JIMMA UNIVERSITY

JIMMA INSTITUTE OF TECHNOLOGY

SCHOOL OF CHEMICAL ENGINEERING

PROJECT OF ENTERPRNEURSHIP

ITTLE: BUSINESS PLAN FOR FURNITURE MANUFACTURING

GROUP MEMBERS
Name Id No

• BIRUK BEYENE 00886/05

• GEBEYEHU ANLEY 04484/06

• GEREMA CHAKA 04511/006

• GIZACHEW ASFEW 01973/04

• LENSA TOLESSA 04722/06

• SIRNO YONAS 05089/06

Submitted to: Mr. Muluken E.

Submission date: 22/05/2018 G.C

JIM
MA,ETHIOPIA

page 1|
 Table of Contents
contents page

1. Introduction.............................................................................................................................................4
1.1 NAME OF THE BUSINESS.............................................................................................................4
1.2 The name and address of partners....................................................................................................4
1.3 The nature and establishment of the business...................................................................................4
2. Executive summery.................................................................................................................................5
3. Description of venture.............................................................................................................................6
3.1 The business mission.......................................................................................................................6
3.2 COMPANY VISION STATEMENT................................................................................................6
3.3 Goals and objectives........................................................................................................................6
3.3.1 Short Term Goals............................................................................................................................6
3.4 Environmental and industry analysis.................................................................................................7
4. Marketing segment..................................................................................................................................8
4.1 product description...........................................................................................................................8
4.2 Promotion strategy.............................................................................................................................8
4.3 Distribution mechanism.....................................................................................................................9
4.4 Analyses of competitors....................................................................................................................9
4.5 Pricing...............................................................................................................................................9
5. Operation/manufacturing segment.........................................................................................................10
5.1 Segments aimed for baby furniture..................................................................................................10
5.2 Segments aimed at producing decorated house furniture.................................................................10
5.3 Suitability for the market.................................................................................................................11
5.4 size of the business..........................................................................................................................11
5.5location of the business.....................................................................................................................11
5.6 Production plan................................................................................................................................11
6. Physical plant........................................................................................................................................11
6.1 Equipment and machinery...............................................................................................................12
7. Form of ownership................................................................................................................................12
7.1 Authority of ownership....................................................................................................................12
7.2 Risk assessment...............................................................................................................................12

page 2|
8.Financial segment...................................................................................................................................13
8.1 financial requirement...........................................................................................................................13
8.2 financial statement...............................................................................................................................14

page 3|
1. Introduction

1.1 NAME OF THE BUSINESS

The name of the enterprise is 'waluman' Furniture Manufacturing Enterprise. The reason that we
assigned this name to the business is to show that as it will be operated and managed by our own
selves. 'Waluman' is Afan Oromo word which means " together".

1.2 The name and address of partners

• Biruk Beyene Jimma

• Gebeyehu Anley D/Markos

• Gerema Chaka Wolliso

• Gizachew Asfew Jimma

• Lensa Tolessa A/Ababa

• Sirno Yonas Dembi-Dolo

1.3 The nature and establishment of the business

Waluman furniture will be run as a partnership between the owners of this business. We are
living in Jimma town and through our own interest in the subject realized that there are no
enough furniture industry in the town and the area around it. The starting date of business
1/sep/2018. The motivation behind to do this business is that, there is no furniture industry that
use the latest technology and offer products with fair price as their required to customers.

page 4|
2. Executive summery
Waluman furniture will be run as a partnership between Biruk Beyene, Gebeyehu Anley,
Gerema Chaka, Gizachew Asfew , Lensa Tolessa and Sirno Yonas. It far away from Finfine in
south direction. For launching this business it requires (30*40) square land, and it will offer
different kinds of office and house materials according to the customer specification. Some of
the product that we will offer is: table, cupboard, bed, and chairs etc.

In order to be more profitable we will segment our products in to different forms. That is;-

• segment aimed for baby furniture

• offering decorated house furniture

Waluman furniture has initial capital of 100,000 birr. Among this 65% of it is generated from
interest free loan/ from relatives, peers / and the rest is from parents share. In order to realize
some of the benefits from it, we will make a sufficient environmental and industrial analysis,
analysis of internal strength and weakness and marketing opportunities. Our furniture shall
consist of the following facilities:

• Raw material room

• Production and product room

• Residence room

Generally our business has the plan to expand to different geographical areas in order to get the
most reasonable profit from it. It plans to serve its customer through producing quality product
within fair price.

page 5|
3. Description of venture

3.1 The business mission

This is to start up and run a furniture business in Ambo town and providing quality furniture
products for local business people or to the direct customer. To offer the products to local
customer within reasonable price than the competitor settle. In addition to this our company
mission is:

1. Providing qualitative living style to its workers

2. Supplying high quality furniture which is good for office, houses and organizations

3. Using existing resources, and providing the society qualitative service with affordable price.

4. Adopting to the dynamic environment throughout the operation

5. Providing entertainment service for customers who are in different age level.

3.2 COMPANY VISION STATEMENT

To solve the shortage of furniture service as well as to promote our business internationally by
providing a good quality of furniture in 2018.

3.3 Goals and objectives

Our goals and objectives are as short term and long term. Those are as bellow.

3.3.1 Short Term Goals

Our short term objective is to find and convert suitable premises that are (40*30) place for
starting the business with adequate seat, storage for inputs and outputs, machinery room and
related service areas. To increase our forecasted sales by intensively advertising and promotion,
by the product itself (producing quality product and service). In addition:

1. To provide work for all members

2. To create job opportunity for local people

page 6|
3. To raise the life standard of the members by paying them a good salary

4. To increase consumption of a furniture by giving awareness

5. Promoting our business

6. Increasing quality of a furniture regularly

7. Increasing profit

3.3.2 Long Term Goals

This is to be able to employee a full time members of the staff to build up reliable and organized
team working in our business, and encourage the business partner to focus on the day to day
problems, activities to meet customer need and wants. This helps as to expand the business
further and made real relationship with loyal customers. After five or six years we would like to
purchase the other premise in different area and set up other operations. Even our long term
objective is:

1. To export a furniture to foreign country

2. To increase the number of customers in the local as well as International

3. To buy modernized a furniture processing machine

4. To expand our business to other places

5. To increase the number of employee

6. To open the branch at other city

3.4 Environmental and industry analysis

Prior to start any business conducting environmental analysis is very important for the smooth
running of the business. Making both internal and external analysis helps the entrepreneur to
forecast the business trends. It is obvious that environment influence the business in many ways.
Some of the environmental factors are:-

• economic factor (cost of business, cash flow, profit potential and related activities)

page 7|
 • marketing factor (demand and market share analysis)

• governmental factor (rule of regulation)

• technical factor (production capacity of the firm)

• Competition and suppliers etc.

Determining the above environmental factors helps the entrepreneur to recognize the real
environment or boundaries between the business and the environment. Environmental analysis is
important to our business we select by considering so many environmental factors and we made
analysis about it.

4. Marketing segment

4.1 product description

The primary products of business shall be

• Office equipment and

• House –furniture

4.2 Promotion strategy

It is obvious that the business firm in a given industry should be advertised to attract the attention

page 8|
of customers in the targeted market. Accordingly, we shall advertise our product through sale
promotion, publicity, local papers and magazines.

4.3 Distribution mechanism

Our products could be dispersed in to different local areas around our premises. We shall
distribute our product to the targeted market through vehicles like carts using cars. After we
expand our business, the mode of channel of distribution will be automatically flow in to
different areas easily

4.4 Analyses of competitors

Currently there are eight competitors who produce furniture products in our locality. They
produce beds, chair, table, and different office equipment. But, they offer their product with high
price, the machine they utility not latest and their premises is not consider the customer. After
having the above, we try to offer a better product that the customer will prefer than the
competitor’s product. The major strength of our competitor is that they have strong business
network, they are not new for the market. The market for our business is divided in to four areas
like

 Addis Ababa
 Agaro
 Woliso
 Wollega (Nekemte)
 Ambo

The Addis Ababa, Wolliso and Nekemte town market is a large consumer of office equipment
(table, shelf, guest chair, and other marble made furniture).

The Agaro and Ambo is the consumer of house furniture (cup board, bed, and other decor
furniture).

4.5 Pricing
Our business will use low cost leadership strategy to introduce its products to easily establish
itself in market. The tentative prices of selected products are presented below.

page 9|
 • Bed =1,500birr

• Sofa = 12,000birr

• Wood table = 600birr

• Glass table= 1,200 birr

• Chair =200 birr

5. Operation/manufacturing segment
5.1 Segments aimed for baby furniture : one of the drawbacks of our competitor is that,
they are not taking in to account for babies related furniture. So, we will produce baby bed, chair
that is comfort for baby, different sized babies’ material that create fun and made from marble,
glass and iron etc.

5.2 Segments aimed at producing decorated house furniture

Furniture industry is the mass known business that is used for delivering material that is used for
different operation. Beyond the above furniture industry aimed at producing decorated product
that creates fun in the minds of the user, such as producing;

• Table made from glass and marble

• Modern sofa seating and sleeping healthy

• Cup-board made from iron etc.

This segment is especially for Addis Ababa market, because the consumer has the power to
purchase the above decorated products than other areas.

page 10 |
5.3 Suitability for the market
After we conduct a mini survey concerned with the suitable place that is easily accessible both
by the customer and supplier that decreases transportation cost, input cost, and miscellaneous
expense.

5.4 size of the business

WALUMAN furniture has to be 5 employees, 2 of them shall be served clear and the other is
employee for the main operation of business. The total estimated amount of money to start up the
business activities is about 100,000 birr. As the business starter our area of coverage may be
limited, but for the furniture we will expand and transform it to large size business firm.

5.5location of the business: - the furniture industry, where different house and office material
produced and processing shall take be located in south west in Jimma town, 356km away from
Addis Ababa. The premise of our business is around the place where inputs like / wood, glass,
electricity, marble, and iron is located. It is convenience for customer accessibility and it’s also a
strategic place for the input supplier.

5.6 Production plan

Without operation plan, the business is dead by itself. The plan of action is necessary for a
smooth running of a given business. The production staff should have friendly welcoming
helpful attitude, they can boost gains by asking the right questions at the right time, it can be
achieved through training and selection.

6. Physical plant
WALUMAN furniture shall consists the following facilities;

• Raw material room

• Production and product room

• Residence room

page 11 |
6.1 Equipment and machinery
No Description Quantity Unit price/birr Total price/birr
1 Drill 1 2000 2000birr
2 Rotor 3 4000 12000
3 Gig so 2 2000 4000
4 Sanglor 1 2500 2500
• Management segment

7. Form of ownership
WALUMAN furniture is a partnership for organization and the owners of the organization are
the manager of the business and they have the responsibility for the overall operation of the
business.

7.1 Authority of ownership

The owners of the furniture have authority on their business and the power to control the
business. The owners have an authority over the business overall affairs like

• The owners have the right to increase or decrease the pricing by considering so many
factors like competitor, demanded etc.

• The owners have the right to control any risk.

7.2 Risk assessment

Risk is uncertainty that faces every business. Normally no good business without risk, but the
degree of risk is different from one business with other one. As there is many competitors
throughout the country, our furniture may face the risk of gaining good market, scarcity of row
material, quality problem and loss of customers

page 12 |
8.Financial segment
8.1 financial requirement; - when a business is initially launched, it may need a high
amount of money. This is because of most of field equipment is purchased during this time. In
order to run out our business with enough finance, we try to get from different alternatives.

From our initial capital (100,000), 50% of it is from loans and the rest is from parents share:

• Loan= 100,000*65/100______________________ dept =65000

• Equity =100000*35/100_____________________credit =35000

• Note: the loan we get is interest free

Different kinds of expense for 1st year /end/

• Licensing expense _________________________1200 birr

• Advertising expense________________________2000 birr

• Rent expense_____________________________6000 birr

• Salary expense ___________________________8000birr/month

• Transportation expense ____________________3500 birr

• Depreciation expense _____________________750birr

• Utilities expense _________________________24,500birr

• Supplies expense _________________________6125 birr

• Miscellaneous expense _____________________2000 birr

Total expense __________________________126075

• Fixed asset =birr 24,400(machinery) + 9000(land) = 33,400 birr

• Accumulated depreciation will be 1500 for 1st year

page 13 |
 The 1st year total sale in number and birr /end/

No unit price whole

• Bed 25 1500 birr 37500

• Sofa 16 12000 192000

• Wood table 80 600 48000

• Glass table 36 1200 43200

5 Chair 500 200 100000

Total sale 508200birr

8.2 financial statement

Waluman furniture

Income statement for September /1/2018 /1st year /

Sales _____________________________________________508,200 birr

Less cost of goods sold _______________________________17000

Gross profit _______________________________________411000birr

Rent expense _______________________________________6000

Licensing expense___________________________________1200

Advertising expense__________________________2000

Salary expense______________________________80000

page 14 |
Transportation expense_______________________3500

Depreciation expense ________________________750

Utility expense______________________________24500

Supplies expense____________________________6125

Miscellaneous expense-_______________________2000

Total______________________________________________126075

Profit before tax _______________________________________364925

Less income tax (35%) ___________________________________127723

Net income _________________________________________237202birr

Dividend _______________________________________________205000

Retained earnings________________________________________ 32202

B. balance sheet for 1st year JAN 1/2018

Assets

Cash _____________________________________________ 0

Inventory _____________________________________________17,000

Total _________________________________________________17000

Long term asset

Equipment _____________________________________________22,500

Land ___________________________________________________8000

Less depreciation /acc/_______________________ 1500

Total __________________________________________________46000

page 15 |
Liability

Account payable__________________________________________10000

Total __________________________________________________10000birr

Owner capital

Retained earnings_________________________________________ 32202

Capital stock _____________________________________________3798

Total liability & capital _____________________________________________46000birr

Projected income statement for 2018and 2019

For 2018 for 2019

Sales increase by 12% ______________________________ increase by 11%

Costs of goods sold increase by 4%_____________________ increase by 5.60%

Expense increase by 4.6% ___________________________ increase by 3.7 %

Projected income statement for the year 2018 & 2019

2018 2019

Sale ____________________________569184______________________ 631794

Less cost of goods sold______________ 17680 _______________________18670.80

Gross profit_______________________ 551504 birr___________________ 613124

Rent expense _____________________6000 __________________________7500

Advertising expense________________2500___________________________ 2500

Salary expense-___________________90000__________________________ 90000

page 16 |
Transportation expense-_____________4200___________________________ 5500

Depreciation expense _______________900____________________________ 990

Utility expense-____________________26000 __________________________26900

Miscellaneous expense-______________2600___________________________ 3000

Total expense ___________________132200_________________________ 136390

Profit before tax____________________ 419304_________________________ 476610

Less income tax /35%/ ________________146756 ________________________166813

Net income _________________________272548________________________ 309797

Dividend___________________________ 235000________________________ 280000

Retained earnings ___________________37548___________________________ 29797 birr

Projected balance sheet for 2018 & 2019

2018 2019

Assets

Cash __________________________7500_______________________________ 6000

Inventory______________________ 11800______________________________ 13600

Total _________________________19300______________________________ 18600

Long term asset

Machinery ________________________29000 ____________________________29000

Land _____________________________12000____________________________ 12000

Less Acc. depreciation ________________1900_____________________________ 2000

page 17 |
Total _____________________________39100 ____________________________39000

Total asset _________________________58400____________________________ 57600

Liability

Account payable_____________________ 5000_____________________________ 8000

Loan payable _______________________13000 ____________________________17000

Total ______________________________18000______________________________ 25000

Capital

Retained earnings ___________________37548____________________________ 29797

Capital stock _______________________2852 _____________________________2803

Total ____________________________58400birr________________________ 57600 birr

C. cash flow for the coming 3rd year assumption

• Cash flow for 1st year

• Machinery and other row material purchase =6.9% of sale

• Wages a birr 1.16 per hour

• Operating expense =3.34% of sale

• Income tax =34.99% of profit

• Loan payment= 10.6% of the whole dept

page 18 |
• Cash flow for 2nd year projection

• Assumes sales cost increased by 12%

• Assumes cost increased by 4%

• Expense increased by 4.6 %

• Salary increased by 11%

• Loan repayment increased by 8.6 % than the previous

• Cash flow for the 3rd year projection

• Sales will be increased by 9.9% than the previous

• Assume cost increased by 5.3% of 2nd year

• Salary expenses similar with the previous trends

• The loan repayment trend is increased by 7.53% than the previous

page 19 |