UNIVERSITY OF DAR ES SALAAM

COLLEGE OF ENGINEERING AND TECHNOLOGY

DEPARTMENT OF MECHANICAL AND INDUSTRIAL ENGINEERING

IE 445: ENTREPRENUERSHIP FOR ENGINEERS

GROUP NUMBER: 40

PROJECT NAME: PRODUCTION OF PLASTIC LUMBER

S/N PARTICIPANTS REG No PROGRAMME SIGNATURE

1 MEELA, EDINA D 2017-04-01159 BSc CPE
2 HUGHO, CHRISTIAN J 2017-04-01158 BSc CPE
3 MTUI, LOVENESS S 2017-04-01177 BSc CPE
4 LASWAI, DIANA UPENDO 2017-04-06805 BSc CPE
5 TEMU, GEORGE GASPER 2017-04-06837 BSc CPE
CONTENTS

LIST OF FIGURES ....................................................................................................................... iv

LIST OF TABLES .......................................................................................................................... v
EXECUTIVE SUMMARY ............................................................................................................ 1
Brief description of the company ................................................................................................ 1
Brief profile of the entrepreneur ................................................................................................. 1
Project’s contribution to the economy ........................................................................................ 1
CHAPTER ONE ............................................................................................................................. 2
1.0 ECONOMIC AND MARKETING ANALYSIS ................................................................. 2
1.1 The Product ...................................................................................................................... 2
1.1.1 The Product Description ........................................................................................... 2
1.1.2 The Target Buyers..................................................................................................... 3
1.1.3 The Market Coverage ............................................................................................... 4
1.2 Demand Analysis ............................................................................................................. 4
1.2.1 Number of Potential Buyers...................................................................................... 4
1.2.2 Estimating Future Demand ....................................................................................... 4
1.2.3 Justifying the Future Demand Estimates .................................................................. 5
1.3 Supply Analysis................................................................................................................ 5
1.3.1 Imports ...................................................................................................................... 5
1.3.2 Local Producers ........................................................................................................ 5
1.3.3 Substitute................................................................................................................... 6
1.3.4 The Competitive Advantage ..................................................................................... 6
1.3.5 Future Supply Estimates ........................................................................................... 6
1.4 Sales Forecasts ................................................................................................................. 6
1.4.1 The Demand and Supply Gap ................................................................................... 6
1.4.2 The Sales Forecasts ................................................................................................... 7
1.5 Marketing Plan ................................................................................................................. 8
1.5.1 Product Strategies ..................................................................................................... 8
1.6 Channels of Distribution .................................................................................................. 8
1.6.1 The Salesperson ........................................................................................................ 8
1.7 The Channels of Distribution ........................................................................................... 8
1.8 Promoting and Advertising .............................................................................................. 9

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 1.8.1 The Sales Store ......................................................................................................... 9
1.8.2 Promotional Strategies .............................................................................................. 9
1.8.3 Pricing Strategies ...................................................................................................... 9
1.9 Sales Justification ............................................................................................................. 9
1.10 Final Thoughts on Marketing ..................................................................................... 10
CHAPTER TWO .......................................................................................................................... 11
2.0 PRODUCTION AND TECHNOLOGY ANALYSIS ....................................................... 11
2.1 The Business Location ................................................................................................... 11
2.2 The Manufacturing Process ............................................................................................ 13
2.3 Buildings and Other Structures ...................................................................................... 14
2.4 Machinery and Equipment ............................................................................................. 15
2.5 Office Equipment ........................................................................................................... 16
2.6 Transport Equipment ...................................................................................................... 17
2.7 Other Equipment ............................................................................................................ 17
2.8 Direct operating costs ..................................................................................................... 17
2.8.1 Raw Materials ......................................................................................................... 17
2.8.2 Direct Labour .......................................................................................................... 18
2.8.3 Factory Overhead .................................................................................................... 18
2.8.4 Final Thoughts on Production................................................................................. 19
CHAPTER THREE ...................................................................................................................... 20
3.0 ORGANIZATION AND MANAGEMENT ANALYSIS ................................................. 20
3.1 Business Name and Logo ............................................................................................... 20
3.1.1 The Business Logo.................................................................................................. 20
3.1.2 Meaning of the Logo............................................................................................... 21
3.2 Story of the Business ...................................................................................................... 21
3.2.1 History of the Business ........................................................................................... 21
3.2.2 Other Management and Entrepreneurship Training ............................................... 22
3.3 Legal Personality ............................................................................................................ 22
3.4 Bio-data of the Entrepreneur .......................................................................................... 23
3.5 The Organizational Structure ......................................................................................... 24
3.6 Salaries and Office Supplies .......................................................................................... 25
3.6.1 Owner’s Salary........................................................................................................ 25

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 3.6.2 Other Salaries .......................................................................................................... 26
3.6.3 Office Supplies........................................................................................................ 26
3.7 Activities Before Operation ........................................................................................... 27
CHAPTER FOUR ......................................................................................................................... 29
4.0 FINANCIAL PROJECTIONS AND ANALYSIS ................................................................. 29
4.1 Financial Assumptions ................................................................................................... 29
4.2 Investment and Working Capital Plan ........................................................................... 30
4.3 Projected Profit and Loss Statements ............................................................................. 33
4.4 The Cash Flow ............................................................................................................... 35
4.5 The Balance Sheet .......................................................................................................... 37
4.6 Equity Sharing ................................................................................................................ 41
4.7 Collateral Offered ........................................................................................................... 42
5.0 CONCLUSIONS..................................................................................................................... 43

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LIST OF FIGURES
Figure 1: Plastic Lumber ................................................................................................................. 2
Figure 2: Ubungo Site Location.................................................................................................... 11
Figure 3: Production Process Flow Diagram ................................................................................ 13
Figure 4: Land Utilization Plan..................................................................................................... 14
Figure 5: Business Logo for EcoLumber ...................................................................................... 21
Figure 6: Organization Structure of EcoLumber .......................................................................... 24
Figure 7: Return on Investment .................................................................................................... 41

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LIST OF TABLES
Table 1: Number of Potential Buyers ............................................................................................. 4
Table 2: The Next Five-Year Demand Estimates ........................................................................... 5
Table 3: The Local Producers ......................................................................................................... 5
Table 4: Future Supply Estimates ................................................................................................... 6
Table 5: Future Demand and Supply Gap....................................................................................... 7
Table 6: The Five-Year Sales Forecasts ......................................................................................... 7
Table 7: Cost of Products................................................................................................................ 8
Table 8: The Machinery and Equipment ...................................................................................... 15
Table 9: Office Equipment............................................................................................................ 16
Table 10: Transport equipment ..................................................................................................... 17
Table 11: Other Equipment ........................................................................................................... 17
Table 12: Raw materials ............................................................................................................... 17
Table 13: The Direct Labour Requirement ................................................................................... 18
Table 14: Factory Overhead Costs................................................................................................ 18
Table 15: Management and Entrepreneurship Training Courses ................................................. 22
Table 16: Estimated Owner’s Salary ............................................................................................ 25
Table 17: Other Salaries................................................................................................................ 26
Table 18: Office Supplies ............................................................................................................. 26
Table 19: Pre operational Timeframe and Expenses .................................................................... 27
Table 20: Investment and Working Capital Plan .......................................................................... 30
Table 21: Projected Profit and Loss Statements ........................................................................... 33
Table 22: Projected Cash Flow ..................................................................................................... 35
Table 23: Projected Balance Sheet ............................................................................................... 37
Table 24: Equity Sharing .............................................................................................................. 41
Table 25: Collateral Offered ......................................................................................................... 42

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EXECUTIVE SUMMARY

Brief description of the company

Ecolumber is a partnership company that deal with production of plastic lumber which is more
durable, cheaper and can be mouldable to different shapes as compared to timber. The company is
located at Ubungo Dar es salaam, Tanzania and was established and register in 2021 as a Tanzanian
company. The company is first expecting to serve people in Dar es Salaam particularly in
Kigamboni and Keko then afterwards will expand to other regions in Tanzania such as Dodoma
and Mwanza.

Production of plastic lumber will be done using plastic waste which will be collected from different
places thereafter will be sorted, shredded, cleaned and extruded at 180℃. This operation is eco-
friendly as it will solid wastes i the country.

The project estimated cost is Tsh 292,437,449 of which 41% will be contributed by share owners
and the remaining 59% by loan from NMB bank. Return on Investment (ROI) of the project is
estimated to be positive and increase in five years hence the project is viable.

Brief profile of the entrepreneur

The company is owned by a group of five graduates from Chemical and Process Engineering at
university of Dar es Salaam.

The partners were motivated to enter into this business after realization of the effective use of
waste plastics and the reduction of deforestation. Therefore through this partners began to
undertake various courses on how to process plastic and plastic waste.

Project’s contribution to the economy

The project will increase the national income through tax collection; it will also generate
employment opportunities to both skilled and unskilled Tanzanians. The project will not only
reduce the plastic wastes, but also it will reduce deforestation hence a good hydrological cycle and
effective environmental preservations.

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 CHAPTER ONE

1.0 ECONOMIC AND MARKETING ANALYSIS

1.1 The Product
1.1.1 The Product Description
Plastic lumber is a plastic form of timber made from virgin or recycled plastic, with or without
additives with applications such as building, furniture and farming, among others. Additives can
be by using wood flour, mineral fillers, plant or synthetic fibres to obtain plastic lumber, a
substitute material for natural wood. Plastic lumber will exhibit several cross-sections such as
rectangular and circular, as well as other shapes depending on the market needs as shown in Figure
1. Plastic lumber can be used in the production of window and door frame, manufacturing of
furniture, production of marine walls and pilling, manufacturing of deck floors and fences. The
dimensions at first will be in 3.3 inches diameter and 10 ft length for the circular cross-section
which will have an approximate weight of 2.4 kg/m, and those of rectangular shape will have 4 in
× 4in and length of 10 ft which will have a weight of 2.1 kg/m.

Figure 1: Plastic Lumber

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Advantages of using plastic lumber over other timber;

• Plastic lumber cheap as it mainly consists of post-industrial plastic scraps which are of low
cost compared to the timber which involves cutting down of trees.
• They are made up of materials that do not absorb water and also, they do not have pores
for the water to move into them like wood, thus they cannot rot. Thus, they can be used to
make sea dikes in coastal areas.
• Plastic lumber is made up of inorganic material that make the insect fail to damage, since
the insect cannot feed on inorganic matter, wood is prone to insects since they are made of
organic matter.
• Plastic lumber can withstand 50 years without deteriorating, defects can easily be
controlled compared to wood-based products exhibits a series of structural defects such as
cracks, fungal damage and wrap resulting from varying moisture content and drying.
• Plastic lumber protects the forest by preventing new trees from being felled to make wood
products such as furniture. Also, minimize accumulation of used plastic waste in the
environment. It doesn’t require regular painting or maintenances such that it can be used
in environment that natural wood will be unable to withstand for a long period.

1.1.2 The Target Buyers

The target buyers will be both individuals, carpentry workshops, interior designers, building
contractors and institutions.

• Individuals

These are the ones who will buy plastic lumbers for building small cabins and pavements and some
other small uses at their home or work places.

• Carpentry workshops

They will be making furniture, doors, cupboards and beds using plastic lumber instead of wood.

• Interior designers

These will use plastic lumber for designing layout of the internal space in a building or structure.
Example Dolson Interiors at Oysterbay, Dar es Salaam.

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 • Building contractors

These will use plastic lumber for building houses, offices windows frames and sea dikes. Example
Mohammed Builder at Mikocheni, Dar es Salaam.

1.1.3 The Market Coverage

The market will first start at Dar es Salaam in areas such as Keko and Kigamboni. Then afterwards
expand in other regions such as Dodoma, Mwanza and other regions in Tanzania. This is because
they are the places that they are currently growing so the need of building materials is high in such
areas.

1.2 Demand Analysis

1.2.1 Number of Potential Buyers
Potential buyers that will be targeted in this business include individual persons that will want to
use plastic lumber to make desired products. This business will also serve institutions such as
schools and other starting with Dar es Salaam then move to the other cities as shown in Table 1.

Table 1: Number of Potential Buyers

Target (in %
Locations Estimated Population Potential Buyers
Population)
Dar es Salaam 4,365,000 22 960,300
Dodoma 2,084,000 18 375,120
Mwanza 2,773,000 15 415,950
Total 9,222,000 18.99 1,751,370

• An average buyer can buy the plastic lumber at least once per year, but with time the usage
rate will increase.
• Average buyers will spend up to Tsh 34,000 per plastic lumber.

1.2.2 Estimating Future Demand

Potential buyer increase rate will be about 3% per year (Held et al., 2017) and the future demand
within the five next years is calculated in Table 2 below.

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Table 2: The Next Five-Year Demand Estimates

Years Potential Buyers (Persons) Usage Rate (%) Future Demand Estimates

Year 1 960,300 18 172,854

Year 2 1,133,154 21 237,962

Year 3 1,371,116 24 329,068

Year 4 1,700,184 27 459,050

Year 5 2,159,234 30 647,770

Total 1,840,704

1.2.3 Justifying the Future Demand Estimates

The future demand of this business will be as estimated due to the following:

• The targeted areas are growing towns hence in as the construction industry prospers so as
this product.
• Through promotion and advertisement to increase awareness on benefits of plastic lumber
this product will be known and hence will increase the demand.

1.3 Supply Analysis

1.3.1 Imports
Presently, there are no identified importers of plastic lumber in Tanzania.

1.3.2 Local Producers

The local producers of the product are shown in Table 3.

Table 3: The Local Producers

Company Name Location Production/ Total

Month Production
EcoAct Tanzania Tegeta – Dar es Salaam 2100 14000

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1.3.3 Substitute
In the absence of plastic lumber, the customers can use sawn timber and wood lumber since plastic
lumber will be introduced to substitute the wood lumber.

1.3.4 The Competitive Advantage

The difference between our product and our competitors’ products is that we add additives to the
lumber to improve its aesthetics and mechanical properties such as strength and texture. We also
customize our products into different shapes depending on the need of the customer.

1.3.5 Future Supply Estimates

The future supply of the product in Dar es Salaam is as shown in the Table 4.

Table 4: Future Supply Estimates

Years Local Production Future Supply

Year 1 25000 45000
Year 2 26800 80400
Year 3 27500 82500
Year 4 28600 85800
Year 5 29500 88500
Total 137400 382000

1.4 Sales Forecasts

1.4.1 The Demand and Supply Gap
This entails evaluation of existing supply conditions towards bridging the gap between the level
of supply and the level of demand for the proposed plastic lumber business. Table 5 shows the
demand and supply gap.

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Table 5: Future Demand and Supply Gap

Years Future Demand Future Supply Demand and Supply Gap

Year 1 172,854 45,000 127,854
Year 2 237,962 80,400 157,562
Year 3 329,068 82,500 246,568
Year 4 459,050 85,800 373,250
Year 5 647,770 88,500 559,270
Total 1,840,704 382,200 1,428,504

The target market is 82% of the demand and supply gap

1.4.2 The Sales Forecasts

The sales forecast for the 5 years are as shown in Table 6.

Table 6: The Five-Year Sales Forecasts

Years Demand and Supply Gap

Year 1 127,854
Year 2 157,562
Year 3 246,568
Year 4 373,250
Year 5 559,270

Ninety-two percent (92%) of the annual sales will be paid in cash by our potential buyers.

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1.5 Marketing Plan
1.5.1 Product Strategies
The product details are;

i. Brand

The brand name of the product made is EcoLumber, indicating how eco-friendly our product is.

ii. Cost
The cost of the lumber product produced is as shown in Table 7.

Table 7: Cost of Products

Item Size/Unit Price (Tsh)

Rectangular Plank 4 in × 4 in, 8 feet 34,500
Round Plank 3.3 in, 8 feet 24,500

1.6 Channels of Distribution

1.6.1 The Salesperson
The actual selling of our product will be done by the retailers and this will involve direct selling
of the product to them. The salesperson will be paid Tsh. 1,400,000 per month.

1.7 The Channels of Distribution

The distribution process of the product will involve two categories which are;

• Producer-retailers-customers.
• Producers-customers.

The products from the company will be transported to retailers directly without wholesalers and
then the retailers will sell the products to the customers.

Another channel of distribution is the product will be sold to the customer directly from the
production site.

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1.8 Promoting and Advertising
1.8.1 The Sales Store
In order to make our product reach out more customers in town and be interested with it, the
following are initiatives means to be employed.

• Aesthetics of the product packages.

• Use of posters, flyers, t-shirts and billboard to be supplied to the distribution agents.

1.8.2 Promotional Strategies

To the customers who purchase the product regularly will be provided with the discount.

There will be a website that will help promoting our products, poster and flyers and social media

1.8.3 Pricing Strategies

• Cost plus method will be used to determine the price of our product. This method involves
encountering all the costs up to the sale point of the product.
• Discount will be provided to large orders and cash payment.

1.9 Sales Justification

The daily sales for a 200 – business day – year would be Tsh. 2,647,000.

We believe the marketing plan we wrote is sufficient enough to make the sales every day. This is
because

i. Our targeted customers are in between the lower and middle class, hence will sufficient
meet the both classes in a reasonable cost
ii. Our products and services will be faster than competitors due to utilization of affordable
transportation facilities.
iii. The product features such as quality, quantity, brands, labels and packaging will attract
many people and hence outsell our competitors.
iv. Use of proposed promotion and advertisement strategies, our product will be sold as
planned and many people will be more informed and aware of our quality product.

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1.10 Final Thoughts on Marketing
i. The production of our products from the plastics, we are confident enough that our product
will outsell the present competitors who use timber and local plastic lumber producers as
our products contains additives that improves aesthetics and mechanical properties such as
strength and texture.

ii. Buyers of our products are customers from construction materials industry and furniture
works who focus on strength, aesthetic and life span of our products.
iii. Sales person salary is set according to Tanzania salary scales and retailers’ margin is
accounted to ensure strong business relationship.
iv. Sales are made on daily basis for the produced products.

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 CHAPTER TWO

2.0 PRODUCTION AND TECHNOLOGY ANALYSIS

2.1 The Business Location
The proposed business location will be Ubungo, Dar es Salaam. Figure 2 shows the location and
how to reach the site.

Figure 2: Ubungo Site Location

Reasons for selection of the location

i. The area itself is one of the locations for our potential buyers. The area consists of people
who have high demand on the product so as they can use it to manufacture various items
such as tables, chairs and various related equipment.
ii. Situated in a planned designated industrial area. The area is well planned and situated for
industrial purpose.
iii. High availability of skilled and unskilled labours. The industry cannot run alone but due to
the presence of skilled labour and unskilled labour it helps to produce sufficient and quality
product while meeting customer demands.
iv. High availability of the raw materials. Due to the increase in population at the Ubungo area
hence consumption rate is high which lead to the production of plastic be high.

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 v. Availability of the basic infrastructures and power.

The land purported for the plastic lumber production factory and offices is rented for Tsh. 300,000
per month with waste disposal fees of Tsh. 50,000 per month.

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2.2 The Manufacturing Process
Plastic waste

COLLECTION

SORTING

SHREDDING

Clean water
CLEANING

120 to
180 EXTRUSION

Plastic lumber

Figure 3: Production Process Flow Diagram

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2.3 Buildings and Other Structures
The factory is divided in two parts namely, Recycling and Production unit, and Warehouse. The
facility is located in an area of 276 m 2. Apart from these two units there is an office which will
looks for the supply of required raw materials and also take care of logistics. The rented area and
buildings are as shown in the Figure 4.

Raw Materials Inventory Washing Area

Cutting
Machine

Scraps Store Chip Store

Crusher
Machine

Machine Machine Machine Machine

Office
Finished good Inventory

Figure 4: Land Utilization Plan

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2.4 Machinery and Equipment
Machinery are items that are directly involved in the production and equipment are items that are
not directly associated to production but they are required for efficient operation. Machinery and
equipment that will be needed are listed in Table 8

Table 8: The Machinery and Equipment

Machinery Specification Quantity Sources Estimated

Needed Cost (in Tsh)
Sorting machine Power 100 KW 1 Alibaba 66,082,859
Capacity 1200kg/h
98% sorting accuracy
Washing Capacity 1000kg/h 1 Alibaba 4,985,198
machine Power 15 KW
Shredding Double shaft shredder 1 Alibaba 22,027,620
machine Power 27 kW
Capacity 2000kg/h
Plastic extruder Speed 150 m/min 1 Alibaba 11,593,484
Power 75 KW
Max. temp. 230 ℃
Equipment
Belt conveyor Rubber belt (20 m) 1 INTEX 10,000,000

PPE Industrial safety gears 25 pieces Zoom 2,500,000

Tanzania
Forklift Driving power 3 kW 3 Alibaba 12,585,886
Max. rated load 5000
kg/h
TOTAL 129,775,047

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Training for workers will be needed and it will cost Tsh. 2,000,000

Some trial production will be needed to try out the machine and this will cost about Tsh.
10,000,000.

2.5 Office Equipment

The proposed business will need the office equipment that are listed in Table 9

Table 9: Office Equipment

Office Equipment Quantity Sources Estimated Costs

Needed (in Tsh)

Executive Tables 2 Alibaba 1,500,000

Executive Chairs 2 U-buy 450,000

File Cupboards 2 U-buy 480,000

Office Tables 2 Alibaba 720,000

Visitors Chairs 5 U-buy 675,000

Computers 2 Touchow Electronics 5,100,000

Printers 2 Touchow Electronics 900,000

Fax Machine 1 Touchow Electronics 600,000

Telephone line 1 Beem Electronic 450,000

CCTV camera System 1 Benson Electrons 3,750,000

Other office items - - 750,000

Total 15,375,000

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2.6 Transport Equipment
Table 10: Transport equipment

Transport Quantity Needed Sources Estimated Costs (in Tsh)

Suzuki Carry 2 Enhance Auto 5,400,000
Canter 2 Be Forward Tanzania 19,900,000
Total 25,300,000

2.7 Other Equipment

Table 11: Other Equipment

Other Equipment Needed Quantity Sources Estimated Costs (in

Needed Tsh)
Overhead crane 1 B2B Trade 11,600,000
Fork lifts 2 Alibaba 500,000
Total 12,100,000

2.8 Direct operating costs

2.8.1 Raw Materials
Table 12: Raw materials

Raw Material Quantity Needed per Sources Price per Unit (in
Product Tsh/kg)
Plastic waste 16.8 kg Plastic collection 120
centers
Saw dust 2 kg Carpentry 1000
Total 1120

The estimate percent of materials to the overall price of the product 27.5%

The estimate total annual raw material cost considering the production volume is Tsh.
265,448,819.

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2.8.2 Direct Labour
The proposed business will need production workers as listed in Table 13.

Table 13: The Direct Labour Requirement

Position Quantity Skill Level Annual Wages

Needed
Supervisory 2 Bachelor degree in chemical and 50,000,000
Engineers process engineering
Machine operators Diploma in mechanical 57,600,000
8 engineering
Forklift drivers 3 Form four 10,800,000
Total 118,400,000

Percent of direct labour to the overall price of the product is about 10.8%

2.8.3 Factory Overhead

The costs incurred to maintain and run the plastic lumber factory annually as estimated from
overall product price are shown in Table 14.

Table 14: Factory Overhead Costs

Annual Costs
Factory Overhead Quantity Needed Monthly Costs (Tsh)
(Tsh)

Electricity 21,153.3 kWh 5,000,000 60,000,000

Transport (Fuel and

- 750,000 9,000,000
related costs)
Water 45.1 m3 75,000 900,000
Other utilities - 75,000 900,000

Production Incentives - 1,200,000 14,400,000

Overtime Payment - 750,000 9,000,000

Operation & Maintenance - 625,000 7,500,000

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 Annual Costs
Factory Overhead Quantity Needed Monthly Costs (Tsh)
(Tsh)
Other Expense - 625,000 7,500,000

Telephone & Internet - 500,000 6,000,000

Total 115,200,000

The estimate percent of factory overhead to the overall price of the product is 12%.

2.8.4 Final Thoughts on Production

i. It would take 10 minutes to produce 10 ft long product
ii. In one eight – hour day we can produce 51 logs of lumber.
iii. Yes! It we can produce 140 logs per day
iv. Factors that can prevent production includes machine breakdown and logistics delay
v. Operating under a 200-day year,28,000 logs can be produced
vi. Raw materials, direct labour, and factory overhead costs are 27.5%, 10.8% and 12% of the
selling price respectively.
vii. Multiplying the total annual production volume by your price per unit under the marketing
section, it approximately reaches our target sales forecast for Year 1 by 62%.

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 CHAPTER THREE
3.0 ORGANIZATION AND MANAGEMENT ANALYSIS
3.1 Business Name and Logo

The business name is EcoLumber. It is a combination on two words Eco which means not harming
the environment and lumber which means timber or logs. Therefore, EcoLumber means timber or
logs that do not harm the environment.

3.1.1 The Business Logo

A business logo is one of the core aspects of promoting the company as it gives something to build
your brand around. Having a logo makes your company instantly recognizable and improves your
marketing efforts. A logo also helps to improve your relationship with your clients. They will see
you as a more professional company, and can even start to build attachments to your brand.

The following are the benefits of having a business logo for Ecolumber.

• Brand Recognition

Having a strong, memorable logo help the business stick in peoples’ minds.

• Professionalism

Having your own logo will influence the way your customers and suppliers treat you.

• Product Branding
Getting your brand out there is another way of ensuring an impression of reliability and longevity.

The logo placed on other products and merchandise can boost brand trustworthiness.
• Stand Out
A good logo will draw the eye, and help you stand out amongst your competition.

• Inform Customers

It helps customers recognize your market sector immediately, giving a clear indication of what
your business does. Whether you are using abstract imagery or a more traditional design, it can
help potential customers understand how you can help them.

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 Figure 5: Business Logo for EcoLumber

3.1.2 Meaning of the Logo

• Green colour represents growth, and evokes a feeling of relaxation and healing as shown
in Figure 5. It is the colour of healthy vegetation, so it reminds viewers of nature and health.
It is also associated with money and wealth.

• The sharp edges, depict strength and presence of the products and company.
• The triangles are associated with stability and ingenuity of the company and its products.
• The bottles shown in Figure 5 represents the examples of the recycled plastics that are used
as raw materials including the PET bottles.

3.2 Story of the Business

3.2.1 History of the Business

The whole idea of making plastic lumber goes a long way back when one of other group member
participated in UDIEC challenge of 2018 of coming up with different ideas on environmental
conservation. Being in a group that participated on this challenge she was able to get different
ideas on how to conserve the environment by utilizing plastic waste. On sharing the idea with the
rest of group members it was found that other three the members shared the same driven
concerning on conserving the environment by minimizing the plastic waste that mostly pollute the
environment. The other member highlighted that the production plastics lumber was a good
opportunity to make profit by introducing a more durable timber.

21
A thorough discussion was done by all the group members and performed a preliminary study on
the requirements of the lumber on construction activities. We realized that a lot of timber is
required for construction meaning that a lot of trees are cut to satisfy the demand. Thus, the need
for production of plastic lumber was necessary that could both conserve the environment and still
serve people.

3.2.2 Other Management and Entrepreneurship Training

There are courses which were undertaken by the managers last year in order to deepen their
understanding on the business they are conducting. The courses, duration and costs for each
course are shown in Table 15.

Table 15: Management and Entrepreneurship Training Courses

Courses Duration Cost

Plant Design and Economics 3 months 100,000

Business and Impact Planning for social 5 weeks 100,000

Enterprise

Soap Making and Entrepreneurship Skills 1 week 150,000

Engineering Economics 3 months 100,000

Plastic Technology 3 months 100,000

TOTAL 550,000

3.3 Legal Personality

The legal personality of the proposed business will be a partnership of 5 people working together
to rise capital cost for the business and sharing managerial and leadership responsibilities available
in the plant. Average amount of money to be spent on license, permit and registration fee will be
about Tshs. 1,120,000.

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3.4 Bio-data of the Entrepreneur

The founders of EcoLumber have been involved as trading entrepreneurs and work in processing
industries since 2017. With experiences of over 3 years in plastic chemistry and processing, unit
operations, product design, marketing and economics, the company has the best managers in the
industry.

Most workers being chemical engineers graduate now, the company’s employees started their
entrepreneur business to influence other students to engage in such activity while pursuing their
education endeavours. Prior to being entrepreneurs, EcoLumber managers spent their school
holidays as environmentalists and so the deeply know the importance of protecting the
environment and its sustainability by participating in different programs like planting trees around
Mount Kilimanjaro.

The founders are hardworking and with highly developed interpersonal skills and recognized for
delivering quality results, outstanding customer satisfaction and safety record. Able to multitask
effectively in handling high-pressure and crisis work situations. Strong laboratory, research, and
analytical skills.

In free time, the workers organize themselves to support the groups with the program of collecting
trash around different parts in Dar es Salaam.

23
3.5 The Organizational Structure
The EcoLumber Organization structure is illustrated in Figure 6

Managing Directors

Raw Materials Human Resource

Production Manager Financial Manager
Manager Manager

Operator
Engineer

Operator

Accountant Sales officer Procurement officer

Figure 6: Organization Structure of EcoLumber

24
3.6 Salaries and Office Supplies

3.6.1 Owner’s Salary

Owner’s salary was calculated according to their monthly expenses as shown in Table 16.
Table 16: Estimated Owner’s Salary

Estimated Expenditure Monthly (Tshs)

House Rent/ Payments 500,000

Electricity 200,000

Water 100,000

Communications and Telephones 200,000

Food, general housekeeping expenses 500,000

Clothing 900,000

Personal insurance 100,000

Entertainment and videos 200,000

Servants 300,000

Transportation 600,000

Medical Expenses 600,000

Savings plans 3,000,000

Children expenditures and presents 2,000,000

Total Estimated Expenditure 9400,000

From Table 16 the estimated owner’s monthly salary is Tsh 10,000,000 and estimated owner’s
yearly salary is Tsh 120,000,000.

25
3.6.2 Other Salaries
The other salaries are calculated in Table 17

Table 17: Other Salaries

Position Number Monthly

Marketing 2 800,000

Production 3 1,500,000

Finance 1 500,000

Others 2 100,000

Total 2,900,000

3.6.3 Office Supplies

The other supplies for production of plastic lumber are calculated in the Table 18.

Table 18: Office Supplies

Office Supplies Quantity Needed Annual Cost (Tshs)

Receipt journal 2 6,000

Cash book 12 36,000

Pens 5 box 30,000

Ruler 3 1,500

Staples 5 box 75,000

Rim paper 5 50,000

Printer ink 10 bags 200,000

TOTAL 398,500

26
3.7 Activities Before Operation
Activities to be performed before operation are as listed in Table 19 in form of a timeframe.

Table 19: Pre operational Timeframe and Expenses

ACTIVITY ORGANISATION MONTHS COST

1 2 3-4 5-7 8 9 10-11

Organising the business EcoLumber 500,000

Business registration TRA 1,000,000

Loan application NMB 200,000

Waiting for loan release NMB -

Buying machines and INTEX 129,775,000

equipment

Waiting for machines INTEX & ALIBABA -

delivery

Facility and production OSHA 2,000,000

inspection

27
Buying office equipment ALIBABA 15,375,000
and supplies

Recruiting workers EcoLumber 2,000,000

Training programs EcoLumber 1,000,000

TOTAL 151,850,000

28
 CHAPTER FOUR

4.0 FINANCIAL PROJECTIONS AND ANALYSIS

4.1 Financial Assumptions

In making the financial projections, the proposed business applied the following
assumptions detailed below:

1. Sales will increase will increase 1.6 percent yearly

2. About 100 percent of the annual sales will be in cash and the rest payable during the
next business year.
3. The direct operating costs as percentage of sales will be as follows: materials 18.3 %;
labour 7.2%; Factory overhead 7.95 %.
4. Generally, costs will increase by 10 % per year.
5. The proposed business will not obtain any credit from the materials and machinery and
equipment suppliers.
6. The proposed business will have negligible or nil inventory level at the end of each
business year.
7. The proposed business will have only one month of working capital level. Note that no
bank will give you loans equivalent to three months or more of working capital.
8. Depreciation and POI amortization are on straight line basis and will be charged
annually.
9. All cash surplus is re-invested throughout the fire year period.
10. The loan (both for fixed and working capital) will be paid in 5 years and no grace
period.
11. The loan principal payments will be equal throughout and are paid at year end. The
first principal payments will be made at the end of Year 1.
12. The interest rate of the fixed investment loan will be 10 percent yearly and the working
capital loan, 10 % yearly.
13. The proposed business is subject to 30 % of tax on net profit at the end of business year

29
4.2 Investment and Working Capital Plan
The investment and working plan are as shown in Table 20.

Table 20: Investment and Working Capital Plan

ITEMS Total Equity Loan

A. FIXED INVESTMENTS

1. Land 0 0 0

2. Office equipment and furniture 15,375,000 15,375,000 0

3. Vehicles 25,300,000 25,300,000

4. Machinery and equipment 129,775,047 0 129,775,047

5. Buildings and other structure 3,600,000 3,600,000

Total Fixed Investments 174,050,047 40,675,000 133,375,047

B. PRE-OPERATING INVESTMENT

1. Business Plan Preparation 500,000 500,000

2. License and Registration 1,000,000

30
3. Skills and Management training 2,000,000 2,000,000

4. Trial production 10,000,000 10,000,000

5. Marketing Survey 10,000,000 10,000,000

Total Pre-Operating Investment (POI) 23,500,000 23,500,000

C. TOTAL INVESTMENTS (A+B) 197,550,047 40,675,000 156,875,047

D. WORKING CAPITAL

DIRECT OPERATING COSTS

1. Raw materials 265,448,819

2. Labour costs 104,400,000

3. Factory overhead 115,200,000

4.Others 0

Total Direct Operating Costs 485,048,819

31
INDIRECT OPERATING COSTS

1. Managing Director Salary 600,000,000

2. Other Salaries 50,000,000

3. Rental 3,600,000

Total Indirect Operating Costs 653,600,000

TOTAL ANNUAL OPERATING COSTS 1,138,648,819

WORKING CAPITAL REQUIRED 94,887,402 10,000,000 84,887,402

TOTAL PROJECT COST (C + D) 292,437,449 50,675,000 241,762,449

EQUITY SHARE (%) 17 83

32
4.3 Projected Profit and Loss Statements
The projected profit and loss statement for plastic lumber production is as shown in Table 21.

Table 21: Projected Profit and Loss Statements

ITEMS Year 1 Year 2 Year 3 Year 4 Year 5

Planned Production (in units) 42,000 50,400 70,480 105,720 180,429

A. SALES 1,449,000,000 1,738,800,000 2,431,560,000 3,647,340,000 6,224,800,500

B. DIRECT OPERATING COST

1. Raw materials 265,448,819

2. Labour costs 104,400,000

3. Factory overhead 115,200,000

4.Others 0

Total Direct Operating Costs 485,048,819 533,553,701 586,909,071 645,599,978 710,159,976

33
C. GROSS PROFIT (A - B) 963,951,181 1,205,246,299 1,844,650,929 3,001,740,022 5,514,640,524

D. INDIRECT OPERATING COSTS

1. Managing Director Salary 600,000,000

2. Other Salaries 50,000,000

3. Rental 3,600,000

Total Ind. Op. Costs bef Dep'n & POI 653,600,000 718,960,000 790,856,000 869,941,600 956,935,760

9. Depreciation 34,124,505 34,124,505 34,124,505 34,124,505 34,124,505

10. POI Amortization 4,700,000 0 0 0 0

E. TOTAL INDIRECT OPER'G COSTS 692,424,505 753,084,505 824,980,505 904,066,105 991,060,265

F. OPERATING PROFIT (C - E) 271,526,676 452,161,794 1,019,670,424 2,097,673,917 4,523,580,259

G. INTEREST (10%) 24,176,245 22,478,497 16,858,873 16,858,873 16,858,873 97,231,360

H. PROFIT BEFORE TAX (F -G) 247,350,431 429,683,298 1,002,811,552 2,080,815,045 4,506,721,387

I. TAX (30%) 74,205,129 128,904,989 300,843,466 624,244,513 1,352,016,416

K. PROFIT (H - I) 173,145,302 300,778,308 701,968,086 1,456,570,531 3,154,704,971

34
 L. BEP (E / C) x 100% 72 62 45 30 18

DEPRECIATION CALCULATOR Value (Ts) Period (Yrs) Annual Dep'n

1. Land 0 50 0

2. Office equipment and furniture 15,375,000 5 3,075,000

3. Vehicles 90,000,000 5 18,000,000

4. Machinery and equipment 129,775,047 10 12,977,505

5. Buildings and other structure 3,600,000 50 72,000

TOTAL 34,124,505

AMORTIZATION CALCULATOR Value (Ts) Period (Yrs.) Amort. / Year

1. Pre-Operating Investment 23,500,000 5 4,700,000

4.4 The Cash Flow

The cash flow for the production of Plastic Lumber is as shown in Table 22.

Table 22: Projected Cash Flow

PROJECTED CASH FLOW(Tshs)

35
ITEMS Year 0 Year 1 Year 2 Year 3 Year 4 Year 5

Sales 1,449,000,000 1,738,800,000 2,431,560,000 3,647,340,000 6,224,800,500

A. Cash In-Flow

1. Cash Sales 1,449,000,000 1,738,800,000 2,431,560,000 3,647,340,000 6,224,800,500

2. Receivables 0 0 0 0

3. Equity 50,675,000

4. Fixed Investment Loan 156,875,047

5. Working Capital Loan 84,887,402

6. Beginning Cash Balance 0 94,887,402 289,879,728 568,586,299 1,248,482,648 2,682,981,442

Total Cash-In Flow 292,437,449 1,543,887,402 2,028,679,728 3,000,146,299 4,895,822,648 8,907,781,942

B. Cash Out-Flow

1. Total Investment 197,550,047

2. Direct Operating Costs 485,048,819 533,553,701 586,909,071 645,599,978 710,159,976

36
 3. Total Ind. Ope Costs bef. Dep'n & POI 653,600,000 718,960,000 790,856,000 869,941,600 956,935,760

4. Interest 24,176,245 22,478,497 16,858,873 16,858,873 16,858,873

5. Tax 74,205,129 128,904,989 300,843,466 624,244,513 1,352,016,416

Total Cash Out-Flow 197,550,047 1,237,030,193 1,403,897,187 1,695,467,409 2,156,644,964 3,035,971,025

C. Net Cash (A - B) 94,887,402 306,857,208 624,782,541 1,304,678,890 2,739,177,684 5,871,810,917

D. Loan Payments

1. Principal for Fixed Inv. Loan 156,875,047 0 39,218,762 39,218,762 39,218,762 39,218,762

2. Principal for Working Cap. Loan 84,887,402 16,977,480 16,977,480 16,977,480 16,977,480 16,977,480

Total Loan Payments 0 16,977,480 56,196,242 56,196,242 56,196,242 56,196,242

E. Ending Cash Balance (C - D) 94,887,402 289,879,728 568,586,299 1,248,482,648 2,682,981,442 5,815,614,675

Growth/p.a. based on year zero 2.1 2.9 7.2 15.1 33.0

4.5 The Balance Sheet

The balance sheet for the production of Plastic Lumber is as shown in Table 23.

Table 23: Projected Balance Sheet

37
 Projected Balance Sheet (Tshs)

Year 3 Year 4 Year 5

ITEMS Year 0 (2016) Year 1 (2017) Year 2 (2018)
(2019) (2020) (2021)

I. ASSETS

1.1. CURRENT ASSETS

1. Cash 94,887,402 289,879,728 568,586,299 1,248,482,648 2,682,981,442 5,815,614,675

2. Receivables 0 0 0 0 0

3. Inventories

Total Current Assets (A) 94,887,402 289,879,728 568,586,299 1,248,482,648 2,682,981,442 5,815,614,675

1.2. FIXED ASSETS

1. Land 0

2. Office equipment and furniture 15,375,000

3. Vehicles 25,300,000

4. Machinery and equipment 129,775,047

38
5. Buildings and other structure 3,600,000

Total Fixed Assets 174,050,047

Accumulated Depreciation 34,124,505 68,249,009 102,373,514 136,498,019 170,622,524

Book Value of Fixed Assets (B) 174,050,047 139,925,542 105,801,038 71,676,533 37,552,028 3,427,524

POI 23,500,000

Accumulated POI 0 4,700,000 4,700,000 4,700,000 4,700,000 4,700,000

Book Value of POI (C) 23,500,000 18,800,000 18,800,000 18,800,000 18,800,000 18,800,000

TOTAL ASSETS (A + B + C) 292,437,449 448,605,270 693,187,337 1,338,959,181 2,739,333,470 5,837,842,198

2. LIABILITIES & EQUITY

2.1. CURRENT LIABILITIES

1. Account Payable 0

2. Working Capital Loan 84,887,402 67,909,921 50,932,441 33,954,961 16,977,480 0

Total Current Liabilities (D) 84,887,402 67,909,921 50,932,441 33,954,961 16,977,480 0

39
2.2. LONG TERM LIABILITIES

1. Fixed Investment Loan 156,875,047 156,875,047 117,656,285 78,437,524 39,218,762 0

Total Long-Term Liabilities (E) 156,875,047 156,875,047 117,656,285 78,437,524 39,218,762 0

3. EQUITY

1. Owner's Equity 50,675,000 50,675,000 50,675,000 50,675,000 50,675,000 50,675,000

2. Profit of Previous Period 173,145,302 473,923,610 1,175,891,696 2,632,462,228

3. Current Profit 173,145,302 300,778,308 701,968,086 1,456,570,531 3,154,704,971

Total Equity (F) 50,675,000 223,820,302 524,598,610 1,226,566,696 2,683,137,228 5,837,842,198

TOTAL LIABILITIES AND

292,437,449 448,605,270 693,187,337 1,338,959,181 2,739,333,470 5,837,842,198
EQUITY (D + E + F)

ROI = (Profit/Total Assets) x 100%) 39 43 52 53 54

40
 60

50

40

30
ROI (%)

20

10

0
1 2 3 4 5

year

Figure 7: Return on Investment

4.6 Equity Sharing

The equity shared among the shareholders is as shown in Table 24.

Table 24: Equity Sharing

Shareholder Equity (in Tshs) Ownership (in %)

Edina D Meela 24,000,000 20
Diana U J Laswai 24,000,000 20
Loveness S Mtui 24,000,000 20
George G Temu 24,000,000 20
Christian J Hugho 24,000,000 20

Totals 120,000,000 100

41
4.7 Collateral Offered
Collateral offered by the shareholders to the bank are as shown in Table 25.

Table 25: Collateral Offered

Shareholder Collateral Type Est. Values (in Tsh)

Edina Davis Meela House 50,000,000
Diana Upendo Jerome Laswai Truck 30,000,000
Loveness S Mtui Land 40,000,000
George Gasper Temu Land 50,000,000
Christian J Hugho Cash in saving account 30,000,000
TOTAL 200,000,000

42
5.0 CONCLUSIONS
Conclusively, from this project of producing plastic lumber number of employees that are expected
to be 20 and as the business grow the number of employees will increase. Also, the government of
Tanzania will obtain tax revenues of 30% of the net profit which will contribute to the economic
growth. The loan Tshs 156,875,047 will be borrowed from NMB Bank and will be paid within 5
years with the interest rate of 10%. On top of that the business will benefit us as the entrepreneur
with a net profit of about Tshs 173,145,302 each year and is expected to increase as the business
grows as the Return On investment (ROI) of the project is positive and increasing on the first five
years shown in Figure 7. Also, the business has breakeven point of 72%, 62%, 45%, 30% and 18%
for the first, second, third and fourth year respectively.

43