BUSINESS PLAN ON LOADING CAR (ISUZU)

ABDI MOHAMMED BAKER

May, 2022
HARAMAYA

i
Table of Contents

Table of Contents......................................................................................................i
Executive Summary...............................................................................................iii
1. Introduction.........................................................................................................1
2 Project Description...............................................................................................1
2.1 Mission and Vision Statement...............................................................................................2
2.1.1 Vision..............................................................................................................................2
2.1.2 Mission............................................................................................................................2
2.2. Objective...............................................................................................................................2
2.3 Site Location..........................................................................................................................2
2.4 Significance of the project.....................................................................................................3
3 Marketing Plan.....................................................................................................3
3.1. Market Analysis....................................................................................................................3
3.2. Target Market........................................................................................................................3
3.3 Marketing Objectives.............................................................................................................4
3.4. Marketing Strategies.............................................................................................................4
3.5 Customer Needs.....................................................................................................................4
3.6 Pricing....................................................................................................................................4
3.7 Promotions Plan.....................................................................................................................4
3.8. Competitors Overview..........................................................................................................5
4 Management and Organization...........................................................................5
4.1 Management...........................................................................................................................5
4.2 Personnel Plan........................................................................................................................5
5. SWOT Analysis....................................................................................................5
5.1 Strengths.................................................................................................................................5
5.2 Weaknesses............................................................................................................................6
5.3 Opportunity............................................................................................................................6
5.4 Threats....................................................................................................................................6
6. Cost Analysis........................................................................................................6
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 6.1 Fixed Costs.............................................................................................................................6
6.2 Operational cost.....................................................................................................................7
6.3. Project Capital and financing................................................................................................7
6.3.1. Project Capital..............................................................................................................7
6.3.2. Financing.......................................................................................................................8
6.3.2.1 Means of Finance......................................................................................................8
6.3.2.2 Margin Money..........................................................................................................8
6.3.2.3 Bank Loan.................................................................................................................8
6.3.2.4 Interest......................................................................................................................8
6.3.2.5 Collateral Security....................................................................................................8
7 Revenue Generation.............................................................................................8
7.1 Financial statements...............................................................................................................9
7.1.1 Projected Profit/loss statement.....................................................................................9
7.1.2 Projected cash flow statement......................................................................................9
8. Financial Analysis................................................................................................9
8.1 Sources of fund......................................................................................................................9
8.2 Total Revenue........................................................................................................................9
8.3 Cash flow.............................................................................................................................10
8.4 Break-even Analysis............................................................................................................10
8.5 Payback Period (PBP)..........................................................................................................10
9. Financial Evaluation.........................................................................................10
9.1 Profitability..........................................................................................................................10
9.2 Economic Benefits...............................................................................................................10
10. Risk Analysis....................................................................................................10
11 Conclusion.........................................................................................................11

ABDI MOHAMMED BAKER BUSINESS PLAN ON LOADING CAR (ISUZU) Page ii

Executive Summary

 Name of the Promoter: ABDI MOHAMMED BAKER

 Contact Address: 0915731494

 Type of vehicle requested: ISUZU

 Period for which the loan to be repaid/ term: 3 years

 Lease or Purchase: Purchase

 Period for which vehicle is required: Ongoing

 Unit number of vehicle being purchased: 2 (Two)

Description Quantity Unit Price Total Cost
ISUZU 2 2,450,000 4,900,000
 Source of finance: The total capital of the project is Br 4,900,000 to be financed

from the promoter’s equity and bank loan.

 Birr 2,450,000 (50%) is contributed by the promoter.

 Birr 2,450,000 (50%) is to be financed by Cooperative Bank of Oromia

(Murabaha).

 Man power requirement: 4 permanent employees will be benefited within this

project.

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1. Introduction
Civilized life depends on transport, for the movement of goods from where they are produced to
where they are needed, and for the movement of people from their places of residence to where
they must go to pursue all the activities of life, such as work, education, shopping and leisure
activities. A good transport system is vital to a country's development; at the same time the
factors affecting the development of a country play an important part in determining the way in
which its transport system evolves. Ensuring that the transport system develops in the way which
is most conducive to the overall development of the country can have far reaching benefits, and
conversely, failing to do so will have an adverse effect on development.
The provision of public transport in urban areas has become a major problem in most developing
countries, in some respects more so than in developed countries. A major cause is rapid urban
population growth, resulting in increased demand with which many transport systems are unable
to cope adequately, compounded by low levels of income, inadequate road infrastructure, and
uncontrolled use of private transport, severe traffic congestion, and inadequate and inefficient
public transport systems. Increasing car ownership is also having an effect on the layout of cities,
with greater decentralization of commercial activities and dispersal of residential areas. This has
implications for transport provision: public transport is relatively inefficient in serving areas of
low population or employment density. The rate of urban population growth is very high, with
natural population growth compounded by migration from rural to urban areas. In many
countries, therefore, the urban population is increasing at a much faster rate than the national
population as a whole. Average commuting distances increase, so that the rate of increase in
passenger kilometers is often substantially greater than the increase in the number of journeys.
However, growth in the level of public transport provision tends to lag behind the increase in
demand
2 Project Description
Transportation is one of the world’s business activities. It is the business that has to do with
travel, traffic and communication or with the movement of persons and things and with the
mechanical transmission of ideas.

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Our intention of starting transportation business is to make profits from the transportation line of
business and we will do all that is permitted by the law in Ethiopia to achieve our business aims
and ambition.
2.1 Mission and Vision Statement
2.1.1 Vision
Our vision is to become the number one transportation service company in this line of business.
2.1.2 Mission
Our mission as standard transportation services business is to develop a highly successful,
profitable business which provides quality automobile transportation services in our city.
2.2. Objective
The main objective of the project is aimed at to maximize the return on invested capital in the
form of profit for the promoter. However, its implementation will benefit the employee, the
society and the government at different levels. In this respect the project is aimed to promote the
following objectives:-
 To recognize business firms as our customers and treat them accordingly.
 To invest in improving the transportation business in terms of government policy.
 Establish fully functional and active service with well‐defined mandates
 To maximize the return on invested capital.
 To raise the significance and importance of the sector and thereby raising its contribution
to the national economic development
 To give quality and standard service
 To provide gainful employment to a large segment of the population.
 Increase government revenue through different forms of taxes, which in turn used to
facilitate social and economic development.
 To make service available to the society at a very affordable price.

2.3 Site Location

The project is intended to be situated in Oromia regional state Eastern Hararghe Zone Adele
town.

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2.4 Significance of the project
The proposed businesses deemed to add to the economic development of the city in general in
specific with following ways:
A. Source of Revenue
As public policy of any nation, the government collects different forms of taxes from different
business organizations and individuals. Therefore, the business will serve as sources of revenue
for the city.
B .Employment opportunity
One of the problems that our country faced is unemployment. Therefore, the current objective of
the government is working on tackling the problem of unemployment and fostering the
development process either through creating self-employment or employment in other
organization. Hence, this project will hire 4 individual during operation.
C. Customer Satisfaction
In addition to serving as a source of employment and income for the region, the project renders
social services for different group of people by distributing enough cement.
3 Marketing Plan
3.1. Market Analysis
A transportation business attracts two types of business. The first type of business is a
commercial charge account business, and the second is direct consumer business. The
commercial accounts usually have either package delivery or pay for passengers. The direct
consumer accounts are people from throughout the city who need loading services for various
reasons, to run their business, go to work etc.
3.2. Target Market
Our target market is segmented into seven subgroups:
 Celebrities and public figures
 Government organization
 Households
 Business people
 Travels and tours agencies
 Public sector
 Corporate executive
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3.3 Marketing Objectives
 Attract customers
 Increase turnover
 Create profit
 Create customer satisfaction.
3.4. Marketing Strategies
This business will apply a lot of marketing strategies which will aim at increased turnover. These
will include:
 Sources of income
 Providing luxury services.
 Customer incentives like free delivery service, advisory services etc.
 Providing corporate services.
 Working with local people to establish a competitive amenity package responsive to
specific requirements.
3.5 Customer Needs
The market characteristics show that there is steady demand for the reliable public transportation
in our city. Our survey also reveals that passengers need Isuzu transportation. The fact that there
is a loading car deficit and people are eager to move goods from one place to another place.
3.6 Pricing
Pricing is fixed by the city using regulated meter. Price can fluctuate when the city council votes
for a meter rate increase. One known fact about our business is that it has stable price which
apply generally to all customers. It is not foreseeable that a single wholesaler will be able to
manipulate the price of the services. In such a price taker market, marketers make other
marketing efforts to promote sales instead of price cut.
3.7 Promotions Plan
Advertising is minimal in the transportation service business, but could be maximized with the
use of a little creativity. Many customers will immediately try in a town to see if it has a faster
response time than the other services in the area. The unique marketing approach/ analysis using
word of mouth, free gifts, loyalty cards, and special offers will be applied.

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3.8. Competitors Overview
There are many loading car, near our intended location, that also give loading service in Adele
town. The quality of their services is no match for the customers, but we may consider them as
competitors because they offer higher prices. In addition to the above, the failure stories that we
have observed from others and the comments collected from my customers will help me to win
my competitors.
4 Management and Organization
4.1 Management
Our management is expected to use resources wisely, operate profitably, pay debts, and abide by
laws and regulations. Our management philosophy is based on team work, responsibility, and
mutual respect. People who work at this business would want to be part of our team because we
operate in an environment that encourages creativity, diversity, growth, and performance.
4.2 Personnel Plan
The personnel plan reflects the need to bolster our capabilities to match our positioning this
business will have the following staff:
 2 Driver
 2 Labor (loading/unloading)
Working as a team is critical to our success. We recognize that human resources are most
valuable asset. Our personnel strategy focuses on selecting, training, rewarding, and stimulating
all employees in order to build employee loyalty, and increase performance.
5. SWOT Analysis
The proposed transportation business is going to be located in Adele town where there are a lot
of competitors.
5.1 Strengths
The project is situated at the commercial city, giving it the opportunity of having substantial
demands situated in Adele town;
 Well-trained driver
 Sited within business areas
 A strong, market-driven business model
 Service is in high demand

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  Customers respect
5.2 Weaknesses
 New comer business.
 Start-up challenges
 The inability to raise large amount of capital..
 The difficulty to find above average employee.
5.3 Opportunity
The external environmental analysis reveals certain new opportunities for profit and growth of
the business. Some of such opportunities include:
 Participation in a high-demand industry.
 Market trend reveals an all year round demand.
 Steady future demand.
 Ageing population call for more comfortable ways to travel
 Better road networks
5.4 Threats
Changes in the external environment also may present threats to the business. Some of such
threats include:
 Rising oil price
 Environmental awareness
 Emergence of price war
 Lack of market entry barriers.
 Better public transportation
6. Cost Analysis
A detailed financial model has been developed to analyze the commercial viability of this
project. Various costs and revenue related assumptions along with results of the analysis are
outlined in this section.
6.1 Fixed Costs
All costs described and calculated below are based on real skill with transportation business
establishment. The most important costs are as follows:
Vehicle Requirement

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 Description Quantity Unit Price Total Cost
ISUZU 2 2,450,000 4,900,000
Equipment and Furniture Requirement

Description Quantity Unit Cost(Br.) Total Cost (Br.)

Top lights 5 5,000 25,000
Chairs 2 2,500 5,000
Radio 1 2,000 2,000
Storage box 1 1,000 1,000
Air condition 5 200 1000
Total 34,000

6.2 Operational cost

The major cost item under this category includes cost of material and labor inputs, fuel and
lubricants, repair and maintenance, employee salary and benefits, insurance, office supplies and
other miscellaneous expenses.
Human Resource Requirement: It is assumed to be Birr 87,000.
Tire costs: Tire with the best energy label were selected and assumed to be Br 20,000 per year
Vehicle depreciation: It is assumed to be Birr 40,000
Fuel expense: It is assumed to be Br 82,000
Oil and lubricant: assumed to be 10% of fuel that is Br 8,200.
Technical and emission check: It is assumed to be Br 10,000
Repair and maintenance: 24,180
Insurance: It is assumed to be 1% of fixed investment cost = birr 18,500
Parking costs: It is assumed to be birr 4,000 per year.
Miscellaneous expense: It includes cost of calibration, installation, legal and license fees and
other miscellaneous expenses. The total annual cost of these cost components is estimated to be
birr 5,000 /year.
6.3. Project Capital and financing
6.3.1. Project Capital
The total capital of the project is estimated at birr 4,900,000 of which Br 2,450,000 (50%) is
contributed by the promoter while the remaining balance Br 2,450,000 (50%) is to be financed
by Bank.

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6.3.2. Financing
The project formulated considering the above aspects should be submitted to the nearest branch
of the bank for availing credit facility for establishment of transportation business. The bank will
then examine the project for its technical feasibility, financial viability and bankability.
6.3.2.1 Means of Finance
The total investment capital of the project is to be financed from the promoter’s equity and bank
loan. The loan will be repaid according to Muraba. The project can be financed by any scheduled
commercial banks, and cooperative banks of oromia.
6.3.2.2 Margin Money
The promoters of the units need to bring their margin as per the requirement of financing banks
and also as per guideline issued from time to time.
6.3.2.3 Bank Loan
The promoters of the proposed business can approach any financing bank for finance. It is
compulsory to take bank loan to avail various subsidy schemes of government. Therefore, the
promoters who are desirous of availing subsidy should adhere to the means of finance i.e. the
quantum of bank loan & margin prescribed under the scheme.
6.3.2.4 Interest
The banks are free to charge rate of service charge according to Muraba bank guideline issued
from time to time. It generally varies from customer to customer based on credit appraisal of the
borrower. Base rate of a bank is a minimum lending rate below which bank is not allowed to
lend.
6.3.2.5 Collateral Security
As per bank guidelines, the banks are required to take adequate security for the loans extended
by them. We should plan projects in such a manner that we have enough fixed assets to offer as
collateral security
7 Revenue Generation
The revenue from operations is relatively easy to project. All revenue is based on one factor, the
operational fee charged to the brokers. The total sales revenue is composed as the following:
Description Year 1 Year 2 Year 3
Revenue from 2 ISUZU per year 1,036,000 1,329,600 1,532,560
Total 1,036,000 1,329,600 1,532,560

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7.1 Financial statements
7.1.1 Projected Profit/loss statement
Description Project Year
1 2 3
Revenue 1,036,000 1,329,600 1,532,560
Less: Operating expense 212,616 223,246.8 234,409.14
Gross income 823,384 1,106,353.2 1,298,150.86
Less: Depreciation 40,000 40,000 40,000
Profit before tax 783,384 1,066,353.2 1,258,150.86
Less: Income tax 20,500 26,000 30,400
Net profit 762,884 1,040,353.2 1,227,750.86
Note: Sales revenue is assumed to increase by 10% annually
7.1.2 Projected cash flow statement
Description Project Year
0 1 2 3
Cash Inflow
Equity 2,450,000
Bank Loan 2,450,000
Revenue _ 1,036,000 1,329,600 1,532,560
Depreciation _ 40,000 40,000 40,000
Total Inflow 4,900,000 1,076,000 1,369,600 1,572,560
Cash Outflow
Fixed cost 4,900,000
Initial Working Capital - 212,616 223,246.8 234,409.14
Total Outflow 4,900,000 212,616 223,246.8 234,409.14
Net Inflow 0 863,384 1,146,353.2 1,338,150.86
Cumulative Balance 863,384 2,009,737.2 3,347,888.06

8. Financial Analysis
The financial analysis of this project is based on the data presented in the previous chapters and
the following assumptions: -
8.1 Sources of fund
The total investment capital of the project is to be financed from the promoter’s equity and bank.
8.2 Total Revenue
Based on the projected profit and loss statement, the project will generate a profit throughout its
operation life. Annual net profit after tax increases from Birr 762,884 at the beginning of the
project to Birr 1,227,750.86 during the last year of operation year.

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8.3 Cash flow
The projected cash flow of the project shows that the project would generate positive net cash
flows throughout the operation years. Cumulative cash flow generated by the project towards the
end of the first operation year will amount to Birr 863,384. At the end of year three, this amount
will rise to Birr 3,347,888.06.
8.4 Break-even Analysis
The break-even analysis establishes a relationship between operation costs and revenues. It
indicates the level at which costs and revenue are in equilibrium. To this end, the break-even
point of the project including cost of finance when it starts to operate at full capacity (year 3) is
33.1% estimated by using income statement projection.
8.5 Payback Period (PBP)
The payback period is the amount of time required for a firm to recover its initial investment in a
project, as calculate from cash inflow.
When we cumulate the cash flows for the first years, Br 863,384 is recovered. In the second year
Br 2,009,737.2 cash flow is generated by the project but we need to recover only Br 440,262.8 so
the time required recovering Br 440,262.8 will be (Br. 440,262.8/3,347,888.06) ×12 months = 2
months. Thus, the PBP is 2 years and 2 months.
9. Financial Evaluation
9.1 Profitability
According to the projected income statement, the project will start generating profit in the first
year of operation. Important ratios such as the percentage of net profit to total sales, net profit to
equity (return on equity) and net profit plus interest to total investment (return on total
investment) will show an increasing trend throughout the production life of the project.
9.2 Economic Benefits
The project can create employment opportunities for 4 persons.
10. Risk Analysis
The major risk of this project shall be high market price fluctuation and turnover the skilled and
trained man power. These risks can be mitigated. The high staff turnover may be lessened by
creating conductive working atmosphere and providing some benefits. For this project, 25%
benefit is proposed for the permanent employees.

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Characteristic (Personal) Risk: This is the most important risk, which should be seriously
considered. As to this project, the promoter has sufficient years of work experience in private
organization (leading private business by engaging themselves), so personal risks are minimum.
Business Risk: The fate of the business is generally found to be dependable. According to the
overall demand the effect of competitors in the sector would not be an immediate alarming threat
at least for the coming few years.
Collateral Risk: Since the owners of the project are engaged on different related business, there
is no any risk related to collateral. In this regard, the proposed project and other proposed
equipment and the business as a whole are dependable securities. The experience and skill of the
owner as well as the manager and the other expertise add confidence to the lenders. Therefore,
there is no risk regarding collateral in general.
11 Conclusion
The Project is found to be operationally profitable & has significant socio-economic benefits.
According to the projected income statement, the project starts earning profit from the first year
of production. The income statement and other profitability indicators show that the project is
viable. The project is believed to have significant social and economic benefits that accrue to the
society beyond those financial returns to its owner.

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