AHADU VENDING

MACHINE
SERVICE

Address: Addis Ababa, Ethiopia

Phone: +251924540435
Email: Brktsy36@gmail.com
Chief executive: Biruk Tesfa
Name Biruk Tesfa
 ID No. 022/20

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Contents
EXECUTIVE SUMMARY........................................................................................................................3
1. ENVIRONMENTAL AND INDUSTRY ANALYSIS....................................................................4
1.1 Analysis of competitors.................................................................................................................4
1.2 Market segmentation......................................................................................................................5
2. DESCRIPTION OF VENTURE........................................................................................................6
2.1 DESCRIPTION OF THE BUSINESS GOALS..............................................................................6
2.2 Sales projection...............................................................................................................................6
2.3 FORM AND LEGAL STATUS OF THE BUSINESS...................................................................8
2.4 Mission.............................................................................................................................................9
2.5 Companies’ characteristics............................................................................................................9
3. MANAGEMENT SUMMARY.......................................................................................................10
3.2 Identify the availability of skilled and experienced and business managers..................10
3.3 Identify the availability of consultants and service providers................................................11
4. DESCRIPTION OF THE BUSINESS IDEA..................................................................................12
4.1 About The Machine................................................................................................................12
4.2 Advantages of a Vending Machine Business............................................................................12
4.3 Type and kind of product(s) or service(s) to be marketed.......................................................13
4.4 Business competitiveness.............................................................................................................14
5. PRODUCTION PLAN....................................................................................................................15
5.1 Material input..........................................................................................................................15
5.2 Quality of raw materials..............................................................................................................15
5.2 Machinery and Equipment....................................................................................................16
5.3 Manpower requirement...............................................................................................................17
5.4 Buildings........................................................................................................................................17
6. DESCRIPTION OF THE MARKET...............................................................................................18
6.1 Business Description..............................................................................................................18
6.2 Market potential......................................................................................................................18
6.3 SWOT ANALYSIS..................................................................................................................19
7. FINANCIAL PLAN........................................................................................................................20
7.1 Initial investment cost............................................................................................................20
7.2 Initial stock to fill a single vending machine.......................................................................20

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 7.3 Furniture & Office Equipment....................................................................................................21
7.3 Ongoing cost............................................................................................................................21
7.4 Taxes...............................................................................................................................................22
7.5 Labor or worker price per month.........................................................................................22
7.6 Other costs...............................................................................................................................22
7.7 Total Cost.................................................................................................................................22
7.8 Means of financing the project....................................................................................................23
7.8.1 Debt financing.......................................................................................................................23
7.8.2 First-year payment................................................................................................................24
7.8 Break-Even Point....................................................................................................................24
REFERENCE...........................................................................................................................................26

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 EXECUTIVE SUMMARY

This business project is concerned with the establishment of a vending

machine business with 4 laborers, located in Addis Ababa in different
locations, and this business starting with 5 machines with total capital of
1,634,000 ETB. To get this money I plan 20% which is 326,800 birr from
equity (I will invest) and 80% which is 1,307,200 birr from bank debt. The
bank debt will be payable within 5 years.

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 1. ENVIRONMENTAL AND INDUSTRY
ANALYSIS

1.1 Analysis of competitors

I will be the first to market a fully automated line of food and beverage vending
business inside the country; therefore, there is no competitor on the market as this
business plan was prepared, but I made my products more preferable and affordable
price for each product at the available place.
They have also a different supplier for each vending machine product based on its type.
Vending machines can be a lucrative business opportunity. However, owning and
running a vending machine business involves a great deal of time and work. Like any
other type of business, you have to keep your customers coming back for more.
One basic consideration when looking for ways to serve the customers is that vending
machines should be placed in areas that make the products easily accessible to the
people who need them immediately.
Provide a customer satisfaction survey card at vending locations so your customers can
leave feedback and suggestions. Customer feedback allows you to provide better
customer service by finding out what people want. Satisfied customers translate into
higher profits.
Also, the best way to attract customers is to keep the machines well maintained and
cleaned. People will not come back to a machine that is frequently out of order or
machines that take their money without giving them an item in return. When the
machine is not working well, make it a priority to repair the problem quickly to prevent
losing business and money.
The concentration competitiveness of food and beverage suppliers & product buyers
are also an important factor for the competitiveness of the business.

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1.2 Market segmentation

Our vending machine market is segmented on the base of product type which includes
beverages vending machines and food vending machines. Among both of these
segments, food vending machines are expected to show healthy growth during the
forecast period. Beverage vending machine is further sub-segmented as hot beverage
vending machine, cold beverage vending machine and soda/beer/liquor/wine
vending machines. Moreover, food vending machine is further sub-segmented as candy
vending machine, snack vending machine, fresh food vending machines, and others.
Further segmented based on end-use which includes the airport, corporate office,
school/colleges, hotels, gymnasiums, and hospitals. Due to those different segments,
these businesses show good futurity and profitability. This business needs a
technological advance and it updates itself day-to-day so the life cycle of the business is
continuing at any time.

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 2. DESCRIPTION OF VENTURE

2.1 DESCRIPTION OF THE BUSINESS GOALS

The main objective of the company is that

 To install the Vending Machine that will dispense different products.

 To provide a vending machine that requires minimum space utilization while
having a large storage capacity.
 To be able to make an income by providing good services for the customers.

2.2 Sales projection

Vending machines let the customers buy items without the need of standing in line for a
long time. The customers simply deposit their money in the machine and then select the
item of their choice. Vending machines have myriad benefits, which are best taken by
the vendors.
 The immediate flow of cash Your cash flow can start as soon as your
equipment is placed. Most new businesses fail, in large part, from lack
of cash flow in the beginning. One of the many benefits of vending
machines is your cash flow can start on day 1.
 Working 24/7It’s like having a sales team working 24 hours a day -
with no coffee breaks, no sick leaves, and no unpredictable
performance because of emphatic factors. Reduction of overhead costs
by not hiring staff only increases the profit margin for you, making it a
success.

The selling products are different as they putting place it means for example when we
put the vending machine in front of gymnasium we should sell power drinks, high-

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 calorie foods, and beverages. The selling price of our products can be summarized as
follows in the table;-

Products Unit Price(birr)

Different snacks Piec 5 birr- 30 birr
e
Soft Per cup/bottle 10 birr – 20 birr
drinks
hot beverage Per cup 5 birr- 10 birr
Water Per pics 5 birr – 10 birr
Sod Per tin 20 birr
a
Chocolate Per pics 10- 50 birr
s
Other - Based on each type
s

Table 2-1 Average price of products

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Based on my business scope the sales projection for the next 3 years became

Table 2-2 sales projection

2.3 FORM AND LEGAL STATUS OF THE BUSINESS

This business is a service provider that gives food and drinks to customers. My
vending machines are either food or drink or both! Snack and cold/hot drink is the
best thing we ever get out of these machines. No big queues, no time-consuming
distance, no issue of unavailability at late at night. Just get to any snack vending

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 machine or drink vending machine and get your favorite food/snack straight into
your hands!

The locations of my business are mostly around where a mass of peoples are found
such as:-

Stadium
Bus stations
Universities and colleges
Around companies
Hospitals
Courts
Gymnasium

2.4 Mission

My company’s mission is to be the leader in introducing innovative, quality vending

machines to the Ethiopian market. Through close customer contact and excellent
relationships, I will meet the needs of my customers wherever I can.

2.5 Companies’ characteristics

24/7 Customer Service (Yes, we are here for you 365/6 days a year and
always on-call!)
Provide healthy materials
Meet customer satisfaction
Convenient to the customer and easy to use

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 3. MANAGEMENT SUMMARY

3.1 Identify any potential joint venture partners,

alliances, or other important share take holders
At the start of my business, I do not want to include joint venture partners and
important share take holders. This is because:

 They will influence my decision-making process

 The partners, alliances, or other important share take holders have their
policies so as a new business it may be difficult to work with them.

But in the future with the advancement of my business, I may open my doers for other
business ventures and share take holders.

3.2 Identify the availability of skilled and experienced

and business managers

It is quite important to have a more experienced and skilled manager for the success of
our business. This is because a manager is the highest decision making body in the
enterprises. Since our business is new it may be difficult to get a skilled and experienced
manager for this vending machine business but managers who have skills in other
businesses can easily manage this business enterprise. In our country context, several
individuals are graduated from universities in business management. Therefore the
availability of business managers is not a difficult thing.

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3.3 Identify the availability of consultants and service
providers

At the starting of the business and during the business process I need several
consultants in terms of:
 Business laws and governmental legislations
 What factors will lead to the failure of my business
 Selecting business sites etc
Therefore I need legal, accounting, and industrial experts who can consult my business
enterprise in our country who have their own office.

Figure 3-1 Company’s management organization

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 4. DESCRIPTION OF THE BUSINESS IDEA

4.1 About The Machine

A vending machine is an automated machine that provides items such as snacks,

beverages, cigarettes, and lottery tickets to consumers after cash, a credit card, or a
specially designed card is inserted into the machine. The vending industry is an
attractive option for new business owners for a variety of reasons. The low startup-
costs, low involvement, low risk, flexibility, and growth potential are why this business
idea is growing in popularity. With the right placement, the right location, and the right
products, a vending machine can earn passive income.
When we start vending machine we need to consider
 Choose the best place where you can put your machine
 Choose the best product
 Deploy vending machines in different places
 Always check the machine if it is working

4.2 Advantages of a Vending Machine Business

Advantages of a vending machine business include:

 Scalability: You can start with a few machines and expand your business as time
and finances permit.
 Low startup costs: Aside from purchasing the machines (which can be financed),
your capital costs are relatively low.
 Simplicity: Once the machines are in place, your only duties are to maintain and
restock the machines as needed and collect the money.
 All cash-based transactions: There are no accounts receivable as in most
businesses. You're either collecting cash from the machines or the credit card
companies.

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  Flexibility: The vending machine business is ideal for families. You can easily
train your spouse and children to assist with purchasing, stocking, bank
deposits, accounting, and more.

4.3 Type and kind of product(s) or service(s) to be

marketed
There are many types of vending machines available from several manufacturers and
suppliers. They come in different sizes, shapes, colors, and prices. Some types of
vending machines need electricity in operating, whereas others use mechanical motion
in vending. A business owner or a freelance entrepreneur may establish several
vending machines in different settings and for different target customers.

Snacks Vending Machine: - The usual vending machine is one offering candy, soft
drinks, and other snack food. These machines are available in most locations including
office buildings, schools, train and bus stations, or malls and shopping facilities.

Coffee Vending Machine: - These vending machines offer a coffee menu that allows
customers to pick specific types of coffees, chocolate drinks, or teas for a given price and
provides the cup, coffee, and milk or cream if selected. These vending machines are
located in offices, universities and college environments, hospitals, and food courts.

Toiletries Vending Machine: - Vending machines offering toiletry and medical

supplies are usually situated in public comfort rooms at airports, bars, restaurants, and
clubs. These vending machines provide sanitary supplies such as facial towels,
tampons, dental floss, small toothbrushes, toothpaste, and condoms.

Change Vending Machine: - A vending machine offering change in exchange for larger
notes or credit cards is also a useful vending machine in certain environments, like in
parking garages or laundry shops.

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Office Supplies Vending Machine; - This type of vending machine is useful in
academic settings and libraries, airports, and career centers. This vending machine
provides pencils, sharpeners, pens, paper, UBS flash drives, and mailing products like
envelopes and stamps.

Customized Vending Machine;- This machine provides several unusual products such
as CDs, DVDs, tickets, console and computer games, stationery equipment, disposable
cameras, and stamps. They are great for supermarkets, malls, and retail stores.

4.4 Business competitiveness

I will be the first to market a fully automated line of food and beverage vending
business inside the country; therefore, there is no competitor on the market, but I will
make my products more preferable and affordable price for each product at the
available place. They have also a different supplier for each vending machine product
based on its type. Vending machines can be a lucrative business opportunity. However,
owning and running a vending machine business involves a great deal of time and
work.

Like any other type of business, you have to keep your customers coming back for
more. One basic consideration when looking for ways to serve the customers is that
vending machines should be placed in areas that make the products easily accessible to
the people who need them immediately.

Another is when stocking the machines; you need to offer a different product mix to
capture a particular segment of customers. Provide a customer satisfaction survey card
at vending locations so your customers can leave feedback and suggestions. Customer
feedback allows you to provide better customer service by finding out what people
want. Satisfied customers translate into higher profits.

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 5. PRODUCTION PLAN
5.1 Material input
This is primarily concerned with defining the material required and specifying their
properties in some detail. The basic raw materials for the vending machine business are:
 The products to be sold such as coffee, snacks, tea, plastic, and tin soft drinks
 Use and through cups
This raw material can be collected from companies and enterprises which produces the
above products these companies include
 COCA-COLA
 MOHA soft drink manufacturing factory
 several snack and coffee producers
The proportion of intake from the sources depends on the machine raw material intake
capacity and the market.

5.2 Quality of raw materials

The raw materials obtained from the above companies and enterprises are not directly
supplied to the customers they have to be inspected and also no raw materials are to
sold if their expired date is specified clearly. Again, if the raw materials are out of date
due to the absence of the market and due to machine damage, they will be removed.

 Range of specification
The quality of raw materials to be sold should meet the specifications supposed by
international standards and the food quality agency. These specifications are:-
 The products to be sold should have acceptable sugar content
 The products should have less fat
 The products should have an acceptable expired date

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  Cost of raw materials
Mostly raw materials are obtained directly from the companies and enterprises and
their cost is mostly decided by those manufacturing industries. The cost of this raw
material includes
 The cost of the products such as coffee, soft drinks, snacks, sugar, and so on.
 Transportation cost for each raw materials
 Other related costs
The total cost which will spend on this business will be done on the financial analysis.

5.2 Machinery and Equipment

Machinery and equipment’s requirement for my business process depends on the

following criteria:
 Business capacity
 Production technique
 Easiness of operation
 Lower power consumption
 Easiness of transportation
Initially, I will try to have the following machine and equipment with the following
quantities these machines may not only buy but they may also rent.

Machine Quantity
name
Vending machine 5
Computers 1
Car for transportation of 1
products
Paper cups 1000
Table 5-1 raw material

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5.3 Manpower requirement

A total of 4manpower can be handled within the business. Technical staff with
certificate and diploma is sufficient to look after specific tasks at the business except for
qualified senior mechanic (operator), and managerial staff.

Manpowe Number Profession

r
Manage 1 In management
r
The shop keeper and 1 Secretary
secretary
Machine operator 1 Mechanic
Driver 1 Driving
Total 4
Table 5-2 labor list

5.4 Buildings

Since the machines are installed around more secured areas no need fora special
building is acquired but since they have to be protected from environmental impact
small buildings are made for the machines only. But since managerial, controlling and
maintenance activities require offices we will rent buildings.

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 6. DESCRIPTION OF THE MARKET
6.1 Business Description

The size and scope of the industry: -The size of our business is basically inside the
country along with each city and zones by distributing different types of vending
machines based on the society feeling and interest. It has a large scope due to its
different types of product distribution line and installation of different types of product
dispenses vending machine around the different city in different places. And also, this
business is new for our country, therefore, we can increase our scope by looking at
customer feedback. My vending machine market is segmented on the base of product
type which includes beverages vending machines and food vending machines. Among
both of these segments, food vending machines are expected to show healthy growth
during the forecast period. Beverage vending machine is further sub-segmented as hot
beverage vending machine, cold beverage vending machine and soda, beer, liquor,
wine vending machines. Moreover, food vending machine is further sub-segmented as
candy vending machine, snack vending machine, fresh food vending machines, and
others. Further segmented based on end-use which includes the airport, corporate
office, school/colleges, hotels, gymnasiums, and hospitals. Due to those different
segments, these businesses show good futurity and profitability. This business needs a
technological advance and it updates itself day-to-day so the life cycle of the business is
continuing at any time.

6.2 Market potential

The market potential of this business is high because the product is different segments
of the market and the usage and demand of the product are high. And also, the market

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has a variety of choices for the buyer to satisfy their interest. In this business, I will add
some branded products from the external supplier by importing those products at an
affordable price for the customer.

6.3 SWOT ANALYSIS

Strength Weaknesses
 Quick and easy service  The number of sales varies
 24/7 servce each months
 Situated at strategic points  Maintenance fee
 Diversity of products  Usage of high voltage of
 Low cost electricity
 Small space

Opportunities Treats
 New distribution channels  Nearby convenience store
 Change in work culture  Vadalism
 People have less time  Electricity dependence
 Technological advance

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 7. FINANCIAL PLAN
7.1 Initial investment cost

Fixed costs Quantity Total price (Birr)

Car 1 250,000
Cost of machine 5 (vending Machine) 1,000,000
Installation and 5 150,000
transporting
Total cost - 1,450,000
Table 7-1 fixed costs

7.2 Initial stock to fill a single vending machine

Item Quality Unit Cost Total cost (Birr)

Snack 100 5 500
Chocolate 200 10 2,000
Soft drink 200 10 2,000
Soda 100 10 1,000
Water 100 5 500
Tea 500 cup 5 2,500
Coffee 500 cup 5 2,500
Total 11,000
Table 7-2 Initial stock to fill a single vending machine

The above cost of each item is the price of earnings from the supplier. And the
volume of hot tea and coffee is 100 ml per cup. Therefore the total amount of cost
for 5 vending machines became:
= 5*11,000
= 55,000 ETB

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 7.3 Furniture & Office Equipment
Furniture & other office equipment required for the enterprise are:
 Shelf
 Table
 Computer
 Writing materials etc

Item Cost (Birr)

Shelf 2000
Table & seat 5000
Computer 3000
Writing Materials 3000
Other necessary equipment 5000
Total 18,000
Table 7-3 Furniture cost

7.3 Ongoing cost

This cost includes different costs that spend on monthly or daily costs those are;-

Ongoing Expense Price per month (Birr)

Area of putting a vending 3000
machine
Office and storing room 3500
Total 6500
Table 7-4 Ongoing costs
The monthly rental or commissions are paid to the business owners where I place my
machine based on the agreement. And this payment is only for a single machine
therefore it multiplies it by 5 vending machines.
Area of putting vending machine= 3000*5
=15,000 + 6500

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 =21,500 ETB

7.4 Taxes
Just like any other business, vending machine businesses are responsible for paying
taxes. In most cases, I will have to obtain a tax license for the machines depending on
country taxes on the revenue generated by the machine.

7.5 Labor or worker price per month

Profession Quantity Price (Birr)

Driver 1 3000
Shop Keeper 1 2000
Technician 1 3500
Manager 1 6000
Total 4 14,500
Table 7-5 Labor cost

7.6 Other costs

Other operations Cost (Birr)

Service and maintenance cost 5000
Electric power cost 20,000
Transportation 40,000
Personal expenditure 10,000
Total 75,000
Table 7-6 Other costs

7.7 Total Cost

Accounts head Total cost (Birr)

Fixed costs 1,450,000
Initial stock to fill 55,000
Furniture and office equipment 18,000
Ongoing costs 21,500

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 Labor cost 14,500
Other costs 75,000
Total cost 1,634,000
Table 7-7 Total cost

7.8 Means of financing the project

To get this finance I have two things:
 Debt financing
 Equity financing
The business is to be financed by these two financing systems in the ratio of 2 to 8.
That means 80% debt and 20% equity. Therefore from the total project cost of 1,634,000
birr, the proportion of equity and debt is as follows:
Equity, 20%*1,634,000 = 326,800 birr
Debt, 80%*1,634,000 =1,307,200 birr

7.8.1 Debt financing

Debt financing requires paying back the amount of money borrowed and interest on
this money. In Ethiopia generally, bank debt is at an interest rate of is 9%-15% per
annum and I assume 12% interest. It will pay within 5 years:
1/5*1,307,200 = 261,440 birr each year
The interest of money left unpaid at the end of each year can be calculated using the
following formula for 5 years: where
D= total remaining debt
P= payment for each year
Y= amount of left at the end of each year = P-D
I= interest = D*0.12
TP= total payment for each year = P+I

Year Debt Payment Amount Interest Total

left payment
1 1,307,200 261,440 1,045,560 156,864 418,304
2 1,045,560 261,440 784,120 121,467.2 386,907.2
3 784,120 261,440 522,680 94,094.4 355,534.4

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 4 522,680 261,440 261,240 62,721.6 324,161.6
5 261,240 261,440 -200 31,348.8 292,588.8
Total 1,777,496 ETB
Table 7-8 Debt payment term

7.8.2 First-year payment

The first year payment is may be difficult because it is a new business and also the
debt payment and the labor cost is high, so let sum the labor cost and the debt
payment and divide within the month:
Monthly cost = Debt payment + labor cost
= 418,304 + 14,500
= 563,304/12
= 46,942 ETB
Therefore my monthly cost for the first year is 46,942 ETB.
Overall this business is new to Ethiopia, it may take time for the peoples to understand
very well but it will be a profitable business.

7.8 Break-Even Point

The number of vending machines annually based on our net profit and market
adaptability. Therefore based on those factors I will decide to increase the numbers of
machine and area of installing cities. My plan o sell per day from the 5 vending
machines is:

Item Sell per day Unit Cost Total cost (Birr)

Snack 15 5 75
Chocolate 10 10 100
Soft drink 5 10 50
Soda 5 10 50
Water 5 5 25
Tea 5 5 25
Coffee 5 5 25
Total - - 350
Table 7-9 sale plan

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 Therefore for the 5 machines =350*5
=1750 ETB
Then let multiple this by 30 days = 1750*30
= 52,500 ETB
On first year payment calculation my monthly payment is to be 46,942 ETB then based
on my plan the revenue I will get is 52,500 ETB
Therefore the net revenue will be = 52,500 – 46,942
= 5,576 ETB

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 REFERENCE

1. Norman M.Scarborough. Jeffrey R.Cornwall, January 8, 2015, Essentials of

Entrepreneurship and Small Business Management. Presbyterian College,
Belmont University
2. Finch, B. 2013. How to write a business plan: creating success. London: Kogan
Page.
3. MULUGETA ESHETU. TAYE MEHERETU. SAMUEL MELKAMU. MIHRET
BETEMARIAM. 2009 E.C. Establishing Of Vending Machine Business.
4. Nama. 2016. History of vending machines. Accessed 05 October 2017.

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