EYEWEAR/EYE GLASS TRADE BUSINESS

PROPOSAL SUMMITED TO FINANCING BANK

OWNER: - KEDIJA JARSO

ADDRESS: ADAMA

AUGUST, 2022

ADAMA
Table of Contents
I. EXECUTIVE SUMMARY ................................................................................................................ 1
2. BACK GROUND INFORMATION ................................................................................................. 6
2.2. Business Name and related information ......................................................................... 6
2.3. Vision and business Values and Culture ........................................................................ 6
2.3.1. Vision of the business........................................................................................................ 6
2.3.2. Business values and Culture ...................................................................................... 6
2.3.3. Business objective of Kedija Jarso Eye-glass and its Accessory Trade ......... 7
2.3.4. Revenue Goals and Repeat Business ....................................................................... 8
2.4.3.1. Minimize Cost ............................................................................................................... 8
2.4.3.2. Margin Goals................................................................................................................. 8
2.4.3.3. Reputation Goals ......................................................................................................... 9
3. KEY SUCCESS AND RISK FACTORS ..................................................................................... 10
4. MARKET ANALYSIS ......................................................................................................................... 12
5. TECHNICAL ANALYSIS OF THE TRADING BUSINESS ............................................................................. 21
5.1. Business location......................................................................................................................... 21
5.2. Production Capacity ............................................................................................................. 21
6. FINANCIAL PROJECTION ...................................................................................................................... 23
6.1. Revenue ...................................................................................................................................... 23
6.3. Management ............................................................................................................................... 25
7. FINANCIAL ANALYSIS ........................................................................................................................... 26
7.1. The total investment cost ........................................................................................................... 26
7.2.1. Gain or loss statement ................................................................................................ 26
7.2.2. Projected Cash Flow Statement ................................................................................ 27
7.2.5. Analysis of business financing decisions tools ........................................................ 29
7.2.5.1. Payback Period ............................................................................................................... 29
7.2.5.2. Net Present Value .......................................................................................................... 30
7.3. Social andEconomic advantage of the business ............................................................. 30
8. CONCLUSION AND RECOMMENDATION............................................................................. 31
8.1. Conclusion................................................................................................................................... 31

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I. EXECUTIVE SUMMARY
The aim of this proposal is to analyze the business performance, forecast the
overall business activity for the next five years and determining financial
sources and amount that will be required by the business. Eyewear trade
business falls under the glasses & contact lens trade and players in this trade
ophthalmic goods, comprising of eyeglass frames, lenses and contact lenses.
The sector also incorporates sunglasses and protective eyewear, such as
goggles. Consumers have increased expenditure on glasses and contacts over
the five years to 2022; competitively priced imports have satisfied a growing
portion of consumer demand for industry products over the period.

The business has been established in Adama city. Mrs Kedija Jarso has been
engaged in wholesaler and retailer trade of different type of eye-glass (optical
and solar) as well as eye glass frames and accessories starting before 2 years
ago attracted by the expanding business opportunity and conducive working
environment. She has rich experience and now wants to increase the sales
volume of her business due to the expanding demand for the product.

The entrepreneur has set to service a wide range of client not just in Adama
city, but also in all parts of the county in future. She know that there are
several eyewear products wholesalers and retailers all around the city, which is
why she spent time and resources to conduct a thorough feasibility studies and
market survey so as to be well positioned to favorably compete with her
competitors. She will ensure that all the glasses and contact lens that traded
through the business are of the highest quality and highly durable. She wants
to build a business with a wide range of client base that cuts across people of
different financial status.

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The existing business was very successful in meeting its goal in terms of
generating good income to the entrepreneur. In terms of demand for tradable
goods there is no suspect that it is at infantry age. This is witnessed by the
entrepreneur herself as she stayed in the same business for more two years.
Currently the promoter has studied the market to strongly engage in. The
marketing are of the business includes Adama and surrounding areas.
Therefore, the market for products under consideration is forecasted to grow
rapidly in the coming years as the number of population increases. The
entrepreneur prepared all requirements for the business including shop site
and different necessary infrastructures.

Finally the very important part of the business financial analysis outputs
indicated that the business is profitable. The most important indicators for this
are profitability and liquidity. The business can generate positive net profit
through its all operations years. The business is liquid through of all its
lifespan. According to payback and NPV business decision factors the business
passed all the two capital budgeting tools. The social economic benefit is great
by inviting more labor to the job sector contributing in increasing government
revenue by tax contribution. In sum-up the business is attractive and
financeable.

1.1. Justifications for expanding the existing business.

According to different information on the number of Ethiopian population,

though there are some slight number differences between different sources the
number is around 110M and expected to increase continuously in the coming
years. In addition urbanization in Ethiopia is dramatically increasing due to
high rural-urban migration which increases the number of people who uses
eye glasses.

Business ideas are all around her but one of the challenges that aspiring
entrepreneurs are confronted with is how to know a business that can become
profitable and successful. The rule of thumb in choosing a business to launch

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is to look out for a business whose products or services are needed in our
everyday life; a business whose products can be purchased by the rich as well
as the poor and a business that is less competitive in your location. Starting a
trade of eyewear and its accessory can come in handy if someone have the
business exposure and financial requirements. She already now the wide
growing demands for eye wear & its accessory and wants to exploit the
prevailing opportunity in the sector.

The existing business operation has been performing by the owner and
other staffs. This business is operating below its capacity due to the
problem of working capital/business running cost. Thus, fund is required so
the business could operate in full capacity and increasing sale volume. In
order to achieve the stated objectives, the owner has planned to increase
sales in full capacity. For this purpose, it needs Birr 4,500,000 for working
capital.

1.1.1. Operational Performance existing business

1.1.2. Financial Performance

Profitability (Income Statement) of the business

The owner financial statement for the year 2012, 2013, and 2014 E.C and
for the last two months is presented. As it is witnessed from the submitted
financial report of the business for the past 3 years and two months, the
business registered a net profit of Birr 281,918.85, and 423,105.26,
580,976.78 and Birr 152,001.70 for the year 2012, 2013, 2014 Ethiopian
colander and for the month of July and August respectively. The income
statement of the project for the last year is presented here under.

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 Table 3.1: Income Statement for the Year ended June 30, 2012,2013
and 2014 E.C

Amount (Birr)
Description
2014 2013 2012

Revenue from sales 7,930,992.20 7,343,511.30 6,799,547.50

Cost of sales (6,440,887.69) (6,134,178.75) (5,842,075.00)

Gross profit/Loss 1,490,104.52 1,209,332.55 957,472.50

Expense

Administrative cost (596,294.09) (558,401.38) (523,751.20)

Interest - - -

Profit Before Tax 893,810.43 650,931.17 433,721.30

Tax (312,833.65) (227,825.91) (151,802.46)

Net profit/loss
580,976.78 423,105.26 281,918.85
after tax

Source: financial statement of the business for the year July 30/2012,13,&14 E.C

For detail please refer to the attached financial statement of the business.

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1.1.3.Balance Sheet

Table 3.2: Assets and Capital of existing business as at June 30,2012,13

&14

Amount (Birr) Amount (Birr) Amount(Birr)

2014 2013 2012

Description

Assets

Current Asset

Cash 736,365.48 413,778.39 197,343.19

Purchase 1,779,354.19 1,695,257.53 1,615,519.05

Total Asset 2,515,719.67 2,109,035.92 1,812,862.24

Equity and
Liability

Owner’s capital 1,615,519.05 1,615,519.05 1,615,519.05

Owners equity 900,200.62 493,516.87 197,343.19

Total 2,515,719.67 2,109,035.92 1,812,862.24

Liability

loan - - -

Total equity and

2,515,719.67 2,109,035.92 1,812,862.24
liability

Source, financial statement of the business June 30,2012,13 &14

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2. BACK GROUND INFORMATION
2.1. The entrepreneur business history
Kedija Jarso Eye-glass and its accessory wholesaler and retailer trade is
established in Adama city. The entrepreneur has engaged in the business for at
least more than 2 years. She has gathered many experiences in eyewear trade
business. Due to good business performance registered and growing market for
different eye-glass (medical or fashioned), she is initiated to increase the
volume of product and revenue generation.

2.2. Business Name and related information

 Name :- Kedija Jarso Eye Glass and its Accessory Trade
 Address:-
Region: -Oromia
Zone: East Shewa
Twon: Adama
Kebele:_________
Mobile:- :----------
 TIN No:-022831972
2.3. Vision and business Values and Culture
2.3.1.Vision of the business
The business has set the vision of becoming one of best quality eye glass trader
and recording sustainable good profit. The vision of the business will be
actualized through performing strict business principle with quality product
trade, good management and lobar force, customer satisfaction. In addition,
different strategies will be designed to realize the vision of the business.

2.3.2.Business values and Culture

Business culture refers to the set of behavioural and procedural norms that
can be observed within a business which includes its policies, procedures,
ethics, values, employee behaviours and attitudes, goals and code of conduct.
It also makes up the “personality” of a business. In other way, it is also the

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business values toward which activities of the business are directed and one of
the most important functions the business owner must perform is setting
objectives. Values are also certainly part of firm culture, but until the firm put
them into action they’re just words on paper. In fact, core values can negatively
impact culture if they aren’t adhered to. Employees will see this as the
business paying lip service and failing to live up to its own standards.

A successful business culture is one that is bought into by everyone from the
newest intern to the CEO. It’s living and breathing your core values. The job of
the business is to make sure that every employee understands the
expectations and acts accordingly. A truly great business culture is one that
inherently promotes curiosity, respect, and teamwork and employee health. A
way to really boost business culture is to put a concerted emphasis on diversity
and inclusion. In simplified terms, diversity and inclusion in the workplace is
making a group of individuals, with completely different backgrounds and
experiences feel safe and accepted in expressing their uniqueness while at
work. Allowing employees to express their differences learn from each other
and feel safe while doing it creates a strong cultural bond that breeds employee
happiness and productivity.

2.3.3.Business objective of Kedija Jarso Eye-glass and its Accessory Trade

The Business objective is trading of eye glass and other related products to the
corporate and individuals based on their order coupled with the small sales
counter for the end customer. Through doing this the entrepreneur is expected
to generate income which in-fact will help her to expand her business to giant
eye-glass supplier and then to the medical/health sector like eye clinics in
future. The business has also different goals which it planned to meet in its
trading period. These goals include; generating income and other in direct
benefits gained from the business.

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2.3.4.Revenue Goals and Repeat Business
This trading business can increase its revenue through advertising and
promotions such as offering deals on specific items on different days of the
week. You can add to sales totals by carefully monitoring and adapting to
demand, paying attention customer flow as well as sales patterns. Many
changes that bring in additional revenue require little or no monetary outlay,
such as adjusting your hours to be open when you are likely to be busiest or
creating displays that tempt customers to buy additional product. Promotional
offerings bring new customers in the door but monthly revenue targets are
more easily met by encourages return visits. Excellent customer service and
rewards/referral systems are major revenue drivers. Therefore, the
entrepreneur will generate and increase his income through the above ways.

2.4.3.1. Minimize Cost

The income of this business is the amount left over after subtracting deductible
expenses from sales revenue. To achieve this objective of maximizing income,
Kedija Jarso eye-glass and accessory trade must minimize cost of sales without
running out of popular activities. Because customer demand is rarely
consistent, it is nearly impossible to avoid cost altogether. However, keeping
careful records of which items sell fastest enables the business to predict some
sales patterns. The business can achieve additional accuracy by paying
attention to variables that affect sales patterns, such as holidays and season
ether in winter or summer.

2.4.3.2. Margin Goals

The trade business model of selling optimal product creates so much potential
for revenue generation, the business should closely monitor profit margins, or
the percentage of sales that exceeds operating expenses. Shop around for low
prices on product, but don't compromise quality for the sake of price if
customers hold the business to a high standard. Introduce efficiencies that
enable the business to sale more in less time, such as consolidating processes,

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eliminating bottlenecks and achieving economies of scale. Maintaining margin
is critical to any business model.

2.4.3.3. Reputation Goals

Building a strong reputation is essential for objective of attracting a loyal
clients and generating a consistent sales volume. Build your reputation by
producing high-quality products and maintaining excellent customer service.
Although it is tempting to sell product that are less than perfect, these sales
may cost more in the long run by compromising the business reputation.
Develop a specialty, and practice until the entrepreneur becomes an expert.
Build the reputation through social media, community events and local
promotional opportunities. Creativity and positive customer
interactions/reviews will boost business in the long run.
In conclusion, Kedija Jarso Eyewear and accessory wholesaler and retailer
trade business is believed that the trading business will have significant social
and economic benefits that accrue to the society, the region and the country
beyond boasting the financial performance of the entrepreneur.
2.3.5.Product/Service Description:-
Kedija Jarso Eyewear and accessory trade business offers wide range of
eyewear. She set to service a wide range of client not just in the Adama, but
also all parts of the Country in the future. The product offerings are listed
below;
 Contact lens
 Eyeglass frame (i.e. fronts and temples)
 Glass and plastic eye wear
 Goggle (e.g. industrial, safety, sun and underwater)
 Lens
 Lens coat
 Lens mount
 Corrective vision-type magnifier
 Sunglasses and etc.

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3. KEY SUCCESS AND RISK FACTORS

A business key success factors also known as Critical Success Factors (CSF)
refers to the most important elements or factors that contributes to the highest
result, impact or outcome, in achieving a business goal and objectives. There
are various Success factors for eyewear product trade business established in
Ethiopia in general and Adama city in particular.

The key to success in business will always depend on the entrepreneur skills
and psychology in these key critical success factors. In this business; access to
credit provision at lower interest rate, attractive investment policy and other
packages, Continues increment in household income and associated
expenditure patterns on such product, Government incentives and
encouragements, increasing demand for the product which mostly tied with the
growth of population and growing per-capita income are the major success
factors of the business at macro level.

3.1. Strength, weakness, opportunity and threat analysis of the Project

3.1.1.Strength
This business strength lies in the fact that it has wants to trade a wide range of
eye-glass products that can meet the needs of a wide range of customers. It has
state of the art facility and equipment that has positioned it to meet the demand of
products even if the demand tripled over night or if it had a massive order to meet
and emergency delivery deadline. Another factor that counts to the advantage is
the background of the entrepreneur W/ro Kedija Jarso; she has a robust
experience in the same business and also a pretty good academic qualification to
match the experience acquired which has placed her one of the top management
of the business.

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3.1.2.Weakness
The fact that the entrepreneur setting up the business in Adama city with the
existence of other same products traders might likely pose a challenge for it in
increasing sales volume in the market surrounding towns.
3.1.3. Opportunities
The opportunities available are unlimited. With increasing number of
population and per capital income lots of people are using/utilizing/ eye glass
either by prescription of eye specialists or for fashion purpose mostly by young
populations.
3.1.4.Threat
The threat that is likely going to confront the business is the fact that the
business is competing with already established eye-glass suppliers and traders
in Adama city and surrounding towns and also there are other entrepreneurs
who are likely going to launch similar businesses within the same location the
business plan to launch out from. The issue of inflation is also other challenge
which may increase the price of the product to be traded which indirectly may
challenge the purchasing power of the customers.

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4. MARKET ANALYSIS
4.1. Market segmentation
Market segmentation is the practice of dividing the target market into
approachable groups. Market segmentation creates subsets of a market based
on demographics, needs, priorities, and common interests and other psych
psychographic or behavioral criteria used to better understand the target
customers. By understanding the market segments, this business can leverage
this targeting in product, sales, and marketing strategies. Market segments can
power the business’s product traded cycles by informing how it trade offerings
for different segments like urban vs. semi- urban or high income vs. low
income or young vs old people.

4.1.1.Benefits of market segmentation

4.1.1.1. The benefits of market segmentation for this business includes;

 Stronger marketing messages:
This business has no longer to be generic and vague. It should speak directly
to a targeted group of people in ways they can relate to, because it understands
their characteristics, wants and needs.
 Targeted digital advertising:
Market segmentation in this business helps to understand and define the
targeted group characteristics, so it can direct its marketing efforts to specific
ages, locations, buying habits, interests etc of its customer.
 Developing effective marketing strategies:
Knowing the target customer gives the business a head start about what
methods, tactics and solutions they will be most responsive to.
 Increasing brand loyalty:
When customers feel understood, uniquely well served and trusting, they are
more likely to stick with your brand

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 Identifying niche markets:
Segmentation can uncover not only underserved markets, but also new ways of
serving existing markets opportunities which can be used to grow the brand of
the business.
 Enhanced profits:
Different customers have different disposable incomes; prices can be
set according to how much they are willing to spend. Knowing this can ensure
the business doesn’t over (or under) sell itself.

 Eye glass type selection:

The business can able to trade eye glass designed with the needs of its
customers’ top of mind, and trade different products that cater to its different
customer base areas.
4.1.1.2. Geographical Segmentation of the business
When discussing about segmentation it is critical to overview about marketing
segmentation most importantly pertaining to this business. Depending of
production trading capacity and location of the business which is under
establishment, the business coverage will be in Adama and surrounding urban
and semi urban areas. The populations in this area are segmented for as
targeted group/consumers of the products of bakery business under
establishment.
4.1.1.3. Segmentation based on Economic Factors
The amount of money the target customers have influences in the purchases of
the entrepreneur’s tradable product. Therefore, it is important for the business
to focus on customer who can afford the price set Kedija Jarso for her tradable
product (Eyewear) products
4.2. Challenges to penetrate the market of eye-glass and its accessory
trade
There are few barriers that would challenge entry into this trade business.
Some of the big barriers that keep business from gaining or maintaining

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success are; lack of capital, brand recognition and increasing cost of sales.
Companies that are able to function and survive despite the sub-arrivers can
enjoy lot of success as there is increasing demand for the tradable product
(eye-glass). There are key factors that can help to determine whether a baking
company will be successful or not. These are the ability to pass on cost
increases, use of the most efficient work practices, and establishment of brand
names. In fact the entrepreneur is already in the same business and all most
challenges listed above may not confront her business.

 Inflation
Inflation, defined as the general rise in price level, has a heavy hand in
determine the demand for tradable products under consideration. Inflation is
known in eroding the purchasing power of middle income stratum of the
population, which is taken to be the major consumer and even determiner of
the economic and political well-being of a nation. Then, if the purchasing power
of the most decisive segment of population and consumer of many products is
eroded, the demand for products will be certain to shift down ward. If new
entrants in the trade or if existing companies within the are able to utilize the
factors as well as avoid some of the costly barriers in the trade, they will be
able to bring joy to many homes for many years to come and the trade itself
will enjoy many years of growth and success.

4.3. Reasons for Wearing Glasses

4.3.1.Fashion
With numerous styles, colors, and shapes, eyeglasses are up to date on the
latest fashion trends. They are a great accessory to make any outfit fashionable
and enhance your facial features.

4.3.2.Eye Protection
In today’s digital world it is important to properly protect your eyesight in order
to ensure that it lasts a lifetime. Glasses not only protect your vision from

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digital screens, but they also keep dirt and dust from getting into your eyes.
Furthermore, eyeglasses can also help protect your eyes from harmful UV rays.

4.3.3.Convenience
Unlike contact lenses, glasses are easy to put on and take off. Eyeglasses do
not require additional cleaning and do not need to be replaced as often as
contact lenses.

4.3.4.Added Features
As technology has expanded and grown, so has eye care technology. Nowadays,
there are numerous additions that can be made to your eyeglasses to better
protect your eyes and vision. For example, you can get a transition lens which
darkens when exposed to UV rays and lightens once inside.

4.3.5.Affordability
Offering the best prices on eyeglasses. The offers should make it easy and
affordable to get the latest eyeglass styles.

4.4. Essential factors to consider when buying//using eye glass

There are so many elements to choosing a flattering frame, including color.

4.4.1. Color
Is your undertone warm or cool? If you are warm you will find that warmer
hues such as tortoiseshell, gold or olive green or orange will look good on you.
If you are cool then silver, grey, blues, pinks and black are more likely to flatter
your skin tone. Do you look better in lighter or darker frames? If you have
lighter hair and fairer skin, opt for frames that aren’t too dark (unless you’re
going for a dramatic look).If you have darker hair or skin, then a deeper darker
frame will suit your coloring. Do you look better in brighter or more muted
colors? If the clothes you wear are brighter in their intensity, then a shiny
metallic or acetate (plastic) frame will work well, in a brighter color. If you tend
to favor more muted or soft/smoky colors in clothing, then harmonies them
with either a brushed metal frame or softer colored acetate frame. Choosing

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color of your glasses frames. If you have a color swatch, use it to find the
frames that blend with it and they will work with your coloring.
4.4.2. Face shape
Wider faces vs Narrower faces. Look for glasses that the temple (that’s the
technical word for the ‘arm’ of the frame) is parallel to the side of your face, not
stretched out (if you have a wider face) or angling in (if your face is narrow).
There are frames made for all widths of faces so look for ones that suit the size
and shape of your head. Wide faces need a lighter temple so that you don’t
define the width of your face so much with the arms. Narrow faces can wear a
heavier temple. Longer faces vs Shorter faces. Longer faces need deeper frames.
Shorter faces look best with narrower and shallower frames (rimless and half
rimless can be great for you).

4.4.3. Defining Features

Angular or curved? Are your facial features more straight or angular in
appearance or curved and softened? Angular faces suit frames that are made
up of straighter lines. Curved faces need softer and curved frames to mirror its
appearance.

4.4.4. Eyes and Nose

Length of nose. Do you have a long nose or a hooked or pointed nose? You may
find that glasses with a high bridge will make your nose look like a beak and
further elongate it (which can be less than flattering. Instead opt for frames
with a low bridge to visually shorten the length of your nose.

4.4.5.Width of eyes.
Are your eyes wide set or narrow set? Wide set eyes need a frame with more
width, as your eyes are expected to sit just in from the middle of the lens. A
heavy bridge will also help to make your eyes appear closer set. Narrow set
eyes need a lighter and wider bridge so that it helps to visually push the eyes
further apart.

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4.5. Personality
Of course your personality is the MOST important factor when choosing a
frame. The frame needs to be matched to your personality; it needs to be
something that represents you. You want to feel great in your glasses, so the
style you choose has to represent in glasses form your personality traits. This
is where understanding your personality style and signature style can come in
as handy as it’s applied to everything you wear – including your frames!

4.6. Demand Analysis

4.6.1.Market Trends
Every business has to critically study the availability of real demand for the
product they want to produce/trade. One common trend in the glasses and
contact lens trade business that the demand for its product is driven by
medical needs, fashion, demographics, and of course consumer’s disposable
income. The profitability of individual trading company depends on their ability
to supply quality and best eyewear models that effectively target consumer
tastes and preferences. Large eyewear same traders have economies of scale in
distribution and marketing and small scale eyewear trader companies can
compete successfully by crafting customized eyewear based in their client’s
preference. With recent developments, there will be influx of new consumers
and this will put pressure on product developers to meet their unfamiliar
preferences and needs. Developed economies placing their products in
emerging markets will also have to adjust their pricing strategies to compete
with local low-price products.

As part of marketing strategies, eyewear wholesale trading companies now

ensure that they have showrooms at different locations where they display the
products. As a matter of fact, it is even cheaper to purchase directly from these
showrooms as against purchasing from eyewear retail stores. It is a strategy
that helps them increase sales and income for their business.

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4.6.2.Target Market
People make use of glasses or contact lens either for medical reasons, fashion
or safety reasons hence there are loads of people who make use of eyewear. In
view of that, the entrepreneur has positioned her trading business company to
service the client in Adama city largely and other parts of the country. The
business is in the glasses and contact lens trading industry to trade a wide
range of eyewear for the following people of all age;
 Men
 Women
 Children
4.6.3. Competitive advantage
A close study of the industry reveals that the market has become much more
competitive over the last decade. As a matter of fact, the business has to trade
highly creative products with smart designs and market approach, customer
centric and proactive way. Kedija Jarsois already launched a standard eyewear
trading company that will indeed become the preferred choice in Adama city
and every other location in the country.

Providing of latest eyewear product and excellent customer service culture,

various payment options and highly secured facility will serve as a competitive
advantage for this business. The employees will be well taken care of, and their
welfare package will be among the best within category in the same business
meaning that they will be more than willing to build the business and help
deliver set goals and achieve all aims and objectives.

4.7. Product Distribution Mechanism

It is planned that the entrepreneur will distribute the product directly to
customer through shops opened by the entrepreneur or retailers. The product
will be sold on by cash and transportation will be by the buy the buyer.

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Figure 4.1. Tradable Product distribution mechanism of the business

4.8. Marketing Strategy

A marketing strategy refers to a business's overall game plan for reaching
prospective consumers and turning them into customers of their products or
services. A marketing strategy contains the business value proposition, key
brand messaging, data on target customer demographics, and other high-level
elements. A thorough marketing strategy covers "the four Ps" of marketing—
product, price, place, and promotion.

4.8.1.Product
The business has not its product but it is trader of eyewear products
4.8.2.Price
Determining the selling price is the most important element in business
establishment. Since there are same businesses in the towns, the entrepreneur
will follow the same price for the same product. But she will do promotion and
brand building to attract customers.
4.8.3.Promotion
The business will promote the product it traded using different promotional
methods which includes
 Advertising using printed leaflets combined with an introductory
discount for new customers
 Proving online booking and related serviced

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  Direct marketing:- it can often be an effective way to contact customer
directly and tell about the product in order to increase numbers of
customer and sales
 A brand trading name be used as promotion, such businesses often want
to establish a positive branded trade name.

4.9. Pricing Strategy

Kedija Jarso aware the pricing trend in the glasses and contact lens trade
which is why she have decided to trade various categories of glasses and
contact lens. In view of that, the prices will conform to what is obtainable in the
trading business but will ensure that within the first 3 to 6 months the
products are sold a little bit below the average price in the Adama city. She has
put in place business strategies that will help her run on low profits for a
period of 6 months; it is a way of encouraging people to buy from her.

4.10. Payment Options

The payment way adopted Kadija Jarso Eyewear wholesaler and retailer trading
business is all inclusive because it is quite aware that different customers
prefer different payment options as it suits them. Here are the payment options
that business will make available to its clients;
 Payment via bank transfer

 In cash

 Payment via online bank transfer

 Payment via check

 Payment via bank draft

In view of the above, the business has have chosen banking platforms that
will enable our client make payment for eyewear purchase without any
stress on their part.

20
 5. TECHNICAL ANALYSIS OF THE TRADING BUSINESS
5.1. Business location
The location of the business is strategic as it is to be situated in an area where
the basic utilities such as electricity, water, and telephone lines are available at
reasonable cost availably of infrastructure for transporting tradable items to
the business site and finished product to the market are another advantage
that the location selection will consider. it is also best place to trade the
describe material in the selected business area/Adama city.

5.2. Production Capacity

The business is trade and there is no production process in this case. Hence,
there is no need of machinery and production program and assumption.
However, in this case it is expected to discuss about the investment i.e. budget
for trading, its source, and developing assumption to know how much working
capital/commercial loan is needed against collateral coverage. In this section
details of tradable item will be listed down along with their respective
purchasing and selling price. Furthermore the sales are assumed to increase
and 26% profit margin is assumed on sales.
purcha
selling
1 list of traded materials Qt sing Cost Revenue Gross profit
price
price
A Normal Frames
Full Frame(Metal, Plastic or
1200 500 650 600,000.00 780000 180,000.00
Titanium)
Half Frame(Metal, Plastic or
1200 510 663 612,000.00 795600 183,600.00
Titanium)
Frame less(Metal, Plastic or
1200 450 585 540,000.00 702000 162,000.00
Titanium)

Total 3600 487 633 1,752,000.00 2277600 525,600.00

B Fashion Frames

Eban Frame 2000 600 780 1,200,000.00 1560000 360,000.00

Gucci Frames 2000 300 390 600,000.00 780000 180,000.00

21
 Boss Frame 2000 350 455 700,000.00 910000 210,000.00

Casminal Frame 2000 500 650 1,000,000.00 1300000 300,000.00

Total 8000 437.5 568.75 3,500,000.00 4,550,000 1,050,000.00

C Clip Frames
Oval Frame 1500 550 715 825,000.00 1072500 247,500.00

Square Frame and lens 1500 550 715 825,000.00 1072500 247,500.00

Total Frame 3000 550 715 1,650,000 2,145,000 495,000

1.2. Lenses Types

Plano type lens 1200 650 845 780,000.00 1014000 234,000.00

Distance vision with plus or

1200 400 520 480,000.00 624000 144,000.00
minus

Close vision {negative} 1200 300 390 360,000.00 468000 108,000.00

Cylindrical lens (net give or

1200 450 585 540,000.00 702000 162,000.00
positive)

Compacted lens 1200 1600 2080 1,920,000.00 2496000 576,000.00

Spherical lenses 1200 450 585 540,000.00 702000 162,000.00

High index lenses from (7-220

1200 1600 2080 1,920,000.00 2496000 576,000.00
with plus or minus)

High quality or blue cut 1200 600 780 720,000.00 936000 216,000.00

Bifocal lenses 1200 550 715 660,000.00 858000 198,000.00

progressive lenses 1200 550 715 660,000.00 858000 198,000.00

Coated lenses 1200 300 390 360,000.00 468000 108,000.00

Bifocal or progressive 1200 550 715 660,000.00 858000 198,000.00

Total lenses 14400 667 867 9,600,000.00 12,480,000. 2,880,000.00

Sun sensor 1000 300 390 300,000.00 390000 90,000.00

Total Sun glass 1000 300 345 300,000.00 390,000.00 90,000.00

1.3. Eye Glass Bag 2000 85.00 110.50 170,000.00 221,000.00 51,000.00

1.4. Eye glass clearing clothes 4000 50.00 65.00 200,000.00 260,000.00 60,000.00

Threads for Suspending the

1.5. 5000 20.00 26.00 100,000.00 130,000.00 30,000.00
glass
11000 470,000.00 611,000.00 141,000.00
Total others

22
6. FINANCIAL PROJECTION

6.1. Revenue

Revenue is the money generated from normal business calculated as the average
sales price times the number of it sold. It is the top line (gross income) figure from
which costs are subtracted to determine net income. Revenue is also known as sales
on the income statement. The business will generate revenue from eye wear/eye glass
trade. It has the capacity to sell around Birr 22,453,600 at initial year from the sale of
normal eye glass frames, fashion frames, clip frames, lenses, sun sensor glass, eye
glass bags, eye glass clearing clothes and thread for suspending the glass

Table 6.1 Revenue Estimation

Average unit Total
Sr. No Item Description Quantity Sold Price Revenue
1 Normal Frames 3600 633 2,277,600.00

2 Fashion Frames 8000 569 4,550,000.00

3 Clip Frames 3000 715 2,145,000.00

4 Lenses Types 14400 867 12,480,000.00

5 Sun sensor 1000 390 390,000.00

6 Eye Glass Bag 2000 110.5 221,000.00

7 Eye glass clearing clothes 4000 65 260,000.00

8 Threads for Suspending the glass 5000 26 130,000.00

Total 41000 22,453,600.00

6.2 Cost of operation/trading

Operating costs are associated with the maintained and administration of the
business on day to day basis. Operating costs include direct and in direct cost and
other operating expenses often called rent, payroll and other overhead costs. The
operating cost is deducted from revenue to arrive at operating income and
reflected on business income statement.

23
Table 6.2. Business running costs
Quantity Average unit
Sr. No Item Description Total Revenue
purchased price
1 Normal Frames 3600 487 1,752,000.00

2 Fashion Frames 8000 438 3,500,000.00

3 Clip Frames 3000 550 1,650,000.00

4 Lenses Types 14400 667 9,600,000.00

5 Sun sensor 1000 300 300,000.00

6 Eye Glass Bag 2000 85.00 170,000.00

7 Eye glass clearing clothes 4000 50.00 200,000.00

8 Threads for Suspending the glass 5000 20.00 100,000.00

9 Inventory 500,000.00

Total 41,000 17,772,000.00

6.2.1.Other costs of the business

This business requires other business running cost in addition to cost of
purchased tradable items. This includes, shop rent salary and wage,
insurance cost, cost for stationery items, legal fee and related costs. See the
detail in the following table.
Sr. No Other cost Monthly Annually
20,000 240,000.00
1 Shop Rent
12,000 144,000.00
2 Salary
33,750 33,750
3 Insurance
5,000 60,000
5 Stationery
50,000.00
6 legal fee
8,250 99,001.20
7 Other cost
626,751.20
Total

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 6.3. Management

Management is the main driver of any business. In the proposed business

organization structure seems the following

Manager/Owner

Secretory

Seller Accountant cleaner

Figure 6.1.Organization Structure

The general manager control overall performance of the business whiles the day to
day operation of the business led by operations units. These shall be Seller.
Accountant and cleaners. This business will employ total of 4 permanent
employees.

25
7. FINANCIAL ANALYSIS
7.1. The total investment cost

Sr.
Commercial
N Description Owner equity Total
bank loan
o
cost of good purchased and business
1 running costs - 4,500,000.01 4,500,000.01

2 Inventory 500,000.00 - 500,000.00

3 Collateral 5,000,000.00 - 5,000,000.00

Total 5,500,000.00 4,500,000.01 10,000,000.01

The estimated business cost is Birr 10,000,000 of which Birr 5.5 is Owner
equity. In fact, owner equity of Birr 5M is not a direct business cost but
assumed collateral amount in the form of building and the left Birr 500,000 is
inventory amount. Furthermore, Birr 4,500,000 is an interest free loan from
commercial banks at 7 percent commission/service fee.

7.2. Financial goodness of the business

7.2.1.Gain or loss statement
According to the projected annual net profit from sales of the products, the
business will generate net positive profit though its life span. See the following
table. It is profiting business.

Table 7.1 Expected projected gain or loss statement of the business

Years
1 2 3 4 5
Description
Sales 22,453,600 23,576,280 24,755,094 25,992,849 27,292,491

Operating Costs: 17,903,751 18,774,551 19,688,891 20,648,948 21,657,008

Gross Profit 4,549,849 4,801,729 5,066,203 5,343,901 5,635,483

(Depreciation) 500,000 500,000 500,000 500,000 500,000

P.B. IT 4,049,849 4,301,729 4,566,203 4,843,901 5,135,483

26
 Commission/service charge 7% 283,489.42 301,121.02 319,634.20 339,073.04 359,483.82

Profit Before tax 3,766,359 4,000,608 4,246,569 4,504,827 4,775,999

Profit tax 1,318,226 1,400,213 1,486,299 1,576,690 1,671,600

Net Gain/Loss 2,448,134 2,600,395 2,760,270 2,928,138 3,104,400

7.2.2.Projected Cash Flow Statement

Cash flow provides a look at the cash in and out of the business. It is
important in determining whether or not a project has enough cash to operate
the business without shortage of cash. See the detail in the following table.
Table 7.2; Expected cash flow of the business after loan received
Years
eastablishment
Description year 1 2 3 4 5
Cash Inflows
Own capital 5,500,000 - - - - -
bank loan 4,500,000 - - - - -
Net Profit 2,448,134 2,600,395 2,760,270 2,928,138 3,104,400
Depreciation 500,000 500,000 500,000 500,000 500,000
Total Cash Inflows 10,000,000 2,948,134 3,100,395 3,260,270 3,428,138 3,604,400
Cash out Flows
Cost of good purchased 4,318,000
Wage and salaries 36,000
Shop Rent 60,000
Cost of ensurance 33,750
stationery 15,000
legal fee 12,500
Other cost 24,750
inventrory 500,000
Increase In workng Capital 217,700 228,585 240,014 252,015
Bulding/collateral 5,000,000
Loan Repayment 1,500,000 1,500,000 1,500,000
Withdrowal 244,813 260,040 276,027 292,814 310,440
Total Cash Outflows 10,000,000 1,757,313 2,195,440 2,233,197 772,842 814,470
Net Cash Flow - 1,190,820.24 904,955.55 1,027,072.63 2,655,295.57 2,789,929.65
Cumulative Cash Balance - 1,190,820 2,095,776 3,122,848 5,778,144 8,568,074
Retained earning 2,203,320 2,340,356 2,484,243 2,635,324 2,793,960
Cumulative Retain Earning 2,203,320 4,543,676 7,027,918 9,663,242 12,457,202

7.2.3.Statement of financial position

27
The balance sheet of the firm shows what the asset, liabilities and owners’
capital for specific date especially end of the year. As showed in the following
table the asset can grow at the end of debt repayment period.
Table 7.3 Expected balance sheet of the business after loan recied

YEARS
DESCRIPTION 0 1 2 3 4 5
ASSETS
current assets
Cash - 1,190,820 2,095,776 3,122,848 5,778,144 8,568,074
Inventory 5,000,000 5,012,500 5,447,900 5,905,070 6,385,099 6,889,129
Total Current Assets 5,000,000 6,203,321 7,543,676 9,027,918 12,163,243 15,457,202
fixed assets
Residental building 5,000,000 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000
Total Fixed Assets 5,000,000 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000
Total Assets 10,000,000 10,703,321 11,543,676 12,527,918 15,163,243 17,957,202
Liability & Capital
lending unit loan 4,500,000 3,000,000 1,500,000 - - -
Sub Total 4,500,000 3,000,000 1,500,000 - - -
Capital
owner capital 5,500,000 5,500,000 5,500,000 5,500,000 5,500,000 5,500,000
Retained Earnings - 2,203,320 4,543,676 7,027,918 9,663,242 12,457,202
Sub total 5,500,000 7,703,320 10,043,676 12,527,918 15,163,242 17,957,202
Total L&C 10,000,000 10,703,321 11,543,676 12,527,918 15,163,242 17,957,202

7.2.4.Loan repayment schedule

The interest free borrowed from commercial banks loan is assumed to be

repaid in 3 years. The payment installment is 12 with equal payment of birr
375,000. See the detail in the following table.

Table 7.5 loan payment scheduling

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 Pmt. Beginning Ending
Payment Date Total Payment Principal
No. Balance Balance
1 12/31/2022 4,500,000.00 375,000.00 375,000.00 4,125,000.00

2 3/30/2023 4,125,000.00 375,000.00 375,000.00 3,750,000.00

3 5/31/2023 3,750,000.00 375,000.00 375,000.00 3,375,000.00

4 8/31/2023 3,375,000.00 375,000.00 375,000.00 3,000,000.00

Total 1,500,000.00

5 12/31/2023 3,000,000.00 375,000.00 375,000.00 2,625,000.00

6 3/30/2024 2,625,000.00 375,000.00 375,000.00 2,250,000.00

7 5/31/2024 2,250,000.00 375,000.00 375,000.00 1,875,000.00

8 8/31/2024 1,875,000.00 375,000.00 375,000.00 1,500,000.00

Total 1,500,000.00

9 12/31/2024 1,500,000.00 375,000.00 375,000.00 1,125,000.00

10 3/30/2025 1,125,000.00 375,000.00 375,000.00 750,000.00

11 5/31/2025 750,000.00 375,000.00 375,000.00 375,000.00

12 8/31/2025 375,000.00 375,000.00 375,000.00 0.00

Total 1,500,000.00
Total Loan 4,500,000.00

7.2.5.Analysis of business financing decisions tools

There are different finance decision making tool. These includes different ratios, payback
period, Net present value, internal rate of return and some many others. Form many of listed
financing decision making tools NPV are more powerful in-terms of its realistic. Top world
financial institution like World Bank and African development bank use this tool to make
decision and selection of profitable investment from applied proposals.

7.2.5.1. Payback Period

Though payback period is mostly used to select one from many mutually exclusive business. The
payback period, also called pay-off period is defined as the period required recovering the original
investment outlay through the accumulated net cash flows earned by the Business.
Accordingly, based on the projected cash flow it is estimated that the project’s
initial investment will be fully recovered within the three years.

29
7.2.5.2. Net Present Value
The NPV is the difference between present value of cash inflow and present
value of cash outflow and the present value of cash out flow over period of time

𝑛
𝑅𝑡
𝑁𝑃𝑉 = ∑ ( )𝑡
1+𝑖
𝑡=1

dicounting present value of discountin present value

years cash inflow cash outflow NPV
@ 16% cash flow g @16% of cash outflow
- 10,000,000.30 1.00 10,000,000 10,000,000 1.00 10,000,000 -
1 2,948,134 0.86 2,541,494 1,757,313 0.86 1,514,925 1,026,569
2 3,100,395 0.74 2,304,099 2,195,440 0.74 1,631,569 672,529
3 3,260,270 0.64 2,088,717 2,233,197 0.64 1,430,715 658,002
5 3,428,138 0.48 1,632,181 814,470 0.48 387,780 1,244,401
NPV 4,887,340

The NPV of the business is Birr 4,887,340 which is above zero. According the
NPV capital budgeting method all business with positive NPV are profitable and
fine but the more the number is greater the more probability of the business
selected. As the above NPV result shows the business is fine and selectable for
financing. However, this loan is interest free and it is difficult to see it viability
by looking its NPV. Rather the profitability determines here. Seven percent
commission/service charge on profit is calculated and the business will be
profitable which makes it financeable.
7.3. Social andEconomic advantage of the business

Business under consideration promotes the socio-economic development which

presented as follow
 Income generation for entrepreneur
 Source of income tax for government
 Play role in alleviating un-employment
 And many other direct and indirect positive effect to the vicinity

30
8. CONCLUSION AND RECOMMENDATION
8.1. Conclusion
In conclusion the business is justified based on the following criteria
 It shows a decent return on invest cost
 It has liquid cash flow over its operational life
 It has positive role to play in our country socio economic development
It is therefore recommendable that the business should get active support
from all stakeholders like financers and government offices to get all legal
recognition and capital budgeting.

31