similarly
by 20% and
 Salary and wage is assumed to be 900,000.00 per an um and assumed to increase by 5% per annum
 Marketing and communication cost is assumed to be 22,000.00 and assumed to increase by 2%
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  Interest rate is assumed to be 15.5% per annum
 Income tax is assumed to be 30%
1. Projected Income Statement

Mahlet Amare Construction Machinery Rental

Projected Incone Statment Statement

Year
Item
1st 2nd 3rd 4th 5th

Rental Renenue 23,086,250.00 27,703,500.00 33,244,200.00 39,893,040.00 47,871,648.00

Cost of sales 18,469,000.00 22,162,800.00 26,595,360.00 31,914,432.00 38,297,318.40

Gross Profit 4,617,250.00 5,540,700.00 6,648,840.00 7,978,608.00 9,574,329.60

Administrative
180,000.00 198,000.00 217,800.00 239,580.00 263,538.00
cost

Salary expense 900,000.00 990,000.00 1,089,000.00 1,197,900.00 1,317,690.00

Marketing and
22,000.00 24,200.00 26,620.00 29,282.00 32,210.20
communication

Utilities 120,000.00 120,000.00 120,000.00 120,000.00 120,000.00

Total expense 1,222,000.00 1,332,200.00 1,453,420.00 1,586,762.00 1,733,438.20

Profit before
3,395,250.00 4,208,500.00 5,195,420.00 6,391,846.00 7,840,891.40
interest and tax

Interest 1,550,000.00 1,067,938.09 765,167.70 411,986.15 114,203.88

Profit before
1,845,250.00 3,140,561.91 4,430,252.30 5,979,859.85 7,726,687.52
tax
Tax 553,575.00 942,168.57 1,329,075.69 1,793,957.96 2,318,006.26

Profit after tax 1,291,675.00 2,198,393.33 3,101,176.61 4,185,901.90 5,408,681.26

2. Projected Cash Flow Statement

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 Mahlet Amare Construction Machinery Rental
Projected Cash Flow Statement

Items per year 1st 2nd 3rd 4th 5th

cash inflow

Beginning Balance 11,291,675 2,198,393 3,101,177 4,185,902

loan granted 10,000,000.00

Sales 23,086,250 27,703,500 33,244,200 39,893,040 47,871,648

Total Inflow 33,086,250.00 27,703,500.00 33,244,200.00 39,893,040.00 47,871,648.00

Cash outflow

C.G.S 18,469,000 22,162,800 26,595,360 31,914,432 38,297,318

Administrative cost 180,000.00 198,000.00 217,800.00 239,580.00 263,538.00

Salary expense 900,000.00 990,000.00 1,089,000.00 1,197,900.00 1,317,690.00

Marketing and
22,000.00 24,200.00 26,620.00 29,282.00 32,210.20
communication

Utilities 120,000.00 120,000.00 120,000.00 120,000.00 120,000.00

Interest 1,550,000.00 1,067,938.09 765,167.70 411,986.15 114,203.88
Tax 553,575 942,169 1,329,076 1,793,958 2,318,006

Total outflow 21,794,575 25,505,107 30,143,023 35,707,138 42,462,967

Net cash flow 11,291,675 2,198,393 3,101,177 4,185,902 5,408,681

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