1.

BEE/4798/13
2. Hadas Zeru BEE/4540/13
3. Haweni Zinna BEE/1528/13
4. Mahlet Sisay BEE/5629/13
5. Habtamu Kumsa BEE/3195/13
6. Beemnet Yohannes BEE/5478/13
7. Abel Frew BEE/9065/13

Submitted To.
Submitted date SEP 21

Executive summary
a) Brief Description of the project

ABLH Hollow concrete Block Production is registered with the countries small
industries office in 2013 as a sole proprietorship and is located in KOLFE
KERANIO sub city near the ASCO ST. GEBREAL CHURCH. It aims to Produce
good quality Hollow concrete Block.

The total project cost amounts to Birr 1,800,000 and we propose to finance
this capital requirement by a loan birr 1,260,000 or 70% and the balance of
Birr 540,000 by our own capacity.

b) Brief profile of the Entrepreneur

The business is owned by Bethlehem, Hadas, Haweni, Mahlet, Beemnet, Abel

and Habtamu those living in ADDIS ABABA. We were motivated to go into the

production of Hollow concrete block after hearing many complaints From

Contractors about the inferior quality of existing Hollow concrete Block.

we gathered information and studied the process of HCB production from

several Books

we also have a relative who is presently working in HCB production for

information and guidance.

c) Project’s Contributions to the local economy

The project will employ 35 employees, excluding members of the

entrepreneur.

It aims to raise the quality standard of the HCB. It will also result in healthy
Competition by forcing existing HCB producers in the Area to improve their
product quality.

2
ABLH Block factory
 Sales and Marketing Plan

 Description of the Product

Hollow concrete is one of the most common masonry units it consists of

hardened cement contains single multiple Hollows.

It is made from Conventional Cement mixed which include Cement, Sand &
Pumice

The HCB are light weight Size of 40x20x20 ,40x15x20 and [Link]
are made from Conventional Cement mixes include cement, sand, and
pumice the products have different Classes such as: Class A, Class B and
Class C.

 Comparison of product with its competitors.

we observed that the quality of HCB currently sold in the market is

poor& expensive and we have the desire to produce good quality HCB and
sell the product at a reasonable price. we improve the quality by using a
good quality row materials for the Production and Continuously Check the
quality of the product through laboratory tests.

 Business Location

The business will be located in kolfe keranio sub city near Asco
[Link] church .This location has been chosen for the following reasons.
The Production operation can easily be supervised by the owners it is close
to its targeted markets and it is easily accessible to the customers as .it has
got access road to the production site.

 Market Area

we distribute our products for the Contractors sites There are many
Construction sites in the areas around & they needs a great deal of HCBs for
the Construction and HCB production site situated at a place which is easily
accessible to customers.

 Major Customers

The main customers are mainly private government contractors which are
working at different sites in the nearby localities as well as individuals who
engage in private construction.

3
ABLH Block factory
  Estimated Total Demand

The Customers need approximately 80,000 pieces of HCB pre monthly.

 Estimated Market Share

A sample survey of competitors in the area indicated that there are only two
manufacturers in the area. The Competitors are small in size and the quality
of Their products is inferior to what is planned by the project Because the
number and size suppliers is small, market share of about 25% is estimated
as being reasonable. In the initial stages of production, operating 100%
capacities cannot be assumed. There are bound to be initial Operating
problems, raw material shortages, distribution difficulties currently cement
supply from government is so difficult etc. have only 75% is projected to be
served in the first year.

 selling price

The selling price is based on “cost-Plus Method” we feel that a profit of 9%

over the total product cost is very reasonable and Competitive especially at
this stage.

Unit product cost is estimated at 15Birr/piece Adding the 10% profit, our
whole sale price is 16.50 Birr/m3. At this price, it is well below the price of
the two manufacturers.

 sales forecast

If the total demand is 80,000pices/month and the projected market share is

25%, the project’s potential market site is 80,000*(25/100) or 20,000 per
month. However, for practical purpose, only 70% of the projected market will
be considered for sales forecast, the is 80,000pices*(75/100) or 60,000pices
month. we believe that the market is expanding rapidly as infrastructure
investment in the area is high. Conservatively, we project that our sale
volume will increase by 10% every year and attain 100% of the projected
market share by the third year.

 Promotional measures

4
ABLH Block factory
 In order to secure the goodwill of the customers, one month credit will be
extended to these who regularly buy in bulk. Other promotional measures to
help in marketing the product will be free delivery for volume purchases, use
of mouth advertisement by satisfied clients, use of posters, and regular and
prompt supply by the manufacturers.

 Marketing Strategy

The project's marketing strategy is based on the following strategies:

a) product strategy - it has a better product

b) pricing strategy - its retail price is lower than the other products.

c) promotion strategy – free delivery

- Prompt Continuous and efficient service &

d) distribution strategy –in the production sites.

 Marketing Budget

Aggregate will have very modest cost to promote and distribute its
product. It will rely mostly on word-of-mouth promotion by satisfied
customers as well as endorsement by the customers of the product because
of its superior quality. Hence, the only cost it will incur will be occasional
posters advertisement for a total monthly.

5
ABLH Block factory
 Production Plan

 Production Process

The Production Process of HCB is as follows

1. cement sand & pumice are mixed with water in ratio’s based on the
classes of HCB

2. The mix is molded by HCB molding machines in different sizes.

3. Drying the molded HCB’s using natural sun light.

4. The HCBs are cured periodically until attaining the required strength.

5. Then the HCB will be ready for sale.

 Fixed capital

Per month (Birr)

Land ………………………………… 4000

Office …………………………………….. 2000

The equipment needed for producing will have a capacity of 2500 pieces
per day or 60000 pieces per month , assuming 24 working days &will be
produced in a single batch each day

Equipment

1mixer……….. …………………………………… 176800

1 HCB molding machines …………………… 115200

1 dump trucks rent per trip…………… 3000

Hand tools …………………………………….. 750

6
ABLH Block factory
 =295750

 Life of fixed Capital

The life of the equipment is 10 years; because of its regularly contact with
cement, sand & water. The depreciation change will be 15%on equipment
and 5% for office.

The Annual description costs assuming no scrap value will therefore

Equipment (15%) = 40320Birr

Office (10%) = 60 Birr

Monthly depreciation cost= 40380 Birr

 Maintenance and Repairs

Because of the simplicity of the machineries almost all services & repair can
be done on the production site.

 Source of machinery

The machinery & equipment will be locally manufactured on the factory site
with local Crafts men.

 Planned Capacity

The factory has a production capacity of 2500pices per day of operation the
factory will initially operate at 80% Capacity, 2000 pices per day for 24 days
in a month.

 Future Capacity

Extra Capacity is available & will be used only when demand is sufficiently
large to justify working Overtime.

 Terms and Conditions of Purchase of Machinery

The machineries will be Paid for at the time of installation.

7
ABLH Block factory
  Production site Location and Layout

The production site will be located in ASCO. The total size of the production
site is 10000sq.m. The land is owned sub city and has a lease cost of
3700birr/month.

 Raw materials needed

For a daily Production level of 2500 Pices per day, the following raw
materials are required.

Fuel …………………. 150 liter

Water …………………… 1000 liter

 Cost of raw material

Fuel …………………….. 40 Birr per lit.

Water ……………………. 0.5 Birr per lit.

Raw materials Cost per month will be :

Fuel = 150*40*24 = 144000

Water = 1000*0.5*24 = 12000

Total = 156000 Birr. Per month

 Raw Materials Availability

The most essential raw material for HCB production is fuel. The availability of
fuel varies from season to season. The most frequently used fuel for the
Mixer are benzene.

we have contacted a number of small suppliers of fuel in the town vicinity,

and because the requirement for this project is not large, regular availability
is assured. we have however, made a provision to keep a regular stock of
fuel equivalent to one month production to ensure continuous production.
This will mean 150 lit. per day x 24 days in a month or 3600 lit. of fuel stocks
are required to run the production continuously.

8
ABLH Block factory
  Labour

We all participate in management of workers. one full-time assistant or

foreman will be selected from us to help in production and to supervise the
production operation. In addition,15 daily laborers hired and 1 store keeper
as well as 1 watch man will be from us.

 Cost of Labour
Direct Labor

15 workers at birr 4300 = 72000

Indirect Labor
1manager = 4,500
1 fore man = 3,000
1 secretary = 1,000
1 store keeper=1000
2 guard = 2000
Total Labor Cost = 83,500 Birr

 Labor Availability

Workers for this type of industry are available throughout the year, even in
seasons of peak agricultural activity. No foreseeable problems are expected
as most of the work requires no previous skills.

 Labor Productivity

Wages to the workers will be paid on a productivity rate basis, i.e., on the
volume of Aggregate products. Tea will be served free during break time
lasting 15 minutes

9
ABLH Block factory
 Organization and Management plan

 Form of Business

The business will be registered under the name "ABLH Hollow concrete block
production" as a sole proprietorship and owned by Bethlehem, Hadas,
Haweni, Mahlet, Beemnet, Abel and Habtamu. It will have its business
address located at Kolfe keraniyo sub city

 Organizational Structure

The business will be managed by Bethlehem Frick who will act as general
manager, personnel manager and production manager. She will be assisted
by a production foreman who will be in charge of production . Other
members will act as marketing manager as well as treasurer.

 Pre-Operating Activities

We have listed down the following activities to be undertaken before we can

operate our business:

1. Registering the business - 3day

2. Preparing the business plan - 3 weeks

3. Applying for a loan and approval - 3 weeks

4. Contacting machinery suppliers - 1 week

5. Installing machineries - 4 weeks

6. Hiring labour - 2 days

10
ABLH Block factory
7. Purchasing raw materials - 2 days

8. Trial production - 1 week

aim to start my operation approximately three months after my loan

application, or six weeks after release of loan.

Financial Plan

• Salaries and rent are the two major expenses, while depreciation is another
significant cost that will increase as the company develops.

• we want to finance growth mainly through cash flow. we recognize that this
means

we will have to grow slowly.

• It should be noted that the owners of ABLH HCB PRODUCING PROJECT do

not intend to take any profits out of the business until the long-term debt has
been satisfied. Whatever profits remain after the debt payments will be used
to finance growth.

4.1 Important Assumptions

Key assumptions for ABLH PROGECT are:

• We sell the Aggregate product on one month credit.

• we assume the continued popularity of ABLH PRODUCING PROGECT in

Addis Ababa.

• Monthly sales are the largest indicator for this business. There are some
seasonal variations, with the months January through June being the highest
sales months.

• We assume access to capital and financing sufficient to maintain our

financial plan as shown in the tables.

Table: General Assumptions

General Assumptions 2014 2015 2016

Plan Month 1 2 3

11
ABLH Block factory
 Current Interest Rate 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00%
Tax Rate 15.00% 15.00% 15.00%
Other 0.00% 0.00% 0.00%
Calculated Totals
Payable Expense 250,000 birr 365,000 birr 540,000birr
Payroll New Accounts 400,000 birr 450,000 birr 500,000birr
Inventory Purchase 250,000 birr 320,000 birr 400,000birr

 Break-even Analysis

For our break-even analysis, assume running costs of approximately 800,000

birr per month, which includes payroll, rent, utilities, and an estimation of
other running costs.

Based on a 30% margin, we need to sell about 240000birr per month to

break even, according to our assumptions. our sales forecast indicates that
monthly sales are expected to be much greater than the break-even point
mentioned in the table

 Projected Profit and Loss

The annual estimates are included on the following page. we expect income
to hit birr at the end of the first year of business. It should increase to around
800,000 birr by the third year as the of our business, its employees, and
services become apparent to the local owners. Second year revenues
anticipate the addition of one part-time employee, along with one fulltime
employee in the third year.

12
ABLH Block factory
 Table: Profit and Loss

Pro Forma Profit and 2014 2015 2016

Loss

Sales 800,000 birr 850,000 birr 1,500,000bir

r

13
ABLH Block factory
 Direct Costs of Goods 200,000 birr 300,000 birr 800,000 birr
……………………………… …………… ………… …………….
Gross Margin 60,000 birr 96,000 birr 136,000 birr
Gross Margin 30.00% 32.00% 34.00%
Expenses:
Payroll 25,000birr 35,000bir r 60,000birr
Sales and Marketing
and Other Expenses 25,000birr 21,000birr 34,000 birr
Depreciation 2,000birr 4,000birr 86000 birr
Depreciation 1,200birr 1,500birr 3,000 birr
Depreciation 6,000birr 6,000birr 6,000 birr
Depreciation 500 birr 500 birr 500 birr
Insurance 12,000birr 12,000 birr 12,000birr
Rent 20,000 birr 20,000birr 20,000 birr
Depreciation 6,000birr 6,000birr 6,000birr
Payroll Taxes 7,500birr 7,500birr 7,5000birr
Other 0birr 0birr 0birr
Total Operating 107,000birr 107,000birr 107,000birr
Expenses 96,000birr 96,000birr 96,000birr
Profit Before Interest 48,000birr 48,000birr 48,000birr
and Taxes
10% 10% 10%
Net Profit/Sales

 Projected Cash Flow

Cash flow projections are critical to our success. The following table shows
cash flow for the first three years.

Table: Cash Flow

Pro Forma Cash Flow 2014 2015 2016

Cash Received

14
ABLH Block factory
 Cash from Operations
Cash Sales 100,000birr 350,000birr 500,000birr

Cash from Receivables 0birr 0birr 0birr

Subtotal Cash from 450,000birr 600,000birr 800,000birr

Operations
Additional Cash Received 0birr 0birr 0birr
Non Operating (Other)
Income

Sales Tax 0birr 0birr 0birr

New Current Borrowing 0birr 0birr 0birr

New Other Liabilities 0birr 0birr 0 birr

(interest-free)

Subtotal Cash Received 400,000birr 450,000birr 550,000birr

Purchase Long-term 0birr 0birr 0birr

Assets
Dividends 0birr 0birr 0birr
Subtotal Cash Spent 400,000birr 300,000birr 500,000birr

Net Cash Flow 135,000birr 1700,000birr 2,350,000birr

REFERENCE

 Toolkit, Start and Improve your Business, Addis Ababa,7/2004

15
ABLH Block factory
 Business Plan guid line and examples
 How to Prepare your Business Plan, UNITED NATION ,New York and
Geneva,2002
 our lecture note

16
ABLH Block factory