Aregash Tiruneh Siyum transport service business

1. Executive Summery

This plan is for the purpose of request of bank finance for working capital request

for the Aregash Tiruneh Siyum transport service business. As we fully understanded

the motorized vehicles are divided into freight transport and human transport

vehicles. Freight transport vehicles include pickups and trucks, or lories, with a load

capacity of up to 500 quintals. Human transport includes the whole range of

vehicles beginning with bicycles and small cars and extending all the way up to

cross-country buses and urban buses. Water transport is divided into local and

international (marine) transport modes. Local transport mode includes river, lake,

and canal transportation as well transportation on huge dams. Marine transport

includes both cargo and human transport across seas or oceans between the ports

of the different countries.

Rail transport, which started about the time of the Industrial Revolution after the

1810s and 1820s, has been serving the world for nearly 200 years. There are many

types of rail transportation. The first phase featured a kind of train drawn by

horses, followed by steam-powered train, followed by the street car. Next came the

different types of rail transport modes: the regular surface railway, metro or

subway, monorail, guided bus, trolley bus, etc. The rail transport system is classified

as Light Rail Transit (LRT) and Heavy Rail Transit (HRT).

The other transportation mode, fairly recent in appearance and modern in its

constitution, is air transport. The appearance on the scene of air transport is

historically linked to the use of balloons for navigational purposes. But the basis for

the development of the world's fastest transportation system is the series of

experiments undertaken by the Wright Brothers. Like the other transport modes

described above, air transport is divided into domestic and international, on the

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one hand, and human and freight transportation on the other. Presently the world

uses airplanes ranging from the smallest, accommodating only one person (the

pilot), to the largest, accommodating 350 people and traversing long distances

across lands and oceans to connect the different parts of the globe.

From the above transport service market fact, the supply and demand gap will

continue for several years due to les availability of cars road, infrastructure and

others; based on this market behavior our every transport service business has

been successful due ever-growing nature of transport service demand in the

country. That is why We are engaged in the transport industry.

2.Background of the Business and Company Profile

we are licensed at Addis Abeba city bole Sub city, Woreda 12 Aregash Tiruneh

Siyum transport service has experienced in these business for more than 5 years.

We developed different knowledge related to these areas. This knowledge helps us

to manage our business in proper ways and we easily understand our retail

industry trends. Due to our long experience, we developed good relationship the

sector real players, the Government and NGOs. The general manager of the

business is Aregash Tiruneh Siyum transport service who has more than five years

of experience as owner and manager of the business.

The recent provisional financial statement shows that the business sales increase

from time to time the expenses also increases due to devaluation of Birr to USD.

the forecasted income and cash flow statement shows that the business will remain

profitable throughout its loan repayment period.

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3.Purpose of the Loan

Aregash Tiruneh Siyum transport service is expanding time to time in terms of

revenue and service sales volume. Aregash Tiruneh Siyum transport service

business is now planned to expand its business in sales volume and numbers of

customers, the current price increment in all business sectors jump rapidly due to

this fact the need for additional financial injection is major instrument to meet the

current transport industry demands, this internal and external current market

trend and behavior needs additional working capital loan to fuel sales volume

increase that ensures sustainable growth of the business. Accordingly, we request

your bank (Commercial Bank of Ethiopia) finance of birr 2 million for additional

working capital and service operation activities. The loan will enable us to purchase

spare parts for repair, staff and overhead costs. Based on our business plan, most

recent cash flow statement and annual profit and loss statement for your review.

Based on the provisional financial documents and our past three years strong sales

score we strongly believe that Aregash Tiruneh Siyum transport service business is

a safe credit risk for Commercial Bank of Ethiopia; plan material purchase for spare

parts for repair listed in the under table; -

Aregash Tiruneh Siyum transport service Purchasing Plan

No Material Unit Purchase Amount Quantity Total
1 Lubricants 15,000 15 225,000
2 Trailer 15,000 12 180,000
3 Battery 50,000 4 200,000
4 Tyer 35,000 40 1,400,000
Total Purchase 2,005,000

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3.1 Collateral offered

We are offering a heavy Cruck Car that is Registered under Addis Ababa city Model

Number R124LA4x2NA400 Produced 1997 EC Motor Number DSC1201L01-6113954

With 360 Horse Power.

4.Business Plan

Plan is the foundation of the future business aim. The plan laid down the ways to

achieve the aim. It also helps to concentrate of activity to one direction. It helps to

cope up with unexpected challenge with its supplementary plan. Knowing these we

developed vision, Mission and related statements like below.

4.1 Vision

 Keeping Aregash Tiruneh Siyum transport service business as one of the

safest and reliable transport service providers.

 Increase the number of sales by 60% over the next three years.

 Build ana maintains solid working relationship with all potential customers

4.2 Mission

Aregash Tiruneh Siyum transport service business mission is always having a well-

equipped transport service with honesty and good manner that improves our sale

volume and increase market share.

5. Market analysis

5.1 Analysis on The Role of Transport Sector in Ethiopia’s Economy

The transportation branches for which data are available in Ethiopia are road

transport, air transport, rail transport and water transport. Of these four types, the

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biggest service provider is the road transport branch. Accordingly, 90% of freight

transportation both in the import and export sectors and 95% of the public

transportation services are provided by the road transport branch. Whereas the

majority of the urban population covers short- and medium-range distances on

foot, in the urban areas people for the most part travel on foot, save for those

limited instances where they use draught animals. It has been noted that the size of

the population with access to modern transportation in Ethiopia does not exceed

20% (Federal Transport Authority, Megabit 1998). When we look at the overall

situation in the transport sector, we observe instability of operation and, in some

cases, deterioration.

When we look at the total manpower employed by the government, the share of

the labor force employed by government institutions in the transport sector,

namely, Transport Authority, Ethiopian Road Authority, Road Fund Administration,

is 46.7%. This figure does not include the manpower employed by the regional

transport institutions. Following in second place, the air transport sector's share of

manpower is 39.3%. At the moment, of all the branches of the transport sector,

these two branches have the best performance records.

While the modern transport system in our country is about a hundred years old, it

has not developed as it should have. Of the different modes of transportation, rail

and water transport especially have been on a path of regression, with the former

faring even worse to reach a stage of total closure.

With regard to showing improvement and growth, the level of the changes

registered in our air transport system makes it the one area in which we should

take pride. Although this branch of the transport sector is only 60 years old, the

level of development it has currently attained is one that gives it pride of place both

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in Africa and around the world. Notable among its strong points is its capacity to

maintain a steady and sustainable growth, with no trace of vacillating. Among the

strong points observable in the area of air transport, one finds the following:

 The high level of its application and use of the results of modern

technology, in terms both of carriers and their accessories;

 The fact that its maintenance tradition, knowledge and capacity has

become a model for both African and Middle-Eastern countries;

 Its ability to create among the country's population a Good Company

Image, thereby being regarded as the country's ambassador to the world

at large;

 The great contribution it has made in terms of producing skilled and

professional manpower; And a host of other virtues including: its capacity

to generate foreign exchange; its capacity to transform itself into a strong

competitor; its ability to create job opportunities for Ethiopians; its ability

to link Ethiopia both with Africa and the rest of the world; its ability to

register a steady and sustainable growth in terms of providing public and

freight transport services; its contribution to the transportation of such

foreign exchange-generating export items as flowers, gold, etc.; the big role

it played in publicizing Ethiopia's tourism, culture, sport, art; the reliability

of the sector's traffic safety.

One can assert that road transport is everything to Ethiopia. The reason simply is

that there is no other transport branch that is as close home to the hearts of the

people than this branch in terms of providing services for transporting

passengers as well as goods. In this regard, among the strong points of the

country's road transport, we find the following:

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 It has the lion's share (90-95%) when it comes to transporting passengers

and goods within the country;

 The effort made in the area of building new roads and upgrading and

expanding the existing ones is highly significant;

 The ability of the sector to create jobs for many Ethiopians;

 The high role it plays in bringing producers and consumers together;

 The improvement shown in the level of our use of modern vehicles for

transporting goods and passengers;

 The initiatives taken, relative to the previous regime, to extend

administrative structures to the lowest possible level, thereby effecting the

principle of decentralization.

5.2 Overview of Road transport sector in Ethiopia

The road transport sub-sector can be examined under two headings: namely,

infrastructure development and services. With regard to infrastructure

development, although at the present moment we see more activities, according to

the data obtained from the Ministry of Transport and Communications for the

years before 1995, the total mileage covered by roads built was only 33,876 Km. Of

this total, the total distance covered by paved (asphalt) roads was only 13% (or 4362

Km.), while 36% (or 12,360 Km) was constituted by all weather and dryweather

gravel roads. The remaining 50% was covered by rural gravel roads. According the

data so far examined, the annual growth rate of road infrastructure development

has been 1.7%.

According to data obtained from the Federal Transport Authority, the annual rate of

increase in the number of vehicles was 10%, with only

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166,310 vehicles for 1997. The past 12 years from 1985-1997 constitute a period

during which the increase in the number of vehicles in the country was high. The

details are given in Table 2 (see in the Amharic script). In connection with this, while

59,785 new driver's licenses have been issued annually, the growth rate stands at

0.8%. Compared to the other African countries, the number of motor vehicles in

Ethiopia is very low. When it comes to loading capacity in terms both of freight and

passengers, the number of vehicles with low and midlevel capacities is very limited.

A large share of the country's motor vehicles goes to private (domestic) cars with

over 37% of the total. While the share of public transport vehicles stands at 70%,

the remaining 30% goes to freight transport.

 The state of newly imported and registered cars

Regarding vehicles imported and registered, the data as of 1982, but especially that

for the years 1983 to 1988/89, shows that the number had increased by much,

while it tended to decrease for the years 1990 to 1993, only to rise again in 1994. It

can be easily observed that the decline registered for the years 1990 to 1993 was

due to the closing of the port of Assab and the Ethio-Eritrean war.

According to the available data, over three-fourths of the vehicles imported into

our country are used for public transportation, and of these, private (domestic) cars

constitute over 51%. This is significant because the vehicles in this category

represent the increase in motorization in our country. With regard to public

transport vehicles, those with a load-capacity of 6 to 30 people have a high rate of

import. With regard to vehicles for transportation of goods, those with less than 70

quintals load-capacity have the highest share with 79% of the total. This means

that, because our economy still is in its beginning stage, the Isuzu brand trucks with

a load capacity of 30-70 quintals are the more convenient to serve the purpose. The

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importation of freight (both dry and liquid) transport vehicles has shown a high

increase after 1984. The details are shown in Table 3 (see the Amharic script).

As we can see from Table 3, the importation of freight transport vehicles had an

annual growth rate of 38% for the 16 years between 1980 and 1995. The growth

rate was for the years after 1984 alone was 21%. One can see the effect of the war

and the economy on the import rate for the years between 1989 and 1991.

5.3 Supply analysis

Due to the transport sector's peculiar characteristic and the backwardness of the
record-keeping systems of our country, it is difficult to the exact volume of people
and goods transported over the years. However, there are different organizations
and government offices collect data especially concerning the Federal Transport
Authority for different reasons. Using these organizations and offices as sources, an
attempt has been made to look into the nature of the activities in the transport
sector as they relate to the number of people and the volume of goods transported
over the specified years.

In the past 13 years between 1985 and 1997, the number of commuters has shown
a growth rate of 10-13%, while that of dry goods transportation has shown a
growth rate of 6-7%. In the case of liquid freight, the growth rate was 5%. Generally
speaking, then, in both public transport and freight transport, but especially in the
case of the former, we see an enormous growth. Looking at the different types of
transport services, the biggest share goes to the services provided by those vehicles
and organizations in the private sector, in terms both of transporting people and
goods. However, because of shortage of data, it has been difficult to find out the
extent of the services provided by the transport sector as a whole. Since, however,
the performance of and the services provided by government organizations could
provide us with some information, it would be useful to have a look into them. We
shall now, therefore, look at the nature of the services provided by those
government agencies, such as Anbessa and Waliya Transport enterprises.

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As we can see from Table 5 (see in the Amharic script), the services provided by
inter-urban public transport has been deteriorating at a high level, while in the case
of intra-urban public transport, especially in Addis Ababa, one observes
improvement both in the volume of commuters and distances covered. However,
the growth rate of the service had shown a very significant decrease, particularly in
the three years between 1986 and 1989. In the period specified, the number of
buses available in 1984 was only 145, while this number had increased to 343 in
1995. The public transport service in Jimma has shown the most deterioration. The
number of buses available in the town wavered between 4 and 6. Besides, because
the available buses had served for a long period of time, the level of the quality of
service shows a high level of deterioration.

5.4 Demand analysis

The current information from Ethiopia Government shows the need for a carrier
bid to generate proxies for the market structure. Socio-economic factors are based
on regional statistics, such as population and economic activities; the market
structure variables and particularly competition intensity are good predictors of the
tariffs paid by the WFP in Ethiopia. Contrary to similar studies of transportation
markets in developed countries, which generally find very little variation in prices
per kilometer across lanes, our results show that road conditions and competition
levels explain a significant amount of the variability observed in transportation
tariffs for Ethiopia. At a macro-level, we are able to quantify the causes for the
generally poor development of transportation in Ethiopia. Simple reduced form
counterfactual analysis shows that better road conditions should reduce shipping
costs by 18 percent and increased competition by 44 percent on the international
corridors. Similarly for the domestic routes, better road conditions would reduce
shipping costs by 12 percent and increased competition should reduce them by 39
percent.

 The World Food Programmer’s transportation management in Ethiopia

The WFP is the United Nations' core agency for food security. It provides a
multilateral channel for food aid and this humanitarian organization has developed
a strong expertise in logistics over the years. The WFP has maintained a continuous
presence in Ethiopia since 1974, where food aid is used as an instrument for

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addressing persistent acute and chronic food insecurity; Ethiopia Ranked 174th out
of 187 in the 2021 Human Development Index of the United Nations Development
Program.

7. SWOT Analysis

The main concept of starting outlet of Aregash Tiruneh Siyum transport

service is to run the business profitably for a long period of time in this regard we
invest money and time to expand the business and then in the mean future

opening other outlets all over city is our main target.

Every business entity knows that if a proper SWOT analysis is conducted for our

business with consideration of current market trend and conditions, we will be able

to position our business to maximize our strength, leverage on the opportunities

that will be available to us, mitigate our risks and be welled equipped to confront

our threats.

Strength: Honesty and good manner are our strong side which showed by when
any customer gives us obligation to transport their products, we do it without any

Teft and carelessness.

Weakness: Computing in today business environment depends on consistent

finance which means a shortage of finance hindered a business to serve customers

properly and shortage of finance is the main weakness for us.

Opportunities: we operating our service at one of the largest population nations

in Africa, for us this is a great opportunity to sell our products to a large number of

individuals, businesses and retailers.

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Threat: The major threats that we may face is economic downturn. It is a reality
that economic downturn affects purchasing and spending power, another is

political instability of our country.

8. Sales and Financial Forecasts

Our financial Forecast will include sales, cost of goods sold and gross profit, income

statement, cash flow and Break-Even Analysis. Our business forecast will base on

recent provisional financial statement of the business and also, we will consider the

external environment for forecasts.

 Basic Assumptions for Sales and Financial Projections

The assumptions used for financial analysis purposes are based on the fact that

business Potential and Overall working environment which can be assumed that it

is possible to increase the sales volume and possible to expand the business in

accordance with our sales volume expansion plan. The assumptions we used to

forecast the financial plan are presented as follows.

 Assumptions
 The bank will finance 2million

 The sales revenue will increase by 60% per year

 Assuming the finance injected after June 30,2024.

 The average cost of the sale increase by 76%

 The profit of the business will be fully retained

 The profit tax rate is 35%

 The loan will be repaid within three years with quarterly manner

 All administration expenses will be increased by 18%

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9. Sales, Cost of Goods Sold and gross profit Forecast

The sales forecast starts in the month of June, 2024, the immediate goal is to
achieve robust sales in the first year. the under Table shows that triple digit
percentage total sales increases can be achieved and maintained throughout
the five years of this business plan.
1st 2nd 3rd

Revenue 33,814,601 49,031,172 68,643,641

Cost of Good Sale 25,699,097.04 37,263,690.71 52,169,166.99

Gross profit 8,115,504 11,767,481 16,474,474

Table of Forecasted Sales and gross profit

10. Forecasted profit and loss

The projected profit and loss, Income and expense and Cash Flow Statement are
expected to show the ability of a business to serve its debts and insure
profitability of the business. To project profit and loss, Income and expense of this
business the above assumptions are taken to account.

Year 1st year 2nd year 3rd year

Revenue 33,814,601 49,031,172 68,643,641

Cost of sales 25,699,097.04 37,263,690.71 52,169,166.99

Gross Profit 8,115,504 11,767,481 16,474,474

Expenses 1,446,414 1,706,768 2,013,986

Profit before tax 6,669,091 10,060,713 14,460,487

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Profit tax (35%) 2,334,182 3,521,250 5,061,171

Profit after tax 4,334,909 6,539,464 9,399,317

Table of Forecasted profit and loss

11.Forecasted Cash Flow

The company will generate a net positive cash flow in its first year. Repayment of
debt is a significant factor in the amount of cash that gets paid out. short-term
debt is on a 5-year amortization, when we see table Aregash Tiruneh Siyum
transport service business will have positive cashflow in the coming years.

Five Years Cash Flow Forecast of Aregash Tiruneh Siyum transport service
Year Year Year
CASH BALANCE 2024 2025 2026
Date Ending 9/3/2024 9/3/2025 9/3/2026
Cash at Beginning of Period 1,669,777 4,334,909 6,539,464
Cash at End of Period 4,334,909 6,539,464 9,399,317
CASH INFLOWS 2024 2025 2026
Cash from Operations
Receipts sales from Customers 33,814,601 49,031,172 68,643,641
Total Cash from Operations 33,814,601 49,031,172 68,643,641
Cash from Financing
Total Cash from Financing - - -
loan 2,000,000 0 0
Total Cash from Investing 2,000,000 0 0
Total Cash Inflows 35,814,601 49,031,172 68,643,641
CASH OUTFLOWS 2024 2025 2026
Operations
Cost Of Sales 25,699,097 37,263,691 52,169,167
General Operating Expenses 1,446,414 1,706,768 2,013,986
interest expence 120,000 120,000 120,000
Income Taxes 2,334,182 3,521,250 5,061,171
Total Outflows from Operations 29,599,693 42,611,709 59,364,324
Repayment of Loans 1,120,524 1,120,524 1,120,524
Dividends Paid
Total Outflows from Financing 1,120,524 1,120,524 1,120,524
Investing
Purchase of Property and Equipment 300,000 250,000 150,000

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Total Outflows from Investing 300,000 250,000 150,000

Total Cash Outflows 31,020,217 43,982,233 60,634,848
NET CASH FLOW 4,794,384 5,048,939 8,008,793

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