Business Plan

For Bank Loan CBE

Hand to Hand Business PLC

BUSINESS PLAN

November 2023

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 CONTENTS

Table of Contents
1. Executive summary..................................................................................................................................3
2 Back ground Information.....................................................................................................................4
2.1 Brief history of the Business.............................................................................................................4
2.2 Business Objectives..........................................................................................................................4
2.3 Credit history and Status of the promoter...................................................................................5
2.4 Purpose and Amount of the loan required..................................................................................5
2.5 Description of company products................................................................................................5
3. SWOT Analysis.....................................................................................................................................6
STRENGTHS..........................................................................................................................................6
WEAKNESSES........................................................................................................................................7
OPPORTUNITIES...................................................................................................................................7
THREATS...............................................................................................................................................7
4 Market Analysis....................................................................................................................................8
4.1 Market Overview.........................................................................................................................8
4.2 Demand and Consumption Pattern of Grains..............................................................................9
4.3 Demand and Consumption Pattern of Pulses...............................................................................9
4.4 Competition...............................................................................................................................10
4.5 Pricing Strategy..........................................................................................................................11
. 4.6 Market Targets...............................................................................................................................11
4.7 Promotion..................................................................................................................................12
4.8 Management Team Members........................................................................................................12
5. Management Plan..................................................................................................................................13
5.1 Personnel Plan...........................................................................................................................13
6. Materials and Inputs..............................................................................................................................14
6.1 Raw and Auxiliary Materials.............................................................................................................14
6.1.1 Purchase Plans of Grains........................................................................................................14
6.2 Sales projections........................................................................................................................14
6.2.1.1.1.1 Production Cost..............................................................................................................16
6.1 Implementation Plan..................................................................................................................17

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 7. Financial Plan.........................................................................................................................................17
7.1 Initial Working Capital Determination........................................................................................18
Table 6 Working Capital Cost for three Months....................................................................................18
7.1.2. Packing Cost.................................................................................................................................19
7.1.2 Salary and benefits’................................................................................................................20
7.1.5 Marketing Cost.......................................................................................................................20
7.1.6 Administration cost................................................................................................................20
7.2Debt Structure..................................................................................................................................20
7.2 Total Loan Requirement.............................................................................................................21
8. Financial Analysis...................................................................................................................................22
8.1 Profitability.................................................................................................................................22
8.2 Projected Cash Flow...................................................................................................................23
8.3 Socio- Economic Benefits...........................................................................................................25
9. Conclusions............................................................................................................................................26

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 1. Executive summary

The present business plan is developed to secure company funding of birr 6 Million
loan to finance business growth. This funding will be used to purchase grains for the
first three months of operation.

The company seeks to increase its effectiveness and efficiencies in grain procurement
and sell these to markets at competitive prices, in a manner that generates fair and
equitable returns for owner, and superior value to our customers. To this regard the
managerial, marketing and financial study of the business has been undertaken in
this document.

Hand to Hand PLC has planned to purchase grain in bulk in order to fulfill still
unsatisfied demand of grain to his customers. The growth of procurement capacity is
expected to contribute substantially to the growth of revenues and profitability.

According to the projected income statement, the project will start generating profit in
the first year of operation. Important ratios show an increasing trend during the life-
time of the project.

.The cash flow statement showed that the business is able to generate positive cash
flows and sufficient cash reserves and also expected to maintain a healthy financial
position over the operation years.

It is therefore concluded that the proposed business is financially viable. The demand
for quality grain is strong and growing, situations that will ensure sufficient return to
owner.

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 2 Back ground Information

The business is based on the idea that to increase grain procurement capacity to expand
market share through competitive pricing and consistent quality. The intended business
is initiated and owned by Hand to Hand PLC.

2.1 Brief history of the Business

Hand to Hand PLC grain trading has been providing customers with the finest quality
cereals and other grains for the last 10 years. We purchase a large volume of grain,
Pulses and Maize from individual farmers and some collectors/small traders to resell to
processors, consumers etc. This allows us to collect from the finest selection of cereals
and grains available anywhere in surrounding areas. Sometimes, we purchase grains
from neighboring Werda (Meki, Marko), to complement and balance our stock
especially during the shortage of production or in dry seasons.

Given the increase of demand, we are planning to expand our storefront and sell direct
to the public. In our expanded market, we will bring our commitment of quality,
freshness and great prices to the public. By purchasing in large quantities we are able
to pass the savings on to our customer.

Hence he got a strong & trustful network as well as a committed team to achieve the
business objectives.

2.2 Business Objectives

➢ Establish grains trade as the leader in selling cereals and other grains in the
region.
➢ Increase the number of our customers buying grains trade by 15%
➢ Establish a yearly continuous availability of food grains for customers that will
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 build customer loyalty.

➢ To provide employment opportunity to the growing labor force of the project

area by employing permanent employees.

2.3 Credit history and Status of the promoter

Hand to Hand PLC has experience in receiving loans. In the company banking
Experience, he has always paid off his balances early and he has managed his financial
obligations with utmost sincerity.

As per the credit information enquiry ID 2064687 dated 16/11/2023 given by NBE and
customer loan profile the customer has a credit relation from our bank.

Name of Type of Amount Outstanding Loan

bank loan granted Date granted Maturity balance Status
CBE Revolving 4,200,000 2014-01-02 2016-09-13 NILL Settled
Abay
Bank Revolving 1,595,880.58 2012-10-15 2014-10-14 NILL Settled
Buna Installmen
Bank t credit 1,700,000 2011-10-21 2013-10-21 NILL Settled
Buna Installmen
Bank t credit 800,000 2011-10-21 2013-10-21 NILL Settled

2.4 Purpose and Amount of the loan required

In order to expanding his operations, increasing its efficiencies and enhancing trade
efficiencies through procurement of quality grain, the bank loan Birr 6,000,000.00 is
required to purchase Pulses , grains and others operational costs.

2.5 Description of company products

Hand to Hand PLC grains trading is specializes in Peas(split, whole),beans(split,

whole),chick peas(Garbanzo peas),Lentils(split, whole),Soybeans and so on,
aggregation and marketing. The company will procure the pulses and grains from the
farmers and private assemblers and sell the grains for Ethiopian consumption and
exporters.

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 The owner will rely on customer feedback, suggestions and sales reports to improve
our grains quality and packaging sizes and distribution networks.

3. SWOT Analysis

Hand to Hand PLC is well informed that there are several grains traders both large and
small in the country which is why our business following the due process of
establishing a business so as to compete favorable with them.

The company conducted SWOT analysis to be able to position the business to

maximize its strength, leverage on the opportunities that will be available, mitigate its
risks and be welled equipped to confront its threats.

This is the summary of the SWOT analysis that was conducted for Hand to Hand PLC
grains trade;

STRENGTHS

High experience of the business owner, Hand to Hand PLC has been in grains trading business
for more than nine years, and more especially the PLC understands very well the market in the
country. Hence he got a strong & trustful network as well as a committed team to achieve the
business objectives this will lead our capacity and experience to do so.

Our business also, proximity to one of the largest grains marketing area in the country
– Addis Ababa, our large national distribution network and of course our excellent
customer service culture will definitely count as a strong strength for the business.

➢ availability of high quality Pulses, Grains

➢ Availability of communication mean’s Tel phone accesses
➢ Availability of low cost labor
➢ Wide range of target market.
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 WEAKNESSES

➢ Shortage of working capital to purchase grain

➢ Less capacity in collection of grains food since it is a seasonal operation
OPPORTUNITIES
➢ Growing number of population has also increased demand of food items.
➢ Good volume of production of grains food in the region;
➢ Government’s policies that reinforce the Crop intensification
➢ Conducive government policy and support

THREATS

We are quite aware that just like any other business, one of the major threats that we
are likely going to face is economic downturn. It is a fact that economic downturn
affects purchasing power. Another threat that may likely confront us is the arrival of
new grains traders in same location where ours is located.

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 4 Market Analysis

4.1 Market Overview

Pulses and Grains remains at the heart of Ethiopia food consumption. Pulses and
Grains consumption is witnessing a steady growth across the country owing to the
rising demand for bakery and fast food products as well as exports among different
classes of consumers and traders.

The increasing number of cafes and food restaurants also exporters in Ethiopia is
driving the market. Moreover, the development of flour milling industry in Ethiopia is
working in favor of the growth of the market.

Pulses become the traditional country’s staple food. Beyond demand for personal
consumption, there is institutional-level demand for Pulses meal from college, hospitals
and armed force.

The flour market is expected to rise in the near future in Ethiopia with the continuous
increase in applications and the introduction of innovative products. The rise in the
consumption of fast food and meal continuous increase in population, and increased
spending on food due to rise in per capita income are some of the major drivers of the
flour market.

Currently there are growing businesses in food products; our business also is among
these businesses. Based on the reality that the market is growing rapidly thus it creates
favorable environment for attainment of the stated objectives of our business.

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 4.2 Demand and Consumption Pattern of Grains

The total grain distribution on demand in the country may have different driving forces.
Large proportion of the domestic consumption from the total supply was demanded by
household agricultural purchasers and consumers for their household consumption and
also food processing industries have a large volume of grain demand to prepare
different food types and exporters as well as wholesalers. Moreover, a significant
amount of grain is also demanded by the government and international organizations
for emergency food aid and safety net program.

The demand pattern also shows that there has been an increasing trend. The number of
establishment for manufacture of macaroni and spaghetti also increases this increment
in the number of establishment causes increment in input demand.

4.3 Demand and Consumption Pattern of Pulses

The main driver of demand for Pulse, expansion of ECX traders and exporters. Beyond
the demand for personal consumption, there is institutional-level demand for Pulses
meal from college, hospitals and armed force.

Government is also responsible for most, if not all, of the school feeding programs in the
country. Pulses is becoming an attractive new grain for health-conscious consumers in
other parts of the world and thus has potential as a profitable export.

Generally, the demand for food is rising due to increasing in urban areas due to
migration of people to urban area, rising incomes and changes in life styles.

The demand for food and drinks is rising in accordance with the increase in population.
Almost 4% of the Ethiopian population lives in the capital city of Addis Ababa, within
proximity to our location, making this an ideal region in which to begin marketing
Pulses and others crops.

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 The demand for pulses and grains is growing quickly as a result of rising incomes and
urbanization. The demand for pulse, grain and maize is rising in accordance with the
increase in population. The number of existing traders is not at par to meet the growing
demand. However, this sector has not yet been developed to any sizeable extent in the
country and as such it is not capable enough to meet the demand of the growing
population. Therefore, the demand for our product is huge due to the fact that these are
products which are consumed daily by everyone in the society as a basic need.

4.4 Competition

The major competitors for the products of the company are grains traders and exporters
in the country. Though there are grains food warehouse in the nearby town, first of all
they are not sufficient and given unpredicted population growth, they cannot succeed to
grow at the same pace.

Furthermore, their system to collect the grains food seems to be highly classic,
whereby they wait the farmers to bring their production. For us, we have a modern
method to collect the grains food in very fresh conditions; we work hand in hand with
the farmers, whereby we accompany them from the beginning of the crop season until
the harvest.

We understand their needs to purchase more. We help them to get all the requirements
at time, in order to purchase more. Hence, to be equipped with such method it will have
a competitive advantage that will allow Hand to Hand PLC grains market to sell more.

The major difference between products supplied by the company and those supplied
by competitors is that the product supplied by our company will be well managed, with
good quality demanded by customers and less cost.

The Company will put more efforts in creating awareness among the customer and
design or developing appropriate promotional strategies. Therefore, the ultimate
competition of the market is purely based on product quality and cost.

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 Generally, the company seeks to establish a competitive edge in its target market
segment by increasing level of customer contact and services that other competitors
seem too often time lack.

4.5 Pricing Strategy

Hand to Hand PLC grains trading will offer the same or better quality grain than other
suppliers in the market. The company will charge significantly less for its grain than
other companies because of its lower overhead expenses and fewer employees it will
engage. Initially the pricing strategy is to capture major market players by negotiating
with them and giving slightly discounted rates. The focus will also be on smaller
market players and helping to service their needs.

Most of the large customers will be identified and new customers will also be won
through competitive pricing. However, the prices will be competitive to other grains
food wholesalers.

. 4.6 Market Targets

When it comes to selling grain and pulse, there is indeed a wide range of available
customers. In essence, our target market can’t be restricted to just a group of people,
but all those who resides in our target market locations.

Hand to Hand PLC grains trading will target two predominantly market segments- food
industries, wholesalers and exporters. Of these three segments, wholesalers industries
represent market potential since most of them situated in Addis Ababa. Those peoples
who engaged in wholesale business supplies to exporters stores also individual
households represent the greatest market potential since most production undertake in
household level in Ethiopia is still made at home. Our company will eventually expand
its marketing to other major urban centers in Ethiopia.

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 4.7 Promotion

To promote its products, the business will use its sister company brokerage firm and its
established well connections. In addition, seasonal promotions will be done on which
such promotions will be based on particular types of products prepared for each
occasion.

4.8 Management Team Members

Hand to Hand’s Business PLC is led by Hand to Hand Ato Belay Zeleke who has been
in the Business PLC business for 20 years.
Hand to Hand Ato Belay has strong knowledge in running a Business PLC himself
also has a degree in business and diploma in Education also in construction, he has
taught selling pulses as the local experience for 20 years. Two courses that he taught
included:

1. How To trade pulses

o This lesson was designed through an overall understanding of pulses.

2. How To Negotiate
o This lesson is self-thought through side business which also run by the
founder as a broker

Hand to Hand PLCs manager is also working as a broker for more than 6 years which
is an asset for such kind of business.

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 5. Management Plan

Our company plans to keep wage and salary expenses low, at least at expansion plan.
To achieve this objective, the managerial position will be occupied by the major
shareholder by the name Belay Zeleke and professional employees who fortunately
possess the relevant experience. The remaining staff will be Security guard, daily
waged workers, and casual laborers who will be hired during the busy periods. Hand to
Hand PLC is responsible to make all of the major management decisions in addition to
monitoring all other business activities.

5.1 Personnel Plan

The management philosophy is based on responsibility and mutual respect. Hand to

Hand PLC grains trading will maintain an environment and structure that will
encourage productivity and respect. Employees will be encouraged to have a sense of
security and pride in their jobs. Following table shows the requirements of human
resources and salary.

Table 1 Personnel required and Salary

Description No. of No. of Salary/month / person Annual Salary

employees

Un skilled labor 4 3,000.00 72,000.00

Security Guard 1 1,000.00 10,000.00

Professional 3 10,000 120,000
employees

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 6. Materials and Inputs

6.1 Raw and Auxiliary Materials

Hand to Hand PLC grains trading specialized in buying Pulses and Grains for reseal.
Pulses and Grains can be available in different part of the region. The impurity rate for
local grain should not exceed 1 %. Auxiliary materials required are pp bags of different
size for packing the product and sewing thread. These can be easily obtained from local
markets.

6.1.1 Purchase Plans of Grains

Hand to Hand PLC grain trading will begin to purchase Pulses and Grains at 4,500 and
3,300 quintal respectively from potential sources of the country. Even if we know that
we can add more items, we want to limit ourselves on just 2 items i.e. Pulses and
Grains.

We are aware that the collection of grains food depends on the annual production, our
capacity of farmers’ mobilization and competition, therefore we expect to increase 5%
our sales the first two years, 10% the following two years and then 15% by the fifth
year. In case of shortage due to natural threats we expect to complement our quantities
from neighboring woredas.

Table 2. Production Plan of Grains in Quintal

Year 1 3 3 4 5
PULSE 3,000.00 3,150.00 3,465.00 3,811.50 4,383.22
GRAIN 2,000.00 2,100.00 2,310.00 2,541.00 2,922.15
SUM 5,000.00 5,250.00 5,775.00 6,352.50 7,305.37

6.2Sales projections

According to the above assumptions we expect to generate income from the collected
quantities of grains trade. The table below shows the expected income that will be
generated within five coming years.
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 The sales price of Pulses and Grains has taken an average price per quintal of 5,000 and
3,900.00 birr respectively. As the following table shows, the company plans to deliver
Sales of approximately birr 22, 800,000.00 in the first expansion year, Birr 25,
615,800.00 in the second subsequent year. As indicated in the table 3, sales price are
forecasted to increase, with an annual growth rate of approximately 7 %. Annual sales
projection has shown below
Table 3 Annual Sales Projections
YEAR 2023/24 2024/25 2025/26 2026/27 2027/28
QTY OF PULSE 3,000.00 3,150.00 3,465.00 3,811.50 4,383.22
Price per quintal 5,000.00 5,350.00 5,724.50 6,125.21 6,553.98
15,000,000 16,852,500. 19,835,392 23,346,23 28,727,536.
S/total .00 00 .50 7.92 22
GRAIN 2,000.00 2,100.00 2,310.00 2,541.00 2,922.15
Price per quintal 3,900.00 4,173.00 4,465.11 4,777.66 5,112.11
S/total 7,800,000 8,763,300. 10,314,404 12,140,03 14,938,352.
.00 00 .10 4.06 24
Total sales 22,800,00 25,615,800. 30,149,79 35,486,2 43,665,888
0.00 00 6.60 71.98 .45

The table above shows the increment in our business sales. However, the table shows
the variation in figures, this means that, according to the experience, we project the
variations of the annual production and the grains food price on regional market and of
course on local market.

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 6.2.1.1.1.1 Production Cost

To trade such quantities, purchase cost is needed. We have made some assumptions
on the costs of grains purchase, delivery, salary and wage, transportation and processing, as
well as additional cost. Annual production costs has shown below Table 4 Annual

Production Costs
Item Yr1 Yr2 Yr3 Yr4 Yr5
QTY OF PULSE 3,000.00 3,150.00 3,465.00 3,811.50 4,383.22
4,500.00 4,815.00 5,152.05 5,512.69 5,898.58
Cost per quintal
13,500,000 15,167,250 17,851,853 21,011,617 25,854,773
S/total .00 .00 .25 .94 .83
GRAIN 2,000.00 2,100.00 2,310.00 2,541.00 2,922.15
Cost per quintal 3,300.00 3,531.00 3,778.17 4,042.64 4,325.62

S/total 6,600,000.00 7,415,100.00 8,727,572.70 10,272,348.24 12,640,110.48

20,100,000.0
T/Cost of grains 0 22,582,350.00 26,579,425.95 31,283,966.18 38,494,884.31
Operational Cost
delivery 75,000.00 78,750.00 86,625.00 95,287.50 109,580.55
Salary & Wage 82,000.00 82,000.00 82,000.00 82,000.00 82,000.00
Marketing 50,000.00 52,500.00 57,750.00 63,525.00 73,053.70
Transportation 220,000.00 231,000.00 254,100.00 279,510.00 321,436.28
production Cost 427,000.00 444,250.00 480,475.00 520,322.50 586,070.53
Financial Cost 951,98 442,00 170,00
8.80 0.00 0.00
Admi. EXp
Stationary EXp 5, 6, 8, 9,
3,400.00 000.00 000.00 000.00 500.00
Dep.@10% 300,000.0 300,0 300,0 300,0 300,0
0 00.00 00.00 00.00 00.00
Other EXpe 45,000.0 56, 61, 69, 71,
0 000.00 000.00 000.00 000.00
T/admi Exp. 349, 361,500.0 367,500.0 377,000.0 380,5
000.00 0 0 0 00.00

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 6.1 Implementation Plan

The following timeline illustrates the detailed activities planned during the period. The
required loan expected to be obtained in short period of time; the implementation of the
project would not take more than a month. The company will start trading As of Nov,
15, 2022. Action plans of the activities of the project is presented below.

Table 5 Action Plan

No Activity Time Table

.

1 Summit loan application, bank accounts, Nov, 2023

permits

2 Received Loan dec.2023

3 Purchase of Grain , Pulse Jan. 2024 and on

wards

4 Brokerage Feb, 2024 and on

wards

5 Start to selling the product for customers, April. 2024 and

Delivery of product to clients on wards

7. Financial Plan

This plan outlines the amount of money the company will need to cover both its
working capital and how much income the company expects to generate after sales of
its first batch of grains.

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 7.1 Initial Working Capital Determination

Initial working capital consists of cost of grains, delivery, salary, transportation,

promotion and administration cost for three month. The minimum days coverage
considered for one turnover is 90 days. The working capital amount is determined to be
Birr 5,138,000.00 for three months. . The items and cost breakdown is shown in the
following table.

Table 6 Working Capital Cost for three Months

Particular Cost (Birr)
Grains/ Pulse& Grain 5,025,000.00
Packing and delivery 18,750.00
marketing 20,500.00
Salary & benefits 55,000.00
transportation 12,500.00
Administration cost 6,250.00
Total Working capital 5,138,000.00

7.1.1 Cost of Grains

As the capacity suggested in this report, the company will purchase 3,000.00 quintal of
Pulses grain and 2,000.00 quintal of grain in the first year. The required quantity of
Pulses grain for three month will be 750.00 quintal (3,000/12)*3 and grain 500.00
quintal (2000/12*3).
The purchase price of Pulses grain has taken an average price of Br. 4,500.00 per
quintal. Therefore; the cost of Pulses grain for three month is determine to be
3,375,000.00(750*4,500)
The purchase price of grain has taken an average price of Br. 3,300.00 per quintal.
Therefore; the cost of grain for three month is determine to be
1,650,000.00(500*3,300). The cost of Pulses and Grains is estimated birr
5,025,000.00

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 7.1.2. Packing Cost

As the capacity suggested in this report, the company will collect 5,000.00 quintals of
grain and Pulses in the first year. The company will purchase 1,250.00 quintals
5,000.00/12*3) of Pulses and Grains in three month. The cost of packing has taken an
average price of Br. 15.00 per quintal. Therefore; the cost of packing for three month is
determine to be 18,750.00 (1,250*15.00).

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 7.1.2 Salary and benefits’

As indicated in this report, estimated annual salary including benefits is birr 82,000.
Salary and benefits for three month is estimated to be birr 20,500.00(82,000/12*3)
7.1.4Transportation
As indicated in this report, the company will purchase 1,250.00 quintals
5,000.00/12*3) of Pulses and Grains in three month. The cost of transportation has
taken an average price of Br. 44.00 per quintal. Therefore; the cost of transportation
for three month is determine to be 55,000.00 (1,250*44.00)

7.1.5 Marketing Cost

As indicated in this report, the company will purchase 1,250.00 quintals

5,000.00/12*3) of Pulses and Grains in three month. The cost of marketing has taken
an average price of Br. 10.00 per quintal. Therefore; the cost of marketing for three
month is determine to be 12,500.00 (1,250*10.00)

7.1.6 Administration cost

As indicated in this report, the company will purchase 1,250.00 quintals

5,000.00/12*3) of Pulses and Grains in three month. The cost of administration has
taken an average price of Br. 5.00 per quintal. Therefore; the cost of administration for
three month is determine to be 6,250.00 (1,250*5.00)

7.2Debt Structure

The major expansion costs selected to be financed with debt are only cost of grain and
pulses. We have estimated the total cost of working capital birr 5,138,000.00, this
makes the loan constitute 93 % (4,800,000) of the cost of the total working capital. And
the rest 7% will be covered by the company. The capital structure is given below.

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 Table 7 Capital Structure
Application Bank Loan Owner Total
Birr Contribution Birr

Working Capital 4,800,000.0 338,000.00 5,138,000.0

0 0

7.2 Total Loan Requirement

The proposed source of funding is a bank loan of Br.6, 000,000.00. The business will
approach Commercial Bank of Ethiopia for assistance with the required funds.

The borrowed funds will be used exclusively to buy grain and Pulses based on the list
that will be made available to the lending institution. The loan could be repaid in equal
quarterly installments over three-year period.

These funds are to be available on 17 October of the year. The proposed security for
the bank loan is the fixed assets of owner, with an estimated value of 6 million
Birr.

Table 8 L o a n Repayment Schedule

Years Quarter Interest 17% Repayment Balance

18

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 0 4,800,000.00
1st 204,000.00 400,000 4,400,000.00
2nd 187,000.00 400,000 4,000,000.00
3rd 170,000.00 400,000 3,600,000.00

1 4th 153,000.00 400,000 3,200,000.00

1st 136,000.00 400,000 2,800,000.00

2nd 119,000.00 400,000 2,400,000.00
3rd 102,000.00 400,000 2,000,000.00

2 4th 85,000.00 400,000 1,600,000.00

1st 68,000.00 400,000 1,200,000.00

2nd 51,000.00 400,000 800,000.00
3rd 34,000.00 400,000 400,000.00

3 4th 17,000.00 400,000 0.00

4,900,000.00

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 8. Financial Analysis

8.1 Profitability

Profit maximization is the overriding factor in most management decisions.

Considering the implementation of the project as planned, the project will remain
profitable right from the beginning.
According to the projected income statement, the company will generate a net profit of
Birr 729,000.00 during the first year and Birr 1.3 million in the second year, birr 1.9
million in the third year, birr 2.4 million in the fourth year of operation.

An important ratio such as Gross profit margin shows an increasing trend during the
life time of the expansion. The projected financial statement shows that the expansion
will remain profitable throughout its life. The income statement and the other
indicators of profitability show that the project is viable. The following table shows the
projected profit and loss for three years.
Table 9 Projected profit and loss

Years
1 2 3 4 5
Sales 22,800,000.00 25,615,800.00 30,149,796.60 35,486,271.98 43,665,888.45
Production cost 20,527,000.00 23,026,600.00 27,059,900.95 31,804,288.68 39,080,954.84
Gross- Margin 2,273,000.00 2,589,200.00 3,089,895.65 3,681,983.30 4,584,933.61
Gross- Margin % 9.96% 10.10% 10.24% 10.37% 10.50%
Expense
Admi Expense 349,000.00 361,500.00 367,500.00 377,000.00 380,500.00
Profit before Interest
& Tax 1,924,000.00 2,227,700.00 2,722,395.65 3,304,983.30 4,204,433.61
Interest Expense 951,988.80 442,000.00 170,000.00
Profit Before Tax 972,011.20 1,785,700.00 2,552,395.65 3,304,983.30 4,204,433.61
Profit tax 25 % 243,002.80 446,425.00 638,098.91 826,245.82 1,051,108.40
Net Profit 729,008.40 1,339,275.00 1,914,296.74 2,478,737.48 3,153,325.21
Net Profit/Sale 3.20 % 5.23 % 6.35 % 6.99% 7.22 %

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 8.2 Projected Cash Flow

Many profitable companies go bankrupt because of cash flow deficiencies. That is why
our main concern will be to have sufficient cash on hand to meet our payment
obligations, and be prepared for unexpected needs of cash. Our projections indicate that
our business is able to generate positive cash flows and sufficient cash reserves. The
following table shows the projected cash flow for three years.

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 Table 9 PROJECTED CASH FLOWS STATEMENT
Years
beg. 1 2 3 4 5
Cash Received
Cash Sales 22,800,000 25,615,800.00 30,149,796.60 35,486,271.98 43,665,888.45

Equity 1,838,000
loan 4,800,000
TotalCash Received 6,638,000 22,800,000 25,615,800.00 30,149,796.60 35,486,271.98 43,665,888.45

Expenditures
Production cost 4,800,000 20,527,000 23,026,600.00 27,059,900.95 31,804,288.68 39,080,954.84

243, 638,09
Profit Tax Paid Out 002.80 446,425.00 8.91 826,245.82

loan 1,600,000 1,600,000.00 1,600,000

Payment of Interest 951,988.80 442,000.00 170,000.00

fixed Assets 1,500,000

6,300,000 22,127,000 25,821,591.60 29,548,325 32,612,387.59 39,907,200.

Total Cash Spent

Net Cash Flow

673,000 -205,791.60 601,470.65 2,873,884.39 3,758,687.79

Opening balance 1,011,000.00 805,20 1,406,679.05

8
338,000.00 4,280,563.44

Cash Balance 338,000 1,011,000 805,208 1,406,67 4,280,563 8,039,251

9

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Plan for Bank Loan

8.3 Socio- Economic Benefits

 Increment of procurement capacity will have a paramount importance towards the
benefit of the surrounding farmers by helping them to obtain better price and raise their
annual income.

Apart from this, the project will also have the following socio- economic benefit:

Aside from the increase in income of the promoters, the project would activate the
economy especially in the continuous production and supply of grains.

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
grains trading and pulses also farming.

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
Government can collect employment, income tax and sales tax.

We hope that with income generated from this business beneficiaries (farmers,
employees, exporters and others.) will be able to pay their health, school materials and
school fees, as well as all of what they need (basic needs). In addition to that, quality
food will be available in the area.

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Plan for Bank Loan

9. Conclusions
 Hand to Hand PLC grain trading will endeavor to attain leadership in the supply of
grain and Pulses in the region. The pursuit of high quality will be the driving force in
the business.
To achieve this, the company 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
grain, on time, and at a reasonable price.

The future of the grain and Pulses demand in Ethiopia looks bright, and company is
poised and positioned to take advantage of this commercial opportunity. The financial
results show that the project is profitable, although there will be some dependence on
loan.

Our store is located near Addis Ababa leading to lesser transport cost, large capacity
and Economies of Scale

The demand for Grain and Pulses 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 grain and Pulses is strong and growing,
situations that will ensure sufficient return to investment.

In view of the technical and financial analysis and the above conclusion, it is
recommended that promoter is encouraging to submit the plan to financial
institutions for funding for the smooth running of the project activities as specified
in the business implementation schedule.

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Plan for Bank Loan