1.

Executive Summary
Alemayehu metallic, doors and frames fabrication share PLC project is the new
establishment conceived by the owener of Alemayehu yadeta with total investment capital of
Birr 1,500,000. The project is located in the Amhara National Regional state, Oromo nation
nationality Zone, Bati Town, kebele 03 which is around 64 kms from Dessie and around 419kms
from the capital city Addis abeba. The project is planned to produce and provide quality metallic
doors and windows and metal frames.
The project envisages fabrication of 100 tons of metallic doors, windows and frames per annum.
The total investment requirement of the project including the working capital is estimated at
about Birr 1,550 thousand; of which more than Birr 1,047 thousand is the cost of the working
capital and Birr 205 thousand is for machinery and equipments. Based on the cash flow
statement, the calculated internal rate of return (IRR) and simple rate of return (SRR) of the
project is 53.3 % and 44.1 %. The net present value (NPV) at 18 % discounting rate is about Birr
377 thousand. The plant is expected to create employment opportunities for about 15 persons.
The project is expected to start its operation at initial capacity of 50% in the first year, 60% in the
second year and it reaches capacity of 70% in the three year and 100 % fourth year.
The major raw material required for metallic doors, windows and frames project is LTZ and
welding electrodes material. The raw materials that the project requires are locally produced.
The major utilities required metallic doors, windows and frames project are electricity and water.
The project site is accessible with water and electricity.
The project is expected to contribute to employment creation, tax revenue generation to the
government and GDP contribution, import substitution, technology transfer and it creates back
ward and forward linkage effects to other sectors.
Finally, considering the market, technical, financial, socio-economic and environmental analysis
results, the wheat flour and iodize salt project is found to viable.

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 2. BACKGROUND
The Ethiopian government has made the rapid development of industries one of its strategic
priorities. Achieving accelerated economic growth to eradicate poverty is the key objective of the
government. During the last five years period, the economy grew on average at 11% per annum.
By accelerating this growth, through industrial development, the government aims to make the
country a middle income country by 2025. The government of Ethiopia has entered in to a
country partnership programme with the United Nations Industrial Development organization
(UNIDO) to enable Inclusive and sustainable industrial development (ISID) across all industries
within the industrial sector.
Metal and engineering industries are identified as one of five priorities for existing industry
investment to build capacity and upgrade performance in terms of utilization of capacity. The
Ethiopian metal industry sector is classified into two categories basic metal and engineering
industries. Basic metal industries deal with production of metal from ore, scrap and conversion
of billet slabs etc.

2.1 The Applicant

2.1.1 Name of the Applicant
(1) Name – Alemayehu yadete
(2) Name of general manager(contact person) – Ato Alemayehu yadeta
2.1.2 Address
1. Applcant Address
Name- Alemayehu yadete
Region – Amhara
Zone – Oromo nation nationality
Town – Bati
Kebele – 03
Tel.no :-

2. Project Address
Name of the project - Alemayehu yadete metallic doors and windows and frame s
fabrication plant
Region – Amhara Regional state
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Zone/sub city – Oromo nation nationality
Town – Bati
Kebele – 03
House No ----------------
Tel.no :- +251-917574437
2.1.3 Type of project: metallic doors and windows and frames fabrication
2.1.4 Objective of the project to produce quality metallic doors and windows and frames to
local market.
2.2 Brief History of the promoters/Project
2.2.1 The promoters
Name- Alemayehu yadeta
Nationality:- Ethiopian
As per the private assessment currently, Alemayehu yadeta has been engaged in their own
businesses for above ten years. Currently, they manage the project vehicle garaje and other trade
activity of this project. They are experienced on their different private businesses. They expand
their business from small working to large metallic doors, windows and frames factory; this
indicates that they are hard workers. They are easy to communicate and committed for their
work. They have ability to manage the project properly, but for the future, they will hire project
manager as well as other necessary technical staff.

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 3.1 Market Study

3.1.1 Present Demand and Supply

Wood and metal based furniture has now a day become very expensive and the price is
exorbitantly growing from year to year due to increasing scarcity & rising price of timber. Wood
based furniture is getting out of reach for households even in the middle & higher income
bracket. Second-hand furniture is expensive for many low and medium income families.
Anybody who is familiar with the rural and urban housing situations in the Amhara region can
easily realize the magnitude of need of metallic doors and windows in the whole Region. If we
leave aside rural homes, most homes in urban areas need better and stronger doors and windows.
Besides, new houses and other buildings are being built in almost all urban areas of the region.
Though there are units which fabricate metallic doors and windows in many of the urban centers
of the Region, the doors and windows they produce are below acceptable standards. Their
measurements are faulty, their design, welding, grinding, painting and etc are crude, and poor
quality. On the other hand the use of The price for a full set of sofa, made in modern local wood
working enterprises, ranges from Birr 20,00 to Birr 70,000 in most urban centers of the country.
On the vice versa currently the average market price(cost) of fabricating metallic doors, windows
and frames ranges between Birr 50,000 and Birr 90,000 per ton of the products depending on the
quality of the products. This project plan to sell the products of full set of sofa at Birr 40,000 and
metallic doors and windows products plan to sell at Birr 70,000 per ton. Work assignments can
be secure by following different bids of work
It is becoming extremely difficult for a newly couple and young people who secure their first job
and who want to live independently of their parents to acquire decent household furniture due to
the high cost of the product.
Plastic furniture & articles can be good substitute for wood furniture. But the price is still higher
that households with lower income bracket cannot manage to get hold of them. In these respect
the best substitute one can think of is woods and metal -based furniture especially for lower
income households & even for middle & higher income households at country and regional
level.

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 3.1.2 Projected Demand

In the absence of the necessary figures regarding the use of wood furniture products and metallic
doors, windows and frames, it is not to make demand projection. However, it is a visible fact that
modern workshops working in the area are facing almost unlimited demand for their products as
long as the products they produce are competent in terms of quality and price.

3.2. Marketing area and Marketing strategy and Prices of the project

3.2.1 Marketing area of the project

The project has identified Amhara region Oromo zone and Afar region as major marketing areas.
The target customers of the products of the project will be individual consumers.

3.2.2 Marketing Strategy

The promoters have planned to sell the wood furniture products and metallic doors, windows and
frames to individual consumers with reasonable price. It plans to produce better quality products
to compete with other homogeneous factories.

Therefore, the wood furniture products and metallic doors, windows and frames, project planned
use different advertisement mechanisms and sell its products at reasonable price to its target
market such as Oromo zone and Afar Region.

3.2.3 Pricing and Distribution

Currently, the average market price (cost) of fabricating for a full set of sofa, made in modern
local wood working enterprises, ranges from Birr 20,000 to Birr 70,000 in most urban centers of
the country. And the average market price (cost) of fabricating metallic doors, windows and
frames ranges between Birr 50,000 and Birr 90,000 per ton of the products depending on the
quality of the products. This project plan to sell the products of full set of sofa at Birr 40,000 and
metallic doors and windows products plan to sell at Birr 70,000 per ton. Work assignments can
be secure by following different bids of work.
3.3 Plant Capacity

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This project envisaged plant, at the initial stage, can be made to produce tables and chairs. At
later stage, the plant can diversify its production to bed, and wood doors and windows. Thus, the
plant is designed to produce 2500 tables and 10,000 chairs (1 table x 4 chairs) and 50 tons
metallic doors, windows and frames per annum. The plant is assumed to operate 275 days a year,
and 8 hours a day in a single shift. This schedule is set by 52 Sundays, and 13 national holidays,
15 days for annual maintenance and 10 days for unexpected work interruption from a given year.
3.4 Production Program
The plant will start production program follows gradual capacity utilization due to market
reasons at 50% of its capacity. Then, it will build up production to 75% and 85% in the
successive years of the operation. The fourth year onwards, 100% gradual capacity build up is
suggested to develop substantial market outlets for the product and enable the operators to get
adequate time to develop the required skills and experience.
4. TECHNICAL ASPECT
4.1 Location and Site
Abdu yimer woods Furniture tables, chairs, shelves and other household items. Now days
furniture like, Beds, Baskets, doors and windows and metallic doors and windows and frames
factory project is located in the Amhara National Regional State, Oromo Nation Nationality
Zone kebele 03 which is around 64kms from Dessie and around 419kms from the capital city
Addis Ababa.
It has good access to raw materials and market out let and it is accessible at any time.
Considering factors like proximity to market/ end users, availability of raw materials and
infrastructure the project is established on appropriate location.

4.2 Raw Materials and Utilities

4.2.1 Availability and Source of Raw materials

All required raw materials to fabricate woods Furniture tables, chairs, shelves and other
household items like Beds, Baskets, doors and windows and metallic doors and windows and
frames are procured in Addis Ababa.

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 3. Product Description and Application
Metallic doors and windows and metal frames have become more and more popular in urban
and even in rural areas. They are increasingly replacing wooden doors and windows because
they are relatively less expensive and easily accessible since they can be fabricated even in small
urban centers when there is electric power. Besides, they are feasible for mass production.

4. Market Study, Plant Capacity and Production Program

3.2 Market Study

3.2.1 Present Demand and Supply

The use of metal doors and windows must be encouraged since this will save trees from being
cut down for timber production- which further aggravates the process of deforestation in the
Region. The use of metal doors and windows is one by which we save our natural resource-
forests at the expense of spending foreign exchange for importing the metal input. But the
foreign exchange used to buy the metal could be generated by exporting products to be obtained
from various natural resources. In addition, metal doors and windows are stronger and last
longer than wooden doors and windows.

Any body who is familiar with the rural and urban housing situations in the Amhara Region can
easily realize the magnitude of need of metallic doors and windows in the whole Region. If we
leave aside rural homes, most homes in urban areas need better and stronger doors and windows.
Besides, new houses and other buildings are being built in almost all urban areas of the Region.
Though there are units which fabricate metallic doors and windows in many of the urban centers
of the Region, the doors and windows they produce are below acceptable standards. Their
measurements are faulty, their design, welding, grinding, painting and etc are crude, and of poor
quality. Consequently, the final products are of inferior quality. Dissatisfied with local
production of doors and windows, many home builders and almost all contractors purchase metal
doors and windows manly from Addis Ababa and to a limited extent from Bahir Dar. This
indicates that there is a good market for doors and windows with good quality (which include

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precise measurements, attractive and fine design, quality and strong welding, fine and smooth
grinding, and attractive and appropriate painting- all with sturdy framework)

3.2.2 Projected Demand

In the absence of the necessary figures regarding the use of metallic doors, windows and frames,
it is not to make demand projection. However, it is a visible fact that modern workshops working
in the area are facing almost unlimited demand for their products as long as the products they
produce are competent in terms of quality and price.

3.2.3 Pricing and Distribution

Currently, the average market price (cost) of fabricating metallic doors, windows and frames
ranges between Birr 46,188 and Birr 89,810 per ton of the products depending on the quality of
the products. This project plans to sell its products at Birr 64,150 per ton. Work assignments can
be secure by following different bids of work.

3.3 Plant Capacity

This project envisages to fabricate 100 tons of metallic doors, windows and frames per annum.
The plant is assumed to operate in a single shift basis for 275 working days in a year. This
schedule is set by deducting 52 Sundays, 13 public holidays, 15 days for annual maintenance and
10 days for unexpected work interruptions from a given year.

3.4 Production Program

The production program follows gradual capacity utilization due to market reasons. Accordingly,
50 %, 75 % and 85 % capacity utilization are assumed for the first and the second and the third
years of the operation, respectively. The fourth year onwards, 100 % capacity utilization is
assumed.

5. Raw Materials and Utilities

5.1 Availability and Source of Raw Materials

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All the required raw materials to fabricate metallic doors, windows and frames are procured in
Addis Ababa.

5.2 Annual Requirement and Cost of Raw Materials and Utilities

Raw material for requirement for a full capacity single shift operation of the plant and the
corresponding cost estimates are given in Table 4.1.

TABLE 4.1
RAW MATERIALS REQUIREMENT

Qty. Cost'000 Birr

NO Material
Foreign Local Total
1. LTZ 100
Tons 4,618,800 4,618,800
2. Welding Electrodes
230,940 230,940
3. Miscellaneous
115,470 115,470
Total
4,965,210 4,965,210

Annual electric consumption at 100 % capacity utilization in a single shift operation of the
plant shall be 60 MWH. Total cost of electricity is estimated at Birr 33,000 per annum. The
plant does not need water for the purpose of production but it is normally needed for general
cleaning. Yearly water consumption is estimated to be100 m3, and its cost amounts Birr 265.

Table 4.2
UTILITIES REQUIREMENT

No. Utility Requirement Unit Price Cost

(Annual) (Birr)
1. Electricity 60 MWH Birr0.55 /KWH 33,000
2. Water 100 m3 Birr2.65 /m3 265
Total 33,265

6. Location and Site

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For its convenience to procure different working contracts, Bahir-Dar is an appropriate choice
for the metallic doors, windows and frames fabricating workshop in Amhara region.

7. Technology and Engineering

7.1 Production Process

The doors and windows are to be fabricated from metal products known as T-shape, L-shape, Z-
shape and etc. Designs are made, physical measurements are taken. Parts are cut according to
sizes, welded and ground finally, the product is coated with anti-rust and painted after locks and
keys are fitted.

There is no alternative technology for this process.

7.2 Machinery and Equipment

Main machinery and tools include drilling machines, grinders, welding set, workshop tools and
etc.
TABLE 6.1
MACHINERY & EQUIPMENT

Item
1. Drilling Machine
2. Portable Drilling Machine
3. Double Ended Grinder
4. Flexible Shaft Grinder
5. Welding Set
6. Workshop Tools

The total cost of machinery/equipment is estimated at Birr 205,280, all of which is in local
currency.

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Machinery Supplier’s Address:
Machinery Suppliers located at Piassa in Addis Ababa.

7.3 Civil Engineering Cost

The building area required by the plant is estimated to be 60m2, and it costs Birr 256,600. This
would include cost of land preparation and associated civil works. The total land area of the
plant, including the open space, is 500 m 2 and its lease cost equals Birr 30,000. The cost of the
land lease is as per ANRS land lease rate for Bahir-Dar which is equal to Birr 60 per square
meter for industrial purpose. Of the total cost of the lease, 5 % is paid in the beginning while the
rest will be paid in 40years.

8. Human Resource and Training Requirement

8.1 Human Resource

Details of the manpower requirement of the plant is shown in Table 7.1

TABLE 7.1
MANPOWER REQUIREMENT

Description No Monthly Salary Annual

(Birr) Salary (Birr)
A. Administration
1. Manager/ Supervisors 1 3,079 36,950
7.Seretary/Cashier 1 2,053 24,634
10. Storekeeper 1 1,540 18,475
11.Guards 2 770 18,475
Sub-Total 5 - 98,534
B. Production - -
1. Skilled workers (Operators) 8 2,053 197,069
2. Unskilled Workers (Laborers) 2
770 18,475
Benefits (20%) - 62,816
15 - 376,894

The total annual wages and salary, including 20 % benefits, amount to Birr 376,894.

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 8.2 Training Requirement

Since fabrication of metallic doors, windows and frames is a simple process it can easily be
handled by hiring skilled labor in the area locally.

9. Financial Analysis
9.1 Underlying Assumption

The financial analysis of metallic doors, windows and frames fabricating workshop is based on
the data provided in the preceding chapters and the following assumptions.

A. Construction and Finance

Construction Period 2 Years

Source Of Finance 40% Equity and 60% Loan
Tax Holidays 2 Years
Bank Interest Rate 12%
Discount For Cash Flow 18%
Value Of Land Based on Lease Rate of ANRS
Spare Parts, Repair & Maintenance 3% of the Fixed Investment

B. Depreciation

Building 5%
Machinery And Equipment 10%
Office Furniture 10%
Vehicles 20%
Pre-Production (Amortization) 20%

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 C. Working Capital (Minimum Days of Coverage)
Raw Material-Local 30 Days
Raw Material-Foreign 120 Days
Factory Supplies In Stock 30 Days
Spare Parts In Stock And Maintenance 30 Days
Work In Progress 10 Days
Finished Products 15 Days
Accounts Receivable 30 Days
Cash In Hand 30 Days
Accounts Payable 30 Days

9.2 Investment
The total investment cost of the project including working capital is estimated at Birr 1.5 million
as shown in Table 8.1 below. The owner shall contribute 40 % of the finance in the form of
equity while the remaining 60 % is to be financed by bank loan.
TABLE 8.1
TOTAL INITIAL INVESTMENT

Items L.C F.C Total

Land
1,500 - 1,500
Building And Civil Works
256,600 - 256,600
Office Equipment
12,830 - 12,830
Vehicles
- - -
Plant Machinery & Equipment
205,280 - 205,280
Total Fixed Investment Cost
476,210 - 476,210
Pre Production Capital
Expenditure* 23,928 - 23,928
Total Initial Investment
500,138 - 500,138
Working Capital at Full Capacity
1,048,098 - 1,048,098
Total 1,548,236 - 1,548,236
*Pre-production capital expenditure includes - all expenses for pre-investment studies, consultancy fee during
construction and expenses for company‘s establishment, project administration expenses, commission expenses,
preproduction marketing and interest expenses during construction.

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 9.3 Production Costs

The total production cost at full capacity operation is estimated at Birr 5.5 million (See Table
8.2). Raw materials and utilities account for 90.9 %.

Table 8.2
PRODUCTION COST AT FULL CAPACITY
Raw Material Requirement Cost
1. Local Row Materials 4,965,210
2.Foreign Raw Materials 0

Total Production Cost at full Capacity

Items Cost
1.      Raw materials
4,965,210
2.      Utilities 33,265
3.      Wages and Salaries
376,894
4.      Spares and Maintenance
14,357
Factory costs
5,389,726
5.      Depreciation
39,427
6.      Financial costs
74,427
  Total Production Cost 5,503,579

9.4 Financial Evaluation

I. Profitability
According to the projected income statement (See Annex 4) the project will generate profit
beginning from the first year of operation and increases on wards. The income statement and
other profitability indicators also show that the project is viable.

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 II. Breakeven Analysis
The breakeven point of the projects is given by the formula:

BEP = Fixed Cost

Sale –Variable Cost at full capacity.

The project will break even at 18.2 % of capacity utilization

III. Payback Period

Investment cost and income statement projection are used in estimating the project payback
period. The project will payback fully the initial investment less working capital in two years.

IV. Simple Rate of Return

The project’s simple rate of return (SRR) is given by the formula:

SRR= (Net Profit + Interest)/ (Total Investment Outlay) at full capacity utilization.

The SRR would be 41.1 % at full capacity utilization.

V. Internal Rate of Return and Net Present Value

Based on cash flow statement (See Annex. 2) the calculated internal rate of return (IRR) of the
project is 53.3 % and the net present value (NPV) at 18 % discount is Birr 1,352 thousands.

VI. Sensitivity Analysis

The sensitivity test result which undertaken by increasing the cost of production by 10 % still
indicates that the project would be viable.

10. Economic and Social Benefit and Justification

Based on the foregoing presentation and analysis, we can learn that the proposed project
possesses wide range of benefits that complement the financial feasibility obtained earlier. In
general, the envisaged project promotes the socio-economic goals and objectives stated in the
strategic plan of the Amhara National Regional State. These benefits are listed as follows:

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 A. Profit Generation

The project is found to be financially viable and earns on average a profit of Birr 544 thousand
per year and Birr 5.4 million within the project life. Such result induces the project promoters to
reinvest the profit which, therefore, increases the investment magnitude in the region.

B. Tax Revenue

In the project life under consideration, the region will collect about Birr 2,009 thousand from
corporate tax payment alone (i.e. excluding income tax, sales tax and VAT). Such result create
additional fund for the regional government that will be used in expanding social and other basic
services in the region

C. Employment and Income Generation

The proposed project is expected to create employment opportunity to several citizens of the
country. That is, it will provide permanent employment to 15 professionals as well as support
stuffs. Consequently the project creates income of Birr 377 thousands per year. This would be
one of the commendable accomplishments of the project.

D. Pro Environment Project

The proposed production process is environment friendly.

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Project proposal on The Establishment of
tornos and auto repair fabrication plant at
oromiya nationality zone, bati town
administration

PROMOTED BY:
Alemayehu tornos and auto repair fabrication plant
Manager of the project; Alemayehu yadeta
Address mobile phone:-+251-917574437
BATI, ETHIOPIA
JANUARY,2021

Bati,
Ethiopia
January,2021

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Table of Contents

1. Executive Summary................................................................................3
2. Product Description and Application....................................................4
3. Market Study, Plant Capacity and Production Program...................7
3.1 Market Study.......................................................................................................7
3.1.1 Marketing Mix 7Ps..............................................................................10
3.1.2 Projected Demand......................................................................................10
3.1.3 Sales Strategy.............................................................................................10
3.2 Pricing and Distribution.....................................................................................11
3.3 SWOT Analysis.................................................................................................12
4. Raw Materials and Utilities..................................................................14
4.1 Availability and Source of Raw Materials.........................................................14
4.2 Annual Requirement and Cost of Raw Materials and Utilities.........................14
5 Location and Site...................................................................................15
6 Technology and Engineering...............................................................15
6.1 Production Process.............................................................................................15
6.2 Machinery and Equipment.................................................................................15
6.3 Civil Engineering Cost......................................................................................16
7 Human Resource and Training Requirement....................................16
7.1 Human Resource................................................................................................16
7.2 Training Requirement........................................................................................16
8 Financial Analysis.................................................................................17
8.1 Underlying Assumption.....................................................................................17
8.2 Investment..........................................................................................................18
8.3 Production Costs................................................................................................19
8.4 Financial Evaluation..........................................................................................19
9 Economic and Social Benefit and Justification..................................20

1. Executive Summary
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The business idea of Alemayehu Tornos is based on the fact that there is a lack of working space
in Bati town and the environment due to dense population. In order to solve this problem, the
business provides working space, machines and tools for customers. Therefore, the clients are
able to fix and tune their vehicles on their own. Furthermore, the company provides more
services and extra offers, which will be presented later on, to satisfy the customer requirements.
The most important marketing action is the spread of the new business idea, in order to gain a
client base and regular visiting car clubs. This will be achieved by an excellent service and a
perfect working environment.
Alemayehu Tornos machine will attract and maintain a loyal customer base through their
customer-oriented focus on business. All employees are trained and held responsible for
providing superior service, developing a long lasting trust bond with customers. This is very
important, especially in the auto repair industry where trust and honesty are not the image of
repair facilities. The auto repair market has a lot of competition, however, almost all only
offer service. Alemayehu Torno machine will differentiate themselves by not only offering a
hassle-free repair service, but a fully stocked parts store. Not only will this serve a wide
range of customers for both service and parts, but the parts department will support the
service department by allowing the service department to turnaround jobs far faster than the
competition with generally all of the needed parts in stock and on location.

This project profile deals with the fabrication of TORNOS machine in Amhara National
Regional State Oromia nationality zone Bati town Administration . The following presents the
main findings of the study

Demand projection divulges that there is substantial demand for hand knitting machines and it is
increasing with time. Accordingly, the planned plant is set to produce 650 units annually. The
total investment cost of the project including working capital is estimated at Birr 2.5 million and
creates 16 job opportunity and Birr 532,086 thousand of income

The financial result indicates that the project will generate profit beginning from the first year of
operation. Moreover, the project will break even at 22.7% of capacity utilization and it will
payback fully the initial investment less working capital in one year and 10 months. The result

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further show that the calculated IRR of the project is 35.3% and NPV discounted at 18% of Birr
1,421,768.

In addition to this, the proposed project possesses wide range of economic and social benefits
such as increasing the level of investment, tax revenue, employment creation and import
substitution

Generally’ the project is technically feasible, financially and commercially viable as well as
socially and economically acceptable. Hence the project is worth implementing.

2. Description of Business Idea

2.1 The Business Idea

The core benefit of Alemayehu Tornos machine is the provision of workspace, machines and
tools in order to maintain, restore, repair or tune the own vehicle by our customer. Additionally,
some parking garages are provided to give the customer the opportunity to let their cars on our
site, in case they are not finished with their work yet. The customer can book the range of offers
online or onsite. Once the booking is done, the customer will be introduced onsite to the tools
and machines provided, depending on the booked offer. Next the customer can work by himself
on his vehicle for the amount of time he had booked. Summing up, the mission is the
abolishment of shortage of space and therefore bad working environment for private consumers.

2.2 Mission

Alemayehu Tornos and Auto Repair aims to offer high-quality auto repair services and
a full range of auto parts. Alemayehu Torno Auto Repair focuses on personalized service to
its customers by offering convenience and rapid service. Additionally, is tech Alemayehu
Tornos and Auto Repair nologically savvy with computerized monitoring of all parts
inventory, to ensure that parts are always in stock, while keeping a balanced level of
inventory to maximize inventory turnover. Finally, Alemayehu Tornos and Auto Repair has
strong vendor relationships with the most service conscious vendors who are capable of
shipping major parts rapidly (on an overnight timeline in most cases).

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 2.3 Keys To Success
Alemayehu Tornos and Auto Repair keys to success will include:
1. Expedient and convenient auto repair services.

2. Growing and maintaining a referral network of local towing service

companies.

3. A wide range of auto parts inventory that is (nearly) never out of stock.

4. Rapid order and delivery of major auto parts items.

2.4 Company Summary

Alemayehu Tornos and Auto Repair is a new start-up a limited liability company and will be
led by ourselves. This kind of legal structure is most appropriate for small business and it
provides the opportunity that three persons are responsible for the business. This offers the
benefit of separation between personal and legal assets and liabilities. Annually the revenues and
the earnings must be reported. Another important advantage is that owners are protected from
financial liability

2.5 Company Ownership

Alemayehu Tornos and Auto Repair is a limited liability company in Bati town

2.6 Company History

Alemayehu Tornos and Auto Repair is a new start-up company. The company management

team has strong industry experience and a clear vision of how will Alemayehu Tornos and
Auto Repair position itself in the local market

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 2.7 Start-up Summary

The economic growth of the last several years has resulted in increased disposable income.
Many people have chosen to spend part of their increased income on their automobiles. As a
result, the need for reliable and convenient auto services has substantially risen as well.
Alemayehu Tornos and Auto Repair will position itself to capitalize on the growing need of
the middle and upper class market for quality auto service in the center area in the town .
The company will be privately owned by four co-owners, with most of the additional
funding coming from a ten year Government loan.

2.1.1 The Applicant

2.1.2 Name of the Applicant
(3) Name – Alemayehu Yadeta Bishasa
(4) Name of general manager (contact person) – Alemayehu Yadeta Bishasa

2.2.1 Address
2.2.2 Applcant Address
Name- Alemayehu Yadeta Bishasa
Region – Amhara
Zone – Oromo nation nationality
Town – Bati
Kebele – 03
Tel.no :-

2.2.3 Project Address

Name of the project - Alemayehu Tornos and Auto Repair fabrication plant
Region – Amhara national Regional state
Zone/sub city – Oromo nation nationality
Town – Bati
Kebele – 03
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House No ----------------
Tel.no :- +251-917574437
2.2.4 Type of project: Tornos Auto Repair
2.2.5 Objective of the project to produce high quality tornos and auto repair the to
local market.
2.2 Brief History of the promoters/Project
2.2.1 The promoters
Name- Alemayehu Yadeta Bishasa
Nationality:- Ethiopian
As per the private assessment currently, Alemayehu Yadeta has been engaged in their own
businesses for above seven years. Currently, they manage the project motor and bajaje garage
service and other trade activity of this project. They are experienced on their different private
businesses. They expand their business from small working to large factory; this indicates that
they are hard workers. They are easy to communicate and committed for their work. They have
ability to manage the project properly, but for the future, they will hire project manager as well
as other necessary technical staff

2.1 Legal Structure

Alemayehu tornos and machine will be a limited liability company and will be led by ourselves.
This kind of legal structure is most appropriate for small business and it provides the opportunity
that three persons are responsible for the business. This offers the benefit of separation between
personal and legal assets and liabilities. Annually the revenues and the earnings must be
reported. Another important advantage is that owners are protected from financial liability.

2.2 Product/Service Description

Alemayehu Torno Auto Repair has the core competencies amongst its large crew to work on
all makes and models of domestic and foreign vehicles. With ten service bays at each
location, and all employees focused on superior customer service, quick turnaround is
always the standard at Alemayehu Tornos and Auto Repair. Alemayehu Tornos and Auto
Repair strives to be accurate and honest with customers in terms of quoting cost estimates
and repair completion time estimates. Alemayehu Tornos and Auto Repair employees focus
on delivering what they promise. This focus on building strong customer relationships based

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on trust and integrity will be the catalyst in establishing a strong regular customer base.

Alemayehu Tornos and Auto Repair utilizes the highest degree of technology in managing a
full range of auto parts inventory. The goal is to never be out of a specific part, while
maximizing inventory turnover. Strong vendor relationships have been established with the
most reputable vendors in terms of shipping time of major parts.

2.3 Market Analysis

Alemayehu Tornos Auto Repair has a focus on meeting the demand of a
regular local resident customer base, as well as towed vehicle drop-ins
from local and freeway traffic traveling on nearby freeways. Alemayehu
Tornos Auto Repair has established relationships with a few major local tow
truck companies for referral business of stalled vehicles requiring a tow
to an auto repair facility.
The company estimates that about 80% of revenues will come from the
established local clientele and 20% from the tow-ins local and freeway
traffic. The table below further estimates the total market potential of
type of services rendered by center areas in the town.

2.4 Service Business Analysis

The market of auto repair services and parts sales is very fragmented. The majority of auto
shops usually offer either repair services or parts inventory. The niche where Alemayehu
Torno Auto Repair positions itself represents auto centers that offer both auto services and
parts at one convenient location. Middle and upper class customers to whom Alemayehu
Torno Auto Repair will cater its services are less price sensitive as they value the
convenience of quick turnaround (on any model/make of car) and high quality of services.

2.5 Market Segmentation

Alemayehu Torno Auto Repair focuses on the middle and upper income markets. This
market looks for high quality, rapid service with as much convenience as possible. Most
individuals in this market segment are willing to pay an extra premium within the pricing
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of auto repair services to avoid the common inconveniences of having a vehicle tied up in a
repair shop.

Local residents regular customer base

Alemayehu Tornos Auto Repair wants to establish a significantly large regular
customer base. This will establish a healthy, consistent revenue base to ensure
stability of the business.
Emergency towing local and freeway traffic
Emergency towing of local and freeway traffic comprises approximately 20% of revenues.
Convenience, regular referrals from tow truck companies, and high quality, rapid service are
critical to capture this segment of the market.

2.6 Target Market Segment Strategy

Alemayehu Tornos Auto Repair will focus on its target market, the middle and upper class
market, and establish a reputable image from that target market's perspective, by offering
convenience, expedient auto repair services, customer service excellence, and by working
with local towing companies.

2.7 Market Needs

Between having a high level of commuting traffic, and an equally high level of tourism
traffic on local highways, there is a constant significant demand for auto repair services and
auto parts. Convenience is a must for most middle and upper class consumers and travelers.

2.8 Competition and Buying Patterns

Alemayehu Tornos Auto Repair faces over 400 auto repair and auto parts
competitors in the local area. Only a quarter of these competitors offer both auto
repair services and auto parts inventories. Among these, only a few are major
national chains. The remainder are small privately-owned establishments.
Alemayehu Tornos Auto Repair will compete well by focusing on convenience and
offering a high level of customer service. Additionally, its honest reputation will be a
major factor in repeat business and building a large base of regular, loyal customers.

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Primary competitors are engaged principally in the retail sale of automotive parts, tires and
accessories, automotive maintenance and service and the installation of parts. Larger
competitors have adopted the "supercenter" store model, a freestanding, "one-stop"
shopping automotive warehouse that features state-of-the-art service bays. These
"supercenters" carry thousands of stock-keeping units and serve the automotive aftermarket
needs of the "do-it-yourself," the "do-it-for-me" (automotive service), tire and "buy-for-
resale" customer sectors.
Large competitors' stores typically carry the same basic product line, with variations based
on the number and type of cars registered in the different markets. A full complement of
inventory at a typical supercenter includes an average of approximately 25,000 items.

Automotive product lines usually include:

2.8.1 Tires.

2.8.2 Batteries.

2.8.3 New and remanufactured parts for domestic and imported cars,
including:

2.8.3.1 Suspension parts.

2.8.3.2 Ignition parts.

2.8.3.3 Exhaust systems.

2.8.3.4 Engines and engine parts.

2.8.3.5 Oil and air filters, belts, hoses, and air conditioning parts.

2.8.3.6 Lighting.

2.8.3.7 Wiper blades.

2.8.3.8 brake parts.

2.8.4 Chemicals, including oil, antifreeze, polishes, additives, cleansers and

paints.

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 2.8.5 Mobile electronics, including sound systems, alarms, and remote vehicle
starters.

2.8.6 Car accessories, including seat covers, floor mats, and exterior
accessories.

2.8.7 Hand tools, including sockets, wrenches, ratchets, paint and body tools, jacks
and lift equipment, automotive specialty tools and test gauges.

2.8.8 A selection of truck, van, and sport utility vehicle accessories.

Many competitors have adopted point-of-sale systems in their stores, which gathers
sales and gross profit data by a stock-keeping unit from each store on a daily basis.
This information is then used to help formulate pricing, marketing and
merchandising strategies. Electronic parts catalogs are available in many competitor
stores along electronic commercial invoicing systems that offer commercial parts
delivery.
Additionally, a number of competitors have electronic work order systems available
amongst their various service centers. This type of system creates a service history for
each vehicle provides customers with a comprehensive sales document, and enables the
service center to maintain a service customer database.

2.9 Strategy and Implementation

Alemayehu Tornos Auto Repair will succeed by offering its customers high-quality, rapid,
and convenient auto repair service. Additionally, Alemayehu Tornos Auto Repair will
succeed by ensuring a full range of auto parts inventory and rapid shipping capability of
major auto parts.

3.0 Competitive Edge

Alemayehu Tornos Auto Repair competitive edge is the heavy focus on customer
convenience by offering unlimited shuttle service, rapid turnaround on auto repair jobs, and
a referral network of a few local major tow truck companies.

3.1 Sales Strategy

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Alemayehu Tornos Auto Repair will focus its sales strategy on effectively reaching the
target customer segment of upper and middle class customers. For this purposes, the
company will employ direct sales staff. At the same time, the company will further
strengthen its relationships with the tow truck companies to capture auto repair needs of the
local and highway traffic.

4. Marketing Mix 7Ps

4.1 Product

Fixed and Tuned is a high qualitative service, because it offers workspace for the maintenance of
cars and other small vehicles like motorcycles. The business provides an excellent equipped
environment with all tools that are needed by the customers. In order to keep the high quality,
regular maintenance for the machines is planned and galled tools will be replaced immediately.
The most important concern is the satisfaction of the customer needs. This is ensured through the
included extra offers, which are the welding area and spare part ordering. Offers like special
tools, the paint shop, parking space and also the vending machines can be used for an extra
payment. This results in long-term binding of the customers which enables regular visits at our
location.

4.2 Price

The different types of workspaces are offered for an hourly tariff according to the opening hours.
The business has two different pricing strategies. There is a cheaper price for the customers from
Tuesday to Thursday in order to reach a high level of booking. At the weekends, including
Friday to Saturday, the hourly prices are increased because of the higher demand. This is due to
the fact, that most of the people do not have to work on weekends and therefore have time to fix
and tune their vehicles. The most important key point regarding the pricing policy is to be
cheaper as the indirect competitors, as mentioned above. It is possible to pay in advance via
online transfer or on-site before the customer begins the work.

4.3 Place/ Distribution

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The company will be located near to Kombolcha industrial park, which is a well-chosen place,
because in this area are a lot of industrial facilities situated. Hence there are a lot of people and
the company gains a high visibility and attention for new customers. The distribution of the
service will be made via the internet, especially over our website. The big advantage of this is the
overview over the available capacity of the working spaces.

4.4 Promotion/ Communication

Fixed and Tuned will set up two promotion policies. On the one hand, flyers will be printed and
spread in the city. On the other hand, will be the social media presence and the website.
Additionally, the business will promote itself at the local and national car clubs via telephone or
per letter. Car clubs are very important for the business, because it is possible to reach very much
potential customers. Regarding the fact, that there are no direct competitors, the most important
point is gaining attention to the new kind of business, in order to create a client base. Therefore
marketing costs are higher at the launch, but will be lowered during the next few months,
because clients are visiting the business regularly. Additionally, there will be a word-of-mouth
advertising through the existing customers, who are telling their family and friends about the
service.

4.5 People

As a start-up company, Fixed and Tuned will be launched and ran by ourselves. The key factor is
to establish long-term relationships with our customers and the car clubs. This is the reason, why
we will be the employees, everybody with different focus, which will be mentioned later. This
concentrated knowledge and enthusiasm will be an additional factor for the customer to choose
the company. This results in an independently working atmosphere and it would be difficult to
find trustful, engaged and educated staff.

4.6 Physical Evidence

The whole equipment of the workshop, including machines and tools, are bought brand new with
high quality standards in an average price class or may be bought reconditioned. With this

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quality it is possible to persuade the customers of the business and that they will come back more
often. Additionally, the vending machines serve the basic requirements of the customers.

4.7 Processes

. First of all, the customer makes a booking request for the working space including standard
tools, the paint shop or the parking space. The system checks the availability of the request. If it
is available, the customer has to do the payment. When the customer arrives at the workshop, the
car mechanic will introduce the client into the equipment and the site safety, after that the
booked space will be handed over. At the end of the booked time, the tools will be handed over
backwards and the car mechanic will investigate the workplace and the used equipment for
damages.

5. SWOT and Competitor Analysis

The automotive industry is an extensive, contrast set of manufacturing and service businesses
that bring large trucks and cars to the market, whether keeping them in working order, painting
them, or cleaning them, fixing them or even trashing them when it’s time. While there are
interesting business opportunities at the auto dealership level, it’s chiefly after the cars are sold
that the franchising begins.

Environmental Analysis

Competition fosters affordability. With added suppliers of equivalent products, come more
options for a consumer. One way to get a consumer to select one item verses another is to offer it
at a lower price.

Inevitably the future of automotive technology becomes the present, what is costly now will
decline in price as technology becomes less high tech and standardized.

(Strengths)

 We have superior customer service.

 Qualified mechanics.
 Quality repair services at better value.

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  Trusted repairs with large customer base.

(Weaknesses)

 High Liability.
 Risks involved with unsupervised work.
 Possible injuries due to equipment involved.
 Open to lawsuits if not careful.

(Opportunities)

 The increase in evolution of cars oftentimes resort to specialized training. Repair shops
can gain an edge by staying current.
 Hybrid and Electric vehicles are bringing new opportunities to the market.
 Service providers can influence and gain marketing efficiencies.

(Threats)

 Labor and overhead costs

 Competitiveness in the automotive industry
 Economy
 Financial Stability

Competitive Analysis

The auto repair business is highly competitive. Each business within this arena has high principal
costs, low margins, and a high intensity of competitiveness. Providers have a great deal of
influence in setting and negotiating the prices of their goods and services to repair shops. This is
due to the element that the suppliers who absorb the highest amounts of cash from repair shops
are huge auto part companies. These corporations are more united that the repair industry, have
bottomless pockets, an almost unlimited number of clients. Subsequently, these businesses can
set whatsoever price they wish to. In addition, because the clients see the service as
undistinguishable and a “product” with slight cost separation between competitors (if they offer
an appropriate level of excellence) consumer power is likewise very high. Furthermore, the costs

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of services are not economical, and buyers are prepared to hunt for the most satisfactory
combination of price and satisfactory service.

6. Raw Materials and Utilities

6.1 Availability and Source of Raw Materials

The main raw materials include stainless steel, aluminum, brass, titanium, steel, copper, basic
plastics, engineered plastics. While aluminum, steel can be purchased from local suppliers, the
other components are imported from abroad.

6.2 Annual Requirement and Cost of Raw Materials and

Utilities

The annual raw material and utility requirement and the associated cost for the envisaged plant is
listed in table 1 here under
Table 1 Material and Utility Requirement
Total Cost
Material and Input Quantity L.C. F.C.
Aluminum, steel 3 ton 461,880 -
engineered plastics, brass, 130,000 pcs - 630,671

Copper, basic plastics 650 - 705,650

Titanium - 211,695
Total Material Cost 461,880 1,548,016
Utility
Electricity 215,000 kwh  118,250
Water 1,500m3  3,975
Total Utility Cost 122,225

According to the above table, the total cost of material and utility is estimated to be Birr
2,132,121.48 per year.

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4 Location and Site
Alemayehu Tornos auto repair machinery factory project is located in the Amhara National
Regional State, Oromo Nation Nationality Zone kebele 03 which is around 64kms from Dessie
and around 419kms from the capital city Addis Ababa.

It has good access to raw materials and market out let and it is accessible at any time.
Considering factors like proximity to market/ end users, availability of raw materials and
infrastructure the project is established on appropriate location.

5 Technology and Engineering

5.1 The core manufacturing process

The design and manufacturing of tools (moulds, dies and jigs) is one of the most
demanding engineering tasks for modern production technology. Figure 3 presents the
typical tool design and manufacturing cycle, starting with a request for a tool quotation
and ending up with the inspection of the final part and tool approval at the client shop,
with the identification of the required engineering phases and operational steps. Many of
these steps happen concurrently rather than sequentially. For instance, the raw material
acquisition order might be launch and the steel rough machining might start before the
tool detail design is over.

The modern tooling shop requires an intensive use of advanced manufacturing applications
and equipments, more and more based on information technologies. In fact applications as
computer

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aided design (CAD), engineering (CAE) and manufacturing (CAM) are routinely used and
numerically controlled machines populate the shop-floor. Although in a more initial stage, product
data management (PDM) systems, database management systems (DBMS) as well as production
planning and scheduling (PPS) systems are becoming widespread.

Injection moulding or deep drawing process design, formerly an empirical-based activity, has been
shifted towards a more scientific-based one, involving the application of numerical simulation
methods, such as Finite Element Analysis, often carried out by external engineering services
companies.

After detailed design, validation and acceptance by the client, the tool construction process is carried
out using basically a combination of machining processes, essentially milling, drilling, grinding and
electro-discharge machining. A significant amount of time is required to obtain the suitable surface
finish (frequently surface coatings, thermal treatments and hand-polishing are required to provide the
shaping surface with specific quality attributes), following the final inspections, the tool assembly and
trial-out.

5.1 Machinery and Equipment

The machineries and equipment required for fabricating Tornos auto repair machines is detailed in table 2
below

Table 2: Machinery and Equipment

Machinery and Equipment Quantity

CNC swiss turn by tsugami machine 1
Tornos swiss cam automatics machine 1
Total room and support equipment machine 1
Quality and inspection equipment machine 1
Multiple spindle cam automatics machine 1

The, total cost of machinery and equipment including freight insurance and bank cost is estimated to be
about Birr 384,900.

5.2 Civil Engineering Cost

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The total site area for the envisaged plant is estimated to be 200m 2 where 150m2 is allocated to the
production place and the remaining space is left for stores (30m2), office buildings and facilities (20m2).

6 Human Resource and Training Requirement

6.1 Human Resource

The list of required manpower for the envisaged plant is stated in table 3 below

Table 3: Human Resource Requirement

Monthly Total Annual

Position No. Required Salary Salary
Manager/Technician 1 10,264 123,168
Accountant/Cashier 1 3,079 36,950
Store Keeper 1 2,053 24,634
Inspector 1 3,079 36,950
Operators 6 2,053 147,802
Daily Laborers 3 1,026 36,950
Cleaners 1 1,026 12,317
Guards 2 1,026 24,634
Benefit (20%) - 88,681
 Total 16 - 532,086

The envisaged plant creates 16 job opportunity and about Birr 532.08 thousand of income. The
professionals and support staffs for the envisaged plant shall be recruited from Amhara region

6.2 Training Requirement

Training of key personnel shall be conducted in collaboration with the suppliers of the plant machineries.
The training should primarily focuses on the production technology and machinery maintenance and
trouble shooting. To handle this, Birr 38,490 will be allocated as training expense.

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7 Financial Analysis
7.1 Underlying Assumption

The financial analysis of tornos auto repair fabrication plant is based on the data provided in the preceding
chapters and the following assumptions.

D. Construction and Finance

Construction period 2 year

Source of finance 40% equity and 60% loan
Tax holidays 2 years
Bank interest rate 12%
Discount for cash flow 18%
Value of land Based on lease rate of ANRS
Spare Parts, Repair & Maintenance 1% of fixed investment

E. Depreciation

Building 5%
Machinery and equipment 10%
Office furniture 10%
Vehicles 20%
Pre-production (amortization) 20%
\

F. Working Capital (Minimum Days of Coverage)

Raw Material-Local 30
Raw Material-Foreign 120
Factory Supplies in Stock 30
Spare Parts in Stock and Maintenance 30
Work in Progress 10
Finished Products 15
Accounts Receivable 30
Cash in Hand 30
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 Accounts Payable 30

7.2 Investment
The total investment cost of the project including working capital is estimated at Birr 2.53 million as
shown in table 4 below. The Owner shall contribute 40% of the finance in the form of equity while the
remaining 60% is to be financed by bank loan.

Table 4: Total initial investment

Items L.C F.C Total

Land 600 600
Building and civil works 1,026,400 - 1,026,400
Office equipment 64,150 - 64,150
Vehicles - - -
Plant machinery & equipment 256,600 128,300 384,900
Total fixed investment cost 1,347,750 128,300 1,476,050
Pre production capital expenditure*
73,849 - 73,849
Total initial investment 1,421,599 128,300 1,549,899
Working capital at full capacity 361,775 619,207 980,982
Total 1,783,375 747,507 2,530,881
*Pre-production capital expenditure includes - all expenses for pre-investment studies, consultancy fee during construction and
expenses for company‘s establishment, project administration expenses, commission expenses, preproduction marketing and
interest expenses during construction.

The foreign component of the project accounts for 29.5% of the total investment cost.

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 7.3 Production Costs

The total production cost at full capacity operation is estimated at Birr 2.94 million as detailed in table 5
below.

Table 5: Production Cost

Items Cost
1. Raw materials
2,009,896
2. Utilities 122,225
3. Wages and Salaries
532,086
4. Spares and Maintenance
14,770
Factory costs 2,678,977
5. Depreciation
110,995
6. Financial costs
151,910
  Total Production Cost 2,941,882

7.4 Financial Evaluation

VII. Profitability

According to the projected income statement attached in the annex part (see annex 4) the project will
generate profit beginning from the first year of operation. Ratios such as the percentage of net profit to
total sales, return on equity and return on total investment are 10%, 25% and 30% in the first year and are
gradually rising. Furthermore, the income statement and other profitability indicators show that the project
is viable.

VIII. Breakeven Analysis

The breakeven point of the project is estimated by using income statement projection. Accordingly, the
project will break even at 22.7% of capacity utilization.

IX. Payback Period

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Investment cost and income statement projection are used in estimating the project payback period. The
projects will payback fully the initial investment less working capital in 1 year and 10 months.

X. Simple Rate of Return

For the envisaged plant the simple rate of return equals to 33.1%

XI. Internal Rate of Return and Net Present Value

Based on cash flow statement described in the annex part, the calculated IRR of the project is 35.3% and
the net present value at 18 % discount is Birr 1,421,768.13.

XII. Sensitivity Analysis

The envisaged plant is profitable even with considerable cost increment. That is the plant maintains to be
profitable starting from the first year when 10 % cost increment takes place in the sector. This result is
accompanied with payback period of 2 years and 3 months.

8 Economic and Social Benefit and Justification

The envisaged project possesses wide range of benefits that promotes the socio-economic goals and
objectives stated in the strategic plan of the Amhara National Regional State. It also plays positive role in
diversifying the economic activity by enhancing the industrial sector of the region. The other major
benefits are listed as follows:

E. Profit Generation

The project is found to be financially viable and earns a profit of Birr 7.18 million within the project life.
Such result induces the project promoters to reinvest the profit which, therefore, increases the investment
magnitude in the region.

F. Tax Revenue
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In the project life under consideration, the region will collect about Birr 2.66 million from corporate tax
payment alone (i.e. excluding income tax, sales tax and VAT). Such result create additional fund for the
regional government that will be used in expanding social and other basic services in the region.

G. Import Substitution and Foreign Exchange Saving

Based on the projected figure we learn that in the project life an estimated amount of US Dollar 3.9
million will be saved as a result of the proposed project. This will create room for the saved hard currency
to be allocated on other vital and strategic sectors.

H. Employment and Income Generation

The proposed project is expected to create employment opportunity to several citizens of the region. That
is, it will provide permanent employment to 16 professionals as well as support stuffs. Consequently the
project creates income of Birr 5.3 million per year. This would be one of the commendable
accomplishments of the project.

I. Pro Environment Project

The proposed production process is environment friendly.

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