Table of Contents

1. Executive Summary..................................................................................................................................i

1.2 Business Background................................................................................................................................1

2.3 The Market................................................................................................................................................1

2.4 Technical aspect........................................................................................................................................2

2.5 Financial Considerations...........................................................................................................................2

2.6 Business Profile.........................................................................................................................................3

2.7 Business Ownership and History...............................................................................................................3

3. Market Analysis...........................................................................................................................................4

3.1 Products.....................................................................................................................................................4

3.2 Market Segmentation.................................................................................................................................4

3.3 Target Market Segment Strategy...............................................................................................................5

3.4 Service Business Analysis.........................................................................................................................5

3.5 Competition and Buying Patterns..............................................................................................................5

3.6 Strategy and Implementation.....................................................................................................................5

3.7 Pricing Strategy.........................................................................................................................................5

4. Business and its Management......................................................................................................................5

4.1 Sales Strategy............................................................................................................................................7

5. Financial Plan............................................................................................................................................10

5.2 Balance Sheet..........................................................................................................................................12

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List of Tables

Tables Page Number

Table 1. Sales forecast and cost estimation 7

Table 2. Personnel 8

Table 3. Investment cost estimation 9

Table 4: Profit and Loss statement 10

Table 5: Balance Sheet 11

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 1. Executive Summary

Derara bakery is a single proprietorship business. The business will be managed by a professional manager.
The site of the business is in Ambo town, Awaro kebele as branch from the main business; Derara bakery
business, which is located in around Ambo University main campus. The business will have a total of 15
employees of which 1 manager, 3 operators and 10 Baristas and 1 sales man in the first year and adjusted in
next year’s. The owner will provide funding by himself Birr 150,000 and Birr 150,000 through borrowing
from Bank, which will cover start-up expenses and provide a financial cushion for the first and second year
of operation. The owner will pay the bank borrowings at the end of the first year.

Derara Bakery offers a broad range of bread and Cake products, all from high quality imported wheat flour.
Derara bakery will succeed by providing the highest quality product with personal customer service and
competitive pricing. Derara Bakery wants to establish a large regular customer base and will concentrate its
business and marketing on local residents and others, which will be the dominant target market. It aims to
offer high quality bakery products at a competitive price to meet the demand of the middle- to higher-income
households. The business expects high amount of purchase from organizations café, hotels and restaurants.
The owner’s strategy is to profitably and efficiently utilize present and future bakery production technology.
The business sets its pricing based on market rates as far as bread and Cake products are concerned. The
business plans to build a strong market position in the town, due to the partners' industry experience and mild
competitive climate in the area.

Derara bakery expects to raise Birr 300,000 totally in its own capital, and it anticipates sales of about Br.
3,531,375 in the first year, Br. 3,707,943.75in the second year, Br. 3,893,340.93in the third year, Br.
4,088,007.98 in the fourth, and Br. 4,292,408.38in the fifth year of the plan. Derara bakery should breakeven
by the third month of its operation as it steadily increases its sales. The businesses profit and loss statement
indicates that the business is profitable through its business life of 5 years. Total expense period are expected
to be approximately Br. 785,995 by year 1 and Br. 836,240 by year 2, and Br. 882,343 by year 3, Br. 930,395
by year 4 and Br. 980,496 by year 5 and Profits for this time period are expected to be approximately Br.
848,141in year 1, Br. 882,886.34 by year 2, and Br. 924,027.02 by year 3, Br. 967,473.92 and Br.
1,013,340.70 in the fifth year of its operation. Thus, the business plans to pay 100% of bank borrowing at the
end of its first year operation.

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1.2 Business Background

This Business plan is prepared for the purpose of expanding the existing bakery business. A brief analysis on
baking is thus conducted to identify the current market trend and to share the shortage and unsatisfied market
in Ambo town, kebele 01 as branch from the Ambo University main business; Derara bakery business, which
is located in around main campus. Derara Bakery expects to catch the interest of a regular loyal customer
base with its broad variety of bread and Cake products in Awaro like that of main campus. The business
plans to build a strong market position in the Awaro like that of Ambo University main campus, Derara
Bakery aims to offer its products at a competitive price to meet the demand of the middle-to higher-income
local market and government and private organizations based on their demand.

2.1 The Business

Derara Bakery is a single proprietorship business engaged in the bakery business. The owner has the capacity
to utilize traditional and more advanced bakery technologies to produce new breads and pastry with locally-
adapted technologies. The business intends to hire 15 employees to handle customer service and day to day
operations of the business.

2.2 Products and Services

Derara Bakery offers a broad range of bread and Cake products, all from high quality imported wheat flour.
Derara Bakery caters to all of its customers by providing to each customer bread and Cake products made to
suit the customer. The bakery provides freshly prepared bakery products at all times during business
operations. Six to eight moderate batches of bakery and pastry products are prepared during the day to assure
fresh baked goods are always available.

2.3 The Market

Bakery business in Ethiopia recently experienced rapid growth as the living standard and ways of the people
is changed. The demand for bread as reported by the government of Ethiopia increased in a substantial figure
annually.

Derara Bakery wants to establish a large regular customer base and will concentrate its business and
marketing on local residents and others, which will be the dominant target market. This will establish a

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healthy, consistent revenue base to ensure stability of the business. High visibility and competitive products
and service are critical to capture this segment of the market.

2.4 Technical aspect

The envisaged business is located in Awaro kebele in the city of Ambo. The total cost of the business is
estimated to be Birr 300,000 (three hundred thousand).

2.5 Financial Considerations

Derara bakery expects to raise Birr 300,000 totally in its own capital, and it anticipates sales of about Br.
3,531,375 in the first year, Br. 3,707,943.75in the second year, Br. 3,893,340.93in the third year, Br.
4,088,007.98 in the fourth, and Br. 4,292,408.38in the fifth year of the plan. Derara bakery should breakeven
by the third month of its operation as it steadily increases its sales. The businesses profit and loss statement
indicates that the business is profitable through its business life of 5 years. Total expense period are expected
to be approximately Br. 785,995 by year 1 and Br. 836,240 by year 2, and Br. 882,343 by year 3, Br. 930,395
by year 4 and Br. 980,496 by year 5 and Profits for this time period are expected to be approximately Br.
848,141in year 1, Br. 882,886.34 by year 2, and Br. 924,027.02 by year 3, Br. 967,473.92 and Br.
1,013,340.70 in the fifth year of its operation.

Highlights

5,000,000

4,000,000

3,000,000 Sales
Total Expense
2,000,000
Net Profit

1,000,000

0
2017 2018 2019 2o20 2021

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2.6 Business Profile

Mission

Derara bakery aims to offer high quality bakery products at a competitive price to meet the demand of the
middle- to higher-income households.

Keys to Success

Keys to success for Derara bakery will include:

1. Providing the highest quality product with personal customer service.

2. Competitive pricing

2.7 Business Ownership and History

The business is owned by a single individual Business. Financing will come from the owner and bank
borrowing. The following table illustrates the business's projected initial start-up costs.

Start-up Requirements

Total Start-up Expenses

Legal……………………………………………...Birr 5, 000

Facilities modification………………………….10, 000

Expensed equipment………………………....30,000

Other………………………………………………..….15, 000

Start-up Expenses………………………………………………………..Birr. 60,000

Start-up Assets

Cash required ………………………….….40, 000

Start-up Inventory………………………….30, 000

Other Current Assets………………………..70,000

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 Long-term Assets……………………………100,000

Total Assets…………………………………………………….Birr.240, 000

Total Requirements ………………………………………………………...…Birr.300, 000

3. Market Analysis

The government of Ethiopia is now subsidizing bakery business to make competitive in the market by
facilitating credits and by making tax redemption. Even the government imports wheat from the global
market by subsidizing some of the costs. Currently, there is high number of investors are investing on bakery
because of the reason that the price of the bakery products are increased on the market and the government of
Ethiopia promotes those who are investing on this business. These make the competition more severe and
sever. Derara Bakery focus to meet the demand of a regular local resident customer, as well as a significant
level of hotels, café and restaurants and others.

3.1 Products

Derara bakery offers a broad range of bread and Cake products, all from high quality wheat flour. Derara
bakery caters to all of its customers by providing each customized bread and Cake products made to suit the
customer, down to the smallest detail. The bakery provides freshly prepared bakery products at all times
during business operations. Six to eight moderate batches of bakery will be prepared during the day to assure
fresh baked goods are always available.

3.2 Market Segmentation

Derara bakery focuses on the lower to upper-income markets. These market segments consume the majority
of bread and Cake products. The market would be segmented based on the quantity purchased both for
households and organizations.

Derara bakery wants to establish a large regular customer base. This will establish a healthy, consistent
revenue base to ensure stability of the business. It expects low amount of purchase for a large amount of
households per individual.

The business expects high amount of purchase from organizations like café, hotels and restaurants. It will
have its own strategy to satisfy the demand of these large purchasers.
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3.3 Target Market Segment Strategy

The dominant target market for Derara bakery is a regular stream of local residents and public and private
organizations. Personal and expedient customer service at a competitive price is key in maintaining the local
market share of this target market.

3.4 Service Business Analysis

The bakery business in Ethiopia has recently experienced rapid growth. Despite low competition in the
immediate area, Derara Bakery will position itself as a bakery where customers can enjoy breads with best
quality and low price with reliable services.

3.5 Competition and Buying Patterns

Competition in the local area is somewhat sparse and does not provide nearly the level of product quality and
customer service as Derara Bakery. Local customers are looking for a high quality product in a low price.
They desire a unique, classy experience. The competitive edge is the relatively low level of competition in
the local area in this particular business.

3.6 Strategy and Implementation

Derara Bakery will succeed by offering consumers high quality bakery products with personal service at a
competitive price. The owner’s strategy is to profitably and efficiently utilize present and future bakery
production technology. In addition, application and utilization of production technology in the production of
breads will allow double utilization of the cost controlled portion of the overhead.

3.7 Pricing Strategy

The business sets its price based on market rates as far as bread and Cake products are concerned. The
promoter’s pricing for bread and Cake will exceed the average market price for the following reasons:

 Taste sampling at outlets will be encouraged.

 Unparalleled flavor superiority will addict bread and Cake tasters.

4. Business and its Management

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Mr. WX is the manager of the business responsible for the operations and management of the business.
Since the business in the world of limited resources, decision making how to use these resources in their best
possible way is an essential matter. To make these decisions skilled and competent management body is
required.

The business will follow efficient management procedures. The business will be run the day to day operation
by consisting of, skilled, semi-skilled and unskilled workers to be employed by the business with attractive
monthly salary.

Each operation of the business, therefore, will run under close supervision of the owners and the manager.
The team leader and the manager will carry decision making, administration, and technical matters of the
business, with awareness of the owner’s.

Therefore, the management of the business will be competent enough and will not face problem. More
specifically, the duties and responsibilities of the bakery manager will be:

To prepare rules and regulations that are practical for business administration

To check consistently if staffs are functionally employed

To prepare the monthly and annual budget, and present to the proprietor for approval

 To organize strategies and means to promote sales

 To be responsible to purchase and sign check when delegated by proprietor

 To check the date of sales report

 To check if tax and liabilities are paid on time

 To check if the business is profitable, output quality is maintained and prices are within a competitive
range

 To check bank loans and other payments are effected on time

One aim of a manager should be to ensure that all staff understand the nature of the business and are active in
working towards its success. This is particularly important in relation to quality assurance which requires all
staff to agree quality management procedures and as individuals, to routinely monitor product quality.

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If it is accepted that most people wish to have the following aspects in their job, the manager can arrange
work to meet these needs:

 A reasonable wage
 Security of employment
 Respect for their skills and knowledge
 Good relationships with other staff
 Opportunity to develop new capabilities
 Reasonable working conditions.

The majority of people wish to have their skills and knowledge recognized and to be able to develop these
further in their work. Again, it is in the managers' own interests to do this because each worker's skills can
then be used most effectively for the benefit of the enterprise. In practice, this may mean allocating specific
areas of responsibility, such as record keeping, labeling of products, raw material inspection etc. to those
staff that have an aptitude for that type of work. However, it is also necessary to train staff in every aspect of
production, regardless of their main area of expertise. When all staff knows how to do every job in a
production unit, there are opportunities for people to do different work during the day leading to greater job
satisfaction and greater flexibility in job allocation to cover for staff absences.

The owner or manager is responsible for providing reasonable working conditions for employees. As a
minimum, the requirements for hand washing and toilet facilities should be met for both workers' benefits
and to maintain hygienic production. Preparation tables should be high enough for staff to work comfortably
and where repetitive work is carried out for long periods, seats and good lighting should be provided. The
owner may also consider providing a rest area with cold water and seating, to prevent workers sitting on
stocks of packaging or finished product as the only comfortable place to take a break. These benefits are
important to retain experienced staff and contribute to the overall efficiency of production.

4.1 Sales Strategy

This financial projection is based on sales volume at the levels described in the sales forecast section and
presents, to the best of management's knowledge, the business's expected assets, liabilities, capital, and
revenues and expenses. The projection reflects management's judgment of the expected conditions and its
expected course of action given the hypothetical assumptions.

Table 1. Sales forecast and cost estimation

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 Unit sales
Bread type
2017 2018 2019 2020 2021

Bread 1
766,500 804825 845066.25 887319.55 931685.55
Bread 2
438,000 459900 482895 507039.75 532391.73
Bread 3
328,500 344925 362171.25 380279.80 399293.80
Bread 4
273,750 287437.5 301809.375 316899.85 332744.85
Bread 5
146,000 153300 160965 169013.25 177463.90
Bread 6
54,750 57487.5 60361.85 63379.95 66548.95
Bread 7
43,800 45990 48289.5 50703.95 53239.20
Bread 8
16,425 17246.25 18108.55 19014 19964.70
Bread 9
10,950 11497.5 12072.35 12675.90 13309.80
Bread10
14,600 15330 16096.5 16901.35 17746.40
Bread11
21,900 22995 24144.75 25351.95 26619.60
Cake 1
262,800 275940 289737 304223.85 319435.05
Cake 2
438,000 459900 482895 507039.75 532391.73
Cake 3
715,400 751170 788728.5 828164.925 869573.17
Total sales 3,893,340.9
3,531,375 3,707,943.75 3 4,088,007.98 4,292,408.38
Direct Cost of Sales and Expenses
  0 0 0 0
Production cost
1,533,750 161,0437.5 169,0959.37 177,5507.34 186.4282.71
Operating expenses
743,000 780,150 819,157.5 860,115.37 903,121.14
Other 0 0 0 0 0

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The price of each type of bread will be Birr. 1.20, 2.40, 3.60, 5,8,10,12,30,40, 60 and 80 and average yearly
sales 638,750, 182,500, 91,250, 54,750, 18,250, 5,475, 3,650, 547, 365, 365 and 365 respectively. The rate of
sales per year will increase by 5% with respect to the number of years after the first year.

The price of each type of cake will be Br. Birr 80, 150 and 280 and average yearly sales 3,285, 2,920 and
2,555 respectively. The rate of sales per year will increase by 5% with respect to the number of years after
the first year.

4.2 Personnel Plan

As the personnel plan shows, Derara Bakery expects to make significant investments in sales, sales support,
and product development personnel.

Table 2. Personnel

Personnel Plan Year

2017 2018 2019 2020 2021

Managers 24,000 34,000 38,000 42,000 46,000

Operators 3,600 4,800 6,000 7,200 8,400

Baristas 12,000 13,200 14,400 15,600 16,800

Sales Man 1,200 1,200 1,200 1,200 1,200

Other 0 0 0 0 0

Total People 15 17 19 21 23

Total Payroll 40,800 53,200 59,600 66,000 72,400

5. Financial Plan

Derara Bakery expects to raise Br. 300,000 of totally in its own capital. This provides the bulk of the current
financing required.

Business Management Decisions:

The business decisions are made based on the following decision as:

Initial investment of the business=Br. 300,000

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Business life= 5years

Break-even Analysis

Derara Bakery’s Break-even Analysis is based on the average of the first-year figures for total sales by units,
and by operating expenses. These are presented as per-unit revenue, per-unit cost, and fixed costs. These
conservative assumptions make for a more accurate estimate of real risk. Derara Bakery should break even
by the third year of its operation as it steadily increases its sales.

The business's break-even analysis is given below.

Monthly Revenue Break-even= Br. 17,067.71

Assumptions:

Average Percent Variable Cost = 65%

Estimated Monthly Fixed Cost = Br. 33,750

Tax rate= 30%

Depreciation:

Machinery………………………………..5%

Table 3. Investment cost estimation

No. Description Unit Quantity Unit price Total cost

1 Baking Machine No 1 60,000 60,000

2 Cash register Machine No 1 30,000 30,000

3 Flour mixing Machine No 1 40,000 40,000

4 Breading house No 1 20,000 20,000

5 Flour Kg 500 20 10,000

Subtotal base cost 161,000

5.1 Projected Profit and Loss

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As the Profit and Loss table shows, Derara Bakery expects to continue its steady growth in profitability over
the next three years of operations.

Table 4: Profit and Loss statement

Derara Bakery Business

Pro Forma Profit and Loss (Birr)
For the year ended
2017 2018 2019 2020 2021
Sales 3,531,375 3,707,943.75 3,893,340.93 4,088,007.98 4,292,408.38
Direct Costs of Goods sold 1,533,750 1,610437.5 1,690,959.37 1,775,507.34 1,864,282.71
Other 0 0 0 0 0
Cost of Goods Sold 1,533,750 1,610437.5 1,690,959.37 1,775,507.34 1,864,282.71
Gross Margin 1,997,625 2,097,506.20 2,202,381.60 2,312,500.60 2,428,125.60
Operating expenses 743,000 780,150 819,157.5 860,115.37 903,121.14
Payroll 40,800 53,200 59,600 66,000 72,400
Depreciation 695 1,390 2,085 2,780 3,475
Utilities 1,500 1,500 1,500 1,500 1,500
Other 0 0 0 0 0
Total Expenses 785,99 836,240
836,240 882,343 930,395 980,496
Profit Before Taxes 1,211,630
5 1,261,266.20 1,320,038.6 1,382,105.60 1,447,629.60
Taxes Incurred (30% of Profits) 363,489 378,379.86 396,011.58 416,631.68 434,288.88
Net Profit 848,141 882,886.34 924,027.02 967,473.92 1,013,340.70
Net Profit/Sales 0.24 0.24 0.24 0.24 0.24

5.2 Balance Sheet

The following is a projected Balance Sheet for Derara Bakery.

Table 5: Balance Sheet

Derara Bakery Business

Pro Forma Balance Sheet (Birr)
For the year
2017 2018 2019 2020 2021
Assets
Current Assets 161,000 161,000 161,000 161,000 161,000
Cash 680,141 882,886.34 924,027.02 967,473.92 1,013,340.70
Other Current Assets 0 0 0 0 0

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Total Current Assets 841,141 1,043,886 1,085,027 1,128,474 1,174,341
Long-term Assets
Long-term Assets 138,305 136,915 134,830 132,050 128,575
Accumulated Depreciation 695 1,390 2,085 2,780 3,475
Total Long-term Assets 139,000 139,000 139,000 139,000 139,000
Total Assets 980,141 1,182,886 1,224,027 1,267,474 1,313,341
Liabilities and Capital
Long-term Liabilities 168,000 0 0 0 0
Paid-in Capital 168,000 0 0 0 0
Retained Earnings 680,141 882,886.34 924,027.02 967,473.92 1,013,340.70
Earnings 848,141 882,886.34 924,027.02 967,473.92 1,013,340.70
Total Capital 132,000 300,000 300,000 300,000 300,000
Total Liabilities and Capital 980,141 1,182,886 1,224,027 1,267,474 1,313,341
Net Worth 680,141 882,886.34 924,027.02 967,473.92 1,013,340.70

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