JiT Seminar Projectt PDF

JIMMA UNIVERSITY
Jimma Institute of Technology
Post Graduate Study

Faculty of Mechanical Engineering
MSc. In Mechanical System Design Engineering
Business plan
“TYM Auto repair and servicing center”
Course name: Industrial Project Management & Engineering Economics

Course code: DMS7051
By:
1) Tesfaye Olana
2) Moti Tekalign
3) Yohanis Dabesa
Advisor: Dr. K. Vinoth Babu (M.E.,M.B.A., Ph.D)
Jan, 2018
Jimma, Ethiopia
TYM Auto repair and servicing center
i) Company’s Name
“TYM Auto Repair and Servicing Center”
ii) Company’s Logo
TESFAYE;MOTI & YOHANNES, JiT, 2018 i

Abstract
The development of Small scale industry in one’s country will helps to enable the effective
economic growth of the society. The Automotive repair and servicing center for customer’s cars
and automobiles would be the crucial phenomenon for opening new business industry. TYM
automotive repair and servicing center that will be located in Wolkite, between Addis Ababa and
Jimma main road with initial 1,100,000 birr required capital and it is proposed to provide general
automotive repair and servicing for the society. TYM company is the business plan developed by
three coworkers based on partnership with most of the additional funding coming from a six year
commercial Bank of Ethiopia (CBE) loan in addition to individual contribution funding. The
organization will differentiate itself from its competitors by being strongly customer focused;
provide high quality service at competitive prices. The company will have board of director,
security sector, Administration sector, Legal affairs, managing director of technical, finance &
commercial affairs, maintenance workers and others in its management structure. In the analysis
of market assessment, sales for three consecutive years is determined and forecasted. The
company will be opened as per project execution time table at the end of March in 2011 E.C.
TESFAYE;MOTI & YOHANNES, JiT, 2018 ii

Table of content
Abstract ........................................................................................................................................... ii
Table of content ............................................................................................................................. iii
List of tables ................................................................................................................................... iv
List of figures ................................................................................................................................. iv
Acknowledgment ............................................................................................................................ v
Chapter One .................................................................................................................................... 1
Introduction ..................................................................................................................................... 1
1.1. Executive summary .......................................................................................................... 1
1.2. Statement of the problem ................................................................................................. 2
Chapter Two.................................................................................................................................... 3
Company Overview ........................................................................................................................ 3
2.1. Objective .............................................................................................................................. 3
2.2. Mission ................................................................................................................................. 3
2.3. Vision ................................................................................................................................... 4
2.4. Scope .................................................................................................................................... 4
2.5. Services ................................................................................................................................ 5
2.6. Goals..................................................................................................................................... 6
Chapter Three.................................................................................................................................. 7
Organizational Management ........................................................................................................... 7
3.1. Owner Profile ....................................................................................................................... 7
3.2 Organizational Structure ....................................................................................................... 7
3.3. General structure of the service company ............................................................................ 8
3.3.1. Organizational Management structure of the company ................................................. 9
3.3.2. Organization of business premises .............................................................................. 10
3.3.3. Service class division................................................................................................... 11
3.4. Operation plan .................................................................................................................... 12
Chapter Four ................................................................................................................................. 14
Market Evaluation ......................................................................................................................... 14
4.1. Market Assessment ............................................................................................................ 14
4.1.1. Market plan for product/service ...................................................................................... 14
4.2. Marketing plan ................................................................................................................... 15
4.3. Market plan for place ......................................................................................................... 16
TESFAYE;MOTI & YOHANNES, JiT, 2018 iii

4.4. Market plan for promotion ................................................................................................. 16
4.5. Organizational team (staff requirements and costs)-.......................................................... 17
4.6. Assessment of risk .............................................................................................................. 18
Chapter Five .................................................................................................................................. 19
Financial Plan................................................................................................................................ 19
5.1. Start-up capital ................................................................................................................... 19
5.1.1. Sources of start-up capital (funding) ........................................................................... 19
5.2. The finance analysis ........................................................................................................... 20
5.2.1. Investment appraisal .................................................................................................... 20
5.3. Sales forecast for three years .............................................................................................. 21
5.4. Monthly Sales Plan (year 1) ............................................................................................... 22
5.5. Monthly operational cost plan based on sales plan (year 1) ........................................... 24
5.6. Starting of the working period plan.................................................................................... 25
5.7. Name description................................................................................................................ 26
Reference ...................................................................................................................................... 27
List of tables
Table 1.1. ........................................................................................................................................ 2
Table 4.1. ...................................................................................................................................... 15
Table 4.2. ...................................................................................................................................... 17
Table 5.1. ...................................................................................................................................... 19
Table 5.2. ...................................................................................................................................... 20
Table 5.3. ...................................................................................................................................... 21
Table 5.4. ...................................................................................................................................... 22
Table 5.5. ...................................................................................................................................... 24
Table 5.6. ...................................................................................................................................... 25
List of figures
Figure 3.1. Organizational management structure .......................................................................... 9
Figure 3.2. Plant layout of the company ....................................................................................... 10
Figure 3.3. Service class division ................................................................................................. 11
Figure 3.4. Customer Contact layout ............................................................................................ 11
TESFAYE;MOTI & YOHANNES, JiT, 2018 iv

Acknowledgment
First of all foremost, our gratitude goes to Dr. K. Vinoth Babu (PhD, Faculty of Mechanical
Engineering (JiT)) for delivering us this vital course, Industrial Project Management &
Engineering Economics (DMS7051) and sharing his rich experience and knowledge without
reservation. His encouragement, lecturing excellent, and critical comments have greatly
contributed to this business plan project. By letting us to work on such interesting topic, he
enabled us to have interesting of working in industry phenomenon for future.
TESFAYE;MOTI & YOHANNES, JiT, 2018 v

Chapter One
Introduction
1.1. Executive summary
TYM is a start-up general automotive repair and servicing business that will be located on Addis
Ababa to Jimma Street in Wolkite. Wolkite is a high growth community and the proposed
business is located on a high traffic street that will give the business high visibility to our new
customer base. Initial capitalization will require 1,100,000 birr to rent building, land, make
improvements and purchase equipment. This will also cover the initial startup costs. We will
look for Bank loan for 700,000 birr with and all members will contribute 400,000 in cash. The
members will have extensive tools, work benches and other equipment for startup. The proposed
building is a 4 bay repair shop with an office on approximately ½ acre of land. This building will
have housed successful and profitable automotive repair and servicing businesses for the next 20
years.
TYM will be a full service general automotive repair shop offering services on domestic car.
Services will include
1) Factory maintenance services
2) Drivability, diagnosis and repair;
3) Brake service
4) Heating / AC repairs and
5) Many other general auto repair services.
TYM is incorporated as a small scale business organization. The automotive repair and
servicing market is growing in Wolkite area. In general people want to repair and service their
vehicles near where they live or work. Both the population and employment of the Wolkite areas
are undergoing high growth. The direction of population growth for the Wolkite area shows that
autos repair and servicing customers are looking for:
1. Outstanding customer service
2. Competitive pricing.
3. Reputation for honesty.
4. Reputation for quality service.
TESFAYE;MOTI & YOHANNES, JiT, 2018 1

5. Knowledgeable licensed technicians.
6. Convenient shop location.
TYM has formed their approach to customers around this survey and will have good market
plan. The organization will have medium number of staff members, some of them include:
Table 1.1.
Position Number
Head Manager 1
Managers 2
Advisors 3
Sales man and 1 purchaser 1
Maintenance workers 12
TYM will get many risks such as lack of experience, natural disaster, competitors and will try to
solve early. It will show a positive cash flow and positive pre-tax income in the first year.
1.2. Statement of the problem

The population of the society in Wolkite is highly increasing and the number of peoples using
Automobile and different stage of truck also becoming very popular. In addition to the local
society of the town the number of automotive car crossing the town per day is comparatively
large in number since the town is the rest place after traveling from Addis Ababa and Jimma vice
versa. Wolkite is located at the gate of Gibe desert that will initiate customers to make sure that
their automobile and trucks before entering and leaving the Gibe desert free from technical
problem because of that there is no repairing and servicing center and since Gibe Desert road is
highly dangerous road, if any technical problem occur during driving the probability of over
taking control on their car is less.
Due to this TYM select to establish his company site location in Wolkite to overcome this
customer’s problem and will provide service for the society and as a business sector the company
aims to create job opportunity for the unemployed educated peoples.

Chapter Two
Company Overview
TYM is a new start-up incorporated business managed by three partners. Two of the three
partners represent sales/management, and one focuses on the finance/administration section of
the business.
The economic growth of the last several years has resulted in increased disposable income. Many
people have chosen to spend part of their increased income on their automobiles. As a result, the
need for reliable and convenient auto services has substantially risen as well. TYM will position
itself to capitalize on the growing need of the middle and upper class market for quality auto
service in the Wolkite area. The company will be privately owned by three co-owners, with most
of the additional funding coming from a six year commercial Bank of Ethiopia (CBE) loan.
2.1. Objective
The business purposes of TYM’s are: -
 To provide service of renting of vehicles & machinery
 To provide maintenance of vehicles
 To provide extra factory services and erect industrial components for cement, textile,
brewery, food industry, storage tanks etc.
 To provide and assemble vehicle bodies, trailers, as well as high & low bed semi-trailers;
moreover, heavy-duty trucks are assembled.
2.2. Mission
TYM is a startup automotive repair and service business. The organization will differentiate
itself from its competition by being strongly customer focused; provide high quality service at
competitive prices. And also will offer a variety of customer services to make sure that we are
easy and convenient to do business with.
 Free customer pickup and drop-off within 5 km.
 Free rental cars on major repairs and discount car rental on minor repairs through
enterprise Car Rental.
 Build a reputation for Honesty, do only what is necessary for your car, and
advising what repairs can wait until a later visit.

 Provide courteous and friendly service to earn customers trust for repeat business.
 Develop a reputation for providing customer with high quality repairs that they
can rely on when commuting to and from work.
 Protect customer vehicles by using protective floor mats and seat covers.
 Provide free exterior car wash on larger repair or service jobs.
 Continually looking for customer requested services.
2.3. Vision
 Executing all works in a genuine, transparent and accountable manner.
 Adding value, handle company property with maximum care and ensure efficient
utilization of resources.
 Giving full customer satisfaction and strive to exceed their expectations.
 Working hard to be best in class and lead the way for quality.
 Building sustainable, closer, long-lasting relationship with our customers and partners.
 Giving maximum respect to employees, customers and partners.
 Ensuring employment; promotion and reward are based on merit, competence and
performance.
 As the employees are the company’s main sources of competitive advantage, the
company therefore will create opportunities for continuous employee development and
empowerment.
 Developing brotherhood among the employees.
 Always ensuring safe working conditions to all employees.
 Providing necessary support to employees as much as possible.
 Always observing & respecting the law.
2.4. Scope
TYM will insure high quality work.
1. Technicians are fully trained and have state certifications for the work being perform

2. Master technician Manager to provide customers with clear & precise explanations of
repairs and recommendations.
3. Setup quality control procedures to insure original customer concern was taken care of
and prevent new or related issues from leaving the shop undetected.
4. All work backed by 12 month or 12KM limited warranty.
5. Use the latest computer references and factory technical bulletins to assist technicians in
drivability diagnosis and repairs.
6. Technicians have latest training in electrical and drivability repairs to provide the
customer first time accurate diagnosis with no guessing.
7. TYM will provide competitive pricing to its customers.
2.5. Services
TYM Automotive is a startup general automotive repair and service business. And will also
provide general automobile repair services for mechanical and electrical car repairs.
1) Factory maintenance services: These are the 30-60KM servicing on cars as specified by the
factory. TYM offers a quality alternative to dealership service departments at a lower cost.
2) Timing belt replacements: Newer vehicles use timing belts rather than timing chains. These
must be replaced periodically.
3) Fuel injection service & repairs: Required every 15KMs.
4) Drivability diagnosis and repair: Check engine light comes on usually as a result of
computer/sensor errors. This causes the car to run poorly. We retrieve diagnostic codes and then
troubleshoot the system. Repairs are then made.
5) Heating and air conditioning service and repairs: Routine and general maintenance is
needed every 2 years. System failures are repaired and fixed including compressor, condenser
and evaporators.
6) Starting and charging system diagnosis and repairs: Usually come in as a repair item and
includes replacing starters and batteries.
7) Brake service work: Complete brake service on drum.
8) Suspension repairs: Typically Mac Person type struts & shocks need to be replaced when
tires show unusual wear or the car ride becomes uneven.

9) Axle boots/axles & drive train repairs. Service, grease or replace axles. Manual
transmission service, U-Joints, drive axle service.
10) Engine tune up: Spark plugs, wires, (set timing and idle), computer trouble code analysis.
11) Cooling system maintenance and repairs: Drain and refill, hoses, radiator (service or
replace), water pumps, freeze plugs, heater control valves, head gasket, etc.
12) Automatic Transmission services: routine maintenance and replacements (rebuilt or new).
13) Clutch replacement: On manual transmissions, mill fly wheel, replace pilot or throw out
bearings, replace clutch disk, pressure plate, etc.
14) Complete engine repairs: Any type of engine repair or replacement.
15) Mechanical repairs: All other miscellaneous repairs.
16) Electrical trouble shooting and diagnostic and repairs: Able to repair most types of
electrical problems. Cars today have one to seven computers that operate and control the various
systems. TYM’s approach is to use the best talented repair technicians to give high quality
repairs. Highly skilled technicians are able to do repairs much more quickly with very good
workmanship. This actually reduces the cost to do a repair.
2.6. Goals
 Developing tools to improve the effective management of the automobile parts inventory.
 To provide fleet insurance coverage in a manner that will ensure the least cost for the
government fleet for the company repair services.
 To Improve shop efficiency.
 To maintain efficient and effective storage tank for different factories.

Chapter Three
Organizational Management
3.1. Owner Profile
The business owners consist mainly of people in the age group of 21-27 years. Due to the
technical intensive and manual & automated nature of work, education is considered as a major
factor for business owners. The legal form of this company (TYM) will be a PARTNERSHIP
because all the company members have a good friendship approach and will have the same age,
job field and education status and create big power on small business and will have good
financial access.
Agreement (contract): All company members will have equal percent of share on the company
means each member of the company have 12.12% of all company profits and loss of the
company works. All company members agree to solve problems and conflicts will occur on
working area by pure discussion and peacefully. All members of the company (TYM) will
participate in maintenance works. Each member will have the following education in company.
Tesfaye Olana have been graduated in Mechanical & vehicle engineering (BSc) from Adama
Science and Technology University and specialized in Design of Mechanical System (MSc) from
Jimma Institute of Technology.
Moti Tekalign have been graduated in Mechanical Engineering (BSc) and specialized in Design
of Mechanical System (MSc) from Jimma institute of Technology.
Yohanis Dabesa have been graduated in Mechanical Engineering (BSc) and specialized in
Design of Mechanical System (MSc) from Jimma institute of Technology.
3.2 Organizational Structure
This Company will have the following servants.
 One board director
 One security sector
 Administration sector
 Legal affairs sector
 One managing director of technical affairs
 One managing director of finance and commercial affairs

 Maintenance workers
 One Planning, follow up and statistics professional
 One Safety and professional health sector
3.3. General structure of the service company
The automotive maintainance and repair organization is easy to implement and to reduce
hierarchy. The working service management and organization refers to importing various valid
production resources to the maintained with such activities as plans, organization, human
resources, instructions, and guide, to reach the target and satisfy the customers with and the
service company organization is people oriented and involves positions and levels. Automotive
maintained and repair organization must clarity the department responsibilities and the
relationship in between, and set up the system of guide, supervision, coordination, and
collaboration.
Board of directors:
The board of directors has the authority of anything for the company they will control the
managers and workers has the authority to control the company. He will control the
workers and the departments. He will answers any question when the visitor come
Finance Manager:
Finance case in the company will take care by this manager. He will pay the money to
workers; he will sell the service, managing finance case, cost and budget. It will check
the company whether it is profitable or not, how much the fixed asset control, money
transaction and finally preparing financial statement
Technical manager:
The technical manager will control the whole technical problems. It maintenance the
default machines, testers, wielders and another problems refers to the coordinated
activities that command and control the organization in terms of quality. The command
and control activities in terms of quality normally involve the formulation of quality
policies, quality goals and quality planning.

Human resources:
The human resource manager have two part senior human resource manager and general
service .this department works on by giving for the workers car services ,it will post and
test new worker
Marketing and supply:
The manager of this department will control the marketing and supply issues, it will find
new customers and it will import the resource
3.3.1. Organizational Management structure of the company
Figure 3.1. Organizational management structure

3.3.2. Organization of business premises
Figure 3.2. Plant layout of the company

3.3.3. Service class division
Figure 3.3. Service class division
Figure 3.4. Customer Contact layout

3.4. Operation plan
In this company any type goods and materials will not manufacture or produces. But this
company is retailer which is buying some goods and a material like oils, grease, and brake,
clutch and soon materials and stores them and sell to the general public.
Also this company will provide services like Electrical trouble shooting and diagnostic and
repairs and Heating and air conditioning service and repairs. After giving this services it’s give
warrant period and maintenance services.
We know that our customers are looking for auto repair shops that give fast and high quality
service at competitive prices and that are easy to do business with.
We will deliver this service and then follow back up with them to make sure they are happy and
that they won’t forget us. We will:
1. Follow up with customer satisfaction surveys.
2. We will use this feedback to keep improving our business.
3. Follow up with post cards reminding them that their vehicle is ready for the next
scheduled service.
4. Keep a mailing list of all customers and send out regular flyers with specials that are
targeted at current customers.
5. We will offer convenience services that make it easier for our customers.
Examples of these include:
1. Free customer pickup and drop-off within 20KM.
2. Free rental cars on major repairs and discount car rental on minor repairs through
Enterprise Car Rental.
3. Build a reputation for Honesty, do only what is necessary for your car, and advising
what repairs can wait until a later visit.
4. Provide courteous and friendly service to earn customers trust for repeat business.
5. Develop a reputation for providing customer with high quality repairs that they can
rely on when commuting to and from work.
6. Protect customer vehicles by using protective floor mats and seat covers.

7. Provide free exterior car wash on larger repair or service jobs.
8. Continually looking for customer requested services.

Chapter Four
Market Evaluation
4.1. Market Assessment
Automobile repair and service market has been a changing and evolving market. It used to be
that every car owner could service and repair their own car.
4.1.1. Market plan for product/service
The services segment of “Sale, Maintenance and Repair of Motor Vehicles and Motorcycles”
constitute the following:
Retail sales of car, buses, trucks, jeeps, pickups and motorcycles
At present, the retail sales sub-segment in Ethiopia is relatively organized with sales being
primarily generated via authorized dealers with strong financial and banking history. Most
businesses are family owned with members of one family serving different functions of business.
Underlying issues inherent to the sub-segment include:
1) Inconsistent demand
2) Inability to assemble and deploy intellectual, human and financial resources

effectively
3) Lack of vision for growth
4) Limited perception of business requirements
5) Restricted funding sources
Repair and maintenance of car, buses, trucks, jeeps, pickups and motorcycles at mechanical
workshops. The repair and maintenance sub-segment is largely dispersed across various cities of
Pakistan, predominantly consisting of small mechanical workshops which continue to operate
using an outdated manual and labor intensive model with limited or no use of technology. The
underlying causes for deploying primitive methods and having limited operations are as follows:
1) Lack of vision for growth
2) Limited perception of business requirements
3) Inability to deploy technology based equipment
4) Restricted funding sources

5) Lack of formal technical or vocational training
6) Inability to identify and explore new ideas
A large amount of mechanical workshops operate on a manual and labor intensive model without
the use of modern technology. The main reason for lack of automation and mechanization in this
sub-segment is due to unavailability of funds to the small workshop owners for purchase and
installation of such equipment as well as to a certain extent lack of proper training with the
absence of effective vocational and technical training centers for usage and operation of such
equipment.
4.2. Marketing plan

Table 4.1.
Product/
1 2 3 4 5 6 7 8 N
Services
Denomination
Heating & AC
Fuel injection
Maintenance
Electrical
companies Oil and
service
Grease
Clutch
Brake
Axle
Belt
&
Positive & friction
Flat, v-belt & rope
Good services
Long & short
Mechanical
Hydraulic,
Electrical
Different
products
Type
-
Different
Different
different
different
Differet
litters
Size
-
Different
Different
different
Differet
Color
-
Quality
Good
Good
Good
Good
Good
Good
Good
Good
Good

After service
Maintenance
Maintenance
Maintenance
Maintenance
Maintenance
Maintenance
Maintenance
Maintenance
No services
services
services
services
service
service
service
service
service
4.3. Market plan for place
TYM will select Wolkite because of this place is dry port & a center place for different cities.
But in this place there are no enough automotive workshops to fulfill the customers need and
give good services.
4.4. Market plan for promotion
For startup promotion company will have planned actions to inform customers about the opening
of this business by using printed information, brochures, posters, newspaper articles, radio
advertisement and opening ceremony. After opening TYM will use stickers after we will give a
service is tell about price discount for different services to attract customers.
Strategies to make sure new customers become repeat customers. We present a high quality
image so that our customers see us as a high quality organization. We will do this by:
1. The building will be bright, neat, and clean and organized from the outside, especially for the
drive by traffic.
2. The inside of the shop will be clean and organized using shadow boards and other visual
organizing techniques.
3. Repair technicians will wear neat color-coordinated uniforms with company logos.
4. Display late model high tech equipment in a clean organized fashion. In this company any
type goods and materials will not manufacture or produces. But this company is retailer; buying
some goods and materials like oil, grease, and brake, clutch and soon materials and store them
and sell to the general public.

4.5. Organizational team (staff requirements and costs)-
Table 4.2.
Position Education Experienc Role Special Salary per
e skill month and
compensation
Board MSC in 3 year in Manager Solve With agreement

director Electromechanical manageria problem
engineering l
Administrator BSC in management 2 year Adviser Solve With agreement

problem
Finance and BSC in account 2 year Adviser Solve With agreement

commercial problem
Legal affairs Diploma 1 year Adviser Solve With agreement

problem
Automotive BSC in mechanical Eng. 1 year - - With agreement

and thermal
Purchaser Diploma in Purchaser 0 year - - With agreement
Maintenance BSC and diploma in 0 year - Solve From profit

Mechanical Electrical problem
Engineering
Security Grade 10 - Security - With agreement
We will insure that the work performed is of the highest possible quality. We will do this by:
1. Technicians are fully trained and have state certifications for the work being
performed.
2. Board director to provide customers with clear & precise explanations of repairs and
recommendations.

3. Setup quality control procedures to insure original customer concern was taken care of
and prevent new or related issues from leaving the shop undetected.
4. Use the latest computer references and factory technical bulletins to assist technicians
in drivability diagnosis and repairs.
5. Use latest computer reference data on all car models. This will be the All Data system.
6. Technicians have latest training in electrical and drivability repairs to provide the
customer first time accurate diagnosis with no guessing.
4.6. Assessment of risk
Risk: Experience; TYM will have first degree graduates and Zero year work experience
members. This lack of Experience will create big problem on the TYM.
Solution: TYM will try to solve this problem by getting Advisors.
Risk: One of the principals decides that they don’t want to continue working in the business.
Solution: Hire a qualified repair technician to replace the Principal who wants to leave.
Risk: Competitors; as mentioned early Wolkite is center place for different cities. So many cars
and Lories passing & work this area. So, many same companies are existing.
As our survey still now there are 16 auto shops in this place. And up to opening year of our
company TYM estimated they will be increase to 31.This Competitors growth will have big
impact on our Company TYM on its alternativeness.
Solution: our company TYM will try to solve this risk by
Providing good quality services like,
- Fast maintenance
- Quality services
- Price discount
- Reputation for honesty
- Knowledgeable technicians
- After services give wide range warrant.

Chapter Five
Financial Plan
5.1. Start-up capital
Table 5.1.
Estimation of start-up capital Amount
 INVESTMENT
Land - -
House Rent 1 YEAR 240,000 birr
Equipment and Tools 150,000 birr
Miscellaneous 80,000 birr
TOTAL INVESTMENT 470,000 birr
 WORKING CAPITAL
Months of staff costs 1 Month 100,000 birr
Months of operational costs 430,000 birr
TOTAL WORKING CAPITAL 530,000 birr
TOTAL START-UP CAPITAL 1,100,000 birr
5.1.1. Sources of start-up capital (funding)
TYM owner’s planned to ways for the source of finance. Namely equity capital in which all
individual of the owners of the company contribute equal amount of money to the initial capital
required for the company. And the second one is Bank Loan, commercial bank of Ethiopia is
selected since he locally a leading Bank service in current status in Ethiopia, so that he can
provide expected amount of money stated by the company.

Table 5.2.
Type Source Conditions Amounts
Equity Capital Members contributions No Interest 400,000 birr
Loan Bank Loan Interest 7% for 6 year 700,000 birr
 TOTAL FUNDING 1,100,000 birr
5.2. The finance analysis
Finance function: by making investing and financing decisions, the financial manager is
attempting to achieve the following objective.
The objective of the finance manager and corporation is to maximize the current value of share
holds’ wealth.
5.2.1. Investment appraisal
It is means of assessing whether an investment project is worthwhile or not. Investment project

could be the purchase of a new piece for a small firm, a new piece of equipment in a
manufacturing plant, a whole new factory etc.
Types of investment: [1]
a) Payback period (PBP)
b) Accounting rate of return (ARR)
c) Internal rate of return (IRR)
d) Profitability index (PI)
e) Net present value (NPV)
a) Payback period (PBP)
PBP: is the length of time taken to pay the initial capital cost. It requires information on the
returns the investment generates. Payback could occur during a day, month or year [2].
i.e.
Payback PBP = (days/month/year)*initial investment/total cash received

b) Accounting rate of return (ARR)
Accounting rate of return: a comparison of the profit generates by the investment with the cost of
the investment.
ARR = average annual return or profit/initial cost of investment
c) Net present value (NPV)
NPV: takes into account the fact that money values change with time value of money is affected
by interest rates. NPV helps take these factors into consideration
PV = Future value/ (1+i) n
Cash flow * discount value = present value
Profitable index = net present value/initial capital cost
Assumptions and calculations
Initial capital cost = 1100000 PBP=?
Interest rate = 7% ARR=?
Time for loan = 6 year
Annual income = 700000
Annual profit = 200000
Pay back = (6*12*1100000)/(6*700000)
= 18.857months (1 and ½ yr.)
ARR = (200000/1100000)*100 = 18.18%
5.3. Sales forecast for three years

Table 5.3.
Sales summary Year 1 Year 2 Year 3
Average number of Average number of Average number of

sales & price sales & price sales & price
No Price No Price No Price
Service 1
55 69,000 60 82,000 70 98,000

Service 2 6 61,ooo 10 100,000 15 155,000
Service 3 105 33,000 115 40,000 120 46,000
Service 4 55 32,000 60 38,000 70 48,000
Service 5 11 46,000 15 62,000 20 80,000
Service 6 11 58,000 15 75,000 20 92,000
Service 7 6 69,000 10 110,000 15 160,000
Service n - 90,000 - 150,000 - 200,000
Total Sales 458,000 657,000 879,000
Growth rate 169,7% 174.7%
Total Costs 412,000 555,000 659,000
91.9% 84.4% 74.5%
Gross profit 46,000 102,000 220,000
5.4. Monthly Sales Plan (year 1)

Table 5.4.
1 2 3 4 5 6 7 8 9 10 11 12
Month
Price 1200 1,300
Quantity 50 60
Service 1
Turnover 60,000 78,000

vice
Price 10,000 12,000

Ser

Quantity 5 6
Turnover 50,000 72,000
Price 300 325
Quantity 100 110

Service 3
Turnover 30,000 35,750
Price 600 620
Quantity 50 55
Service 4
Turnover 30,000 34,100
Price 4000 4,200
Quantity 10 12
Service 5
Turnover 40,000 50,400
Price 5000 5,500
Quantity 10 12
Service 6
Turnover 50,000 66,000
Price 12,000 13,000
Quantity 5 6
Service 7
Turnover 60,000 78,000

Service n
Price - -
Quantity - -

Turnover 100,000 78,500
Turnover 420,000 490,000

services
All
5.5. Monthly operational cost plan based on sales plan (year 1)

Table 5.5.
Month 1 2 3 4 5 6 7 8 9 10 11 12
Service 1 Quantity 50 60
Materials All costs 50,000 65,000

Service n Quantity - -
Materials Total Costs 315,000 377,000
+ staff 100,000 100,000
=Operation Total Costs 415,000 477,000
+ capital cost Interest 972 972
Depreciation 300 300
+ Total Costs 416,272 478,272
5.6. Starting of the working period plan

Table 5.6.
YEAR 2011 E.C.
MONTH
September
November
December
February
January
October
Activities
March
Members First Meeting 28
Forming a group & making contract 21-24
Agreement with gov’t & getting job 15-22

license
Rent, clean & preparing the house 1-10
Market analysis 11-30
Buying Equipment’s & Tools 2-5

Installation of Equipment’s & Tools 5-25
Employee vacancy 26-29
Exam for applicants 1-2
Promotion 3-25
Opening date and Ceremony (Tentative) 28
5.7. Name description
The name of company TYM derived from collecting first letters from each company owner’s
name:
T- Tesfaye Y- Yohannes & M- Moti
Logo of the company
Word Description
Service 1………………….brake
Service 2…………………axle
Service 3………………..oil
Service 4…………………grease
Service 5………………..clutch
Service 6………………..belt
Service 7…………………fuel injection
Service n…………………all other service

Reference
[1] Park C. Fundamentals of Engineering Economics New Jersey Pearson Prentice
Hall; 2004.
[2] R.Siby. A course material on Engineering Economics and cost Analysis. New
Delhi: Sasurie College Of Engineering; 2009.

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JIMMA UNIVERSITY

Jimma Institute of Technology

Post Graduate Study

“TYM Auto repair and servicing center”

Course name: Industrial Project Management & Engineering Economics

Advisor: Dr. K. Vinoth Babu (M.E.,M.B.A., Ph.D)

“TYM Auto Repair and Servicing Center”

ii) Company’s Logo

TESFAYE;MOTI & YOHANNES, JiT, 2018 i

TESFAYE;MOTI & YOHANNES, JiT, 2018 ii

TESFAYE;MOTI & YOHANNES, JiT, 2018 iii

TESFAYE;MOTI & YOHANNES, JiT, 2018 iv

TESFAYE;MOTI & YOHANNES, JiT, 2018 v

1) Factory maintenance services

2) Drivability, diagnosis and repair;

4) Heating / AC repairs and

5) Many other general auto repair services.

1. Outstanding customer service

3. Reputation for honesty.

4. Reputation for quality service.

TESFAYE;MOTI & YOHANNES, JiT, 2018 1

6. Convenient shop location.

1.2. Statement of the problem

TESFAYE;MOTI & YOHANNES, JiT, 2018 2

The business purposes of TYM’s are: -

 To provide service of renting of vehicles & machinery

 To provide maintenance of vehicles

 Free customer pickup and drop-off within 5 km.

TESFAYE;MOTI & YOHANNES, JiT, 2018 3

 Provide free exterior car wash on larger repair or service jobs.

 Continually looking for customer requested services.

 Executing all works in a genuine, transparent and accountable manner.

 Giving full customer satisfaction and strive to exceed their expectations.

 Giving maximum respect to employees, customers and partners.

 Developing brotherhood among the employees.

 Always ensuring safe working conditions to all employees.

 Providing necessary support to employees as much as possible.

 Always observing & respecting the law.

TYM will insure high quality work.

TESFAYE;MOTI & YOHANNES, JiT, 2018 4

4. All work backed by 12 month or 12KM limited warranty.

7. TYM will provide competitive pricing to its customers.

3) Fuel injection service & repairs: Required every 15KMs.

7) Brake service work: Complete brake service on drum.

TESFAYE;MOTI & YOHANNES, JiT, 2018 5

14) Complete engine repairs: Any type of engine repair or replacement.

15) Mechanical repairs: All other miscellaneous repairs.

 To Improve shop efficiency.

 To maintain efficient and effective storage tank for different factories.

TESFAYE;MOTI & YOHANNES, JiT, 2018 6

3.2 Organizational Structure

This Company will have the following servants.

 One board director

 One security sector

 Legal affairs sector

 One managing director of technical affairs

 One managing director of finance and commercial affairs

TESFAYE;MOTI & YOHANNES, JiT, 2018 7

 One Planning, follow up and statistics professional

 One Safety and professional health sector

3.3. General structure of the service company

TESFAYE;MOTI & YOHANNES, JiT, 2018 8

Marketing and supply: