1.

Executive Summary

4AM internet café is an internet café located in Dire Dawa, Marmarsa area, offers an
ideal spot for the public in social gathering and leisure. It provides customers
free access to the Internet for the first one hour usage as well as an area for to meet
together in a casual environment under an economical manner.
The business intends to obtain finance from personal contribution of the owners in the
amount of 60,000br each and loan from bank 240,000br, for which the application
will be for commencing work on rental of building with maintenance, equipment
purchases, and as operating cash flow.
4AM internet café will be incorporated as a limited liability company. The initial
owners will be the shareholders and their personal liabilities will be subject to a
ceiling at the amount of their respective investments.
The finance acquired through this business proposal will allow 4AM internet café to
successfully open and operate as an internet café. A comfortable and innovative
environment is provided to the customers with a casual atmosphere

2 . Description of the business

2.1 Mission

4AM internet café provides the public free access to the Internet for the first hour usage, high-
quality food and beverages in a comfortable environment. People from different backgrounds
will come to enjoy the exclusive, stylish, and innovative environment that 4AM internet café offers.
2.2 Vision

To be the leading and the best internet café service provider.

2.3 Objectives

4AM internet café’s objectives include:

 The creation of an exclusive, stylish, innovative environment that will
 Distinguish 4AM internet café from other coffee shops.
 Maintaining profitability of the business
 the creation of a comfortable and casual environment that will bring people
 With different interests and backgrounds together for socialization.
 High-quality coffee and bakeries at a reasonable price.
 Free access to online services for the first one hour usage.

2.4 Values

- We are committed to our customer and staffs.

- We are punctual and honest

- Team work is our café principle

2.5 Background of Entrepreneur(s)
The company founded by five entrepreneur's who are studied in Dire Dawa University undergraduate
logistics and supply chain management student and also have information science technology knowledge from grade 9 up to
University level. Especially Abdirisaq have diploma in IT.
 3. Company Summary

4AM internet café, soon to be opened at Marmarsa area in Dire Dawa, Ethiopia, will provide the public free
access to the Internet for the first hour usage and a special and innovative environment for enjoying top
quality coffee and bakeries.

Individuals of all ages and backgrounds will find 4AM internet café appealing. The staffs of 4AM internet
café provide not only top quality service but also helpful instructions to customers in computer usage.
This educational aspect will attract elderly customers and youngsters who do not own computers at home.
3.1 Company Ownership

4AM internet café will be privately owned by 5 members which are Adnan yasin, Adirisak
mohamed,Abshir ahmed, Awale abdirahman, Mohamud dayib

3.2 Start-up Summary

4AM internet café’s start-up costs will cover rental of building with maintenance, furniture, computers,
equipments and running capital to cover expenses in the

first year.

The equipment provided to 4AM internet café’s customers with high-speed connection to the Internet
forms a 10% of the start-up costs. These costs will include ten computers, installation of internet line, one
laser printers and scanner.

Besides, the start-up costs will comprise the coffee machines such as one espresso machine, one automatic
coffee grinder, and other additional equipment. The shop will also require funds for modification of rented
building. Breakdown of the start-up costs is illustrated as follows:
Start-up Costs Birr

Legal Fee 2000

Stationeries 2000
Fixtures/Furniture’s 80,000

Total Start-up Costs 517,000

Start-up Assets

Running Cash 83,000

Total Assets 83,000

Total Requirements 600,000

Tableware 3000

Rent (2 months) 80,000

Internet Lines installation 10,000

Maintenance 20,000

Computer Systems (x11), Software, Printer, Scanner 70,000

Equipments 250,000
Fixtures/Furniture’s 80,000

Total Start-up Costs 517,000

Start-up Assets

Running Cash 83,000

Total Assets 83,000

Total Requirements 600,000

 4. Services

4AM internet café will provide free access to the Internet for the first hour usage and computer
services such as printing and scanning with reasonable price, It will also provide customers with a unique and innovative
environment for enjoying top quality coffee and bakeries.

4.1 product &Service Description

Top quality food and beverages, and a comfortable environment will provide 4AM internet café’s customers
with a second home, a place to enjoy the benefits of computing in a comfortable environment.

Also, 4AM internet café will provide its customers free access to the Internet for the first hour usage and common
computer software and hardware. Some of the Internet and computing services available to 4AM internet café’s customers are
listed below:

 Internet browsers.

 Laser color printing, copying and scanning.

 Popular software applications.

4.3 Service Business Analysis

The retail coffee industry in Dire Dawa experienced rapid growth from the 2000’s
and is now moving into the mature stage of its life cycle. Many factors contribute to
the large demand for high-quality coffee in Dire Dawa. The climate in Dire Dawa is extremely favorable
to coffee consumption. Current trends in this high-spending residential area reflect the popularity of fresh
and strong coffee. Dire Dawa is a haven for coffee lovers.

The popularity of the Internet is growing exponentially. Those who are familiar with the Internet are well
aware of how fun and addictive going online can be. Those who have not yet experienced with the
Internet need a convenient, relaxed atmosphere where they can feel comfortable learning about and
utilizing the current technologies. 4AM internet café seeks to provide its customers with affordable Internet
access in an innovative and supportive environment.

Due to intense competition, café owners must look for ways to differentiate their
place of business from others in order to achieve and maintain a competitive
advantage. The founders of 4AM internet café realizes the need for differentiation and strongly believes
that combining a café with complete Internet service is the key to
success. The fact that no internet cafés are established in Dire Dawa, presents
4AM internet café with a great opportunities to enter into a profitable niche in the market.

4.3.2 Distributing a Service

The dual product/service nature of 4AM internet café’s business faces competition on two levels. 4AM
internet café competes not only with coffee shops, but also with Internet service providers. The good news is
that 4AM internet café does not currently face any direct competition from other internet cafés in the Dire
Dawa market.

Heavy competition between coffee shops in Dire Dawa creates an industry

where all firms face the same costs. There is a positive relationship between

price and quality of coffee. Some coffees retail at birr 7/cup while other,
more exotic beans may sell for as high as birr 10/cup. Wholesalers sell
beans to retailers at a discount rate. In most industries, price decreases as volume

increases.
 5. Market Analysis

4AM internet café is facing the opportunity of being the pioneer in the Dire Dawa internet café market. The
consistent popularity of coffee, combined with the growing interest in the Internet, has been proven to be a
winning concept in other markets and will produce the same results in Dire Dawa.

5.1 Market Segmentation

4AM internet café’s customers can be divided into two groups.

The first group is familiar with the Internet and desires a progressive and inviting atmosphere where they can
get out of their offices or bedrooms and enjoy a great cup of coffee.

The second group is not familiar with the Internet, yet, and is just waiting for the right opportunity

to enter the online community. 4AM internet café’s target market falls anywhere between the ages of 17
and 60. This extremely wide range of ages is due to the fact that both coffee and the Internet appeal to a
variety of people. In addition to these two
broad categories, 4AM internet café’s target market can be divided into more specific market
segments. The majority of these individuals are students and business
people. See the Market Analysis table below for more specifics.

Market Analysis

2015 2016 2017 2018 2019

Potential Customers Growth

University Students 5% 3,000 3,150 3,308 3,474 3,648

Office Workers 4% 5,000 5,200 5,408 5,625 5,850

Seniors 2% 1,000 1,020 1,041 1,062 1,084

Teenagers 2% 2,000 2,040 2,081 2,123 2,166

Others 1% 4,000 4,040 4,081 4,122 4,164

Total 2.8% 15,000 15,450 15,919 16,406 16,912

5.2Target Market Segment Strategy

4AM internet café intends to cater to people who want a guided tour on their

first spin around the Internet and to experienced users eager to indulge their passion for computers in a
social setting. Furthermore, 4AM internet café will be a magnet for local and traveling professionals who
desire to work or check their email messages in a friendly atmosphere. These professionals will either use
4AM internet café’s PCs, or plug their notebooks into Internet connections.

5.3 market trends

market survey was conducted recently with key questions and asked to fifty potential customers in dire dawa
some key funding include :-

42 people said we enjoyed free access to the internet

5.4 Market Needs

Factors such as current trends, addiction, and historical market data ensure that
the high demand for coffee and Internet access will remain constant over the
next five years. Being the first internet café in Dire Dawa, 4AM internet café will enjoy the pioneer
advantages of name recognition and customer loyalty. In the next five years, competitors will enter the
market. 4AM internet café has set a goal to maintain greater than a 50 percent market share.

5. Marketing plan

4AM internet café will position itself as a stylish coffee house and Internet service provider. It will serve high-
quality coffee and specialty beverages at competitive prices. Due to the number of cafés in Dire Dawa, it is
important that 4AM internet café sets fair prices for its products. 4AM internet café will use advertising as
its main source of promotion.

5.1 Promotion Strategy

4AM internet café will implement a pull strategy in order to build consumer awareness and demand. Initially,
4AM internet café has budgeted USD20,000 for promotional efforts which will include advertising with
TVs/Radios/Magazines and in-house promotions such as offering customers free drinks.
4AM internet café realizes that in the future, when competition enters the market, additional revenues
must be allocated for promotion in order to maintain market share.

5.2 Pricing Strategy

Determining a fair market for internet café is more difficult because there is no direct competition from
another internet café in Dire Dawa. Therefore, 4AM internet café has to base its prices for coffee and
specialty drinks on the “retail profit analysis” provided by our supplier.

5.3 Sales Strategy

As a retail establishment ,4AM internet café employs people to handle sales transactions. Computer
knowledge is a prerequisite for 4AM internet café employees. If an employee does not possess basic
computer skills when they are hired, they are trained by our full-time technician. Our full-time technician is
also available for customers in need of assistance. 4AM internet café’s commitment to friendly, helpful
service is one of the key factors that distinguish itself from other internet cafés.
5.4 Sales Forecast

Cost of Sales: The cost of goods sold for coffee-related and bakery products was determined by the "retail
profit analysis" we obtained from some business cafes. The cost of items is 30% of the selling price. The
cost of Internet access is USD3000 per month, paid to ETC for service fees.

2013 2014 2015

Unit Sales

Coffee 60,000 66,000 72,600

Specialty Drinks 50,000 55,000 60,500

Cakes 30,000 33,000 36,300

Fast foods 20,000 22,000 24,200

Cheeps 10,000 11,000 12,100

Total Unit Sales 170,000 187,000 205,700

 Note: 10% change annual on unit sale

 Unit Prices

Coffee 8.00 9.00 10.00

Specialty Drinks 8.00 9.00 10.00

Cakes 15.00 18.00 20.00

Fast foods 35.00 40.00 45.00

Cheeps 20.00 25.00 30.00

Sales

Coffee 480,000 594,000 726,000

Specialty Drinks 400,000 495,000 605,000

Cakes 900,000 594,000 726,000

Fast food 700,000 880,000 1,089,000

Cheeps 200,000 275,000 363,000

Printing and Scanning service 100,000 110,000 121,000

Internet service 300,000 330,000 363,000

Total Sales 3,080,000 3,278,000 3,993,000

Direct Cost of Sales

Cost of sale based on average (30%) 924,000 983,400 1,197,900

Total Direct Cost of Sales 924,000 983,400 1,197,900

4.3 Company Location

4AM Internet located in Dire dawa city, specifically marmarsa 200 meter far from Dire dawa University.

A site has been chosen in Marmarsa, Dire Dawa for the following
reasons:

 Nearness to the close-by entertainment centers

 Proximity to stylish, upscale restaurants in the same area.
 High visibility.
 there are a mass of student in the campus and they want to access internet services.

3.2 Competition and Buying Patterns

The main competitors in the retail coffee segment within the same location are different coffee shops.
These businesses target a similar segment to 4AM Internet café’s (i.e. educated, upwardly-mobile
students and business people). However, 4AM internet café will offer substantial computing services
to its customers which these competitors are not providing at the moment.

4AM internet café will be the first internet café in Dire Dawa. It will differentiate itself from other ordinary
coffee shops in the same area by providing its customers with free Internet service for the first hour usage
and computing services with reasonable price.
 3.3 Technology

4AM internet café will invest in high-speed computers to provide its customers with a fast and efficient
connection to the Internet. The computers will be reliable and fun to work with. 4AM internet café will
continue to upgrade and modify the systems to stay with current technologies.
6. Management and operation
4AM internet café is operated by Abdirisak Mohamed. The company, being small in nature, requires a
simple organizational structure. Implementation of this organizational form calls for the owners to make all
of the major management decisions in addition to monitoring all other business activities.

Personnel Plan
The staff will consist of 14 permanent employees working eight hours per day at different scales of salaries .
This simple structure provides a great deal of flexibility and
allows communication to disperse quickly and directly. Because of these characteristics,
there are few coordination problems seen at 4AM internet café that are common within larger
organizational chains. This strategy will enable 4AM internet café to react quickly to changes in the market.

2013 2014 2015

Total People Monthly Salary 15 15 15

Owner and Manager 3,500 42,000 46,200 50,820

Accountant 1,500 18,000 19,800 21,780

Barista 2,000 24,000 26,420 29,040

Kitchen worker 1 1,500 18,000 19,800 21,780

Kitchen worker 2 1,000 12,000 13,200 14,520

Waiter/Waitress 1 700 8,400 9,240 10,164

Waiter/Waitress 2 700 8,400 9,240 10,164

Waiter/Waitress 3 700 8,400 9,240 10,164

Waiter/Waitress 4 700 8,400 9,240 10,164

Waiter/Waitress 5 700 8,400 9,240 10,164

Waiter/Waitress 6 700 8,400 9,240 10,164

Waiter/Waitress 7 700 8,400 9,240 10,164

Waiter/Waitress 8 700 8,400 9,240 10,164

Cashier 1,500 18,000 19,800 21,780

Technician 2,500 30,000 33,000 36,300

Total Payroll 229,200 232,320 255,552

 Note: 10% appraisal per annum.

10. Application and Effect of Loan or Investment
 Our business total required investment is 60,000ETB.

 . This investment may be evaluated as large amount but our business center have many new features which are describe us as a unique

 The loan which we debt from bank business office Br. 240,000 long term loan with 6% simple interest

rate paid fully with in 6 years.

 - Our capital structure is 60% equity and 40% debt.

7. Financial Plan

The following sections lay out the details of our financial plan for the next three years.

7.1 Start-up Funding

The supplemental financing is required to begin work on site preparation and

modifications, equipment purchases, and to cover expenses in the first year of
operations.

Owners’ investments has already been secured as follows:

1. 72,000 birr of personal savings from owner Abdirisak mohamed

2. 72,000 birr of personal savings from owner Adnan yasin.
3. 72,000 birr of personal savings from owner Abshir ahmed
4. 72,000 birr of personal savings from owner Awale abdirahman
5. 72,000 birr of personal savings from owner Mohamud dayib

Birr

Start-up Expenses to Fund 517,000

Start-up Assets to Fund 83,000

Total Funding Required 600,000

Assets

Cash balance 83,000

Total Assets 83,000

Liabilities

Long Term Bank Loans 240,000

Total Liabilities 240,000

Capital

Paid in capital 360,000

Total Planned Investment 360,000

Note: - Br. 240,000 long term loan with 6% simple interest rate paid fully with in 6 years.
- Our capital structure is 60% equity and 40% debt.
 7.2 Projected Profit and Loss

Payroll Expense: Total payroll expense for Year one, two and three are 229,200, 232,300 and 255,552
respectively.

Rent Expense: 4AM internet café is leasing a 150 square meter facility at 40,000 birr/month for a total of 36
months. At the end of the third year, the lease is open for negotiations and 4AM internet café may or
may not re-sign the lease depending on the demands of the lessor.

Utilities Expense: The only utilities expenses that 4AM internet café must pay are entertainment,
electricity and the phone bill generated by twelve phone lines; ten will be dedicated to broadband and two
for business purposes.

Marketing Expense: 4AM internet café will allocate birr 20,000 for promotional expenses over the first year.
This amount will be used for advertising in TVs/Radios/Magazines in order to build consumer awareness.
Projected Profit and Loss data is presented in the table below:

2013 2014 2015

Birr Birr Birr

Sales 3,080,000 3,278,000 3,993,000

Direct Cost of Sales 924,000 983,400 1,197,900

Gross Margin 2,156,000 2,294,600 2,795,100

Expenses

Payroll 229,200 232,320 255,552

Marketing/Promotion 20,000 20,000 20,000

Rent 480,000 480,000 480,000

Utilities 84,000 84,000 84,000

Depreciation (20%) 80,000 80,000 80,000

Start-up Cost 37,000 0 0

Total Operating Expenses 930,200 896,320 919,552

Profit Before Interest and Tax 1,225,800 1,398,280 1,875,548

Interest Expense 14,400 14,400 14,400

Taxes Incurred (30%) 367,740 419,484 562,664.60

Net Profit 843,660 964,396 1,298,483.60

7.3 Projected Cash Flow

2014 2015 2016

Birr Birr Birr

Cash flow from operating activities:

Operating Income (EBIT) 1,225,800 1,398,280 1,875,548

Depreciation expense 80,000 80,000 80,000

Net Cash flow from Operating Activities 1,305,800 1,478,280 1,955,548

Cash flow from investing activities:

Purchase of Fixed Asset (400,000) 0 0

Long Term Bank Loan 240,000 0 0

Investment from Owners’ 360,000 0 0

Net Cash flow from investing Activities 200,000 0 0

Cash flow from financing activities:

Payment of loan 54,400 54,400 54,400

Payment of tax 367,740 419,484 562,664.40

Net Cash flow from Operating Activities 422,140 473,884 617,064.40

Net Change in Cash 1,083,660 1,004,396 1,338,483.60

Beginning Cash Balance 0 1,083,660 2,088,056

Ending Cash Balance 1,083,660 2,088,056 3,426,539.60

7.4 Projected Balance Sheet

2014 2015 2016

Birr Birr Birr

Assets

Fixed Assets 400,000 400,000 400,000

Accumulated Depreciation 80,000 160,000 240,000

Net Fixed Asset 320,000 240,000 160,000

Cash 1,083,660 2,088,056 3,426,539.60

Total Assets 1,403,660 2.328,056 3,586,539.60

Liabilities

Long-term Liabilities 200,000 160,000 120,000

Total Liabilities 200,000 160,000 120,000

 Shareholders’ Equity

Paid-in Capital 360,000 360,000 360,000

Retained Earnings 843,660 1,808,056 3,106,539.60

Total Shareholders’ Equity 1,203,660 2,168,056 3,466,539.60

Total Liabilities and Shareholders’ Equity 1,403,660 2,328,056 3,586,539.60

2. Assessment risks

The risks involved with 4AM internet café’s business

 Insufficient demand for the services provided by 4AM internet café in Dire Dawa.

 The popularity of the Internet stops to grow.

 The opening of new cafés in the same area which offers the exact services
that 4AM internet café provides.

 Internet network disruption.

.