Manufacturing of Office & Household Furniture - 2 PDF

www.elevateethiopia.
com
Manufacturing of Office &

Household Furniture
COMPANY PROFILE, BUSINESS PLAN

& EXPANSION PROJECT FOR
LOAN REQUEST
January, 2020
Addis Ababa, Ethiopia
Tumim Wolde
1
www.elevateethiopia.com
+251911090701, Addis Ababa
2
Contents
1. EXECUTIVE SUMMARY .............................................................................................................. 5
2. INTRODUCTION .......................................................................................................................... 7
3. BACKGROUND OF THE COMPANY ...................................................................................... 11
3.1 INVESTOR’S PROFILE ......................................................................................................... 13
4. OBJECTIVE OF THE COMPANY ............................................................................................. 14
5. PROJECT DESCRIPTION ......................................................................................................... 16
6. MARKET STUDY ......................................................................................................................... 18
6.1 PAST SUPPLY AND PRESENT DEMAND......................................................................... 18
6.2 PROJECTED DEMAND .......................................................................................................... 19
6.3 TARGET CUSTOMERS.......................................................................................................... 21
6.4 COMPETITORS’ PROFILE.................................................................................................... 22
6.5 PRODUCT DESCRIPTION AND APPLICATION............................................................. 24
6.6 PRICING AND DISTRIBUTION ......................................................................................... 26
6.7 SALES FORECAST ................................................................................................................. 26
7. PRODUCTION CAPACITY AND PROGRAM ........................................................................ 29
7.1. PRODUCTION CAPACITY ................................................................................................ 29
7.2. PRODUCTION PROGRAM................................................................................................ 29
8. RAW MATERIALS AND INPUTS ............................................................................................ 30
9. UTILITIES CONSUMPTION & COST ................................................................................... 32
10. TECHNOLOGY USED AND ENGINEERING........................................................................ 34
10.1. TECHNOLOGY ..................................................................................................................... 34
10.1.1 PRODUCTION PROCESS ......................................................................................... 34
10.2. ENGINEERING .................................................................................................................... 36
10.2.1 MACHINERY AND EQUIPMENT ............................................................................. 36
11. ORGANIZATION AND MANAGEMENT ................................................................................ 37
11.1 PROPOSED ORGANIZATIONAL STRUCTURE .......................................................... 37
11.2 LAND LAYOUT .................................................................................................................... 41
12 SOCIO ECONOMIC BENEFIT................................................................................................. 42
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13 CORPORATE SOCIAL RESPONSIBILITY............................................................................ 42

14 ENVIRONMENTAL IMPACT..................................................................................................... 43
15 FINANCIAL ANALYSIS ............................................................................................................. 45
15.1 ASSUMPTION ..................................................................................................................... 45
15.2 PROFITABILITY .................................................................................................................. 46
15.3 NET PRESENT VALUE ...................................................................................................... 46
15.4 INTERNAL RATE OF RETURN........................................................................................ 46
15.5 PAYBACK PERIOD ............................................................................................................. 47
16 CONCLUSION ............................................................................................................................. 48
APPENDIX ............................................................................................................................................ 49
INITIAL INVESTMENT COST ......................................................................................................... 49
ANNUAL PRODUCTION COST ....................................................................................................... 50
PROJECTED INCOME STATEMENT ............................................................................................. 51
PROJECTED CASH FLOW STATEMENT ...................................................................................... 53
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1. EXECUTIVE SUMMARY
Project Name: …………. MANUFACTURING OF OFFICE & HOUSEHOLD

FURNITURE Expansion Project
Project Type: Manufacturing of Wood products
Project Activity: Manufacturing of Household Furniture & Fixtures, Office

Furniture, Hotel & Restaurant Furniture & Fixtures
Project Promoter: ........................
Nationality: Ethiopian
Project Purpose: requesting ETB 5,000,000 investment loan for Expansion.
Project Location: Kirkos Subcity, Wereda 08, Hs.No. 205/06. Addis Ababa.
Total Investment Capital: ETB 10,500,000.
Fixed Investment: 76.92%, working capital: 23.08%
Raw Materials: locally available.
Production Capacity: 13,824 sets in total, per annum, at full capacity
Legal form of the Business: 100% private
IRR: & NPV: 67% & 75.5 million
Employment Opportunity: 36 individuals; 17 on permanent 19 on casual

basis of which 16 skilled, & 20 unskilled laborers.
Social and Economic Benefits: will provide better manufacturing,

innovate new technologies, will have a foreign exchange saving effect to the
country since it reduces import, will create forward linkage with different
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sectors, will have employment opportunity, and generates income for the
government in terms of tax revenue and payroll tax.
Environmental Impact: not have any adverse impact on the environment.
Contact Person:
Mr. ........................, Cell Phone:
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2. INTRODUCTION
Ethiopia, the second most populous country in Africa, is home to one of the
world’s oldest civilization. With the economy registering two digits growth
rate for the last nine years, the growth of Ethiopia has been broad-based.
Where, with the services and the industrial sectors growing at the highest
rates. Since the Federal Democratic Republic of Ethiopia has given top
priority to ensure faster and sustainable development of the industrial
sector; favorable conditions are created for industry to play a key role in the
economy.
The five-year Growth and Transformation Plan (GTP), which emphasizes

agricultural transformation and industrial growth, projects the economy to
grow at much higher rates. Besides, the government policies and incentives
for the private sector investment are very promising that it motivates the
investors to engage in manufacturing sector. This is fundamental as the
manufacture sector plays a pivotal role to absorb unemployment.
The Federal Democratic Republic of Ethiopia has given top priority to ensure
faster and sustainable development of the industrial sector; favorable
conditions are created for industry to play a key role in the economy.
To this end, particular emphasis has been given to two main sub sectors.
First, the main strategic direction is to support the expansion and
development of macro and small scale enterprises. In addition, efforts are
being made to further develop medium and large scale industries.
Although Ethiopia’s industrial base is still relatively small, the growth

prospects of this sector are significant, as new industries – such as cement,
textile factories and leather – are coming on stream and new projects are
planned in other areas including steel, chemicals and pharmaceuticals. This
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momentum is expected to continue given the priority accorded to

industrialization, both for exports and import substitution, in the
governments five-year 2nd round GTP.
In the 2nd five years Growth and Transformation Plan (GTP), the Micro and
Small enterprises development is the strategic focus of the industrial
development. During the GTP period an environment encouraging for the
emergence of new Macro and Small scale Enterprises (MSEs) and support
that increases the productivity of the existing MSEs will be put in place. This
strategic direction will enable the development of broad-based and
competent private sectors.
The current fast and dynamic economic growth of Ethiopia especially in

urban area necessitates equivalent growth of building and construction
sector. The sector should expand rapidly to support the overall economic
development sustainable.
Investment and property development play an important role in any

emerging markets or economies. The property investment market in
Ethiopia remained under developed for several years. As a consequence, the
supply of residential houses and non-residential real estate that can be used
for parking, residence, office space, shopping malls and catering services in
the urban centers of the country is disproportionately low to cope with the
growing demand in the country spinning from the average growth in GDP of
5.5 percent over the last ten years and population increase. The relatively
good performance of the macro-economy (real growth in GDP, low inflation
rate and growth in investment and export sector) has stimulated
unprecedented investment growth in the property sector over the last five
years. The growth of investment in the property market over the last five
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years is consistent with the global experience suggesting that investment in

the residential and commercial property (real estate) is greatly influenced by
the performance of the macroeconomic conditions.
In general, a stable macroeconomic condition leads to economic and

business growth and develops investors' confidence. This certainly spurs
large demand in the property market. Following growing demand trends, and
with the expectation of high return on their investment capital, large number
of land developers pooled their financial resources and invested in the
property market.
Besides, the government policies and incentives for the private sector
investment are very promising that motivates the promoter to engaged in
forming furniture factory particularly the need for manufacturing.
Establishing of such service/supply is very important because of the

following reasons:
➢ Reduce & Control Operating Expenses,
➢ Improves Business Focus,
➢ Gain World-class Capabilities,
➢ Re-allocate Internal Resources,
➢ Accelerate Re-engineering Efforts,
➢ Manage an Out-of-Control Function,
➢ Create New Resources,
➢ Increase Capital Funds Sources,
➢ Share Business Risk with Trusted Partners,
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➢ Infusion of Cash, etc.
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3. BACKGROUND OF THE COMPANY

............MANUFACTURING OF OFFICE & HOUSEHOLD FURNITURE is an
invention of Mr. ......................... The Company is established in 2011;
located in Addis Ababa, Kirkos Sub city, Wereda 08, House #205/206. It is
established as a furniture company specializing in custom furniture for the
high-end residential, resort, and commercial market and therefore, arose its
operation with producing Sofa, Shelf and Coffee Table only. The company
engaged particularly in manufacturing of varies ranges of household and
office furniture that are designed to substitute the imported products in the
sector.
Being attracted by the profit potential of the industry and request from
customers for other related products the company added other items in its
product line. Through time the company has got itself as best quality
furniture producer both for households and offices. By now the organization
is producing more than 25 types of products categorized as household
furniture & fixture, office furniture and hotel furniture & fixture.
When it starts its operation, the company’s initial capital was ETB 50,000.00.
From this startup the current capital grown in to ETB 10.5 million. At the
time where ............MANUFACTURING joined the industry, its workforce was
only 6 employees. The now existed situation created an employment
opportunity for 36 people. These labor forces are at different levels of skill.
............MANUFACTURING believes in treating its customers with respect

and faith. It grows through creativity invention and innovation. It integrates
honesty, integrity and business ethics into all aspects of its business
functioning. Our vision will be accomplished by sharing the responsibilities of
work with all employees. We want our customers to experience the warmth
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and comfort through respect and trust. We will achieve our aims through
implementing values with focus on quality, value for money, satisfy
customers’ needs, and build relationships.
• Vision: Being a Chief Manufacturer of High Quality Products by

Continuing the Legacy of our Company!
• Mission: To Satisfy Customer’s need Through Reliability and

Flexibility!
The promoter and his employees have long experience and proven record of
achievements. They have sufficient educational background and diversified
work experience that would result in successful operation of the project.
They will make joint ventures and attract other foreign expertise and expand
the investment to highly mechanized operation rendering trainings and
experience sharing activities to the surrounding communities.
Since the promoter has extensive experience in the furniture-making

industry, and has sound managerial experience and best performance track
of records both as employed and employer the company has been
progressive and profitable starting from its establishment. Both its
production and sales volume has shown growth almost on yearly basis.
In addition, the establishment of this furniture manufacturing factory has

been generated revenues to the regional government in the form of VAT,
profit tax and income tax. i.e. the 3 years financial report is attached with
this paper.
The favorable environment created for the investors in the country

encouraged and motivated MR. AMHA GUTA. The company has been
manufacturing wood products for the last 9 years and now planned to
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envisage the expansion of a factory for the manufacturing of high quality

furniture products to minimize the demand supply gap and the loss of
foreign currency amounting more than 40 million USD annually.
3.1 INVESTOR’S PROFILE

MR. ........................ is an Ethiopian investor who had various working and
managing experiences. He graduated in Diploma in Furniture Works. The
promoter was employed for 1 year in an organization before he commits
himself to his own small scale furniture production facility. So that, this gave
him ample experience in management and valuable lesson that he would use
in running his own business. He has been developing the skills, experience
and financial resources to start his own business for a number of years.
MR. ............used each and every opportunity that the coordination office
has been giving to the micro enterprises and his market networking
increased from time to time. And he is now planning to expand the existing
modern furniture manufacturing factory in Addis Ababa with a broad
selection of design choices, high-end finishes along with top of the line
organization, customer service, and quality at an affordable price.
There are several factors that initiated the promoter. Firstly, the increasing
number of investment in infrastructure development and overall population
growth, increasing demand for furniture necessitated increase in the utility
of these goods and products demand within the whole industry.
Secondly, the suitable investment policy environment which encourages

investment activities, enterprises to expand and graduate to medium and
large-scale ventures is a good opportunity. Investment incentives facilitated
by the government such as income tax-exemption for a specified period and
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availability and easy access to institutional credit are important elements for
the development of private investment in the country.
Therefore, it is another and innovative investment creating employment

opportunity for many Ethiopians, manufacturing advanced furniture products
for households, offices, hotels, universities, retailers, exporters, and so on.
4. OBJECTIVE OF THE COMPANY

The objective of ............MANUFACTURING OF OFFICE & HOUSEHOLD
FURNITURE is to manufacture and supply varied range of furniture products
that can be used in individual homes, offices, hotels and recreational areas.
It aims at running an eco-friendly furniture manufacturing plant and
contributing its share towards conserving natural resources of our planet by
fostering innovation and sustainability.
The company plans to make use of new advanced technology for the
production to achieve best quality and efficient use of resources. In doing so
the factory will be in a position to discharge its societal responsibility by
using its expanded factory and facilities to serve as a training ground for
technical and vocational fresh graduates.
Its objective towards wood manufacturing industry is to see the sector to be

competitive enough in all dimensions. For these, ............MANUFACTURING
plans to adopt modern production systems and technologies to upscale
quality standards of furniture products of the country. It will work at its best
to secure economics scale of operation and making products available in
every corner of the country at affordable price.
Providing the required wood related inputs and component parts for booming
construction industry of Ethiopia by being an alternative source of supply is
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an objective to be pursued at ............MANUFACTURING OF OFFICE &

HOUSEHOLD FURNITURES. It works to be supporting hand for the overall
growth expected to come in our country.
The main objective of the promoter is to contribute for the national economy
in the area of furniture manufacturing. In addition, the project will generate
revenues to the regional government in the form of sales tax revenue, profit
tax and payroll taxes.
Considering the economic and social benefits of the project’s technical

viability, financial capacity and managerial capability of the promoter, the
project is found to be feasible both economically and socially based on the
following descriptions.
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5. PROJECT DESCRIPTION
............MANUFACTURING OF OFFICE & HOUSEHOLD FURNITURE plans to
expand a furniture manufacturing company which can produce 6,687 sets of
finished products per year at full capacity. The company will mostly use local
materials but will supplement with imported materials to bring
environmental sustainability. The factory is expected to create job
opportunity for more than 24 employees and heavy duty machineries. It will
have different stores for raw-materials, semi-finished and finished items.
The manufacturing company plan to get ETB 5,000,000 loan from bank. The
expansion project designed to render a multipurpose giving business and
workshop facility which will in turn plays significant role towards solving
shortage of production facility. Having difficulties of operation faced due to
congested working capital & technology the company is in a problem to work
to meet the demands of the market. So the investor is seeking a loan from
Addis International Bank for the expansion of a furniture making factory.
............MANUFACTURING OF OFFICE & HOUSEHOLD FURNITURE intends to

integrate different strategies in manufacturing different types of modern
furniture. Its plan is to have a cost effective business that will reduce the
production cost starting from the initial stage of woodcutting to retailing of
the final product at an affordable price and serve to minimize foreign
currency spending incurred in importing furniture.
On the approval of this project and subsequent execution of related tasks

MR. ............will be among the pioneers to invest in the first modern
furniture factory in Ethiopia in order to meet the region’s transformation and
development goal as well as bringing competitiveness and excellence in the
industry. By now, the promoter is ready to invest and expand in this
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business by providing the capital to cover the start-up expenses and apply
key strategies to ensure its success.
The total investment cost of the project including working capital is

estimated at ETB 10.5 million. The project is financially viable with internal
rate of return (IRR) of 67% and a payback period 3 years.
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6. MARKET STUDY
6.1 PAST SUPPLY AND PRESENT DEMAND

The demand for high-quality contemporary furniture in particular is
increasing in the domestic and international market due to technological
advancement, augmented construction population, the economic boom, and
other factors. The exponential growth in the real estate industry has seen an
increase in the demand for office and home furniture. The construction of
multi-star hotels has also created the need for a reliable furniture market.
While the demand for high-end furniture is soaring, there are a limited
number of modern furniture factories producing quality furniture. Instead,
much of the office and home furniture is being imported. This made furniture
too expensive, and it created a heavy drain on the country’s foreign currency
reserves. The supplied furniture sets during the period 2008 – 2015 are
shown as follows;
Year Quantity Demanded per annum

2008 216,447
2009 222,723
2011 229,182
2012 235,829
2013 242,668
2014 249,705
2015 256,947
2016 264,399
2017 272,066
2018 279,956
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2019 288,074
As can be seen from the above table the demand of furniture has been
consistently increasing from period to period. The yearly average level of
demand which was only 216,447 sets during the period 2008 has reached
nearly 256,947 sets by the 2015. Generally, during the past 7 years demand
volume has shown an annual average growth rate of 2.9%.
6.2 PROJECTED DEMAND

The demand for housing is mainly influenced by population growth and
income rise. The 1984 census put the population of Addis Ababa at 1.4
million, while the 1994 census recorded 2,112.737 people. There is an
increase of 0.7 million or nearly 50% increase over a decade period. The
annual increase over the period 1984-1994 is 5%. The total population of
Addis Ababa in 2015 is estimated about 4.4 million. The population grows at
an average annual growth rate of 2.9%. The city population is estimated to
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reach more than 4.6 million by the year 2016. Whereas, current population
of Ethiopia is estimated about 102.4 million. Accordingly, the demand for
housing is estimated to grow at 2.9% per annum which is equivalent to the
population growth.
The present demand for housing in Addis Ababa is estimated at 210,347

housing units per annum. The demand is expected to reach at 296,428
housing units by the year 2020. Assuming that the demand for furniture is
directly proportional to the demand for housing, the demand is expected to
reach at 296,428 set of furniture by the year 2020.
The table below shows the projected demand for housing in Addis Ababa
computed by taking the estimated present demand as a base and applying
an average annual growth rate of 2.9%.
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PROJECTED DEMAND FOR FURNITURE
YEAR Future Demand Per

Annum /Set
2020 296,429
2021 305,025
2022 313,871
2023 322,973
2024 332,339
2025 341,977
6.3 TARGET CUSTOMERS

The target customers of this envisaged project includes:-
1. Households circle
2. Business Community such as, Hotels & business organizations
3. Addis Ababa Housing Development Agency
4. Small & Medium Enterprises
5. Governmental and Non-governmental organizations
6. Emerging economies
7. Neighboring countries
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8. Distributors and retailer
6.4 COMPETITORS’ PROFILE

There are many local and Chinese furniture factories in Ethiopia surrounding
Addis Ababa. Some of these are;
➢ Deluxe Furniture owned by Ethiopian – at Olympia (mainly importer)
➢ NH Bay Furniture Factory owned by Chinese – at Kality
➢ Summate Furniture Factory owned by Chinese – at Lebu
➢ 3F Furniture factory owned by Ethiopian – at Saris
➢ Alpha Furniture Factory owned by Ethiopian – at Lancia
➢ Harot Family Furniture Factory owned by Ethiopian – at Gelan
➢ Sunrise Steel Structures owned by Chinese – at Jomo
➢ Many other importers – at Merkato and Building Malls
Even though this project has many other competitors all over Ethiopia, the
market gap has been seen as it is summarized in the above and this shows
there is a huge opportunity. As the company’s strength, the network of
customers and good partnership with the government offices, real estate
developers, importers, and small scale enterprises makes this project unique
and increases the confidence of the promoter. Moreover, the promoter has
so far received many contracts from his customers and is working at full
capacity in the existing status.
Therefore, the main aim of this project is to expand the previous works to
factory level standard to gain additional customers by importing the
machinery and constructing the facility that was leased.
22
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6.5 PRODUCT DESCRIPTION AND APPLICATION

Furniture is a movable objects intended to support various human activities
such as seating and sleeping. It is also used to hold objects at a convenient
height for work or to store things. Furniture can be made from many
materials including metal, plastic, and wood. Wood furniture can be made
using a variety of woodworking joints which often reflect the local culture.
The main products which are produced in ............MANUFACTURING
Expansion Project are listed below;
1. House hold furniture lists

1.1. Living room sofa
1.2. Coffee table
1.3. TV rack
1.4. Dining chairs & table
1.5. Bed
1.6. Dressing table
1.7. Book shelf & Corner shelf
2. Household fixture lists
2.1 Kitchen cabinet
2.2 Cupboard
2.3 Exterior doors & interior doors
3. Office furniture
3.1 File cabinet
3.2 Executive desk
3.3 Conference desk
3.4 Reception desk
4. Hotel & restaurant
4.1 Guest couches
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4.2 Beds
4.3 Lobby couches
4.4 Guest luggage resting desks
4.5 Cupboards
4.6 Interior & exterior doors
4.7 Stool chair
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6.6 PRICING AND DISTRIBUTION

The pricing strategy is multi-facial since the aim and goal of this project is
reaching all classes of people in the country. Different strategies that
address different classes or social status will be used. Among other things,
affordability is the key issue that affects furniture manufacturing. This is
directly related with the residents’ ability to buy or rent a housing unit. The
end users of the product are numerous and their geographical distribution is
very wide. Hence, the product has to reach the final consumer through
distributors and retailer.
Considering the nature of the products and the characteristics of the end
users a combination of both direct distribution to end users (for bulk
purchasers) and indirect distribution (using agents) is selected as the most
appropriate distribution channel. In this Expansion Project,
............MANUFACTURING aimed to distribute its products all over Ethiopia
including Eritrea. Whereas, the prices adopted for financial analyses per set
of furniture unit is studied and seen as it is summarized in the following sub
title.
6.7 SALES FORECAST

............MANUFACTURING OF OFFICE & HOUSEHOLD FURNITURE Expansion
Project has a capacity of 3,870 set of finished furniture products in the first
phase of production. The aim of the project is to produce quality and
affordable furniture products to meet the growing demand. The marketing
strategy to penetrate and gain considerable market share is consistently
rendering quality after-sales service to its customers. The selling price will
be much fair as compared to the existing market.
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Therefore, ............MANUFACTURING OF OFFICE & HOUSEHOLD FURNITURE

Expansion Project expect to sale its products effectively since the market
study results a huge supply & demand gap. The project forecasts the sales
collection from the 1st phase of production will be ETB 22 million.
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AMHA GUTA MANUFACTURING

SALES FORECAST PER ANNUM
SR NO. ITEM Quantity Selling Price per set/piece Total
House hold furniture lists
1 Living room sofa 100 40,000.00 4,000,000.00
2 Coffee table 70 6,000.00 420,000.00
3 TV rack 100 8,000.00 800,000.00
4 Dining chairs & table 50 30,000.00 1,500,000.00
5 Bed 140 20,000.00 2,800,000.00
6 Dressing table 20 7,000.00 140,000.00
7 Book shelf & Corner shelf 40 6,000.00 240,000.00
Household fixture lists -
8 Kitchen cabinet 20 50,000.00 1,000,000.00
9 Cupboard 20 30,000.00 600,000.00
10 Exterior doors & interior doors 200 9,000.00 1,800,000.00
Office furniture -
11 File cabinet 20 7,000.00 140,000.00
12 Executive desk 20 14,000.00 280,000.00
13 Conference desk 15 20,000.00 300,000.00
14 Reception desk 30 10,000.00 300,000.00
Hotel & restaurant -
15 Guest couches 100 3,000.00 300,000.00
16 Beds 300 16,000.00 4,800,000.00
17 Lobby couches 20 22,000.00 440,000.00
18 Cupboards 50 9,000.00 450,000.00
19 Interior & exterior doors 150 9,000.00 1,350,000.00
20 Stool chair 100 3,500.00 350,000.00
Total 22,010,000.00
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7. PRODUCTION CAPACITY AND PROGRAM
7.1. PRODUCTION CAPACITY

The demand for furniture expected to reach 296,428 set of furniture by the
year as indicated in the market study. The plant is proposed to produce
around 6,687 set of furniture per annum considering the market study,
minimum economies of scale, investment cost, period for implementation and
full capacity attainment. The plant will operate double shifts of 8 hours each
per day for 312 days in a year.
7.2. PRODUCTION PROGRAM

The production program is worked out by deducting Sundays and public
holidays and assuming that maintenance works will be carried out during off-
production hours. The factory is assumed to start its operation at 40% of its
rated full capacity and progressively increase to 60%, 80% and 100% in the
second, third and fourth year, respectively. The production program is
provided in the Table below;
............MANUFACTURING OF OFFICE & HOUSEHOLD

FURNITURE Expansion Project PRODUCTION CAPACITY PER ANNUM,
per set/piece
29
S.No. Description Phase 1 Phase 2 Phase 3 Phase 4

1 Working hours per shift 8 8 8 8
2 Number of shifts 2 2 2 2
3 Working days per year 312 312 312 312
4 Capacity Utilization (%) 40 60 80 100
Total set/piece per annum 3,870 4,644 5,573 6,687
8. RAW MATERIALS AND INPUTS

Most of the raw material will be acquired locally and these raw materials are
easily available in the market. There are some materials which will be
imported. The list of raw materials and quantity required per production
capacity is seen in the Table below;
............MANUFACTURING
RAW MATERIALS NEEDED (LOCAL)
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Item Name U.O.M Quantity

S.No.
1 Local Pines(Timber) M3 200
2 Fiber KG 1000
3 Foam 200 x 100 x 1 Pcs 1000
4 Bonded Foam 200 x 100 x 4 Pcs 500
5 Wanza Hard Wood M3 100
6 PP Bag Meter 20
7 Kaki Meter 60
8 Rubber Pcs 20
9 Adhesive Glue KG 1500
10 Metallic Stucco Gallon 160
11 Normal Stucco Gallon 160
12 Lacquer Gallon 200
13 Sealer Gallon 200
14 Sprusso Ctn 60
15 Shoe Nail KG 1000
16 Nail # 2,4,5,6,8,10 KG 1000
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............MANUFACTURING
RAW MATERIALS NEEDED (IMPORTED)

tim
1 MDF Normal 3mm,6mm,12mm,18mm Pcs 500
2 MDF Walnut Veneer Laminated 3mm,6mm,12mm,18mm Pcs 500
3 MDF Ask Oak Veneer Laminated 3mm,6mm,12mm,18mm Pcs 500
4 MDF UV Laminated Different Shades And Textures 18mm Pcs 300
5 Sofa Fabric Meter 2000
6 Stainless Caster Footing Pcs 2000
7 Screw #2, #3, 4# , 5# ,6# ,8# 10# Pkt 1000
8 Adhesive KG 1000
9 Thinner KG 2000
10 Staple Wire Pkt 1000
9. UTILITIES CONSUMPTION & COST

A number of utilities would be put in place in order to ensure smooth
functioning of the project. These utilities include:
➢ Water Supply
➢ Electricity supply
➢ Telephone line
➢ Internet Broadband
The total annual cost of utility is estimated at ETB 712,074.22. The annual
utility requirement and cost are indicated in Table.
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AMHA GUTA MANUFACTURING OF OFFICE & HOUSEHOLD FURNITURE

ANNUAL UTILITY CONSUMPTION & COST
Annual Counter Rate
S. No. UTILITIES UOM Unit Cost Service Charge Total Cost
Consumption per year
1 Electric Power kWh 876,000 1.14 270.72 998,910.72
2 Water m³ 29,200 11.60 168.60 338,888.60
3 Telephone - National calls minute 43,800 0.83 228.00 36,582.00
4 International Call (Av.Zone 1&2) minute 365 9.46 3,452.90
TOTAL COST 1,377,834.22
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10. TECHNOLOGY USED AND ENGINEERING
10.1. TECHNOLOGY
10.1.1 PRODUCTION PROCESS
In the manufacturing process of furniture there are several stages of

process. All process must be done in furniture making to get maximal quality
and satisfaction from the buyer. These are some of the steps in production
process:-
1. Preparing of timber
Log wood, a wood result of hewing is distributed to sawmill to start the

manufacturing process of furniture. The logs are split by sawmill according
to the required size and placed outdoor in the sun for a week to reduce the
moisture content of the wood before it goes to the kiln machine. In the Kiln
dry machine the drying process (kiln dried) of the wood with specific heating
system takes place in order to reduce the moisture content to 12-15%.
Then the wood (timber) will be checked and measured to ensure size and
moisture contents within requirements. Each bundle is documented and
release to production floor for processing.
2. Cutting and molding
Selecting from the received timber bundle, each piece of timber is carefully
cross cut into lengths required. Cut timber is then bundle on pallets, which is
then processed at the molding section to achieve the shapes and size
required.
Documentation and identification of each bundle is properly done here to

ensure chain of custody procedure is followed.
34
3. Component fabrication
Molded timber is processes by different machines depending on its shape

and design to acquire its features. These components are then carefully
sanded to round all sharp edge and smoothen out all surfaces.
4. Assembly
Each component will be assembled according to from the part the intended
furniture.
Joints are glued together to form a strong bond. Assembled parts are then
stacked together and labeled for traceability.
5. Finishing & packing
Assembled parts are dipped in teak oil and wiped dry to achieve the brown/
teak finishing.
Teak oil acts as repellent of wood destroying insects, fungicide, as well as

providing some weather and UV resistant to the wood.
These parts are left for a period of time for the teak oil to cure and dry. They
are inspected again before packed into carbon boxes.
6. Delivery
Finished products will be loaded into containers according to customers’

order. These containers are then shipped out to our customers from all
around the country.
35
10.2. ENGINEERING
10.2.1 MACHINERY AND EQUIPMENT
The total cost of machinery and equipment is estimated at ETB 4,950,500.00,

out of which about 45% is required in foreign currency. The following are
some of the machines we use for the manufacturing of furniture.

MACHINARY & EQUIPMENT in Birr
New Machineries To Invent

Estimated Unit Estimated Total
S.No Cost In Birr Cost In Birr
1 Conveyer Belt Sanding Machine Pcs 1 200,000.00 200,000.00
2 Foam Grinding Machine Pcs 1 100,000.00 100,000.00
3 Foam Bonding Machine Pcs 1 125,000.00 125,000.00
4 Fabric Cutting Machine Set 2 150,000.00 300,000.00
5 Power Generator 500 KVA Set 1 1,000,000.00 1,000,000.00
6 Edge Binding Machine Set 1 150,000.00 150,000.00
7 Hot Pressing Machine Set 2 500,000.00 1,000,000.00
Total 2,875,000.00
36
11. ORGANIZATION AND MANAGEMENT
11.1 PROPOSED ORGANIZATIONAL STRUCTURE

Organizing, the process of structuring human and physical resources in order
to accomplish organizational objectives, involves dividing tasks into jobs,
specifying the appropriate department for each job, determining the
optimum number of jobs in each department, and delegating authority
within and among departments. The framework of jobs and departments
that make up any organization must be directed toward achieving the
organization’s objectives. In other words, the structure of an organization
must be consistent with its strategy.
37
General Manager
Internal Audit
Admin Operation Forman

Finance &
Accounts
Carpenter
Cleaner
Accountant
Driver
Finishing
Security
Tailoring Sofa Section
The following section includes all the manpower requirement of the plant.
38

HUMAN RESOURCE REQUIREMENT & SALARY EXPENDITURE in Birr
EMPLOYEE POSITION Monthly Salary Total Monthly
S.No. Skilled Staff Head Count Per Head Salary Annually
1 Technical Director 1 10,000.00 10,000.00 120,000.00
2 Accountant 1 6,000.00 6,000.00 72,000.00
3 Cashier Receptionist 1 3,000.00 3,000.00 36,000.00
4 Production Department 4 5,000.00 20,000.00 240,000.00
5 Finishing Expert 3 5,000.00 15,000.00 180,000.00
6 Security Guard 2 800.00 1,600.00 19,200.00
7 Janitor 2 800.00 1,600.00 19,200.00
8 Driver 2 1,500.00 3,000.00 36,000.00
Total Skilled Staffs 16 60,200.00 722,400.00
Unskilled Laborers 8 500.00 4,000.00 48,000.00
Sub-Total 24 32,600.00 770,400.00
Employee Benefits (15%) 115,560.00
Total 885,960.00
Casual Laborer 12 1,000.00 12,000.00 144,000.00
Grand Total 36 1,029,960.00
39
SUMMARIZED STAFFING PLAN

TYPE OF EMPLOYEE Unskilled Skilled Total
Permanent 12 5 17
Casual 8 11 19
TOTAL 20 16 36
40
11.2 LAND LAYOUT

TOTAL LAND LAYOUT
No. DESCRIPTION Total (m2) % Share
1 Carpenter/woodwork area 150 15.79
2 Sofa production area 100 10.53
3 Finishing area 100 10.53

4 Tailoring section 15 1.58
5 Sofa assembly area 50 5.26

6 Display Section /show room 100 10.53
7 Office Area 12 1.26

8 Reception 12 1.26
9 Warehouse/Store 45 4.74
10 Loading & Unloading 100 10.53
11 Security 100 10.53

12 Free space & Other 166 17.47
TOTAL PLOT REQUIRED 950 100
41
12 SOCIO ECONOMIC BENEFIT

One of the problems that our country faces is a high unemployment rate.
The current objective of the government is tackling the problem of
unemployment and fostering the development process either through
creating self-employment or subcontracting other organizations.
The project will generate more than ETB 1.6 million incomes for the
Government in terms of payroll tax. The project will also generate around
ETB 4 million in terms of profit tax revenue per annum for the country. The
establishment of such factory will have a foreign exchange saving effect to
the country by substituting the current imports.
13 CORPORATE SOCIAL RESPONSIBILITY

There is a growing awareness that business needs to manage its relationship
with the wider society. Corporate leaders are responsible for their
corporations’ impact on society and the natural environment beyond legal
compliance and the liability of individuals. MR. ............considers Corporate
Social Responsibility (CSR) a leading principle of top management and of
entrepreneurs. The promoter expects the employees to reexamine their
pattern of behaviors and begin their journey toward a sustainable approach
that is integrated into the business strategy. To that end, he will ensure skill
and technology transfer to small and medium scale enterprises is achieved
by introducing training and experience-sharing programs. These enterprises
may be used as subcontractors. The company will bring professional people
from Sweden in order to train local people on international and modern
furniture factories’ standard. It plans to add value to street youths and
children live by training them on various job skills in the company and by
42
giving opportunity to practice. It will also provide continuous training of staff

members and equip to become self-employed.
14 ENVIRONMENTAL IMPACT
Furniture has a positive contribution to sustainable development that aims to
make the human society to live in harmony with nature at high level. Wood,
especially from sustainable harvesting practices has been shown to be the
best material to use for many different applications as it has a very minimal
impact on the environment compared to other materials such as metals and
plastics.
The use of wood was found to be the most favorable in terms of minimizing
the impact on the environment. Wood harvested from sustainable logging
practices is a renewable resource whereas other materials (such as steel,
aluminum and plastic) are derived from non-renewable resources. The
embodied energy of wood is very low compared to metals and plastics and is
a measure of the fact that the production of metals and plastics is a high-
energy intensive process. The embodied energy of wood is largely derived
from the energy required to dry the timber. In many environmental impact
categories, wood has been found to be superior to either metals or plastics.
In many examples, timber has been considered to be CO2 neutral when
burned for energy production since the amount of CO2 released is balanced
by the uptake of CO2 from trees.
In addition to that, this project will be environmentally conscience by using

domestic wood, water-based (low VOC) finishing materials, green packaging
material and wood from sustainable species and forests. The envisaged
43
project plans to get any kind of forestation led by in a legal manner.

Moreover, the project will import some raw materials from abroad.
44
15 FINANCIAL ANALYSIS
15.1 ASSUMPTION
The financial analysis of ............MANUFACTURING OF OFFICE &
HOUSEHOLD FURNITURE Expansion Project is based on the data provided in
the preceding sections and the following assumptions.
• Built up area 950Sq.m

• Revenues 10% every year after full capacity
• Expenses 10% every year after full capacity
• Working Hour 2 shifts
• Working Days 312 days per year
• Working Capital 5% of total Investment Cost
• Cost of Promotion 2% of Sales of Service
• Maintenance & Repair 2% of Equipment per year
• Depreciation 10% of Equipment per year
• Repair and maint’ce cost 5% of construction & machinery
• Legal Reserve 5% of Gross Profit
• Profit Tax 35% of Gross Profit
• Source of finance 100 % loan
• Bank interest 14%
• Discount cash flow 10%
• Accounts receivable 15 days
• Cash in hand 5 days
• Accounts payable 15 days
• Raw material local 5 days
• Work in progress 5 days
• Finished products 5 days
45
15.2 PROFITABILITY
The financial statement prepared based on the projected income statement
reveals that the project would generate a net profit throughout its project
life. In the 1st year of operation (1st phase, 40%) Birr 9.6 million, 2nd year
(2nd phase, 60%) Birr 11.3 million, 3rd year (3rd phase, 80%) Birr 13.6
million, and 4th year (4th phase, 100%) where the company reaches in to full
capacity Birr 16.4 million. The net cash flow is positive throughout the
project life. Therefore, we can conclude that the project will not face any
deficit throughout its life.
15.3 NET PRESENT VALUE

Net Present Value (NPV) is the total present value of a time series of cash
flows. NPV aggregates cash flows that occur during different periods of time
during the life of a project in to a common measuring unit i.e. present value.
It is a standard method for using the time value of money to appraise long-
term projects. NPV is an indicator of how much value an investment or
project adds to the capital invested. In principal a project is accepted if the
NPV is non-negative.
Accordingly, the net present value of ............MANUFACTURING OF OFFICE

& HOUSEHOLD FURNITURE Expansion Project at 10% discount rate is found
to be Birr 75.50 million and which is acceptable.
15.4 INTERNAL RATE OF RETURN

The internal rate of return (IRR) for an investment is the discount rate that
makes the net present value of the investment's income stream total to
zero. It is the compounded return rate that can be earned on the invested
capital, i.e., the yield on the investment. It is an indicator of the efficiency or
46
quality of an investment. A project is a good investment proposition if its IRR

is greater than the rate of return that could be earned by alternate
investments or putting the money in a bank account. Accordingly, the IRR of
Project is computed to be 67% indicating the viability of the project.
15.5 PAYBACK PERIOD

The payback period is the period required to recover the original investment
outlay through the accumulated net cash flows earned by the project.
Accordingly, based on the projected cash flow it is estimated that the
project’s initial investment will be fully recovered within 3 years.
47
16 CONCLUSION
Project will use advanced technology to produces acceptable, high quality
and standard products. As it is clearly presented in the financial analysis, the
proposed factory is promising and financially viable. The factory is liquid
starting from the first year of its operation. Since the plant is profitable and
can accommodate employment opportunity for 74 workers. It is beneficial
both for the promoter as well as the country to initiate the business.
The establishment of such factory will have a foreign exchange saving effect
to the country by substituting the current imports. The project will generate
revenue in terms of tax for the government. The competitive advantage of
getting ETB 5,000,000 loans for the envisaged project will have definitely
best outcome in various ways.
In addition to serving as a source of employment and income for the region,

the project will render social services for different group of people.
Furthermore, it will serve as the pilot experience and ground for other
investors who wish to enter into such kinds of urban development.
48
APPENDIX
INITIAL INVESTMENT COST

TOTAL INVESTMENT COST in Birr
S.No. COST ITEMS Total Cost % Share
1 Plant Machinery and Equipment

3,900,500.00 58.21
2 Inputs and Raw Materials
1,401,900.00 20.92
3 Office Furniture
210,000.00 3.13
4 Pre - Production Expenditure
744,622.05 11.11
5 Working Capital
444,248.57 6.63
TOTAL INVESTMENT COST
6,701,270.62 100.00
49
ANNUAL PRODUCTION COST

PROJECTED PRODUCTION COST in Birr
S.No. COST ITEMS Year 1 Year 2 Year 3 Year 4
1 Raw Materials and Inputs 1,401,900.00 1,682,280.00 2,018,736.00 2,422,483.20
2 Utilities 1,377,834.22 1,653,401.06 1,984,081.28 2,380,897.53

3 Maintenance and Repair 78,010.00 93,612.00 112,334.40 134,801.28
4 Administration Costs 228,000.00 250,800.00 275,880.00 303,468.00
5 Cost of marketing and distribution 30,857.44 37,028.93 44,434.72 53,321.66
6 Other Costs 15,583.01 17,141.31 18,855.44 20,740.98

TOTAL OPERATION COST 3,132,184.67 3,734,263.30 4,454,321.83 5,315,712.66
7 Depreciation - 78,010.00 76,449.80 74,920.80

8 Cost of Finance 116,341.25 116,341.25 116,341.25 116,341.25
TOTAL PRODUCTION COST 3,132,184.67 3,928,614.55 4,647,112.88 5,506,974.71
50
PROJECTED INCOME STATEMENT
51

PROJECTED INCOME STATEMENT in Birr
ACCOUNT DESCRIPTION Year 1 Year 2 Year 3 Year 4 Year 5
Sales Revenue 22,010,000.00 26,412,000.00 31,694,400.00 38,033,280.00 41,836,608.00
Other Income 440,200.00 528,240.00 633,888.00 760,665.60 836,732.16
TOTAL REVENUE 22,450,200.00 26,940,240.00 32,328,288.00 38,793,945.60 42,673,340.16
Cost of Sales 3,132,184.67 3,928,614.55 4,647,112.88 5,506,974.71 6,057,672.18
GROSS PROFIT 19,318,015.33 23,011,625.45 27,681,175.12 33,286,970.89 36,615,667.98
Salary & Wages 1,029,960.00 1,235,952.00 1,483,142.40 1,779,770.88 1,957,747.97
Utilities 1,377,834.22 1,653,401.06 1,984,081.28 2,380,897.53 2,618,987.29
Maintenance and Repair 78,010.00 85,811.00 94,392.10 103,831.31 114,214.44
Administration Costs 228,000.00 273,600.00 328,320.00 393,984.00 433,382.40
Cost of marketing and distribution 30,857.44 46,286.16 62,023.46 77,529.32 85,282.26
Other Costs 15,583.01 23,374.51 31,321.85 39,152.31 43,067.54
Depreciation - 78,010.00 76,449.80 74,920.80 74,920.80
Cost of Finance 116,341.25 116,341.25 116,341.25 116,341.25 127,975.38
Miscellaneous 440,200.00 660,300.00 884,802.00 1,106,002.50 1,216,602.75
TOTAL EXPENSE 3,316,785.92 4,173,075.99 5,060,874.13 6,072,429.91 6,672,180.82
GROSS PROFIT/LOSS 16,001,229.41 18,838,549.46 22,620,300.98 27,214,540.98 29,943,487.16
Legal Reserve 1,122,510.00 1,347,012.00 1,616,414.40 1,939,697.28 2,133,667.01
TOTAL PROFIT BEFORE TAX 14,878,719.41 17,491,537.46 21,003,886.58 25,274,843.70 27,809,820.15
Profit Tax 5,207,551.79 6,122,038.11 7,351,360.30 8,846,195.30 9,733,437.05
NET PROFIT AFTER TAX 9,671,167.62 11,369,499.35 13,652,526.28 16,428,648.41 18,076,383.10
52
PROJECTED CASH FLOW STATEMENT
53

PROJECTED CASH FLOW STATEMENT in Birr
Item Year 1 Year 2 Year 3 Year 4 Year 5
CASH INFLOW
Sales Income 22,010,000.00 26,412,000.00 31,694,400.00 38,033,280.00 41,836,608.00
Other Income 440,200.00 528,240.00 633,888.00 760,665.60 836,732.16
TOTAL CASH INFLOW 22,450,200.00 26,940,240.00 32,328,288.00 38,793,945.60 42,673,340.16
CASH OUTFLOW
Cost of Sales 3,132,184.67 3,928,614.55 4,647,112.88 5,506,974.71 6,057,672.18
Salary & Wages 1,029,960.00 1,235,952.00 1,359,547.20 1,495,501.92 1,645,052.11
Utilities 23,403.00 35,104.50 47,040.03 58,800.04 64,680.04
Maintenance and Repair 78,010.00 85,811.00 94,392.10 103,831.31 114,214.44
Administration Costs 228,000.00 250,800.00 275,880.00 303,468.00 333,814.80
Cost of marketing and distribution 4,674.90 5,142.39 5,656.63 6,222.30 6,844.52
Other Costs 313,218.47 344,540.31 378,994.35 416,893.78 458,583.16
Depreciation 113,557.50 102,201.75 103,337.33 103,223.77 103,235.12
Cost of Finance 116,341.25 116,341.25 116,341.25 116,341.25 127,975.38
Miscellaneous 440,200.00 484,220.00 532,642.00 585,906.20 644,496.82
Profit Tax 5,207,551.79 6,122,038.11 7,351,360.30 8,846,195.30 9,733,437.05
Legal Reserve 1,122,510.00 1,347,012.00 1,616,414.40 1,939,697.28 2,133,667.01
TOTAL CASH OUTFLOW 11,809,611.58 14,057,777.87 16,528,718.47 19,483,055.85 21,423,672.64
SURPLES/DEFICIT 10,640,588.42 12,882,462.13 15,799,569.53 19,310,889.75 21,249,667.52
54

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Manufacturing of Office &

COMPANY PROFILE, BUSINESS PLAN

Addis Ababa, Ethiopia

+251911090701, Addis Ababa

13 CORPORATE SOCIAL RESPONSIBILITY............................................................................ 42

Project Name: …………. MANUFACTURING OF OFFICE & HOUSEHOLD

Project Type: Manufacturing of Wood products

Project Activity: Manufacturing of Household Furniture & Fixtures, Office

Project Promoter: ........................

Project Purpose: requesting ETB 5,000,000 investment loan for Expansion.

Total Investment Capital: ETB 10,500,000.

Fixed Investment: 76.92%, working capital: 23.08%

Raw Materials: locally available.

Production Capacity: 13,824 sets in total, per annum, at full capacity

Legal form of the Business: 100% private

IRR: & NPV: 67% & 75.5 million

Employment Opportunity: 36 individuals; 17 on permanent 19 on casual

Social and Economic Benefits: will provide better manufacturing,

Environmental Impact: not have any adverse impact on the environment.

Mr. ........................, Cell Phone:

The five-year Growth and Transformation Plan (GTP), which emphasizes

Although Ethiopia’s industrial base is still relatively small, the growth

momentum is expected to continue given the priority accorded to

The current fast and dynamic economic growth of Ethiopia especially in

Investment and property development play an important role in any

years is consistent with the global experience suggesting that investment in

In general, a stable macroeconomic condition leads to economic and

Establishing of such service/supply is very important because of the

➢ Reduce & Control Operating Expenses,

➢ Improves Business Focus,

➢ Gain World-class Capabilities,

➢ Re-allocate Internal Resources,

➢ Accelerate Re-engineering Efforts,

➢ Manage an Out-of-Control Function,

➢ Create New Resources,

➢ Increase Capital Funds Sources,

➢ Share Business Risk with Trusted Partners,

➢ Infusion of Cash, etc.

3. BACKGROUND OF THE COMPANY

............MANUFACTURING believes in treating its customers with respect

• Vision: Being a Chief Manufacturer of High Quality Products by

• Mission: To Satisfy Customer’s need Through Reliability and

Since the promoter has extensive experience in the furniture-making

In addition, the establishment of this furniture manufacturing factory has

The favorable environment created for the investors in the country

envisage the expansion of a factory for the manufacturing of high quality

3.1 INVESTOR’S PROFILE

Secondly, the suitable investment policy environment which encourages

Therefore, it is another and innovative investment creating employment

4. OBJECTIVE OF THE COMPANY

Its objective towards wood manufacturing industry is to see the sector to be

an objective to be pursued at ............MANUFACTURING OF OFFICE &

Considering the economic and social benefits of the project’s technical

............MANUFACTURING OF OFFICE & HOUSEHOLD FURNITURE intends to

On the approval of this project and subsequent execution of related tasks

The total investment cost of the project including working capital is

6.1 PAST SUPPLY AND PRESENT DEMAND

Year Quantity Demanded per annum

6.2 PROJECTED DEMAND

The present demand for housing in Addis Ababa is estimated at 210,347

PROJECTED DEMAND FOR FURNITURE

YEAR Future Demand Per