BUSINESS PLAN PROPOSAL FOR BERHE

HAILEMARIYAM MANUFACTURING OF HOUSE

HOLD AND OFFICE FURNITURE

BUSINESS PLAN FOR CRGF 4th ROUND

APPLICATION
COMPANY NAME: BERHE HAILEMARIYAM MANUFACTURING OF HOUSE
HOLD AND OFFICE FURNITURES
PROMOTER: BERHE HAILEMARIYAM
PHONE:0914300089
SUBMITTED TO: DEVELOPMENT BANK OF ETHIOPIA
LOCATION: MEKELLE, TIGRAY REGIONAL STATE, ETHIOPIA
January26, 2025

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Contents
1. EXECUTIVE SUMMARY ........................................................................................................................................ 4

2. INTRODUCTION.................................................................................................................................................. 6

1.2 Project Objectives .................................................................................................................................. 10

1.3 Project Scope .......................................................................................................................................... 11

3. BACKGROUND OF THE COMPANY .............................................................................................................. 11

3.1INVESTOR’S PROFILE ................................................................................................................................. 16

4. OBJECTIVE OF THE COMPANY ..................................................................................................................... 17

5. PROJECT DESCRIPTION ................................................................................................................................. 18

6. MARKET STUDY ............................................................................................................................................... 20

6.1 Target Market .......................................................................................................................................... 20

6.2 Market Trends .......................................................................................................................................... 20

6.3 PAST SUPPLY AND PRESENT DEMAND .................................................................................................... 21

6.2 PROJECTED DEMAND .................................................................................................................................. 24

6.3 TARGET CUSTOMERS ................................................................................................................................ 24

6.4 COMPETITORS’ PROFILE ........................................................................................................................... 25

6.5 PRODUCT DESCRIPTION AND APPLICATION ......................................................................................... 27

6.6 PRICING AND DISTRIBUTION ................................................................................................................... 30

6.7 SALES FORECAST ...................................................................................................................................... 32

7. PRODUCTION CAPACITY AND PROGRAM................................................................................................... 33

7.1. PRODUCTION CAPACITY ...................................................................................................................... 33

7.2. PRODUCTION PROGRAM ...................................................................................................................... 33

8. RAW MATERIALS AND INPUTS ........................................................................................................................ 34

9. UTILITIES CONSUMPTION & COST .................................................................................................................. 36

10. TECHNOLOGY USED AND ENGINEERING.................................................................................................. 37

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 10.2. ENGINEERING .................................................................................................................................... 39

10.2.1 M A C H I N E R Y AND EQUIPMENT................................................................................................. 39

11. ORGANIZATION AND MANAGEMENT ...................................................................................................... 40

11.2 LAND LAYOUT ......................................................................................................................................... 42

12 SOCIO ECONOMIC BENEFIT ........................................................................................................................ 44

13 CORPORATE SOCIAL RESPONSIBILITY ........................................................................................................ 44

14 ENVIRONMENTAL IMPACT ........................................................................................................................... 45

15 FINANCIAL ANALYSIS .................................................................................................................................. 46

15.2 PROFITABILITY ......................................................................................................................................... 47

15.3 NET PRESENT VALUE ............................................................................................................................... 47

15.4 INTERNAL RATE OF RETURN ................................................................................................................... 47

15.5 PAYBACK PERIOD .................................................................................................................................. 48

16 CONCLUSION ............................................................................................................................................... 48

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1. EXECUTIVE SUMMARY

Project N a m e : MANUFACTURING O F O F F I C E & H O U S E H O L D FURNITURE

Expansion Project
Project Type: Manufacturing of Wood products
Project Activity: Manufacturing of Household Furniture & Fixtures, Office Furniture,
Hotel & Restaurant Furniture & Fixtures
Project Promoter: Mr.BERHE HAILEMARIYAM KAHSAY
Nationality: Ethiopian
Project Location: Mekelle, Tigray Ethiopia
Total Investment Capital: ETB 10,500,000.
Fixed Investment: 76.92%, working capital: 23.08%
Raw Materials: locally available.
Production Capacity: 13,824 sets in total, per annum, at full capacity
Legal form of the Business: 100% private
IRR: & NPV: 67% & 75.5 million
Employment Opportunity: 36 individuals; 17 on permanent 19 on casual basis of
which 16 skilled, & 20 unskilled laborers.
Berhe Hailemariyam, a well-established manufacturer of high-quality household and
office furniture in Mekelle, seeks to expand its operations to meet the growing demand
in the region and beyond. This expansion project aims to increase production
capacity, diversify product offerings, upgrade machinery, and enhance marketing
efforts. The project requires an investment of 10,500,000. and promises significant return
on investment through increased revenue, market share, and brand recognition.
Social a n d E c o n o m i c B e n e f i t s : will provide better manufacturing,
innovate new technologies, will have a foreign exchange saving effect to the country
since it reduces import, will create forward linkage with Different sectors will have
employment opportunity, and generates income for the government in terms of tax
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revenue and payroll tax.
Environmental Impact: not have any adverse impact on the environment.
Contact Person: Mr.BERHE HAILEMARIYAM KAHSAY
Cell phone: 0914300089

N/O Description remark

1 MSME Address Mekelle,Tigray,Ethiopia

PHONE: 0914300089

2 Legal status of the business  Sole

proprietorship
 Manufacturing
sector
 Under production
3 Marital status Married

4 Type of business Manufacturing

5 Status of the business Under production

6 Credit information NO credit

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2. INTRODUCTION
Berhe Hailemariyam has been manufacturing durable and stylish furniture for homes
and offices in Mekelle. Our reputation for quality craftsmanship, competitive pricing,
and customer satisfaction has earned us a loyal clientele in the region. Ethiopia, the
second most populous country in Africa, is home to one of the world’s oldest
civilization. With the economy registering two digits growth rate for the last nine years,
the growth of Ethiopia has been broad-based. Where, with the services and the
industrial sectors growing at the highest rates. Since the Federal Democratic Republic
of Ethiopia has given top priority to ensure faster and sustainable development of
the industrial sector; favorable conditions are created for industry to play a key role in
the economy.
The five-year Growth and Transformation Plan (GTP), which emphasizes agricultural
transformation and industrial growth, projects the economy to grow at much higher
rates. Besides, the government policies and incentives for the private sector investment
are very promising that it motivates the investors to engage in manufacturing sector.
This is fundamental as the manufacture sector plays a pivotal role to absorb
unemployment.
The Federal Democratic Republic of Ethiopia has given top priority to ensure faster and
sustainable development of the industrial sector; favorable conditions are created for
industry to play a key role in the economy.
To this end, particular emphasis has been given to two main sub sectors. First, the main
strategic direction is to support the expansion and development of macro and small
scale enterprises. In addition, efforts are being made to further develop medium and
large scale industries.

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Although Ethiopia’s industrial base is still relatively small, the growth prospects of this
sector are significant, as new industries – such as cement, textile factories and leather –
are coming on stream and new projects are planned in other areas including steel,
chemicals and pharmaceuticals. This momentum is expected to continue given the
priority accorded to industrialization, both for exports and import substitution, in
the governments five-year 2nd round GTP.

In the 2nd five years Growth and Transformation Plan (GTP), the Micro and Small
enterprises development is the strategic focus of the industrial development. During the
GTP period an environment encouraging for the emergence of new Macro and Small
scale Enterprises (MSEs) and support that increases the productivity of the existing MSEs
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will be put in place. This strategic direction will enable the development of broad-
based and competent private sectors.
The current fast and dynamic economic growth of Ethiopia especially in urban area
necessitates equivalent growth of building and construction sector. The sector should
expand rapidly to support the overall economic development sustainable.
Investment and property development play an important role in any emerging markets
or economies. The property investment market in Ethiopia remained under developed
for several years. As a consequence, the supply of residential houses and non-
residential real estate that can be used for parking, residence, office space, shopping
malls and catering services in the urban centers of the country is disproportionately low
to cope with the growing demand in the country spinning from the average growth in
GDP of 5.5 percent over the last ten years and population increase. The relatively good
performance of the macro-economy (real growth in GDP, low inflation rate and
growth in investment and export sector) has stimulated unprecedented investment
growth in the property sector over the last five Years. The growth of investment in the
property market over the last five years is consistent with the global experience
suggesting that investment in the residential and commercial property (real estate) is
greatly influenced by the performance of the macroeconomic conditions.

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In general, a stable macroeconomic condition leads to economic and business
growth and develops investors' confidence. This certainly spurs large demand in the
property market. Following growing demand trends, and with the expectation of high
return on their investment capital, large number of land developers pooled their
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financial resources and invested in the property market. Besides, the government
policies and incentives for the private sector investment are very promising that
motivates the promoter to engaged in forming furniture factory particularly the need
for manufacturing. Establishing of such service/supply is very important because of the
following reasons:
➢ Reduce & Control Operating Expenses,
➢ Improves Business Focus,

➢ Gain World-class Capabilities,

➢ Re-allocate Internal Resources,

➢ Accelerate Re-engineering Efforts,

➢ Manage an Out-of-Control Function,

➢ Create New Resources,

➢ Increase Capital Funds Sources,

➢ Share Business Risk with Trusted Partners,

➢ Infusion of Cash, etc.

1.2 Project Objectives

* Expand Production Capacity: Increase production output to meet growing demand,
both locally and regionally.
*Diversify Product Offerings: Introduce new product lines, including contemporary and
modern furniture designs, to cater to diverse customer preferences.
*Enhance Machinery: Invest in modern machinery and equipment to improve
efficiency, quality, and productivity.
*Strengthen Marketing Efforts: Develop comprehensive marketing strategies to reach a
wider audience and establish a stronger brand presence.
*Create New Employment Opportunities: Generate new employment opportunities for
skilled workers in the region.

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1.3 Project Scope
*Expand Workshop Facility: Secure a larger workshop space with adequate capacity
for increased production.
*Acquire New Machinery: Invest in advanced woodworking machinery, finishing
equipment, and material handling systems.
*Product Development: Introduce new product lines, focusing on modern designs and
incorporating customer feedback.
*Upgrade IT Infrastructure: Implement a modern management system for inventory
tracking, order management, and financial reporting.
*Marketing and Sales: Develop a comprehensive marketing plan, including online
presence, promotional campaigns, and partnerships.

3. BACKGROUND OF THE COMPANY

BERHE HAILEMARIYAM MANUFACTURING OF OFFICE & HOUSEHOLD FURNITURE is an

invention of Mr.Berhe hailemariyam The Company is located in Mekelle Tigray, Ethiopia.
It is established as a furniture company specializing in custom furniture for the high-end
residential, resort, and commercial market and therefore, arose its operation with
producing Sofa, Shelf and Coffee Table only. The company engaged particularly in
manufacturing of varies ranges of household and office furniture that are designed to
substitute the imported products in the sector.

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Being attracted by the profit potential of the industry and request from customers for
other related products the company added other items in its product line. Through
time the company has got itself as best quality furniture producer both for
households and offices. By now the organization is producing more than 25 types of
products categorized as household furniture & fixture, office furniture and hotel
furniture & fixture.

When it starts its operation, the company’s initial capital was ETB 50,000.00. From this
startup the current capital grown in to ETB 10.5 million. At the time where berhe haile
mariyam MANUFACTURING joined the industry, its workforce was only 6 employees. The
now existed situation created an employment opportunity for 36 people. These labor

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forces are at different levels of skill.

BERHE HAILEMARIYAM OFFICE AND HOUSEHOLD FIRNITURE MANUFACTURING believes in

treating its customers with respect and faith. It grows through creativity invention and
innovation. It integrates honesty, integrity and business ethics into all aspects of its
business functioning. Our vision will be accomplished by sharing the responsibilities of
work with all employees. We want our customers to experience the warmth and
comfort through respect and trust. We will achieve our aims through implementing
values with focus on quality, value for money, satisfy customers’ needs, and build
relationships.

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• Vision: Being a Chief Manufacturer of High Quality Products by
Continuing the Legacy of our Company!

• Mission: To Satisfy Customer’s need Through Reliability and

Flexibility! The promoter and his employees have long experience and proven record
of achievements. They have sufficient educational background and diversified work
experience that would result in successful operation of the project. They will make joint
ventures and attract other foreign expertise and expand the investment to highly
mechanized operation rendering trainings and experience sharing activities to the
surrounding communities.
Since the promoter has extensive experience in the furniture-making industry, and has
sound managerial experience and best performance track of records both as
employed and employer the company has been progressive and profitable
starting from its establishment. Both its production and sales volume has shown
growth almost on yearly basis.

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In addition, the establishment of this furniture manufacturing factory has been
generated revenues to the regional government in the form of VAT, profit tax and
income tax. i.e. the 3 years financial report is attached with this paper.
The favorable environment created for the investors in the country encouraged and
motivated MR. BERHE HAILEMARIYAM. The company has been manufacturing wood
products for the last 10 years and now planned to envisage the expansion of a factory
for the manufacturing of high quality furniture products to minimize the demand supply
gap and the loss of foreign currency amounting more than 40 million USD annually.

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3.1INVESTOR’S PROFILE
MR.BERHE HAILEMARIYAM is an Ethiopian investor who had various working and
managing experiences. He graduated in Diploma in Furniture Works. The promoter was
employed for 1 year in an organization before he commits himself to his own small
scale furniture production facility. So that, this gave him ample experience in
management and valuable lesson that he would use in running his own business. He
has been developing the skills, experience and financial resources to start his own
business for a number of years.

MR.BERHE HAILEMARIYAM used each and every opportunity that the coordination
office has been giving to the micro enterprises and his market networking
increased from time to time. And he is now planning to expand the existing modern
furniture manufacturing factory in MEKELLE with a broad selection of design
choices, high-end finishes along with top of the line organization, customer service,
and quality at an affordable price.

There are several factors that initiated the promoter. Firstly, the increasing number of

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investment in infrastructure development and overall population growth, increasing
demand for furniture necessitated increase in the utility of these goods and products
demand within the whole industry.

Secondly, the suitable investment policy environment which encourages investment

activities, enterprises to expand and graduate to medium and large-scale ventures is a
good opportunity. Investment incentives facilitated by the government such as income
tax-exemption for a specified period and Availability and easy access to institutional
credit are important elements for the development of private investment in the
country. Therefore, it is another and innovative investment creating employment
opportunity for many Ethiopians, manufacturing advanced furniture products for
households, offices, hotels, universities, retailers, exporters, and so on.

4. OBJECTIVE OF THE COMPANY

The objective of BERHE HAILEMARIYAM MANUFACTURING OF OFFICE & HOUSEHOLD

FURNITURE is to manufacture and supply varied range of furniture products that can be
used in individual homes, offices, hotels and recreational areas. It aims at running an
eco-friendly furniture manufacturing plant and contributing its share towards
conserving natural resources of our planet by fostering innovation and sustainability.

The company plans to make use of new advanced technology for the production to
achieve best quality and efficient use of resources. In doing so the factory will be in a
position to discharge its societal responsibility by using its expanded factory and
facilities to serve as a training ground for technical and vocational fresh graduates.
Its objective towards wood manufacturing industry is to see the sector to be
competitive enough in all dimensions. For these, BERHE HAILEMARIYAM
MANUFACTURING plans to adopt modern production systems and technologies to

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upscale quality standards of furniture products of the country. It will work at its best to
secure economics scale of operation and making products available in every corner
of the country at affordable price.
Providing the required wood related inputs and component parts for booming
construction industry of Ethiopia by being an alternative source of supply is an
objective to be pursued at BERHE HAILEMARIYAM MANUFACTURING OF OFFICE &
HOUSEHOLD FURNITURES. It works to be supporting hand for the overall growth
expected to come in our country.
The main objective of the promoter is to contribute for the national economy in the
area of furniture manufacturing. In addition, the project will generate revenues to the
regional government in the form of sales tax revenue, profit tax and payroll taxes.
Considering the economic and social benefits of the project’s technical viability,
financial capacity and managerial capability of the promoter, the project is found to
be feasible both economically and socially based on the following descriptions.

5. PROJECT DESCRIPTION
BERHE HAILEMARIYAM MANUFACTURING OF OFFICE & HOUSEHOLD FURNITURE plans to
expand a furniture manufacturing company which can produce 6,687 sets of finished
products per year at full capacity. The company will mostly use local materials but
will supplement with imported materials to bring environmental sustainability.
The factory is expected to create job opportunity for more than 24 employees and
heavy duty machineries. It will have different stores for raw-materials, semi-finished and
finished items.
The manufacturing company plan to get ETB 7,350,000 loan from bank. The expansion
project designed to render a multipurpose giving business and workshop facility which
will in turn plays significant role towards solving shortage of production facility. Having
difficulties of operation faced due to congested working capital & technology the
company is in a problem to work to meet the demands of the market. BERHE

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HAILEMARIYAM MANUFACTURING OF OFFICE & HOUSEHOLD FURNITURE intends to
integrate different strategies in manufacturing different types of modern furniture. Its
plan is to have a cost effective business that will reduce the production cost starting
from the initial stage of woodcutting to retailing of the final product at an affordable
price and serve to minimize foreign currency spending incurred in importing
furniture.

On the approval of this project and subsequent execution of related tasks MR. BERHE
HAILEMARIYAM will be among the pioneers to invest in the first modern furniture
factory in Ethiopia in order to meet the region’s transformation and development goal
as well as bringing competitiveness and excellence in the industry. By now, the
promoter is ready to invest and expand in this business by providing the capital to
cover the start-up expenses and apply key strategies to ensure its success.

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The total investment cost of the project including working capital is estimated at
ETB 10.5 million. The project is financially viable with internal rate of return (IRR) of 67%
and a payback period 3 years.

6. MARKET STUDY
6.1 Target Market
Existing Customers: Expand service offerings and product range to cater to the
evolving needs of current clients.
New Customers: Reach a wider audience through effective marketing campaigns and
leverage the expanded product range.
Government and Institutional Clients: Bid on contracts for furnishing public spaces,
schools, and offices.
Retailers: Partner with furniture retailers in Mekelle and surrounding regions to distribute
products more widely.

6.2 Market Trends

Growing demand for quality furniture: Increasing urbanization and disposable income
are driving demand for stylish and durable furniture.
Trend towards modern designs: Consumers are increasingly seeking modern and
contemporary furniture styles.
E-commerce growth: The rise of online shopping presents opportunities for reaching a
wider audience and expanding sales channels.
Emphasis on sustainability: Growing consumer awareness of environmental concerns is
increasing demand for sustainably sourced and manufactured furniture.
Market Size and Growth: the potential market size and growth rate for furniture in
Mekelle and surrounding areas. Consider factors like population growth, urbanization,
and disposable income.

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6.3 PAST SUPPLY AND PRESENT DEMAND
The demand for high-quality contemporary furniture in particular is increasing in the
domestic and international market due to technological advancement, augmented
construction population, the economic boom, and other factors. The exponential
growth in the real estate industry has seen an increase in the demand for office and
home furniture. The construction of multi-star hotels has also created the need for a
reliable furniture market.

While the demand for high-end furniture is soaring, there are a limited number of
modern furniture factories producing quality furniture. Instead, much of the office and
home furniture is being imported. This made furniture too expensive, and it created a
heavy drain on the country’s foreign currency reserves. The supplied furniture sets
during the period 2008 – 2015 are shown as follows;

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No Year Quantity Demanded
per annum

1 2008
216,447
2 2009 222,723
3 2010
229,182
4 2011 235,829
5 2012 242,668
6 2013 249,705
7 2014 256,947
8 264,399
2015
9 2016 272,066
10 2017 279,956
11 2018 288,074
As can be seen from the above table the demand of furniture has been consistently
increasing from period to period. The yearly average level of demand which was only
216,447 sets during the period 2008 has reached nearly 256,947 sets by the 2014.
Generally, during the past 7 years demand volume has shown an annual average
growth rate of 2.9%.

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6.2 PROJECTED DEMAND
The demand for housing is mainly influenced by population growth and income rise.
The present demand for housing is estimated at 210,347 housing units per annum. The
demand is expected to reach at 296,428 housing units by the year 2028. Assuming that
the demand for furniture is directly proportional to the demand for housing, the
demand is expected to reach at 296,428 set of furniture by the year 2028.
The table below shows the projected demand for housing computed by taking the
estimated present demand as a base and applying an average annual growth rate of
2.9%.
PROJECTED DEMAND FOR FURNITURE
No year Future demand per
annum/set
1 2025 296,429
2 2026 305,025
3 2027 313,871
4 2028 322,973
5 2029 332,339
6 2030 341,977

6.3 TARGET CUSTOMERS

The target customers of this envisaged project includes
1. Households circle
2. Business Community such as, Hotels & business organizations
3. Housing Development Agency
4. Small & Medium Enterprises
5. Governmental and Non-governmental organizations
6. Emerging economies
7. Neighboring countries
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8. Distributors and retailer

6.4 COMPETITORS’ PROFILE

There are many local and Chinese furniture factories in Ethiopia surrounding
Addis Ababa. Some of these are;
➢ Deluxe Furniture owned by Ethiopian – at Olympia (mainly importer)
➢ NH Bay Furniture Factory owned by Chinese – at Kality

➢ Summate Furniture Factory owned by Chinese – at Lebu

➢ 3F Furniture factory owned by Ethiopian – at Saris
➢ Alpha Furniture Factory owned by Ethiopian – at Lancia
➢ Harot Family Furniture Factory owned by Ethiopian – at Gelan

➢ Sunrise Steel Structures owned by Chinese – at Jomo

➢ Many other importers – at Merkato and Building Malls

Even though this project has many other competitors all over Ethiopia, the market gap
has been seen as it is summarized in the above and this shows there is a huge
opportunity. As the company’s strength, the network of customers and good
partnership with the government offices, real estate developers, importers, and small
scale enterprises makes this project unique and increases the confidence of the
promoter. Moreover, the promoter has so far received many contracts from his
customers and is working at full capacity in the existing status.

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Therefore, the main aim of this project is to expand the previous works to factory level
standard to gain additional customers by importing the machinery and constructing
the facility that was leased.

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6.5 PRODUCT DESCRIPTION AND APPLICATION

Furniture is a movable objects intended to support various human activities such as

seating and sleeping. It is also used to hold objects at a convenient height for work or
to store things. Furniture can be made from many materials including metal, plastic,
and wood. Wood furniture can be made using a variety of woodworking joints which
often reflect the local culture. The main products which are produced in BERHE
HAILEMARIYAM MANUFACTURING Expansion Project are listed below;
1. House hold furniture lists
1.1. Living room sofa
1.2. Coffee table
1.3. TV rack
1.4. Dining chairs & table
1.5. Bed
1.6. Dressing table
1.7. Book shelf & Corner shelf

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2. Household fixture lists
2.1 Kitchen cabinet
2.2 Cupboard
2.3 Exterior doors & interior doors

3. Office furniture
3.1 File cabinet
3.2 Executive desk
3.3 Conference desk
3.4 Reception desk
4. Hotel & restaurant
4.1 Guest couches

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4.2 Beds
4.3 Lobby couches
4.4 Guest luggage resting desks
4.5 Cupboards
4.6 Interior & exterior doors
4.7 Stool chair

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6.6 PRICING AND DISTRIBUTION
The pricing strategy is multi-facial since the aim and goal of this project is reaching all
classes of people in the country. Different strategies that address different classes or
social status will be used. Among other things, affordability is the key issue that affects
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furniture manufacturing. This is directly related with the residents’ ability to buy or rent a
housing unit. The end users of the product are numerous and their geographical
distribution is very wide. Hence, the product has to reach the final consumer through
distributors and retailer.

Considering the nature of the products and the characteristics of the end users a
combination of both direct distribution to end users (for bulk purchasers) and indirect
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distribution (using agents) is selected as the most appropriate distribution channel.
In this Expansion Project, BERHE HAILEMARIYAM MANUFACTURING aimed to
distribute its products all over Ethiopia including Eritrea. Whereas, the prices adopted
for financial analyses per set of furniture unit is studied and seen as it is summarized in
the following sub title.

6.7 SALES FORECAST

BERHE HAILEMARIYAM MANUFACTURING OF OFFICE & HOUSEHOLD FURNITURE Expansion
Project has a capacity of 3,870 set of finished furniture products in the first phase of
production. The aim of the project is to produce quality and affordable furniture
products to meet the growing demand. The marketing strategy to penetrate and gain
considerable market share is consistently rendering quality after-sales service to its
customers. The selling price will be much fair as compared to the existing market
Therefore, BERHE HAILEMARIYAM MANUFACTURING OF OFFICE & HOUSEHOLD FURNITURE
Expansion Project expect to sale its products effectively since the market study results
a huge supply & demand gap. The project forecasts the sales Collection from the 1st
phase of production will be ETB 22 million.

BERHE HAILEMARIYAM
SALES FORECAST PER ANNUM
MANUFACTURING
SR NO. ITEM Quantity Selling Price per Total
House hold furniture lists
set/piece
1 Living room sofa 100 40,000.00 4,000,000.0
2 Coffee table 70 6,000.00 420,000.0
0
3 TV rack 100 8,000.00 800,000.0
0
4 Dining chairs & table 50 30,000.00 1,500,000.0
0
5 Bed 140 20,000.00 2,800,000.0
0
6 Dressing table 20 7,000.00 140,000.0
0
7 Book shelf & Corner shelf 40 6,000.00 240,000.0
0
Household fixture lists -
0
8 Kitchen cabinet 20 50,000.00 1,000,000.0
9 Cupboard 20 30,000.00 600,000.0
0
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0
 10 Exterior doors & interior doors 200 9,000.00 1,800,000.0
Office furniture -
0
11 File cabinet 20 7,000.00 140,000.0
12 Executive desk 20 14,000.00 280,000.0
0
13 Conference desk 15 20,000.00 300,000.0
0
14 Reception desk 30 10,000.00 300,000.0
0
Hotel & restaurant -
0
15 Guest couches 100 3,000.00 300,000.0
16 Beds 300 16,000.00 4,800,000.0
0
17 Lobby couches 20 22,000.00 440,000.0
0
18 Cupboards 50 9,000.00 450,000.0
0
19 Interior & exterior doors 150 9,000.00 1,350,000.0
0
20 Stool chair 100 3,500.00 350,000.0
0
Total 22,010,000.0
0
0
7. PRODUCTION CAPACITY AND PROGRAM
7.1. PRODUCTION CAPACITY

The demand for furniture expected to reach 296,428 set of furniture by the year as
indicated in the market study. The plant is proposed to produce around 6,687 set
of furniture per annum considering the market study, minimum economies of scale,
investment cost, period for implementation and full capacity attainment. The plant will
operate double shifts of 8 hours each per day for 312 days in a year.

7.2. PRODUCTION PROGRAM

The production program is worked out by deducting Sundays and public holidays and
assuming that maintenance works will be carried out during off- production hours. The
factory is assumed to start its operation at 40% of its rated full capacity and
progressively increase to 60%, 80% and 100% in the second, third and fourth year,
respectively. The production program is provided in the Table below;

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BERHE HAILEMARIYAM MANUFACTURING OF OFFICE & HOUSEHOLD FURNITURE
Expansion Project PRODUCTION CAPACITY PER ANNUM, per set/piece

BERHE HAILEMARIYAM

S.No.
MANUFACTURING
Description Phase 1 Phase 2 Phase 3 Phase 4
1 Working hours per shift 8 8 8 8
2 Number of shifts 2 2 2 2
3 Working days per year 312 312 312 312
4 Capacity Utilization (%) 40 60 80 100
Total set/piece per 3,870 4,644 5,573 6,687
annum
8. RAW MATERIALS AND INPUTS

Most of the raw material will be acquired locally and these raw materials are
easily available in the market. There are some materials which will be
imported. The list of raw materials and quantity required per production
capacity is seen in the Table below;

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BERGE HAILEMARIYAM MANUFACTURING
RAW MATERIALS NEEDED (LOCAL)

Item Name U.O.M Quantity

1S.No. Local Pines(Timber) M3 200
2 Fiber KG 1000
3 Foam 200 x 100 x 1 Pcs 1000
4 Bonded Foam 200 x 100 x 4 Pcs 500
5 Wanza Hard Wood M3 100
6 PP Bag Meter 20
7 Kaki Meter 60
8 Rubber Pcs 20
9 Adhesive Glue KG 1500
10 Metallic Stucco Gallon 160
11 Normal Stucco Gallon 160
12 Lacquer Gallon 200
13 Sealer Gallon 200
14 Sprusso Ctn 60
15 Shoe Nail KG 1000
16 Nail # 2,4,5,6,8,10 KG 1000

35 | P a g e
 MANUFACTURING
RAW MATERIALS NEEDED (IMPORTED)

Item U.O.M Quantit

1 tim MDF Normal 3mm,6mm,12mm,18mm
Name Pcs y 500
2 MDF Walnut Veneer Laminated Pcs 500
3 MDF Ask Oak Veneer Laminated Pcs 500
3mm,6mm,12mm,18mm
4 MDF UV Laminated Different Shades And Textures Pcs 300
3mm,6mm,12mm,18mm
5 Sofa Fabric Meter 2000
18mm
6 Stainless Caster Footing Pcs 2000
7 Screw #2, #3, 4# , 5# ,6# ,8# 10# Pkt 1000
8 Adhesive KG 1000
9 Thinner KG 2000
10 Staple Wire Pkt 1000

9. UTILITIES CONSUMPTION & COST

A number of utilities would be put in place in order to ensure smooth
functioning of the project. These utilities include:

➢ W a t e r Supply

➢ Electricity supply

➢ Telephone line

➢ Internet Broadband
The total annual cost of utility is estimated at ETB 712,074.22. The annual utility
requirement and cost are indicated in Table
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BERHE HAILEMARIYAM MANUFACTURING OF OFFICE & HOUSEHOLD

ANNUAL UTILITY CONSUMPTION & COST
FURNITURE
Annual C ounte r Rate

S. No. UTILITIES UOM Unit Cost Se rvi ce C Total Cost

Consumption harge pe r ye
1 Electric Power kWh 876,000 1.1 ar 270.72 998,910.7
Water m 29,200 4 2
338,888.6
2 11.6 168.60
Telephone - National calls mi³ nut 43,800 00.8
036,582.00
3 228.00
e nut 365
International Call (Av.Zone mi
4 39.4 3,452.90
1&2) e
6 1,377,834.2
TOTAL COST
2

10. TECHNOLOGY USED AND ENGINEERING

10.1. TECHNOLOGY
10.1.1 P R O D U C T I O N PROCESS
In the manufacturing process of furniture there are several stages of process. All
process must be done in furniture making to get maximal quality and satisfaction
from the buyer. These are some of the steps in production process:-
1. Preparing of timber

Log wood, a wood result of hewing is distributed to sawmill to start the

manufacturing process of furniture. The logs are split by sawmill according to the
required size and placed outdoor in the sun for a week to reduce the moisture
content of the wood before it goes to the kiln machine. In the Kiln dry machine the
drying process (kiln dried) of the wood with specific heating system takes place in
order to reduce the moisture content to 12-15%.

Then the wood (timber) will be checked and measured to ensure size and moisture
contents within requirements. Each bundle is documented and release to
production floor for processing.
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2. Cutting and molding

Selecting from the received timber bundle, each piece of timber is carefully cross
cut into lengths required. Cut timber is then bundle on pallets, which is then
processed at the molding section to achieve the shapes and size required.
Documentation and identification of each bundle is properly done here to ensure
chain of custody procedure is followed.
3. Component fabrication

Molded timber is processes by different machines depending on its shape and design
to acquire its features. These components are then carefully sanded to round all sharp
edge and smoothen out all surfaces.
4. Assembly
Each component will be assembled according to from the part the intended furniture.
Joints are glued together to form a strong bond. Assembled parts are then stacked
together and labeled for traceability.
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5. Finishing & packing

Assembled parts are dipped in teak oil and wiped dry to achieve the brown/ teak
finishing. Teak oil acts as repellent of wood destroying insects, fungicide, as well as
providing some weather and UV resistant to the wood.These parts are left for a period
of time for the teak oil to cure and dry. They are inspected again before packed into
carbon boxes.

6. Delivery
Finished products will be loaded into containers according to customers’ order. These
containers are then shipped out to our customers from all around the country.

10.2. ENGINEERING
10.2.1 M A C H I N E R Y AND EQUIPMENT

The total cost of machinery and equipment is estimated at ETB 4,950,500.00, out
of which about 45% is required in foreign currency. The following are some
of the machines we use for the manufacturing of furniture.

BERHE HAILEMARIYAM MANUFACTURING OF OFFICE & HOUSEHOLD

MACHINARY & EQUIPMENT in Birr
FURNITURE
New Machineries To Invent
Estimated Unit Estimated
Item U.O.M Quantity Total
Cost In Birr
1S.No Conveyer Belt Sanding Machine
Name Pcs 1 200,000.0 200,000.0
Cost In Birr
2 Foam Grinding Machine Pcs 1 100,000.0
0 100,000.0
0
3 Foam Bonding Machine Pcs 1 125,000.0
0 125,000.0
0
4 Fabric Cutting Machine Set 2 150,000.0
0 300,000.0
0
5 Power Generator 500 KVA Set 1 1,000,000.0
0 1,000,000.0
0
6 Edge Binding Machine Set 1 0 150,000.0 0 150,000.0
7 Hot Pressing Machine Set 2 500,000.0
0 1,000,000.0
0
Total 0 2,875,000.0
0
0
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11. ORGANIZATION AND MANAGEMENT

11.1 PROPOSED ORGANIZATIONAL STRUCTURE

Organizing, the process of structuring human and physical resources in order to
accomplish organizational objectives, involves dividing tasks into jobs, specifying the
appropriate department for each job, determining the optimum number of jobs
in each department, and delegating authority within and among departments. The
framework of jobs and departments that make up any organization must be directed
toward achieving the organization’s objectives. In other words, the structure of an
organization must be consistent with its strategy.
The following section includes all the manpower requirement of the plant.

BERHE HAILEMARIYAM MANUFACTURING OF OFFICE & HOUSEHOLD FURNITURE

HUMAN RESOURCE REQUIREMENT & SALARY EXPENDITURE in Birr
EMPLOYEE POSITION
Monthly Salary Total Monthly
Skille d Staff
1S.No. Technical Director He 1 ad 10,000.00
Per Head 10,000.00
Salary 120,000.0
Annually
2 Accountant 1
Count 6,000.00 6,000.00 072,000.00
3 Cashier Receptionist 1 3,000.00 3,000.00 36,000.00
4 Production Department 4 5,000.00 20,000.00 240,000.0
5 Finishing Expert 3 5,000.00 15,000.00 180,000.0
0
6 Security Guard 2 800.00 1,600.00 019,200.00
7 Janitor 2 800.00 1,600.00 19,200.00
8 Driver 2 1,500.0 3,000.00 36,000.00
Total Skilled 16 0 60,200.0 722,400.00
Unskilled
Staffs 8 500.00 0 4,000.00 48,000.00
Sub-Total Laborers 24 32,600.00 770,400.00
Employee Benefits 115,560.0
Total (15%) 885,960.00
0
Casual Laborer 12 1,000.00 12,000.00 144,000.0
Grand Total 36 0
1,029,960.00
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SUMMARIZED STAFFING PLAN

TYPE OF EMPLOYEE Unskilled Skilled Total

Permanent 12 5 17

Casual 8 11 19

TOTAL 20 16 36
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11.2 LAND LAYOUT

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BERHE HAILEMARIYAM MANUFACTURING OF OFFICE & HOUSEHOLD FURNITURE

TOTAL LAND LAYOUT

No. DESCRIPTION Total (m2) % Share

1 Carpenter/woodwork area 200 4

2 Sofa production area 500 10

3 Finishing area 500 10

0
4 Tailoring section 200 4
0
5 Sofa assembly area 500 10

6 Display Section /show room 300 6

7 Office Area 500 10

8 Reception 500 10

9 Warehouse/Store 500 10

10 Loading & Unloading 500 10

11 Security 300 6

12 Free space & Other 500 10

5000 100
TOTAL PLOT REQUIRED
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12 SOCIO ECONOMIC BENEFIT

One of the problems that our country faces is a high unemployment rate. The current
objective of the government is tackling the problem of unemployment and fostering
the development process either through creating self-employment or subcontracting
other organizations.

The project will generate more than ETB 1.6 million incomes for the Government in
terms of payroll tax. The project will also generate around ETB 4 million in terms of profit
tax revenue per annum for the country. The establishment of such factory will have a
foreign exchange saving effect to the country by substituting the current imports.

13 CORPORATE SOCIAL RESPONSIBILITY

There is a growing awareness that business needs to manage its relationship with the
wider society. Corporate leaders are responsible for their corporations’ impact on
society and the natural environment beyond legal compliance and the liability of
individuals. MR. BERHE HAILEMARIYAM considers Corporate Social Responsibility (CSR)
 [Pick the date] Page 45

a leading principle of top management and of entrepreneurs. The promoter expects

the employees to reexamine their pattern of behaviors and begin their journey toward
a sustainable approach that is integrated into the business strategy. To that end, he
will ensure skill and technology transfer to small and medium scale enterprises is
achieved by introducing training and experience-sharing programs. These enterprises
may be used as subcontractors.

14 ENVIRONMENTAL IMPACT
Furniture has a positive contribution to sustainable development that aims to make the
human society to live in harmony with nature at high level. Wood, especially from
sustainable harvesting practices has been shown to be the best material to use for
many different applications as it has a very minimal impact on the environment
compared to other materials such as metals and plastics.

The use of wood was found to be the most favorable in terms of minimizing the impact
on the environment. Wood harvested from sustainable logging practices is a
renewable resource whereas other materials (such as steel, aluminum and plastic) are
derived from non-renewable resources. The embodied energy of wood is very low
compared to metals and plastics and is a measure of the fact that the production of
metals and plastics is a high- energy intensive process. The embodied energy of wood
is largely derived from the energy required to dry the timber. In many environmental
impact categories, wood has been found to be superior to either metals or plastics. In
many examples, timber has been considered to be CO2 neutral when burned for
energy production since the amount of CO2 released is balanced by the uptake of
CO2 from trees.

In addition to that, this project will be environmentally conscience by using domestic

wood, water-based (low VOC) finishing materials, green packaging material and
wood from sustainable species and forests. The envisaged project plans to get any
kind of forestation led by in a legal manner. Moreover, the project will import
some raw materials from abroad.
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15 FINANCIAL ANALYSIS
15.1 ASSUMPTION

The financial analysis of BERHE HAILEMARIYAM MANUFACTURING OF OFFICE &

HOUSEHOLD FURNITURE Expansion Project is based on the data provided in the
preceding sections and the following assumptions.

• Built up area 5000.0 Sq.m

• Revenues 10% every year after full capacity

• Expenses 10% every year after full capacity

• Working Hour 2 shifts

• Working Days 312 days per year

• Working Capital 5% of total Investment Cost

• Cost of Promotion 2% of Sales of Service

• Maintenance & Repair 2% of Equipment per year

• Depreciation 10% of Equipment per year

• Repair and maint’ce cost 5% of construction & machinery

• Legal Reserve 5% of Gross Profit

• Profit Tax 35% of Gross Profit

• Source of finance 100 % loan

• Bank interest 14%

• Discount cash flow 10%

• Accounts receivable 15 days

• Cash in hand 5 days

• Accounts payable 15 days

• Raw material local 5 days

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• Work in progress 5 days

• Finished products 5 days

15.2 PROFITABILITY
The financial statement prepared based on the projected income statement reveals
that the project would generate a net profit throughout its project life. In the 1st year
of operation (1st phase, 40%) Birr 9.6 million, 2nd year (2nd phase, 60%) Birr 11.3 million,
3rd year (3rd phase, 80%) Birr 13.6 million, and 4th year (4th phase, 100%) where the
company reaches in to full capacity Birr 16.4 million. The net cash flow is positive
throughout the project life. Therefore, we can conclude that the project will not face
any deficit throughout its life.

15.3 NET PRESENT VALUE

Net Present Value (NPV) is the total present value of a time series of cash flows. NPV
aggregates cash flows that occur during different periods of time during the life of a
project in to a common measuring unit i.e. present value. It is a standard method for
using the time value of money to appraise long- term projects. NPV is an indicator of
how much value an investment or project adds to the capital invested. In principal a
project is accepted if the NPV is non-negative.

Accordingly, the net present value of BERHE HAILEMARIYAM MANUFACTURING OF

OFFICE & HOUSEHOLD FURNITURE Expansion Project at 10% discount rate is found to be
Birr 75.50 million and which is acceptable.

15.4 INTERNAL RATE OF RETURN

The internal rate of return (IRR) for an investment is the discount rate that makes the
net present value of the investment's income stream total to zero. It is the
compounded return rate that can be earned on the invested capital, i.e., the yield on
the investment. It is an indicator of the efficiency or quality of an investment. A project
is a good investment proposition if its IRR is greater than the rate of return that could
be earned by alternate investments or putting the money in a bank account.
Accordingly, the IRR of BERHE HAILEMARIYAM MANUFACTURING OF OFFICE &
HOUSEHOLD FURNITURE Expansion

Project is computed to be 67% indicating the viability of the project.

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15.5 PAYBACK PERIOD

The payback period is the period required to recover the original investment outlay
through the accumulated net cash flows earned by the project Accordingly, based
on the projected cash flow it is estimated that the project’s initial investment will
be fully recovered within 3 years

16 CONCLUSION
BERHE HAILEMARIYAM MANUFACTURING OF OFFICE & HOUSEHOLD FURNITURE
Expansion Project will use advanced technology to produces acceptable, high quality
and standard products. As it is clearly presented in the financial analysis, the proposed
factory is promising and financially viable. The factory is liquid starting from the first
year of its operation. Since the plant is profitable and can accommodate
employment opportunity for 74 workers. It is beneficial both for the promoter as well as
the country to initiate the business.

The establishment of such factory will have a foreign exchange saving effect to the
country by substituting the current imports. The project will generate revenue in terms
of tax for the government.

In addition to serving as a source of employment and income for the region, the
project will render social services for different group of people. Furthermore, it will serve
as the pilot experience and ground for other investors who wish to enter into such kinds
of urban development.
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APPENDIX
INITIAL INVESTMENT COST

BERHE HAILEMARIYAM MANUFACTURING

TOTAL INVESTMENT COST in Birr

S.No. COST ITEMS Total Cost %

5,000,000.0 47.6
Share
1 Plant Machinery and Equipment
3,900,500.0
2,000,000.0 58.21
2 Inputs and Raw Materials 19
0
1,401,900.0
500,000.0 20.92
3 Office Furniture 4.8
0
210,000.0 3.13
4 Pre - Production Expenditure 1,000,000.0 9.5
0
744,622.0 11.11
5 Working Capital 2,000,000.0 19.1
5
444,248.5
10,500,000.0 6.63
TOTAL INVESTMENT COST 100.0
7
6,701,270.6 100.0
2 0
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ANNUAL PRODUCTION COST

BERHE HAILEMARIYAM MANUFACT URING OF OFFICE & HOUSEHOLD FURNIT URE

PROJECTED PRODUCTION COST in Birr

S.No. COST ITEMS Year 1 Ye ar 2 Ye ar 3 Year 4

1 Raw Materials and Inputs 1,401,900.00 1,682,280.00 2,018,736.00 2,422,483.20

2 Utilities 1,377,834.22 1,653,401.06 1,984,081.28 2,380,897.53

3 Maintenance and Repair 78,010.00 93,612.00 112,334.40 134,801.28

228,000.00

4 Administration Costs 250,800.00 275,880.00 303,468.00

5 Cost of marketing and distribution 30,857.44 37,028.93 44,434.72 53,321.66

6 Other Costs 15,583.01 17,141.31 18,855.44 20,740.98

TOTAL OPERATION COST 3,132,184.67 3,734,263.30 4,454,321.83 5,315,712.66

7 Depreciation - 78,010.00 76,449.80 74,920.80

8 Cost of Finance 116,341.25 116,341.25 116,341.25 116,341.25

TOTAL PRODUCTION COST 3,132,184.67 3,928,614.55 4,647,112.88 5,506,974.71

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PROJECTED INCOME STATEMENT

BERHE HAILEMARIYAM MANUFACT URING OF OFFICE & HOUSEHOLD FURNIT URE

PROJECTED INCOME STATEMENT in Birr

ACCOUNT DESCRIPTION Year 1 Year 2 Year 3 Year 4 Year 5

Sales Revenue 22,010,000.00 26,412,000.00 31,694,400.00 38,033,280.00 41,836,608.00
Other Income 440,200.00 528,240.00 633,888.00 760,665.60 836,732.16
TOTAL REVENUE 22,450,200.00 26,940,240.00 32,328,288.00 38,793,945.60 42,673,340.16
Cost of Sales 3,132,184.67 3,928,614.55 4,647,112.88 5,506,974.71 6,057,672.18
GROSS PROFIT 19,318,015.33 23,011,625.45 27,681,175.12 33,286,970.89 36,615,667.98
Salary & Wages 1,029,960.00 1,235,952.00 1,483,142.40 1,779,770.88 1,957,747.97
Utilities 1,377,834.22 1,653,401.06 1,984,081.28 2,380,897.53 2,618,987.29
Maintenance and Repair 78,010.00 85,811.00 94,392.10 103,831.31 114,214.44
Administration Costs 228,000.00 273,600.00 328,320.00 393,984.00 433,382.40
Cost of marketing and 30,857.44 46,286.16 62,023.46 77,529.32 85,282.26
Other Costs
distribution 15,583.01 23,374.51 31,321.85 39,152.31 43,067.54
Depreciation - 78,010.00 76,449.80 74,920.80 74,920.80
Cost of Finance 116,341.25 116,341.25 116,341.25 116,341.25 127,975.38
Miscellaneous 440,200.00 660,300.00 884,802.00 1,106,002.50 1,216,602.75
TOTAL EXPENSE 3,316,785.92 4,173,075.99 5,060,874.13 6,072,429.91 6,672,180.82
GROSS PROFIT/LOSS 16,001,229.41 18,838,549.46 22,620,300.98 27,214,540.98 29,943,487.16
Legal Reserve 1,122,510.00 1,347,012.00 1,616,414.40 1,939,697.28 2,133,667.01
TOTAL PROFIT BEFORE TAX 14,878,719.41 17,491,537.46 21,003,886.58 25,274,843.70 27,809,820.15
Profit Tax 5,207,551.79 6,122,038.11 7,351,360.30 8,846,195.30 9,733,437.05
NET PROFIT AFTER TAX 9,671,167.62 11,369,499.35 13,652,526.28 16,428,648.41 18,076,383.10
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PROJECTED CASH FLOW STATEMENT

BERHE HAILEMARIYAM MANUFACT URING OF OFFICE & HOUSEHOLD FURNIT URE

Item Year 1 Year 2 Year 3 Year 4 Year 5

CASH INFLOW
Sales 22,010,000.00 26,412,000.00 31,694,400.00 38,033,280.00 41,836,608.00
Income
Other 440,200.00 528,240.00 633,888.00 760,665.60 836,732.16
Income
TOTAL CASH INFLOW 22,450,200.00 26,940,240.00 32,328,288.00 38,793,945.60 42,673,340.16
CASH OUTFLOW
Cost of Sales 3,132,184.67 3,928,614.55 4,647,112.88 5,506,974.71 6,057,672.18
Salary & Wages 1,029,960.00 1,235,952.00 1,359,547.20 1,495,501.92 1,645,052.11
Utilities 23,403.00 35,104.50 47,040.03 58,800.04 64,680.04
Maintenance and Repair 78,010.00 85,811.00 94,392.10 103,831.31 114,214.44
Administration Costs 228,000.00 250,800.00 275,880.00 303,468.00 333,814.80
Cost of marketing and 4,674.90 5,142.39 5,656.63 6,222.30 6,844.52
distribution
Other Costs 313,218.47 344,540.31 378,994.35 416,893.78 458,583.16
Depreciation 113,557.50 102,201.75 103,337.33 103,223.77 103,235.12
Cost of Finance 116,341.25 116,341.25 116,341.25 116,341.25 127,975.38
Miscellaneous 440,200.00 484,220.00 532,642.00 585,906.20 644,496.82
Profit Tax 5,207,551.79 6,122,038.11 7,351,360.30 8,846,195.30 9,733,437.05
Legal Reserve 1,122,510.00 1,347,012.00 1,616,414.40 1,939,697.28 2,133,667.01
TOTAL CASH OUTFLOW 11,809,611.58 14,057,777.87 16,528,718.47 19,483,055.85 21,423,672.64
SURPLES/DEFICIT 10,640,588.42 12,882,462.13 15,799,569.53 19,310,889.75 21,249,667.52
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