DIRE DAWA UNIVERSITY

DIRE DAWA INSTITUTE OF TECHNOLOGY

SCHOOL OF ELECTRICAL & COMPUTER ENGINEERIN
STREAM COMMUNICATION ENGINEERING
TITLE: - HOLLOW CONCERET BLOCK

NAME ID

1.Desalegn Bereda……………………………………………R/0858/08

2.Meron Melaku…………………………………………………R/1168/08

Submitted to: Ins.Natnael.

Submission date: Feb 08/06/13
 ACKNOWLEDGEMENT
We owe our thanks and appreciation to many people for their help and encouragement in
completing this project. Foremost, we would like to thank to God.

Next, we would like to thank to our teacher, Ins.Natnael. for engaging us on this project which has
increased our knowledge about such business plans.

Last but not the least, we would like to express our deepest gratitude to our smart cooperation, our valuable
effort and unrelenting discussion throughout the life of the project for the completion of this work.

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Table of Contents

LIST OF FIGURES ................................................................................................................................. iv

LIST OF TABLES .................................................................................................................................... v
1. Executive Summary ............................................................................................................................. 1
1.1 General overview and Purpose of the business plan ............................................................... 1
1.2 Brief profile of the Entrepreneurs............................................................................................ 1
1.3 Project’s Contributions to the local Economy .......................................................................... 1
2. Company Description .......................................................................................................................... 2
2.1 Company Ownership ..................................................................................................................... 2
2.2 Startup Plan .................................................................................................................................. 2
3. Marketing plan &sales strategy............................................................................................................ 3
3.1 Description of the Products and Services ...................................................................................... 3
3.2 Manufacturing Progress ................................................................................................................ 3
3.3 Business Location .......................................................................................................................... 7
3.4 Market Area .................................................................................................................................. 7
3.5 Major Customers ........................................................................................................................... 7
3.6 Estimated Total Demand ............................................................................................................... 7
4. Initial cost of investment ..................................................................................................................... 8
4.1 Life of fixed Capital........................................................................................................................ 9
4.2 Maintenance and Repairs.............................................................................................................. 9
4.3 Source of machinery...................................................................................................................... 9
4.4 Planned Capacity ........................................................................................................................... 9
4.5 Future Capacity ........................................................................................................................... 10
4.6 Terms and Conditions of Purchase of Machinery......................................................................... 10
4.7 Production site location and layout ............................................................................................ 10
4.8 Raw Materials Availability and why we select HCB as buissness plan ......................................... 10
4.9 Labour ......................................................................................................................................... 10
4.10 Labor Availability ...................................................................................................................... 11
5.MARKET ANALYSIS .............................................................................................................................. 12
5.1 Market Segmentation ................................................................................................................. 12
5.2 Target Market Strategy ............................................................................................................... 13
5.2.1 Market Needs ...................................................................................................................... 13
5.2.2 Market Trend ........................................................................................................................ 13

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 5.2.3 Market Growth ...................................................................................................................... 14
5.3 Industry Analysis ......................................................................................................................... 14
5.3.1 Industry Participants.............................................................................................................. 14
5.3.2 Distribution Patterns ............................................................................................................ 14
5.3.3 Competition and Buying Patterns .......................................................................................... 14
5.3.4 Main Competitors ................................................................................................................. 15
5.4 Value Chain ............................................................................................................................... 15
6, MANAGEMENT AND ORGANIZATION ................................................................................................. 17
6.1 Form of Business ......................................................................................................................... 17
6.2 Organizational Structure ............................................................................................................. 17
6.3 Management Team ................................................................................................................... 17
6.4 Personnel Plan ............................................................................................................................ 18
6.5 Pre-Operating Activities ............................................................................................................ 19
6.6 Plan timeframe: ........................................................................................................................... 19
7. Financial Plan .................................................................................................................................. 20
7.1 Important Assumptions............................................................................................................... 20
7.2 Project Profit and Loss before tax ............................................................................................... 23
7.3 Project Cost Evaluation ............................................................................................................... 26

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LIST OF FIGURES
Figure 1 process of HCB production on site ............................................................................................. 6
Figure 2 Diagram of organizational management ................................................................................... 18
Figure 3 Profit and Loss before tax ........................................................................................................ 23
Figure 4 Project cash flow after tax ........................................................................................................ 24
Figure 5 Net cash flow of income after 5TH year ................................................................................... 25

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LIST OF TABLES
Table 1 necessary material for production ................................................................................................ 8
Table 2 Plan timeframe.......................................................................................................................... 19
Table 3 first year production per day...................................................................................................... 20
Table 4 second year production per day ................................................................................................. 21
Table 5 the 5 successive year production per day ................................................................................... 21
Table 6 the total sales, after tax and net profit ........................................................................................ 22

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1. Executive Summary
1.1 General overview and Purpose of the business plan
Hollow concrete block company is a construction industry providing block for construction. The services
and products will be available for customers in Dire dawa at any working time.

The main objectives and mission of hollow concrete block is providing hollow blocks to construction
buildings and any private enterprise starting from the vicinity of the firm’s location to anywhere in Ethiopia.
In addition, we want to deliver our products and services at affordable prices and credits such that customers
at any degree can use our product without limitations.

Generally, the prominent purpose of developing and presenting this business plan is:

 To start viable and profitable businesses,

 To inform and raise new capital from outside investors/lenders stating the Progress of the
business and
 To establish basis for developing a detailed plan of activities

1.2 Brief profile of the Entrepreneurs

The business is owned by group of two persons who are B.Sc. Graduates of Electrical and computer
engineering in communication stream in 2013E.C. We were interested to doing this project to give
production of hollow concrete blocks products to construction company’s due to market demand of quality
services and easily accessible supply in this sector. Some of members have technical experience and skills
to run this investment. In addition, we have gathered market demand, accessibility, level of services
efficiency, supply products information and studied and asked the process of hollow concrete block
production from similar experianced business area. We have studied in order to determine the Commercial,
technical and financial viability of the Project which is painting services and gypsum board products for
private customers, local contractors and governmental organization.

1.3 Project’s Contributions to the local Economy

The project will employ 13 employees, excluding members of the entrepreneurs. The main aims of this
business to raise the quality standard production of hollow concrete block products. It will also result in
healthy competition and profitable business basis area.

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2. Company Description
2.1 Company Ownership
Hollow concrete block business is formed and owned by a group of two interested professional
individuals who are specialized in Electrical and computer engineering in Dire dawa University in
2013 E.C and willing to pay the initial finance requirement of the firm. The individuals have to be
also hard working and energetic professionals. Their educational background may not limit their
interest to join the business but they have to have at least a BSc. Degree in Electrical engineering.

2.2 Startup Plan

To begin a business activity, first we have to plan expense, time and resources as a result business firm
will be effective and attract more customers to its assumed activity radius. If a business has underestimated
the costs, it will have faced with the danger of running with inadequate capital reserves. The key to avoid
this pitfall is to adopt a rigorous approach to your research and planning.

Expenses, contingencies, working capital, sources and collateral are the major area that needs to be
addressed in order to precisely estimate the cost requirements of a given business firm such that future
business activities will not be altered due to cash shortages.

To estimate our expense, we have considered different things which include the following; equipment
required, location, administrative expenses, promotional/advertising expenses, utility costs, etc… and other
expenses. To cover our expenses, we have planned to cover 100% by the shareholders,

Considering every expense and contingencies to start our project we need about 1,835,312birr.

The starting time of the business activities will depend on the availability of the initial investment fund.
However, individuals must be ready to work hard as soon as the required resources are available.

We are planning the business company to work 8 hours a day and seven days a week so that any interested
customers can have the product of the company at any time convenient to them. This will increase both the
quality of service and the revenue of the business firm.

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3. Marketing plan &sales strategy
3.1 Description of the Products and Services
Products
We are planned to produce hollow concrete block and sell to the customers. It is made of Concrete is a
mixture of

 ordinary Portland cement

 mineral aggregate (sand and stone chips)
 water.
 Grain

 Fine
 Medium
 Coarse

Mineral aggregates (sand and stone chips) are normally divided into two fractions based on their
particle size those are coarse and fine aggregate. Natural sand is often used as fine aggregate in
cement concrete mixture. Coarse aggregate is crushed stone chips. Crushed stone chips broken into
particle sizes as fine aggregate. The maximum size of the coarse aggregate that may be used in
cement concrete hollow blocks is 12.5 mm. However, the particle size of the coarse aggregate
should not exceed one third thickness of the thinnest web of the hollow blocks.

Ordinary Portland cement is the cementing material used in cement concrete hollow blocks.
Cement is the highest priced material per unit weight of the concrete. Hence, the fine and coarse
aggregates are combined in such proportions that the resulting concrete is workable and has
minimum cement content for the desired quality.

3.2 Manufacturing Progress

The process of manufacture of cement concrete hollow blocks involves the following 5 stages;
 Proportioning
 Mixing
 Compacting
 Curing
 Drying

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 (1) Proportioning:
The determination of suitable amounts of raw materials needed to produce concrete of desired quality under
given conditions of mixing, placing and curing is known as proportioning. As per Ethiopian Standard
specifications, the combined aggregate content in the concrete mix used for making hollow blocks should
not be more than 6 parts to 1 part by volume of Portland cement. If this ratio is taken in terms of weight
basis this may average approximately at 1:6 (cement: aggregate). However, there have been instances of
employing a lean mix of as high as 1:9 by manufacturers where hollow blocks are compacted by power
operated vibrating machines. The water cement ratio of 0.62 by weight basis can be used for concrete
hollow blocks.

(2) Mixing

The objective of thorough mixing of aggregates, cement and water is to ensure that the cement-
water paste completely covers the surface of the aggregates. All the raw materials including water
are collected in a concrete mixer, which is rotated for about 1 ½ minutes.
(3) Compacting
The purpose of compacting is to fill all air pockets with concrete as a whole without movement of
free water through the concrete. Excessive compaction would result in formation of water pockets
or layers with higher water content and poor quality of the product.
Semi-automatic vibrating table type machines are widely used for making cement concrete hollow
blocks. The machine consists of an automatic vibrating unit, a lever operated up and down metallic
mold box and a stripper head contained in a frame work.
Wooden pallet is kept on the vibrating platform of the machine. The mold box is lowered on to the
pallet. Concrete mix is poured into the mold and evenly levelled. The machine can accommodate
interchangeable mold for producing blocks of different sizes of hollow or solid blocks.
(4) Curing
Hollow blocks removed from the mold are protected until they are sufficiently hardened to permit
handling without damage. This may take about 24 hours in a shelter away from sun and winds. The
hollow blocks thus hardened are cured in a curing yard to permit complete moisturisation for atleast
28 days. When the hollow blocks are cured by immersing them in a water tank, water should be
changed atleast every four days.
The greatest strength benefits occur during the first three days and valuable effects are secured up
to 10 or 14 days. The longer the curing time permitted the better the product.
(5) Drying

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 Concrete shrinks slightly with loss of moisture. It is therefore essential that after curing is over, the
blocks should be allowed to dry out gradually in shade so that the initial drying shrinkage of the
blocks is completed before they are used in the construction work. Hollow blocks are stacked with
their cavities horizontal to facilitate thorough passage of air.
Generally, a period of 5 to 10 days of drying will bring the blocks to the desired degree of dryness
to complete their initial shrinkage. After this the blocks are ready for use in construction work.

The water used in preparing the concrete serves two purposes:

 It combines with the cement to form a hardened paste

 It lubricates the aggregates to form a plastic and workable mass

The water that combines with the cement varies from about to of the total amount of mixing water in
concrete. And water mixes. Technically, the mix is placed to the mixer machine into an aesthetically
Deformed mold and hollow shaped box, then after a certain period the mold is dismantled and the curing,
dry process continues. Following checkup for surface cleanness and quality, it is ready for s

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 Figure 1 process of HCB production on site

The following points should be kept in mind while manufacturing the hollow concrete blocks:

i. The cement-aggregate ratio should not be leaner than 1:6.

ii. Blocks should be taken out from the molds only when concrete has sufficiently set.

iii. Machine casting is preferable to hand casting, to obtain better finish.

iv. After taking the blocks out of mold they should be kept under shade for a week and should
be properly cured 1to 2 weeks.

v. Bocks should be used only after about 1- 2 weeks of curing.

We observed that the quality of hollow concrete block currently sold in the market is poor & expensive.
Therefore, we have to produce the desire good quality and sell the product at a reasonable price.

We improve the quality by using a good quality row material for the Production and Continiously check
the quality of the product through different tests.

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3.3 Business Location
The business will be located in Dire dawa considering different reasons. It is nearby and easily
accessible to our targeted market area and the customers. In addition, there are many private, governmental,
some condominium constructions and naturally Dire dawa is sandy, so it is not mudy houses, further
advantegious for our business to be profitable and commercial place for finishing raw materials to be used
in our business.

3.4 Market Area

The business will distribute its products and give services to construction firms in Dire dawa. There are
many construction sites in this area which needs a big demand of hollow concrete block. Hence, it will
make a competitive market for the company.

3.5 Major Customers

The main customers are private, public and governmental project. In addition, subcontracting from
main contractor projects. It maybe new residential buildings, condominiums, renewal projects etc.

3.6 Estimated Total Demand

There are many building sites in Dire dawa which includes housing, commercial building, governmental
office, social, educational projects. From each sectors there are so many contractors in Dire participating in
construction.

However, there are about 9000 Condominium Residential units [about 822 blocks],1000 real estate and
private housing projects, 43 large scale building projects, 172 Commercial buildings under progress.
Source, Ethiopian Ministry of Construction Estimated Market Share

A sample survey of competitors in the area indicated that there are many producers who are participating
in the production of hollow concrete blocks in this area. Even though, the competitor’s method of
production and services are traditional, they are experienced. This makes the firm very competitive. But,
our method production and services are modern, and time efficient a market share of about 0.00912% is
estimated considering the above reasons. 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 etc. As a result, we will perform about 75% of our capacity to be served in the first year.

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4. Initial cost of investment
 During the production of hollow concrete blocks the mixing ratio is 1:3:6 which means that for
1m^3 cement we need 3m^3 of grain and 6m^3 aggregate

Table 1 necessary material for production

Name of Number Unit/other Cost (in birr) Consumption Total (cost in

material of material birr)
/day
Mixer 1 115000 115000
Aggregates: M^3 500/M^3 125m^3/mont 625,000/year
fine, coarse h
Office 1 3000/month - 36000/year
(rent)
Land for 1 210M^2 40,000/month - 480,000
working area (rent)
Glove 13 20 260
HCB Shaped 8 - 115 920
box
Gress - 4000/year
Akafa 4 90 360
Cement(derba, 500kg 29,250birr/ month 130kuntal/mo 292,500/year
messobo) (5kuntal) nth
lowest in price
Gard 1 2500 2500
Nafta 8Lit 152/day 39520/year
Chair 3 - 270 270
Labours 8 - 2529/month/1lab 20232
Formal 1 3525 3525
Maintenance 2500
money
Office table 2 - 5000 5000
Printer 1 - 5525 5525
Desktop 1 - 4000 4000
computer
Grain, fine, M^3 350/m^3 42m^3/month 147,000/year
medium,
coarse
Spatula 2 - 100 200
Generator 1 - 50000 50000
Water Per - 1000/year 1000
month
Total=1,835,312/
year

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  In the second year we have 1,732,312birr cost, to be more safe, we, the owner of the company argue
that the cost of the material may increase by 2.2%, 2.4%, 2.6%, 2.8% in the 2 nd, 3rd, 4th ,5th year
from their initial value

Type of material and other Unit Price in birr/year

Sand M^3 147,000
Aggregate M^3 620,000
Cement Kg 292,500
Labour, formal, guard Qnt=8,1,1 247,809

Rent of land 480,000

Water, gress, nafta, birr for 57020

maintenance
Rent of office 36000
Total=1,732,312

4.1 Life of fixed Capital

The project owners are arguing that the salvage value of the equipment is not less than 30% that of their
initial value before 3 years. Therefore, the service period of different equipment’s and tools varies, we have
made a weighted average service period based on scientifical cost evaluation. The depreciation for
equipment’s and tools become 14.43% and 13.57% for office furniture, equipment’s and expenditures.

 monthly depreciation cost for equipment’s and tools =2007.09275birr

 Monthly depreciation cost for office tools =164.25354birr
 Total monthly depreciation cost= 2171.346242birr

4.2 Maintenance and Repairs

Because of the simplicity of the machineries almost all services & repair can be done on the working
site, which is about 2500 Birr.

4.3 Source of machinery

The machinery & equipment will be purchased from local manufacturers and importers.

4.4 Planned Capacity

The company is aimed to produce a capacity of producing 738 hollow concrete blocks per day. But,
we will initially operate at 75% capacity. But, after one year we are planning to achieve 85% capacity and
almost producing of 1000+(150 >>> after one year) block (depends on situations) per day

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4.5 Future Capacity
The company has more capacity to produce different hollow concrete with different shapes, with
different and thickness if the demand is high.

4.6 Terms and Conditions of Purchase of Machinery

The purchase cost of machineries will be paid for at the time delivery.

4.7 Production site location and layout

The production workshop will be located in Dire. The total area of the workshop is 210 sq.m. It is
obtained for rent with a rate of 190birr per sq.m/month.

4.8 Raw Materials Availability and why we select HCB as buissness plan
The most common reasons reported for choosing to construct with HCBs were as follows:

• There is a scarcity of water for construction so HCBs chosen because they require less water to build
with

• HCBs are cheaper than other materials

• HCBs are quicker to build with than other materials

• Households had seen neighbours building with HCBs and wanted to construct their house in the same
manner

• Good stone is not available

• Stone is hard to store

• Bricks are expensive to transport to the area

• HCBs protect well from cold weather, e.g. HCB have a good thermal performance

The most essential raw materials are fine aggregate, coarse aggregate, grain (fine, coarse) cement,
water etc.

They are available in local market and the supply is sufficient and stable.

4.9 Labour
We will be participated in management of resources, assistance of workers, supervise the
production operation, store keeper, daily cooperation work will be hired on time.

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4.10 Labor Availability
Workers for this type of company are available throughout the year. No foreseeable problems are
expected as most of the work requires no previous skills.

4.11 Labor Productivity

Wages to the workers will be paid on a productivity rate and daily performance basis. Tea will
be served free during break time lasting 20 minutes.

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5.MARKET ANALYSIS
5.1 Market Segmentation
The market is segmented according to clients in the vicinity of the town. This will help us how much market
we have at hand and can benefit the society and the member of the firm. Clients are the backbone and
reference frames of any business activities.

There are different potential clients for our products and services that could be generally classified into two.

1. Public or governmental clients

2. Non-governmental or private clients

3. Other clients

Public Clients

The government is running a large scale of construction activities in different parts of Ethiopia.
These construction activities require finishing work in their process. Hence, for our company services
and products, the federal government will be a potential client. Currently, the Ethiopian government
is involved in: -

 Building constructions

 Highway and rural road construction

 Water supply installations

 Rail way constructions

Most construction firms listed above need a large service and products of gypsum décor and
painting, which makes the government a very potential client.

Private Clients

Many private companies are participating in the construction industries of Ethiopia and hatting
up the construction activities all over the country. In addition to the existing private construction
companies, there are also companies established as a business firm which could not at once meet the
overall requirements of a construction company.

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 Some of the private companies are home grown and some of them are foreign construction
companies. Most of the home grown construction companies are limited in their capacity while foreign
construction companies are a bit stronger in every aspect than local construction companies.

Many foreign construction companies are involved in large scale construction productions like
power production, highway construction, railway construction, hydropower systems etc.

Therefore, the above-mentioned construction companies and construction industries will be our
potential clients.

Other Clients

Beyond these organized construction firms there are also other individuals/subcontractors who
require our products daily. Our products are going to be on sale for a fair and affordable price such
that any individual interested in our products can purchase and use it at any time they want.

5.2 Target Market Strategy

The hollow concrete blocks, in our business, targets to anybody in the vicinity that requires its
services and products. Customers will get any kind of hollow concrete blocks both quantity and
quality with multiple of options to make their construction process easier.

5.2.1 Market Needs

Since this century construction is increasing rapidly, we are going to manufacture to the
optimum situation. Therefore, the demand of good quality hollow concrete block and other services
increases from time to time. So, different hollow concrete is demandable at different area of the
country especially here in Dire dawa are being emerged in different areas of our country.

5.2.2 Market Trend

Ethiopian government is also planning to connect towns, “kebels”, and even “woredas” by using
highways and pavement roads, and also to widen towns &cities. But the number of suppliers of these
construction materials in quality and quantities around our business area are very few and not well
organized in terms of their performances and quality. So, a number of supplier hollow concrete block
services are required for such kind of task.

Currently market trend in the local is not enough in its performance. Producers sell their products
only on their will that means they do not consider the requirements of clients. The products purchase

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 somehow limits by the government. It is also largely dependent on the governmental demand and
supply.

5.2.3 Market Growth

Ethiopia is a developing country the construction of infrastructures is increasing from time to
time. The increase in the construction activities requires large amount of construction materials
especially hollow concrete blocks with different shapes and different strengths.

The interest to produce hollow concrete block has been increasing because of the expansion of the
construction in the last two decades.

5.3 Industry Analysis

Currently the construction industry is the major economical sector of the Ethiopia. It takes majority
of the national budget of the country as a whole. So involving in this sector will be a good idea of
business activity. Specifically, the production of the hollow concrete block is important business
activity that everybody can engage in construction industry.

5.3.1 Industry Participants

In the hollow concrete blocks, there are certain enterprises participating in a firm. But, the number
of suppliers of these construction materials in quality and quantities are very few and not well
organized in terms of their performances and quality as well. Therefore, many suppliers are required
for this sector.
A client cannot totally relay on such firms because of that they are doing their works based on
experience not a scientific manner. In addition, these few suppliers are not produce in different
options as well as customer’s selection.

5.3.2 Distribution Patterns

The hollow concrete block enterprises in Dire dawa are located far from construction sites and
they don’t have an organized market patterns. This sets a best ground for our business to distribute
its services and products to the customers.

5.3.3 Competition and Buying Patterns

Hollow concrete block business is unique from others, by the following qualities:

 It is going to be a well-organized business firm in its structure and performance.

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  Provides hollow concrete block with a number of options depending on the requirements of
customers.
 Provide with technically and aesthetically qualities approved based on the shape that we are
going to produce.

 Afford services in addition to products in the long run of the business activity for instance
exterior design.

 The products and services are going to be available for wide range of areas.

 The requirements of customers have a place in addition to ready made products and services.

Hence, depending on the above mentioned unique characteristics we can afford better quality of
services and goods to our customers. Comparing to our ideas there are lesser competition from other
similar firm which will enable us to get the success we want with in the shorter period of time.

5.3.4 Main Competitors

As we are doing works in the construction industry there are basically three different kinds of
competitors.

I. Similar hollow manufacturer work enterprises

II. Large construction firms who are well experienced and have specialization.

III. Construction companies who have their own production of hollow concrete blocks may have
higher chance than our business during procurement to be hired for an interested customer at initial
time. But this may overcome by our professional skill in the firm, the qualities and different
alternatives products and services.

5.4 Value Chain

The value chain of the business firm includes a process starting from material mobilization to
production, installation and painting.

The following main activities are included in the value chain.

 Accept customer orders and make contract agreements.

 Mobilize different resources necessary for production of HCB

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 Prepare gypsum boards and make ready for customer test.
 After checking their qualities tell the customers to take their orders or simply sell qualified
readymade HCB interested clients.
 Take payment,
 We may also be interested to have their comments in order to update our services and
products.

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6, MANAGEMENT AND ORGANIZATION
6.1 Form of Business
The business will be registered under the name hollow concrete block as a sole proprietorship and
owned by four entrepreneurs’ business address located at Dire dawa.

6.2 Organizational Structure

The company is administered by board of executive which is organized the all members of
entrepreneurs. It is then divided into the following sub–departments.

A, Marketing Department: - This department makes advertisement for our products and services,
negotiation, signs contact agreements with customers, perform payments and others related to cost and
market.

B, Design and Technical Department: - prepares with different shapes and quality of resources,
production method at the workshop and prepares cost analysis.

C, Site Supervision and Control Department: - manages, controls and supervises resources works
in the site.
D, Executive secretary and finance: - This division includes reception, finance, audition and salary.

6.3 Management Team

As indicated in the figure shown below the management team consists of four personnel each
responsible for managing different activities.

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 Excutive board

Marketing Design and Site Excutive

Technical Supervision secretary
Department Department and finance
and control

Interior Site work Reception

Advertising Design

Workshop Auditing
Supervision
Contract Manufacturing of work
and
Salary
agrement
Cost Resource
making
analysis management
Purchasing

Figure 2 Diagram of organizational management

The management team will control the financial flow and any other resources like, human resources,
material resources and the like. Any defects in the management process will be less tolerable. The
management personnel are composed of trained professionals to increase the production efficiency
of our business firm. If there are problems to be addressed the company managers are responsible to
hear those problems and seek solutions as fast as possible.

6.4 Personnel Plan

The owners are going to be the executive director and manager of the business firm involved in any
work activities. A large portion of the work is assumed to be done by the entrepreneur to list out each
department will be managed by one individuals.

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 Other professional in the field of finishing work will also be hired to assist in performing practical
activities. Accountant and secretary are going to be hired from the outside of us to facilitate the
business activities.
The backbone of our business activities human resources are daily labours which will be employed
according to the rules and regulations drafted by the ministry of works. Security guards will also be
appointed considering the company requirements drafted by the executive board of directors.

Generally, the requirement of human resource will depend on the current investment and the future
productivity of the business firm.

6.5 Pre-Operating Activities

We have listed down the following activities to be undertaken before we can operate our business:

6.6 Plan timeframe:

Table 2 Plan timeframe

Date /2020 Activities

December 28 Company formation: -
 Create business brand and set rule and regulation
 Collect personal fee
 Prepare and present business proposal to the
government and start process for loan
 Make workshop rent
 Purchase portable tools and equipment’s

January 15  Make advert

 Banner
 distribute Business
card etc.

January 30  Officially start the business

Source of initial capital From our selves
February 15  Office and car rent
 Purchasing office furniture’s, computer, printer, etc.

February 18  Organizing office staffs

February 30  Business activities run as planned

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7. Financial Plan
Salaries and rent are the two major expenses, while depreciation is another significant cost that will
increase as the company develops. hollow concrete block plans to use any profits from the business to its
investment capital until the long-term debt has been satisfied. Whatever profits remain after the debt
payments will be used to finance growth.

7.1 Important Assumptions

Key assumptions for our project are:

 There is no cost inflation during the working years.

 Sales of products and services are cleared in month terms.
 We assume the company will be effective in Dire dawa.
 Monthly sales will encounter seasonal variations i.e. from Jan to June in the first year will be the
highest sales, and June to August will be the lowest sale. However, for calculation purpose we
have taken the average sales value.
 The source of this project is covered by our family.

At the time where the company is started production is. The company is working at the night also by
shift high because of this the company production is very high.

Table 3 first year production per day

Types Of HCB Price in Production capacity Total birr/day

birr/blocks of the company/day
HCB 20cm thick 11 354 3894

HCB 15cm thick 10 365 3650

HCB 10cm thick 9 281 2529

Total =10,070

Where at the second year the company production efficiency is planned to arrive around 80% from the
initial time, and during the first year production the market demand of class A1(demandable at this
time especially for private constructions) and HCB 15cm thick is now very high. Therefore, we are
going to increase in HCB 15cm thick and HCB 10cm thick production in the second year.

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Our plan is to manufacture 6 days/week except Sunday. Therefore, the total work days are 26 per
month based on this we planned to work261,820 birr in the first month, almost we are planned to work
this amount of birr through the entire year per month. Therefore, the total amount birr in 2021 will be
12*261,820= 3,141,840 birr/year

In the second year (2022)

For us, depending on the material production the 20 cm thick HCB is consumed more materials. Therefore,
we are focusing on the production of 10cm thick and 5cm thick at the second year.

Again our plan is to manufacture 6 days/week except Sunday. Therefore, the total work days are 26
per month based on this we planned to work birr in the first month, almost we are planned to work this
amount of birr through the entire year per month. Therefore, the total amount birr in 2022 will be: -

Table 4 second year production per day

Type of HCB Price in birr/block Production Total birr/day

capacity of the
company/day
HCB 20 cm thick 11.5 300 3450
HCB 15 cm thick 10.5 425 4462.5
HCB 10 cm thick 9.5 425 4037.5
Total=11950

Again the sales of the hollow concrete based on the production is 11950*26*10=3,107,000 birr.
In general, the planned sale in each day per year is as follow
Table 5 the 5 successive year production per day

2021 2022 2023 2024 2025 Year

10,070 11950 14000 15625 19775 Average
sales/day

Here at the end of the first year, or at the beginning of the second year, in order to be safe, we consider
that the price of the raw material is increased by 2.2%, 2.4%, 2.6%, 2.8% in the 2nd, 3rd, 4th, and 5th
year from their initial price. This situation helps us to be more safe in our project plan throughout the
years.

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 Table 6 the total sales, after tax and net profit

2021 2022 2023 2024 2025

Total sales 2,618,200 3,107,000 3,640,000 4,062,000 5,141,500
After tax 1,846,975 2,640,950-2.2%o 3,094,000-2.4% of 3,452,700-2.6% of 4,370,275-
of the initial price the initial price of the initial of 2.8% of the price
of material(increasing material(increasing of the initial
material(increasing price) of price) material
of price) (increasing of
price)
Net profit 11663 870,527.136 1,293,620 1652,320 2,569,895
from the sale
only

But, in order to be safe the business owners argue that the cost of the material after one year might be
increased as the sale and the demand is increased too.

Because of the daily work the machinery and other material are assumed to be depreciated by 65%
from their initial value at the end of the 5th year and some of them are 100% depreciated.

Therefore, the depreciated value of the material after the 5th year is

 Mixer=115000*65/100=74750 birr (lost money from the sale)

 HCB shaped box=920*65/100=589 birr (lost money from the sale)
 Chair =270*65/100=175.5 birr (lost money from the sale)
 Office chair =5000*65/100=3250 birr (lost money from the sale)
 Printer=5525*65/100=3391.25 birr (lost money from the sale)

Therefore, the total depreciated value of the machinery and other material is 82155.75 birr after the 5th
year. Therefore, the total net of gain from the sale is

(115000birr+920birr+270birr+5000birr+5525birr) -(82155.75birr=44559.25birr after the end of the

fifth year (salvage value).

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7.2 Project Profit and Loss before tax
5,141,500
4,042,000
3,640,000
3,107,000
2,618,200

0 1 2 3 4 5

1,732,312 1,770,422.864
1,773,887.488
1,777,352.112

1,835,312 1,780,816.736

Figure 3 Profit and Loss before tax

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Project cash flow after tax

4,370,275

3,435,700
3,094,000
2,640,470
2,225,470

0 1 2 3 4 5

1,732,312
1,835,312 1770,422.86
1,773,887.4
1777,352.112
1,780,816.73
Figure 4 Project cash flow after tax
In valuing a capital project, we need to know the after-tax cash flows associated with the project. These are usually
forecasts based on revenue and cost projections.

To be meaningful, cash flows

1. Must be after tax
2. Must be incremental
3. Must not include sunk sosts
4. Must include opportunity costs
That is, they must be relevant, incremental after-tax cash flows.
it is easy to classify cash flows as:
1. Initial investment
2. Net operating cash flows

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 3. Termination or end-of-project cash flows
Initial Investment (I0 0r Cf0)
All normal projects require initial investment in fixed assets and working capital. It is computed as follows: Initial
Investment I0 =
Price of asset
+ Modification costs
+ Shipping & Installation costs
+ Legal costs etc.
+ Increase in net working capital
Of these cost, increase in net working capital is not depreciable. It is assumed to be recovered, fully or partially,
depending on the nature of working capital, at the end of

net cash flow of income after 5TH year

2,589,458.27+44559.25(salvage)
1,658,347.888
1,320,112.6
870,047.14
493,158
0 1 2 3 4 5

1,835,312
Figure 5 Net cash flow of income after 5TH year

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7.3 Project Cost Evaluation
Present Worth Analysis
Since, we have a single payment series

IRR=15%, n=5

P= -1,835,312+493,158/ (1+.15) ^1+870,047.14/ (1+.15) ^2+1,320,112.6/ (1+.15) ^3+

1,658,347.888/ (1+.15) ^4+2,589,458.27/ (1+.15) ^5=2,354,984.846

2,377,138.67>MARR

Future Worth Analysis

Since, we have a single payment series

IRR=15% n=5

F=-1,835,312+493,158*(1.15^4+870,047.14*(1.15)^3+1,320,112.6*(1.15)
^2+1,658,347.888*(1.15) ^1+2634017.52*(1.15) ^0

= 6,637,416.877birr

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