BUSINESS PLAN 2022

BUSINESS PLAN
FOR
PHARMACETICAL AND MEDICAL SUPPLIES IMPORT TRADE

SEPTEMBER, 2022
ADDIS ABABA, ETHIOPIA

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TABLE OF CONTENTS

1. EXECUTIVE SUMMARY ......................................................................................... 3

2. BUSINESS BACKGROUND AND SRVICE DESCRIPTIONS. .............................. 4

3. ORGANIZATION AND MANAGEMENT PLAN .................................................... 8

4. MARKET ANALYSIS… .......................................................................................... 13

5. TECHNICAL OPERATIONS PLN ........................................................................... 17

6. FINANCIAL ANALYSIS .......................................................................................... 20.

7. ANNEXES ................................................................................................................ 27.

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I. EXECUITIVE SUMMARY
Gensin Pharma is a legally established as a Sole- Proprietorship Company in accordance with
Ethiopian Commercial Code and by fulfilling sector standards. Since its establishment; Gensin
Pharma has been striving on availing in demand medical supplies specially having ethical
business management skills with best Ethiopian personality with a very rich business experience
in running successful health care and commercial ventures in the pharmaceuticals import,
wholesale and retail business, targeting to increase accessibility and affordability of quality
medicines and health care products for the public.

The purpose of this business plan is to raise working capital of ETB 20,000,000 in connection
with the importation of pharmaceutical and medical supplies while showcasing the expected
financials and operations over the next five years. Gensin Pharma is an Ethiopian based
company that was established with the intension to provide distribution and wholesale services
of medical equipment, devices and soft medical supplies to physicians, consumers, hospitals and
many other private as well as government owned health care Centers at fare and affordable
price in its targeted market.

Based on the study conducted for the envisaged business operation, the total investment cost
required including existing asset is worked out for about ETB 30.85 Million. Of which
ETB 5.33Million accounted for major portion of Fixed Asset and the remaining ETB 25.52
Million accounted for Working capital fulfillment. By computing the debt to equity ratio on the
investment, the promoter is expected to get bank loan of ETB 20,000,000 (65%) for the purposes
of working capital use and the remaining amount ETB 10.85 Million (35%) is assumed to be
promoter’s equity contribution.

Regarding the results of financial statement analysis, the project shows net profit of ETB
14,881,985; ETB 17,964,161; ETB 21,630,981; ETB 24,523,146; and ETB 27,324,191 in the 1st,
2nd, 3rd, 4th & 5th years respectively. In addition, the cash flow projection shows cumulative cash
inflow of ETB 1,301,580; ETB 15,890,223; ETB 17,941,805; ETB 20,242,318; ETB 21,514,612
and ETB 23,055,914 during the year-0; 1st, 2nd, 3rd, 4th; and 5th years respectively. Whereas, the
discounted cash flow also generated acceptable results of investment decision parameters (i.e., The
NPV=13,107,539 and IRR After Tax = 39%) with the pay-back period is expected during 2nd year.

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II. BACKGROUND AND SRVICE DESCRIPTIONS

2.1 ESTABLISHMENT
 Business Name:..................Gensin Pharma Medical Supplies Import
● Address: ............................. Addis Ababa City Administration,
S/City-Lemi Kura, Wor.-09; H.No – New
● Contact Detail:…...................Mr. ABCD-1 Foggi Bilo (Gm)
Tel: +251982720705/+251954999867
● Business Status: …………..New Establishment
● Business Formation: ........... Sole proprietor
 Planned Investment ............. ETB 30,850,354

2.2 BUSINESS BACKGROUND AND OWNERSHIP

The Company, Gensin Pharma is legally established as a Sole-Proprietorship Company in accordance
with Ethiopian Commercial Code and by fulfilling sector standards. Since its establishment; Gensin
Pharma has been playing a significant role on availing in demand medical supplies having ethical business
management skills with best Ethiopian personality. Although currently operating with limited capital
outlay and lesser performance, the location of envisaged business activity is in Addis Ababa city, Lemi
Kura Sub city within the vicinity where abundant streets enables customers’ access to its store. In this
regard, the company has planned to undertake the importation, distribute, wholesale and retail of a wide
array of pharmaceutical & medical Equipment sourced from different manufacturers (brands) from abroad
USA, China India, and multiple European countries.

Besides, the underlying business, Gensin Pharma is a privately owned company established and
managed by Mr. ABCD-1who is at a middle age of life and possess best entrepreneurial spirit while
leading multiple business lines of his own. On the otherhand, his academic record is the high level
factor that capacitates this business to become successful along with ample experiences grasped
during running other business operations in previous years. Thus, with this business plan, Gensin
Pharma has set-forth its short and long term strategic plan to operate at full capacity by availing medical
supplies mostly in necessitated for all round health care service providers. In order to properly
implement such strategic plans, the company’s urgent intension is to secure minimum working capital
funding requirement from external source (bank loan) that enables to provide quality pharmaceutical
supplies along with medical devices having new style of this era that fulfill health care standard by
importing from abroad as well as from local sources.

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2.3 BUSINESS MISSION AND VISION

2.3.1 Vision
Vision of Gensin Pharma is to become one of the leading brands in the Pharmaceutical & Medical
supplies import and distributing business in Ethiopia.

2.3.2 Mission
The mission is to establish a world of Pharmaceutical & Medical Equipment trading Company that
will make available a wide range of Pharmaceutical & Medical supplies from top manufacturing
brands at affordable price.

2.4 BUSINESS OBJECTIVES

The main objectives of pursuing this business is resulted from the fact that the promoter strictly
identified the existing problem of the sector that patients could not find proper treatment and
medicine for their relief and also the price is not affordable. Sometimes they are vulnerable to be
victim for traditional medication, absence of clinical service and medicine due to lack of quality
medical supplies. Therefore, in the long-run, the company has planned to expand the capacity of its
Primary business to open branches in other areas and by supplying quality/standard service using modern
medical supplies with affordable price to communities in other regional states as well as a set of
strategic plans are in place to participate on manufacturing of basic health care supplies in Ethiopia.

On the other hand, as currently and short-term objective, the business intends to overcome the cash
short it has faced to cover working capital requirement which mainly related to item importation
costs, transporting medicine from genuine wholesalers/distributors and other administrative costs that
enables to provide equivalent services as demanded. Hence, specifically the short-term objectives are:

 To secure ETB 20,0000,000 bank loan facility, partially to cover purchase/importation of

pharmaceutical supplies and basic medical equipment for resale and fulfill the additional
working capital requirement,

 To retain its long-term contracts with local business companies as well as government offices to
provide sustainable health care services by fulfilling their needs for medical supplies.

 Become the premier health care supplies provider in community assisting manner at affordable
services price.
 To create a medical practice that will exceed expectations and serve the community's needs
 To fully engage in the service delivery operations with further expansion activities to other
surrounding vicinities.

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2.5 DESCRIPTION OF SERVICE PRODUCTS AND SCOPS

It is the Ministry of Health’s mission to provide integrated, quick and satisfactory health service with
efficient management, controlling mechanism and support. In view of this, contribution of private
sector is higher and much emphasis has been given by the Government of Ethiopia. This is the
reason that share of private sector in hospital, clinical and pharmaceutical services as well as medical
supply business is by far higher than the Government owned service providers.

Basic medical supplies are medicines essential for meeting the basic health needs of the community
and equipment for health service centers. Access to health care, which includes access to health
treatment as well as essential medication, is part of the fulfillment of the fundamental human right to
health. Indispensable health care and essential medicines save lives and improve health when they
are available and affordable at assured quality and are properly used. However Ethiopia has been
considered as the country with poor health status largely attributable to preventable infectious and
nutritional diseases.

In general, having all facts and other related business opportunities as a rational behind its
establishment, Gensin Pharma Wholesale service business intended to provide most needed
pharmaceutical supplies and medical equipment for both private and state owned health care centers,
which in turn gives general care for all ages, as well as providing multiple procedures to create a
complete health care solution. Hence, some basic medical supplies all the time available at our stores
including but not limited to items listed in the table below:
Table-1: List of Available Products at Gensin Pharma
S.No. ITEM DESCRIPTION S.No. ITEM DESCRIPTION
1 Multivitamin Syrup 10 Amoxicillin Oral Suspension
2 Effervesent Multivitamin 11 Metrondazol Oral Suspension
3 Omiprazol Capsul 12 Dipholydramine Oral suspension
4 Paracetamol Syrup 13 Ceftraxon,500mg Injn
5 Azithromycin 500mg 14 Natabiol Tab
6 Hct 25mg Tab 15 Cefteaxon(Travilan)Im Injn
7 Diclofenac 50mg Tab 16 Azithro Susspention 30ml
8 Effervecent Calcium 17 Dorzolamid2% +Tilmolo
9 Vitamin B_ Complex Cheweble Tab 18 Tobramycin 0.3%+Dexam 0.1%

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III. ORGANIZATION AND MANAGEMENT PLAN

3.1 ORGANIZATION SETUP PLAN

The firm has a plan for rendering the underlying pharmaceutical and related medical supplies and
distribution services through its own means of distribution and proper marketing strategies. Hence,
the organizational setup of the company has been trying to serve the market with limited resource
utilization.

Currently, Gensin Pharma medical supplies import and distribution business has an intention to build
a standard and one stop full-fledged store outlet in Ethiopia and always ensure it hire people that are
qualified, honest, customer centric and ready to work towards building a prosperous business that will
benefit all its customers. With this business plan, the newly proposed business structure will
encompass G/Manager office and three department units as shown by figure below and other work
units will be deployed under each department.

Figure-1: Planned Organizational Structure

GENERAL MANAGER

SECRETARY

LOGISTICS &
ADMIN. & FINANC COMMERCIAL UNITS
MARKETING

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3.2 DEPARTMENT ROLE AND RESPONSIBILITIES

3.2.1 General Manager
The company general manager will be In charge of all aspects that leads the envisaged business
towards predetermined success. Therefore, the general manager will be responsible for every detailed
direction of the business operations by coordinating other department units from top-to-bottom by
undertaking the following duties; such as:

 Representing the company to Creates business contacts, Communicate potential

customers and making a deal for any business transactions.
 Developing a strategic plan which enables the company to operate in sustainable manner.
 Execute business strategies in order to attain the organization’s vision, mission and set
of strategic objectives by availing overall directions as-well-as leading the work units
through entire business implementation plan.
 Provide strategic advice to all stakeholders so that they will have accurate view of the
market and the company’s future
 Ensure company policies and legal guidelines are communicated all the way from the
topdown in the company and that they are followed at all times
 Communicate and maintain trust relationships with business partners and authorities
 Oversee the company’s overall performance, investments and other business ventures
 Delegate responsibilities and supervise the work of executives providing guidance
andmotivation to drive maximum performance
 Evaluate all reports submitted by department managers to reward performance,
preventissues and resolve problems

3.2.2 Commercial Department

 Responsible for Planning, Organizing and Coordinating marketing team and managing
commercial databases
 Organizing marketing Events, Expos, Bazars and other related activities in order to
enhance company’s product awareness in the market
 Dealing with potential customers’ correspondence, complaints and queries
 Preparing market assessment reports and develop alternative market outlets
 Supervising and monitoring the commercial work units
 Present, promote and sell products/services using solid arguments to existing and
prospective customers
 Perform cost-benefit analysis of existing/potential customers to meet their needs
 Establish, develop and maintain positive business and customer relationships
 Reach out to customer leads through cold calling

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 Expedite the resolution of customer problems and complaints to maximize satisfaction

 Achieve agreed upon sales targets and outcomes within schedule
 Analyze the territory/market’s potential, track sales and status reports
 Supply management with reports on customer needs, problems, interests, competitive activities,
and potential for new products and services.
 Keep abreast of best practices and promotional trends
 Continuously improve through feedback
 Ensure the proper records of Pharmaceutical & Medical Equipment are kept and the warehouse
does not run out of products.
 Controls Pharmaceutical & Medical Equipment distribution and supply chain.

3.2.3 Administration and Finance Department

 Administration Unit:
 Develop a manpower planning, monitoring, and appraising job results developing incentives,
developing a climate for offering information and options providing educational opportunities
 Responsible to increase management effectiveness by recruiting, selecting, orienting, training,
coaching counseling’s and discipline other colleges,
 Communicating values, strategies and objectives, assigning accountabilities to every employees of
the company
 planning, monitoring, and appraising job results developing incentives, developing a climate for
offering information and options providing educational opportunities
 Responsible for each and every company issues towards the implementation of overall
administrative systems
 Delegating tasks to employees and Organizing induction programs for new employees
 Ensuring that health and safety policies are up to date
 Keeping personnel records up to date using a range of software packages for HR Management

 Finance Unit:
 Responsible for company’s financial planning, preparing annual budgets and financial report

 Provides managements with financial analysis development budgets and accounting reports,
like Performing cash management, general ledger accounting, and financial reporting.

 Responsible for developing and managing financial systems and polices.

 Responsible for employees’ payroll administration and compliance with taxation legislation

 Handling procurement issues whether the transaction will be through tender of direct purchase
from suppliers.

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 Coordinate all financial matters by creating inter-organizational systematic linkage with

own work team members and other departments

 Maintaining and keep financial records using latest accounting software

 Dealing with financial sectors and fund providers in case strengthening company’s
financial capacity

3.2.4 Logistics & Operations Department

 Responsible for managing the daily activities in the store.
 Ensure the proper records of Pharmaceutical & Medical Equipment are kept and the
ware house does not run out of products.
 Ensure that the sore facility is in the tip top shape and goods are properly
arranged and easy to locate.
 Controls Pharmaceutical & Medical Equipment distribution and supply chain
 Supply management with reports on customer needs, problems, interests,

3.3 MANPOWER REQUIRMENT PLAN

Although the company’s initial setup is intended to operating with limited number of employees as
stated in section 3.1 above, Gensin Pharma has a strategic plan to engage it-self on providing full
capacity services by hiring additional staffs in line with compatible to newly proposed organizational
structure. Hence, with the new business structure, the company will have the following manpower

Table-2: List of Required Manpower and Corresponding Costs

Position Monthly Annual
S.No Job Title No.
Salary Salary Salary
1 G/Manager 1 25,000.0 25,000.0 300,000.0
2 Head, Operations Dep’t 1 12,000.0 12,000.0 144,000.0
3 Head, Admin & Finance Dep’t 1 12,000.0 12,000.0 144,000.0
4 Head, Commercial Dep’t 1 12,000.0 12,000.0 144,000.0
5 HR Offices 1 4,500.0 4,500.0 54,000.0
6 Pharmasist/Health Expert 1 6,500.0 6,500.0 78,000.0
7 Secretary 1 3,500.0 3,500.0 42,000.0
8 Marketing Officer 1 5,500.0 5,500.0 66,000.0
9 Sales Officers 2 2,750.0 5,500.0 66,000.0
10 Account/Cashier 2 5,000.0 10,000.0 120,000.0
11 Store Officers 2 4,000.0 8,000.0 96,000.0
SUB-TOTAL 14 104,500.0 1,254,000.0
Support Staffs
11 Janitors 1 1,100.0 1,100.0 13,200.0
12 Guard 2 1,500.0 3,000.0 36,000.0
13 Driver 2 2,500.0 5,000.0 60,000.0
SUB-TOTAL 5 9,100.0 109,200.0
SALARY TOTAL 19 113,600.0 1,363,200.0
EMPL. BENEFIT @10% SALARY 19 11,360.0 136,320.0
GRAND TOTAL 19 124,960.0 1,499,520.0

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IV. MARKET ANALYSIS

4.1 GENERAL MARKET DESCRIPTION
Pharmaceutical and Medical supplies are designed to aid diagnosis, monitoring or treatment of
medical conditions. The medical equipment market comprises surgical and medical instruments, surgical
appliances and supplies, ophthalmic goods, dental laboratories, and in vitro reagents.

If you are conversant with the pharmaceutical & medical equipment whole sale and distribute
business, you will quiet agree that most pharmaceutical & medical equipment Whole Sale & shops
usually locate their stores close to medical facilities; it enables them make quick sales.so also, the
need to meet up with international best practice and conforming to the regulatory authority will result
in revenue growth, but profit margins will stagnant as medical device store keep price low to attract
more sales amid growing competition. A close watch on the Pharmaceutical & Medical Equipment
Whole Sale shop business reveals that the industry has indeed done pretty well because of the high
demand for latest and efficient Pharmaceutical & Medical Equipment Whole Sale.

As part of their marketing strategies pharmaceutical & medical equipment whole stores engage in a
massive clearance sales and discount sales to attract customers.it is a strategy that helps them
welcome new customers and also reinforce the locality of old customers. Lastly, in recent time, the
pharmaceutical & medical equipment wholesale stores landscape has seen tremendous changes in the
last 20 years; it has grown from the smaller outlets to a more organized and far reaching venture. The
introduction of franchise and online store makes it easier for a retailer to reach out to a larger market
for beyond the areas where their physical retail store is located.

4.2 TARGET MARKET

Gensin Pharma medical supplies store has positioned to service domestic markets throughout the
country by importing all required supplies from abroad. The company has conducted in depth market
research and business plan on determining the target market that expected domestically. Therefore,
the target market for Gensin Pharma Medical Supplies Import and Distribution business includes:

 Hospitals and Other Health Service Providers

 Medical universities and colleges
 Pharmacies and Drug Stores
 Wholesales of Medical Supplies, etc.

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4.3 OUR COMPETITIVE ADVANTAGE

A close study of the pharmaceutical & medical equipment store reveals that the market has become
much more intensely competitive over the last decades.as a matter of fact it has to be highly creative,
customer centric and proactive if you must survive in this industry. We are aware of the stiff
competition and we are well prepared to compete favorably with other leading medical device store in
Ethiopia and throughout the world.

Gensin Pharma Medical Supplies and Distribution business is strategically moving to launch a
standard one stop wholesale retail store that become the preferred choice for hospitals, pharmacies
and other medical centers. The stores are planned to be located in pretty good locations. One thing is
certain; the firm will ensure that a wide range of pharmaceutical & medical equipment from leading
manufacturers available in its store at all the time and it will be difficult for customers to visit our
store and not see the type of Pharmaceutical and medical equipment they are looking for.

4.4 DEMAND DRIVING FACTORS

Ethiopia today has needed high quality Health service and generic medicines for the society, which is
related country’s economic and social development. In recent years, expenditures for healthcare as a
share of gross domestic product (GDP) in the Ethiopia has risen and are projected to continue to
increasing rate of account for an estimated more than 4.3 percent of total health expenditures. The
following factors are indicators of the growth for the drugs and pharmaceutical market of Ethiopia in
relation to other developing nation experience:

 Fastest growing population;

 Fast economic growth and Individual income increasing;
 Improving healthcare infrastructure;
 Improving of Formal and informal education
 An increase in lifestyle-related diseases (like debate)
 High rate rising incidence of contagious diseases
4.5 MARKETING STRATEGIES
4.5.1 Product Quality

Product quality is one of the basic and most important marketing mixes that affect the success of a
new product. Product quality has two dimensions, i.e., level and consistency. Level means the
producer must first choose a quality level that will be acceptable in the target market and in a level
that comply with the quality of competing products. Consistency refers to the consistent delivering of
established quality through strict quality control measures. Thus, the underlying medical supplies by
Gensin Pharma are all encompasses quality demanded by the market.

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4.5.2 Product Pricing

The business under study is focusing for an advantage of using latest technology as against the
existing domestic producer and/or which enables to purchase at a lesser cost and better quality.
Pricing a product is an important and critical activity since it is the major factor in determining
revenue. If a lower price is fixed, it will affect the profitability of the company, and if a higher price is
fixed, the product will not be able to stand in market competition and may be forced out of the
market. Therefore, the right price has to be fixed.

The determination of sales price for a consumer-oriented product like Medical Supplies depends on a
complex series of factors such as the production and marketing costs, distribution techniques, the
prevailing competitors’ price and market conditions. In general, price setting is done by selecting one
of the two frequently used pricing approaches. The simplest method is cost-based approach (Cost-
plus pricing), which involves adding a standard mark-up to the cost of the product, and competition
based approach (going-rate pricing), which bases its price largely on competitors’ prices.
Accordingly, Gensin Pharma Pharmaceutical & Medical supplies is using cost-based approach (Cost-
plus pricing), which is average selling price per product type by considering 35% profit margin on
costs of imported goods.

4.5.3 Product Promotion

In a competitive market, trade promotion should be made to persuade or to make a product attractive
for end users. Such trade promotional tools include; credit and discount with the volume of products
sold etc. The envisaged company is recommended to offer discounts with the volume of product
bought and credit for one to two months. The other promotional strategy, is selecting of the media
channel that involves choosing among available advertising media and deciding how they can be
used; given the type of message, target audience and the budget available. To that end, the company
Gensin Pharma has a plan to develop an extensive sales brochure that will showcase the business
ability to supply any type of medical supplies to domestic market. This brochure will provide all
necessary contact information and preliminary pricing information for the customer. The company
will also use an internet based strategy. Finally, the Company will maintain a modest level of print
and media advertising within local trade publications. In this regard, the company will have financial
budget of 1.5% of annual profit for promotion costs.

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V. TECHNICAL AND OPERATIONS PLAN

5.1 BUSINESS LOCATION
The main business Office of Gensin Pharma including the intended standard warehouse is located in
Addis Ababa City Administration, Lemi-Kura Sub- city; Woreda-09. In addition, the company has a
plan to open more business branch in different regional locations.
5.2 DESCRIPTIONS OF SUPPLIES AND COSTS
As discussed in section 2 above about product market, it is well observed that currently almost all
suppliers are providing medical supplies through import and only few medical products are
manufactured in the country. Thus, in connection with the new business activities, the company has a
plan to provide medical equipment sourced through import which will cost the company for newly
planned initial phase as tabulated below:

Table-3: List of Items to be Imported and One time financial cost

U/RATE T/VALUE T/VALUE

S.N. ITEM DESCRIPTION UoM QTY
(IN US$) (IN US$) (IN ETB)
1 Amoxicillin Suspension BP 125 mg/5ml 100ml (btl) 80000 0.35 28,000 1,498,000
2 Amoxicillin Suspension BP 250 mg/5ml 100ml (btl) 80000 0.45 36,000 1,926,000
3 Metronidazole Suspen. BP 125 mg/5ml 100ml (btl) 70000 0.32 22,400 1,198,400
4 Diphodramine Susp’n BP 125 mg/5ml 100ml (btl) 50000 0.34 17,000 909,500
5 Multivitamin Syrup 100ml (btl) 50000 0.49 24,500 1,310,750
6 Effervesent Multivitamin 20 tab (sld) 30000 1.8 54,000 2,889,000
7 Omiprazol Capsul 10 cap (sld) 30000 0.09 2,700 144,450
8 Paracetamol Syrup 60ml (btl) 25000 0.4 10,000 535,000
9 Azithromycin 500mg 3 tab (sld) 10000 1.39 13,900 743,650
10 Hct 25mg Tab 10 tab (sld) 10000 0.18 1,800 96,300
11 Diclofenac 50mg Tab 10tab (sld) 25000 0.05 1,250 66,875
12 Effervecent Calcium 20 tab (sld) 20000 1.8 36,000 1,926,000
13 Vitamin B_ Complex Cheweble Tab 18 tab (sld) 15000 0.94 14,100 754,350
14 Ceftraxon,500mg Injn vial 10000 1.44 14,400 770,400
15 Natabiol Tab 30 cap (sld) 25000 2.25 56,250 3,009,375
16 Cefteaxon(Travilan)Im Injn vial 10000 1.17 11,700 625,950
17 Azithro Susspention 30ml 30ml (btl) 20000 1.93 38,600 2,065,100
18 Dorzolamid2% +Tilmolo 5ml (btl) 5000 4.92 24,600 1,316,100
19 Tobramycin 0.3%+Dexam 0.1% 5ml (btl) 10000 1.53 15,300 818,550
Total 422,500 22,603,750
Freight &Insurance 2.5% of Item Price 10,563 565,094
Total FOB Value 433,063 23,168,844

Furthermore, this initial purchase inventory is expected to cover only supply plan of 90 days and the
capital raised for item purchase is assumed to be revolving with at-least increasing by 10% each
quarter during the year.

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5.3 DELIVERY SYSTEMS

The company delivery system for current operation is by means of using Rented Vehicles, which
payment mode of rental cost is on daily basis. Accordingly, rental expenses vehicles are Birr 2,500.00
per day. Hence, assuming average delivery services of 240 days/year, the company incurs a total of
Birr 600,000 per year and this cost doesn’t include daily fuel expenses.

5.4 DAILY FUEL COSTS

Since delivery vehicles are rented on daily basis, it is the sole responsibility of the company to cover daily
fuel expenses. Hence, assuming the daily Fuel consumption is calculated for about consuming total of 50
litters/day @ average rate of birr 48.75/litter that equals to Birr 2,500.00/day. Thus, the total annual fuel
consumption will be 12,000 litters @ rate of birr 48.75/litter is equal to Birr 585,000.

5.5 OFFICE BUILDING AND WAREHOUSE AREA RENT

The company rented office building and space areas for stock availability as required and to fulfill
customers’ demand in time. Thus, the rental expenses for building and stock area is about Birr
72,000/month; which equivalent to Birr 864,000.00 per year. In addition, the company needs to
perform remodeling works of rented office and warehouse premises with one time cost of ETB
750,000, which is assumed to be categorized as company fixed investment.

5.6 OFFICE AND WAREHOUSE EQUIPMENT

The business will have standard office spaces for smoothen the operation at Administrative
office to meet business requirement and Standard Warehouse equipment that costs the
company for sum value of financial investment about ETB 975,000 as lump-sum budget.
5.7 VEHICLE AND GENERATOR
The company requires using its own Vehicle for marketing and administrative purposes. Thus, cost of
the existing vehicle is assumed to be ETB 2,500,000; whereas, power supply generator in case of
regular electricity supply interrupted. Hence, cost of generator purchase is assumed to be ETB
1,100,000 and considered to be financed by company it-self.

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VI. FINANACIAL ANALYSIS

6.1 ASSUMPTIONS FOR FINANCIAL ANALYSIS

The financial analysis of GENSIN Pharma for Medical Supplies Import and Distribution business is
based on the data presented in the previous chapters and the following assumptions:-

6.1.1 Project Life

The operational life of the expansion project taken is 5 years and hence, the costs and benefits of the
project are computed over 5 years.

6.1.2 Depreciation & Amortization

Based on the Business Income Tax Proclamation Number 276/2016, the following depreciation rates
areapplied to depreciate the assets of the project:

Table-4: DEPRECIATION AND AMORTIZATION

ITEM DEPRECIATION RATE

Buildings and Civil Works 5%
Machinery and Equipment 20%
Vehicle 20%
Office Furniture & Other Assets 20%

6.1.3 WORKING CAPITAL

The working capital requirement during operation is calculated on the basis of the minimum days of
coverage needed for the different elements of the working capital. Hence, minimum days are as follows:-

Table-5: COVERAGE FOR WORKING CAPITAL COMPUTATION

Operating Cost No. of Days

Inventory/Stock Cost 90
Utility (Electricity cost + water) 90
Salary and wages 90
Administrative expenses 90
Services Selling Expenses 90
Fuel, Oil and Lubricants 90
Repair and Maintenance 90
Accounts Receivable 30
Accounts Payable 30

6.1.4 INCOME TAX

The income tax rate taken is 35% of income before tax.

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6.1.5 Revenue and Cost Assumptions

Revenue estimation has made up to 35% margin held over costs of medical supplies for sale and
increase by 15% each year through its operations life. However, Other Income is assumed to be 5% of
all sales service income.
Table-6: Total Revenue and Costs assumption for the first year

COST Revenue T/Annual T/Annual

ITEM DESCRIPTION UoM QTY U/Cost U/Price
90 days 90 days Cost Revenue
Amoxicillin 125 mg/5ml 100ml (btl) 80000 18.73 25.2855 1,498,400 2,022,840 5,993,600 8,091,360
Amoxicillin 250 mg/5ml 100ml (btl) 80000 24.08 32.508 1,926,400 2,600,640 7,705,600 10,402,560
Metronidazole 125 mg/5ml 100ml (btl) 70000 17.12 23.112 1,198,400 1,617,840 4,793,600 6,471,360
Diphodramine 125 mg/5ml 100ml (btl) 50000 18.19 24.5565 909,500 1,227,825 3,638,000 4,911,300
Multivitamin Syrup 100ml (btl) 50000 26.22 35.397 1,311,000 1,769,850 5,244,000 7,079,400
Effervesent Multivitamin 20 tab (sld) 30000 96.3 130.005 2,889,000 3,900,150 11,556,000 15,600,600
Omiprazol Capsul 10 cap (sld) 30000 4.82 6.507 144,600 195,210 578,400 780,840
Paracetamol Syrup 60ml (btl) 25000 21.4 28.89 535,000 722,250 2,140,000 2,889,000
Azithromycin 500mg 3 tab (sld) 10000 74.37 100.3995 743,700 1,003,995 2,974,800 4,015,980
Hct 25mg Tab 10 tab (sld) 10000 9.63 13.0005 96,300 130,005 385,200 520,020
Diclofenac 50mg Tab 10tab (sld) 25000 2.68 3.618 67,000 90,450 268,000 361,800
Effervescent Calcium 20 tab (sld) 20000 96.3 130.005 1,926,000 2,600,100 7,704,000 10,400,400
Vitamin B-Chewable Tab 18 tab (sld) 15000 50.29 67.8915 754,350 1,018,373 3,017,400 4,073,490
Ceftraxon,500mg vial 10000 77.04 104.004 770,400 1,040,040 3,081,600 4,160,160
Natation Tab 30 cap (sld) 25000 120.38 162.513 3,009,500 4,062,825 12,038,000 16,251,300
Cefteaxon (Travilan)Im Injn vial 10000 62.6 84.51 626,000 845,100 2,504,000 3,380,400
Azithro Susspention 30ml 30ml (btl) 20000 103.26 139.401 2,065,200 2,788,020 8,260,800 11,152,080
Dorzolamid2% +Tilmolo 5ml (btl) 5000 263.22 355.347 1,316,100 1,776,735 5,264,400 7,106,940
Tobramycin 0.3%+Dexam 0.1% 5ml (btl) 10000 81.86 110.511 818,600 1,105,110 3,274,400 4,420,440

22,605,450 30,517,358 90,421,800 122,069,430

6.2 INVESTMENT STRUCTURE

6.2.1 Total Investment Costs

Gensin Pharma is an existing business, which the promoters have previously been invested on major
assets for years from own equity and running such business efficiently. However, in order to segregate
the planned equity investment from the external financing, it so important to show the structure of both
investment outlets as follows. Hence, the total Investment cost is assumed to be ETB 30.85 million.
Out of this total investment outlet ETB 10.85 million is from equity contribution and remaining ETB
20,000,000 is expected from financial source as bank loan.

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6.2.2 Fixed Assets/Capital Investment Cost

The total investment cost of the project including working capital is estimated at ETB 30.85
Million. Out of this, cost of fixed investment is assumed to be about ETB 5.33 Million.- as the major
breakdown of the total fixed investment cost is shown in table below:
Table-7: Fixed Asset Cost Summary

Description Value in Birr

Building Premises Remodeling Works 750,000
Warehouse & Office Equipment’s 975,000
Trucks and Vehicles 2,500,000
Power Supply Generator 1,100,000
Total Fixed Asset 5,325,000

6.2.3 Working Capital Summary

The business requires working capital funding other than capital/fixed investment costs of the project.
Hence, the following table illustrates summary of major working capital needed at start-up.

WORKING CAPITAL SUMMARY

Description Total Cost

Initial Cost of Goods Sold 24,223,765
Salary & Benefits 374,880
Utilities 35,000
Fuel, Oil & Lubrications 146,250
Insurance 314,059
Repair & Maintenance 16,641
Other Administration Expenses 414,750
GRAND TOTAL 25,525,345

6.2.4 Loan Repayment Schedule

The total amount of bank loan including interest (at a rate of 17.75%) will be fully paid within five years.
Accordingly, the annual repayment schedule is tabulated below; whereas, detailed loan amortization is annexed

Years Principal Pay. Int. @ 17.75% Total Pay. End Balance

0 20,000,000
1 2,758,210 3,325,448 6,083,658 17,241,790
2 3,273,507 2,810,151 6,083,658 13,968,283
3 3,885,073 2,198,585 6,083,658 10,083,210
4 4,610,894 1,472,764 6,083,658 5,472,315
5 5,472,315 1,271,037 6,083,658 -
TOTAL 20,000,000 11,077,984 30,418,290 -

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6.3 RESULTS OF FINANCIAL STATEMENTS

Financial Feasibility analysis provides a basis for a decision as to whether to proceed or not with the
business project. The financial implication of the project and its viability is evaluated on the
investment plan detailed out in various parts of this report and the above assumptions. Accordingly,
the financial analysis results are presented below.

6.3.1 PROFITABILITY

The profit and loss statement of the project shows net profit of ETB 14,881,985; ETB 17,964,161;
ETB 21,630,981; ETB 24,523,146; and ETB 27,324,191 in the 1st, 2nd, 3rd, 4th & 5th years respectively.

6.3. 2. Liquidity

The cash flow projection shows cumulative cash inflow of ETB 1,301,580; ETB 15,890,223; ETB
17,941,805; ETB 20,242,318; ETB 21,514,612 and ETB 23,055,914 during the year-0; 1st, 2nd, 3rd,
4th; and 5th years respectively.

6.3.3 Balance sheet

The project starts its upgrading operation at Br 30.85 million and reached to Br 70.85 million at the
fifth year ofits operations.

6.3.4 Net Present Value (NPV) and Internal Rate of Return (IRR)
The NPV and IRR Calculated on the projection are both attractive and acceptable as shown below:

39%
IRR After Tax
51%
IRR Before Tax
13,107,539
NPV @ 12.5% Disnt

6.3.5 Pay-Back Period

The investment cost over cash flow statement projection is used to assume the pay-back period. Thus,
the upgrading business total investment will be fully recovered at the 2nd year after implementing the
expansion and running proper business operation with full utilization of available resources.

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VII. ANNEXES
Annex-I: WORKING CAPITAL REQUIERMENT
COST OF IMPORTED ITEMS FOR RE-SALE
Description of Costs Cost @100% Cost @ 70% W/Capital
Direct Cost of Goods Sold 90,421,800 63,295,260 23,168,844
Selling Expenses (Domestic) 4,521,090 3,164,763 1,054,921
Total CGS 94,942,890 66,460,023 24,223,765
HUMAN RESOURCE REQUIREMENT (SALARY & BENEFITS)
Descriptions Year 1 W/Capital
Employees Salary 1,363,200 340,800
Employees Benefit (10% of Salary) 136,320 34,080
Total 1,499,520 374,880

OTHER GENERAL EXPENSES

Descriptions Costs Year-1 W/Capital
Vehicle Rent Expenses 600,000 150,000
Office and Warehouse Rent Expenses 864,000 216,000
Legal and Other Professional Fees Exp. 50,000 12,500
Office & Other Supplies Expenses 25,000 6,250
Miscellaneous Expense 10,000 2,500
Sales Out late & Office Rent Expense 60,000 15,000
Transport & Per-diem Expenses 50,000 12,500
Total Admin. Expenses 1,659,000 414,750
UTILITIES BUDGET
Description Annual Budget W/C Need
Telephone & Internet Usage 50,000 12,500
Electricity Consumption 75,000 18,750
Water consumption 15,000 3,750
Total 140,000 35,000
FUEL, OIL AND LUBRICANTS
Description Cons'n/Yr. Rate (Br.) T/Cost W/Capital
Trucks and Light Vehicles 12,000 48.75 585,000 146,250
INSURANCE
Description Insurable Insu. Cost/yr W/Capital
Fixed Assets Cost 5,325,000 93,188 23,297
Merchandise Cost 66,460,023 1,163,050 290,763
Total 71,785,023 1,256,238 314,059

EPAIR & MAINTAINACE

Description T/Asset cost Cost/Yr. W/Capital
Building Construction & Civil Works 750,000 9,375 2,344
Warehouse & Office Equipment’s 975,000 12,188 3,047
Trucks and Vehicles 2,500,000 31,250 7,813
Power Supply Generator 1,100,000 13,750 3,438
Total 5,325,000 66,563 16,641

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WORKING CAPITAL SUMMARY

Description Total Cost
Initial Cost of Goods Sold 24,223,765
Salary & Benefits 374,880
Utilities 35,000
Fuel, Oil & Lubrications 146,250
Insurance 314,059
Repair & Maintenance 16,641
Other Administration Expenses 414,750
GRAND TOTAL 25,525,345

DEPRECIATION EXPENSES
DEP'N
DESCRIPTION ASSET COST DEP. RATE
EXP.
Building Construction & Civil Works 750,000 5% 37,500
Warehouse & Office Equipment’s 975,000 20% 39,000
Trucks and Vehicles 2,500,000 20% 100,000
Power Supply Generator 1,100,000 20% 44,000
Total 5,325,000 220,500

SUMMARY OF INVESTMENT
Equity Required Total
Description
Investment Financing Investment
Building Premises Remodeling Works 750,000 750,000
Warehouse & Office Equipment’s 975,000 975,000
Trucks and Vehicles 2,500,000 2,500,000
Power Supply Generator 1,100,000 1,100,000
Sub-Total 5,325,000 - 5,325,000
Working Capital (Merchandise and Admin Costs) 5,525,345 20,000,000 25,525,345
Total Investment Cost 10,850,345 20,000,000 30,850,345

INVESTMENT STRUCTURE
Equity Contribution 10,850,345
Bank Financing 20,000,000
TOTAL INVESTMENT 30,850,345

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