Tamra BP

TSRUY SOAP AND DETERGENT
FACTOTY
BUSINESS PLAN ON THE ESTABLISHMENT

OF SOAP AND DETERGENT PLANT
Final Report
September 2021
SENYO Business PLC

(Management Consultancy Service)
Lideta Sub City, Wereda 08, House No. New
On the way to Geja Sefer, Abdella Building, Room No. 501
Phone: +251 91 160 0631
E-mail: senyo.business@gmail.com
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TABLE OF CONTENTS
EXCUTIVE SUMMARY......................................................................................................................... 1
1. INTRODUCTION........................................................................................................................... 3
1.1 Background of the Owner...................................................................................................... 3
1.2 Business Model and the Business Objective.........................................................................4
1.3 Vision and Mission................................................................................................................. 4
1.3.1 Vision............................................................................................................................. 4
1.3.2 Mission........................................................................................................................... 4
1.4 Products and Services of the Envisaged Business................................................................4
1.5 SWOT Analysis...................................................................................................................... 5
1.5.1 Strengths........................................................................................................................ 5
1.5.2 Weakness...................................................................................................................... 6
1.5.3 Opportunity..................................................................................................................... 6
1.5.4 Threats........................................................................................................................... 6
1.5.5 Actions in line with the SWOT analysis results...............................................................7
2. MARKETING ENVIRONMENT ANALYSIS....................................................................................8
2.1 PESTL Analysis..................................................................................................................... 8
2.1.1 Political factors............................................................................................................... 8
2.1.2 Economic environment................................................................................................... 8
2.1.3 Social factors................................................................................................................ 10
2.1.4 Technological factors................................................................................................... 10
2.1.5 Legal factors................................................................................................................. 11
2.2 Market Structure and Analysis............................................................................................. 11
2.2.1 Supply analysis............................................................................................................ 11
2.2.2 Demand analysis.......................................................................................................... 12
2.3 Target Market and Customer Base......................................................................................14
2.4 Market Size and Potential.................................................................................................... 14
2.5 Competitors Analysis........................................................................................................... 15
2.5.1 Major competitors......................................................................................................... 15
2.5.2 The five – forces model of competition.........................................................................16
2.6 Key Success Factors........................................................................................................... 18
3. MARKETING STRATEGIES (4PS).............................................................................................. 19
3.1 Products............................................................................................................................... 19
3.2 Promotions........................................................................................................................... 19
3.3 Distribution /Places.............................................................................................................. 21
3.4 Pricing Strategies................................................................................................................. 22
4. OPERATIONAL PLAN................................................................................................................. 23
4.1 Civil Work and the Physical Layouts....................................................................................23
4.1.1 Location and site.......................................................................................................... 23
4.1.2 Building and civil work.................................................................................................. 23
4.2 Technology and Engineering............................................................................................... 24
4.2.1 Plant capacity............................................................................................................... 24
4.2.2 Technology................................................................................................................... 24
4.2.3 Engineering.................................................................................................................. 27
4.3 Commencement Plan........................................................................................................... 27
4.3.1 Project management.................................................................................................... 31
4.3.2 Project implementation schedule.................................................................................32
4.3.3 Project implementation cost.........................................................................................33
5. ORGANIZATION AND HUMAN RESOURCES PLAN.................................................................34
5.1 Governance Structure.......................................................................................................... 34
5.2 Manning / Staffing................................................................................................................ 35
5.3 Organizational Systems....................................................................................................... 35
6. FINANCIAL FEASIBILITY............................................................................................................ 36
6.1 Financial Assumptions......................................................................................................... 36
6.1.1 Project life.................................................................................................................... 36
6.1.2 Repair and maintenance cost.......................................................................................36
6.1.3 Depreciation and amortization......................................................................................36
6.1.4 Working capital............................................................................................................. 37
6.1.5 Discounting.................................................................................................................. 37
6.1.6 Investment.................................................................................................................... 38
6.1.7 Source of finance......................................................................................................... 38
6.1.8 Income tax.................................................................................................................... 38
6.1.9 Production cost............................................................................................................ 39
6.2 Projected Financial Statements........................................................................................... 39
6.2.1 Projected profit and loss statement..............................................................................39
6.2.2 Projected balance sheets............................................................................................. 39
6.2.3 Cash flows for planning................................................................................................ 39
6.2.4 Breakeven analysis...................................................................................................... 40
6.3 Investment Decision Ratings................................................................................................ 40
6.3.1 Net present value......................................................................................................... 40
6.3.2 Internal rate of return.................................................................................................... 40
6.3.3 Payback period............................................................................................................ 41
6.4 Economic Benefits............................................................................................................... 41
FINANCIAL SCHEDULES................................................................................................................... 42
ANNEXES............................................................................................................................................ 51
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EXCUTIVE SUMMARY
The promoter of the present project, Yirgalem Debre Tabor St. Arsema and Debre
Kusquam St. Mariam Church intends to establish Soap Factory to supply mainly for
local markets.
Soap is a cleansing agent or detergent, made from animal and vegetable fats, oils
and greases; chemically, the sodium salt of a fatty acid, formed by the interaction of
fats and oils with alkali. Soaps can be classified based on their usage. However,
keeping in view the market demand and characteristics “Laundry Soap: 200 gm,
Laundry Soap: 250 gm, Toilet Soap: 80 gm, Toilet Soap: 175 gm” is recommended
to be the final product of the proposed business.
The country’s requirement of soap is met through both local production and imports.
The project uses total supply as a proxy method for effective demand as it avoid the
potential errors associated with the end use method since it is based on actual
supply data or apparent consumption of the product. Accordingly, the demand for
soaps is forecasted to grow from 175,246 tons in 2022 to 499,939 tons in 2036.
Based on the unsatisfied demand projection for soap in the market study and the
minimum economic scale, the annual production capacity of the envisaged plant is
proposed to be 10,800 tons per annum (1.5 tons per hour). This capacity is
proposed on the basis of a three shifts of 8 hours per day and 300 working days per
annum.
The direct raw materials used for the production of soap are fat and oil, caustic soda,
salt, additives, colors, scents and skin protecting agents. Electric power and water
are the major utilities required for the plant.
Technically, the promoter believes the use of automated machines would be

instrumental in terms of efficiency and effectiveness of the manufacturing sectors.
The project bases itself on the use of high technology production lines to better meet
the current needs in the domestic market.
The plant is proposed to be located at Yirgalem Town. Essential facilities such as

power, water, and banking are available in the site.
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The proposed organization structure of the envisaged factory suggested that there
will be a Board of Directors to oversee the performance of the Company. The day –
to –day activities of the Company will be managed by the CEO of the factory. About
79 employees will be required when the plant operates in full capacity. Out of the
total employees 50 are production workers and the rest 29 persons are support staff.
The annual salary and fringe benefit of these employees are Birr 9,734,400.
It is estimated that about six months would be required for the implementation of the
project including the preparation time, assuming project activities will be undertaken
as planned. The activities on the critical path of the implementation are applying and
approval of loan; detailed project planning; delivery and erection of machinery and
equipment; and plant commissioning.
The project is estimated to cost Birr 46.6 million including fixed investment, pre-
operation expenditures and working capital. The investment requirement of the
project is assumed to be financed both from bank loan and equity capital. It is
assumed that machinery and equipment are financed by lease financing. At full
capacity, the factory will generate gross sales revenue of Birr 663 million, and a net
profit after tax of Birr 67 million (5 th year). The internal rate of return (IRR) of the
project is calculated to be 119% on total investment. When discounted at a rate of
24%, the project generates a net present value (NPV) of above Birr 149 million on
total investment. The simple payback period of the project is less than 2 years.
The financial analyses show that the project is highly profitable and viable. The
entire components of the project are designed to be socially and economically
friendly that benefit the promoter and the country.
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INTRODUCTION
1.1 Background of the Owner
The promoter of the present project is Yirgalem Debre Tabor St. Arsema and
Debre Kusquam St. Mariam Church. The church is established on March 2009.
The promoter is an experienced business leader with years of experience in the

fields of social enterprises. It had leading a number of business organizations before
he embarked on the current project such as:
 Establishing Candles manufacturing plant,
 Establishing Metals workshop, and
 Establishing Block manufacturing plant.
In general the promoter has broad background in the overall management of

business organization. In order to manage the above establishments the promoter
has 50 permanent employees. The promoter also participates in different social
activities along with the above establishments.
The project is headed by Board of Directors who is accountable to Kesis Endeshaw

Abrha, the head of the church. Kesis Endeshaw Abrha is an experienced church
leader. He had leading the promoter church to be well recognized in the international
level before he embarked on the current project. In general he has broad
background in the overall management of both religious activities and business
organization.
The Board of Directors consists nine members including the chairman, deputy
chairman and secretary. There is also a technical committee under the Board of
Directors who is responsible to the day to day activities of the project.
The chairman of the Board of Director, Kesis Assefa, has graduated with B.Sc.
Degree in Civil Engineering. He has also received his M.Sc. in Construction
Management. He has more than 12 years tangible leading, supervising and
managerial experience in the construction management in addition to leading his
own business organization.
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Deacon Hailemelekot Mulugeta, the Deputy Chairman of the Board of Director, has
graduated with B.A. Degree in Business Management. He has years of proven
experience in managing his own five story building in particular and also has wide
scope of business management in general that the envisage project will thought and
properly planned.
In order to fulfill its purpose, the promoter also formed a technical team by well
trained professionals.
1.2 Business Model and the Business Objective
The business is established as part of Yirgalem Debre Tabor St. Arsema and Debre
Kusquam St. Mariam Church but intends to operate as a full-fledged manufacturing
enterprise under TSRUY SOAP AND DETERGENT FACTORY. The whole purpose
of this project is to have soap and detergent producing factory targeting mainly local
market and start exporting in the near future.
1.3 Vision and Mission
1.3.1 Vision
 Become one of the top five soap and detergent manufacturers in

Ethiopia by 2026.
1.3.2 Mission
 To exceed our customers’ expectations in quality, delivery, and cost

through continuous improvement and customer interaction
1.4 Products and Services of the Envisaged Business
The products and services of the envisaged business is production and supply of
soap and detergents.
Soap is a cleansing agent or detergent, made from animal and vegetable fats, oils
and greases; chemically, the sodium salt of a fatty acid, formed by the interaction of
fats and oils with alkali.
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People use soap to make their skin clean. Dirt and other impurities are easily
removed from the skin whenever one uses soap. Ingredients present in soap are
strong; this is why eliminating dirt becomes easier with the use of soap.
Soap can be used for general situations such as bathing, cleaning and washing. On
top of that, soap is a key component in most lubricants.
There are two different categories of soap including bar and liquid soap. Bar soap is
recommended over liquid soap because they are less expensive and their
ingredients are stronger for cleaning than those of liquid soap.
Therefore, keeping in view the market demand and characteristics, the

recommended final product of the proposed business is Bar Soap with the following
product mix:
- Laundry Soap: 200 gm
- Laundry Soap: 250 gm
- Toilet Soap: 80 gm
- Toilet Soap: 175 gm
1.5 SWOT Analysis
The SWOT analysis explores both the internal and external environment for the
owners’ and their current business and applies in relation to both existing and
potential competitors towards meeting the goals of the envisaged project. The
SWOT analysis outlines the identified strengths, weakness, opportunities and threats
in light of executing the soap manufacturing project.
1.5.1 Strengths
 The project has been initiated by an experienced management engaged in

different activities. The promoter can capitalize its experience for the
successful implementation and management of the envisaged project.
 The promoter has strong presence on the project site
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 The promoter network will be valuable for the anticipated marketing of the
product.
1.5.2 Weakness
 Being new entrant to market
1.5.3 Opportunity
 Conducive and encouraging economic environment.
 The soap business has been promising.
 Priority sector: Increased attention and focus given by the government for
manufacturing and value additions.
 Social acceptability: Good social acceptability of the promoter.
 Unsatisfactory demand for soap: there exists unmet demand for soap in
local market.
 A number of investment incentives available.
1.5.4 Threats
 Volatility in the price of raw material may impact on the pricing structure of
the products.
 Generally undeveloped working culture of the society
 Power Interruption: If the current power interruption continues, it may
affect the profitability of the project by reducing the level of capacity
utilization or by increasing the cost of power for using alternative power
source.
 Foreign Exchange Shortage: not getting the foreign currency on time to

opening of LC for procurement of machine and inputs may delay the
project implementation timing and affect the profitability of the project.
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1.5.5 Actions in line with the SWOT analysis results
The project will plan to address its weaknesses, and minimize the potential threats
through devising appropriate mitigation strategies. It will have aggressive marketing
initiative to reach more potential customers.
The following are actions to be taken as part of the project implementation process
to minimize the effect of weaknesses and threats identified in the SWOT analysis.
 Developing a customer oriented marketing strategy to win the competition

“Fair price with best quality”.
 Designing the appropriate sales strategy in which the objective of ensuring

dependable customer relationship.
 Adopt modern, waste avoiding and technology enabled operations
 Strengthen the networking and communication with the concerned

governmental administration bureaus (woreda, district and zonal) to assure
the importance of the project and other planned strategic moves of the
organization.
 Working in advance with Banks and other concerned governmental

organization to get loan on time.
 Strengthening linkage with all value chain actors in the industry and create
favourable environment for the production.
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MARKETING ENVIRONMENT ANALYSIS
1.6 PESTL Analysis
The PESTL analysis offers an insight of the various macro environmental factors that
the business needs for the successful implementation of the business plan.
1.6.1 Political factors
Commitment of the federal and local governments towards achieving the vision of
the country, rural capacity building strategic plan, power decentralization, security
and stability of the country, etc. have desirable effect on business environments. The
private sector is given recognition as allay in the government’s economic
development program playing key role particularly in small, medium and huge
industries.
The Ethiopian government new prosperity plan re-emphasizes the importance of

agriculture in country overall growth and industrial development. Hence, the
government strongly promotes agro- processing industries. A number of international
donors are providing support to strengthen the sector.
There are also incentives including providing of land with lease free provision for the
organization involving agro-processing sector and building industry zone in different
part of the country for giant projects with fair rent.
In general, the political environment is conducive to operate lucrative business and

the influence of the government is very minimal in trading and pricing.
1.6.2 Economic environment
In Ethiopia as a result of the appropriate policy adopted by the government in recent

years the country’s economy is on a higher growth trajectory. According to the
National Bank of Ethiopia the Ethiopian economy continued to register a notable
growth even when the world faces challenging macroeconomic and social conditions
owing to the outbreak of COVID-19 pandemic. In 2019/20 fiscal year, real GDP grew
by 6.1 percent compared to 3.5 percent average growth estimated for Sub - Saharan
Africa (World Economic Outlook Update, June 2019).
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This growth in real GDP was attributed to 9.6 percent growth in industry, 5.3 percent
in service and 4.3 percent in agriculture sectors. Thus, nominal GDP per capita rose
to USD 1,080, showing a 9.6 percent year-on-year growth.
Generally, the Ethiopian economy recorded 8.2 percent average growth rate per
annum during the GTP II period (2015/16-2019/20) which was 2.8 percentage point
lower than the average growth target set for the plan period.
The structure of the Ethiopian economy is divided into three major sectors; namely,
the agriculture, industry and service sectors. In 2019/20, the share of agriculture in
GDP went down to 32.7 percent from 33.3 percent last year and 33.5 percent GTP
target for the year. The contribution of agriculture to GDP growth was 22.9 percent of
which crop production accounted for 65 percent, followed by animal farming &
hunting (25.9 percent) and forestry (8.8 percent). In terms of growth, crop production
expanded by 4.7 percent, animal farming & hunting by 3.3 and forestry 3.9 percent.
Industry showed 9.6 percent annual growth and constituted 29 percent of the total
GDP. The sector contributed 42.6 percent to the overall economic growth during the
fiscal year and its performance was far below the 18.4 percent target set in the GTP
II though its share was higher than the 22.3 percent target.
Manufacturing sector increased by 7.5 percent and constituted 23.9 percent of the
industrial output. Construction industry, on the other hand, contributed more than half
(72.6 percent) to industrial sector and it expanded by 9.9 percent signifying its
leading role in roads, railways, dams and residential houses construction. The
mining and quarrying sector has reversed its downward trend of the past few years
and registered 91.4 percent growth over the previous year. Policy improvements,
especially in boarder areas as well as the closure of borders due to COVID-19, can
be cited as the main reasons for the robust growth although its contribution to
industry production was still minimal (0.9 percent). Electricity & water had 2.6
percent contribution to industrial production.
Service sector continued to dominate the economy as its share in GDP was about
39.5 percent and its contribution to GDP growth stood 34.4 percent. The 5.3 percent
annual growth in service sector was largely attributed to the increase in real estate,
renting and business activities (9.5 percent), others (7.5 percent), whole sale and
retail trade (6.4 percent) and public administration and defense (2.3 percent).
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1.6.3 Social factors
Ethiopia, with a population of nearly 110 million is the second most populous country
in Africa next to Nigeria. Almost 25% of Ethiopia’s population is under the age of 18
and 83% resides in the country side. A look in to some human development
indicators reveals that primary school enrolments have quadrupled, child mortality
has been cut in half, and the number of people with access to clean water has more
than doubled.
Ethiopia’s agriculture contributes to less than 33% of the national GDP whereas
provides 80-85 percent of employment for the population plays a central role in the
economic and social life of the nation. In recent years, the role played by services
and manufacturing sector is also showing improvement from time to time. Along with
this dynamics, population growth, growth of urbanization, improved income of
farmers, and growing urbanization have contributed to the expansion of consumer
market as well as sourcing the human resource requirement needs of the project.
1.6.4 Technological factors
With the massive public expenditure going on in the country especially in roads, train
air and port facilities and improvements in utilities such as electricity, the import and
export activities in the country is showing improvements. The project area, where
movements of commercial and industrial products take place, is benefiting from
construction and road networks.
With regards to communication services, there are technological developments in

the area of ICT mainly in the mobile network. This has greatly contributed to
enhance access to information. Most organizations have now mobile access that
would enable them to access market information and active network with their fellow
trading partners, information to and from production areas up to export outlets. The
introduction of electronic payments, including mobile payments will also facilitate
payment transactions.
The choice technologies specific to soap production depends on the requirements of

capacity, level of sophistication, cost, efficiency and quality. As a result, there is
more preference to imported technology mainly from Asian countries. European
machineries are known for better efficiency and durability than machineries imported
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from Asian countries but with regard to cost, the Asian brand is cheaper than the
European ones.
1.6.5 Legal factors
The new commercial code of Ethiopia Proclamation No.979/2008 is incorporates

modern business legal frameworks. The Ethiopian Government has a package of
incentives under Regulation No.270/2012 for domestic and foreign investors which
are a priority sector for the country. Among the incentives are tax holidays, export
guarantee schemes, duty free privileges for importation of machinery. Export is zero
tax rates where exporters can claim for rebate for value added tax paid for their
inputs. Moreover, exemptions from customs duties or other taxes levied on imports
are granted for raw materials and packing materials necessary for the production of
export goods. All other goods and services destined for export are exempted
from any export and other taxes levied on exports.
The other regulation conducive to the export is the Income Tax Exemption and Loss
Carry Forward privileges. Accordingly, any income derived from an approved new
manufacturing, agro-industrial or agricultural investment is exempted from the
payment of income tax ranging from 2-8 years depending on the area of investment,
export volume and the location in which the investment is undertaken. On the other
hand, business enterprises that suffer losses during the tax holiday period can carry
forward such losses for half of the income tax exemption period, after the expiry of
such a period. There are also other export incentive packages (which help to boost
the export activities) following various agreements that the country has made with
bilateral and multilateral organizations, in the form of duty exemption for inputs of
exports, export credit guarantee schemes and bonded warehouse.
2.2 Market Structure and Analysis
2.2.1 Supply analysis
The country’s requirement of bar soap is met through both local production and
imports. During the period 2011 – 2020, the maximum total supply (apparent
consumption) of bar soap to the local market was 153,246 tons (year 2019), while the
minimum 67,243 tons was registered in year 2012. In the remaining years, apparent
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consumption was fluctuating between these two extremes, around a mean figure of
108,918 tons.
During the period under consideration (2011 – 2020) apparent consumption of bar
soap though characterized by a noticeable growth trend exhibits fluctuations from year
to year. In 2012, total supply has decreased by about 4.3% as compared to 2011.
However, in 2013 total supply has increased by 22.4% compared to the previous year.
During the same period (2011 – 2020), the maximum market share local production
managed to capture was 87% in 2015 and the minimum was 73% in 2019. On average
during the period under consideration, the overwhelming share (80%) was accounted
by local production.
2.2.2 Demand analysis
Demand is defined as the quantity of a good or service consumers are willing and
able to buy at a given price in a given time period. Only when the consumers' desire
to buy something is backed up by willingness and an ability to pay for it than we
speak of demand.
2.2.2.1 Factors that influence the demand for soap products
There are many factors affect the demand for Soap products. The most important
ones are sustainability of supply, price and overall economic development level.
Quality: - Product quality is the basic and most important marketing mixes that affect
the success of a product. Product quality has two dimensions, i.e., level and
consistency. Level means the producer must first choose a quality level that will be
acceptable in the target market and in a level that comply with the quality of
competing products. Consistency refers to the consistent delivering of ones
established quality through strict quality control measures.
The envisaged project would thus install modern machineries and safe guarded
production process with a system of optimally combined machine operations and
control of them by qualified and trained technicians and quality control will be given
top priority.
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Product price: - price is the other major factor that influences the demand for soap
products. If the price of a product is cheaper and its quality is inferior, lower income
groups are often used it. If it has good quality and high price, it is only affordable to
high income groups. The project has taken this information as good insight to
develop best pricing strategy affordable to all income groups.
Performance of the Ethiopian Economy – The demand for soap is strongly related
to Economic development. Therefore, the demands for soap may also be expected
to increase as economic expansion accentuates the demand for the product.
In Ethiopia as a result of the appropriate policy adopted by the government in recent

years the country’s economy is on a higher growth trajectory. According to the
National Bank of Ethiopia the Ethiopian economy continued to register a notable
growth even when the world faces challenging macroeconomic and social conditions
owing to the outbreak of COVID-19 pandemic. In 2019/20 fiscal year, real GDP grew
by 6.1 percent compared to 3.5 percent average growth estimated for Sub - Saharan
Africa (World Economic Outlook Update, June 2019).
This growth in real GDP was attributed to 9.6 percent growth in industry, 5.3 percent
in service and 4.3 percent in agriculture sectors. Thus, nominal GDP per capita rose
to USD 1,080, showing a 9.6 percent year-on-year growth.
Generally, the Ethiopian economy recorded 8.2 percent average growth rate per
annum during the GTP II period (2015/16-2019/20) which was 2.8 percentage point
lower than the average growth target set for the plan period.
2.2.2.2 Projected demand and supply for soap products
As we noted above, there is huge demand by domestic production. On top of this

positive performance of the economic development will obviously bring huge
demand for soap products. The supply for soap has been increasing since 2012 with
an average rate of 12%. Demand is expected to be higher than the actual supply.
In this case, the demand and the market share projection are computed based on
the results of SWOT analysis. As per the SWOT analysis, it is assumed that the
opportunities will be counter balanced by the threats so that with conservative
estimate the project will capture a market share of 7% which is less than the average
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annual growth rate (9.27%) of the country’s total demand in the past ten years.
Accordingly, the market size for soap product by the project is as shown in Table 2.1.
TABLE 2.1: PROJECTED DEMAND AND MARKET SHARE OF THE PROJECT
Projected Demand Market Share of

Year
for Soap Products Tsruy
2022 175,246 12,267
2023 189,959 13,297
2024 205,561 14,389
2025 222,131 15,549
2026 239,757 16,783
2027 258,531 18,097
2028 278,557 19,499
2029 299,948 20,996
2030 322,827 22,598
2031 347,330 24,313
2032 373,606 26,152
2033 401,818 28,127
2034 432,143 30,250
2035 464,779 32,535
2036 499,939 34,996
As can be seen from the above Table, the total market share of the project is
forecasted to grow from 12,267 tons in 2022 to 34,996 tons in 2036.
2.3 Target Market and Customer Base
The targets for the project are local and export market. However, in the early project
period, the project will more focus on local market. In latter year of the project period
(after increasing production capacity and securing raw material sources) it will try to
reach some neighboring countries with affordable price.
Therefore, strong marketing initiatives, enhancing of contract management skill,

ability of providing quality supplies and overall customer handling matters to increase
market share in any part of the country. The project will actively work towards
achieving the utmost market share.
2.4 Market Size and Potential
The different types of market segments for soap products can be classified as:-
1) Wholesaler and Retailers

2) Household consumers
3) Organizations
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4) Farmers’ Cooperative and Unions
All the segments except household consumers buy the product from producers to
get the product with reasonable price. These customers are often professional
buyers and orders may be won by a competitive tendering process. The main factors
of interest to these buyers are that they require the product to be delivered in bulk, at
a low price, and with a proven ability to meet delivery requirements. The project
should therefore take these factors into account when deciding if this is a market
sector that they can successfully target.
2.5 Competitors Analysis
2.5.1 Major competitors
The demand for Soap is met both through import and local production. The latter
source constitutes of the lion's share, on average accounting for more than 80
percent of the country's total Soap consumption during the period 2011 – 2020.
There are more than 70 local Soap producers in Ethiopia with the combined annual
output of 122,000 tons. These manufacturers have been in the market for many
years, some of them as many as 40 years old and others are established only in
recent years.
At present ETAB Soap Factory (ESF) is the largest soap producer in the project
area. ESF was established and legally registered in Ethiopia in 2005, in Hawassa
City as a private company. ESF started its operation with three machines; it has
undertaken an expansion project which has doubled its capacity producing 2 tons of
soap per hour. Currently ESF has a total of 380 employees, of which 331 are
permanent and the remaining 49 contract employees.
ESF produces laundry bar soap with a range of brands such as City, Etab, Hamer,
Walta, Yani and Zumbara. The current maximum selling prices of ESF products are
Birr 12.00 for 200gm Laundry Soap and Birr 16.00 for 250gm Laundry Soap.
ESF uses the following 10 zones for distribution of its products:
- Zone 1: Awassa, Yirba, Leku

- Zone 2: Shashemene, Kuyera, Arsi negele, Golojota, Bulbula
- Zone 3: Dila
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- Zone 4: Yirgalem, Bensa, Kibremengist, Wenago, Gedeb, Yergachefe,
- Zone 5: Kofele, Adaba, Dodolla, Bale, Assosa,
- Zone 6: Aje, Halaba, Shone, Bodity, Sodo
- Zone 7: Meki, Mojo, Adama, Metehara, Awash
- Zone 8: Asebot, Measo, Chiro, Kuni, Dender
- Zone 9: Koshe, Butajera, Hossana, Mito
- Zone 10: Hirna, Boreda, Nekemt
2.5.2 The five – forces model of competition
1. Threat from Substitutes
A substitute for soap products does not exist. However, there are generic products
and complementary products such as herbal soap, sanitizers, and detergents which
can be used instead of soap products. Furthermore, the buyer propensity to switch
brands is low; since consumers on the market are brand loyal to the soap brands
they are currently using and the fact that soap products often have complementary
products. However, the buyer switching costs remain relatively low except when
switching from mass soap products to professional soap products.
2. Rivalry from Existing Competitors
• Concentration, Diversity of Competitors – There are many small and

medium scale manufacturers in Ethiopia and they are similar in their cost
structure and strategies thus no price competition as it is difficult for
prices coordination
• Product Differentiation - There is no product differentiation other than

differences in product offerings
• Cost Conditions - The price competition from excess capacity is not

aggressive as fixed costs are low relative to variable costs
3. Threat from New Entrants
• Capital requirements – The cost of setting up soap production plant is

high,
16
• Economies of scale – Entry into the industry has to be on a large scale in
order to make a meaningful profit. There is currently excess capacity as
the market penetration rate is very low.
• Absolute cost advantages – No absolute cost advantage unless the new

entrant has its own input source.
• Access to distribution channels – Key distribution channels is by

appointing sufficient number of agent.
• Regulatory and legal barriers – There is no legal barriers
• Retaliation by established competitors – There can be retaliation by

competitors as there are many competitive manufactures.
4. Bargaining Power of Customer
• Market Type - The industry is combination of inputs and outputs; with

inputs being the dominant market. The main input is fat and oil. Output is
soap products.
• Price Sensitivity - There is little price sensitivity and there is no product

switching due to price changes; hence largely dictates prices.
• Relative Bargaining Power - There are a number of buyers, who make

large purchases. There is awareness on manufacturer’s costing
methods. Appointing sufficient number of agent which are manageable in
size for supervision and control, feedback exchange purposes and
facilitating the selling process of the project would be attractive for soap
producers.
5. Bargaining Power of Suppliers
 The suppliers of inputs are usually small number chemical companies.

Hence these suppliers may be said to have high bargaining power.
 It is difficult for manufacturer’s to integrate backward to produce inputs

by themselves to reduce their dependence on the suppliers.
17
Combined Impact of the Forces
The five forces model competitors’ analysis indicates an industry marked high
bargaining power of supplier, high barriers to entry, high customer power and no
price rivalry between competitors as no product differentiation.
2.6 Key Success Factors
The commercial viability of the envisaged plant depends on the following factors:
 Production processes need to be monitored very carefully.
 Advance sale orders can ensure the success of the business.
 Quality maintenance will play an important role as it is evident from the

behavior of consumers that they are more specific towards quality issues.
 Cost accounting system should be strengthened so as to monitor the

entire process and determine the reasons for major variances in the
process such as Material, Labor and Factory Overhead Variances.
 Selection of technical / skilled staff would be very crucial decision to be

made by the management.
 Continuous efforts should be made for up-gradation of the technology.
18
MARKETING STRATEGIES (4PS)
Based on the detailed analysis presented in this business plan, the project has
designed marketing strategies to ensure its competitiveness and return on investment. It
is also the objective of the project to ensure the highest level of customer satisfaction in
the targeted market segment. Strategic relationship with major buyers is one of the key
success factors in each selected market segments (institutional buyers and consumers).
The marketing strategy explains the sub strategies with the four marketing components
(4Ps) and additional customer oriented strategy.
1.7 Products
The project plan is to produce standard quality soap products i.e. a product which has
good quality parameters such as pH, foam height, hardness, moisture content, free fatty
acid (FFA), and total fatty matter (TFM). In addition to this, the soap products will
available in required amounts and qualifies acceptable national and international quality
standards.
1.8 Promotions
The project will use different promotional strategies, which are essential to support
attainment of its marketing and profit objectives. Its main promotion strategies,
therefore, include personal selling, product dedicated marketing personnel, maintaining
healthy and strong networking brochure and flyers, web presence, organizing annual
events, attending at national and international trade fairs, most of which are discussed
here below.
 Inauguration: the project will have inauguration ceremony soon after the
completion of the commission phase. Relevant governmental officials,
sector representatives and the media will be invited. The event will enable
the project to get publicity.
 Personal selling: The project will deploy personal selling approach to

potential buyers through door to door visit. Popular trade shows in
connection with cleaning will be used as an opportunity to create
opportunities for networking and personal communication with buyers.
19
 Assigning product oriented marketing personnel: A marketing
representative or management staff will be recruited and assigned to handle
product specific marketing activities.
 Networking activities: The management has to promote the hugeness

and positive impact of the project on overall soap market of the country to
appropriate government bodies. The management will watch closely
national level events in the sector and involve whenever applicable to tap
opportunities to follow from such events.
 Web presence: The project will develop a website, which will contribute
towards the visibility of the project and its products in the soap market. The
website allows potential customers and collaborators to get to know the
project and reach it through contact information to be provided on the site. In
addition to website, it is planned to intensively use different information
systems to promptly communicate and closely work with potential customers,
collaborators and other interested parties.
 Brochure and flyers: The project plans to develop an informative brochure

to be distributed to various stakeholders and buyers. The brochures and
flyers will be distributed national association, chamber of commerce and
during networking events.
 Annual events: The project will have annual events where corporate
customers and stakeholders will be invited. The session will be used as a
promotional event to acknowledge employees, partners and corporate
customers who did excellent jobs during the year.
 Trade fairs: the project will attend national and international trade fairs to
promote its products. International trade fairs are excellent opportunities to
reach as many customers as possible and also to understand the
competition environment and the customers’ requirements.
 Sample: As part of the promotional strategy, the project will prepare

representative soap products and send to potential buyers and distributers.
20
 Advertisement and sponsorship: Regular advertisement will be
conducted on local Medias. The advertisement will target end consumers
and retailers. The project will sponsor TV and radio programs where large
audience is expected to attend.
The types of promotion that are selected are different for each market segment. For
example, rural customers are unlikely to have access to television, radio or to
newspapers. Posters or signboards in villages and special leaflet promotions in village
shops are likely to reach more people. In urban markets the project will use personal
contacts with buyers and provide free samples.
1.9 Distribution /Places
The envisaged project adopted two-tier system with the distribution channel as
follow:
The Factory Agents Consumers
The system is working by appointing sufficient number of agent which are

manageable in size for supervision and control, feedback exchange purposes and
facilitating the selling process of the project and by assign to each agent a well-
defined market segments.
In this case the agents receipt the product from the Promoter at factory gate with
their own truck and then supply to consumers in their market segment.
According to the distribution experience of convenient goods manufacturers such as

beverage and water manufacturers, the market should have to be segmented by
broad market territory if the factory chooses two-tier system. The following six market
territories are proposed for the implementation of a distribution system for the
products of the factory:
 Central Territory consisting of Addis Ababa, North Shewa, West Shewa,

East Shewa, Arssi Region and Gurage and Hadiya Zones in SNNP.
 North Western Territory comprising North Gondar, South Gondar, East

Gojjam, West Gojam and its surrounding.
21
 Western Territory consisting of West Wellega, East Wellega, Illubabor,
Jimma, Gambella and Benishangul-Gumuz.
 Northern Territory covering SNNP Region, Bale, and Borena.
 Eastern Territory containing West Harerge, East Harerge, Harar Region,

Dire Dawa, Somali Region and Afar Region.
 Northern Territory covering South Wello and surroundings, North Wello,

and Tigray Region.
1.10 Pricing Strategies
The price of soap products will be set based on the cost of production and the price of
competing products supplied in the Ethiopian market. Soap products produced by the
project is expected to attract better price than other types of soap due to standard
quality acceptable by all type of customers. However, the project has a plan to install a
price well below the current market price of high standard price to reach all type of
customers. Unless there is a significant cost variation during the purchase of inputs, the
project will try to maintain a uniform and stable selling price.
22
OPERATIONAL PLAN
4.1 Civil Work and the Physical Layouts
4.1.1 Location and site
The envisaged plant is proposed to be located in Yirgalem town where basic

infrastructures are readily available. The availability of reliable electrical power
supply is vital for the smooth operation of the plant.
The site is a lease permitted land of the promoter. The site covers 20,000 square
meter area. The title to the land owned by the promoter was vested in the name of
St. Arsema Church under Tenure Deed No. In-KAC-2.
The lease price for land is 120 Birr/m2. The advance payment of Birr 683,070.00 is
settled and the unpaid balance shall pay periodically within 30 years. Therefore, the
total lease payment is Birr 2,400,000 and the unpaid balance is Birr 1,716,930. The
payments shall make every year, and the yearly payment shall amount to the
average price of the remaining lease payment divided over the period of payment;
and interest shall pay over the remaining payment as per the rate of interest on loan
offered by banks.
Yirgalem is located 45km south of Hawassa (275 km south of Addis Ababa) on the
main road to southern Ethiopia. It is linked to other cities by all-weather asphalt road
and the nearby express road connecting the city of Hawassa to Addis Ababa and
port of Djibouti. It is recommended to establish the factory in Yirgalem town mainly
due to availability of electricity, water supply, trained manpower, public institutions,
postal and telecommunication services.
4.1.2 Building and civil work
The envisaged plant requires building for production and packing, ware houses, and
management buildings. The space requirement of the plant is determined by the total
area each production equipment occupy, adequate space required in between the
equipment /machineries, space required for the workers and that needed to handle
work in progress. Finished product store will also have enough building space to
store a minimum of one month finished products.
23
Site development and landscaping are one of the important functions of civil works
for the envisage plant. They include green space and trees; fencing; lighting
systems; and surface drainage systems. In the plant compound there exist
construction of asphalt road as part of infrastructural development to ease circulation
of raw materials, products, byproducts, and people.
The building for production and packing is constructed and ready for operation.
4.2 Technology and Engineering
4.2.1 Plant capacity
Having considered the investment cost, management and administration complexity

as well as the business, the capacity of the plant is selected to be 10,800 tons of bar
soap per annum (1.5 tons/h). This capacity is proposed on the basis of a three shifts
of 8 hours per day and 300 working days per annum.
4.2.2 Technology
4.2.2.1 Process description
The production processes for selected technology are briefly discussed as follow:
1) Treatment of Oil and Fats
a. Bleaching
The majority of good quality oils and fats do not require bleaching. Only palm oil and
to a lesser extent tallows require bleaching where toilet soap is manufactured from
second-grade raw materials.
In the selected technology bleaching of oils and fats is generally carried out by
oxidation, achieved by heating the oil and passing a current of hot air through it at a
high temperature (90 to 120° C).
b. Hydrogenation
Hydrogenation by catalysis makes palm oil and tallow more resistant to oxidation
and rancidity, and improves their properties. However, the production of
24
hydrogenated fats and oils with the desired properties requires a degree of technical
expertise and practical experience.
2) Continuous Saponification Process
This process is based on a system of dosing pumps which continuously supply the
saponification reactor with raw materials (fats, soda lye, electrolyte, water) in
precisely specified proportions. This stage is followed by counter-current washing
and separation (particularly by centrifugation) of the niger (partly recycled) and the
neat soap.
3) Cooling and Drying
Vacuum spray drying of the liquid soap in an expansion chamber. This method
allows the liquid soap to be cooled and dried simultaneously until the desired fatty
acid concentration has been obtained.
4) Finishing
a. Mixer-blender - "Amalgamator"
The soap, in the form of chips mixed with additives - dyes, perfumes, fillers,
antioxidants etc. The process allows the mixture to be perfectly homogenized and
changes the crystalline structure of the soap, which improves its lathering properties.
b. Plodder And Extruded
The plodder can be of the simplex, duplex or even triplex type (with a single, double
or triple screw) to refine and perfect the homogenization of the soap. The plodder
can also work under vacuum to remove trapped air and to complete drying.
c. Packing and Stamping
The extruded soap is then cut, and if necessary molded, stamped, and packed.
4.2.2.2 Production program
Considering the experience of similar plant, it is assumed that owing to probable

technological, production and commercial difficulties, the envisaged project will
initially experience problems that can take the form of only a gradual growth of sales
25
and market penetration, on the one hand and a wide range of production problems
such as acquaintance of technical manpower with the selected technology and
equipment on the other hand.
Accordingly, the plant starts production at 40% of its installed capacity which will
grow to 55% in the second year, 70% in the third year and 85% in the fourth year.
Full capacity production will be attained in the fifth year and onwards.
Thus the annual production programme for the project has been formulated based
on the proposed plant capacity. The production program for the life of the project is
shown in the Table 4.2 below.
TABLE 4.2: PRODUCTION PROGRAMME
Production Year
N Unit of
Description 5th and
o Measure 1 st
2nd
3rd 4th
onwards
1 Capacity utilization % 40 55 70 85 100
2 Bar soap
Pcs 8,640,000 11,880,00 15,120,000 18,360,00 21,600,000
Laundry Soap - 200 gm
0 0
Laundry Soap - 250 gm Pcs 3,456,000 4,752,000 6,048,000 7,344,000 8,640,000
Pcs 16,200,000 22,275,00 28,350,000 34,425,00 40,500,000
Toilet Soap - 80 gm
0 0
Toilet Soap - 175 gm Pcs 2,462,400 3,385,800 4,309,200 5,232,600 6,156,000
4.2.2.3 Materials and inputs
A. Direct Materials
The direct raw material needed for making bar soap are fats (oil, grease or butter),
alkaline, water and secondary products (salt, additive colors, scents etc.).
B. Auxiliary Materials
The major auxiliary materials required for the plant are packing materials. Bar soap
is packed in a carton box and plastic sheet. All packing material can be available
locally.
C. Utilities
Utilities required for the production of soap are steam (fuel oil), water, electricity, and
compressed air.
26
Steam is used to generate heat for production process. Water is used for production,
cleaning and for human consumption. Electricity is used for running machineries and
lighting purpose. Compressed air is for operation of pneumatic instruments. The
source of water and electricity is ground water and national grid respectively.
The estimated annual requirement for raw materials and packing materials at 100%
capacity of production are given in table 4.3 below.
TABLE 4.3: LIST OF RAW MATERIALS AND COST AT FULL CAPACITY
Unit Total Cost (000 Birr)

No. Description UoM Quantity Cost
(Birr) L.C FC Total
A. Direct Raw Materials
1 Refined tallow ton 5,400.00 35.00 189,000.00 - 189,000.00
2 Palm oil ton 2,700.00 80.00 - 216,000.00 216,000.00
3 Caustic soda ton 1,215.00 45.00 - 54,675.00 54,675.00
4 Salt ton 1,215.00 9.00 10,935.00 - 10,935.00
5 Additives (Kaolin) ton 405.00 3.00 1,215.00 - 1,215.00
6 Colors ton 8.10 600.00 - 4,860.00 4,860.00
7 Scents ton 8.10 780.00 - 6,318.00 6,318.00
8 Skin protecting agents ton 243.00 23.00 5,589.00 - 5,589.00
(beeswax)
Sub Total 1 206,739.00 281,853.00 488,592.00
B. Auxiliary Material
1 Wrapping plastic sheet tons 180,000 270,000 40,500.00 - 40,500.00
2 Carton box Pcs 360,000 540,000 6,480.00 - 6,480.00
3 Glue tons 3.60 5.40 378.00 - 378.00
Sub Total 2 47,358.00 - 47,358.00
C. Utilities
1 Electrical Energy Kwh 2,160,000.00 1.76 3,803.98 - 3,803.98
2 Fuel Oil Liters 216,000.00 12.00 2,592.00 - 2,592.00
3 Water M3 108,000.00 11.60 1,252.80 - 1,252.80
Sub Total 3 7,648.78 - 7,648.78
Grand Total 261,745.78 281,853.00 543,598.78
4.2.3 Engineering
The detail of recommended machinery and equipment along with their costs is given
in the Table 4.4.
TABLE 4.4: DETAILS OF MACHNERY AND EQUIPMENT REQUIREMENTS OF

THE PROJECT AND THEIR RESPECTIVE COSTS
Price in Total Cost in

No. Name Model Qty
USD Birr
I Oil Mixing & Melting: Mix kinds of oil together on the basis of the
formula. Deposit and take out the unsaponifiables.
1 Caustic Soda Melting Pool Melt solid caustic soda to soda solution. 1 1,300.00 69,828.98
Volume: 5 m3.
2 Soda Solution Submerged 3 kW. 1 650.00 34,914.49
Pump
3 Soda Solution Automatic Auto stop. 1 800.00 42,971.68
27
No. Name Model Qty
USD Birr
Control Meter
4 Oil Automatic Control Meter Auto stop. 1 800.00 42,971.68
5 Storage Tank for Refined Oil Size: φ2000X2600, 8.2 m3; 1 6,800.00 365,259.28
Feature: With coiler inside.
6 Oil Pump 5.5 kW. 1 1,500.00 80,571.90
7 Seamless Tube, Valves, (φ76X3.5) (φ57X3.5), etc. 6,500.00 349,144.90
Flange, screw, elbow,
gasket.
Sub Total 1 18,350.00 985,662.91
II Oil & Caustic Soda Saponification: Oil and caustic soda do reaction in
the saponification cauldrons.
8 High-placed Soda Tank 1. Size:5 m3. 1 3,200.00 171,886.72
2. δ=6mm.
3. Marked measuring scale.
9 Saponification Cauldron Saponification between oil and NaOH. 3 64,500.00 3,464,591.70
Sufficient reaction. Save water.
Size: φ1800 X 2000, 5 m3;
Feature: with heating pipe liner and
blender;
Power: 11 kW/set, frequency conversion
motor.
10 Soap Pump Spherical rotor pump. Power: 5.5 kW/set. 3 4,500.00 241,715.70
gasket.
Sub Total 2 83,000.00 4,458,311.80
III Vacuum Drying system: Dry and cool the hot liquid soap base to soap
noodles. Total fat matter of soap noodles can be adjusted from 50% to
80%.
12 Soap Base Feeding Pump Spherical rotor pump, used for pump high- 1 2,600.00 139,657.96
temperature and sticky liquid soap base to
heat exchanger.
Power: 7.5 kW, Beide frequency
conversion motor.
13 Heat Exchanger Heat the liquid soap rapidly. 2 37,000.00 1,987,440.20
Size: φ325 X 4000.
14 Steam Trap 1 200.00 10,742.92
15 Vacuum Spray Dryer The vacuum dryer makes the soap flakes 1 32,500.00 1,745,724.50
thinner and evener, and cools them down
more quickly, to improve the quality of soap
noodles.
The whole set of vacuum system can make
soaps with fatty acid content from 55% to
80%.
Adopt hard-teeth reduction gear and
frequency conversion motor.
1. Type: XTD-1500;
2. Capacity: 1000-2000 kg/hr;
3. Barrel Diameter: Φ 1200 mm;
4. Mouth Diameter: 10 mm;
5. Speed: 13 r/min;
6. Power: 3 kW.
16 Fine Separators Separate the soap powder from the water 2 10,600.00 569,374.76
when vacuum drying.
17 Barometric Condenser Condense steam water from the soap. 1 3,200.00 171,886.72
18 Water pump Water pump: For water circulating. Power: 1 1,000.00 53,714.60
5.5 kW.
19 Multi-Stage Vacuum Pump Two grades, combined with a water ring 1 9,200.00 494,174.32
vacuum pump, and a roots pump.
Speed: water ring vacuum pump 12
m3/min, roots pump 18 m3/min.
Ultimate vacuum: -0.099 Mpa;
Power: 18 kW;
Materials: Parts touched with water is
stainless steel.
20 Buffer Tank of Vacuum Protect the vacuum pump from steam 1 1,000.00 53,714.60
28
No. Name Model Qty
USD Birr
Pump water.
Size: φ600 X1200.
21 Cooling Tower It is used to cool down circulating water for 1 2,500.00 134,286.50
vacuum drying system.
1. Capacity: 60 m3/hr;
22 Submerge water pump Power: 7.5 kW/set. 1 1,100.00 59,086.06
23 Pelletizer It is used to press the vacuum-dried soap 1 28,300.00 1,520,123.18
materials into soap noodles.
1. Type: XTN-1500;
2. Capacity: 1500-2000 kg/hr;
3. Screw diameter: Φ 230 mm x 2;
4. Power: 18.5 kW.
gasket.
Sub Total 3 133,800.00 7,187,013.48
IV Finishing Line: Mill soap noodles twice, vacuum extruding soap bar,
cut soap cakes, at the same time stamp logo on soap cakes.
25 Mixing Agitator Mix soap noodle and other additives 1 20,800.00 1,117,263.68
sufficiently. Double Z blenders can crush
soap materials into small granules or
powders to mix well. Adopt famous brand
hard-teach gear reducer for a long-life
span.
1. Model: XSMZ-500;
2. Capacity: 500 kg/batch;
3. Mixing time: 5-10 min;
4. Blender: Sigma;
5. Power: 22+22+1.1 kW;
6. Discharging way: electric.
26 Three Roller Mill It’s used to mix soap noodle sufficiently, 2 22,000.00 1,181,721.20
make the soap structure tight and improve
soap’s density and quality.
1. Type: S405;
2. Roll diameter: Φ405;
3. Roll length: 810 mm;
4. Motor power: 22 kW;
5. Roll speed ratio: 1:3:9.
27 Vacuum Plodder Vacuum Plodder is used to grind, refine 1 46,800.00 2,513,843.28
and press soap material into soap bar. The
above and below screws and two orifice
plates press and refine the soap material
and make the soap bar tight and the
surface bright.
Adopt hard-teeth reduction gear and
frequency conversion motor.
1. Type: XT-1500;
2. Material: Parts that touch the soap are
made by stainless steel 304;
3. Capacity:1500~2000 kg/hr;
4. Diameter of screw: 230 mm x 2;
6. Power: top:18.5 kW; bottom: 22 kW.
7.Dimension: 5370x1300x1990mm
8.Weight: 4500kg
28 Vacuum pump & buffer tank For vacuum plodder. 1 1,100.00 59,086.06
Power: 2.2 kW.
29 Electronic Soap electronic cutting machine is used to 1 13,500.00 725,147.10
Cutting Machine cut soaps into cakes and stamp patterns on
the soap. Adopt Yaskawa servo motor and
converter, voltage stabilizer and precision
purified AC voltage stabilizer, to protect
motor and electrical components and to
keep high accuracy.
1.Size and Weight: Adjusted by customer’s
requirements;
2.Power: 2 kW, 380 V, 50 HZ;
3.Capacity: In step of vacuum plodder;
29
No. Name Model Qty
USD Birr
4.Mould: 1 set.
30 Vertical Stamping Machine It is an fully automatic design and equipped 1 46,000.00 2,470,871.60
with PLC control system. High efficiency,
simple and stable structure, and easy
mould changing maintenance.
Yaskawa SERVO system, Omron PLC,
FESTO pneumatic parts, and Shangyin
linear guide. All these spare parts
combining together and ensure the
machine would performance stable with
high efficiency.
1.Type: XDA-1500;
2.Capacity: 50-70 times per minute;
3.Cavities: (70-200g) x 3;
4.Motor: 3 kW;
5.Spare parts equipped:
1) conveyor belt: 0.37kw x3 pcs;
2)Vacuum pump: 15L per second, 7.5kw;
3) Air compressor: 0,8m3 per minute,
2.2kw;
4) Mould: one set.
31 Refrigerator Matched cooling unit of XDA-1500 1 6,300.00 338,401.98
stamping machine. It is used to make the
mould cold so that the soap can demould
easily with a very smooth surface.
1. Compressor: French “Maneurop”, 2.5
kW;
2. Cooling capacity: 1978kcal/h;
3. Temperature: -25 centigrade;
4. Water pump power: 0.75 kW.
32 Chiller Water chiller is used to cool soap 1 7,000.00 376,002.20
machines’ circulating water.
1.Compressor: LG brand, 4.4 kW x2;
2.Water pump power: 1.5 kW;
3.Cooling capacity: 24940 Kcal/hr;
4.Temperature: 5-35 centigrade;
33 Conveyors Appearance is good and operation is 6 8,400.00 451,202.64
stable, non-noise and anti-dust. Famous
decelerator is used.
Motor: 1.5kw/pcs
Sub Total 4 171,900.00 9,233,539.74
V Accessories
34 Equipment Support, Used in saponification cauldrons and 15,800.00 848,690.68
Operating Platform, Ladder, vacuum system.
etc.
35 Distribution Box 4 6,000.00 322,287.60
Sub Total 5 21,800.00 1,170,978.28
VI Additional Machines
36 Automatic arranging & Connect the soap production line with the 1 8,700.00 467,317.02
setting machine packing system Get soap ready for flow
packing automatically;
Dimension: 3.35*0.1*0.8m
Capacity: Well matched with the present
soap production line
37 ZH-500 Flow Packing ZH-500 pillow packaging machine is used 1 8,900.00 478,059.94
machine to pack toilet soap, laundry soap, and other
regular shape products. It has simple
structure, less wear and long-life span. Can
automatically shift to use another roll of
packing film when the present roll finish.
It can adjust the bags’ size and speed
automatically. Sealing temperature is
controlled separately and the seal is tight
and beautiful. The tracking system cuts the
bags accurately after set-up. Positioned
stop function let the film not stick the knife.
Its fault diagnosis function makes the
30
No. Name Model Qty
USD Birr
maintenance convenient.
Equipped the date printing device and hole
making device.
1.Model: ZH-500;
2.Capacity: 35-350 bag/min;
3.Packing film width: 65-280 mm;
4.Film:
OPP/CPP、PT/PE、KOP/CPP、ALU-FOIL
5.Bag size: (85-220)×(30-140)×(5-45) mm;
6.Power: 4.4 kW;
7.Weight: 750 kg;
38 Cable All wires from each machine to the four 2,500.00 134,286.50
distribution boxes. The main wire from the
four distribution boxes to the main
distribution box and sleeves are not
included.
39 Heat Insulating Material Thermal insulation for saponification tanks, 2,000.00 107,429.20
exchange heater and the pipes. Including
rock wool, aluminum foil, etc.
40 Welding Rod 2,300.00 123,543.58
41 Sodium Silicate Solution Motor: 7.5kw; 1 31,500.00 1,692,009.90
Equipment Capacity: 5.5 ton/batch;
Production: 4~5 ton per batch;
thickness of tank: 20mm boiler plate;
Steam requirement: 0.5 ton, 0.8Mpa;
42 Steam Boiler Material: Furnace oil. 1 64,600.00 3,469,963.16
Rated Power: 2000 KG/H
Rated Pressure: 1.0 MPa.
Including all accessories for the boiler, and
the boiler connecting with the soap line.
43 Generator 500KVA, Diesel oil as fuel, including 1 85,500.00 4,592,598.30
silence box, Cummins C550D5/400KW
brand
Sub Total 6 206,000.00 11,065,207.60
Total Amount (FOB 634,850.00 34,100,713.81
Qingdao)
Freight, insurance, bank 63,485.00 3,410,071.38
charges, port handling,
inland transport and
contingency (10%)
Total (Cost at site) 698,335.00 37,510,785.19
4.3 Commencement Plan
4.3.1 Project management
The implementation of the proposed plant constitutes medium scale project. A large
number of activities will have to be carried out in order to bring the project into
successful operation. Like all other management functions, the management of the
project involves planning, organizing, staffing leading and controlling activities. Time
and cost control will be the most important aspect of the project management since
the implementation of the project will involve several parties including the owner,
consultant, suppliers, contractor and governmental authorities, adequate
mechanisms should be in place for coordinating the various project sectors.
31
Project engineering involves the definition of the project scope; the preparation of
designs, specification and bill of quantities; assistance in tendering and contracting;
and incorporating, as necessary change and modifications in the process of the
project implementation.
Procurement is at the center of the implementation of the project as all other

activities are meant to facilitate it. The installation of plant will involve procurement of
equipment and materials both from local and foreign sources. The implementation
aspect will involve installation of plant and machinery; and lying of infrastructure.
In order to ensure the project will ultimately fulfill the intended purpose, it is important
to exercise adequate quality control throughout the implementation of the project.
Quality control involves inspection, supervision, commissioning and taking over
completion of various components of the project
4.3.2 Project implementation schedule
The implementation schedule covers the activities starting from the project
evaluation and approval up to and including the trial-run and commissioning. It is
envisaged that the complete implementation program requires a total of 6 months
from the approval and financial arrangement is carried out.
Negotiation and contracting for plant machinery and equipment will start after project
is approved and finance is arranged and will take 1 month period. Design,
engineering and manufacture of plant machinery and equipment will start after the
contract agreement is signed and be completed within 2 months.
Equipment delivery, that requires 3 months for completion, will start after the design
and manufacture of machinery and equipment is completed. Erection of machinery
and equipment will start as their delivery is completed and will take 1.5 months.
Recruitment and training of manpower will start 1month before the erection of
machinery and equipment starts and will continue up to the completion of erection
and commissioning. Commissioning startup will commence immediately after
completion of erection of machinery and equipment and continues for 0.5 month.
The plant operation will start immediately after commissioning at the end of the 6 th
32
month from approval of the study. Details of the implementation schedule are shown
in Figure 4.1.
4.3.3 Project implementation cost
It is assumed some costs will be incurred such as for project engineering; project
management, production know-how transfer (training of workers); and start-up cost.
These costs are estimated as 1% of fixed investment cost which is equivalent to Birr
758,000.00.
All these costs are amortized over the project years. Consequently, the annual
amortization amount would be Birr 75,800.
FIGURE 4.1: IMPLEMENTATION SCHEDULE
Months
No Activity
1 2 3 4 5 6
1 Preparatory period
1.1 Approval of the study
1.2 Financial arrangement
2 Machinery procurement and errection

2.1 Negotiation and contracting of plant machinery and
equipment
2.2 Delivery of machinery and equipment to factory site
2.3 Erection of machinery and equipment
3 Manpower recruitment and training

4 Trial - run and commissioning
5 Start of operation
33
ORGANIZATION AND HUMAN RESOURCES PLAN
1.11 Governance Structure
Taking in to account the supply chain management system, the whole on-site and
off-site operations, product demand and marketing functions, human resources
management, financial and resources control functions, the following organization
structure is proposed for the envisaged plant.
The proposed organization structure of the envisaged plant (as depicted in Figure
5.1 below) suggested that there will be a Board of Directors to oversee the
performance of the Company. The day –to –day activities of the Company will be
managed by the CEO of the factory.
The CEO of the factory will be responsible for the overall operation and will be
supported by Department Heads of Production and Technical, Administration and
Finance, Sales and Marketing, Purchasing, and ICT. Each Department Head is
provided with his own supporting staff for the proper functioning of the department.
The chart depicts the proposed organizational structure for the factory when
completed and becomes fully operational.
FIGURE 5.1 PROPOSED ORGANIZATIONAL STRUCTURE
Board of
Directors
CEO
Production and Sales and Finance and

Procurement ICT
Technical Marketing Administration
Department Department
Department Department Department
Sales and
Production Finance
Distribution
Division Division
Division
Plant
Marketing Administration
Maintenance
Division Division
Division
34
1.12 Manning / Staffing
The total personnel requirement for both the production plant and administration has
been estimated at 79 persons on the basis of functional requirements of a modern
plant and summarized in Table 5.1 by skill category together with costs. The table
shows annual salaries during full capacity plant operation based on current labor
market estimate. A detailed list is also provided in Annex 4.
TABLE 5.1: PERSONNEL REQUIREMENT AND ANNUAL COSTS
Head Direct labor Indirect

No Description Count
Total
cost labor cost
1 Manager's Office 2 780,000 780,000
2 ICT Division 3 960,000 960,000
3 Administration & Finance 20 1,536,000 1,536,000
4 Sales & Purchasing 4 840,000 840,000
5 Production & Technical 50 2,772,000 600,000 3,372,000
Total 79 2,772,000 4,716,000 7,488,000
1.13 Organizational Systems
The project will develop organization system procedures and operational manuals to
enhance the efficient and effective use of resources and to ensure the appropriate
level of internal control and for the overall achievement of its objectives. These
include development of HR, financial management, marketing, procurement, and
production and operation manuals.
35
FINANCIAL FEASIBILITY
6.1 Financial Assumptions
6.1.1 Project life
According to the implementation plan of the project, the construction period allotted
for the entire project from the start of applying for loan to the final commissioning is
six months. With regard to operational life of the project, a standard assumption of
10 years is considered. Hence, the costs and benefits of the project are computed
over 11 years.
6.1.2 Repair and maintenance cost
The annual cost of spare parts, repair and maintenance usually increases with the
increase in the service life of machinery and equipment and other facilities. In the
present study, considering the heavy wear and tear of some of the machines a value
equivalent to 3% and 5% of the cost of machinery and equipment is assumed for the
annual cost of spare parts during the first three years and the remaining years of the
project life, respectively. The same assumption is also used for the annual cost of
repair and maintenance of the production plant. The annual cost of repair and
maintenance of other facilities is taken to be 2% of the cost of fixed assets other than
land, machinery and equipment during the first three years, and 3% of the same
thereafter.
6.1.3 Depreciation and amortization
Based on the Federal Income Tax Proclamation No. 979/2016 and Council of Ministers
Regulations 2017, the following depreciation rates are applied to depreciate the assets
of the project under the straight-line method:
 Buildings and associated civil works 5%, linear to scrap value
 Machinery and equipment 15%, linear to scrap value
 Computer and software products 20%, linear to scrap value
 Pre-production expenditure 10%, linear to scrap value
36
6.1.4 Working capital
The working capital requirement of the project during operation is calculated on the
basis of the minimum days of coverage needed for the different elements of the
working capital. Hence, the minimum days are specified as follows:-
TABLE 6.1: MINIMUM DAYS OF COVERAGE
No Item Minimum Days of Coverage

1 Raw Materials
- Local 10 days
- Foreign 60 days
2 Work in progress 1 day
3 Finished product 5 days
4 Cash in hand 30 days
5 Accounts receivables 10 days
6 Accounts payable 0 days
6.1.5 Discounting
The cash flows expected to be generated by a business are discounted to their

present value equivalent using a rate of return that reflects the relative risk of the
investment, as well as the time value of money. Our approach is to use the weighted
average cost of capital (WACC) as the appropriate rate at which to discount future
free cash flows. The WACC is calculated by weighting the required returns on
interest-bearing debt and common equity capital in proportion to their estimated
percentages of total invested capital.
We have used the Capital Assets Pricing Model to estimate the cost of equity. The
CAPM gives an estimate of an equity investor's required rate of return for a given risk
level associated with an investment. The model estimates an equity investor's
expected return by adding the country’s risk free rate and estimated equity market
premium.
The estimated nominal long-term risk free rate of return for Ethiopia is derived by
adding the Ethiopia inflation and the country risk premium. The country risk premium
has been estimated by using credit ratings of countries prepared by Moody’s, S&P,
EIU and Euromoney. The risk free rate of Ethiopia has been estimated to be 11 –
12%.
Although Ethiopia does not have developed capital markets from which to estimate
an empirical equity risk premium, we estimate that its equity risk premium by using
37
the credit ratings of countries prepared by Moody’s. The equity risk premium for
Ethiopia markets has been estimated to be between 12-13%.
Therefore the total investment and equity capital of the project are discounted with
the average cost of capital at 24 percent over the life of the project.
6.1.6 Investment
The total investment cost of the project is estimated at Birr 46.6 million (See Table
6.3). From the total investment cost the highest share (Birr 37.5 million or 80%) is
accounted by fixed investment cost followed by initial working capital (Birr 8.4 million
or 18%) and pre operation cost (Birr 0.7 million or 2%).
TABLE 6.2: TOTAL INVESTMENT COSTS IN 000 BIRR
Cost ( in
Item % Share
000 BIRR)
Fixed investment 37,511 80.38%
Pre operating cost 725 1.55%
Working capital 8,432 18.07%
Grand Total 46,668 100.00%
6.1.7 Source of finance
The investment requirement of the project is assumed to be financed both from bank
loan and equity capital. It is assumed that machinery and equipment are financed by
lease financing. The type of lease financing is further assumed to be a constant
principal bank loan, with a loan repayment period of 5 years. The annual interest rate
including the various fees is taken to be 11.5 percent.
6.1.8 Income tax
According to the Investment Incentives and Investment Areas Reserved for Domestic
Investors Council of Ministers Regulations No.270/2012, the project is entitled to the
following incentives:
 Income tax exemption for 4 years
 Losses carry forward for 2 years, and
 Exemptions from payment of custom duty on machineries and equipment
For the rest of project’s life, a 30% tax rate is applied on the taxable income.
38
6.1.9 Production cost
The total cost of production at 100% capacity utilization is estimated at Birr 566
million. Table 6.3 shows the total costs of production for a selected year. The costs
of production for the other years of operation are shown in Annex 1.
TABLE 6.3: COSTS OF PRODUCTION (YEAR FIVE IN 000’ BIRR)
Item Cost % share

Raw material 535,950 94.64%
Utilities 8,024 1.42%
Repair and maintenance 2,626 0.46%
Labour 3,507 0.62%
Labour overhead costs 877 0.15%
Administrative costs 4,317 0.76%
Depreciation 5,699 1.01%
Financial costs 879 0.16%
Marketing costs 4,408 0.78%
TOTAL 566,286 100.00%
6.2 Projected Financial Statements
6.2.1 Projected profit and loss statement
Based on the projected profit and loss statement shown in Schedule 4, the project
will generate a profit throughout its operation life. Annual net profit after tax increases
from BIRR 29 million to BIRR 72 million. Net profit as percent of sales revenue lies
between 11 to 14 %. Net profit to equity and net profit to total investment or return on
investment (ROI) are also attractive.
6.2.2 Projected balance sheets
The positive financial performances are manifested in the balance sheet. As can be
seen from the projected Balance sheet depicted in Schedule 8, the net worth of the
project at the start, which is about BIRR 38 million, will rise to BIRR 650 million at the
end of the project life.
6.2.3 Cash flows for planning
The projected cash flow of the envisaged project shows that the project would
generate positive net cash flows throughout the operation years. Cumulative cash
flow generated by the project towards the end of the first operation year will amount
39
to BIRR 27 million. At the end of the project life, this amount will rise to BIRR 650
million. Details are shown in Schedule 5.
6.2.4 Breakeven analysis
The break-even analysis establishes a relationship between production costs and

revenues. It indicates the level of production at which costs and revenue are in
equilibrium. To this end, using full capacity operation costs of year five, the break-
even point for capacity utilization and sales value is computed as followed.
Brake Even Sales Value = Fixed Cost + Financial Cost = Birr 91,249,232
Variable Margin ratio (%)
Brake Even Capacity utilization = Brake even Sales Value X 100 = 13.76%
Sales Revenue
6.3 Investment Decision Ratings
6.3.1 Net present value
Net present value (NPV) is defined as the total present (discounted) 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 principle a project is accepted if the NPV is non-negative.
Accordingly, the net present value of the project at 24% discount rate is found to be Birr
149 million which is acceptable. (See Schedule 7)
6.3.2 Internal rate of return
The internal rate of return (IRR) is the annualized effective compounded return rate that
can be earned on the invested capital, i.e., the yield on the investment. Put another
way, the internal rate of return for an investment is the discount rate that makes the net
present value of the investment's income stream total to zero. 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 this project is computed
on capital invested to be 119% indicating the viability of the project. (See Schedule 7)
40
6.3.3 Payback period
The payback period, also called pay – off period is defined as the period required
recovering 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 two years, which is a
reasonably short period of time.
6.4 Economic Benefits
As a result of the envisaged project employment opportunities will create for 79

persons. Moreover, during the life of the project Birr 181 million will generate in terms
of corporate tax.
41
FINANCIAL SCHEDULES
42
Schedule 1& 2: Initial Investment Costs
000’ BIRR
Year 0 Year 1 Total Grand Own Bank
Items
Loc. C. For. C. Loc. C. For. C. Loc. C. For. C. Total Financing Financing
Machinery and equipment - 37,511 - - - 37,511 37,511 - 37,511
Pre-production expenditures 350 375 - - 350 375 725 - 725
Working capital, initial - - 6,872 1,560 6,872 1,560 8,432 8,432 -
350 37,886 6,872 1,560 7,222 39,446 46,668 8,432 38,236
Total
38,236 8,432 46,668 100.00% 18.07% 81.93%
43
Schedule 3: Production Programme and Sales Revenue
000’ BIRR
Selling Production Years
No
Descrption Price/uni
. 1 2 3 4 5 6 7 8 9 10
t
Capacity utilization 50% 60% 75% 90% 100% 100% 100% 100% 100% 100%
1 Production
Programme
Laundry Soap - 200 pcs 8,640,000 11,880,00 15,120,00 18,360,00 21,600,00 21,600,00 21,600,00 21,600,00 21,600,00 21,600,00
gm 0 0 0 0 0 0 0 0 0
Laundry Soap - 250 pcs 3,456,000 4,752,000 6,048,000 7,344,000 8,640,000 8,640,000 8,640,000 8,640,000 8,640,000 8,640,000
gm
pcs 16,200,00 22,275,00 28,350,00 34,425,00 40,500,00 40,500,00 40,500,00 40,500,00 40,500,00 40,500,00
Toilet Soap - 80 gm
0 0 0 0 0 0 0 0 0 0
Toilet Soap - 175 gm pcs 2,462,400 3,385,800 4,309,200 5,232,600 6,156,000 6,156,000 6,156,000 6,156,000 6,156,000 6,156,000
2 Sales Revenue 265,248 364,716 464,184 563,652 663,120 663,120 663,120 663,120 663,120 663,120
Laundry Soap - 200 6.0 51,840 71,280 90,720 110,160 129,600 129,600 129,600 129,600 129,600 129,600
gm 0
Laundry Soap - 250 10.0 34,560 47,520 60,480 73,440 86,400 86,400 86,400 86,400 86,400 86,400
gm 0
8.0 129,600 178,200 226,800 275,400 324,000 324,000 324,000 324,000 324,000 324,000
Toilet Soap - 80 gm
0
20.0 49,248 67,716 86,184 104,652 123,120 123,120 123,120 123,120 123,120 123,120
Toilet Soap - 175 gm
0
44
Schedule 4: Proforma Profit & Loss Statement
000’ BIRR
Production Years
Description
1 2 3 4 5 6 7 8 9 10
Total Sales Revenue 265,248 364,716 464,184 563,652 663,120 663,120 663,120 663,120 663,120 663,120
Less Cost of Goods Sold 226,768 308,965 391,162 474,485 556,682 556,682 554,807 551,056 551,056 551,056
Gross Profit 38,480 55,751 73,022 89,167 106,438 106,438 108,313 112,064 112,064 112,064
Gross Profit Margin 15% 15% 16% 16% 16% 16% 16% 17% 17% 17%
Less Adminstrative Expenses 2,158 2,698 3,237 3,777 4,317 4,311 4,305 4,299 4,294 4,288
Profit (loss) before Interest, Sales Cost & Tax 36,322 53,053 69,784 85,390 102,121 102,127 104,008 107,765 107,771 107,776
Less Interest (Financial Costs) 4,397 3,518 2,638 1,759 879 0 0 0 0 0
Profit (loss) before Sales Cost & Tax 31,925 49,536 67,146 83,631 101,242 102,127 104,008 107,765 107,771 107,776
Less Selling & Dist'n Costs 2,418 2,916 3,413 3,910 4,408 4,408 4,408 4,408 4,408 4,408
Profit (loss) before Tax 29,507 46,620 63,733 79,721 96,834 97,719 99,600 103,357 103,363 103,369
Less Income Tax (30%) * * * * 29,050 29,316 29,880 31,007 31,009 31,011
Net Profit (Loss) 29,507 46,620 63,733 79,721 67,784 68,403 69,720 72,350 72,354 72,358
Cumulative Net Profit (Loss) 29,507 76,127 139,860 219,581 287,365 355,768 425,489 497,839 570,193 642,551
Profit (loss) before Tax (w.o. ex. financing) 33,904 50,138 66,371 81,480 97,713 97,719 99,600 103,357 103,363 103,369
Less Income Tax, w.o. ex. Financing (30%) * * * * 29,314 29,316 29,880 31,007 31,009 31,011
Net Profit (Loss), w.o. External Financing 33,904 50,138 66,371 81,480 68,399 68,403 69,720 72,350 72,354 72,358
Cumulative Net Profit (Loss) 33,904 84,042 150,413 231,893 300,292 368,696 438,416 510,766 583,120 655,478
* Tax holiday period
Ratios (%)
Return on sales (net income by revenue) 11% 13% 14% 14% 10% 10% 11% 11% 11% 11%
Return on equity (net profit divided by equity) 350% 553% 756% 945% 804% 811% 827% 858% 858% 858%
Return on assets (operating income divided by 56% 52% 45% 38% 36% 29% 25% 22% 19% 17%
assets)
Return on total investment (Net profit + interest to 89% 208% 373% 579% 754% 930% 1113% 1302% 1491% 1680%
investment)
Schedule 5: Cash Flow for Financial Planning (Source and Application of Funds)
45
000’ BIRR
Book
Description Impl. Yr. Production Years Value
0 1 2 3 4 5 6 7 8 9 10 11
Total Cash Inflow 38,236 43,638 52,319 69,432 85,420 73,483 74,103 73,544 72,423 72,427 72,431 21,002
1. Inflow of funds 38,236 8,432 - - - - - - - - - -
Total equity - 8,432 - - - - - - - - - -
Borrowing (term loan) 38,236 - - - - - - - - - - -
Borrowing (medium term) - - - - - - - - - - - -
Borrowing (working cap.) - - - - - - - - - - -
Increase in overdraft - - - - -
2. Inflow from operation - 35,206 52,319 69,432 85,420 73,483 74,103 73,544 72,423 72,427 72,431 -
Profit after tax - 29,507 46,620 63,733 79,721 67,784 68,403 69,720 72,350 72,354 72,358 -
Depreciation - 5,699 5,699 5,699 5,699 5,699 5,699 3,824 73 73 73 -
3. Other income - - - - - - - - - - - 21,002
Salvage value of assets - - - - - - - - - - - -
Recoverable assets - - - - - - - - - - - 21,002
Total Cash Outflow 38,236 16,079 10,784 10,784 10,807 10,784 (0) (0) (0) (0) (0) -
4. Investment
Fixed investment 37,511 - - - - - - - - - - -
Pre-Production 725 - - - - - - - - - - -
expenditures
Incremental working capital - 8,432 3,137 3,137 3,160 3,137 (0) (0) (0) (0) (0) -
5. Loan repayment
Term loan (Principal) - 7,647 7,647 7,647 7,647 7,647 - - - - - -
Overdrft (Principal) - - - - - - - - - - - -
Net cash flow - 27,559 41,535 58,648 74,613 62,699 74,103 73,544 72,423 72,427 72,431 21,002
Cumulative Net cash flow - 27,559 69,094 127,742 202,355 265,054 339,157 412,701 485,123 557,550 629,980 650,983
46
Schedule 6: Discounted Return on Equity Capital Invested
000’ BIRR
Book
Impl. Yr. Production Years
Description Value
0 1 2 3 4 5 6 7 8 9 10 11
Total Cash Inflow 38,236 35,206 52,319 69,432 85,420 73,483 74,103 73,544 72,423 72,427 72,431 21,002
1. Inflow of funds 38,236 - - - - - - - - - - -
Borrowing (long term) 38,236 - - - - - - - - - - -
Borrowing (short term) - - - - - - - - - - - -
Profit after tax - 29,507 46,620 63,733 79,721 67,784 68,403 69,720 72,350 72,354 72,358 -
Depreciation - 5,699 5,699 5,699 5,699 5,699 5,699 3,824 73 73 73 -
3. Other income - - - - - - - - - - - 21,002
Recoverable asset - - - - - - - - - - - 21,002
4. Investment
Pre-Production expenditures 725 - - - - - - - - - - -
5. Loan repayment
Long term loan (Principal) - 7,647 7,647 7,647 7,647 7,647 - - - - - -
Short term loan (Principal) - - - - - - - - - - - -
Net cash flow - 19,127 41,535 58,648 74,613 62,699 74,103 73,544 72,423 72,427 72,431 21,002
Cumulative Net cash flow - 19,127 60,662 119,310 193,923 256,622 330,725 404,269 476,691 549,118 621,548 642,551
Net present value (@ 24%)
Internal rate of return (IRR)
47
Schedule 7: Discounted Return on Total Capital Invested
000’ BIRR
Book
Impl. Yr. Production Years
Value
Description
0 1 2 3 4 5 6 7 8 9 10 11
Total Cash Inflow - 39,603 55,837 72,071 87,179 74,099 74,103 73,544 72,423 72,427 72,431 21,002
Profit after tax without - 33,904 50,138 66,371 81,480 68,399 68,403 69,720 72,350 72,354 72,358 -
external financing
Depreciation - 5,699 5,699 5,699 5,699 5,699 5,699 3,824 73 73 73 -
2. Other income - - - - - - - - - - - 21,002
Recoverable asset - - - - - - - - - - - 21,002
3. Investment

Pre-Production expenditures 725 - - - - - - - - - - -
Net cash flow (38,236) 31,171 52,700 68,934 84,019 70,962 74,103 73,544 72,423 72,427 72,431 21,002
Cumulative Net cash flow (38,236) (7,065) 45,635 114,569 198,588 269,550 343,652 417,196 489,619 562,045 634,476 655,478
Net present value(@ 24%) 149,684
Internal rate of return (IRR) 119%
48
Schedule 8: Projected Balance Sheet
000’ BIRR
Con.Yr. Production Years
Description
0 1 2 3 4 5 6 7 8 9 10
Fixed assets
Fixed investment 37,511 37,511 37,511 37,511 37,511 37,511 37,511 37,511 37,511 37,511 37,511
Pre-production expenditures 725 725 725 725 725 725 725 725 725 725 725
Total Fixed Assets 38,236 38,236 38,236 38,236 38,236 38,236 38,236 38,236 38,236 38,236 38,236
Less acc. Depr'n & ammortiz'n - 5,699 11,398 17,097 22,797 28,496 34,195 38,018 38,091 38,163 38,236
Net fixed assets 38,236 32,537 26,838 21,139 15,439 9,740 4,041 218 145 73 -
Current assets
Cash on hand & at bank - 27,673 69,239 127,918 202,562 265,292 339,395 412,939 485,361 557,788 630,219
Debtors (recievables) - 3,634 4,996 6,359 7,721 9,084 9,084 9,084 9,084 9,084 9,084
Stocks - 4,685 6,428 8,171 9,937 11,680 11,680 11,680 11,680 11,680 11,680
Total current assets - 35,991 80,663 142,448 220,221 286,057 360,159 433,703 506,126 578,552 650,983
Less Current liabilities
Creditors (payables) - - - - - - - - - - -
Overdraft - - - - - - - - - - -
Total current liabilities - - - - - - - - - - -
Total working capital - 35,991 80,663 142,448 220,221 286,057 360,159 433,703 506,126 578,552 650,983
Total net assets 38,236 68,528 107,501 163,587 235,660 295,797 364,200 433,921 506,271 578,625 650,983
Financed by
Paid-up capital - 8,432 8,432 8,432 8,432 8,432 8,432 8,432 8,432 8,432 8,432
Loan and Credit 38,236 30,589 22,942 15,294 7,647 - 0 0 0 0 -
Retained profits (Losses) - 29,507 76,127 139,860 219,581 287,365 355,768 425,489 497,839 570,193 642,551
Total 38,236 68,528 107,501 163,587 235,660 295,797 364,200 433,921 506,271 578,625 650,983
Schedule 9: Repayment of Loan (Debt Financing Schedule)

49
000’ BIRR
Impl.
Description Yr. Operation Years
0 1 2 3 4 5 6 7 8 9 10
1. Borrowing 38,236 - - - - - - - - - -
Long-term loan - Initial working 38,236 -
capital
Medium-term loan - -
2. Repayment of Principal - 7,647 7,647 7,647 7,647 7,647 - - - - -
Long-term loan - 7,647 7,647 7,647 7,647 7,647 - - - - -
Medium-term loan - - - - - - - - - - -
3. Repayment of Interest - 4,397 3,518 2,638 1,759 879 - - - - -
Long-term loan 11.5% - 4,397 3,518 2,638 1,759 879 - - - - -
Medium-term loan 0.0% - - - - - - - - - - -
4. End of Year Balance 38,236 30,589 22,942 15,294 7,647 - - - - - -
Long-term loan 38,236 30,589 22,942 15,294 7,647 - - - - - -
Medium-term loan - - - - - - - - - - -
50
ANNEXES
51
Annex 1: Annual Costs of Production & Expenses
000’ BIRR
Production years
Cost item
1 2 3 4 5 6 7 8 9 10
Capacity utilization 40% 55% 70% 85% 100% 100% 100% 100% 100% 100%
I. Costs of Goods Manufactured 226,768 308,965 391,162 474,485 556,682 556,682 554,807 551,056 551,056 551,056
1. Direct and auxiliary materials 214,380 294,773 375,165 455,558 535,950 535,950 535,950 535,950 535,950 535,950
2. Spare parts 1,125 1,125 1,125 1,876 1,876 1,876 1,876 1,876 1,876 1,876
3. Utilities 3,060 4,207 5,354 6,501 7,649 7,649 7,649 7,649 7,649 7,649
4. Labour, direct 1,441 1,982 2,523 3,063 3,604 3,604 3,604 3,604 3,604 3,604
5. Factory Overheads 6,761 6,878 6,995 7,487 7,604 7,604 5,729 1,978 1,978 1,978
Salaries & wages (+ benefits) 312 429 546 663 780 780 780 780 780 780
Repair & maintenance 450 450 450 750 750 750 750 750 750 750
Depreciation & amortization 5,699 5,699 5,699 5,699 5,699 5,699 3,824 73 73 73
Insurance (0.5% of M/C) 188 188 188 188 188 188 188 188 188 188
Supplies & services 113 113 113 188 188 188 188 188 188 188
II. Selling & Dist'n (Marketing) Costs 2,418 2,916 3,413 3,910 4,408 4,408 4,408 4,408 4,408 4,408
Salaries & wages (+ benefits) 1,092 1,092 1,092 1,092 1,092 1,092 1,092 1,092 1,092 1,092
Marketing costs (0.5% sales) 1,326 1,824 2,321 2,818 3,316 3,316 3,316 3,316 3,316 3,316
III. General & Adm. Expenses 6,555 6,215 5,876 5,536 5,196 4,311 4,305 4,299 4,294 4,288
1. Administrative Overheads 2,158 2,698 3,237 3,777 4,317 4,311 4,305 4,299 4,294 4,288
Salaries & wages (+ benefits) 1,204 1,656 2,108 2,559 3,011 3,011 3,011 3,011 3,011 3,011
Land lease payment 220 215 209 204 199 193 188 182 177 171
Expense for license and support 450 450 450 450 450 450 450 450 450 450
Travelling and perdiem 181 248 316 384 452 452 452 452 452 452
Miscellaneous 103 128 154 180 206 205 205 205 204 204
2. Financial costs (interest) 4,397 3,518 2,638 1,759 879 0 0 0 0 0
Total Operating Costs 235,741 318,096 400,451 483,931 566,286 565,401 563,520 559,763 559,757 559,751
52
Annex 2: Net Working Capital Requirement
000’ BIRR
Days of Production Years
Description Coverage
1 2 3 4 5 6 7 8 9 10
1. Current assets 8,432 11,569 14,706 17,865 21,002 21,002 21,002 21,002 21,002 21,002
1.1 Accounts recievable (debtors) 10 3,634 4,996 6,359 7,721 9,084 9,084 9,084 9,084 9,084 9,084
1.2 Inventory 4,685 6,428 8,171 9,937 11,680 11,680 11,680 11,680 11,680 11,680
a) Materials
- Local materials 10 702 966 1,229 1,492 1,756 1,756 1,756 1,756 1,756 1,756
- Imported materials 60 1,544 2,124 2,703 3,282 3,861 3,861 3,861 3,861 3,861 3,861
b) Spare parts in stock 60 15 15 15 26 26 26 26 26 26 26
c) Work-in-Progress 1 606 831 1,056 1,284 1,510 1,510 1,510 1,510 1,510 1,510
d) Finished Products 5 1,817 2,493 3,168 3,853 4,529 4,529 4,529 4,529 4,529 4,529
1.3 Cash-in-hand 30 114 145 176 207 238 238 238 238 238 238
2. Current liabilities - - - - - - - - - -
2.1 Accounts payable (creditors) - - - - - - - - - - -
3. Working capital
3.1 Net working capital (1) - (2) 8,432 11,569 14,706 17,865 21,002 21,002 21,002 21,002 21,002 21,002
3.2 Increase in working capital 8,432 3,137 3,137 3,160 3,137 (0) (0) (0) (0) (0)
3.3 Foreign component (%) 18.5% 18.5% 18.5% 18.5% 18.5% 18.5% 18.5% 18.5% 18.5% 18.5%
53
Annex 3: Depreciation & Amortization of Fixed Assets
000’ BIRR
Book
Production Years val.
Description
1 2 3 4 5 6 7 8 9 10 11
A. Fixed Investment
Machinery & equipment 5,627 5,627 5,627 5,627 5,627 5,627 3,751 - - - -
Sub-total of A 5,627 5,627 5,627 5,627 5,627 5,627 3,751 - - - -
Cumulative Sub-total 5,627 11,253 16,880 22,506 28,133 33,760 37,511 37,511 37,511 37,511 37,511
B. Pre-production expenditure 73 73 73 73 73 73 73 73 73 73 -
Cumulative 73 145 218 290 363 435 508 580 653 725 725
Total A & B 5,699 5,699 5,699 5,699 5,699 5,699 3,824 73 73 73 -
Cumulative 5,699 11,398 17,097 22,797 28,496 34,195 38,018 38,091 38,163 38,236 38,236
54
Annex 4: DETAILED PERSONNEL REQUIREMENT AND ANNUAL COSTS
Monthly Salary (Birr) Annual

No.
No. Description Salary
Required Rate Total (Birr)
I Manager's Office 2 65,000 780,000
1 CEO 1 50,000 50,000 600,000
2 Administrative assistant 1 15,000 15,000 180,000
II ICT Division 3 80,000 960,000
System administrator 2 25,000 50,000 600,000
1
(Technical operator)
External consultant (CIO as a 1 30,000 30,000 360,000
2
Service)
III Administration and Finance 20 128,000 1,536,000
1 Finance Head 1 30,000 30,000 360,000
2 Accountant 1 10,000 10,000 120,000
3 Cashier 1 5,000 5,000 60,000
4 Store Keeper 1 5,000 5,000 60,000
5 Administration Head 1 25,000 25,000 300,000
6 General Service 1 8,000 8,000 96,000
8 Driver 2 6,000 12,000 144,000
9 Guard 6 3,000 18,000 216,000
10 Cleaning 2 2,500 5,000 60,000
10 Laborers 4 2,500 10,000 120,000
IV Sales and Purchasing 4 70,000 840,000
1 Sales and Marketing Rep 1 30,000 30,000 360,000
2 Sales Person 2 15,000 30,000 360,000
3 Purchaser 1 10,000 10,000 120,000
V Production and Technic 50 281,000 3,372,000
Production Section - -
1 Supervisor 1 25,000 25,000 300,000
2 Chemist 3 15,000 45,000 540,000
3 Assistant Chemist 3 6,000 18,000 216,000
4 Packing workers 36 3,000 108,000 1,296,000
Technic Section - -
1 Supervisor 1 25,000 25,000 300,000
2 Mechanic 3 10,000 30,000 360,000
3 Electrician 3 10,000 30,000 360,000
Total, monthly/annual salary 79 624,000 7,488,000
55
Annex 5: BUSINESS LICENSE OF THE
CONSULTANT
56

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TSRUY SOAP AND DETERGENT

BUSINESS PLAN ON THE ESTABLISHMENT

SENYO Business PLC

Technically, the promoter believes the use of automated machines would be

The plant is proposed to be located at Yirgalem Town. Essential facilities such as

1.1 Background of the Owner

The promoter is an experienced business leader with years of experience in the

 Establishing Candles manufacturing plant,

 Establishing Metals workshop, and

 Establishing Block manufacturing plant.

In general the promoter has broad background in the overall management of

The project is headed by Board of Directors who is accountable to Kesis Endeshaw

1.2 Business Model and the Business Objective

1.3 Vision and Mission

 Become one of the top five soap and detergent manufacturers in

 To exceed our customers’ expectations in quality, delivery, and cost

1.4 Products and Services of the Envisaged Business

Therefore, keeping in view the market demand and characteristics, the

- Laundry Soap: 200 gm

- Laundry Soap: 250 gm

- Toilet Soap: 175 gm

1.5 SWOT Analysis

 The project has been initiated by an experienced management engaged in

 The promoter has strong presence on the project site

 Being new entrant to market

 Conducive and encouraging economic environment.

 The soap business has been promising.

 Social acceptability: Good social acceptability of the promoter.

 A number of investment incentives available.

 Foreign Exchange Shortage: not getting the foreign currency on time to

 Developing a customer oriented marketing strategy to win the competition

 Designing the appropriate sales strategy in which the objective of ensuring

 Adopt modern, waste avoiding and technology enabled operations

 Strengthen the networking and communication with the concerned

 Working in advance with Banks and other concerned governmental

1.6 PESTL Analysis

1.6.1 Political factors

The Ethiopian government new prosperity plan re-emphasizes the importance of

In general, the political environment is conducive to operate lucrative business and

1.6.2 Economic environment

In Ethiopia as a result of the appropriate policy adopted by the government in recent

1.6.4 Technological factors

With regards to communication services, there are technological developments in

The choice technologies specific to soap production depends on the requirements of

1.6.5 Legal factors

The new commercial code of Ethiopia Proclamation No.979/2008 is incorporates

2.2 Market Structure and Analysis

2.2.1 Supply analysis

2.2.2 Demand analysis

2.2.2.1 Factors that influence the demand for soap products

In Ethiopia as a result of the appropriate policy adopted by the government in recent

2.2.2.2 Projected demand and supply for soap products

As we noted above, there is huge demand by domestic production. On top of this

TABLE 2.1: PROJECTED DEMAND AND MARKET SHARE OF THE PROJECT

Projected Demand Market Share of

2.3 Target Market and Customer Base

Therefore, strong marketing initiatives, enhancing of contract management skill,

2.4 Market Size and Potential

1) Wholesaler and Retailers

2.5 Competitors Analysis