PROJECT PROPOSAL ON FURNITURE AND WOOD

PRODUCT MANUFACTURING INDUSTRY

PROJECT TO BE IMPLEMENTED IN SHEGER GELAN SUB-CITY

PROMOTER:- AFOMIYA FURNITURE MICRO ENTERPRISE

March, 2023
FINFINE, ETHIOPIA

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Contents
Executive Summery................................................................................................................................4
1. Introduction.................................................................................................................................5
1.1. General Background................................................................................................................................ 5
1.2. Purpose Of The Document.................................................................................................................... 6
1.3. Mission Statement.................................................................................................................................... 6
1.4. Objective Of The Project........................................................................................................................ 6
1.5. Project Rationale...................................................................................................................................... 7
1.6. Description Of Project Area.................................................................................................................. 8
1.8.1. Source Of Employment.......................................................................................................................... 10
1.8.2. Source Of Government Revenue........................................................................................................ 10
2. Market Demand And Production Process............................................................................12
2.1. Market Overview.................................................................................................................................... 12
2.2. Demand And Supply Condutuons................................................................................................... 13
2.3. Marketing Strategy................................................................................................................................ 15
2.3.1. Target Market Segmentation Strategy.......................................................................................... 15
2.3.2. Pricing Strategy...................................................................................................................................... 15
2.3.3. Promotion Strategy............................................................................................................................... 16
2.3.4. Distribution Strategy............................................................................................................................ 16
2.3.5. Positioning Statement.......................................................................................................................... 16
2.4. Product Description.............................................................................................................................. 17
2.5. Plant Capacity.......................................................................................................................................... 17
2.6. The Production Program.................................................................................................................... 18
2.7. Pricing........................................................................................................................................................ 19
2.8. Availability And Source Of Raw Materials................................................................................... 19
2.9. Macro Economic Overview................................................................................................................ 19
2.10. The Production Process...................................................................................................................... 21
2.11. Projection Of Revenue And Expenses............................................................................................ 22
Operating Activity Schedule............................................................................................................................ 23
3. Organization And Management Summary..........................................................................24

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3.1. Organization Structure........................................................................................................................ 24
3.2. The Management Team....................................................................................................................... 25
3.3. Personnel Requirement And The Staffing Plan.........................................................................25
4. Financial Requirment..............................................................................................................26
4.2.1. Machinery And Equipments.............................................................................................................. 27
4.2.2. Office Equipments................................................................................................................................. 27
4.2.3. Vehicles...................................................................................................................................................... 28
4.4.1. Raw Materials.......................................................................................................................................... 29
4.4.2. Salary Expense........................................................................................................................................ 29
4.4.3. Operating Expenses.............................................................................................................................. 32
4.5. Underlying Assumption...................................................................................................................... 33
4.6. Source Of Finance And Schedule Of Debt Servicng..................................................................34
Loan Repayment Schedule............................................................................................................................... 34
Depreciation Schedule....................................................................................................................................... 34
4.7. Projected Sales Plan For The Project............................................................................................. 35
4.8. Financial Statement.............................................................................................................................. 36
4.8.1. Balance Sheet/Beginning................................................................................................................... 36
4.8.2. Profit/Loss Statement.......................................................................................................................... 36
4.8.3. Cash Flow Statement............................................................................................................................ 37
4.6 Pay-Back Period..................................................................................................................................... 38
4.7 Future Development............................................................................................................................. 38
5 Environmental Impact Of The Project..................................................................................39
6. Project Implementation Action Plan....................................................................................39

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EXECUTIVE SUMMERY
1. Project Name Furniture and Wood product Manufacturing Industry

2. Project Promoter Afomiya furtiture micro enterprise

3. Nationality Ethiopian
4. Project location Sheger Gelan sub city

5. Project Composition Manufacturing of wood product such as Chip Wood, veneer

sheets, wood-based panels wooden boards Office and house
hold furniture and etc

6. Premises Required 0.5 hectare which is equivalent 5,000m2

7. Total Initial Capital Br. 5,000,000from this amount 30% (Br1,500,000) financed by
the owner equity and 70% (3,500,000) financed by bank loan.

8. Market Share The project will supply 70% of products for Domestic market
and 30% for export (International market) mainly for
neighboring countries like South Sudan, Sudan and Kenya.

9. Production at full capacity The factory will produces Chip Wood 8000 in pc veneer sheets
8000 in pc wood-based panels 7000 in pc wooden boards 7000
in pc Household furniture in pcs 5000, Office Furniture in Pcs
10,000 and Other furniture’s in Pcs 5000.

10. Employment Opportunity The total manpower required for the plant will be 317
employees at full capacity.

Permanent workers 267

 Skilled 177 and Unskilled 90
 Temporary workers 60
 Skilled 5 and Unskilled 55
11. Benefits of the project For Manufacture and Supply of Quality Furniture products,
The region/ country Source of Revenue, Employment opportunity, Save the
Country Foreign Exchange, Benefit for the Local
Community Stimulate the Local Economy, Technology
Transfer, Agricultural and Environmental development.

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1. INTRODUCTION

1.1. GENERAL BACKGROUND

These days by realizing the positive role that the private sector plays in the development
endeavors, the government of Ethiopia in general and the Sheger City administration in
particular, creating a favorable investment atmosphere for private investment and
business activities with the to support the hitherto significant role of the state with greater
domestic participation are in progress.

Among others, significant progress was made in reducing the bureaucratic bottlenecks and
regulatory impediment to doing business, the time taken to get investment license reduced
and procedures to access land and credit service for investment become simplified, mainly
following the full scale implementation of Business Process Reengineering.

Moreover varies laws and policies have been formulated and enacted officially in favor of
the private sector promotion and expansion. To this effect the government took actions of
privatizing some of its economic premises, of creating multiple investment opportunities
and other motivational incentives which succeed in pulling investors from international,
national and local areas. As result currently there are several investors working on
different areas of economy in the capital and many other regions of the country. In addition
the government expressed its attempt and commitment to actualize sustainable economic
development and growth in the country by means of practicing agricultural Development
led Industrialization (ADLI). This strategy stresses primarily on agricultural growth, which
is believed to be a reliable base for subsequent industrial growth. Besides one of the
strategies for poverty alleviation is encouraging private investment especially in the area of
manufacturing industries as the sector is one of employer of the young working people and
helps in economic development. On the other hand agro processing industries with firm
relationship with agricultural sector are encouraged to develop and expand.

The promoter of this project Afomiya Furniture micro Enterprise hopes this project to be
the first of many other developmental projects to follow as they look forward to share the
responsibility of, reducing unemployment. Therefore, it is the ample opportunity and

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cumulative experience which makes the owner to envisage this wood product Equipment
Factory in Gelan sub city with name of Afomiya Furniture micro Enterprise wood product
Factory.

1.2. PURPOSE OF THE DOCUMENT

The objective of the feasibility study is primarily to facilitate potential entrepreneurships in

project identification for investment. The project feasibility may form the basis of an
important investment decision and in order to serve this objective; the document/study
covers various aspects of project concept development, start-up, production, marketing,
and finance and business management. The document also provides sectoral information,
brief on production & engineering technology which have some bearing on the project
itself. This particular feasibility is regarding production of wood product equipment for
commercial basis.

1.3. MISSION STATEMENT

Based on the present conducive investment policy of the country our wood product
company seeks to contribute to the economic development of the nation, encourage and
support the construction sector, private retailers of building materials and the individual
end users to attain their business objectives and satisfy their needs respectively by
supplying locally produced pine and renowned manufactured wood product
manufacturing it has got a short term plan to discourage import that cedes a considerable
amount of foreign currency

1.4. OBJECTIVE OF THE PROJECT

The envisaged wood product manufacturing company to be one of the vest manufacturing
of pine and wood product manufacture in terms of market share and long term
profitability it should strive for one of its objective that is maximizing its revenue by
promoting the supply of locally produced pine and its manufacturing furniture’s in today’s
highly competitive and it will be timelier to introduce a business deform which the market
requires therefore, based on the above facts and experience as well as to effectively utilize

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the available finance and human resources at hand, the following fundamental objectives
were established:

 To carryout and undertake the business of manufacturing wooden furniture

 Supplying locally manufactured specific brands of wooden furniture’s local market,
 To promote the production of wooden furniture’s in large scale.
 Promote transfer of technology and knowledge by inventing new forms and designs in
the products
 To enhance and promote the country’s foreign currency savings by substituting and
discouraging the import of pine & furniture’s
 Satisfying the customer at large by providing quality products with minimum cost.
 To create employment opportunity and contribute to the national economy.
 Provide efficient and effective after sales support service.
 To promote the transfer of the technical knowhow in the progress and the management
of the earmarked industry to interested individuals to improve their capabilities to earn
additional income.
 Establishing maintaining and enhancing the long term customer relationship.

1.5. PROJECT RATIONALE

Internationally the economic growth this country experiencing, the good governance
created and even if the town is at a nascent stage of development this project is the first in
its kind in the district are feasible and would be a model development in promoting and
attracting different investments. In order to respond to the created environment the
district is in need of major basic and feasible urban projects to be developed.

The existing promising investment opportunities, the demands of service needs along with
relatively sound investment support made by the government in such kinds of feasible
projects compelled the project promoters to initiate the this Furniture Factory.

Despite the promising business opportunities of the area the trend on such kinds of
investment found to be minimal and none-existing. The mismatch between the demand for
supply and supply of such kind of services is easily observed in the country.

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Therefore the existing shortage or absence in the supply of these services, along with its
commercial and administrative access, better location and infrastructure access, escalating
trend of urbanization and business activities has given the opportunity for the project to be
demanded significantly. Thus it is with such reason that this project is identified and
proposes and assumed to be more profitable

1.6. DESCRIPTION OF PROJECT AREA

Location

 In project under consideration will be implemented in Gelan sub-city

administration. Gelan sub city is found at distance of about 20 kms away
from Addis Ababa on the main road to Adama.
The reason of selected the location for the proposed project is:

 Its proximity to Addis Ababa city administration with good scenery and
weather condition.
 Its proximity to serve as and facility like road, transport and utilities like
electricity, water and telephone line.
 The existing conductive social and investment situational and increase
number of private investment in the area.
 Its accessibility and easy of future development are some of the reasons
behaved selecting the area for the propose project.
 Attractive policy incentives and administrative procedures of the region.
 Proximity to new dry port in Gelan sub-city & around Mojo town.
 The existences of high demand for the envisaged service.
 Personal preference of the investor.
2.2. Physical Characteristics

Most part of the Gelan Sub-city is covered by manufacturing projects. The rest
part is also covered by different commercial centers, hotel & recreation, social
services residential areas and so on.

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The town has elevations that range from 1,500 – 2,300 with the exception part
of Yarer Mountain (3,100m) as far. The climate is woinadega (98%) and dega
(2%)& 1800-2000m above sea level.

2.3. Soil type

Soil is the most important natural restore in the world for human beings. It
also used for construction of houses and its rocks parts is used of
reconstruction of roads.

Gelan has two different kinds of soils. Red soils & black soils. The 1 st one is the
very important for constructions of houses & rods in town the black one is also
used a especially for environmental farmers in their production.

For construction big villas building & ware houses in Gelan city is simply
possible because the most parts of solid in Gelan is red solid.

Infrastructural Development

The level of development in infrastructure is one of the major point in selecting location
and site for establishing any business activities. Development of roads, availability of water,
power, communication facilities and availability of social services are included in this
category. The project area, Gelan sub city and its surrounding have a well developed net
work of the mentioned roads and facilities.

Labor Availability

As Compared to capital availability, which is accessed with difficulty, human labor is

abundantly available in the town and nearby rural settlements. This shows that our
organizations can carry out labor intensive works rather than capital intensive ones. In this
respect, the town is fostering well-educated and, well-experienced professionals, wage
laborers, etc.

Premises Required

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For the proposed set up of wood product factory, a total of 0.5 hectare, which is equivalent
5,000 square meters, is required. This land requirement includes space for the installation
of plant and machinery, management office and show room, finished product and parking.
The land use plan is shown in the table below;

Table; Land use Plan

SN Description Land
Requirement(M2)

1 Production Hall
1.1 Workshop 2,000
1.2 Inspection Room 200
1.3 Packing Area 100
  Total production Hall 2,300
2 Warehouse
2.1 Raw Materials and Inputs 500
2.2 Finished Products 700
  Total Warehouse area 1,200
3 Office and show room Building (G+2)
3.1 Office 200
3.2 Show Room 300
  Total Office & Showroom 500
4 Waste Accumulation area 500
5 Green Area, Parking, road and future expansion 500
  Total 5,000
BENEFIT OF THE PROJECT:

The envisaged project deemed to contribute to the economic development of the

country in the following ways:

1.8.1. Source of Employment

One of the problems that our country is faced is unemployment. Therefore, the
current objective of our government is working on tackling the problem of
unemployment either through creating self employment or employment in other
organization. Hence, the envisaged wood product factory deemed to contribute
somewhat to solve the problem of unemployment. Upon completion, the project

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assumed to generate employment opportunities for about 317 on permanent and
temporary basis when fully get operational.

1.8.2. Source of Government Revenue

To redistribute income, the government collects different forms of taxes from
different business undertakings and individuals as income tax. Among the different
forms of taxes, business income taxes are collected from undertaking business
activities. Therefore, the project will serve as sources of revenue for the both for the
state and the Nation.

1.8.3. Sources of Social Service

In addition to serving as a source of employment and income for the region, the
project renders social services for different group of people. Hence, it is also provide
the following services:

 Serve as a source of mental satisfaction for the different users,

 Since, the center encompasses different recreational areas; it will divert the
attention of the users from different evil deeds.
 It deemed to minimize the demand for wood product factory and other
bundles of services in the area.
Furthermore, it serves as the pilot experience and ground for other investor to enter
in to such kinds of woodwork investment.

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2. MARKET DEMAND AND PRODUCTION PROCESS

2.1. MARKET OVERVIEW

During the Derg regime, there were only few private investors who involved in
manufacturing and production activities were there was no free market economy and the
existing market was underutilized. In most industries, the then government was the only
produce and seller of various products and due to this case, there was no such a serious
competition from private sector against government monopoly. However, now that the
movement of EPRDF has brought about the policy of free market economy and that of free
private investment in most sectors, there flourished different types of private investments
in numerous types of activities.. As there is an increment various items, it has to be
matched with the growth of market opportunities. Otherwise, if there are market
constraints, then undoubtly there arises very high competition among those who produce
the same kind and type of products in view of getting market penetration and staying there.
From the point of view of our organization, such problems can be solved by producing
quality products and selling them, at reasonable prices, at different local and national
markets (market diversifications).

It is generally believed that currently there is an acute shortage of residential and non
residential housing units in major cosmopolitan cities of the country. In order to minimize,
if not eliminate the prevailing wide demand-supply gap; the government is undertaking a
number of courageous measures. This includes issuing of plots of land to individuals,
cooperatives, developers of real estate and to the public sector in construction of low cost
residential buildings and condominiums.

Public and private banks are extending substantial development loans for construction of
villas, apartment houses, hotels, etc. as part of their obligation to enhance the
comprehensive development needs, this is in full trust that the facilities are major
contributor to and firm foundation for infrastructure development needs; and hence for,
sound economic and social development of the country, is general and the capital city in
particular

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Especially, the city exhibits a growing socio-economic disparity reflected in the living
standard and neighborhood facilities. The town has been witnessing astonishing
improvement in the magnitude and value of domestic and foreign investment in the areas
of industry, agriculture, real estate development, hotel & tourism, education service, health
service, construction, trade, transport, storage service and other business.

The above mentioned facts and figures justify the existence of sufficient market for the ear
marked project and forecast its future success and feasibility hence, to make use of the
available potential market, a decision has been reached to establish a manufacturing plant
that will be engaged in the manufacturing & distribution of pine and wood product ’s to the
Ethiopian market as a subsidiary commercial activities which will be operated as part of
the holding company.

To materialize the above mentioned expansion plan, the proposed project resorts to adopt
product development strategies that deals with product planning.

From our country’s perspective, market analysis can be viewed from different angles.
There are manufactures that produce and sell their products in international and national
markets only, where as others limit their market penetration to national and local markets.

2.2. DEMAND AND SUPPLY CONDUTUONS

In the past five years, the country has registered and average of 10% economic growth and
expects to record the same rate for the coming tears. From the two digits economic growth,
the construction and the industry sector plays a major role next to the agriculture sector
for the total GDP.

As the construction sector growth increases the demand for wood product also increases.
And at the same time, the growth of real estate, condominium houses, hotel, education,
health sector and others have direct impact on the requirements of wood product . Due to
the growth in the above sectors, the demand for timed for timber and wood product will
increase in an alarming rate from time to time.

For fulfilling the demands of wood product and Tiber, a large number of entrepreneurs
invest other import of the products from Europe and Far East and some of them establish

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manufacturing plant of wood product . But still the engagement on the later is not
satisfactory or minimal, as compared to the growth of the sectors mentioned.

The price for import of finished products like furniture’s like furniture’s is increasing from
time to time due to the increment of the local inflationary rate and the continuous
devaluation of Birr against foreign currency especially US Dollar, Euro and Pound sterling.

This makes large number of the population to refrain on deciding on the imported
products. It is also known that above 80% of the country population purchasing power and
income cannot afford the price of imported luxury and quality furniture’s

Currently there are a number of furniture manufacturers and importers in the market. The
major one includes the following.

Major market share holder of the industry

N Company Type of Location

o engagement
1 Finfine Furniture Factory PLC Manufacturing Addis Ababa
&import
2 Deluxe furniture Import Addis Ababa
3 Wanza furniture manufacturing Manufacturer Around Addis Ababa
4 Uni furniture Manufacturer Around Addis Ababa
5 GM furniture Manufacturer Around Addis Ababa
6 Genet household & office furniture Manufacturer Addis Ababa
7 Blue Nile furniture factory Manufacturer Bahir Dar
8 SNS furniture Manufacturing PLC Manufacturer Addis Ababa
9 Warke furniture Manufacturer Addis Ababa
10 Elshaday house and office furniture Manufacturer Addis Ababa

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2.3. MARKETING STRATEGY
Our main strategy is to position ourselves at the top of the quality scale, featuring our
combination of superb technology and fine old-fashioned woodworking, for the buyer
who wants the best quality regardless of price. Tactics underneath this strategy include
continuo’s research and development related to new designs and new technology,
choosing the right channels of distribution, and communicating our quality position to
the market. The research includes customers’ comments and order specifications as
additional input.

Our marketing strategy is based mainly on making the right information available to the
right target customer. We can’t afford to sell people on pure competitive priced products
because most don’t have the budget. What we really do is to make sure that thus who
have the budget and appreciate the product the products know that it exists, and know
where to find the best product as per their desire.

2.3.1. Target Market Segmentation Strategy

Our segment definition is of itself strategic we seek the buyer who appreciates two
attributes: the quality of furniture workmanship and the excellence of design, with an
understanding of technology and ergonomics built in.

The project will supply 70% of products for Domestic market and 30% for export
(International market) mainly for neighboring countries like South Sudan, Sudan and
Kenya.

2.3.2. Pricing strategy

We will maintain our pricing position as a premier provider. We are the best product
available, for the most discriminating consumer. We intend to maintain our separation
from the price competition at the lower end of the business. Put plan calls for no
significant changes in pricing. Our company’s goal is to provide good quality furniture
and timber for a reasonable price while still maintaining healthy profit margins. While

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our company offer volume discounts to retailers, and 15% credit sales to prominent
customer for the projected period.

2.3.3. Promotion strategy

The promotional strategy targets both potential retail outlets and potential consumers.
For retailers and organization that purchase in bulk will have a makeup on the product,
i.e. the price set for having a discount comparing to the retail price. Moreover, we plan to
produce a catalogue featuring our product lines and samples of our products and
distribute to the potential and targeted customers. The wood finish samples used to
show customers the finishes and stains available with our product lines.

A brochure has been developed on each product line that is distributed to interested
consumers through the retailers and also our marketing staff the brochures feature
pictures of each product and highlight the unique design and quality of our products
electronics media like television and FM radio, other media of the private and
government owned published news papers advertisement are considered in the
promotion strategy.

2.3.4. Distribution strategy

Our furniture’s are distributed through several channels depending on the needs of our
targeted customers. The company truck and vehicles used to ship bulk orders to
customers. The channel of distribution varies depending on the customers and size of

2.3.5. Positioning statement

For discriminating our products from the competitor’s products’ our product line offers
exquisite workmanship and design combined with state-of-the-arts ergonomics and
technology. We also include the customer interest on the style and design of the
furniture before production.

3.4.6 Analysis of competitive position

The plan product line has several competitive advantages over the competitors including
unique design and quality for a reasonable price our product line is flexible in that the

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customers can choose different finishes to satisfy their style and design preferences. In
addition to that there area not sufficient pine and furniture manufacturing plant in Addis
Ababa to fill the demand and supply gap of the product, hence it also gives us additional
advantages for the plant to get market share since the selection of the sector is at right
time, and excellent position to capitalize the opportunity.

2.4. PRODUCT DESCRIPTION

Our company’s plan is to establish wooden furniture manufacturing plant in BISHAN
GURRACHA town the main products of the manufacturing plant are different wood
product s. The productions of furniture are classified in three sub categories namely;

a) Office furniture’s:- includes managerial tables, office shelves & cabinets,

secretarial tables & chairs, and computer tables.
b) Household furniture’s:- like dining room furniture’s living room furniture’s sofa
sets, and room sets.
c) Other furniture’s:- including hotel, restaurant, café, standard and non standard
doors, kitchen cabinets, built in cupboards and institutional furniture’s.

2.5. PLANT CAPACITY

The manufacturing of wood product is based in two main conditions. The first and
major one is the increased market requirements of the demand for the furniture. The
second one is the availability of raw materials and this has a direct impact on the
production capacity of the plant.

The plant is planned to be equipped with latest high technology machines and
equipment so that it manufacture furniture with classic quality and quantity. In addition
to the advanced technology of the machineries, the project highly emphasizes on the
interest of the customer, design, painting and finishing style of the furniture, our plant
marketing strategy is to manufacture products based on the interest of the customer, the
client advice the type and style of the products; and then, we manufacture the products
including the customer need and add our professional value.

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 Table-The plant of the Project
Description Year
1 2 3 4_10
Capacity utilization (%) 70 80 90 100
Chip Wood in pc 4000 5000 6000 8000
veneer sheets in pc 4000 5000 6000 8000
wood-based panels in pc 3000 4500 6000 7000
wooden boards 3000 4500 6000 7000
Household furniture in pcs 3,500.0 4,000.00 4,500.00
0 5,000
Office Furniture in Pcs 7,000.0 8,000.00 9,000.00
0 10,000
Other furniture’s in Pcs 3,500.0 4,000.00 4,500.00
0 5,000

2.6. THE PRODUCTION PROGRAM

The production program of wooden furniture manufacturing plant is designed in such a
way that at the initial year, it operates at 70%, 80%, 90% and 100% respectively for 1 st,
2nd, 3rd and 4th year respectively. Thus, from the fourth year onwards the plant will
continuously operate at 100% of its installed capacity.

The following assumptions were considered in preparing the production plan;

 The liquidity of the project which starts from year 1 st grants sufficient working
capital that safeguards the provision of uninterrupted raw material supply.
 As a new entrant to the market, due attention is given to the position of our
competitors and the anticipated market share of the plant.
 The efficient market promotion & pricing strategy adopted and the proper utilization
of resources creates additional new market which results the production volume to
increase by 10% each year starting from the third year of the projected period.

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2.7. PRICING AVAILABILITY AND SOURCE OF RAW MATERIALS

Products Description Unit Price of the

project in Br
Chip Wood in pc 2000
veneer sheets in pc 3500
wood-based panels in pc 4000
Household furniture in pcs 3500
Office Furniture in Pcs 5000
Other furniture’s in Pcs 3500
Total annual Income

The raw materials needed to produce different sizes of timber are local logs includes cop
ruses & pace hula types of pine. These logs are found in many parts of the country and
are supplied by forestry organization from Oromia, Addis Ababa, SNNRP, Gambela and
Benshangul Gumz regional states the capacity of the organization to supply the logs is
currently above the demand of the manufacturing plants.

The raw materials for furniture production are from both local timbers produced from
weira, wanza, zigiba and korero in our own manufacturing plant and imported timbers.
The sizes are indicated in the product description of this project proposal. The main raw
material for furniture production is timber. Other raw materials include; foam, Glue,
paint, varnish chip board/fiberboard, nail, key, metal nuts, bolts, steel coners and others.

These raw materials are available in the market from local manufacturer and importers
from different parts of the world. We plan to import some of the materials by ourselves
and the remaining to purchase from the local manufacturer; so that we can take the cost
and time advantages. The project proposal forecasts the source of raw materials as 75%
from local, and the remaining 25% from abroad.

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2.8. MACRO ECONOMIC OVERVIEW
Ethiopia follows agrarian leading economy that contributes around 50% of the total
output of GDP, creates 80% of employment opportunity & 90% of foreign exchange
earning thus, organizing & coordinating the available physical resource of land, labor
and capital with proper management & planning leads to higher economic benefit.

The following table shows the scrotal contribution to the domestic product and its
respective.growth.

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Table: - Sectoral contributions to GDP and GDP Growth

Item description Fiscal year

Real GDP (million of birr) 2003/04 2004/05 2005/06 2006/2007
Agriculture 74,397 83,804 93,496 104,179
Sector and allied 34,990 39,729 44,063 48,226
(in activities
million) Industry 10,420 11,402 12,561 13,944
Service 29,536 33,312 37,770 42,877
Growth in real GDP 11,7 12.6 11.6 11.4
Source:- National Bank Ethiopia Anal Report 2006/07

The real GDP of the country is expected to grow in the future, which, in turn has a
positive effect in the overall consumption of the country in general and the demand of
industrial products and services in particular.

2.9. THE PRODUCTION PROCESS

Before the start of manufacturing of any furniture a desired design is selected. Selection
of elegant design is important to ensure attractive finished product. The seasoned wood
blocks are cut into desired shape and slices according to the requirement of design.

The slices of wood are then molded into the desired shape according to the design
carving means put tint different elegant pattern carved in the wood quality of carving
depends on the skills of the labor. Once the different pieces are carved and molded, then
these part/pieces are assembled or fixed together to give shape to the final product.

Assembled product is grind to make the surface smooth once the surface is smooth,
finishing material is applied to make the surface ready for paint or polish. After the base
is prepared, final finishing is applied depending on requirement in term of
paint/polish .upholstery of fabric is carried out according on requirement in term of
paint/polish upholstery of fabric is carried out according requirement of design.

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Fig ; the production process of furniture manufacturing

Wood comes at Wood comes to Furniture designing

shaper machine machine man on CAD

Carpenter shape the Furniture comes to Furniture comes

wood in to furniture spindle/molding to carver for
machine carving

Furniture goes to store Furniture comes to Carpenter

or for polishing inspection before assembles the
flinching furniture

2.10. PROJECTION OF REVENUE AND EXPENSES

2.11.1. REVENUE PROJECTION

The reliability of the captured demand, the forecasted production plan and feed back of
the market survey for product pricing were critically considered for the revenue
projection hence, the revenue projection for the projection for the project period by
major product categories is presented in the annex.

2.11.2 EXPENSE PROJECTION

The expense projection is based on the main general expense in which the plant will
have in the forecasted projected period. The bases for the expenses are the current price
of the items described and the future expected growth of the prices in addition to the
performance of the plant. The projected expenses are presented in the annex with major
categories

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Operating Activity Schedule

The successful implementation of any project proposal depends on the planning of core
activities to be performed during the project phase, and meeting the desired result by
close follow up and due attention, therefore, considering that the basic assumptions will
be realized, the pre-operating activates to be undertaken, with their corresponding time
table set for the implementation of the project are presented here under.

Table pre-operating activity schedule

No Item description months

1 2 3 4 5 6 7 8 9 10 11 12
1 Getting the investment license
2 Registering the business
3 Applying &getting the bank loan
4 Contracting machinery suppliers
5 Construction of civil works
6 Plant & machinery erection
7 Man power requirement
8 Purchase of fixed assets & raw
materials
9 Trial production

23
3. ORGANIZATION AND MANAGEMENT SUMMARY
3.1. ORGANIZATION STRUCTURE

The organizational structure of the business was designed based on the function of the
overall business towards the achievements of the objectives, and selecting the best way of
managing the organization resources (human resource, capital, information and
technology) effectively and efficiently.

The organo-gram of the company has been structured by activity lines to attain
specialization and maximum possible efficiency in the lines. The proposed organizational
set up comprises fiancé and administration, production, and marketing and sales
departments. The organizational structure depicting the responsibility and authority
relationship of the plant is presented below.

Organizational structure of our furniture manufacturing company

Plant manager

Legal advisor Secretary

Administration Marketing & Production head

&finance head sakes head

Furniture
Finance Personnel & production
general service

24
3.2. THE MANAGEMENT TEAM

The management teams of the plant are plant manager, finance and administration head,
production head and marketing and sales head the plant manager has the responsibility of
managing the overall function of the plant and also the chairman of the management team.

The plant will recruit personnel’s for the managerial positions who have an extensive
experience on the area of business and also have the expected educational background. The
management of the company to utilize the well experienced administrative system of the
company.

3.3. PERSONNEL REQUIREMENT AND THE STAFFING PLAN

The envisaged project considers the technology selected, the man power availability and
changing level of productivity when estimating the man power requirement as far as the
technological process is concerned. The manufacturing system is quite simple,

A total of 317 workers are proposed to attain the required production outputs. Out of these
257 of them will be permanent staff while the remaining 60 will be casual workers. The
availability of professional and production workers is assessed accordingly, if existed, can
be filled by extensive training program to cope up with the necessary labor norm.

Salaries are generally in line with market pay for the sector in the industry the project is
planned to have a situation that the workers will get fringe benefits under the general labor
legislation with regard to the entitlement in the social security system for government
employees.

25
4. FINANCIAL REQUIRMENT
The Financial analysis include insight to the total capital outlay required for the project
which would consist of total fixed investment cost, and pre- production costs; the source of
finance for the total planned initial investment cost requirement and other parameter of
feasibility analysis including projection of profit/loss statement, cash flow statement and
payback analysis.

4.1. Fixed Investment Cost

The fixed investment cost of the project consists of land acquisition and development,
construction costs of building and civil works, costs for purchase of plant machineray and
equipment, cost of purchase of vehicles, purchase of other fixed asset and other pre
production capital expenditure. Accordingly the fixed investment cost constitute the the
resource ruquired for land acquisition, site preparation and development, design and
engineering cost, building construction cost, civil works(service facilities), purchase of
plant machinery and equipment, purchase of transportation vehicles, purchase of office
furniture and equipment and capital costs required for other fixed assets.

4.2. Building and Construction

Table- Cost of the Building

SN Description Land Unit cost

Total cost in br.
Requirement(M2) in br.
1 Total Production Hall 5,500.00 2140 11770000

2 Total Warehouse 3,000.00 2000 6000000

3 Inspection Room   2906.28 2906280

4 Packing Area 1,000.00 2500 2500000

5 Office Building and show room 3,000.00 2500 7500000

6 1700 1300 2210000

Waste Accumulation area
7 Green Area, Parking and road 800 1500 1200000

8 5184000
Fence and others

26
 9 671512
Site Development
10 1161540
Design and Supervision
11 1944000
Land lease Initial Fee
Total 43000308
 

4.2.1. Machinery and Equipments

The size of the plant affects actual production practices. In this proposal, the selection of
the technology was based on firsthand knowledge offers received from various machinery
& equipment suppliers and detailed comparative studies.

Thus the machinery & equipment selected are state-of-the-arts technology user-friendly
and full & semi automatic manufacturing system; taking into account such factors as plant
capacity, product quality, maintenance, investment and production cost. The total cost of
machineries and equipment is Br. 11,112,480.

4.2.2. Office Equipments

SN Description Qty Unit cost in Total cost in Br.

Br.
1 Managerial Tables with chair 6 24261.12 145566.72

2 Secretarial chairs 5 18954 94770

3 Office Chairs with tables 20 1263.6 25272

4 Computer with its printer 7 18954 132678

5 Shelf 5 6318 31590

6 Telephone and fax machine 5 6318 31590

7 Filing Cabinets 4 2811.51 11246.04

8 Decoration and others   0 37908

Total     510620.76

27
Details of machinery and equipment

Combination machines *1 includes: - saw (heavy duty, frame & circular), planer, shape
router and spindle shaper.

Combination machines *2 includes: - sander machine, boring machine, edge banding

machine, press machine, grinding machine and dust collector

Work shop equipment & tools *3 includes :- paint sprayer, table saw, hammers, hand tools,
working bench, welding equipment, vice & jig and other working tools and hand held
power machine.

4.2.3. Vehicles

For the purpose transporting raw materials to factory site and finished products /goods/
to market area, the enterprise needs different vehicles whose importance is indispensable
for realization of the project.

SN Description Qty Unit Price in br. Total Price in br. Remark

1 Pick up 1 947700 947700 Duty free

2 Mini-Bus 1 884520 884520 Duty free

3 Worker Bus 1 1642680 1642680 Duty free

4 FSR Isuzu truck 2 1415232 2830464 Duty free

Total 6   6305364

4.3. Pre- Operating Expense

Pre-operating expenditure includes cost of engineering & design, construction supervision
fee, cost of project proposal study and other expenses before implementation period.

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 Table- Pre-operating Expense

SN Description Total Cost in br

1 Project proposal 17550

2 Environmental Impact Assessment 29250

3 Promotion and Advertisement 292500

4 Staff Capacity Building 117000

5 Licensing fee and others 2340

  Total 458640

4.4. INITIAL WORKING CAPITAL

The operating cost of the project include direct production costs and overhead or
administrative costs. The major cost items under this include cost of raw materials and
utilities, salary of employee, oil and lubricants, repair and maintenance, office supplies,
travel expense, employee benefit and other miscellaneous expenses. Initial working capital
of the project is estimated to be Br. 23,417,329.63.

4.4.1. Raw materials

The raw materials for furniture production are from both local timbers produced from
weira, wanza, zigiba and korero in our own manufacturing plant and imported timbers. The
sizes are indicated in the product description of this project proposal. The main raw
material for furniture production is timber. Other raw materials include; foam, Glue, paint,
varnish chip board/fiberboard, Leather cover, Melamine board, Foam, Glass, Marble, Glass,
nail, key, metal nuts, bolts, steel coners and others. The yearly total raw material cost is
about ETB 23,417,329.63 at full capacity. The ratio of the raw materials and input to the
selling price is 65%.

29
4.4.2. Salary Expense

In order to get things done and to keep the organization live and operational, it needs
staffing consisting of the following positions as mentioned in the table below .

SN Position No. Qualification Monthly Annual Salary

Salary in in br.
Br
I Permanent Worker        
MSC in Mechanical 12,000.
1 General Manager 1 Engineering 00 144,000.00
Head, Production BSC-in Mechanical/Industrial 7,000.
2 Division 1 Engineering 00 84,000.00
Diploma in General 1,800.
3 Technician 2 Mechanics 00 43,200.00
Production Diploma in production 1,800.
4 Supervisor 2 Technology 00 43,200.00
Production/
Carpenter & Painter 1,050.
5 Worker 120 10+1 in Metal work 00 1,512,000.00
Assistant Prodn 500.0
6 Worker 85 10 completed (Semi Skilled) 0 510,000.00
Head,
Administration & 6,000.
7 Finance Division 1 BA in Management 00 72,000.00
3,000.
8 Personnel 1 BA in HRM 00 36,000.00
Head, Marketing BA in Marketing 6,000.
9 Dept 1 Management 00 72,000.00
1,500.
10 Sales 8 Diploma in Sales Mgt 144,000.00
00
3,500.
11 Accountant 2 BA In Accounting 00 84,000.00
1,100.
13 Cashier 3 10+2 in Bookkeeping 39,600.00
00
Diploma in Secretariat 1,200.
14 Secretary 2 science 00 28,800.00
15 Cleaner 6 Unskilled 700.0 50,400.00
0
1,350.
16 Store keeper 2 Diploma in logistic mgt 00 32,400.00
1,500.
17 Purchaser 2 Diploma in supp. & Put. Mgt 36,000.00
00
700.0
18 Guard 8 Unskilled 0 67,200.00

30
 1,000.
19 Driver 6 10 completed + certification 00 72,000.00
700.0
20 Assistant Driver 2 Unskilled 0 16,800.00
700.0
21 Gardner 2 Unskilled 0 16,800.00
3,104,400.0
  Sub Total 257     0
II Temporary Worker        
1 Electrician 2 Diploma in General 1,600.00
Electricity 38,400.00
2 Auto Mechanic 2 Diploma in Automotive 1,750.00
technology 42,000.00
3 Plumber 1 10+2 in Plumbering 1,500.00 18,000.00
4 Laborer 55 Unskilled 700 462,000.00
  Sub Total 60     560,400.00
3,664,800.0
  Total 317     0
Benefits(25 % of
  Basic Salary)       776,100.00
4,440,900.0
  Grand Total 317     0

31
4.4.3. Other Operating Expenses

SN Description Annual Cost in Br Assumption Used

1 Property Insurance
2038694.292 1% of fixed Investment Cost

2 Audit & Legal Fee

60652.8 Br. 4000 per month

3 Worker Uniforms
52313.04 230*180br

4 Telephone, fax and postal

30326.4 2000 per month

5 Cleaning goods supplies

37908 2500 per month

6 Repair and maintenance

4077388.692 2 % of the Fixed Cost

7 Advertisement
1010880 % of sales

6 Stationery and other office supplies

27293.76 1800 per month

8 Electricity
142155 0.45*250,000KW per year

9 Water
12636 2 br.*5,000m3 per year

10 Fuel
508472.64 20120 lit*20 per year

11 Oil and lubricant

50847.264 10% of fuel cost

12 Miscellaneous Expense
151632 Br. 10000 per month

  Total 8201199.888  

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Summary of Investment and working capital requirement

SN Description Cost in birr in Br.

1
Land, Building & Construction 43000308

2
Machines & Equipments 11,112,480

3
Vehicles 6305364

4
Office Equipment 510620.76

  Total Fixed Investment Cost

60928772.76

5
Pre service Expense 495331.2

6 salery expense
4,440,900

7 Raw material
10216485.52

8 Other operating expense

8201199.888

  Total operating expenses

23353916.61

Initial working capital 23417329.63

  Total
107700019

 
Contingency (5%) 5385000.95

  Total Initial Investment Capital

113085000

Pre-operating expenditure includes cost of engineering & design, construction supervision

fee, cost of project proposal study and interest payment during implementation.

4.5. UNDERLYING ASSUMPTION

The financial analysis of the envisioned Furniture factory is based on the data provided in
the preceding sections and the following assumptions.

A. Construction and Finance

Construction period 1.2 year

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Source of finance 30% equity and 70% loan
Bank interest rate 10 %

4.6. SOURCE OF FINANCE AND SCHEDULE OF DEBT SERVICNG

The total financing of the project that is Birr 5,000,000will be covered from the investor’s own
fund and from domestic bank loan 30% of the total investment which is Birr 1,500,000will be
covered by the investor’ and 70% of the total investment, which is Birr 3,500,000 shall be
obtained from local bank borrowing the loan will be paid at 10% interest rate over ten years
period the breakdown of source of financing and summary of the loan repayment schedule is
presented below.

Loan repayment Schedule

Yea Principal Interest Total Annual Payment in Remaining
r Payment (10%) br. Balance
0 0 0 0 3,500,000

1 7915950 7915950 15831900 71,243,550

2 7915950 7124355 15040305 63,327,600

3 7915950 6332760 14248710 55,411,650

4 7915950 5541165 13457115 47,495,700

5 7915950 4749570 12665520 39,579,750

6 7915950 3957975 11873925 31,663,800

7 7915950 3166380 11082330 23,747,850

8 7915950 2374785 10290735 15,831,900

9 7915950 1583190 9499140 7,915,950

10 7915950 791595 8707545 0

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Depreciation Schedule
Original Value In Depreciation Depreciation
SN Description Birr rate in % Per year
43000308 5 2,150,015.40
1 Construction and Civil Work

2 Machineries & Equipments

11,112,480 10 1,111,248.00

6305364 20 1,261,072.80
3 Vehicles

4 office equipment
510620.76 10 51,062.08

60,928,773   4,573,398.28
  Total

4.7. PROJECTED SALES PLAN FOR THE PROJECT

Description Year 1 Year 2 Year 3 Year 4_10
Pine m2 1,960,000.00 2,240,000.00 2,520,000.00 2,800,000.00
Household
furniture in
pcs 38,500,000.00 44,000,000.00 49,500,000.00 55,000,000.00
Office
Furniture in
Pcs 45,500,000.00 52,000,000.00 58,500,000.00 65,000,000.00
Foam in m2 1,400,000.00 1,600,000.00 1,800,000.00 2,000,000.00
Total 87,360,000.00 99,840,000.00 112,320,000.00 124,800,000.00

35
 4.8. FINANCIAL STATEMENT

4.8.1. Balance Sheet/Beginning

Asset
Current Asset  
Cash 1,500,000
Inventory of raw materials and inputs 500,000
Total Current Asset 2,000,000
Fixed Asset  
Land, Building and Construction 1,000,000
Machineries and Equipment’s 1,300,000
Office Equipment 500,000
Vehicles 200,000
Total fixed Asset 3,000,000
Total Asset  
Liability  
Account payable 3,000,000
Owners Equity 1,500,000
Capital  
Total Liability & Owners’ Equity 5,000,000

4.8.2. Profit/Loss Statement

Revenue Year 1 Year 2 Year 3 Year 4_10

Sales Revenue 112,320,000.0
87,360,000.00 99,840,000.00 0 124,800,000.00
VAT 13,104,000.00 14,976,000.00 16,848,000.00 18,720,000.00
Purchase of Raw 7,485,376.80 8,233,914.48 9,057,305.93
Material & Inputs 6,804,888.00
Gross profit 67,451,112.00 77,378,623.20 87,238,085.52 97,022,694.07
Expenses        
Salary Expense 3,552,720.00 3,774,765.00 3,996,810.00 4,440,900.00

36
Other Operating
Expenses 8201199.888 8201199.888 8201199.888 8201199.888

Deprecation 2,150,015.40 2,150,015.40 2,150,015.40 2,150,015.40

Building

Deprecation 1,261,072.80 1,261,072.80 1,261,072.80 1,261,072.80

Vehicles

Deprecation 1,111,248.00 1,111,248.00 1,111,248.00

Machineries &
equp. 1,111,248.00
Deprecation
office equipment 47,279.70 47,279.70 47,279.70 47,279.70

Interest Expense 14,000,000.00 12,600,000.01 11,200,000.01 9,800,000.01

Lease payment
11.90 Birr per
1m2 (10% ) 1428000

Total Expense 27,480,631.26 33,813,970.47 32,636,015.47 31,680,105.47

Profit Before Tax 39,970,480.74 43,564,652.73 54,602,070.05 65,342,588.60
Tax(30% ) 16,380,621.02 19,602,776.58
- -
Net Profit 39,970,480.74 43,564,652.73 38,221,449.04 45,739,812.02

4.8.3. Cash Flow Statement

 Year Year 1 Year 2 Year 3 Year 4 -10

Equity Capital     90,386,780.37  
Loan principal 7915950 7915950 7915950 7915950

Net sale 72847200.96 83568913.06 94217132.36 104784509.6

Total cash in flow 72847200.96 126416702.2 191834855.3 250832893.3

Cash payment

Purchase of raw 7785707.04 7785707.04 7785707.04 7785707.04

37
 materials

Pre operating
expense 423360

Investment

Other Operating
cost 8201199.888 8201199.888 8201199.888 8201199.888

loan repayment 79159500

Lease payment 1428000

Tax payment 17691070.7 21170998.71

Total payment 29999411.64 28798979.76 45786471.48 48643662.24

Cash surplus /
Deficit 42847789.31 97617722.8 146048384.2 202189232.1

Cumulative cash
flow 42847789.31 97617722.8 146048384.2 202189232.1

4.6 PAY-BACK PERIOD

The investment cost and income statement projection are used to project the pay-back period.
The project's initial investment will be fully recovered within 2 years after the time of operation.
This shows that this furniture factory project is a long term business.

4.7 FUTURE DEVELOPMENT

Every business undertakings be it large or small should have future development plan. It is a
plain fact that business activities are undertook in a dynamic business nature and different
environment. Therefore, the furniture factory will have an expansion phase to include other
additional services in the future.

38
 5 ENVIRONMENTAL IMPACT OF THE PROJECT
Currently the issue of environment and envelopment get due emphasis and thus every citizen
called exert their maximum effort for fighting against any negative impacts on the environment
so as to result in a win-win solution on common agenda that is creating environmentally friendly
business environment. Therefore, this project does not cause a negative impact on the
environment.

6. PROJECT IMPLEMENTATION ACTION PLAN

The envisaged project has the following implementation schedules.

Activities Time plan

Land requisition March 2023
Land Acquisition March 2023

Site development & Design July 2024

Building and Construction September 2025_June 2025
Import of Machineries August 2025
Machinery Installation October_ January-2026
Office structuring May 2026-Augest 2026
Production September 2026

39