ADAMA SCIENCE AND TECHNOLOGY

UNIVERSITY
School of Mechanical Chemical and Materials Engineering
DEPARTMENT OF MECHNAICAL DESIGN AND

MANUFACTURING ENGINEERING

ENTREPRENEURSHIP FOR ENGINEERS

Business Plan for Multi-Purpose Furniture

Production

Submitted to: Dr. Sugandha

Submission Date July 8, 2019,

KGHGH MULTI-PURPOSE FURNITURE PRODUCTION

Prepared by:

Name Id No.

1. Kassahun Chekol R/0688/08

2. Gemechis Diriba R/0531/08
3. Hanan Seid R/0603/08
4. Getinet Sisay R/0545/08
5. Helen Yalew R/0621/08
6. Surafel Hailekiros R/1089/08

Submitted to: Dr. Sugandha

Submission date July 8, 2019

2. Executive Summary
KGHGH Multi-Purpose Furniture Production is a partnership form of business organization that
aiming to produce a furniture which is used for multiple purpose. Our company will manufacture
a multi-purpose furniture which are easily accessed and series for anyone it can be for office
facilities or living room. Most of furniture manufacturing companies in Ethiopia manufactures a
very fancy furniture which are very expensive and cannot be afford by majority of the society
and most of them they are one purpose products so comparing to those companies our products
are a multi-purpose and which satisfies customer need with a good price. And we will
manufacture different types of furniture such as; multi-purpose chair which serves as a seat and
when unfolded they become shelf storage, a piece that can be converted into a table, a bed, a
chair or a shelf unit. The primary objectives of the business plan for manufacture of furniture are:
to be the premier simple manufacturer in Ethiopia, Jimma, to provide quality machine at
reasonable prices with exemplary service, to achieve each citizen to have with good furniture in
their house, to attract a minimum of 100 regular customers per day in the first year of operation.
Our company will be located in Jimma. The Company is located in a center of the country which
have high raw material supply area. Since our products main raw material is wood our suppliers
will be mostly farmers we will establish relationships with qualified suppliers, who can provide
reasonably priced products, delivered according to the schedule.
The organization that we are going to establish is partnership. Our organization consists of 6
partners. We entered in to a contract in the organizations memorandum of association. We will
pay attention to any future legislation that a government wants from us like tax by revealing our
daily income and renewing our license of work from time to time.
A basic preliminary in our furniture production is the provision of working drawings. In our firm
of any size there is invariably a special department where full-size drawings are prepared from
small-scale drawings provided by the designer.

In 2006-2010 in Addis Ababa a total of 175000 condominium housing unit are constructed
which is worth billions of dollars. if we take average of 100000 birr for the furniture and
multiply it by the number of condominium housing built it will be around 17.5 billion Ethiopian
birrs for installation of the multipurpose furniture’s. We plan to acquire 5-6% of the market
share of this

i|Page
KGHGH Multi-Purpose Furniture
Production
condominium housing in the first year. We do not think this is unbearable, especially in a still
growing market.
According to our conservative estimates, KGHGH Multi-Purpose Furniture Production is
expected to maintain a healthy financial position over the next five years. The business will be
initially financed by a 200,000 ETB five-year term loan, and each of the group members share
50,000 ETB and a total capital investment of 500,000 ETB.

Total startup costs will be 500,000 birr, 60% of which will be contributed by the owners and the
remainder will be secured through a proposed bank loan. The majority of the costs are associated
with the machinery and equipment, and raw material inventory. Total costs for these items are
Total reported to be 250,000 ETB.

For our break-even analysis, we assume running costs of approximately 56,874 ETB per month,
which include payroll, utilities, insurance, rent and other fixed costs. We need to sell about 125
pieces for minimum 12 furnitures per month to break even, based on our assumptions. We will
be profitable in the first year of operations with aa profit of 61,698 ETB, and profits increasing
over the next four years, as we establish and increase our customer base.

Our management is responsible for constantly evaluating risks and taking corrective actions to
provide adequate prevention, control and risk reserves. There are many possible classifications of
risks, but for the purposes of this plan, we consider External Risks the risks which come from
outside the company and are more difficult to prevent and control, such as, competition and
buying patterns changes, technology, location, inflation, currency and Internal Risks the risks
which come from inside the company and can be better prevented or controlled such as,
personnel, management, business continuity, cash flow deficiency.

ii | P a g e
KGHGH Multi-Purpose Furniture
Production
Table of Contents
2. Executive Summary......................................................................................................................i

3 Environmental and Industry Analysis..........................................................................................1

3.1 Future outlook and trend........................................................................................................1

3.2 Legal concerns.......................................................................................................................1

3.3 Industry demand.....................................................................................................................2

3.4 Analysis of competitors.........................................................................................................2

3.5 Market segmentation..............................................................................................................3

4 Description of venture..................................................................................................................3

4.1 description of business goals..................................................................................................3

4.2 Location and Facilities...........................................................................................................3

4.3 Mission...................................................................................................................................4

4.4 Organization of the business..................................................................................................4

4.5 Identification of partners or principal shareholders...............................................................4

4.6 Roles and responsibilities of members of organization.........................................................4

4.7 The personnel and office equipment that will be needed.......................................................5

5 Organizational Plan and Management Summary.........................................................................5

5.1 Forms of ownership...............................................................................................................5

5.2 Real life business accomplishments.......................................................................................5

5.3 Academic accomplishment....................................................................................................5

5.4 Our human resources.............................................................................................................6

6. Description of the Business Idea.................................................................................................6

6.1 Products and Services............................................................................................................6

6.2 Competitive Comparison.......................................................................................................6

6.3 What Makes It Different........................................................................................................6

iii | P a g e
KGHGH Multi-Purpose Furniture
Production
 6.4 What Benefit It Offer.............................................................................................................7

6.5 Why US..................................................................................................................................7

6.6 Potential patents, trademarks or design registrations.............................................................7

7. Production/Operational Plan........................................................................................................7

7.1 Manufacturing process...........................................................................................................7

7.2 Physical Plant.........................................................................................................................9

7.3 Machinery and equipment......................................................................................................9

7.4 Suppliers.................................................................................................................................9

7.5 Technology in use..................................................................................................................9

7.6 Production Capacity.............................................................................................................10

8. Marketing Plan...........................................................................................................................10

8.1 Target Marketing..................................................................................................................10

8.2 Industry Analysis.................................................................................................................10

8.3 Competation and Buying Pattern.........................................................................................11

8.4 Marketing Summery............................................................................................................11

8.4.1 Pricing............................................................................................................................11

8.4.2 Distribution....................................................................................................................11

8.4.3 Promotion of the Product..............................................................................................11

9. Financial Plan............................................................................................................................12

9.1 Start-Up Costs......................................................................................................................12

9.2 Source and Use of Funds.....................................................................................................13

9.3 Break-even Analysis............................................................................................................14

9.4 Projected Profit or Loss........................................................................................................14

9.5 Projected Balance sheet.......................................................................................................16

9.6 Risk Analysis.......................................................................................................................17

iv | P a g e
KGHGH Multi-Purpose Furniture
Production
3 Environmental and Industry Analysis

Our multipurpose furniture production competes with companies that produce a furniture and
transport to different areas like Addis Ababa, shashemene, and there are also small company that
produce furniture.

The profitability of individual companies can vary. Large companies have advantages in
purchasing, finance, and marketing. Small companies can offer superior product. The industry is
labor-intensive.

Wages form a significant proportion of operating costs. The existence of a statutory minimum
wage in most states increases the need for players to keep other costs as lean as possible, which
in turn increases the importance of suppliers. A slight complication is that in some states,

3.1 Future outlook and trend

Our company has future plans to provide furniture that are durable and comfortable for offices,
Hotels, Restaurants, Households and guest houses. We also have an idea to minimize the cost of
this multipurpose furniture so that every class of Jimma society can afford and buy our furniture.
Our company are targeting for Five years and at that point, we will expand our company to some
regions of Ethiopia like Hawasa, Mekele and bahirdar outside Oromia cities.

We planned to manufacture a fashionable multipurpose furniture which is used as a shelf, sofa,

and beds that means they serve as for different purpose that everybody loves our design. We use
CATI, CAD and CAM software’s to simplify our design and facilitate the manufacturing
processes using this software can be printed the model and can show to the customer. As now a
day’s market is rapidly changing due to technological developments we have also planned to
manufacture and sell our products by using some technologies this saves time and energy that
makes us best choice for our customers.

3.2 Legal concerns

Our management is expected to use resources wisely, operate profitably, pay debts, and abide by
laws and regulations. We will pay attention to any future legislation that a government wants
from
1|Page
KGHGH Multi-Purpose Furniture
Production
us like tax by revealing our daily income and renewing our license of work from time to time.
also giving a credit not affecting a society around our company, because if waste material
released to environment it affects healthy of the society. this changes image of our company in
front of the society.

3.3 Industry demand

Now a day’s furniture has great market as they are essential in all hall, churches and houses that
means demand of furniture are increasing.in the future the market of furniture is growing. As we
manufacture a multipurpose furniture demand of people increase for us because we manufacture
different from our competitors, they manufacture a furniture that has a single purpose. The
company will sell to individuals, but it will also accept some occasional catering jobs to
individuals and companies in the area. We take orders online, by phone, or at our location.

3.4 Analysis of competitors

Suppliers

Because of their years of experience combined with their existing catering business, we have
established relationships with qualified suppliers. These suppliers can provide reasonably priced
products, delivered according to the schedule.

Management Controls:

We will practice sound management procedures in order to control costs, insure quality of
product and provide friendly customer service. The following systems will be used by
management:

Order Guide: The company will use an item specific order guide to track order history and
maintain designated levels of product in inventor

Weekly Inventory: Management will conduct a weekly inventory to determine valuation for use
in the preparation of weekly profit and loss reports.

Daily Inventory Tracking: Daily inventory will be taken on specific items. Movement will be
compared to sales data to ensure designated products have been properly accounted for.

Administrative Systems
With a limited staff, it is crucial that their main current with daily cash outlay. Daily Cash
Control Sales and receipts recorded by the POS system will be compared to actual cash and
credit card deposits on a daily basis. Acceptable over/short amounts will be an immediate audit
to account for the difference. Cash, debit card and credit card receipts will be deposited in a
deposit. Weekly Prime Cost Report.

3.5 Market segmentation

The main market segments are: a) individuals (retail customers) accounting for more than 90
percent of our sales, and b) local businesses (corporate customers) which, in terms of purchase
orders, typically make larger orders for their employees and business needs.

4 Description of venture
4.1 description of business goals
A) Main Objective of the Company

The primary objectives of the business plan for manufacture of furniture machine are below:

 To be the premier simple manufacturer in Ethiopia Jimma

 To provide quality machine at reasonable prices with exemplary service
 Achieve each citizen to have with good furniture in their house
 To achieve Prime Cost Ratios lower than 52%
 To attract a minimum of 100 regular customers per day in the first year of operation

B) Form and Legal Status of the Business

Start-Up Summary: - The cost to open the manufacture of multipurpose furniture is 36398.
The majority of the expenses are in furniture fixtures and equipment totally 110,000. The
location requires some build-out and renovation totally 5000 and will require approximately 30
days to complete.

4.2 Location and Facilities

Our company will be located in Jimma. The Company is located in a center of the country which
have high traffic area, at the intersection offers most urban and, a suburb city's. Ethiopia has
around 100,000,000 million populations which with minimum income but there is no research
based data exactly.

4.3 Mission
Our Mission is to produce simple, flexible and unique furniture. We will strive to achieve this
goal by:

1) by providing menu items incorporating quality ingredients at reasonable prices, and

2) we will be mindful of the wellbeing of our customers and staff– treating each and every one
with dignity and respect guiding principles.

4.4 Organization of the business

Planned organization chart

We are open 6 days a week as follows

Monday 2:15-10:30
Tuesday 2:15-10:30
Wednesday 2:15-10:30
Thursday 2:00-10:00
Friday 2:30-10:30
Saturday 2:00-10:00

4.5 Identification of partners or principal shareholders

The company will be owned by ourselves, after we graduated from university we will be the
owner of this company and become Independence from any financial problem. In these
organizations we held the positions of Assistant Manager and then General Manager. Because of
our profit ion related to design and manufacturing this product is design completely at high
quality, strength with minimum parts this makes for our product very reliable and preferable.

4.6 Roles and responsibilities of members of organization

The responsibilities required from the members of the organization is to share their idea in order
to be a competitive and successful, also if there is a meeting they have to be on time.

4.7 The personnel and office equipment that will be needed

Number of employee increases as our company become developed but at the initial number of
employee are five, one accountant and two supervisors. In our office we need chair, table,
computers and other infrastructure which help us to facilitate our work.

5 Organizational Plan and Management Summary

5.1 Forms of ownership
The organization that we are going to establish is partnership. Our organization consists of 6
partners. We entered in to a contract in the organizations memorandum of association. All the
members actively participate in the activities of the organization and decision making process
also the members are equally liable to the liabilities of the organization hence, the type of partner
is general partner.

5.2 Real life business accomplishments

Most of the partners of the group have accomplished many business activities in their
proprietorship business in manufacturing sector. Some of partners have small wood
manufacturing shops. The members have long time experience in using technologies that is
helpful for the operation of the partnership that is going to be formed. In addition, some members
do have experience on managing business activities and good communication skill with
different:

 customers
 agents and
 suppliers

5.3 Academic accomplishment

 All the partners have first degree on manufacturing and design engineering from Adama
science and technology university
 Two of the partners have first degree on business management from Rift valley university
  Most the members have long time experience in different companies

5.4 Our human resources

All the members actively will involve in the activities of the firm. Our partnership has six
members and all have their authority in different operational levels formed. Some of the partners
are engaged in administration, some controlling, checking and so on. Other human sources are
employees those who works on machines in the industry. These employees have no any share
and are not responsible for the liability of the industry. They are paid a salary monthly.

6. DESCRIPTION OF THE BUSINESS IDEA

6.1 Products and Services
Our company will manufacture a multi-purpose furniture which are easily accessed and series for
anyone it can be for office facilities or living room. And we will manufacture different types of
furniture such as
• multi-purpose chair which serves as a seat and when unfolded they become shelf storage
• A piece that can be converted into a table, a bed, a chair or a shelf unit
• A mirror that can also become an ironing board. All you have to do is tilt it and lock it in
place and etc.

6.2 Competitive Comparison

Most of furniture manufacturing companies in Ethiopia manufactures a very fancy furniture
which are very expensive and cannot be afford by majority of the society and most of them they
are one purpose products so comparing to those companies our products are a multi-purpose and
which satisfies customer need with a good price.

6.3 What Makes It Different

There is no industry which manufactures such type of product in Ethiopia except they import it
from other countries and our company can produce those products with a fair price, quality and
design. So this will make us unique and compatible.
6.4 What Benefit It Offer
Some of our products advantages are listed below;
➢ It enhances efficiency in utilization of space, especially to those who lives on small house
or apartment.
➢ It saves money. You do not have to exhaust your savings in order to be able to buy these
from the market, you can spend a decent sum on them in order to have them in your home
because they are affordable.
➢ They are easy to clean and maintain.

6.5 Why US
Because our company manufactures a multi-purpose product which can be afforded and accessed
easily with the best quality since most of the current companies in our country does not produce
such product.

6.6 Potential patents, trademarks or design registrations

The company will be owned by ourselves, after we graduated from university we will be the
owner of this company and become Independence from any financial problem. This company
will be organized as a Partnership, wholly owned and operated by ourselves.

7. PRODUCTION/OPERATIONAL PLAN
7.1 Manufacturing process
A basic preliminary in our furniture production is the provision of working drawings. In our firm
of any size there is invariably a special department where full-size drawings are prepared from
small-scale drawings provided by the designer. In the small-scale drawing the general form and
essential requirements are worked out; the full-size drawing shows proportions and
constructional details. A sample piece is made to check the design and cutting problems. Cutting
lists are prepared; the cost of materials, fittings, finish, etc. figured; and an estimate of machining
and assembly time worked out. When the work is to be produced in quantity, costs are lowered
considerably because only one setting of the machine and only one set of cutters are needed for
the whole run of any particular part.
Selection of timber, already passed through the seasoning kiln and converted to standard
thicknesses, follows. The wood passes to the machine shop, where it is sawed to size, planed,
molded, grooved, or rebated as required. When a number of parts must be cut exactly alike, they
are clamped in forms having the proper contour and are then brought in contact with high-speed
rotating knives that shape the part to proper size as the form rides against a guide on hand or
automatic shapers and routers. Intricately carved pieces such as legs are roughly carved on
multiple-spindle carving machines. These duplicate a master leg by means of a follower point
that is guided along the surface of the model and imparts the same motions to as many as 32
high- speed rotating knives as they whittle the leg blanks. After the rough carving, the pieces are
machine sanded and finished by a hand carver.

If veneering is required, this is now done. Jointing follows tanning, dovetailing, etc. Automatic
machines often combine several operations. Exposed parts are sanded on edge belt sanders,
three- drum, or belt sanders. Rounded parts are sanded on soft pneumatic drums, and carved
parts are sanded on a buffer, a machine in which shredded sandpaper is supported by brushes on
a revolving wheel.

Finally, the work passes to the assembly shop where door frames are put together, drawers glued
up, and carcasses assembled. After the glue has set, the parts may be returned to the machine
department for machining that could not be performed before assembly, such as sanding the
joints and shaping the edges. Then it returns to the assembly department for final assembly. Air-
driven clamps are used when the design permits; otherwise the piece is pressed by hand clamps.
Unless electronically cured glues are used, clamps must be applied long enough to ensure a good
bond. The completed article is cleaned to remove excess glue, inspected, and hand sanded.
Finally, staining and spray polishing is done and fittings added. Then our product will be
packaged and delivery to our customers

our company will be open 6 days a week for production component assembly and storage. We
will write the schedules. The schedules will be written in a manner that will allow the ability to
increase or decrease hourly labor according to sales volume in order to maintain a consistent
labor cost control. Proper labeling and rotation techniques, accompanied by ample storage
facilities will ensure that high quality prepared product will be sufficiently available to meet the
demands during
peak business hours. Replenishment and ongoing preparation will continue during off peak
business hours.
We will be responsible for ordering, receiving and maintaining sufficient inventory to meet
production demands. Standard parts and supply orders will be ordered less often, according to a
predetermined schedule and storage capacity.
The company layout, including the production room, assembly and packing line, has been
designed for efficiency and flexibility to accommodate the fluctuation in customer traffic
periods.
Upon arrival, ordering design we will be manufacturing according to the capacity of our machine
the customer’s order is taken, the order will automatically be printed to a requisition printer
located in the area.

7.2 Physical Plant

Our company will be located around Jimma in order to get easy access of the raw material such
as wood and to reach our customers.

7.3 Machinery and equipment

We will be use different machineries to manufacture our product such
as; wood working machine
power drill machine
circular saw, hand saw, jig saw
power jointer and thickness
planer
hammer, a puttering bench and
clamps measures

7.4 Suppliers
Since our products main raw material is wood our suppliers will be mostly farmers we will
establish relationships with qualified suppliers, who can provide reasonably priced products,
delivered according to the schedule.

7.5 Technology in use

Our company will use the latest technologies as much as possible to make our work fast and
effective and as we stated above we will use the smart soft wares such as CAD for our design
and others.
7.6 Production Capacity
KGHGH multi-purpose furniture production is planned to produce 12 pieces of furnitures per
month during the first year and expand its production to 15 per month for the second year and we
will break even in the first year. For the remaining three years we are planned to increase the
production into 22 per month and annual production capacity of 264 furnitures by increasing the
number of employees and supply.

8. MARKETING PLAN
KGHGH Multi-Purpose Furniture Production will be focusing on owners, constructor and
architectures in the regional area who are involved in high end residential resorts and commercial
development segment.
In 2006-2010 in Addis Ababa a total of 175000 condominium housing unit are constructed
which is worth billions of dollars. if we take average of 100000 birr for the furniture and
multiply it by the number of condominium housing built it will be around 17.5 billion Ethiopian
birrs for installation of the multipurpose furniture’s. We plan to acquire 5-6% of the market share
of this condominium housing in the first year. We do not think this is unbearable, especially in a
still growing market.

8.1 TARGET MARKETING

KGHGH Multi-Purpose Furniture Production will be focusing on contacting contractors and
architects that deals with the luxury home market making our self-known to these entities it will
generate some strong leads along with getting personal recommendation to home owners.
There are plans to upgrade office space to showrooms in a high visibility location this will give
us exposures to new home builders that are looking for our product.

8.2 INDUSTRY ANALYSIS

There are two main types of furniture supplier in the industry: -
1. Furnitures with one purpose only which is preferable by local customers
2. Multipurpose furniture which is very economical to purchase, easy to maintain and
doesn’t take that much of a place.
KGHGH Multi-Purpose Furniture Production can provide high volume work, superior project
management and excellent quality while maintaining allowable overhead.
8.3 COMPETATION AND BUYING PATTERN
There are many competitors in the local market. Although each of them delivers a quantity
product we feel they fail to deliver a full package. There are four factors that governs the cost of
all furniture projects: - Scope, Product design and Service. Most customers mistakenly think that
the size of the project and choice of brand name of products will make for the best result. but it is
the design and companies’ services that will have the greatest impact on the quality and value of
customer investment.

8.4 MARKETING SUMMERY

8.4.1 PRICING
Based on the product they(customers) are interested in the pries varies since we are offering a
whole different kinds of furniture product and they are multipurpose products. Instead of
purchasing product for one purpose only after understanding our view point, they will be so
interested in our product.
Since our product will be a quality product and will stay for long time customers will be satisfied
our moto is make the customer’s happy and their happiness is our goal and price. For our hard
work and way for a better work.
8.4.2 DISTRIBUTION
We are aiming for condominiums and other real estate homes so the product is transported from
our nearest shop to their houses we show them how to install it for the first time then it will be all
theirs.
For our local customer’s we are planning on going to their house deliver the product and show
them how it works as we have said earlier customer’s satisfaction is our price.
8.4.3 PROMOTION OF THE PRODUCT
We work in our customers if they are satisfied, they will recommend us to different contactors
and customers’. we will show our products in different exhibitions and programs like that where
many customers can look to our products.
Using medias and social medias we will capture the heart of the customers out there instead of us
talking our product will be talking for its self. By fliers, radios, television and others using this
we will reach out to everyone we can on our capacity.
9. Financial Plan
According to our conservative estimates, KGHGH Multi-Purpose Furniture Production is
expected to maintain a healthy financial position over the next five years. The following plan
outlines the financial development of our company. The business will be initially financed by a
200,000 ETB five-year term loan, and each of the group members share 50,000 ETB and a total
capital investment of 500,000 ETB.

The source to repay the loan will be the cash flow generated from operations. The company will
also finance growth through cash flow. After an initial period of five years, the company will be
able to make a further expansion. At that time, it is envisioned that a bank loan or equity funding
will be sought to finance the new development, in addition to retained earnings.

The following sections outline our financial plan:

 Required Cost of Start-Up

 Profit and Loss
 Monthly Cash Flow
 Balance Sheet
Important Assumptions

 Average cost of a furniture: 4,000 ETB

 The KGHGH Furniture Production Co. is located around Adama city and is
comprised of 1,000 square meter.

 The company will employ 5 employees.

9.1 Start-Up Costs

Total startup costs will be 500,000 birr, 60% of which will be contributed by the owners and the
remainder will be secured through a proposed bank loan.

Table 9.1 Start-Up Costs

Startup Expenses Amount (ETB)

Graphic Logo and Name Creation 1,000
Permits + Lease Deposit 1,200
 Contingency 10,000
Outdoor Sign 3,000
Building Improvements 50,000
Working Capital 170,000
Pre-Opening Expenses 14,800
Raw material Inventory 150,000
Equipment 100,000
Total Start-Up Expenses 500,000

9.2 Source and Use of Funds

Start-up costs are estimated to be 500,000 ETB. The majority of the costs are associated with the
machinery and equipment, and raw material inventory. Total costs for these items are Total
reported to be 250,000 ETB. The costs are associated with build out and renovation of the
company to provide updated plumbing and creating the best to make it remarkable working
space: 50,000 birr. Additional startup expenses are in the form of working capital and
contingency 180,000 birr. We will contribute 300,000 ETB and an additional 200,000 ETB is
requested in the form of a bank loan. The loan is expected to be a fully amortizing 5 years.

Table 9.2 Source and Use of Funds

Source of funds Amount (ETB)

Owners' investments 300,000
Bank loans 200,000
Other loans -
Total Source of Funds 500,000
Use of Funds
Buildings
Leasehold improvements 50,000
Capital equipment 100,000
Location/administration expenses 14,800
 Raw material inventory 150,000
Advertising/promotional expenses 4,000
Other expenses 1,200
Contingency fund 10,000
Working capital 170,000
Total Use of Funds 500,000

9.3 Break-even Analysis

For our break-even analysis, we assume running costs of approximately 56,874 ETB per month,
which include payroll, utilities, insurance, rent and other fixed costs. We need to sell about 125
pieces for minimum 20 furnitures per month to break even, based on our assumptions. Since our
normal production capacity is 3 pieces per week (12 pieces for 48,000 ETB per month), and the
average projected sales of 48,000 ETB per month, we believe that our company is likely to easily
reach and maintain profitability within the first year.

9.4 Projected Profit or Loss

We expect to be profitable in the first year of operations, with profits increasing over the next
four years, as we establish and increase our customer base. The following table and charts show
the projected profit and loss for five years.

Table 9.3 Profit and Loss

Profit and Loss Fiscal Year

2020 2021 2022 2023 2024
Sales 665,154 756,703 873,992 991,107 1,071,882

Direct Costs of Goods 340,680 385,918 441,631 490,899 520,188

Other Production Expenses 17,034 19,296 22,082 24,545 26,009

Cost of Goods Sold 357,714 405,214 463,713 515,444 546,198

Gross Margin 297,440 351,488 410,279 475,663 525,684

Gross Margin 45.40% 46.45% 46.94% 47.99% 49.04%

Expenses

Payroll 108,600 114,030 119,732 125,718 132,004

Sales and Marketing and Other 8,000 8,500 8,700 8,900 9,000

Depreciation 9,996 9,996 9,996 9,996 10,016

Office Supplies 1,200 1,250 1,300 1,350 1,400

Utilities 6,600 6,900 7,226 7,640 8,022

Insurance 9,000 9,450 9,922 10,418 10,939

Rent 24,000 24,720 25,461 26,225 27,012

Payroll Taxes and Benefits 31,494 33,069 34,722 36,458 38,281

Other 3,600 4,000 4,500 4,800 5,200

Total Operating Expenses 202,490 211,915 221,559 231,505 241,874

Profit Before Interest and Taxes 94,950 139,574 188,720 244,158 283,810

Interest Expense 6,810 6,120 5,400 4,680 3,960

Tax Incurred 26,442 40,036 54,996 71,843 83,955

Net Profit 61,698 93,418 128,324 167,634 195,895

Net Profit/Sales 9.42% 12.35% 14.68% 16.91% 18.28%

250,000 Yearly Profit

200,000
Profit (ETB)

150,000

100,000

50,000

FY 2020 FY 2021 FisFiYca2l02Y2ear FY 2023 FY 2024

9.5 Projected Balance sheet
We expect a healthy growth in net worth and a healthy financial position. We do not project any
real trouble meeting our debt obligations, as long as we achieve our specific objectives. The
following Table gives the balance sheet of three years.

KGHGH Multi-Purpose Furniture Production

Balance Sheet

For the Year Jan 1, 2020- Dec 31, 2022

2020 2021 2022

Assets
Current Assets
Cash 63,000 66,150 71,111
Accounts Receivable 25,000 26,250 28,219
Inventory 14,000 14,700 15,803
Other Current Assets 129,500 135,975 146,173
Total Current Assets 231,500 243,075 261,306
Long Term Assets
Long Term 144,500 151,725 163,104
Assets
Total Long Term 268,500 281,925 303,069
asset
Total Assets 500,000 525,000 564,375
Liabilities and
Capital
Current Liabilities
Accounts Payable 29,000 30,450 32,734
Other Current 28,500 29,925 32,169
Liability
 Subtotal Current 59,000 66,596 0
Liabilities
Long Term Liabilities 189,000 198,450 213,334
Total Liabilities 277,000 290,850 312,664
Paid In / Invested 223,000 234,150 251,711
Capital
Total Capital 223,000 234,150 251,711
Total Liabilities and 500,000 525,000 564,375
Capital
Net Worth 255,244 374,265 513,351

9.6 Risk Analysis

Our management is responsible for constantly evaluating risks and taking corrective actions to
provide adequate prevention, control and risk reserves. We have identified several risks that are
associated with our business project. There are many possible classifications of risks, but for the
purposes of this plan, we have chosen to group them as follows:

A) External Risks (These risks come from outside the company and are more difficult to
prevent and control.)

 Competition and buying patterns changes

 Technology
 Location
 Inflation
 Currency
B) Internal Risks (These risks come from inside the company and can be better prevented or
controlled.)

 Personnel
 Management
 Business Continuity
 Cash Flow deficiency