COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF MANAGEMENT

Group member ID

1. Ayele eshete_______________________________________2499/10
2. Getnet belachew ______________________________________138/02
3. Getnet berihun ________________________________________139/02
4. Girma berhanu ________________________________________140/02
5. Gizachew Atlie_________________________________________141/02
6. Habtam Melkamu_______________________________________142/o2
7. Habtamu Abera ________________________________________143/02
8. Habtamu Getnet _______________________________________144/02
9. Habtamu Seta _________________________________________145/02

Submitted to: inst. Mohammed

May09/2012

Bahir dar

Business plan
Executive summery
Gech furniture will be run as a partnership between Getnet Girma , habtamu gizachew, and habtam
melkamu In wereta town, which is far from addis ababa in 620km. for launching business it requires
(30*20) square land, and it will offer different kinds of office and house materials according to the
customer specification. Some of the product that we will offer is table, cupboard, buffa, bed, and
chairs etc.

In order to be more profitable we will segment our products in to different forms. That is;-

 segment aimed for baby furniture

 offering decorated house furniture

Gech furniture has initial capital of 156,575 birr. Among this 60% of it is generated from interest free
loan/ from relatives, peers / and the rest is from parents share. In order to realise some of the
benefits from it, we made a sufficient environmental and industrial analysis, analysis of internal
strength and weakness and marketing opportunities. Our furniture shall consist of the following
facilities;

 Row material room

 Production and product room
 Residence room

Generally our business has the plan to expand to different geographical areas in order to get the most
reasonable profit from it. It plans to serve its customer through producing quality product within fair
price.

1.1 Introduction
 Geach furniture will be run as a partnership between the owners of this business. We have lived
in woreta town and through our own interest in the subject realised that there are no enough
furniture industry in the town and the area around it. The motivation behind to do this business is
that, there is no furniture industry that use the latest technology and offer products with fair
price to customers.

1.2 The name and address of partners

1. getnet girma _____________________________kebele 10

2. habtamu gizachew ________________________kebele 03
3. habtam melkamu_________________________kebele 29

1.3 The business mission

This is to start up and run a furniture business in wereta town and providing quality furniture
products for local business people or to the direct customer. To offer the products to local customer
within reasonable price than the competitor settle.

1.4 Short term objective

Our short term objective is to find and convert suitable premises that are (30*20) place for starting
the business with adequate seat, storage for inputs and outputs, machinery room and related service
areas. To increase our forecasted sales by intensively advertising and promotion, by the product itself
(producing quality product and service).

1.5 Long term objective

This is to be able to employee a full time members of the staff to build up reliable and organized team
working in our business, and encourage the business partner to focus on the day to day problems,
activities to meet customer need and wants. This helps as to expand the business further and made
real relationship with loyal customers. After five or six years we would like to purchase the other
premise in different area and set up other operations.
1.6 Key personnel
This business could be run out by getnet girma, habtamu gizachew and habtam melkamu. To run out
this business we are experienced in different courses life entrepreneurship, marketing and business
management. In addition to this we conduct a market survey how furniture business is operated from
similar business and different marketing opportunities and threats around our premises. So we are
well equipping how to plan the business, operate, design, promote and how to compute and provide
quality product than our competitors.

1.7 Confidentiality of the report

When an entrepreneur has a plan to start a new business they need to have a confidence about the
effort to achieve the objective of the business unless and otherwise it is difficult to think to achieve
the business mission and goal. Geach furniture starts its business with in a full confidence of the
group or partners hoe to achieve the goal. The partners are fully confident to accept the consequence
at the end.

2. Environmental and industry analysis

Prior to start any business conducting environmental analysis is very important for the smooth
running of the business. Making both internal and external analysis helps the entrepreneur to
forecast the business trends. It is obv7ious that environment influence the business in many ways.
Some of the environmental factors are;-

 economic factor (cost of business, cash flow, profit potential and related activities)
 marketing factor (demand and market share analysis)
 governmental factor (rule of regulation)
 technical factor(production capacity of the firm)
 Competition and suppliers etc.

Determining the above environmental factors helps the entrepreneur to recognize the real
environment or boundaries between the business and the environment. Environmental analysis is
important to our business we select by considering so many environmental factors and we made
analysis about it.
2.1 Future outlook and trends
When the business is initially started it is not for ever as it is. Our future outlook and trends are
creating an extra ordinary business in our country by making our product and service more
standardized and the business have also planned to expand our business in to large investment.

2.2 Analyses of competitors

Currently there are three competitors who produce furniture products in our locality. They produce
beds, chair, table, and different office equipment. But, they offer their product with high price the
machine they utility not latest and their premises is not consider the customer. After having the
above, we try to offer a better product that the customer will prefer than the competitor’s product.
The major strength of our competitor is that they have strong business network, they are not new for
the market.

2.3 Market segment

The market for our business is divided in to four regions like

 Bahir dar
 Addis zemen
 Debre tabour
 Hamusit

The bahir dar town market is a large consumer of office equipment (table, shelf, guest chair, and
other marble made furniture).

The addis zemen and hamusit is the consumer of house furniture (cup board, bed, and other decor
furniture).

2.4 Selected market segment

1. Segments aimed for baby furniture;- one of the drawbacks of our competitor is that,
they are not take in to account for babies related furniture. So, we shall produce baby bed, chair that
is comfort for baby, different sized babies’ material that create fun and made from marble, glass and
iron etc.

2. Segments aimed at producing decorated house furniture

Furniture industry is the mass known business that is used for delivering material that is used for
different operation. Beyond the above furniture industry aimed at producing decorated product that
creates fun in the minds of the user, such as producing ;

 Table made from glass and marble

 Modern sofa seating and sleeping healthy
 Cup-board made from iron etc.

This segment is especially for bahir dar market, because the consumer has the power to purchase the
above decorated products than other areas.

3. Description of venture
3.1 products
The primary products of business shall be

1. Office equipment and

2. House –furniture

3.2size of the business

Geach furniture has to be 8 employees, 3 of them shall be served a clear and the other is employee
for the main operation of business. The total estimated amount of money to start up the business
activities is about 156,575 birr. As the business starter our area of coverage may be limited, but for
the furniture we will expand and transform it to large size business firm.

3.3 location of the business: - the furniture industry, where different house and office
material produced and processing shall take, shale be located in south Gonder, Wareta town, 620km
away from Addis Ababa. The premise of our business is around the place where inputs like / wood,
glass, electricity, marble, and iron / is located. It is convenience for customer accessibility and it’s also
a strategic place for the input supplier.

3.4 back ground of the entrepreneur

The partner are well equip concerning with entrepreneurial activities, furniture operations which will
significantly contribute to the successful establishment and operation of the furniture business.

3.5 Suitability for the market

After we conduct a mini survey concerned with the suitable place that is easily accessible both by the
customer and supplier that decreases transportation cost, input cost, and miscellaneous expense.

4. Production plan
Without operation plan, the business is dead by itself. The plan of action is necessary for a smooth
running of a given business. The production staff should have friendly welcoming helpful attitude,
they can boost gains by asking the right questions at the right time, it can be achieved through
training and selection.

4.1 Physical plant; - geach furniture shall consists the following facilities;
1. Row material room
2. Production and product room
3. Residence room

4.2 Equipment and machinery

No Description Qty Unit price/birr Total price/birr

1 Drill 1 2000 2000birr

2 Rotor 3 4000 12000

3 Gig so 2 2000 4000

4 Sanglor 1 2500 2500

22,500

5. marketing plan
5.1 Pricing
Our business shall use low cost leadership strategy to introduce its products to easily establish itself
in market. The tentative prices of selected products are presented below.

 Bed =15,00birr
 Sofa = 12,000birr
 Wood table=600birr
 Glass table= 1,200birr
 Bufa =2,000birr
 Chair =200birr

5.2 Promotion strategy

It is obvious that the business firm in a given industry should be advertised to attract the attention of
customers in the targeted market. Accordingly, we shall advertise our product through sale
promotion, publicity, local papers and magazines.

5.3 Distribution mechanism

Our products could be dispersed in to different local areas around our premises. We shall distribute
our product to the targeted market through vehicles like carts & cars. After we expand our business,
the mode of channel of distribution will be automatically changed.

6. Financial plan
6.1 financial requirement; - when a business is initially launched, it may need a high amount
of money. This is because of most of field equipment is purchased during this time. In order to run
out our business with enough finance, we try to get from different alternatives.

From our initial capital (156,575), 60% of it is from loans and the rest is from parents share:

 Loan= 156,575*60/100______________________ dept =93,945

 Equity =156,575*40/100_____________________credit =62,630

Note: the loan we get is interest free

Different kinds of expense for 1st year /end/

 Licensing expense _________________________1200 birr

 Advertising expense________________________2000 birr
 Rent expense_____________________________6000 birr
 Salary expense ___________________________8000birr/month
 Transportation expense ____________________3500 birr
Depreciation expense _____________________750birr
Utilities expense _________________________24,500birr
Supplies expense _________________________6125 birr
Miscellaneous expense _____________________2000 birr
Total expense __________________________126075
 Fixed asset =birr 22,500(machinery) + 8000(land) = 30,500 birr
 Accumulated depreciation will be 1500 for 1st tear

The 1st year total sale in number and birr /end/

No unit price whole
1. Bed 25 1500 birr 37500
2. Sofa 16 12000 192000
3. Wood table 80 600 48000
4. Glass table 36 1200 43200
5. Bufa 44 2000 88000
6. Chair 500 200 100000
Total sale 508200birr

6.2 Financial statement

A. Geach furniture
Income statement for dec30, 2012 /1st year /

Sales ______________________________________508,200 birr

Less cost of goods sold _______________________________17000

Gross profit _______________________________________491000birr

Rent expense ______________________________6000

Licensing expense___________________________1200

Advertising expense__________________________2000

Salary expense______________________________80000

Transportation expense_______________________3500

Depreciation expense ________________________750

Utility expense______________________________24500

Supplies expense____________________________6125

Miscellaneous expense-_______________________2000

Total______________________________________________126075

Profit before tax _______________________________________364925

Less income tax (35%) ___________________________________127723

Net income _________________________________________237202birr

Dividend _______________________________________________205000

Retained earnings________________________________________ 32202

b. balance sheet for 1st year dec30,2012

Assets

cash _____________________________________________ 0

Inventory _____________________________________________17,000

Total _________________________________________________17000

Long term asset

Equipment _____________________________________________22,500

Land ___________________________________________________8000

Less depreciation /acc/_______________________ 1500

Total __________________________________________________46000

Liability

Account payable__________________________________________10000

Total __________________________________________________10000birr

Owner capital

Retained earnings_________________________________________ 32202

Capital stock _____________________________________________3798

Total liability & capital _____________________________________________46000birr

Projected income statement for 2013and 2014

For 2013 for 2014

Sales increase by 12% ______________________________ increase by 11%

Costs of goods sold increase by 4%_____________________ increase by 5.60%

Expense increase by 4.6% ___________________________ increase by 3.7 %

Projected income statement for the year 2013 & 2014

2013 2014

Sale ____________________________569184______________________ 631794

Less cost of goods sold______________ 17680 _______________________18670.80

Gross profit_______________________ 551504 birr___________________ 613124

Rent expense _____________________6000 __________________________7500

Advertising expense________________2500___________________________ 2500

Salary expense-___________________90000__________________________ 90000

Transportation expense-_____________4200___________________________ 5500

Depreciation expense _______________900____________________________ 990

Utility expense-____________________26000 __________________________26900

Miscellaneous expense-______________2600___________________________ 3000

Total expense ___________________132200_________________________ 136390

Profit before tax____________________ 419304_________________________ 476610

Less income tax /35%/ ________________146756 ________________________166813

Net income _________________________272548________________________ 309797

Dividend___________________________ 235000________________________ 280000

Retained earnings ___________________37548___________________________ 29797 birr

Projected balance sheet for 2013 & 2014

2013 2014

Assets

Cash __________________________7500_______________________________ 6000

Inventory______________________ 11800______________________________ 13600

Total _________________________19300______________________________ 18600

Long term asset

Machinery ________________________29000 ____________________________29000

Land _____________________________12000____________________________ 12000

Less Acc. depreciation ________________1900_____________________________ 2000

Total _____________________________39100 ____________________________39000

Total asset _________________________58400____________________________ 57600

Liability

Account payable_____________________ 5000_____________________________ 8000

Loan payable _______________________13000 ____________________________17000

Total ______________________________18000______________________________ 25000

Capital
Retained earnings ___________________37548____________________________ 29797

Capital stock _______________________2852 _____________________________2803

Total ____________________________58400birr________________________ 57600 birr

C. cash flow for the coming 3rd year assumption

1. Cash flow for 1st year

 Machinery and other row material purchase =6.9% of sale

 Wages a birr 1.16 per hour
 Operating expense =3.34% of sale
 Income tax =34.99% of profit
 Loan payment= 10.6% of the whole dept

2. Cash flow for 2nd year projection

1. Assumes sales cost increased by 12%
2. Assumes cost increased by 4%
3. Expense increased by 4.6 %
4. Salary increased by 11%
5. Loan repayment increased by 8.6 % than the previous
3. Cash flow for the 3rd year projection
1. Sales will be increased by 9.9% than the previous
2. Assume cost increased by 5.3% of 2nd year
3. Salary expenses similar with the previous trends
4. The loan repayment trend is increased by 7.53% than the previous year

7. Organizational plan

7.1 Form of ownership

Geach furniture is a partnership for organization and the owners of the organization are the manager
of the business and they have the responsibility for the overall operation of the business.
7.2 Authority of ownership
The owners of the furniture have authority on their business and the power to control the business.
The owners have an authority over the business overall affairs like

 The owner have the right to increase or decrease the pricing by considering so many factors
like competitor, demanded etc
 The owner have the right to control any risk

7.3 Risk assessment

Risk is uncertainty that faces every business. Normally no good business without risk, but the degree
of risk is different from one business with other one. As there is many competitors throughout the
country, our furniture may face the risk of gaining good market, scarcity of row material, quality
problem and loss of customer loyalty.

7.4 internal rate of return /IRR/

IRR measures the worthiness of an investment, i.e. it is the rate of return from investment. Internal
rate of return is used to find the worthiness of an investment proposal by comparing it to the
company’s cost of capital. IRR should be greater than that of cost of capital.

IRR for 1st year = net income /expense = 273202 /126070

= 2.17%

If the IRR is increase, the acceptance of the given project will be increased so, the 1 st year operation is
feasible

IRR for 2nd year = 309,797/136,390

2.27

The 2nd year IRR is greater than that of the 1st year .this shows that, our project will be successful in
the coming year.