Addis Ababa, Ethiopia

Tel 0913213407 Fax. +25111568978

Martha Getaneh
 TABLE OF CONTENTS

PAGE

I. SUMMARY 168-3

II. SERVICE DESCRIPTION & APPLICATION 168-3

III. MARKET STUDY AND SERVICE CAPACITY 168-5

A. MARKET STUDY 168-5
B. SERVICE CAPACITY & SERVICE PROVISION
PROGRAMME 168-8

IV. MATERIALS AND UTILTIES 168-9

A. MATERIALS 168-9
B. UTILITIES 168-9

V. TECHNOLOGY & ENGINEERING 168-10

A. TECHNOLOGY 168-10
B. ENGINEERING 168-12

VI. MANPOWER & TRAINING REQUIREMENT 168-16

A. MANPOWER REQUIREMENT 168-16
B. TRAINING REQUIREMENT 168-17

VII. FINANCIAL ANALYSIS 168-17

A. TOTAL INITIAL INVESTMENT COST 168-18
B. OPERATING COST 168-19
C. FINANCIAL EVALUATION 168-20
D. ECONOMIC BENEFITS triple 168-21
I. EXCUTIVE SUMMARY

Now a day lack of babysitter is the biggest problem that parent face,
which can lead to parents not being able to do their job properly. Baby
day care is one of the solutions to reduce the parents hassle.

MM Day care center is a private limited company. MM Day care center

will offer a secure, loving environment for children ages three months to
six years and will be staffed by child care professional trained in early
leaning programs and curricula.

We will offer the same quality of day care services and programs as well
as the accreditations that the large, national chains do, but at
approximately 25% lower prices.

We intend to diversify our service offerings after our first year in

business, thereby adding new revenue streams and increasing operating
income.

This profile predicts the establishment of a child day care center with a capacity to
accommodate 1000 children. Child day care centers provide care and supervision to
preschool children while their parents are at work or school. Day care centers employ
trained personnel and offer various educational activities to babies.

The present demand for the proposed service is estimated at 5,000 children per annum.
The demand is expected to reach at 10,000 children by the year 2020.

The total investment requirement is estimated at Birr 1 million, out of which Birr 400,000
thousand is required for equipment. The service will create employment opportunities for
114 persons.

III. ENVIRONMENTAL AND INDUSTRY ANALYSIS

MM day care offers services which are vitally important in today’s fast
paced, dual-income world. As an increasing number of families have
become dependent on two incomes, the need for quality child care has
skyrocketed.
There is no doubt, in the Riverview, FL area, that there is room and a
need for MM daycare servuce Market demographics to support this
statement can be found below.

MARKET TRENDS

Currently there are more family caregivers than licensed child care
facilities nationwide. However, this business model can’t keep up with
the needs of the growing child care industry. In the family care giver
paradigm, space is limited and quality of care is questionable – in many
cases viewed as only slightly higher quality than babysitter services.

SERVICE BUSINESS ANALYSIS

MM child daycare is in the child care services industry, which includes

several models:

1. Licensed Child Care Facilities: Business facilities that offer child

daycare services.
2. Family Child Care Homes: Individuals that offer child daycare
services in their homes.
3. Specific Interest Based Programs: Businesses that offer specialized
instruction such as gymnastics, martial arts and athletics.
4. Church Child Care Facilities: Religious organizations that offer
child daycare services in their communities.

ANALYSIS OF COMPETITIONS

Price, service, certification and reputation are critical success factors in

the child care services industry therefore MM child daycare will compete
well in our market by offering competitive prices, high-quality child care
services, and leading-edge educational programs with certified, college-
educated instructors, and by maintaining an excellent reputation with
parents and the community in which we serve.

Main competitors of this service are private child daycare centers, there
are a lot of daycares around the place and they are already established in
the market. But they have a weakness that is they allowed a certain
number of children in the center and they provide the service by non-
professional stigma.

MARKET SEGMENTATION

MM daycare has a focus on meeting the local community need for child
care services within the 10-mile radius of summit condominium.
Childrens will be taken in flexibly on either a full-day or half day basis.

The daycare will establish a significantly large, full-time, regular client

base in order to establish the healthy, consistent revenue base which
will ensure stability of the business. Customer and community relations
are extremely important, as it is imperative to keep the parents pleased
in order to keep their children in the daycare.

This client base will provide a higher profit for the daycare since
instructor-to-student ratios are higher, and the children’s require more
educational services, which are the primary focus of the daycare. By
offering children care servce and pre school tutorial service, MM daycare
will attract these profitable business clients, producing significant
supplemental revenues.

TARGET MARKET SEGMENT STRATEGY

The target market for MM daycare is full-time working couples. Referral

marketing, direct-mail campaigns and community activity days will be
the primary types of marketing strategies utilized. Maintaining and
enhancing its reputation with families and in the community will be
crucial in obtaining the planned market share growth of this target
market.

MARKET NEEDS

With inflation continuing to rise each year, the typical Ethiopian family
now requires dual or supplemental incomes. This trend has created a
need for quality child care services. We do not see this model changing in
the foreseeable future. In fact, based on the growth in the Summit area,
specifically the Condominium communities, we expect the need to
increase.
IV. DESCRIPTION OF VENTURE

A) DESCRIPTION OF THE BUSINESS GOALS

The most parents who are seeking child care services are young and
employed parents. These parents are living in or in a nearby to
condominium apartments. These parents enrolled their kids to a day
care centers, because they find it a better option to take care of their
children while they are away for work.

Therefore, MM daycare first objective is to determine the facility of

simply day care for children and to provide a structured learning
environment. This service includes feeding the child, providing a play
environment and nap times and school setting. we have structured
activities from drop-off to pick-up, which includes learning activities.

Another goal of MM daycare is to determine how the childred will grow

with our care. That means children will achieve by interacting with each
other. These include socially accepting each other by learning from each
other, achieving physical health by learning how to care for themselves,
and developing the intellectual ability to think for themselves. Another
goal would be for children to learn how to have a positive self-image and
respect for others.

Another objective of our day care is to be preferable by Parents by our

quality service. Learning objectives can also encompass the disciplinary
style for the facility. Different methods include time out or abstaining
from a fun activity.

The final and main goal of MM day care is to make a profit. To

accomplish this goal, our daycare must keep accurate financial records
of the money coming in and going out. This includes the fees being paid
by clients and the money being paid to employees and to purchase
supplies. There must be a fine balance between spending enough money
to run an effective business but not spending so much money that there
is nothing left as profit. And we should consider hiring a bookkeeper to
work a few hours a week to ensure that the records are correct.

Service Description

Generally, the regular day care hour is from 6 am through 6pm. It depends on the day
care center whether breakfast will offer for the children. However for this particular
project, breakfast will not be included (offered) for the children. Mid-morning and mid-
afternoon, snacks are required. It definitely provides a hot meal for the children at noon.
This entails a cook, dishes, planned menus, food supplies in bulk.

The daycare centers operate according to planned routines. The day is broken down in to
one-hour segments, with pre-planned curriculum, much the same as classes at a public
school.

A typical day begins with a play period from whenever the children arrive until about 9
o’clock. For this, it needs indoor sand boxes, toys and perhaps a family sized television
set. From 9 to 10, the children are separated into groups-generally by ages and hold a
reading or story-telling session. The mid-morning snack time is scheduled sometime
between10 to 11.

From the younger children, this might include a mid-morning nap. After snack time, a
learning session is usually held. Typically, this is the time when guests are invited to
speak or entertain the children. Children will enjoy visits by police men, firemen and
others who talk to them about citizenship, show films, and teach them about the things
they do in the community. Also will demonstrate such things as drawing, working with
clay, building with wood, making things out of paper, and hundreds of other talents or
skills they might be learning.
Noon to 1 o’clock is generally lunch time, and from 1 until 2 is another learning of chores
session. For an infant under 1 year of age, it needs to give very careful attention to the
child’s needs. For an older child as described above, his developing play and learning
styles, interaction with other children, intellectual curiosity, and need for individualized
attention should be considered.

B) Form and legal status of MM Day care

MM day care is service giving organization. Child care means a care of a

child during the day by a person other than the child’s parents or legal
guardians, typically someone outside the child’s immediate family.

A nationally accredited, state licensed early childhood program, MM

Child Daycare Center provides daycare services to the children of
Summit Condominium area Community. The service they provide the
children in their care is based on developmental theories and child-
centered methodologies i.e play places, personal spaces and advanced
security systems for this purpose. that would help the kids socially,
emotionaly, physicaly, and intellectually.

Mission Statement

The mission of the MM Child Daycare Center is to be provided safe,

affordable, high quality child care service for the community of summit
condominium society. In doing so, we will support families in their efforts
to reach their goals. The MM child Care Center will provides a cognitively
based program for children ages six weeks to three years. We will also
provide a home like environment where children are encouraged to
develop at their own pace. The MM child Daycare will be committed to
the families we serve, providing support and encouragement.
ORGANIZATION OF THE BUSINESS

MM Child Daycare Center

Organizational Chart

Director

OFFICE
Assistant Director ASSISTANT
ACCOUNTANT

Infant Teacher Toddler teacher Preschool teacher Facility manager

Infant support Toddler support Preschool support Nurse assistant Kitchen assistant

Mechanic/Driver
Identification of partners or principlal shareholders

Martha Getaneh is the founder, owner and Managing Member of MM

Day Care Center. She will serve as the board of director, and is
therefore responsible for all of the center’s operations as well as its chief
fiduciary. Ms. Martha has spent her entire professional career in child
care and development, and most recently was the Child Care Teacher at
private daycare center (an accredited full service day care center) for 5
years.

Ms. Abeba H/micheal will serve as the center’s Assistant Director , and
will develop the center’s educational programs and curricula and lead the
learning sessions on-site. A native of Colombia, she is a dedicated,
positive and outgoing caregiver who has been extensively trained in child
development and early-childhood education.

Management Team background

Owner/Board of Director – Martha Getaneh, The Owner/Director will have overall fiscal
responsibility, ensuring that the business is financially sound and attains its planned
goals.

 7 years Executive Management and Director.

 Master’s degree in Business Administrative
 Proven leadership and employee development ability
 Extensive experience with budgeting methodologies and strategic planning,

Assistant Director – Abeba H/micheal. The Campus Assistant Director will be

responsible for daily operations, curriculum oversight and management of all
instructors, caregivers and tutors.

 B.A. Degree in Education

 5 years facilities administration/support experience with Private Daycares and
kindergarten school in Addis
 2 years managerial/supervisory experience
 3 years teachers

Office Assistant/Accountant – Meron Tadesse

 BA. Degree in Accounting

 2 years Accountant
 2+ years child care industry
The director of MM Daycare will responsible for the daily operations
of a daycare center, supervise staff, manage Daycare Facilities and
also She must ensure a safe and educational environment for
toddler children, manage teaching staff, develop curricula in
coordination with teachers, communicate with parents, and uphold
the center's reputation.

The assistant director of a MM day care will tasked with a number of necessary
behind-the-scenes duties to keep the day care center running smoothly. She must
constantly monitor the facility, ensuring that it is a safe and healthy place for children,
and adhere to proper state codes. It’s also essential that she makes sure all children have
proper paperwork on file, including their health insurance information, allergies, details
of any medical conditions they suffer from and authorization from the parents stating
who is allowed to pick the child up from the facility. She will work to keep enrollment at
MM day care center up by responding to parent inquiries, giving tours, hosting open
houses, advertising and any other applicable marketing initiatives. The assistant director
also works with the director to create a budget for the facility, submit payroll and
purchase necessary supplies.

The MM Daycare Worker will assist parents and their company by preparing meals for
children, maintaining their hygiene, monitoring them for health, behavioral, and
emotional concerns, providing them with age-appropriate instruction and working with
parents to ensure that children are learning and socializing in a positive way. They may
also assist with sterilizing toys and play areas and other duties to ensure that the children
are in a safe, engaging, and clean environment.

SOME RESPONSIBILITIES OF MM DAYCARE TEACHERS:

 Providing care for children, such as setting schedules and routines, grooming,
feeding, changing diapers, and cleaning rooms and toys.
 Developing and encouraging age-appropriate learning and socialization to ensure
children learn basic skills and concepts, such as communication, manners, sharing,
etc.
 Maintaining a safe workplace by monitoring children for health, behavioral, and
emotional issues and reporting concerns to staff and parents.
 Helping children discover new interests by introducing them to art, music, sports, and
other potential hobbies.
 Ensuring children are learning positive behaviors and providing guidance or approved
discipline, as needed.
 Keeping records relating to child care.
 Working with parents to help children progress towards educational and behavioral
goals.

MANAGEMENT SUMMARY

MM Daycare is a full-service child care/development facility that cares

for childres how age under 3 years. MM child day care aims to
prepare its students to first class child care services. Unlike our
competitors, we offer advanced technology programs, after-school
tutoring, and activities such as arts and crafts, dance, theatre and
gymnastics, all in one location.

MM child day care will be a privately held corporation run by its owner,
Martha Getaneh, More than 7 years of Excutive management and
director experience. she Masters degree in Business Administration is
the driving force behind our technology component. She will be
supported in daily operations by an industry consultant, a Centers
director, all with extensive experience in child care fields.

With inflation continuing to rise each year, the typical Ethiopian family
now requires dual or supplemental incomes. This trend has created a
need for quality child care services. Know a day the population growth
faster and it lead us to anticipate expanding market potential for this
industry in our local area. Price, service, certification and reputation are
critical success factors in the child care services industry. MM Child
daycare will compete well in our market by offering competitive prices,
high-quality child care services, and pre-age educational programs
with certified, college-educated instructors, and by maintaining an
excellent reputation with parents and the community we serve.

We will open for business starting with an initial enrollment of 1000

students. We will be profitable in the first year. By year 3 we will be able
to hire more general help which focuses on care since we are all set for
teachers. Our biggest operating expenses will be compensation at
industry standard rates for our highly-qualified personnel, and rent on
our facilities, improved for our purposes during the start-up period. We
would like to grow into four campuses, eventually, but growth is planned
conservatively, to be financed from existing cash flow as we go.
We anticipate a net profit beginning in our second year.

To these ends, we are putting significant investment in the business, and

are seeking a matching amount in the form of bank loan.

Description of the Business Idea

MM Child Daycare center offers upscale child care services and an

advanced collegiate based curriculum designed for kids ages 6 months to
3 years and pre-school tutorial. Normal operating hours will be 12:00
am to 2:00pm, Monday through sunday – with observance of all major
legal holidays. Early drop-off service will be offered as needed.

MM Child daycare exists to provide Premier child care services that are
aimed at enhancing traditional day care methodologies and integrating
extracurricular interests (such as arts and crafts, dance, theatre and
gymnastics) into one comprehensive program. We will offer state-of-the-
art technology programs in leading-edge facilities which help prepare
students for the technology age in which they live. Our general and
“continuing” education programs will help mentor and tutor students
through “main school” homework assignments and provide a base of
understanding and interaction to ensure success in future educational
endeavors. Finally, our developmental programs reinforce basic social,
listening, independence and motor skills and prepare students for future
related interaction.

All of our learning and child care services employ technology,

partnerships, professional services and other activities that will support
and promote higher learning.

In addition to the extensive services and curriculum offered, each

campus will also offer weekend specialty classes for toddlers and
planned family activities in the community it serves. MM daycare will
also offer children birthday party hosting services, providing great
activities for kids and an easy experience for parents. Activity
instructors will be assigned for these events and will lead the activities,
ensuring a memorable celebration.

COMPETITIVE COMPARISON

MM child daycare center differentiate itself from its local competitors by

offering an alternative to these traditional day care approaches.

MM daycare center will use the latest technology to improve curriculum

office management systems, payment systems and enrollment to be
preferred by parents from other competitors.

Our daycare market strategy will be based on providing an activity

based learning environment that is used in many major colleges,
universities and vocational centers around the nation. We will offer a
community of professional caregivers with the credentials to not only
enhance a child’s early social and motor skills, but to also teach them
advanced studies in the arts and sciences found at institutions of higher
learning.

MM daycares will be located in a new medical arts plaza, which has

already shown a need and interest for child care services. The center
currently has a pediatrics office and fitness center with clientele that
has inquired about child care services. By forming collaborative
partnerships with these businesses and becoming an active voice in the
Lake Condominium community, the daycare will position itself as the
market share leader in child care services, development and educational
offerings.

The Main difference/uniquess of MM child daycare center are:

Marketing: differentiating MM child daycare care giving and educational

services from other traditional daycares offerings and interest activity
programs.

Service quality: our daycare care giving and educational programs will
provided by degreed and certified educators, child care workers, tutors
and subject matter industry professionals in a technologically advanced
first-class child care center environment. And maintaining a highly
regarded reputation for excellence in care giving, education and
community involvement and being the employer of choice in our market
for child care and educational talent. Finally Profitability of MM child
daycare will basedon controlling costs and managing budgets in
accordance with company goals, adhering to strategic business plans for
growth and expansion and reinvesting in the business and its employees.
PRODUCTION PLAN

MATERIALS AND UTILITIES

The major materials required for the envisaged plant are food stuff, sanitary materials
{corrosive agent, pesticides, bleaches, detergent, cleansers, polishes, clothes (diaper,
sheet, blanket, linen etc.), tight–fitting mattress made of water proof, toys etc. Mostly we
will use locally available raw materials and inputs. The estimated annual raw and
auxiliary materials cost at full capacity is about Birr 100,000. The list of raw materials
requirement is presented in Table 4.1.

Table 4.1
MATERIALS REQUIREMENT AND COST

Total Cost
Sr. No. Material Qty. (MT)
('000 Birr)
1 Food Stuff 2.5 50
2 Sanitary materials L.S 35
3 Clothes L.S 15
Total 100

The utility required for the envisaged project is electricity, Gas and water.

TECHNOLOGY AND ENGINEERING

MM Daycare center will use the latest technologies that enriches early learning
experiences for young children. In addition, we belive that the technology increases the
efficiency of daily functions, helps keep kids safe and boosts client satisfaction.
The major technologoy we used will be Survillance: it is a kind of camera that used to
allow parents and daycare center administrator to login securely over the internet and
view children in the center. Children view and skyway security digital security solution
are tow companies that provide daycare survillance systems and equipment. The reasons
to use this technology will enhances the safety of the children and gives parents peace of
mind.

Computers: now a day computers play an integral role in teaching toddler in daycare
center. We will facilitate educational software and online education games that help
toddler in daycare develop the skills necessary for kindergarten. The importance of using
computer in our daycare, that will allows children to explore the internet and lean how to
locate information.

The managerial body of MM daycare will use business software to perform a wide of
administrative durites. this softwares allow daycare center to automate the most tedious
function like billing, payment processing and tracking attendace. This software also send
reminder notices, assist with staff management compile data and create reports. .

We will aslo implement SMART Board interactive wite bords instead of traditional
chalkboards. The SMART Board is an interactive whiteboard which allows touch control
of microsoft windows computer applications. We will providers use 3 SMART Boards
for daily class procedures. In addition, children use this technology to play interactive
learning games which enhance learning skils, such as math and reading.

B. ENGINEERING

1. Machinery and Equipment

The list of materials and equipment is given in Table 5.1. The total material and
equipment cost is estimated at Birr 147,200.
 Table 5.1
MACHINERY AND EQUIPMENT REQUIREMENT AND COST

Price In Birr
Sr. No. Description Qty.
LC FC TC
Outdoor playing equipment (slides,
1 swings, climbing frames, sand box, play 5 18,500 - 18,500
houses, trampolines etc.)
Indoor playing equipment (various child
2 L.S 5,500 - 5,500
educational toys)
3 Children bedroom furniture L.S 15,000 - 15,000
Children beds and kids bedroom
4 L.S 12,000 - 12,000
accessories
5 Washing machines 1 8,500 - 8,500
6 TV & Video set 5 23,500 - 23,500
7 Refrigeration 10 45,000 - 45,000
8 Kitchen equipment with accessories L.S 4,200 - 4,200
9 Stoves 1set 15,000 - 15,000
147,200-

Description of the Market

MM child daycare offers services which are vitally important in today's

fast paced, dual-income world. As an increasing number of families have
become dependent on two incomes, the need for quality child care has
increase rapidly.

The two income families have children, yet both parents work. MM
Daycare is an innovative solution that acts as virtual parents,
broadening the children's skills during the day. This is no baby sitter
facility. The children are engaged throughout the day, learning new
skills and reinforcing already acquired ones.
Competitions

There are many different competitors in the child care space. The MM
Day care will only detail the direct, or reasonably direct competitors, and
will not detail the many of other service providers that offer some sort of
child care option. The direct competitors are:

1. Established, often franchised, child care centers. These are

typically larger facilities that offer care to a wide range of ages. The
number of children serviced is usually quite large. The child care is
adequate, although somewhat impersonal by virtue of its large
size.
2. Small, home based child care. These competitors are people that
have a child care facility based out of their house. The quality of
these ranges considerably, some are great, some are sub par.
3. Medium sized companies. These are typically independently owned
facilities. Some of theses will handle a wide range of ages, others
will specialize with a specific age group.

We also know that Price, service, certification and reputation are

critical success factors in the child care services industry. MM Child
daycare will compete well in our market by offering competitive prices,
high quality child care services, and leading edge educational
programs with certified, University educated instructors, and by
maintain an excellent reputation with parents and the community in
which we service.

Marketing Segmentation and positioning

Market Segmentation of MM child day care has a focus on meeting the
local community need for child care services within the 1-mile radius of
Summit condominium. Toddlers will be taken in flexibly on either a full-
time or part-time basis. The Full-Time Working Couples our child
daycare will establish a significantly large, full-time, regular client base
in order to establish the healthy, consistent revenue base which will
ensure stability of MM Child daycare business. We believe that Customer
and community relations are extremely important for us, as it is
imperative to keep the parents pleased in order to keep their children in
the center. After School Care will be another large segment of MM child
care's business will be in the after school care market. This client base
will provide a higher profit for the child care since instructor- to-student
ratios are higher, and the students require more educational services,
which are the primary focus of the child care. By offering tutoring, and
advanced studies in technology, theatre, arts and sciences, MM daycare
center will attract these profitable business clients, producing significant
supplemental revenues.

Marketing Plan summery

Pricing:
Pricing of MM child day care services will consider the cost and value aspect, commonly
referred as cost based pricing and value base pricing. Therefore the daycare will strive to
hire the best caregivers to ensure that children receive quality training. Obviously, this is
going to increase business operation cost; hence, penetration pricing cannot work in our
favor.
Discount
- MM child daycare will offer some discount to parents who enroll two or more
children to the center.
- To promote word of mouth advertising we will going to offer some special rates to
those who refer their friends to the center.
Distribution

Promotion

We will use a number of tactics to help us our brand put and import those new
subscriptions. Some may be used throughout the year, while others may be
used throughout the year for special promotions. MM Children's Day Care
Promotion Plan will be as follows:
 Creating business cards that will easy to read and show our brand and it
will put photos of the daycare environment on one side and the contact
information on the other.
 By designing bright and easy to read Brochures/Posters large text, dot
points and lots of images to make them easy to read for busy parents.

 we will print out our logo on rain suits, t shirts and/or hats for the
children to wear to provide opportunities for visibility when on
excursions or they are just out with their own family after pick up on
care days. we also print our logo on drink bottles we gave to the children
as part of the enrolment pack which they loved and carried everywhere
they out.

 Use will use online services like Vista print to create MM child daycare
own signs and banners.
 We also had stickers made up for our day care information pack folders
and carried our calico bag with logo whenever we happened to be taking
my own children to the park or shopping.

 By sending press releases to local newspapers and community magazines

 By creating contact with schools, community and parenting
 By create a simple website or at least a landing page.
 By using media Advertising
The community of condominium and apartment, they highly need baby child
day care centers for there child.

SWOT ANALYSIS

The following SWOT analysis captures the key strengths and weaknesses of within the
company, and describes the opportunities and threats facing The Toddler Warehouse.

STRENGTHS
 A sophisticated and effective
learning system.
 Excellent training programs
that all employees must
participate in.
 An educated customer base
who recognize the benefits
that The Toddler Warehouse
offers.
WEAKNESSES
 A lack of visibility due to the
newness of the operations.
 The ability to attract and
keep well trained employees.
 The inability to perfectly
forecast demand of services
relative to the number of
employees on staff at any one
time.

OPPORTUNITIES THREATS
 A growing market with a  Competition from already
large percentage of target established facilities that
customers not yet aware of improve their service
The Toddler Warehouse. offerings to be more
 Increased revenue as more competitive to The Toddler
and more people are working, Warehouse.
thereby unable to care for  Unfounded "public scares"
their children during the day. regarding child care.
 As the number of children  Legal liability issues, either
served grows, fixed costs are one large suit against The
spread thinner over a larger Toddler Warehouse, or
customer base. significant increases in
premiums due to changes
within the operating
environment of the industry.
VII. FINANCIAL ANALYSIS

The financial analysis of the child care centre is based in the data presents in the previous
chapters and the following assumptions.

Construction period 1 year

Source of finance 30 % equity
70 % loan
Bank interest 8.5%
Discount cash flow 8.5%
Accounts receivable 30 days
Raw material local 30 days
Raw material import 90 days
Work in progress 1 day
Cash in hand 5 days
Accounts payable 30 days
Repair and maintenance 5% of machinery cost

A. TOTAL INITIAL INVESTMENT COST

The total investment cost of the project including working capital is estimated at Birr
7.23 million. The major breakdown of the total initial investment cost is shown in Table
7.1.

Table 7.1
INITIAL INVESTMENT COST
 Sr. Cost Items Local Foreign Total
Cost Cost Cost
No.
1 Land lease value 4,470.00 - 4,470.00
2 Building and Civil Work 1,725.00 - 1,725.00
3 Plant Machinery and Equipment - 147.20
147.2
4 Office Furniture and Equipment 75.00 - 75.00
5 Vehicle 450.00 - 450.00
6 Pre-production Expenditure* 339.61 - 339.61
7 Working Capital 32.36 - 32.36
Total Investment cost 7,239.17 - 7,239.17

* N.B Pre-production expenditure includes interest during construction ( Birr 214.61

thousand , training ( Birr 50 thousand) and Birr 75 thousand costs of registration,
licensing and formation of the company including legal fees, commissioning
expenses, etc.

B. OPERATING COST

The annual operating cost at full capacity operation is estimated at Birr 2.44 million
(see Table 7.2). The major components of the operation cost are labour cost ,
administration cost and depreciation cost accounting for 29%, 19.34% and 16.43% of
the total operation cost respectively. The remaining 35.23% is the share of material and
inputs, utility labour overhead cost, financial cost and repair and maintenance and
utilities.

Table 7.2
ANNUAL PRODUCTION COST AT FULL CAPACITY ('000 BIRR)

Items Cost %
Raw Material and Inputs
100.00 4.82
Utilities 136.47 6.58
 Maintenance and repair
7.36 0.36
Labour direct 708.12 34.16
Labour overheads
295.05 14.23
Administration Costs 401.43 19.36
Land lease cost - -
Total Operating Costs 1,648.43 79.52
Depreciation 213.47 10.30
Cost of Finance 211.10 10.18
Total Production Cost
2,073.00 100

C. FINANCIAL EVALUATION

1. Profitability

Based on the projected profit and loss statement, the project will generate a profit through
out its operation life. Annual net profit after tax will grow from Birr 822.61 thousand to
Birr 1.41 million during the life of the project. Moreover, at the end of the project life the
accumulated cash flow amounts to Birr 13.27 million.

2. Ratios

In financial analysis financial ratios and efficiency ratios are used as an index or yard
stick for evaluating the financial position of a firm. It is also an indicator for the strength
and weakness of the firm or a project. Using the year-end balance sheet figures and other
relevant data, the most important ratios such as return on sales which is computed by
dividing net income by revenue, return on assets ( operating income divided by assets),
return on equity ( net profit divided by equity) and return on total investment ( net profit
plus interest divided by total investment) has been carried out over the period of the
project life and all the results are found to be satisfactory.

2. Break-even Analysis
The break-even analysis establishes a relationship between operation costs and revenues.
It indicates the level at which costs and revenue are in equilibrium. To this end, the
break-even point of the project including cost of finance when it starts to operate at full
capacity ( year 3) is estimated by using income statement projection.

BE = Fixed Cost = 29 %
Sales – Variable Cost

3. Payback Period

The pay back period, also called pay – off period is defined as the period required to
recover the original investment outlay through the accumulated net cash flows earned by
the project. Accordingly, based on the projected cash flow it is estimated that the
project’s initial investment will be fully recovered within 5 years.

4. Internal Rate of Return and Net Present Value

The IRR of the project which is the discounted rate at which the present value of cash
inflows is equal to the present value of cash outflows or in other worlds the discount rate
for what the present value of the net receipts from project is equal to the present value of
the investment is computed to be 19.71%.

Net present value ( NPV) which is defined as the value obtained by discounting, at a
constant interest rate and separately for each year, the difference of all annual cash
outflows and inflows accruing through out the life of the project, this differences is
discounted to the point at which the implementation of the project is supposed to start, the
NPV obtained for the years of the project life are than added to obtain the NPV.
Accordingly, the net present value of the project at 8.5% discount rate is found to be
Birr 4.33 million.
D. ECONOMIC BENEFITS

The project can create employment for 254 persons. The project will generate Birr 2.56
million in terms of tax revenue.

Financial Plan
FORECAST
Key Assumptions

Our key assumptions:

 Kids need to have a place that caters to the way they learn
 Kids need somewhere that teaches them life skills
 Education starts at a very young age
 Parents need somewhere safe and nurturing to leave children while they finish
their workday.

Revenue by Month

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Expenses by Month

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Net Profit (or Loss) by Year

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FINANCING
Use of Funds

The Toddler Warehouse’s start-up costs include:

 Legal: $1,000
 Stationery etc: $100
 Brochures: $350
 Art supplies: $150
 Kitchen supplies: $200
 Cleaning supplies: $100
 Medicine kits: $100
 Matts and pillows: $150

Total $ 2150

Sources of Funds

Our founder will invest $85,000 to get the operation up and running.

STATEMENTS
Projected Profit & Loss
2018 2019 2020
Revenue $266,700 $330,000 $402,000

Direct Costs $5,334 $6,600 $8,040

Gross Margin $261,366 $323,400 $393,960

Gross Margin % 98% 98% 98%
Operating Expenses
Salaries & Wages $138,400 $169,344 $263,065
Employee Related Expenses $27,680 $33,869 $52,613
Rent $30,000 $30,000 $30,000
Licenses $1,440 $1,440 $1,440
Utilities $1,800 $1,800 $1,800
Insurance $3,600 $3,600 $3,600
Marketing $18,000 $18,000 $18,000
Total Operating Expenses $220,920 $258,053 $370,518

Operating Income $40,446 $65,347 $23,442

Interest Incurred
Depreciation and Amortization $2,800 $2,800 $2,800
Gain or Loss from Sale of Assets
Income Taxes $5,647 $9,382 $3,096
Total Expenses $234,701 $276,835 $384,454
Net Profit $31,999 $53,165 $17,546
Net Profit/Sales 12% 16% 4%
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Projected Balance Sheet

Starting Balances 2018 2019 2020
Cash $49,250 $97,888 $150,866 $171,444
Accounts Receivable $0 $0 $0
Inventory
Other Current Assets
Total Current Assets $49,250 $97,888 $150,866 $171,444

Long-Term Assets $33,600 $33,600 $33,600 $33,600

Accumulated Depreciation ($2,800) ($5,600) ($8,400)
Total Long-Term Assets $33,600 $30,800 $28,000 $25,200

Total Assets $82,850 $128,688 $178,866 $196,644

Accounts Payable $259 $256 $262

Income Taxes Payable $4,190 $2,346 $772
Sales Taxes Payable $9,390 $8,250 $10,050
Short-Term Debt
Prepaid Revenue
Total Current Liabilities $13,839 $10,852 $11,084
Long-Term Debt
Long-Term Liabilities

Total Liabilities $13,839 $10,852 $11,084

Paid-In Capital $85,000 $85,000 $85,000 $85,000
Retained Earnings ($2,150) ($2,150) $29,849 $83,014
Earnings $31,999 $53,165 $17,546
Total Owner’s Equity $82,850 $114,849 $168,014 $185,560

Total Liabilities & Equity $82,850 $128,688 $178,866 $196,644

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Projected Cash Flow Statement

2018 2019 2020
Net Cash Flow from Operations
Net Profit $31,999 $53,165 $17,546
Depreciation & Amortization $2,800 $2,800 $2,800
Change in Accounts Receivable $0 $0 $0
Change in Inventory
Change in Accounts Payable $259 ($3) $6
Change in Income Tax Payable $4,190 ($1,844) ($1,574)
Change in Sales Tax Payable $9,390 ($1,140) $1,800
Change in Prepaid Revenue
Net Cash Flow from Operations $48,638 $52,979 $20,578
Investing & Financing
Assets Purchased or Sold
Net Cash from Investing
Investments Received
Dividends & Distributions
Change in Short-Term Debt
Change in Long-Term Debt
Net Cash from Financing
Cash at Beginning of Period $49,250 $97,888 $150,866
Net Change in Cash $48,638 $52,979 $20,578
Cash at End of Period $97,888 $150,866 $171,444
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