PROJECT PROPOSAL ON WOOD MANUFACTURING

COMPANY PROFILE, BUSINESS PROPOSAL & EXPANSION OF THE PROJECT

FOR LAND REQUEST

PROMOTERS: - AKMEL, FISTUM AND HIS FRIENDS

SUBMITTED TO: MATTU TOWN INVESTMENT AND INDUSTY OFFICE AFFAIRS

August , 2024
MATTU ,OROMIA
 TABLE OF CONTENTS
EXCUTIVE SUMMERY ................................................................................................................................ 3
1. INTRODUCTION ............................................................................................................................. 4
1.1. BACKGROUND OF THE COMPANY ................................................................................................ 5
1.2. INVESTORS’ PROFILE ..................................................................................................................... 6
1.3. OBJECTIVE OF THE COMPANY....................................................................................................... 6
1.3.1 General Objective ............................................................................................................................ 7
1.3.2. Specific Objectives .......................................................................................................................... 7
2. PROJECT DESCRIPTION .................................................................................................................. 8
2.1. DESCRIPTION OF PROJECT AREA ................................................................................................... 8
2.2. BENEFIT OF THE PROJECT ............................................................................................................. 9
3. MARKET DEMAND AND PRODUCTION PROCESS ........................................................................ 10
3.1. PAST SUPPLY AND PRESENT DEMAND........................................................................................ 10
3.2. TARGET CUSTOMERS .................................................................................................................. 10
3.3. PROJECTED DEMAND ....................................................................................................................... 10
3.3. SOURCES OF INCOME ................................................................................................................. 11
3.4. MARKETING STRATEGY .................................................................................................................... 11
4. PRODUCT DESCRIPTION .............................................................................................................. 13
4.1. PLANT CAPACITY ......................................................................................................................... 13
4.2. THE PRODUCTION PROGRAM ..................................................................................................... 14
4.3. PRODUCTION PROGRAM ............................................................................................................ 14
4.4. RAW MATERIALS AND INPUTS ......................................................................................................... 15
5. ORGANIZATION AND MANAGEMENT ................................................................................................. 18
6. ORGANIZATION AND MANAGEMENT SUMMARY ..................................................................... 19
7. MANUFACTURING OF OFFICE & HOUSEHOLD FURNITURE ........................................................ 20
8. SOCIO ECONOMIC BENEFIT\ ....................................................................................................... 22
9. CORPORATE SOCIAL RESPONSIBILITY ......................................................................................... 22
10. ENVIRONMENTAL IMPACT .......................................................................................................... 22
11. FINANCIAL ANALYSIS ................................................................................................................... 23
12. PROFITABILITY ............................................................................................................................. 24
13. PAYBACK PERIOD ........................................................................................................................ 24
14. CONCLUSION ............................................................................................................................... 24
15. APPENDIX .................................................................................................................................... 26

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EXCUTIVE SUMMERY

Furniture and Wood product Manufacturing

Project Name

Project Promoter Akmel, Fistum And His Friends Micro Enterprise

Nationality Ethiopian
Project location Oromia region Mattu city
Project Composition Manufacturing of wood product such as Chip Wood, veneer
sheets, wood-based panels wooden boards Office and house hold
furniture, Bee hive and etc
Project Purpose Requesting 4,500 m2 land for expansion investment
Project Capital:
Fixed Capital = Birr 4,250,000.00 85.%
Operating Capital = Birr 600,000.00 12%
Pre Operating Cost= Birr 150,000.00 3%
Total Capital= Birr 5,000,000.00

Equity Finance:
Owner Equity (20%) = Birr 1,000,000.00
Bank Loan (80%) = Birr 4,000,000.00

Market Share The project will supply 100% of products for Domestic market.
Production at full capacity The factory will produces Chip Wood 8000 in pc veneer sheets
8000 in pc wood-based panels 7000 in pc wooden boards 7000
in pc Household furniture in pcs 5000, Office Furniture in Pcs
10,000 and Other furniture’s in Pcs 5000, Beehive 5000.
Employment Opportunity The total manpower required for the plant will be 100 employees
at full capacity.
Permanent workers 67
Temporary workers 23

Benefits of the project For The Manufacture and Supply of Quality Furniture and wood products,
region/ country Source of Revenue, Employment opportunity, Benefit for the
Local Community Stimulate the Local Economy, Technology
Transfer, Agricultural and Environmental development.
Environmental Impact Not have any adverse impact on the environment.
Gross revenue at full capacity 15,270,499 13
Birr
Gross profit at full capacity Birr 6,125,748

Contact person Mr. Andinet Abera

Cell phone: 0917778953
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 1. INTRODUCTION

These days by realizing the positive role that the micro enterprises sector plays in the
development endeavors, the government of Ethiopia in general and the Mattu City administration
in particular, creating a favorable investment atmosphere for micro enterprises and business
activities with support to significant role of the state with greater domestic participation are in
progress.
Among others, significant progress was made in reducing the bureaucratic bottlenecks and
regulatory impediment to doing business, the time taken to get investment license reduced and
procedures to access land and credit service for investment become simplified, mainly following
the full scale implementation of Business Process Reengineering.
Moreover varies laws and policies have been formulated and enacted officially in favor of the
private sector promotion and expansion. To this effect the government took actions of privatizing
some of its economic premises, of creating multiple investment opportunities and other
motivational incentives which succeed in pulling investors from international, national and local
areas.
Besides one of the strategies for poverty alleviation is encouraging private investment and small
scale enterprises especially in the area of manufacturing industries as the sector is one of
employer of the young working people and helps in economic development. On the other hand
agro processing industries with firm relationship with agricultural sector are encouraged to
develop and expand.
The promoter of this project Akmel, Fistum And His Friends Micro Enterprise hopes this
project to be the first of many other developmental projects to follow as they look forward to
share the responsibility of, reducing unemployment. Therefore, it is the ample opportunity and
cumulative experience which makes the owner to envisage this wood product Equipment Factory
in Mattu city with name of Akmel ,Fistum And His Friends Furniture Micro Enterprise wood
product Factory.
Likewise, modern wood furniture manufacturing industry supply is very low regarding quantity
and quality both at local and national level. The promoter has considered many investment
opportunity such as, Metu town as interlink various surrounding districts, and its strategic
location is among others. In addition to these, various public and private institutions are,
inhabited in the town.

Generally, these all factors are reason the promoter to be, established a modern wood furniture
factory in Metu town that will be a modern wood processing manufacturing workshop center and
set a good example in the provision of quality both household and office furniture products at
affordable price that may be transferred to other area. Moreover, the enterprise will be possessed
wide range of economic and social benefits such as increasing the level of investment, tax
revenue, employment creation and import substitution. Finally, the enterprise will be, technically
feasible, financially and commercially profitable as well as socially and economically
acceptable.

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 1.1. BACKGROUND OF THE COMPANY

Manufacturing of Office & Household Furniture is an invention of Akmel, Fistum and His
friends . The enterprises is established in 2013; located in Oromia region, Mattu city. It is
established as a furniture company specializing in custom furniture for the high-end residential,
resort, and commercial market and therefore, arose its operation with producing Bee Hive only.

Being attracted by the profit potential of the industry and request from customers for other
related products the company added other items in its product line. Through time, the company
has got itself as best quality furniture producer both for households and offices. By now the
enterprise is producing more than 10 types of products categorized as household furniture &
fixture, office furniture and hotel furniture & fixture. When it starts its operation, the company’s
initial capital was ETB 500,000.00. And also, working place was the property of mattu town
municipality, which means The company didn’t has its own working place till now. From this
startup the current capital grown in to 5 million. At the time where manufacturing joined the
industry, its workforce was only 19 employees. The now existed situation created an
employment opportunity for 39 people. These labor forces are at different levels of skill.
Manufacturing believes in treating its customers with respect and faith. It grows through
creativity invention and innovation. It integrates honesty, integrity and business ethics into all
aspects of its business functioning. Our vision will be accomplished by sharing the
responsibilities of work with all employees. We want our customers to experience the warmth
and comfort through respect and trust. We will achieve our aims through implementing values
with focus on quality, value for money, satisfy customers’ needs, and build relationships.
• Vision: Being a Chief Manufacturer of High Quality Products by Continuing the Legacy of our
Company!
• Mission: To Satisfy Customer’s need Through Reliability and Flexibility!
The promoters and their employees have long experience and proven record of achievements.
They have sufficient educational background and diversified work experience that would result
in successful operation of the project.
Since the promoters have extensive experience in the furniture-making industry, and has sound
managerial experience and best performance track of records both as employed and employer the
company has been progressive and profitable starting from its establishment. Both its production
and sales volume has shown growth almost on yearly basis.
In addition, the establishment of this furniture manufacturing factory has been generated
revenues to the regional government in the form of VAT, profit tax and income tax.
The favorable environment created for the investors in the country encouraged and motivated
this enterprises. The company has been manufacturing wood products for the last 4 years and
now planned to envisage the expansion of a factory for the manufacturing of high quality
furniture products to minimize the demand supply gaps.
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 1.2. INVESTORS’ PROFILE
The promoters are an Ethiopians, who had various working and managing experiences. They
graduated in degree from accreted University. The promoters were also employed for 1 year in
an organization before they committed their self to their own small scale furniture production
facility. All of the members were born and grown in Metu, Oromia, Ethiopia. It is, organized
under Wood production businesses, which the whole town & surrounding areas have been
benefit from its out puts. Beside this, it has been creating job opportunity for more than 39
persons. Currently, it has been, transformed into Middle Scale Enterprise, which recognized by
Regional Government for it is quality and efficiency effort of the enterprise performance. They
have been actively participated in various local and regional development programs through their
;ideas and financial support. They have been engaging in construction business in which
nowadays the enterprise is, found at a good financial position with well-organized business-
working experiences in aforementioned business sector. The members are, became the role
model of hard working in the field. With such business experiences, they are confident to make a
difference in the envisaged wood furniture factory project and contribute in overall
development activity of Metu town and surrounding areas as condition permits.
Likewise, with better knowledge of wood business activities and ambition to make a difference
in the provision of quality processed wood, furniture (household & office), various agricultural
equipment, and wood panels’ products for Metu an customers/clients. The enterprise can play
good role in promoting government strategy to enhance private investment development in
particular and the national economy of a country in general.

1.3. OBJECTIVE OF THE COMPANY

The objective of Manufacturing of Office & Household Furniture is to manufacture and supply
varied range of furniture products that can be used in individual homes, offices, hotels and
recreational areas. It aims at running an eco-friendly furniture manufacturing plant and
contributing its share towards conserving natural resources of our planet by fostering innovation
and sustainability.
The company plans to make use of new advanced technology for the production to achieve best
quality and efficient use of resources. In doing so, the factory will be in a position to discharge
its societal responsibility by using its expanded factory and facilities to serve as a training ground

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for technical and vocational fresh graduates. Its objective towards wood manufacturing industry
is to see the sector to be competitive enough in all dimensions.
For these, manufacturing plans to adopt modern production systems and technologies to upscale
quality standards of furniture products of the country. It will work at its best to secure economics
scale of operation and making products available in every corner of the country at affordable
price. Providing the required wood related inputs and component parts for booming construction
industry of Ethiopia by being an alternative source of supply is an objective to be pursued at
manufacturing of office & household furniture. It works to be supporting hand for the overall
growth expected to come in our country.
The main objective of the promoter is to contribute for the national economy in the area of
furniture manufacturing. In addition, the project will generate revenues to the regional
government in the form of sales tax revenue, profit tax and payroll taxes.

1.3.1 General Objective

As already pointed out the objective of this schema is to seek and find an investment license for
establishing a modern wood furniture factory.

1.3.2. Specific Objectives

It has the following community driven objectives:

To established a modern wood furniture Industry with environmentally friendly

To supply various office & household furniture products

To supply various agricultural equipment and tools

To supply parquet panels & related products

To offering new different processed wood products that will be used for various purposes

To create employment opportunity for local community

To substituted an imported wood furniture product and safe currency
 To generate income for promoter & government in the form tax

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 2. PROJECT DESCRIPTION
The company is performing its operation within limited land and it is rent from Mattu Town
municipality. Manufacturing of Office & Household Furniture plans to expand a furniture
manufacturing company which can produce 70,000 sets of finished products per year at full
capacity. The company will mostly use local materials. The factory is expected to create job
opportunity for more than 36 employees and heavy duty machineries. It will have different stores
for raw-materials, semi-finished and finished items. The manufacturing company plan to get its
own wide land/work place which is not rent for further investment.
The expansion project designed to render a multipurpose giving business and workshop facility
which will in turn plays significant role towards solving shortage of production facility. Having
difficulties of operation faced due to congested working capital & technology the company is in
a problem to work to meet the demands of the market. So the investor is seeking their own
working place for the expansion of a furniture making factory.
Manufacturing of Office & Household Furniture intends to integrate different strategies in
manufacturing different types of modern furniture. Its plan is to have a cost effective business
that will reduce the production cost starting from the initial stage of woodcutting to retailing of
the final product at an affordable price.
On the approval of this project and subsequent execution of related tasks the investors will be
among the pioneers to invest in the first modern furniture factory in Mattu in order to meet the
region’s transformation and development goal as well as bringing competitiveness and
excellence in the industry. By now, the promoters is ready to invest and expand in this business
by providing the capital to cover the start-up expenses and apply key strategies to ensure its
success.

2.1. DESCRIPTION OF PROJECT AREA

 Location
In project under consideration will be implemented in Mattu-city administration. Mattu city is
found at distance of about 600 km away from Addis Ababa.
The reason of selected the location for the proposed project is:
Its proximity to the city administration with good scenery and weather condition.
Its proximity to serve as and facility like road, transport and utilities like electricity, water and
telephone line.
The existing conductive social and investment situational and increase number of private
investment in the area.
Its accessibility and easy of future development are some of the reasons behaved selecting the
area for the propose project.

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  Land Required
For the proposed set up of wood product factory, a total of 400 hectare, which is equivalent
400,000 square meters, is required. This land requirement includes space for the installation of
plant and machinery, management office and show room, finished product and parking.

Table; Land use Plan

SN Description Land Requirement(M2)

1 Production Hall
1.1 Workshop 500
1.2 Inspection Room 500
1.3 Packing Area 200
Total production Hall 1,200
2 Warehouse
2.1 Raw Materials and Inputs 400
2.2 Finished Products 700
Total Warehouse area 1,100
3 Office and show room
3.1 Office 200
3.2 Show Room 200
Total Office & Showroom 400
4 Waste Accumulation area 1,000
5 Garden and refreshment area for coffee brake 500
Total 4,000

2.2. BENEFIT OF THE PROJECT

The envisaged project deemed to contribute to the economic development of the town in the
following ways:
 Source of Employment
One of the problems that our town is faced is unemployment. Therefore, the current objective of
our company is working on tackling the problem of unemployment either through creating self
employment or employment in other organization. Hence, the envisaged wood product factory
deemed to contribute somewhat to solve the problem of unemployment. Upon completion, the
project assumed to generate employment opportunities for about 57 on permanent and temporary
basis when fully get operational.

 Source of Government Revenue

To redistribute income, the government collects different forms of taxes from different business
undertakings and individuals as income tax. Among the different forms of taxes, business
income taxes are collected from undertaking business activities. Therefore, the project will serve
as sources of revenue for the both for the town.

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  Sources of Social Service
In addition to serving as a source of employment and income for the region, the project renders
social services for different group of people. Hence, it is also provide the following services:
Serve as a source of mental satisfaction for the different users,
Since, the center encompasses different recreational areas; it will divert the attention of the users
from different evil deeds.
It deemed to minimize the demand for wood product factory and other bundles of services in the
area. Furthermore, it serves as the pilot experience and ground for other investor to enter in to
such kinds of woodwork investment.

3. MARKET DEMAND AND PRODUCTION PROCESS

3.1. PAST SUPPLY AND PRESENT DEMAND

The demand for high-quality contemporary furniture in particular is increasing in the domestic
and international market due to technological advancement, augmented construction population,
the economic boom, and other factors. The exponential growth in the real estate industry has
seen an increase in the demand for office and home furniture. The construction of multi-star
hotels has also created the need for a reliable furniture market. While the demand for high-end
furniture is soaring, there are a limited number of modern furniture factories producing quality
furniture. Instead, much of the office and home furniture is being imported. This made furniture
too expensive, and it created a heavy drain on the country’s foreign currency reserves.

3.2. TARGET CUSTOMERS

The target customers of this envisaged project includes:-
1. Households
2. Business Community such as, Hotels & business organizations
3. Ilubabor zone agricultural office affairs
4. Small & Medium Enterprise
5. Governmental and Non-governmental organizations
6. Mattu University

3.3. PROJECTED DEMAND

Based on available information the demand for office & household furniture, beekeeping and
other agricultural equipment will be increase for next five year in Ilubabour zone, due to some
NGOs, such as (SNV Ethiopia, GIZ, SLMP, & ECFF) has a plan working on quality honey
production with selected farmers in Ilubabour zone. The program includes supporting and
sustains environmental reclamation through provision of environmental friendly honey
production scheme. These NGOs will expected to provide beekeeping equipment with
accessories for selected farmers in order to enhance honey & related activity development which
it indicate the required additional beekeeping and other related equipment in Ilubabour and
surrounding areas.
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 3.3. SOURCES OF INCOME
The enterprise, will ensure that it leverage on the enterprise strength and opportunities available
both in Metu town and other Ilubabour zone markets to generate enough income that will help
the enterprise drive the business to stability. The enterprise will go all the way to explore every
available sources of income in the woodworking industry. Below are the sources the enterprise
intends exploring to generating income for proposed wood furniture factory products:
 Office and household furniture & equipment
 Beehives, honey extraction, starter kit, protection kit, and bees products salvage &
upkeep materials
 Wood processing panels
 Other agricultural equipment, etc

3.4. MARKETING STRATEGY

Our main strategy is to position ourselves at the top of the quality scale, featuring our
combination of super technology and fine old-fashioned woodworking, for the buyer who wants
the best quality regardless of price. Tactics underneath this strategy include continuo’s research
and development related to new designs and new technology, choosing the right channels of
distribution, and communicating our quality position to the market. The research includes
customers’ comments and order specifications as additional input.
Our marketing strategy is based mainly on making the right information available to the right
target customer. We can’t afford to sell people on pure competitive priced products because most
don’t have the budget. What we really do is to make sure that thus who have the budget and
appreciate the product the products know that it exists, and know where to find the best product
as per their desire.

3.4.1.Target Market Segmentation Strategy

Our segment definition is of itself strategic we seek the buyer who appreciates two attributes: the
quality of furniture workmanship and the excellence of design, with an understanding of
technology and ergonomics built in. The project will supply 100% of products for Domestic
market.

3.4.2. Pricing strategy

We will maintain our pricing position as a premier provider. We are the best product available,
for the most discriminating consumer. We intend to maintain our separation from the price
competition at the lower end of the business.
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Put plan calls for no significant changes in pricing. Our company’s goal is to provide good
quality furniture and timber for a reasonable price while still maintaining healthy profit margin.

3.4.3.Promotion strategy
The promotional strategy targets both potential retail outlets and potential consumers. For
retailers and organization that purchase in bulk will have a makeup on the product, i.e. the price
set for having a discount comparing to the retail price. Moreover, we plan to produce a catalogue
featuring our product lines and samples of our products and distribute to the potential and
targeted customers. The wood finish samples used to show customers the finishes and stains
available with our product lines.
A brochure has been developed on each product line that is distributed to interested consumers
through the retailers and also our marketing staff the brochures feature pictures of each product
and highlight the unique design and quality of our products electronics media like television and
FM radio, other media of the private and government owned published news papers
advertisement are considered in the promotion strategy.

3.4.4.Distribution strategy
Our furniture’s are distributed through several channels depending on the needs of our targeted
customers. The company truck and vehicles used to ship bulk orders to customers. The channel
of distribution varies depending on the customers and size of

3.4.5. Positioning statement

For discriminating our products from the competitor’s products’ our product line offers exquisite
workmanship and design combined with state-of-the-arts ergonomics and technology. We also
include the customer interest on the style and design of the furniture before production.

3.4.6 Analysis of competitive position

The plan product line has several competitive advantages over the competitors including unique
design and quality for a reasonable price our product line is flexible in that the customers can
choose different finishes to satisfy their style and design preferences. In addition to that there
area not sufficient pine and furniture manufacturing plant in Addis Ababa to fill the demand and
supply gap of the product, hence it also gives us additional advantages for the plant to get market
share since the selection of the sector is at right time, and excellent position to capitalize the
opportunity.

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 4. PRODUCT DESCRIPTION
Our company’s plan is to establish wooden furniture manufacturing plant in Kolobo town the
main products of the manufacturing plant are different wooden office and household furniture.
The productions of furniture are classified in three sub categories namely;
a) Office furniture’s:- includes managerial tables, office shelves & cabinets, secretarial
tables & chairs, and computer tables.
b) Household furniture’s:- like dining room furniture’s living room furniture’s sofa sets,
and room sets.
c) Other furniture’s:- including hotel, restaurant, café, standard and non standard doors,
kitchen cabinets, built in cupboards and institutional furniture’s and beehive.

4.1. PLANT CAPACITY

The manufacturing of wooden furniture is based in two main conditions. The first and major one
is the increased market requirements of the demand for the furniture. The second one is the
availability of raw materials and this has a direct impact on the production capacity of the plant.
The plant is planned to be equipped with latest high technology machines and equipments so that
it manufacture furniture with classic quality and quantity. In addition to the advanced technology
of the machineries, the project highly emphasizes on the interest of the customer, design,
painting and finishing style of the furniture, our plant marketing strategy is to manufacture
products based on the interest of the customer, the client advice the type and style of the
products; and then, we manufacture the products including the customer need and add our
professional value.
Table-Projected plan of products in number of production in cumulative items in potential
capacities
Description Year
1 2 3 4_10
Capacity utilization (%) 70 80 90 100
Household furniture in pcs 2,100.00 2,400.00 2,700.00 3,000
Office Furniture in Pcs 3,500.00 4,000.00 4,500.00 5,000
Other furniture’s in Pcs 3,500.00 4,000.00 4,500.00 5,000

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 4.2. THE PRODUCTION PROGRAM
The production program of wooden furniture manufacturing plant is designed in such a way that
at the initial year, it operates at 70%, 80%, 90% and 100% respectively for 1st, 2nd, 3rd and 4th
year respectively. Thus, from the fourth year onwards the plant will continuously operate at
100% of its installed capacity.
The following assumptions were considered in preparing the production plan;
 The liquidity of the project which starts from year 1st grants sufficient working capital that
safeguards the provision of uninterrupted raw material supply.
 As a new entrant to the market, due attention is given to the position of our competitors and
the anticipated market share of the plant.
 The efficient market promotion & pricing strategy adopted and the proper utilization of
resources creates additional new market which results the production volume to increase by
10% each year starting from the second year of the projected period.

Products Discription Products(No.) Unit Price of the

Annual Seal
project in Br
Household furniture in pcs 3,000 3500 10,500,000.00
Office Furniture in Pcs 5,000 5000 25,000,000.00
Other furniture’s in Pcs 5,000 3500 17,500,000.00
Total annual Income 53,000,000.00

4.3. PRODUCTION PROGRAM

The production program is worked out by deducting Sundays and public holidays and assuming
that maintenance works will be carried out during off-production hours. The machine is assumed
to start its operation at 40% of its rated full capacity and progressively increase to 60%, 80% and
100% in the second, third and fourth year, respectively. The production program is provided in
the Table below;
S.No. Description Phase 1 Phase 2 Phase 3 Phase 4
1 Working hours per shift 8 8 8 8
2 Number of shifts 2 2 2 2
3 Working days per year 312 312 312 312
4 Capacity Utilization (%) 40 60 80 100
Total set/piece per annum 3,870 4,644 5,573 6,687

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 4.4. RAW MATERIALS AND INPUTS
Most of the raw material will be acquired locally and these raw materials are easily available in
the market. There are some materials which will be imported. The list of raw materials and
quantity required per production capacity is seen in the Table below;

S.No. Item Name U.O.M Quantity

1 Local Pines(Timber) M3 200
2 Fiber KG 1000
3 Foam 200 x 100 x 1 Pcs 1000
4 Bonded Foam 200 x 100 x 4 Pcs 500
5 Wanza Hard Wood M3 100
6 PP Bag Meter 20
7 Kaki Meter 60
8 Rubber Pcs 20
9 Adhesive Glue KG 1500
10 Metallic Stucco Gallon 160
11 Normal Stucco Gallon 160
12 Lacquer Gallon 200
13 Sealer Gallon 200
14 Sprusso Ctn 60
15 Shoe Nail KG 1000
16 Nail # ,4,5,6,8,10 KG 1000

A. RAW MATERIALS NEEDED(IMPORTED)

Item Name U.O.M Quantity

tim
1 MDF Normal 3mm,6mm,12mm,18mm Pcs 500
2 MDF Walnut Veneer Laminated 3mm,6mm,12mm,18mm Pcs 500
3 MDF Ask Oak Veneer Laminated 3mm,6mm,12mm,18mm Pcs 500
4 MDF UV Laminated Different Shades And Textures 18mm Pcs 300
5 Sofa Fabric Meter 2000
6 Stainless Caster Footing Pcs 2000
7 Screw #2, #3, 4# , 5# ,6# ,8# 10# Pkt 1000
8 Adhesive KG 1000
9 Thinner KG 2000
10 Staple Wire Pkt 1000

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B.UTILITIES CONSUMPTION & COST

A number of utilities would be put in place in order to ensure smooth functioning of the project.
These utilities include:
Water Supply Electricity supply
Telephone line
The total annual cost of utility is estimated at ETB 112,074.22. The annual utility requirement
and cost are indicated in the Table.\
Counter Rate
Annual
S. No. UTILITIES UOM Unit Cost Service Charge Total Cost
Consumption per year

1 Electric Power KWh 876,000 1.14 270.72 998,910.72

2 Water m³ 29,200 11.60 168.60 338,888.60

3 Telephone - National calls Minute 43,800 0.83 228.00 36,582.00

1,374,381.32
TOTAL COST

C. PRODUCTION PROCESS
In the manufacturing process of furniture there are several stages of process. All process must be
done in furniture making to get maximal quality and satisfaction from the buyer. These are some
of the steps in production process:-
1. Preparing of timber
Log wood, a wood result of hewing is distributed to sawmill to start the manufacturing process
of furniture. The logs are split by sawmill according to the required size and placed outdoor in
the sun for a week to reduce the moisture content of the wood before it goes to the kiln machine.
In the Kiln dry machine the drying process (kiln dried) of the wood with specific heating system
takes place in order to reduce the moisture content to 12-15%.
Then the wood (timber) will be checked and measured to ensure size and moisture contents
within requirements. Each bundle is documented and release to production floor for processing.
2. Cutting and molding
Selecting from the received timber bundle, each piece of timber is carefully cross cut into lengths
required. Cut timber is then bundle on pallets, which is then processed at the molding section to
achieve the shapes and size required.
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Documentation and identification of each bundle is properly done here to ensure chain of
custody procedure is followed.
3. Component fabrication
Molded timber is processes by different machines depending on its shape and design to acquire
its features. These components are then carefully sanded to round all sharp edge and smoothen
out all surfaces.
4. Assembly
Each component will be assembled according to from the part the intended furniture.
Joints are glued together to form a strong bond. Assembled parts are then stacked together and
labeled for traceability.
5. Finishing & packing
Assembled parts are dipped in teak oil and wiped dry to achieve the brown/ teak finishing.
Teak oil acts as repellent of wood destroying insects, fungicide, as well as providing some
weather and UV resistant to the wood.
These parts are left for a period of time for the teak oil to cure and dry. They are inspected again
before packed into carbon boxes.
6. Delivery
Finished products will be loaded into container order. These containers are then shipped out to
our customers from all around the country.

5. MANUFACTURING OF OFFICE & HOUSEHOLD FURNITURE

REQUIRED MACHINARY & EQUIPMENT COSTS in Birr
Estimated Unit Estimated Total
Item Name U.O.M Quantity
Cost In Birr Cost In Birr
S.No
1 Wood mither Machine Pcs 1 1,200,000.00 1, 200,000.00
2 Ye ust melagia Pcs 1 300,000.00 300,000.00
3 Foam Bonding Machine Pcs 1 125,000.00 125,000.00
4 Proofing Machine Set 2 500,000.00 500,000.00
5 Power Generator 500 KVA Set 1 1,000,000.00 1,000,000.00
6 Cutter Machine Set 1 300,000.00 300,000.00
7 chokolare Set 1 300,000.00 300,000.00
Total 3,725,000.00

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5. ORGANIZATION AND MANAGEMENT
 PROPOSED ORGANIZATIONAL STRUCTURE
Organizing, the process of structuring human and physical resources in order to accomplish
organizational objectives, involves dividing tasks into jobs, specifying the appropriate
department for each job, determining the optimum number of jobs in each department, and
delegating authority within and among departments. The framework of jobs and departments that
make up any organization must be directed toward achieving the organization’s objectives. In
other words, it must be consistent with its strategy.
Fig ; The production process of furniture manufacturing

Wood comes at Wood comes to Furniture designing

shaper machine machine man on CAD

Carpenter shape the Furniture comes to Furniture comes

wood in to furniture spindle/molding to carver for
machine carving

Furniture goes to store Furniture comes to Carpenter

or for polishing inspection before assembles the
flinching furniture

a. PROJECTION OF REVENUE AND EXPENSES

REVENUE PROJECTION
The reliability of the captured demand, the forecasted production plan and feedback of the
market survey for product pricing were critically considered for the revenue projection hence, the
revenue projection for the projection for the project period by major product categories is
presented in the annex.
 EXPENSE PROJECTION
The expense projection is based on the main general expense in which the plant will have in the
forecasted projected period. The bases for the expenses are the current price of the items
described and the future expected growth of the prices in addition to the performance of the
plant. The projected expenses are presented in the annex with major categories

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  OPERATING ACTIVITY SCHEDULE
The successful implementation of any project proposal depends on the planning of core activities
to be performed during the project phase, and meeting the desired result by close follow up and
due attention, therefore, considering that the basic assumptions will be realized, the pre-operating
activates to be undertaken, with their corresponding time table set for the implementation of the
project are presented here under.

 Table pre-operating activity schedule

No Item description Months
1 2 3 4 5 6 7 8 9 1 1 12
0 1
1 Getting the investment license and
land for expansion
2 Registering the business
3 Applying &getting the bank loan
4 Contracting machinery
5 Construction of civil works
6 Plant & machinery erection
7 Man power requirement
8 Purchase of fixed assets & raw
materials
9 Trial production

6. ORGANIZATION AND MANAGEMENT SUMMARY

 ORGANIZATION STRUCTURE
The organizational structure of the business was designed based on the function of the overall
business towards the achievements of the objectives, and selecting the best way of managing the
organization resources (human resource, capital, information and technology) effectively and
efficiently.
The company has been structured by activity lines to attain specialization and maximum possible
efficiency in the lines. The proposed organizational set up comprises finance and administration,
production, and marketing and sales departments. The organizational structure depicting the
responsibility and authority relationship of the plant is presented below.

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 Organizational structure of our furniture manufacturing company

General
manager

Legal advisor Secretary

Administration Marketing & Production head

&finance head sakes head

Furniture
Finance Personnel & production
general service

7. MANUFACTURING OF OFFICE & HOUSEHOLD FURNITURE

 HUMAN RESOURCE REQUIREMENT & SALARY EXPENDITURE in Birr

EMPLOYEE POSITION
Monthly Salary Total Monthly
S.No. Skilled Staff Head Count Per Head Salary Annually

1 Technical Director 1 10,000.00 10,000.00 120,000.00

2 Accountant 1 6,000.00 6,000.00 72,000.00

3 Cashier Receptionist 1 3,000.00 3,000.00 36,000.00

4 Production Department 4 5,000.00 20,000.00 240,000.00

5 Finishing Expert 3 5,000.00 15,000.00 180,000.00

6 Security Guard 2 800.00 1,600.00 19,200.00

7 Janitor 2 800.00 1,600.00 19,200.00

8 Driver 2 1,500.00 3,000.00 36,000.00

Total Skilled Staffs 16 60,200.00 722,400.00

Unskilled Laborers 8 500.00 4,000.00 48,000.00

Sub-Total 24 32,600.00 770,400.00

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 Employee Benefits (15%) 115,560.00

Total 885,960.00

Casual Laborer 12 1,000.00 12,000.00 144,000.00

Grand Total 36 1,029,960.00

 SUMMARIZED STAFFING PLAN

TYPE OF EMPLOYEE Unskilled Skilled Total

Permanent 33 67 100

Casual 8 11 19

TOTAL 20 16 36

 TOTAL LAND LAYOUT

DESCRIPTION Total (m2) % Share
No.
1 Carpenter/woodwork area 150 15.79

2 Sofa production area 100 10.53

3 Finishing area 100 10.53

4 Tailoring section 15 1.58

5 Sofa assembly area 50 5.26

6 Display Section /show room 100 10.53

7 Office Area 12 1.26

8 Reception 12 1.26

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9 Warehouse/Store 45 4.74

10 Loading & Unloading 100 10.53

11 Security 100 10.53

12 Free space & Other 166 17.47

TOTAL PLOT REQUIRED 950 100

8. SOCIO ECONOMIC BENEFIT\

One of the problems that our country faces is a high unemployment rate. The current objective of
the government is tackling the problem of unemployment and fostering the development process
either through creating self-employment or subcontracting other organizations.
The project will generate more than ETB 600,000 incomes for the Government in terms of
payroll tax. The project will also generate around ETB 500,000 in terms of profit tax revenue per
annum for the country.

9. CORPORATE SOCIAL RESPONSIBILITY

Social Responsibility (CSR) a leading principle of top management and of entrepreneurs. The
promoter expects the employees to reexamine their pattern of behaviors and begin their journey
toward a sustainable approach that is integrated into the business strategy. To that end, he will
ensure skill and technology transfer to small and medium scale enterprises is achieved by
introducing training and experience-sharing programs. These enterprises may be used as
subcontractors. The company will bring professional people from Sweden in order to train local
people on international and modern furniture factories’ standard. It plans to add value to street
youths and children live by training them on various job skills in the company and by giving
opportunity to practice. It will also provide continuous training of staff members and equip to
become self-employed

10. ENVIRONMENTAL IMPACT

Furniture has a positive contribution to sustainable development that aims to make the human
society to live in harmony with nature at high level. Wood, especially from sustainable
harvesting practices has been shown to be the best material to use for many different applications
as it has a very minimal impact on the environment compared to other materials such as metals
and plastics.
The use of wood was found to be the most favorable in terms of minimizing the impact on the
environment. Wood harvested from sustainable logging practices is a renewable resource
whereas other materials (such as steel, aluminum and plastic) are derived from non-renewable
resources. The embodied energy of wood is very low compared to metals and plastics and is a
measure of the fact that the production of metals and plastics is a high-energy intensive process.
The embodied energy of wood is largely derived from the energy required to dry the timber. In

22
many environmental impact categories, wood has been found to be superior to either metals or
plastics. In many examples, timber has been considered to be CO2 neutral when burned for
energy production since the amount of CO2 released is balanced by the uptake of CO2 from
trees.

11. FINANCIAL ANALYSIS

 ASSUMPTION
The financial analysis of manufacturing of office & household furniture Expansion Project is
based on the data provided in the preceding sections and the following assumptions.
• Built up area 4,000Sq.m
• Revenues 10% every year after full capacity
• Expenses 10% every year after full capacity
• Working Hour 2 shifts
• Working Days 312 days per year
• Working Capital 5% of total Investment Cost
• Cost of Promotion 2% of Sales of Service
• Maintenance & Repair 2% of Equipment per year
• Depreciation 10% of Equipment per year
• Repair and costmaint’ce5% of construction & machinery
• Legal Reserve 5% of Gross Profit
• Profit Tax 35% of Gross Profit
• Source of finance 80 % loan
• Bank interest 14%
• Discount cash flow 10%
• Accounts receivable 15 days
• Cash in hand 5 days
• Accounts payable 15 days
• Raw material local 5 days
• Work in progress 5 days
• Finished products 5 days

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 12. PROFITABILITY
The financial statement prepared based on the projected income statement reveals that the project
would generate a net profit throughout its project life. In the 1st year of operation (1st phase,
20%) Birr 200,000, 2nd year (2nd phase, 40%) Birr 400,000, 3rd year (3rd phase, 80%) Birr 1.2
million, and 4th year (4th phase, 100%) where the company reaches in to full capacity Birr 5
million. The net cash flow is positive throughout the project life. Therefore, we can conclude that
the project will not face any deficit throughout its life.

13. PAYBACK PERIOD

The payback period is the period required to recover the original investment outlay through the
accumulated net cash flows earned by the project. Accordingly, based on the projected cash flow
it is estimated that the project’s initial investment recovered within 5 years.

14. CONCLUSION
Manufacturing of office & household furniture Expansion Project will use advanced technology
to produces acceptable, high quality and standard products. As it is clearly presented in the
financial analysis, the proposed factory is promising and financially viable. The factory is liquid
starting from the first year of its operation. Since the plant is profitable and can accommodate
employment opportunity for 36 workers. It is beneficial both for the promoter as well as the
country to initiate the business.
The establishment of such factory will have a foreign exchange saving effect to the country by
substituting the current imports. The project will generate revenue in terms of tax for the
government. The competitive advantage of getting ETB 5,000,000 loans for the envisaged
project will have definitely best outcome in various ways.
In addition to serving as a source of employment and income for the region, the project will
render social services for different group of people. Furthermore, it will serve as the pilot
experience and ground for other investors who wish to enter into such kinds of urban
development.

24
25
 15. APPENDIX
15.1. ANNUAL PRODUCTION COST
S.No. COST ITEMS Year 1 Year 2 Year 3 Year 4
1 Raw Materials and Inputs 1,401,900.00 1,682,280.00 2,018,736.00 2,422,483.20
2 Utilities 1,377,834.22 1,653,401.06 1,984,081.28 2,380,897.53
3 Maintenance and Repair 78,010.00 93,612.00 112,334.40 134,801.28
228,000.00
4 Administration Costs 250,800.00 275,880.00 303,468.00
5 Cost of marketing and distribution 30,857.44 37,028.93 44,434.72 53,321.66
6 Other Costs 15,583.01 17,141.31 18,855.44 20,740.98
TOTAL OPERATION COST 3,132,184.67 3,734,263.30 4,454,321.83 5,315,712.66
7 Depreciation - 78,010.00 76,449.80 74,920.80
8 Cost of Finance 116,341.25 116,341.25 116,341.25 116,341.25
TOTAL PRODUCTION COST 3,132,184.67 3,928,614.55 4,647,112.88 5,506,974.71

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 15.2. INCOME STATEMENT
ACCOUNT DESCRIPTION Year 1 Year 2 Year 3 Year 4 Year 5
Sales Revenue 22,010,000.00 26,412,000.00 31,694,400.00 38,033,280.00 41,836,608.00
Other Income 440,200.00 528,240.00 633,888.00 760,665.60 836,732.16
TOTAL REVENUE 22,450,200.00 26,940,240.00 32,328,288.00 38,793,945.60 42,673,340.16
Cost of Sales 3,132,184.67 3,928,614.55 4,647,112.88 5,506,974.71 6,057,672.18
GROSS PROFIT 19,318,015.33 23,011,625.45 27,681,175.12 33,286,970.89 36,615,667.98
Salary & Wages 1,029,960.00 1,235,952.00 1,483,142.40 1,779,770.88 1,957,747.97
Utilities 1,377,834.22 1,653,401.06 1,984,081.28 2,380,897.53 2,618,987.29
Maintenance and Repair 78,010.00 85,811.00 94,392.10 103,831.31 114,214.44
Administration Costs 228,000.00 273,600.00 328,320.00 393,984.00 433,382.40
Cost of marketing and distribution 30,857.44 46,286.16 62,023.46 77,529.32 85,282.26
Other Costs 15,583.01 23,374.51 31,321.85 39,152.31 43,067.54
Depreciation - 78,010.00 76,449.80 74,920.80 74,920.80
Cost of Finance 116,341.25 116,341.25 116,341.25 116,341.25 127,975.38
Miscellaneous 440,200.00 660,300.00 884,802.00 1,106,002.50 1,216,602.75
TOTAL EXPENSE 3,316,785.92 4,173,075.99 5,060,874.13 6,072,429.91 6,672,180.82
GROSS PROFIT/LOSS 16,001,229.41 18,838,549.46 22,620,300.98 27,214,540.98 29,943,487.16
Legal Reserve 1,122,510.00 1,347,012.00 1,616,414.40 1,939,697.28 2,133,667.01
TOTAL PROFIT BEFORE TAX 14,878,719.41 17,491,537.46 21,003,886.58 25,274,843.70 27,809,820.15
Profit Tax 5,207,551.79 6,122,038.11 7,351,360.30 8,846,195.30 9,733,437.05
NET PROFIT AFTER TAX 9,671,167.62 11,369,499.35 13,652,526.28 16,428,648.41 18,076,383.10

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 15.3. PROJECTED CASH FLOW STATEMENT in Birr

Item Year 1 Year 2 Year 3 Year 4 Year 5

CASH INFLOW
Sales Income 22,010,000.00 26,412,000.00 31,694,400.00 38,033,280.00 41,836,608.00
Other Income 440,200.00 528,240.00 633,888.00 760,665.60 836,732.16
TOTAL CASH INFLOW 22,450,200.00 26,940,240.00 32,328,288.00 38,793,945.60 42,673,340.16
CASH OUTFLOW
Cost of Sales 3,132,184.67 3,928,614.55 4,647,112.88 5,506,974.71 6,057,672.18
Salary & Wages 1,029,960.00 1,235,952.00 1,359,547.20 1,495,501.92 1,645,052.11
Utilities 23,403.00 35,104.50 47,040.03 58,800.04 64,680.04
Maintenance and Repair 78,010.00 85,811.00 94,392.10 103,831.31 114,214.44
Administration Costs 228,000.00 250,800.00 275,880.00 303,468.00 333,814.80
Cost of marketing and distribution 4,674.90 5,142.39 5,656.63 6,222.30 6,844.52
Other Costs 313,218.47 344,540.31 378,994.35 416,893.78 458,583.16
Depreciation 113,557.50 102,201.75 103,337.33 103,223.77 103,235.12
Cost of Finance 116,341.25 116,341.25 116,341.25 116,341.25 127,975.38
Miscellaneous 440,200.00 484,220.00 532,642.00 585,906.20 644,496.82
Profit Tax 5,207,551.79 6,122,038.11 7,351,360.30 8,846,195.30 9,733,437.05
Legal Reserve 1,122,510.00 1,347,012.00 1,616,414.40 1,939,697.28 2,133,667.01
TOTAL CASH OUTFLOW 11,809,611.58 14,057,777.87 16,528,718.47 19,483,055.85 21,423,672.64
SURPLES/DEFICIT 10,640,588.42 12,882,462.13 15,799,569.53 19,310,889.75 21,249,667.52

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IV. Land Use & Action Plan
The establishment of the project will take 24 months (2year).

This period is the time required to establish various types of land use activities that include the
following.

 Site clearing and development

 Site grubbing and uprooting

 Bulk excavation of the project site to reduce the elevation

 Preparations of site plan from the condition of proposal block type and size

 Survey and set the blocks location from the site plan

 Material production and transportation for construction and civil works

 Construction of furniture factory building includes, fencing the compound

 Supply of power, water and telephone services the detail feature of project activity is,
listed on action plan table below.

A. Land Use Plan

The total land required for the proposed furniture factory project is, estimated at 4,00(m2 ) in
which a total area for the construction workshop & other buildings will be 3,350m2 as revealed
on Table (A) below.
Table A: Land utilization plan
No Description Size (m2)

1 Construction of workshop 2000

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2 Construction of office, store and guardhouse 1150

3 Septic tank & related facility 500

4 Parking & open green areas 800

Total 4,000

30