JIMMA UNIVERSITY

JIMMA INSTITUTE OF TECHNOLOGY

FACULTY OF ELECTRICAL AND COMPUTER ENGINEERING

Industrial Management and Engineering Economy

BASIC ACCOUNTING PRINCIPLES AND BUDGETING

FUNDAMENTALS AND BUSINESS PLAN FOR AWETUTECH

Submitted to Instructer Fikadu (MSc)

2022/2023

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DECLARATION

We hereby confirm that all the works included in this document are our own work and no
copying or plagiarism is there with our work. We assure that we agree with all written above
with our signature as follows.

Name Signature

Mezgebu Getahun ………………………

Million Shiferaw ………………………

Mintesinot Mulu ……………………….

Mintesinot Bekele ………………………

Mohammed Endris ………………………

Nesredin Haji ……………………….

Sumeya Abdulshikur ………………………

School: School of Electrical and Computer Engineering

Program: BSC Degree

Project subject: black line tracking robot

Table of Contents

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Table of Contents..............................................................................................................................i

CHAPTER ONE..............................................................................................................................1

BASIC ACCOUNTING PRINCIPLES AND BUDGETING FUNDAMENTALS.......................1

1.1 Significant Classification of accounts.......................................................................................1

1.2 Concepts develop for accounting concepts................................................................................4

1.3 Accounting statements...............................................................................................................6

1.4 Budgets......................................................................................................................................9

1.5 Budgetary Control...................................................................................................................10

CHAPTER TWO...........................................................................................................................14

BUSINESS PLAN FOR AWETUTECH......................................................................................14

2.1 EXECUTIVE SUMMARY.....................................................................................................14

2.2 COMPANY DESCRIPTION..................................................................................................15

2.2.1 Brief History and Nature of AWETUTECH....................................................................15

2.2.2 Management.....................................................................................................................16

2.2.3 Business Structure, size and location................................................................................16

2.3 DESCRIPTION OF OUR PRODUCT/SERVICES................................................................20

2.3.1 Identification of AWETUTECH Products/Services.........................................................20

2.3.2 Key Features and Benefits of AWETUTECH Products/Services....................................21

2.3.3 Product Protection............................................................................................................21

2.4. MARKET ANALYSIS...........................................................................................................22

2.4.1 Industry Analysis..............................................................................................................22

2.4.2 Market Research...............................................................................................................22

2.4.3 Target Market Analysis....................................................................................................23

2.4.3.1 Market Segmentation.................................................................................................23

2.4.3.2 Targeting....................................................................................................................23

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 2.4.3.3 Positioning.................................................................................................................24

2.5. MARKETING AND SALES.................................................................................................25

2.5.1 Pricing strategy.................................................................................................................25

2.5.2 Promotion strategy............................................................................................................25

2.5.3 Sales and distribution........................................................................................................26

2.5.3.1 Sales strategy.............................................................................................................26

2.5.3.2 Distribution strategy......................................................................................................27

2.6. OPERATIONS PLAN............................................................................................................28

2.6.1 Production or procurement and inventory management...................................................28

2.6.2 Personnel...........................................................................................................................28

2.6.3 Research and development plans and other......................................................................29

2.7. FINANCIAL PLAN...............................................................................................................30

2.7.1 Cost of investment............................................................................................................30

2.7.2 Estimated revenues...........................................................................................................30

2.7.3 Working capital requirements and expected cash inflows/outflows................................31

2.7.4 Projected income statement..............................................................................................32

2.7.5 Projected balance sheet.....................................................................................................33

2.8. RISK ANALYSIS AND CONTINGENCY PLANNING.....................................................34

2.8.1 External risk......................................................................................................................34

2.8.2 Internal risk.......................................................................................................................34

2.8.3 Risk management and contingency plans.........................................................................34

2.9. SUPPORTING MATERIALS................................................................................................35

LIST OF TABLES

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Table 2.1 Summary of Market Analysis........................................................................................24
Table 2.2 Start-Up Costs................................................................................................................30
Table 2.3 Estimated revenues........................................................................................................31
Table 2.4 Projected Profits and Losses..........................................................................................31
Table 2.5 Projected Form for Cash Flow.......................................................................................32
Table 2.6 Projected Form Balance Sheet.......................................................................................33

ABSTRACT

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 CHAPTER ONE

BASIC ACCOUNTING PRINCIPLES AND BUDGETING

FUNDAMENTALS

1.1 Significant Classification of accounts

In accounting, the accounts are classified using one of two approaches – modern approach or
traditional approach.

Modern approach

According to modern approach, the accounts are classified as asset accounts, liability accounts,
capital or owner’s equity accounts, withdrawal accounts, revenue/income accounts and expense
accounts.

1. Asset accounts:

Assets are things or items of value owned by a business and are usually divided into tangible or
intangible. Tangible assets are physical items such as building, machinery, inventories,
receivables, cash, prepaid expenses and advance payments to other parties. Intangible assets
normally include non-physical items and rights. Examples of intangible assets include goodwill,
trademarks, copyrights, patent rights and brand recognition etc.

A separate ledger account for each tangible and intangible asset is maintained by the business to
record any increase or decrease in that asset.

2. Liability accounts:

Liabilities are obligations or debts payable to outsiders or creditors. The title of a liability
account usually ends with the word “payable”. Examples include accounts payable, bills payable,
wages payable, interest payable, rent payable and loan payable etc. Besides these, any revenue
received in advance is also a liability of the business and is known as unearned revenue. For
example, a marketing firm may receive marketing fee from its client for the forthcoming quarter
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in advance. Such unearned revenue would be recorded as a liability as long as the related
marketing services against it are not provided to the client who has made the advance payment.

3. Capital or owner’s equity accounts:

Capital is the owner’s claim against the assets of the business and is equal to total assets less all
liabilities to external parties. The balance in capital account increases with the introduction of
new capital and profits earned by the business and decreases as a result of withdrawals and losses
sustained by the business.

In sole proprietorship, a single capital account titled as owner’s capital account or simply capital
account is used. In partnership or firm, each partner has a separate capital account like John’s
capital account, Peter’s capital account etc. In corporate form of business there are many owners
known as stockholders or shareholders and the title capital stock account is used to record any
change in the capital.

4. Withdrawal accounts:

Withdrawals are cash or assets taken by a business owner for his personal use. In sole
proprietorship and partnership, an account titled as drawings account is used to account for all
withdrawals. In corporate form of business withdrawals are more systematic and usually termed
as distributions to stockholders. The account used for recording such distributions is known as
dividend account.

5. Revenue or income accounts:

Revenue is the inflow of cash as a result of primary activities such as provision of services or
sale of goods. The term income usually refers to the net profit of the business derived by
deducting all expenses from revenue generated during a particular period of time. However, in
accounting and finance, the term is also used to denote all inflows of cash resulted by those
activities that are not primary revenue generating activities of the business. For example, a
merchandising company may have some investment in an oil company. Any dividend received
from oil company would be termed as dividend income rather than dividend revenue. Other
examples of income include interest income, rent income and commission income etc. The
businesses usually maintain separate accounts for revenues and all incomes earned by them.

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6. Expense accounts:

Any resource expended or service consumed to generate revenue is known as expense. Examples
of expenses include salaries expense, rent expense, wages expense, supplies expense, electricity
expense, telephone expense, depreciation expense and miscellaneous expense.

Traditional approach

According to traditional approach, the accounts are classified into four types – personal accounts,
real accounts, nominal accounts, and valuation accounts.

1. Personal accounts:

The accounts related to real persons and organizations are classified as personal accounts.
Examples of personal accounts include John’s account, Peter’s account, Procter and Gamble’s
account, Vibrant Marketing Agency’s account and City bank’s account etc. The business keeps a
separate account for each individual and organization for the purpose of ascertaining the balance
due from or due to them.

2. Real accounts:

Real accounts are accounts related to assets or properties (both tangible and intangible) owned by
a business enterprise. A separate account for each asset is maintained to account for increases
and decreases in that asset. Examples of real accounts include cash account, inventory account,
investment account, plant account, building account, goodwill account, patent account, copyright
account etc.

3. Nominal accounts:

The accounts related to incomes, gains, expenses and losses are classified as nominal accounts.
These accounts normally serve the purpose of accumulating data needed for preparing income
statement or profit and loss account of the business for a particular period. Examples of nominal
accounts include sales account, purchases account, wages account, salaries account, interest
account, rent account, gain on sale of fixed assets account and loss on sale of fixed assets
account etc.

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4. Valuation account:

Valuation account (also known as contra account) is an account which is used to report the
carrying value of an asset or liability in the balance sheet. A popular example of valuation
account is the accumulated depreciation account. Companies maintaining fixed assets in the
books of accounts at their original cost also maintain an accumulated depreciation account for
each fixed asset. In balance sheet, the balance in the accumulated depreciation account is
deducted from the original cost of the asset to report it at its book value or carrying value.
Another example of valuation account is allowance for doubtful accounts. In balance sheet, the
balance in allowance for doubtful accounts is deducted from the total receivables to report them
at their net realizable value or carrying value.

1.2 Concepts develop for accounting concepts

Accounting concepts are ideas, assumptions and conditions based on which a business entity
records its financial transactions and organizes its bookkeeping. It helps a business interpret and
integrate a financial transaction into the accounting process. It is important for a business owners
and accountants to understand basic concepts to bring about consistency and uniformity in their
accounting process.

Accounting concepts are theoretical ideas, components and terms that make up the subjects
accounting, finance and economics. These terms help individuals, businesses or organizations
systematically record their financial information and transactions. Accountants use these
concepts as guidelines to prepare financial reports and other documents for individuals and
businesses. Companies tend to follow accounting standards, principles and accounting laws of
the countries they operate in. These principles include concepts and conventions that help those
companies report transactions accurately.

Accountants are professionals who record the financial transactions of a company. Periodic
summaries of these transactions or financial reports give managers, investors, analysts and the
government relevant financial information about a company. If every business follows an
independent system for creating and producing summaries and statements, it could lead to
discrepancies and increase the scope of fraud and financial mismanagement. To overcome this,

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accounting bodies, governments and regulatory agencies use a universally agreed-upon set of
principles to standardize accounting practices.

Accounting bodies classify concepts as based on assumptions or based on principles. Every type
of business—including a sole proprietorship, partnership or a public or private company—
records its financial transactions based on these assumptions and principles. These are some of
the important concepts in accounting:

1. Going concern concept

Going concern concept prescribes that accountants prepare financial statements on the
assumption that a business may continue its operations for the foreseeable future. Under this
concept, the definition of a foreseeable future is a period of 12 months from the end date of the
reporting period. If a business owner or the management is invested in scaling down business
operations to zero, they cannot apply the going concern concept for accounting. Accountants
may no longer apply the going concern concept if a company is:

 unable to pay dividends

 unable to raise credit from banks and financial services
 facing losses and negative operating cash flow
 facing an adverse financial position
 unable to pay back crucial debts
 facing an unfavorable legal or regulatory action against it

2. Materiality concept

The materiality concept prescribes guidelines to identify if a piece of financial information is

material and whether it can influence the person reading a company's financial statements. Based
on this concept, an accountant or a business may remove negligible transactions that may not
have a bearing on final accounts. This concept is open to subjective interpretation and the basis
for using the materiality concept varies with the size of a company.

3. Consistency Principle

The consistency principle states that business should maintain the same accounting methods or

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principles throughout the accounting periods, so that users of the financial statements or
information are able to make meaningful conclusions from the data.

Consistency principle is useful for measuring trends in the business which is spread across many
accounting periods. If the business keeps on changing accounting methods, it will create
confusion and the financial statements will not be comparable across accounting periods.

Consistency principle is important for a business both from accounting and auditing point of
view as having a consistent set of accounting principles, procedures help accountants in
recording business transactions in an orderly manner.

1.3 Accounting statements

Accounting statements are written records that convey the business activities and the financial
performance of a company. Financial statements are often audited by government agencies,
accountants, firms, etc. to ensure accuracy and for tax, financing, or investing purposes. For-
profit primary financial statements include the balance sheet, income statement, statement of
cash flow, and statement of changes in equity. Nonprofit entities use a similar but different set of
financial statements.

The accounting statements are used by investors, market analysts, and creditors to evaluate a
company's financial health and earnings potential. The two major financial statement reports are
the balance sheet, income statement.

1) Balance Sheet

The balance sheet provides an overview of a company's assets, liabilities, and shareholders'
equity as a snapshot in time. The date at the top of the balance sheet tells us when the snapshot
was taken, which is generally the end of the reporting period.

Assets

Cash and cash equivalents are liquid assets, which may include Treasury bills and certificates of
deposit.

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Accounts receivables are the amount of money owed to the company by its customers for the
sale of its product and service.

Inventory is the goods a company has on hand, which are intended to be sold as a course of
business. Inventory may include finished goods, work in progress that is not yet finished, or raw
materials on hand that have yet to be worked.

Prepaid expenses are costs that have been paid in advance of when they are due. These expenses
are recorded as an asset because their value of them has not yet been recognized; should the
benefit not be recognized; the company would theoretically be due a refund.

Property, plant, and equipment are capital assets owned by a company for its long-term benefit.
This includes buildings used for manufacturing or heavy machinery used for processing raw
materials.

Investments are assets held for speculative future growth. These aren't used in operations; they
are simply held for capital appreciation.

Liabilities

Accounts payable are the bills due as part of the normal course of operations of a business. This
includes utility bills, rent invoices, and obligations to buy raw materials.

Wages payable are payments due to staff for time worked.

Notes payable is recorded debt instruments that record official debt agreements including the
payment schedule and amount.

Dividends payable are dividends that have been declared to be awarded to shareholders but have
not yet been paid.

Long-term debt can include a variety of obligations including sinking bond funds, mortgages, or
other loans that are due in their entirety in longer than one year. Note that the short-term portion
of this debt is recorded as a current liability.

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Shareholders' Equity

Shareholders' equity is a company's total assets minus its total liabilities. Shareholders' equity
(also known as stockholders' equity) represents the amount of money that would be returned to
shareholders if all of the assets were liquidated and all of the company's debt was paid off.

Retained earnings are part of shareholders' equity and are the amount of net earnings that were
not paid to shareholders as dividends.

2) Income Statement

Unlike the balance sheet, the income statement covers a range of time, which is a year for annual
financial statements and a quarter for quarterly financial statements. The income statement
provides an overview of revenues, expenses, net income, and earnings per share.

Revenue

Operating revenue is the revenue earned by selling a company's products or services. The
operating revenue for an auto manufacturer would be realized through the production and sale of
autos. Operating revenue is generated from the core business activities of a company.

Non-operating revenue is the income earned from non-core business activities. These revenues
fall outside the primary function of the business. Some non-operating revenue examples include:

 Interest earned on cash in the bank

 Rental income from a property
 Income from strategic partnerships like royalty payment receipts
 Income from an advertisement display located on the company's property

Other income is the revenue earned from other activities. Other income could include gains from
the sale of long-term assets such as land, vehicles, or a subsidiary.

Expenses

Primary expenses are incurred during the process of earning revenue from the primary activity of

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the business. Expenses include the cost of goods sold (COGS), selling, general and
administrative expenses (SG&A), depreciation or amortization, and research and development
(R&D).

Typical expenses include employee wages, sales commissions, and utilities such as electricity
and transportation.

Expenses that are linked to secondary activities include interest paid on loans or debt. Losses
from the sale of an asset are also recorded as expenses.

The main purpose of the income statement is to convey details of profitability and the financial
results of business activities; however, it can be very effective in showing whether sales or
revenue is increasing when compared over multiple periods.

Investors can also see how well a company's management is controlling expenses to determine
whether a company's efforts in reducing the cost of sales might boost profits over time.

1.4 Budgets
A budget is a spending plan based on income and expenses. In other words, it’s an estimate of
how much money we’ll make and spend over a certain period of time, such as a month or year.

Budgeting can involve making a comprehensive list of expenditures or focusing on a few

categories. Some people prefer to write their budget out by hand, while others use a spreadsheet
or budgeting app. There’s no correct way to budget, what works for one person might not work
for another.

Budgeting isn’t about depriving ourself; it’s about taking control of our money. Making a budget
shouldn’t feel like a punishment. it’s a plan for all of our money that includes money for fun
stuff, too.

A budget doesn’t have to be rigid. In fact, it should change as your circumstances change when
we get a raise, for example, or become a homeowner. The idea is to make your budget as
personalized as possible, leaving room to adapt. Surprises (and mistakes) will happen.

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Budgeting benefits everyone, not just those who struggle financially. It encourages people put
their money to work in the best way possible and can help identify what's soaking up too much
of their cash. We think of a budget as a steppingstone to our financial goals. It can help us:

 Understand our relationship with money. Tracking our income and expenses paints a
clear picture of how much we have to save or spend. Once we spot patterns, you can
identify where to make adjustments. Maybe we spend less than we earn but we’re paying
for some subscriptions or services we no longer need.
 Save for the future. A good budget coaxes us to earmark money for an emergency fund
and savings goals like a vacation or retirement.
 Relieve stress. Budgeting isn’t a cure-all, but it can help us manage financial decisions
and prepare for challenges.

Features of budget:

 Financial and/or quantitative statement.

 Futuristic – prepared and approved prior to a defined period of time.
 Goal oriented – for the purpose of attaining a given objective.
 Components – income, expenditure and employment of capital.

1.5 Budgetary Control

Budgeting is the art of planning. It is the process of making a plan to spend money. Making this
spending plan helps the companies determine whether they have enough money to do the things
they need or would like to do. If our expenses exceed your spending, we can use the planning
process to prioritize the more essential things. It involves making a comprehensive list of
expenditures or focusing on a few categories. Some companies use to prepare budgets using
spreadsheets, while others use budgeting apps.

The establishment of budgets, relating the responsibilities of executive to the requirements of a

policy and the continuous comparison of actual with budgeted results either to secure by
individual action the objectives of that policy or to provide a firm basis for its revision.

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In a budgetary control system, performance and costs are controlled in different parts of the
business:

(i) by setting budgets

(ii) by comparing actual results against the budgets; and

(iii) taking corrective action and remedial measures (if necessary).

Budgetary control is a management accounting technique that continuously compares actual

results with the budgets. This comparison helps identify variances or deviations and promptly
take appropriate remedial actions. This system controls budgets by coordinating with various
departments and establishing and comparing them with the actual results. It implies regularly
comparing actual expenses with the planned income and expenses. Preparing aims to ensure
corrective measures in case of any variances. The essence of budgetary control lies in its ability
to provide a proactive framework for financial management. It ensures that an organization
remains on track to achieve its financial and operational goals.

Steps in the Budgetary Control Process

Set Financial Objectives: The first step in the budgetary control process is determining the
organization’s financial objectives. This might include increasing revenue, reducing costs,
improving cash flow, or increasing profit margins.

Develop a Budget: Once the financial goals have been identified, a comprehensive budget
should be developed that outlines expected income and expenditures for the budget period. The
budget should be broken down by department, product, or project, and it should be realistic and
achievable.

Implement the Budget: Once the budget has been developed, it must be implemented within the
organization. This might involve communicating the budget to employees. Everyone should
understand their role in achieving the budget goals and how their spending will be monitored.

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Track Performance: The final step in the budgetary control process is monitoring performance
against the budget. This might involve comparing actual expenditures and revenues to budgeted
amounts, tracking cash flow, and reviewing financial reports. This can be done monthly or
quarterly, depending on the organization’s size and needs.

Taking Corrective Action: If the organization is not meeting its budgeted targets, it may be
necessary to take corrective action. This might involve reducing expenditures, increasing
revenue, or changing the budget.

Objectives of Budgetary Control

The main objectives of budgetary control are to:

Plan for the Future: Budgetary control helps organizations plan for the future by forecasting
future income and expenditures. This allows organizations to recognize potential problems and
develop strategies to address them.

Coordinate Activities: Budgetary control helps to coordinate the activities of different

departments and units within an organization. As a result, everyone works towards the same
goals and resources are not duplicated.

Control Costs: It helps organizations control costs by setting targets for spending and tracking
actual performance against those targets. This allows organizations to identify areas where costs
are overspending and take corrective action.

Improve Efficiency: It helps organizations improve efficiency by identifying areas where

resources are ineffective. This can lead to changes in processes and procedures that can save the
organization money.

Increase Profitability: Budgetary control can help organizations increase profitability by using
their resources efficiently and effectively. This can lead to higher revenues and lower costs,
which in turn can boost profits.

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Advantages of Budgetary Control

Improved Financial Performance: Budgetary control can help organizations improve their
financial performance by ensuring that they are using their resources efficiently and effectively.
This can lead to enhanced revenues, lower costs, and improved profitability.

Better Decision-Making: Budgetary control provides organizations with a better understanding

of their financial performance. Companies can use this information to make better decisions
about where to allocate resources, how to grow the business, and how to manage risk.

Increased Accountability. Budgetary control helps to increase accountability within an

organization by setting clear and achievable goals for individuals, departments, and the
organization. In addition to motivating employees to work harder and smarter, this can help
identify and address performance problems early on.

Improved Coordination and Communication: Budgetary control helps to improve

coordination and communication between different organizational departments and units. The
reason is that everyone is working towards common goals and is aware of the budget and how
their performance will impact the organization’s financial performance.

More Efficient Use of Resources: Budgetary control enables organizations to identify areas to
reduce or eliminate costs. Thereby helping them use resources more efficiently. This can lead to
savings that the organization can reinvest in other business areas or use to improve profitability.

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 CHAPTER TWO

BUSINESS PLAN FOR AWETUTECH

2.1 EXECUTIVE SUMMARY

AWETUTECH is a start-up business located in Awetu area of Jimma. We have been able to
secure a standard shop facility. The company specializes in the design, realization and
installation of electronic equipment, repair and sales of consumer electronics (including mobile
phones, DVD, radio, TVs and VCR, etc.) repairs, computer and office machine repairs,
communications equipment repairs and other electronic equipment repairs. Our business goal is
to become regional leader in consumer electronics repair, with shops throughout the South-West
Region of Ethiopia.

Our competitive advantage is clear for the fact that there are a lot of big-time investors that have
a stake in the electrical repair services industry; but one thing is certain, there is room big enough
to accommodate everyone. What smaller electronics repair businesses need to do to survive in
the industry is to concentrate on providing electronics repair, maintenance and installation
services to households, individuals, estates, communities, schools, hospitals and hotels et al
before bidding for big contracts from corporations and government agencies.

We are quite aware that to be highly competitive in the industry means that you are not only
expected to deliver highly reliable electronics installation, repair, and maintenance jobs, but you
must be able to meet set targets. No one would want to continue to bring their faulty electronics
to your shop if they know that you are not going to carry out a thorough repair job. Lastly, all our
employees will be well taken care of, and their welfare package will be among the best within
our category in the industry. It will enable them to be more than willing to build the business
with us and help deliver our set goals and achieve all our business aims and objectives.

AWETUTECH is a business that will be owned and managed by Engineer Mintesnot Bekele his
business group members. They are the sole financiers of the business which is why they decided
to restrict the sourcing of the startup capital for the business to just three major sources.

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These are the areas we intend generating our startup capital; personal savings, income from the
documentation and cybercafé department that is already operational, loans from banks if
necessary. The capital generated shall be used to furnish the shop, purchase repairing
equipment’s, and part will be invested in sales of electronic equipment’s and accessories.

2.2 COMPANY DESCRIPTION

2.2.1 Brief History and Nature of AWETUTECH

The company is owned and managed by Mintesnot Bekele, an electronics technician with a
degree in electrical engineering from the Jimma university. He has a combined experience in
computer software and hardware maintenance, Networking, Printed Circuit Board Designs and
Computer Programming, that can help them build AWETUTECH Repair Shop. He will also
employ his business group members to help with running and growing the business.

Our business goal is to become regional leader in consumer electronics repair, with shops
throughout the South-West Region of Ethiopia. AWETUTECH is a growth-oriented business. Its
ten-year goal is to become a regional leader in consumer electronic repair, with shops in the
South-West Region of Ethiopia. With this in mind, the objectives over the next three years for
AWETUTECH are the following:

 Achieve steady growth in sales revenues by year three.

 Achieve local market share (in Jimma) of approximately 20% by year five.
 Expand product line to include authorized satellite TV service installation and new
electronics sales.

AWETUTECH is a business located in Awetu area of Jimma. The company specializes in the
design, realization and installation of electronic equipment, repair and sales of consumer
electronics, specifically home electronics, including TV, DVDs and VCRs. It also operates in the
computer and office machine repairs, communications equipment repairs and other electronic
equipment repairs.

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We will target people who place great importance in their entertainment equipment and own
higher-end electronics, where repairing them would be more cost effective than replacing them.
Many low-end VCRs for example, are priced so low, people find it more cost effective and
convenient to purchase a new product than to get the existing one repaired.

The mission of AWETUTECH is to provide high quality, convenient and comprehensive home
electronics repair at a low cost. The most important aspect of our business is trust. It is the goal
of our firm to have 100% customer satisfaction in regards to quality, friendliness and time to
completion, and discover new ways to exceed the expectations of our customers while doing so
at the lowest possible cost. We want to build an electronics repair business that can favorably
compete with other leading brands in the electronics repair services industry.

2.2.2 Management
As a matter of fact, profit-sharing arrangement will be made available to all our senior
management staff and it will be based on their performance for a period of five years or more as
agreed by the board of trustees of the company. In view of the above, we have decided to hire
qualified and competent hands to occupy the following positions; these positions are in order of
hierarchy and flow of information from the CEO right down to the client service Executive.

 Chief Executive Officer

 Head, Technical Services
 Human Resources and Admin Manager
 Sales and Marketing Executive
 Accountant
 Electronics Repair and Maintenance Engineers and Technicians (10)
 Client Service Executive

2.2.3 Business Structure, size and location

AWETUTECH is an electronics repair business that intends starting small as a shop in Awetu
area of Jimma, but hopes to grow big in order to compete with leading electronics repair
companies in the industry. We are aware of the importance of building a solid business structure
that can support the kind of business we want to own, which is why we are committed to only
hire the best hands within our area of operation.

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AWETUTECH, we will ensure that we hire people that are qualified, hardworking, creative,
customer centric and are ready to work to help us build a prosperous business that will benefit all
our stake holders.

Roles and Responsibilities

Chief Executive Officer – CEO:

 Increases management’s effectiveness by recruiting, selecting, orienting, training,

coaching, counseling, and disciplining managers; communicating values, strategies,
and objectives; assigning accountabilities; planning, monitoring, and appraising job
results; developing incentives; developing a climate for offering information and
opinions.
 Generates and implements the organization’s vision, mission, and overall direction -.
 Responsible for fixing prices and signing business deals
 Provides direction for the business
 Responsible for signing checks and documents on behalf of the company
 Evaluates the success of the organization

Head, Technical Services:

 Serves as project manager of the organization; works directly with employees

 Develops strategic plan by studying technological and financial opportunities;
presenting assumptions; recommending objectives.
 Builds company image by collaborating with customers, government, community
organizations, and employees; enforcing ethical business practices.
 Maintains quality service by establishing and enforcing organization standards.
 Makes certain that the technical department perform efficiently, coordinate employee
efforts, and facilitate communications between management and electronics repairs
and maintenance engineers and technicians
 Ensures that the organization works in line with international best practices

Human Resources and Administration Manager

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  Responsible for overseeing the smooth running of HR and administrative tasks for the
organization
 Maintains office supplies by checking stocks; placing and expediting orders;
evaluating new products.
 Ensures operation of equipment by completing preventive maintenance requirements;
calling for repairs.
 Defines job positions for recruitment and managing interviewing process
 Carries out induction for new team members
 Responsible for training, evaluation and assessment of employees
 Responsible for arranging travel, meetings and appointments
 Oversees the smooth running of daily office activities

Sales and Marketing Manager

 Identifies development opportunities; follows up on development leads and contacts;

participates in the structuring and financing of projects; assures the completion of
development projects.
 Writes winning proposal documents, negotiate fees and rates in line with
organizations’ policy
 Responsible for handling business research, market surveys and feasibility studies for
clients.
 Responsible for supervising implementation, advocate for the customer’s needs, and
communicate with clients.
 Develops, executes and evaluates new plans for expanding increase sales
 Creates new markets cum businesses for the organization
 Empowers and motivates the sales team to meet and surpass agreed targets

Accountant /Cashier:

 Responsible for preparing financial reports, budgets, and financial statements for the
organization.
 Responsible for financial forecasting and risks analysis.

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  Performs cash management, general ledger accounting, and financial reporting for one
or more properties.
 Accountable for developing and managing financial systems and policies
 Responsible for administering payrolls
 Ensures compliance with taxation legislation
 Handles all financial transactions for the organization
 Serves as internal auditor for the organization

Electronics Repair and Maintenance Engineers (2) and Technicians (8)

 Responsible for carrying out consumer electronics repairs

 Carrying out computer and office machine repairs
 Responsible for carrying out communications equipment repairs
 Responsible for handling other electronic equipment repairs such as dental equipment,
medical and surgical equipment and optical instruments.

Client Service Executive

 Welcomes clients and potential clients by greeting them in person or on the telephone;
answering or directing inquiries.
 Ensures that all contacts with clients (e-mail, walk-In center, SMS or phone) provides
the client with a personalized customer service experience of the highest level.
 Through interaction with clients on the phone, uses every opportunity to build client’s
interest in the company’s products and services.

19
2.3 DESCRIPTION OF OUR PRODUCT/SERVICES
AWETUTECH Electronics offers a wide range of services as outlined in the detailed sections
below. It is ultimately the goal of the company to offer a one-stop facility for all home
entertainment needs, including both sales and servicing. In this way the company can offer
greater perceived value for the customer than many other shops which only offer sales or
services.

The industry is highly competitive with suppliers having a great deal of power in setting and
negotiating the prices of their products and services to repair shops. In addition, because the
customers see the service as undifferentiated and a “commodity” with little value separation
between competitors, buyer power is also very high. Finally, the barriers to entry are moderately
low, and the large number of competitors in this field, including substitutes (such as do-it-
yourself work) mean that the pricing for such services is very competitive. The only way to have
an advantage in this industry is a low-cost leadership principal applied aggressively or to create
higher switching costs through the building of strong business-to-customer ties. It is the aim of
AWETUTECH Electronics to create a competitive advantage through both the low-cost strategy
and by offering greater value through its broader product and service line.

2.3.1 Identification of AWETUTECH Products/Services

AWETUTECH Electronics provides a wide range of home entertainment repair services. These
include:

 Repair and cleaning of home and car stereos and CB radios.

 Repair and cleaning of TVs.
 Repair and cleaning of VCRs and DVDs.
 Sale of used TVs, stereos, VCRs and DVDs.
 Free estimates on repair jobs.
 Authorized warranty servicing on all major brands of home entertainment systems.
 Responsible for carrying out consumer electronics repairs
 Carrying out computer and office machine repairs
 Responsible for carrying out communications equipment repairs
 Responsible for handling other electronic equipment repairs such as dental equipment,
medical and surgical equipment and optical instruments

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  House calls and free pickup and delivery.
 Provide Repair Service at Customer’s Home:

2.3.2 Key Features and Benefits of AWETUTECH Products/Services

AWETUTECH product/services are beneficial in the following ways:

 It has staffs who provide repairing services at consumer’s home thereby cutting off the
cost of transportation of heavy electrical products.
 They also provide their services at a remarkable discount.
 Welcomes clients and potential clients by greeting them in person or on the telephone;
answering or directing inquiries.
 Ensures that all contacts with clients (e-mail, walk-In center, SMS or phone) provides the
client with a personalized customer service experience of the highest level
 Through interaction with clients on the phone, uses every opportunity to build client’s
interest in the company’s products and services

2.3.3 Product Protection

Future products and services that AWETUTECH Electronics will prepare to institute include
TV/VCR/DVD rental, satellite TV installation and servicing, sales of new TVs, DVDs, VCRs
and stereos, and repair/sale of microwave ovens. Mr. SAMA is also investigating the possibility
of offering a new product line of home entertainment cabinets at some future date.

These Services are provided to assist customers in making informed decisions about the financial
services we provide to them. It explains who we are, the financial services provided by us, how
we are remunerated and how their complaints are dealt with. Where we provide general factual
advice to them about AWETUTECH Accidental Damage Protection Insurance, or arrange for the
issue of AWETUTECH Accidental Damage Protection Insurance to them.

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2.4. MARKET ANALYSIS

2.4.1 Industry Analysis

AWETUTECH Establishment will be part and parcel of the electronic industry in Ethiopia which
is a growing branch of the economy. There enormous factors influencing the growth of the
industry such as:

 Increase in population
 Increase in the electronic equipment brands
 Increase in technology and so on

There are no standard regulations which can affect electronic repairs in Jimma. However, some
common costs and profit margins tend to influence consumer-capability of electronic equipment
use. These include: personal influence from families, changes due to inflation, and rural-urban
migration.

The opportunities for electronic repairs and sales are enormous. The population of Jimma is large
enough and given their economic power and standard of living, there is enough market demand
to satisfy the supply. Moreover, the people in this area have a very low bargaining power which
is an added advantage to the business. Threats that may impinge the growth of AWETUTECH
are:

 Lack of capital
 Competition from similar businesses
 Lack of advance equipment to meet the necessary repairs

There is no entry barrier into the business. The main competitors are uneducated and mainly use
unskilled labor. This is an advantage to AWETUTECH.

2.4.2 Market Research

There are approximately 521,506 households in Jimma area. Virtually all of these households
have TVs, VCRs, etc. AWETUTECH segments its market into product categories that reflect the
estimated number of each electronic device currently being used in the greatly in Jimma area,
since each of these devices may fail at any time and require our services. Presently, the fastest

22
growing product, in terms of sales, is the DVD player. It is anticipated that the DVD will replace
the VCR within the next three to five years as movie rental stores replace their existing VHS
movies with DVD. The largest segment is the home and car stereo segment, since usually a
household has more than one of these systems. The company will be focusing on servicing all of
these systems, and not focusing on one over the other.

2.4.3 Target Market Analysis

The STP process is an important concept in the study and application of marketing. The letters
STP stand for segmentation, targeting, and positioning. The STP process demonstrates the links
between an overall market and how a company chooses to compete in that market.

2.4.3.1 Market Segmentation

AWETUTECH has segmented the households in the AWETUTECH area as follows:

 Couples with children.

 Couples without children (including Baby Boomers).
 Retired people.
 Students living in multi-unit housing.
 Single people living alone.
 Single people living with roommates.

2.4.3.2 Targeting
AWETUTECH will target the following segments.

Middle class couples without children. This group will tend to have a higher disposable
income since they have two incomes but do not have the expense of children. They prioritize
socializing and spend a fair amount of time entertaining in their home and in the homes of their
friends. For this reason, they will spend more on their electronic equipment.

Single men living alone or with roommates: This group is not the largest segment for us, but
potentially one of the most profitable, since single men tend to prioritize their home
entertainment equipment. They will spend a greater percentage of their income on high-quality
TV and stereo equipment.

23
Baby boomers: Baby boomers are reaching the age where their children have left home and they
have more disposable income than when their children were young and living at home. They are
more tech savvy than the generation before them and appreciate the good things in life. They like
to spend time in their homes, now that the children are out of the house

2.4.3.3 Positioning
As stated before, the electronic repair industry is highly fragmented. In fact, there are so many
small providers that any company in this industry is facing a purely competitive environment.
More than 15,000 electronic repair firms exist in the country today. Firms within this field range
in sizes from the "mom and pop" outfits such as Rahi Computer & Electronics Repair and
Golden electronics to regional companies like OMEDAD. Not all of these firms are purely repair
outfits. In fact all of the larger firms make the majority of their revenue in original sales. It is
these companies that have the largest market share and have the opportunity to compete by
differentiating on customer service or product/service range.

YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5

Potential Growth CAGR

Customers

TVs 3% 415,875 428,351 441,202 454,438 468,071 3.00%

VCRs -2% 310,645 304,432 298,343 292,376 286,528 -2.00%

DVDs 25% 106,400 133,000 166,250 207,813 259,766 25.00%

Stereo Systems 12% 875,500 980,560 1,098,227 1,230,014 1,377,616 12.00%

Microwave 8% 282,625 305,235 329,654 356,026 384,508 8.00%

Ovens
Total 8.67% 1,991,045 2,151,578 2,333,676 2,540,667 2,776,489 8.67%

Table 2.1 Summary of Market Analysis

24
2.5. MARKETING AND SALES
The business will provide quality and superior service at a fair price to the customers on time.
Promotional measures therefore will be quality recreational activities availability at the right
place and time. AWETUTECH Electronic Shop will succeed by offering its customers high-
quality and convenient electronic repair service. Each satisfied customer is a potential of five
new referrals so the quality of our workmanship is key to growing the business.

The most important marketing strategies will be:

2.5.1 Pricing strategy

The business will have a mark-up policy of 20%-30% which will be affordable by the target
market. The market place dictates our pricing and the approval of loans for customers is a proof
that our pricing structure is acceptable in the market. It means a fair price lead by demand and
supply.

2.5.2 Promotion strategy

The business will be engaged in direct marketing. The products will be market by means of word
of mouth and house visits. The manager of AWETUTECH also ensures that fliers are posted
about town and seminars and workshops organized to sensitize the public of how the services the
shop renders to the society are so important. The owner plans to mount a demonstration model
on his four-wheel drive vehicle for promotion purposes.

We will begin promoting AWETUTECH to the market through several avenues. These include:

 Special IT and Project Management

 Conference sponsorships and
 Demonstrations
 Direct mail campaigns
 Print advertising campaigns
 Email and web promotional

Campaigns Supplemental to these efforts will be development of the company web site
Development of supporting print and electronic literature and multi-media presentations of
AWETUTECH will be promoted heavily at the 2025 National Project Managers'

25
Professional Development Conference in July, to begin to build product awareness in the overall
project management market. A special open invitation session and cocktail reception will be held
at the end of day two of the conference to introduce and demonstrate the product, focusing on its
link and its benefits. Demo CDs will be placed in each attendee's seat prior to the session. This
promotion will act as a practice run for two national IT conferences held in August and October
of 2025 where a similar special session, demonstration, and reception will be held. While the
goal of these sessions is to build brand awareness, ordering opportunities will also be available
during and after conferences. A direct mail campaign will begin immediately following the
October IT conference with special time-limited pricing discounts for those on the mailing list
who also attended the special demo sessions. Print advertising campaigns will begin in July with
prominent placement in the show programs, as well as in publications that will be available at the
conferences. This campaign will be continued through January of 2025.

Email and web campaigns will also begin in July, with email announcements sent out to the pre-
registered conference attendees notifying them of the special session and reception
AWETUTECH offers. A link to the AWETUTECH web site will be included.

2.5.3 Sales and distribution

2.5.3.1 Sales strategy

Our sales strategy is oriented toward the idea of arming the sales force with information so they
completely understand both the product and the market and can hit the ground running. within
our own company, so the sales staff will have firsthand knowledge of the product.

Our sales team (initially three representatives and a sales manager) will be divided by geographic
territory and will be on a base salary plus commission structure. They will each go through two
week-long training sessions on basic project management, as well as a week-long training
session on project management needs in the maintenance field (Led by a leading maintenance
project manager.)

Special product training will also be done for retail merchants.

26
2.5.3.2 Distribution strategy
Products will be distributed by technicians to the customer site when necessary. Otherwise, the
clients visit the shop to request for their goods and services.

The product will be initially sold through our direct sales force and company web site

It will be available introduced into retail outlets where electronics are sold.

Negotiations are also under way with the Project Management Institute to offer the product to
their members at a slightly discounted price through both their website and other membership
publications.

27
2.6. OPERATIONS PLAN
AWETUTECH services are provided through electronic repairs. Electronic equipment’s and
accessories are bought and stocked. These equipment’s and accessories come from Addis Abeba
which is the economic capital of Ethiopia and not far from Jimma.

AWETUTECH is expected to maintain a healthy financial position over the next five years. The
following plan outlines the financial development of our company. The business will be initially
financed by a 189,000birr five-year term loan and a total capital investment of 363,000birr.

The source to repay the loan will be the cash flow generated from operations. The company will
also finance growth through cash flow. After an initial period of five years, the company will be
able to make a further expansion. At that time, it is envisioned that a bank loan or equity funding
will be sought to finance the new development, in addition to retained earnings.

The projected financial statements have been prepared in accordance with the general accounting
principles, and necessarily include some amounts that are based on reasonable estimates and
judgment. For accounting purposes, the long-term assets are expensed using the straight-line
depreciation method, and inventory is accounted for based on the First-In, First-Out (FIFO)
method. The following sections outline important financial information.

2.6.1 Production or procurement and inventory management

Repairs at AWETUTECH are done by qualified technicians. Skilled labor is employed and the
management is done by qualified personnel.

2.6.2 Personnel
In view of the above, we have decided to hire qualified and competent hands to occupy the
following positions; these positions are in order of hierarchy and flow of information from the
CEO right down to the client service Executive.

 Chief Executive Officer

 Head, Technical Services
 Human Resources and Admin Manager
 Sales and Marketing Executive
 Accountant

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  Electronics Repair and Maintenance Engineers and Technicians (10)
 Client Service Executive

2.6.3 Research and development plans and other

Over the time, AWETUTECH researches in electronic technology and has been interested in
producing local or homemade electronics rather than importing.

Total startup costs will be 363,000birr of which will be contributed by the owners and the
remainder will be secured through a proposed bank loan.

29
2.7. FINANCIAL PLAN

2.7.1 Cost of investment

Start-Up Expenses Amount (in BIRR)

Graphic Logo and Name Creation 1,000
Outdoor Sign 1,500
Building Improvements 15,000
Working Capital 172,500
Pre-Opening Expenses 15,000
Rent store 180,000 / one year
Total Start-Up Expenses 252,500

Start-Up Assets
3chairs 10,000
2 tables 10,000
2 multi-meters 5,500
3 soldering iron and led 5,000
Varieties of components 25,000
1 computer and software for design 15,000
Liquid Fire Protection System 10,000
1 printer 10,000
2 distributors 5,000
Chemical product and their safety 5,000
Total Start-Up Assets 110,500
Total Required Start-Up Costs 363,000

Table 2.2 Start-Up Costs

2.7.2 Estimated revenues

Owners' and other investments 174, 000birr

Bank loans 189,000birr
Other loans 0birr
Total Source of Funds 363,000birr
Use of Funds
Buildings/real estate - birr
Leasehold improvements 50,000 birr
Capital equipment 110,500 birr

30
Location/administration expenses 14,800 birr
Opening inventory - birr
Advertising/promotional expenses 4,000birr
Other expenses 1,200birr
Contingency fund 10,000birr
Working capital 172,500birr
Total Use of Funds 363,000birr
Table 2.3 Estimated revenues

2.7.3 Working capital requirements and expected cash inflows/outflows.

Year 1 (birr) Year 2 (birr) Year 3 (birr)
Income
Sales 1, 028,422 1, 161,443 1, 235,835
Cost of Goods Sold (402,113) (414,176) (426,602)
Gross Profit 626,309 747,267 809,234
Expenses
Accounting / Legal 12,000 12,360 12,731
Bad Debts 25,711 26,482 27,276
Shrinkage 90,000 92,700 95,481
Credit Card Fees 20,568 21,185 21,821
Insurance 75,000 77,250 79,568
Miscellaneous 44,112 45,435 46,798
Payroll Taxes 0 0 0
Permits and Licenses 7,356 7,577 7,804
Rent 68,000 70,040 72,141
Salaries 12,341 12,711 13,093
Wages 269,987 323,057 340,027
Total Expenses 625,075 688,798 716,739
Net Profit 1,234 58,469 92,494

2.7.4 Projected income statement

Year 1 (birr) Year 2 (birr) Year 3 (birr)

Cash Received

31

Table 2.4 Projected Profits and Losses

Cash from Operations 148,101 30,995 11,402
Cash Sales 1,028,422 1,161,443 1,235,835
Cash from Receivables 0 0 0
Subtotal Cash from Operations 1,176,523 1,192,438 1,247,237
Additional Cash Received 189,000

Sales Tax

Owners Investment 174,000

Subtotal Cash Received 1,539,523 1,192,438 1,247,237

Expenditures
Expenditures from Operations 765,113 414,176 426,602
Cash Spent 710,176 731,481 753,426
Bills Paid

Subtotal Spent on Operations 1,475,289 1,145,658 1,180,028

Additional Cash Spent

Sales Tax

Loan Payment 33,240 35,378 37,654

Subtotal Additional Cash Spent 33,240 35,378 37,654
Subtotal Expenditures 1,508,529 1,181,036 1,217,681
Net Cash Flow 30,994 11,402 29,556
Cash Balance 30,994 42,397 71,953
Table 2.5 Projected Form for Cash Flow

2.7.5 Projected balance sheet

Year 1 (birr) Year 2 (birr) Year 3 (birr)

Assets
Current Assets
Cash 63,000 66,150 71,111

32
Accounts Receivable 25,000 26,250 28,219
Inventory 14,000 14,700 15,803
Other Current Assets 129,500 135,975 146,173
Total Current Assets 231,500 243,075 261,306
Long Term Assets
Long Term Assets 144,500 151,725 163,104
Accumulated Depreciation 0 0 0
Total Long Term Assets 268,500 281,925 303,069
Total Assets 500,000 525,000 564,375
Liabilities and Capital
Current Liabilities 198,450
Accounts Payable 29,000 30,450 32,734
Current Borrowing 1,500 1,575 1,693
Other Current Liabilities 28,500 29,925 32,169
Subtotal Current Liabilities 59,000 66,596 0
Long Term Liabilities 189,000 198,450 213,334
Total Liabilities 277,000 290,850 312,664
Paid In / Invested Capital 223,000 234,150 251,711
Retained Earnings
Earnings
Total Capital 223,000 234,150 251,711
Total Liabilities and 500,000 525,000 564,375
Capital
Net Worth 223,000 234,150 251,711
Table 2.6 Projected Form Balance Sheet

33
2.8. RISK ANALYSIS AND CONTINGENCY PLANNING

2.8.1 External risk

External risks arise from changes or threats in business environment (political, economic,
technological, sociological changes, market changes customers, competitors, product, suppliers)
that can influence negative on the objectives and strategies of the company.

The external risk in AWETUTECH

 constant cut of electricity by EEU (Ethiopian electric Utility)

 lack composing good quality
 The increase of the prices of the components

2.8.2 Internal risk

Internal risk can come from a variety of source: corporate strategy, processes, resources,
management information.

The internal risk in AWETUTECH

 risk of electrocution because the electric installations are not in the norms
 bad maneuver
 risk of fire

2.8.3 Risk management and contingency plans

After having identified the risk incurred by the organization, the management carries out their
analysis based on qualitative and quantitative methods (collection point of view of different
people or the use of sophisticated probiotics models).

Risk management and contingency plan

The risk can be reduced or eliminated by taking corrective or preventive actions.

 Correct at the source the risks that are of high importance and probability
 Check for risks that are high in importance and low probability
 Analyze risks that are low importance and high probability
 Ignore temporarily risks of low importance and probability

34
2.9. SUPPORTING MATERIALS
Sample of laptop Repairs at AWETUTECH

Key members of the management team

 Chief Executive Officer

 Head, Technical Services
 Human Resources and Admin Manager
 Sales and Marketing Executive
 Accountant

35
REFERENCES

[1].Tucson Electronics (2018). Electronics Repair Shop Business Plan. Retrieved at

https://articles.bplans.com/a-standard-business-plan-outline.
[2].A Sample Electronics Repair Business Plan Template. Retrieved
athttps://www.profitableventure.com/electronics-repair-business-plan/
[3].Apr 6, 2018 - Business Plans (Business Reference Services; Science, Technology, and
Business Division; Library of Congress)
[4].Business Planning References. General Information Sources. INC Magazine.
http://www.inc.com. Garage.com (organization to accelerate startups).
[5].Business Plan Structure Proposed By NEGOU Ernest

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