BUSINESS PLAN

ON PROJECT OF BREAD BAKERY

PROMOTER: TAHIR KASIM

ADDRESS: OROMIA REGINAL STATE JIMMA ZONE

AGARO TOWN

PHONE: 0977684566

March, 2023
 Table of Contents
Contents Page
1. Executive summary ............................................................................................................................. 1
2. Project Background ............................................................................................................................ 2
2.1. Name of the applicant ................................................................................................................... 2
2.2. Address ......................................................................................................................................... 2
2.3. Marital status of the applicant ....................................................................................................... 2
2.4. Type of project .............................................................................................................................. 2
2.5. The type of organization/legal structure ....................................................................................... 2
2.6. Status of the project ...................................................................................................................... 2
3. Market Analysis .................................................................................................................................. 3
3.2. Target Market................................................................................................................................ 3
3.3. Supply and demand survey ........................................................................................................... 3
3.4. Competitors ................................................................................................................................... 4
3.5. Marketing strategies: ..................................................................................................................... 5
3.6. Pricing: .......................................................................................................................................... 7
3.7. SWOT Analysis ............................................................................................................................ 7
4. Technical study.................................................................................................................................... 9
4.1. Location and site of the project ..................................................................................................... 9
4.2. Engineering of the project ............................................................................................................. 9
4.3. Machinery and Equipment ............................................................................................................ 9
4.4. Condition of facilities and infrastructure ...................................................................................... 9
4.5. Production process ...................................................................................................................... 13
4.6. Environmental impact assessment .............................................................................................. 14
4.7. General action plaan.................................................................................................................... 16
5. Organization, management and human resources ........................................................................ 17
6. Financial planning ............................................................................................................................ 19
6.1. Proposed Investments ................................................................................................................. 19
6.2. Total sales/revenue prediction: ................................................................................................... 20
6.3. Operating Cost: ........................................................................................................................... 21
6.4. Income statement ........................................................................................................................ 22
6.5. Cash Flow Projection .................................................................................................................. 24
6.6. Balance Sheet Projection ............................................................................................................ 25
6.7. Loan Amortization Schedule ...................................................................................................... 27
6.8. Payback Period............................................................................................................................ 29
7. Social and economic benefits............................................................................................................ 30
8. Conclusion and Recommendation ................................................................................................... 31

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 1. Executive summary
Awareness of high quality baked goods is on the rise. Good bread is a rare combination of
nutrition, convenience, and luxury. Today’s consumer has less time to create wholesome,
handmade bread, but increasingly appreciates the nutritional and sensory benefits it provides.
Good bread provides fiber and carbohydrates in a convenient, low fat form that is portable and
delicious. Good bread never goes out of style.

The present business plan is developed to secure Project funding financial lease of birr
2,086,720.09 loan to Development Bank of Ethiopia for finance business growth. This funding
will be used to purchase machinery for the operation.

1
 2. Project Background
The business is based on the idea that to increase machinery procurement capacity to
expand market share through competitive pricing and consistent quality. The intended
businessis initiated and owned by Tahir Kasim
2.1. Name of the applicant
Tahir Kasim
2.2. Address

Oromia Regional State Jimma Zone Agaro City Kebele 05 phone number 0977684566

2.3. Marital status of the applicant

Marital status of business promoter is being married used on official form.

2.4.Type of project

The industry primarily engaged in manufacturing sector bread bakery products. These products
may be finished in sense of that they are ready to be consumed

2.5.The type of organization/legal structure

The business entity is owned and run by one individual so it sole proprietorship.

2.6.Status of the project

The project is currently being initial formation of project that means new project or start up.

2
 3. Market Analysis
3.1.. General Analysis

There are approximately 60,000 households in the Agaro area and different Types of Public
institutions and universities which participate in purchasing product as customers. The company
will be focusing on service of supplying new technology to the customers.

We are expecting to expand in the very near future in our size and the number of units all over
the woreda`s, starting with Agaro, Bulbulo and Gembe.
There is no major regulation facing the industry for now since there is little noise pollution
caused by the company implying there are little regulations.
The common cost we expect to incur will be the running cost of the business and also the
continuous transportation of raw materials and bread to our retailers.
The major source of our income at this start after investment would be done would only be the
income from our sales.
3.2.Target Market

The bakery will appeal to all household and residents. Whether someone is working class a,
business executive, a teacher, or a student, there will always be a need for a bakery. Our target
customers mainly consist of the higher income consumers, and the top of the middle class.
Although this is a smaller group of consumers to appeal to, we hope to position our-self as a
business in the downtown area or along the bypass in Tahir bakery where there is easy access to
our selected consumers. We expect our customers to be of the working class, people with steady
jobs, and possibly families. In the future products targets health-conscious customers with low
sugar quantities and small portion of products.

3.3. Supply and demand survey

According to the recent study, the demand for bread is expected to explode in the coming years.
Ethiopia is one of currently largest and leading bread markets in Africa. Regular customers are
mainly those purchasing the bread for commercial purposes, with demand coming from food
kiosks.

3
The bread comes from Sheger Bread & Flour Factory, a recently opened industrial-scale bakery
in the outskirts of Agaro. The stall was supplied with as much as 1,000 loaves of bread a day in
the early days. In recent weeks, no more than 1,200 loaves have made it to the shelves.

On the morning, the stock of 1,200 pieces of bread, packed in 10 and 20 Br bundles, ran out in
less than two hours. Dozens of customers were turned away. At least, the supply would be
sufficient to cover the needs of around 120 people, as a single buyer is limited to 12 loaves, for
20 Br.

Supplies running out so quickly do not amount to good news for the owners. Instead, it makes
them wary of the rising costs they incur in light of fewer sales.

3.4.Competitors

Competition in the local area is somewhat sparse and does not provide nearly the level of product
quality and customer service as Tahir. But some of the competitors have strength and weakness.

Strength

They will definitely be more than ten of the major competitors because of its strong financial
position and established marketing and operational practices. However, despite of the entrenched
market position, many customers favor smaller, independent establishments that offer
comfortable atmosphere and good bread at affordable prices.

Weakness

They bake more bread product; but they do not have large number of customers so the bread did
not complete finish selling. Unsold left bread will prepare for the next period this activities of
selling will make dangerous for customers life due to contamination by bacteria fungus.

They don’t have good management practice,

They don’t give back to the community

They don’t keep the personality of the customer as Tahir

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3.5. Marketing strategies:

1. Benefit from efficient operation: - despite the fact that most sales in the industry the hauled in
by large bakeries, mass production is beginning to lose its dominant position in the market to
artisan bakeries. They are gaining popularity because it`s much easier for small and medium
businesses to adopt new food trend.

2. Make the most out of our promotion.

Of course, it can be hard to make a profit in the bakery business without having unique and high-
quality products. However, if you don’t promote them, people will never find out that your
recipe is best in town. One of great advantage of a timely promotion is that it can turn a random
buyer into a regular customer.

1. Be nice to our customers

To improve bakery profits, you need to find the right way to communicate with your customers.
Figure out who frequents your place, get to know them better, and find out what their interest
are. Try your best to customers’ good service means that you much more pleasant to have a chat
with a nice

2. Care about customers

People do appreciate when your employees care about their experience and make them feel
welcome. They'll come back again and again even if your prices are a bit higher than in another
bakery around the corner.

3. Be ready for the holidays

We don’t miss a chance when people are in a festive mood and ready to spend more money to
make they feel even better. All national holidays can significantly increase profits in a
bakery and improve your brand’s exposure. Don't miss these opportunities to promote your
bakery and hold small, relevant events for our customers.

4. Offer loyalty programs

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Gets a loyalty system going to encourage people to buy more? When people know they stand to
gain something from spending a few Birr on your pastries, they'll keep spending! POS systems
with built-in loyalty program allow you to keep information about discounts and bonuses that
your customers earn right in your POS system and apply them appropriately and bonuses that
your customers earn right in your POS system and apply them appropriately.

5. Tap Into Social Media

There are some bakery promotion ideas, for instance campaigns on social media, that don’t
require a large investment, but which still work well for raising people's awareness of your
brand. This is especially useful if you plan on opening new locations or franchising your
business in the near future. Instagram is the perfect platform to share beautiful pictures of your
products, interior design and team.

6. Cooperate with local media

There are a lot of ways to improve bakery sales, and traditional media is one of them. Think
about paid articles on popular local websites that mention or feature your bakery. It would be a
good idea to work directly with the editor to find the best way to promote your product while
delivering value to the reader.

7. Try different distribution methods

If you want to make more profit and reach more customers, try to use a couple of different
distribution methods. Consider going online. You can develop your own website marketing
strategy for a bakery, or try to cooperate with popular online ordering and delivery platforms.

8. Add more healthy options

It’s hard to find someone who doesn’t like any sweets, chocolate, cakes, or pastries. But people
often try to cut down on pastries to reduce their daily caloric intake. Although they enjoy what
they’re eating, they have to pay the price in the gym.

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3.6. Pricing:

In this first aspect in our marketing plan we intend to use the penetration pricing strategy with
the primary goals of attracting customers and gaining a better market share as we shall enter the
market with our products at relatively cheaper prices than our competitors. Though some losses
shall be incurred but we intend at the very beginning to make our products known by a greater
amount of the population.

After a while when our products has been known, we shall step up the prizes a little to meet up
with cost thus introducing the cost-based pricing strategy to enable us meet our operational cost.

3.7. SWOT Analysis

 Strengths
The strengths are its resources and capabilities that can be used as a basis for developing a
competitive-advantage. Such strengths include:

 Strong brand names.

 Good reputation among customers.
 Cost advantages from proprietary know-how.
 Exclusive access to high grade natural resources.
 Favorable access to distribution networks.
 Weaknesses

The absence of certain strengths may be viewed as a weakness. For example, each of the
following may be considered weaknesses:

 A weak brand name.

 Poor reputation among customers.
 High cost structure.
 Lack of access to the best natural resources.
 Lack of access to key distribution channels.
 Opportunities

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The external environmental analysis may reveal certain new opportunities for profit and growth.
Some opportunities include:

 An unfulfilled customer need.

 Arrival of new technologies.
 Loosening of regulations.
 Removal of international trade barriers.
 Threats

Changes in the external environmental also may present threats to the firm. Such threats include:

 Shifts in consumer tastes away from the firm's products.

 Emergence of substitute products.
 New regulations.
 Increased trade barriers.

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 4. Technical study
4.1. Location and site of the project

The project due to the its nature of manufacturing would be located or have its base or
production unit afar into the suburbs of Agaro specifically in the interior areas of Agaro town for
the lone reason of avoiding the pollution of the surrounding environment. But our wholesale unit
shall be located relative to the market.

In the beginning of the proposed project is owned 400sq.m compound which has rooms in
different size will renovate the compound to set up for the proposed purpose. In this regard the
venue costs as follows;

4.2. Engineering of the project

Bakery plant engineering is design to build construction of wholesale bakery unit and snack
production or manufacturing and distribution facilities. In our project we focus on the design on
an oven for baking of semi-automated.

4.3. Machinery and Equipment

This is list of summarize major equipment and machinery used semi-automated production of
bread.
s. no Equipment and machinery
1 Rotary Rack Oven
2 Volumetric Dough Divider
3 Mixer
4 Molding Machine
5 Bread Slicer
6 French Bread Tray and Trolley
7 Flat Tray
8 Diesel Generator

4.4. Condition of facilities and infrastructure

Physical Layout
Infrastructure and processing site layout

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When setting up a bakery it is essential that the condition of the building - the materials of
construction and its position - are all suitable for food production. The plant should not be
located near swamps, ditches or refuse dumps where insects and rodents are likely to be found.
The site should allow waste water to drain away freely and have suitable facilities to dispose of
waste food and rubbish. A supply of clean water is essential.

Physical layout

Basic services

Equipment

Physical layout

Ideally the operational areas of the bakery building should be at ground level, with the raw
ingredients entering at one end and the finished goods leaving at the other. The different
operations should be kept separate from each other to prevent contamination. For example,
perishable raw materials should be kept separate from non-perishable ones. Packaging materials
should be stored separately from the food items. If possible, toilets should be located outside the
processing building. If they are in the main building, there should be two doors between the
processing room and the toilet.

Workers must have access to hand washing facilities with soap and clean towels. The building
should be constructed with smooth walls. The joint between the wall and floor should be rounded
for easy cleaning. The building lines should be simple and square, without crevices and small
places that can attract dust and may become birds’ nests. Windows should be covered with
mosquito mesh to prevent the entry of flies and other insects.

The floor should be made of good quality concrete and should slope to a central drainage channel
so that at the end of the day the whole area can be hosed down. The drainage channel should be
fitted with a heavy iron grating that can easily be removed for cleaning. The outlet of the drain
should be covered with wire mesh to prevent rodents entering.

The ceiling and walls must be made from washable and easily dried materials. They must not be
absorbent or porous. The lighting should be natural if possible. If artificial lights are used they

10
must not get in the way of the processing. The bulbs should be protected to prevent glass falling
into the products if the lights are broken.

It is important to have good ventilation, especially where heating takes place. Large window
openings should be covered with mesh to allow air and natural light into the building, while
preventing insects and birds.

2. - Basic Services

Three basic services are required for a basic food processing operation:

Electrical power

It is preferable to have access to electricity for lighting and for the operation of machinery. The
electricity points should be situated high up the walls and away from water supplies so that they
do not get wet during hosing down of the building.

Drinking water

Drinking water should be available in sufficient quantities to allow for the safe, hygienic
processing of food. Water must be protected from all possible sources of contamination. The
storage tank must be covered. Clean water is often a scarce commodity and therefore efforts
should be made to conserve it. Clean water must be available at all times. It is recommended that
an elevated storage tank is used that is not reliant on the use of electricity. The use of a storage
tank allows the water to be treated with a disinfectant. It is recommended that chlorine is added
to water as a disinfectant. The recommended dosage is 2 ppm of free chlorine, which is
equivalent to 100ml sodium hypochlorite solution per 2000 litres of water. At this level, the
chlorine disinfects, but does not affect the taste of the water.

Disposal of waste water and material

Provision should be made for the disposal of waste water and waste material

Basic facilities

A small to medium scale fruit and vegetable processing unit must have the following basic
facilities:

Reception of raw material

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The plant must have a special area for the reception and storage of raw material until it is
required. This area may simply be a shed or an appropriately designed room. The area should be
clean, away from direct sunlight and with control over the temperature and humidity according
to the type of material being stored. Care should be taken to ensure that rodents, birds and insects
cannot get into the store building. The raw material storage area should not be used for the
storage of other products that could contaminate it such as cleaning materials and pesticides. The
quality of the finished product is directly dependent on the quality of the raw material. Thus the
conditions of the storage area are of great importance. The storage area should have basic
equipment such as weighing scales for the reception of raw material.

Processing room

The processing room is the main place of activity. The different materials used during processing
and the various pieces of equipment are kept here. Ideally, the room should be large enough to
house all the equipment needed for the various stages, to allow the process to be continuous and
improve the efficiency of processing.

Quality control

Quality control operations should be carried out in a separate room. The room should be
equipped with basic equipment such as a sink, running water and a bench or table where the tests
can be carried out. The equipment for testing should be kept in this room.

Storeroom for finished products

The storeroom should be clean and airy, free from damp and away from direct sunlight. The
temperature of the room should be kept as low as possible to maintain the quality of the stored
products. The storeroom should be fitted with shelves to allow neat and tidy storage of the
processed foods. Processors should regularly test the quality of the stored products and make
sure they rotate the stock, selling the oldest stock first.

Other facilities

Some equipment needs to be stored outside the main processing area, but still accessible to the
processor. The boiler or steam generator needs to be housed outside the main processing area to
avoid contamination of the foods.

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Sanitary facilities

All sanitary facilities - changing rooms, toilets and hand washing areas should be kept separate
from the processing area to avoid cross contamination.

Small Equipment

In addition to the large pieces of equipment, there are various smaller items, some of which are
essential and others that facilitate the process. The following are all optional extras:

 Glaze brushes are used to give a glossy surface to the products\

 Table sweeping brushes that are only used to clean the working surfaces
 Hard and soft floor brushes and floor scrubbing brushes are all required for cleaning –
 Nail brushes for the operators to keep their hands clean
 Table dusting boxes that are used to shake a thin layer of flour onto the table for
4.5. Production process

Bread is the product of baking a mixture of flour, water, salt, yeast and other ingredients. The
basic process involves mixing of ingredients until the flour is converted into a stiff paste or
dough, followed by baking the dough into loaf.

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4.6. Environmental Impact Assessment

The major air emissions of concern from bakeries are known as volatile organic compound. The
primary VOC emitted from bakery operations is ethanol. A large facility may require a permit
with specific emission parameter from the regulatory authority may be required.

Energy Consumption

Processing operations consume high amounts of energy as:

• Thermal energy for proving and baking the product and to produce hot water for cleaning
and sterilizing;
• Electricity for machinery operation, dust extraction, ventilation, lighting and production of
compressed air.
• Energy usage has a direct correlation to the operating costs of the company and energy
generation and consumption may be regulated or taxes/levies applied to reduce energy use
and associated emissions of gases such as carbon dioxide.

Dust, Aerosols and Gases

Dust may arise from raw material storage, handling and drying activities; aerosols typically
result from the use of compressed air and high-pressure water for cleaning.

• Workers may inhale or ingest the dust and aerosols exposing them to biological and microbial
hazards presenting a risk of occupational lung disease or asthma. When combined with high
levels of humidity dust and/or aerosols may give rise to skin irritation or allergic reactions;

• Some bakery additives/flour improvers contain enzymes that are an occupational hazard to
which workers may become allergic (sensitized). Exposure to them should be limited by using
improvers in liquid, paste or dust suppressed powder form;

• Dust can be a nuisance to the surrounding locality;

• A dust cloud of any flammable material (such as flour) will explode if:

o The concentration of dust in air falls

o within the explosive limits3;
o A source of ignition is present.

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Dust can be controlled by enclosing processing and transport equipment, which also reduces
product losses and by the installation of extraction (antistatic) equipment.

Storage

Bulk storage facilities will be used for the storage of raw materials, finished product, chemicals
used in the production process and for cleansing and disinfection, and fuel oils for energy
production. These storage facilities should be provided with satisfactory containment (concrete
walls/bunds, drainage gullies connected to wastewater treatment areas) to prevent spills reaching
the wider environment.

The storage facilities should be secure to prevent pest invasion, be waterproof and well
ventilated.

Alarms should be fitted to detect leakages. All outdoor bulk storage of dusty or potentially dusty
materials should be in silos and ventilation/extraction equipment used to minimize dust
generation or explosion/fire.

Bulk storage facilities should be fitted with alarms to prevent overfilling. Solid Wastes Wastes
may arise at all stages in the production process, including spoiled raw materials, spillages,
dough, non-conforming product, packaging wastes and sludge from wastewater treatment.
Organic wastes should be segregated from non-organic wastes to facilitate recycling/reuse and
stored in adequate containers. Solid wastes will need to be temporarily stored, collected and
disposed to regularly to avoid odour, litter, fly, rodent or hygiene problems.

Packaging

Packaging is widely used within the bakery industry to preserve the quality of the product, for
marketing and transport purposes. Smaller bakeries and in-store bakeries may transport some
unwrapped finished product in open reusable plastic crates or baskets, but the majority of larger
operations package the product in paper (sometimes waxed), polythene, plastic or card.
Companies operating with the aims to reduce the amount of packing that are being introduced
into waste streams.

Water supply

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Bakeries can use a relatively large volume of water, which may require treatment before it can be
used. It is used both to make the product and for cleaning. In cities and towns, water is supplied
by the municipal water supply system.

Our project will committed to maintaining and promoting safe and environmentally responsible
practices for the benefit of consumers, the communities in which we operate and our employees.
Our machine doesn’t release west material to the university and community. We provide
customers with safe, and make efficient use of energy. We raise awareness of environmental
issues within our companies and train employees in environmental best practice. We increasingly
consider environmental protection as part of our planning and operational procedures. We will
reduce the risk of non-compliance as well as improve health and safety practices for employees
and the public will operate in an environment-friendly manner

4.7. General Action Plan

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 5. Organization, Management and Human Resources

A hierarchical structure characterizes how exercises, for example, assignment, coordination and
supervision are coordinated toward the accomplishment of authoritative points.

i) The hired bakery specialist:

This is the person who is entirely in charge of scrutinizing and implementing the policies of the
shareholders and works with the mind set of maximizing their wealth. He has ones been the
bakery manager of a renowned bakery in England with a seven years of experience in the bakery
business.
ii) The finance manager:
He is a holder of a first class degree in financial management with a one year working
experience in the banking sector and also part of the shareholders with the duties below;
 Make sure the production department and likewise the marketing department doesn’t
run short of cash to meet their daily activities.
 Also he has as a duty to make sure the funds granted to the department are well
managed or utilized.
 He is the only person concerned with management of funds contributed by the
shareholders.
iii) The production manager:
He is expected to have a degree in the field of economics and management with at least two
years working experience.
 Makes sure the products are produced in cognizance to the demand of our
 In charge of ensuring that the ware house does not run short of the finished products.
 Has as duty to maximized resources put at his disposal to produce the goods at the
lowest possible cost.
iv) The marketing manager:
This person is holder of a first class degree in management from the University of Buea with a
working experience of two in the MTN marketing department. He has as duties to;
 Inform the public constantly of our innovations
 Create a concrete link with the company and the customers.

17
  Makes sure the production manager is fed with information about the latest
developments in the market
 Inform the company constantly on the changing demands of our customers
.
a) Responsibilities
The Hired specialist;
He shall be responsible for ensuring that everything goes according to plan. All the other
managers are also answerable to him.
Marketing manager;
He is responsible for informing the public with latest developments on the company’s product
and gives a feed back to the company on the responses of the customers.
The production manager;
Also He is involved with the responsibility of taken the information provided by the marketing
manager and transforming it into a suitable product needed by the customers.
The finance manager likewise has as a responsibility to properly manage the funds under his
keeping.

Special consultant

Financial
manager
Marketing manager Operation manager

Unskilled labourers

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 6. Financial planning

It includes the estimated financial cost of the project, the financial system and the expected
income from the project
6.1. Proposed Investments

A. Start-up Expenses and Assumptions in Birr

Equipment Quantity Cost Each Total Cost
Rotary Rack Oven 1 548941.82 548941.82
Volumetric Dough divider 1 247562.00 247562.00
Mixer 1 160915.30 160915.30
Molding Machine 1 129970.05 129970.05
Bread Slicer 1 49512.40 49512.40
French Bread Tray and Trolley 2 27850.725 55701.45
Flat Tray with Trolley 2 34039.775 68079.55
Diesel Generator 1 813725.52 813725.52
Total Equipment 2074408.09

Professional Services Cost

Business License 1 500 500.00
Insurance / bonding
Dues and subscriptions 1 2,500 2500.00
Accounting set-up and training 2 4,500 9000.00
Marketing design, printing, etc.
other 0
Total Services 12000.00

Assumption/Explanations Customize your notes below

Total Start-up Funds Requested for Financial Lease 2,086,720.09

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 6.2. Total sales/revenue prediction:

5-YEAR FINANCIAL PLAN

Usman Bread Bakery

Average price Annual revenue
Units sold annually
per unit per product
Bread 220752 20.00 4,415,040.00
TOTAL OF FORECASTED REVENUE 4,415,040.00
Annual cost of
Expected gross margin
goods sold
Bread 30% 1,324,512.00
TOATL COST OF GOODS SOLD 1,324,512.00
Factor (%) on capital equipment 15%
ASSET DEPRECIATION
Number of Years 5
TAX
Annual Tax Rate 20%
INFLATION
Annual Inflation Rate 2%
PRODUCT PRICE INCREASE
Annual Price Increase 2%
Loan Amount 2,086,720.09
Annual interest rate 9%
Term of loan (months) 60
Monthly rate 0.72%
Payment 42,962.05
Total Amount Payable 2,577,723.18

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6.3. Operating Cost:

EXPENSES
Years
Operating expenses 1 2 3 4 5
Sales and marketing
15,000.00 15,300.00 15,912.00 16,866.72 18,216.06
Depreciation
6,000.00 6,120.00 6,240.00 6,360.00 6,480.00
Insurance
7,500.00 7,650.00 7,956.00 8,433.36 9,108.03
Payroll and Payroll Tax
21,000.00 21,420.00 22,276.80 23,613.41 25,502.48
Property taxes
2,500.00 2,550.00 2,652.00 2,811.12 3,036.01
Maintenance, repair, and
overhaul 1,500.00 1,530.00 1,560.00 1,590.00 1,620.00
Utilities
5,000.00 5,100.00 5,304.00 5,622.24 6,072.02
Administrative fees
300.00 306.00 318.24 337.33 364.32
Interest expense on long-term debt
166,869.45 135,488.68 101,283.65 64,000.16 23,361.16
Other
1,000.00 1,020.00 1,060.80 1,124.45 1,214.40
Total operating expenses
226,669.45 196,484.68 164,563.49 130,758.79 94,974.48
TOTAL EXPENSES
226,669.45 196,484.68 164,563.49 130,758.79 94,974.48

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6.4. Income statement

Income Statements of Tahir Bread Bakery 5 years ending June, 30____

Year
Profit and Loss Assumption

Year 1 Year 2 Year 3 Year 4 Year 5

Annual cumulative price (revenue)
0.00% 2.00% 4.00% 6.00% 8.00%
increase
Annual cumulative inflation (expense)
0.00% 2.00% 4.00% 6.00% 8.00%
increase
INCOME
Year 1 Year 2 Year 3 Year 4 Year 5
Revenue
Bread
4,415,040.00 4,503,340.80 4,683,474.43 4,964,482.90 5,361,641.53
Total revenue
4,415,040.00 4,503,340.80 4,683,474.43 4,964,482.90 5,361,641.53
Cost of Sales
Bread
1,324,512.00 1,351,002.24 1,405,042.33 1,489,344.87 1,608,492.46
Cost of goods sold
1,324,512.00 1,351,002.24 1,405,042.33 1,489,344.87 1,608,492.46
Gross Profit
3,090,528.00 3,152,338.56 3,278,432.10 3,475,138.03 3,753,149.07
Non-Operation Income
Rental - - - - -
Interest income - - - - -
Loss (gain) on sale of assets - - 1,000.00 - -
Other income (specify) - - - - -
Total Non-Operation Income - - 1,000.00 - -
TOTAL INCOME
3,090,528.00 3,152,338.56 3,279,432.10 3,475,138.03 3,753,149.07
EXPENSES
Operating expenses
Sales and marketing 15,000.00 15,300.00 15,912.00 16,866.72 18,216.06
Depreciation 6,120.00 6,240.00 6,360.00 6,480.00
421,344.02
Insurance 7,500.00 7,650.00 7,956.00 8,433.36 9,108.03

22
 Payroll and Payroll Tax 210,000.00 214,200.00 222,768.00 236,134.08 255,024.81
Property taxes 2,500.00 2,550.00 2,652.00 2,811.12 3,036.01
Maintenance, repair, and overhaul 313,008.01 - - - -
Utilities 5,000.00 5,100.00 5,304.00 5,622.24 6,072.02
Administrative fees 300.00 306.00 318.24 337.33 364.32
Interest expense on long-term debt 166,869.45 135,488.68 101,283.65 64,000.16 23,361.16
Other 1,000.00 1,020.00 1,060.80 1,124.45 1,214.40
Total operating expenses
TOTAL EXPENSES 1,142,521.48 387,734.68 363,494.69 341,689.46 322,876.80
387,734.68 363,494.69 341,689.46 322,876.80
TAXES
1,142,521.48
Income Tax
641,101.96 887,215.16 934,928.58 1,003,790.77 1,097,938.38
Other Tax (specify) - - - - -
TOTAL TAXES
641,101.96 887,215.16 934,928.58 1,003,790.77 1,097,938.38
NET PROFIT
1,495,904.56 2,070,168.71 2,181,500.03 2,342,178.47 2,561,856.22

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6.5. Cash Flow Projection

Cash flow of Tahir Bakery of 5 year ending June 30__________

Year
Operating activities Year 1 Year 2 Year 3 Year 4 Year 5 Total
Net income 2,004,700.99 2,069,097.71 2,180,408.03 2,341,065.47 2,560,722.22 11,155,994.41
Depreciation 6,000.00 6,120.00 6,240.00 6,360.00 6,480.00 31,200.00
Other operating cash flow items - - - - - -
Total operating activities
2,010,700.99 2,075,217.71 2,186,648.03 2,347,425.47 2,567,202.22 11,187,194.41
Investing activities Year 1 Year 2 Year 3 Year 4 Year 5 Total
Sale of fixed assets - - - 1,000.00 - - - 1,000.00
- -
Total investing activities - - - -
1,000.00 1,000.00
Financing activities Year 1 Year 2 Year 3 Year 4 Year 5 Total
Long-term debt/financing - 248,675.19 - 430,055.95 - 389,260.99 - 401,544.48 - 567,183.48 - 2,036,720.09
Total financing activities - 248,675.19 - 430,055.95 - 389,260.99 - 401,544.48 - 567,183.48 - 2,036,720.09
Cumulative cash flow
1,762,025.80 1,645,161.76 1,796,387.04 1,945,880.99 2,000,018.73 9,149,474.32
Beginning cash balance 50,000.00
1,812,025.80 3,457,187.56 5,253,574.60 7,199,455.59
Ending cash balance
1,812,025.80 3,457,187.56 5,253,574.60 7,199,455.59 9,199,474.32

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 6.6. Balance Sheet Projection

Balnce Sheet of Tahir Bakery for 5 years ending June 30_________

Current Assets Initial balance Year 1 Year 2 Year 3 Year 4 Year 5
Cash and short-term investments 50,000.00
3,805,293.48 5,451,526.24 7,249,005.29 9,195,999.27 11,197,152.01
Accounts receivable 3,000.00
3,000.00 3,000.00 3,000.00 3,000.00 3,000.00
Total inventory 25,000.00
25,000.00 25,000.00 25,000.00 25,000.00 25,000.00
Other current assets 5,000.00
5,000.00 5,000.00 5,000.00 5,000.00 5,000.00
Total current assets 83,000.00
3,838,293.48 5,484,526.24 7,282,005.29 9,228,999.27 11,230,152.01
Property and Equipment Initial balance Year 1 Year 2 Year 3 Year 4 Year 5
Buildings 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00
Land 10,000.00 10,000.00 10,000.00 10,000.00 10,000.00 10,000.00
Machinery and equipment 2,086,720.09 - - -

Less Accumulated depreciation expense

421,344.02 427,464.02 433,704.02 440,064.02 446,544.02
Total Property and Equipment 2,116,720.09 - 391,344.02 - 397,464.02 - 403,704.02 - 410,064.02 - 416,544.02
Other Assets Initial balance Year 1 Year 2 Year 3 Year 4 Year 5
TOTAL ASSETS 2,199,720.09
3,446,949.47 5,087,062.23 6,878,301.27 8,818,935.26 10,813,607.99
Current Liabilities Initial balance Year 1 Year 2 Year 3 Year 4 Year 5

Accounts payable 2,000.00

2,000.00 2,000.00 2,000.00 2,000.00 2,000.00
Capital leases - - - - - -

25
 Other current liabilities 100.00
100.00 100.00 100.00 100.00 100.00
Total Current Liabilities 2,100.00
2,100.00 2,100.00 2,100.00 2,100.00 2,100.00
Debt Initial balance Year 1 Year 2 Year 3 Year 4 Year 5
Financial Lease/Loan 2,086,720.09 1,738,044.90 1,357,988.95 943,727.96 492,183.48 -

Other long-term debt 100,000.00

200,000.00 150,000.00 175,000.00 225,000.00 150,000.00
Total Debt 2,188,820.09
1,940,144.90 1,510,088.95 1,120,827.96 719,283.48 152,100.00
TOTAL LIABILITIES 2,088,820.09
1,740,144.90 1,360,088.95 945,827.96 494,283.48 2,100.00
EQUITY
Initial balance Year 1 Year 2 Year 3 Year 4 Year 5
Owner's equity (common) 50,000.00
50,000.00 50,000.00 50,000.00 50,000.00 50,000.00
Paid-in capital 250,000.00
250,000.00 250,000.00 250,000.00 250,000.00 250,000.00
Retained earnings - 1,495,904.56 3,566,073.28 5,747,573.31 8,089,751.78 10,651,607.99

TOTAL EQUITY 300,000.00

1,795,904.56 3,866,073.28 6,047,573.31 8,389,751.78 10,951,607.99
TOTAL LIABILITIES AND EQUITY 2,388,820.09 3,536,049.47 5,226,162.23 6,993,401.27 8,884,035.26 10,953,707.99

26
6.7. Loan Amortization Schedule

SCHEDULED
MONTH BALANCE PRINCIPAL INTEREST
PAYMENT

1 2,086,720.09 42,962.05 27,922.39 15,039.67

2 2,058,797.70 42,962.05 28,123.63 14,838.42
3 2,030,674.07 42,962.05 28,326.33 14,635.72
4 2,002,347.74 42,962.05 28,530.49 14,431.57
5 1,973,817.26 42,962.05 28,736.11 14,225.94
6 1,945,081.14 42,962.05 28,943.22 14,018.83
7 1,916,137.92 42,962.05 29,151.83 13,810.23
8 1,886,986.09 42,962.05 29,361.93 13,600.12
9 1,857,624.16 42,962.05 29,573.56 13,388.50
10 1,828,050.60 42,962.05 29,786.70 13,175.35
11 1,798,263.90 42,962.05 30,001.38 12,960.67
12 1,768,262.52 42,962.05 30,217.61 12,744.44
13 1,738,044.90 42,962.05 30,435.40 12,526.65
14 1,707,609.50 42,962.05 30,654.76 12,307.29
15 1,676,954.74 42,962.05 30,875.70 12,086.36
16 1,646,079.04 42,962.05 31,098.23 11,863.82
17 1,614,980.82 42,962.05 31,322.36 11,639.69
18 1,583,658.45 42,962.05 31,548.11 11,413.94
19 1,552,110.34 42,962.05 31,775.49 11,186.56
20 1,520,334.84 42,962.05 32,004.51 10,957.54
21 1,488,330.34 42,962.05 32,235.18 10,726.88
22 1,456,095.16 42,962.05 32,467.50 10,494.55
23 1,423,627.66 42,962.05 32,701.51 10,260.54
24 1,390,926.15 42,962.05 32,937.20 10,024.85
25 1,357,988.95 42,962.05 33,174.59 9,787.47
26 1,324,814.36 42,962.05 33,413.69 9,548.37
27 1,291,400.67 42,962.05 33,654.51 9,307.54
28 1,257,746.16 42,962.05 33,897.07 9,064.98
29 1,223,849.09 42,962.05 34,141.38 8,820.68
30 1,189,707.72 42,962.05 34,387.44 8,574.61
31 1,155,320.27 42,962.05 34,635.29 8,326.77
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32 1,120,684.99 42,962.05 34,884.91 8,077.14
33 1,085,800.07 42,962.05 35,136.34 7,825.71
34 1,050,663.73 42,962.05 35,389.58 7,572.47
35 1,015,274.15 42,962.05 35,644.64 7,317.41
36 979,629.51 42,962.05 35,901.55 7,060.51
37 943,727.96 42,962.05 36,160.30 6,801.75
38 907,567.66 42,962.05 36,420.92 6,541.13
39 871,146.74 42,962.05 36,683.42 6,278.64
40 834,463.32 42,962.05 36,947.81 6,014.25
41 797,515.52 42,962.05 37,214.10 5,747.95
42 760,301.42 42,962.05 37,482.31 5,479.74
43 722,819.10 42,962.05 37,752.46 5,209.59
44 685,066.64 42,962.05 38,024.56 4,937.50
45 647,042.08 42,962.05 38,298.61 4,663.44
46 608,743.47 42,962.05 38,574.64 4,387.41
47 570,168.83 42,962.05 38,852.66 4,109.39
48 531,316.17 42,962.05 39,132.69 3,829.37
49 492,183.48 42,962.05 39,414.73 3,547.33
50 452,768.75 42,962.05 39,698.80 3,263.25
51 413,069.95 42,962.05 39,984.92 2,977.13
52 373,085.03 42,962.05 40,273.11 2,688.94
53 332,811.92 42,962.05 40,563.37 2,398.68
54 292,248.55 42,962.05 40,855.72 2,106.33
55 251,392.83 42,962.05 41,150.18 1,811.87
56 210,242.64 42,962.05 41,446.77 1,515.29
57 168,795.88 42,962.05 41,745.49 1,216.57
58 127,050.39 42,962.05 42,046.36 915.69
59 85,004.03 42,962.05 42,349.40 612.65
60 42,654.63 42,962.05 42,654.63 307.43

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6.8. Payback Period
Expected Cash Flow
Year (birr) Cumulative Cash Flow (birr)
-2086720.09
0 -2086720.09
-3848745.89
1 -1762025.80
-5493907.65
2 -1645161.76
-3697520.61
3 1,796,387.04
1,945,880.99 -1751639.62
4
2,000,018.73 248,379.11
5
Cash Flow in Payback Completion 2,000,018.73
Year
Cumulative cash flow preceding 1,751,640
break-even point

Payback period (years) 4.88

29
 7. Social and economic benefits
Increment of project capacity will have a paramount importance towards the benefit of
the surrounding residents by helping them to obtain better price and raise their annual
income.
Aside from the increase in income of the promoters, the project would activate the
economy especially in the continuous production and supply of bread.
Being efficient in terms of business returns and thus considered as a role model, we
hope, this project will also encourage other entrepreneurs in the country to engage in
bread bakery trading.

The expected increase in income of the permanent & temporary employees would
eventually contribute to good health & nutrition in the family and allow them to access
better education for their children, improve sanitation and provide for the necessities in
the household. The business will generate in terms of tax revenue. Moreover, the
Regional Government can collect employment, income tax and sales tax.

30
 8. Conclusion and Recommendation:

Usaman Bread Bakery grain trading will endeavour to attain leadership in the supply of bread in
the region. The pursuit of high quality will be the driving force in the business.

To achieve this, the project will use the dedication, experience and skill of its members in key
technical and management positions. Extensive promotional activity will help to ensure that our
customers perceive that they are receiving the best quality bread, on time, and at a reasonable
price.

The demand for bread is increasing with the growing awareness among the public, this
business has great potential. It is therefore concluded that the business is financially
viable. The demand for quality bread is strong and growing, situations that will ensure
sufficient return to investment.

31