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FEASIBLITY STUDY OF LAUNDRY SERVICE
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Table of content
Content page
LIST OF TABLE ...........................................................................................................................IV
CHAPTER ONE .............................................................................................................................. 1
INTRODUCTION ........................................................................................................................... 1
1.1. Business Description........................................................................................................ 2
1.2. Business Name ................................................................................................................. 2
1.3. General business model ................................................................................................... 2
1.4. Service Description .......................................................................................................... 2
1.5. Quality Services ............................................................................................................... 2
1.6. Company Locations and Facilities ................................................................................... 3
1.7. Time horizon .................................................................................................................... 3
1.8. Environmental Impact ...................................................................................................... 3
CHAPTER TWO ............................................................................................................................. 4
MARKETING ASPECT .................................................................................................................. 4
2.1. Area Covered ........................................................................................................................ 4
2.2. Market Need ......................................................................................................................... 4
2.2.1. Sample questionnaire for a new laundry service ........................................................... 4
2.3. SWOT ANALYSIS .............................................................................................................. 5
2.5. Marketing potential ............................................................................................................... 8
2.6 Market share and competition .............................................................................................. 18
2.7 Advertising and Promotion .................................................................................................. 19
2.8. Demand Analysis ................................................................................................................ 20
2.9. Supply and Competitor Analysis ........................................................................................ 20
2.10. Sales Projection................................................................................................................. 21
CHAPTER THREE ....................................................................................................................... 22
Technical Feasibility ...................................................................................................................... 22
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3.1. Raw materials ................................................................................................................ 22
c) Staffing levels ................................................................................................................ 22
3.2. Suitability of service technology ................................................................................... 24
3.2.1. Technology Selection............................................................................................. 24
3.2.2. Descriptions of the Machines ................................................................................. 24
3.2.3. Auxiliary Equipment .............................................................................................. 25
3.2.4. Office Furniture and Equipment ............................................................................ 25
3.3. Building and Civil Works .............................................................................................. 26
3.4. Capacity and Operation Process .................................................................................... 26
3.4.1. Capacity ................................................................................................................. 26
3.4.2. Operation/Washing Process ................................................................................... 27
CHAPTER FOUR.......................................................................................................................... 29
Financial feasibility........................................................................................................................ 29
4.1. Estimate the total capital requirement............................................................................ 29
4.2. Analysis of Cost Estimates ............................................................................................ 30
4.2.1. Fixed Investment Cost ........................................................................................... 30
4.2.2. Pre-Operation Expenditures ................................................................................... 30
4.3. Fixed Assets ................................................................................................................... 31
4.4. Accounts Receivable and Accounts Payable ................................................................. 31
4.5. Net Working Capital ...................................................................................................... 31
4.6. Total Investment Costs .................................................................................................. 32
4.7. Production Costs ............................................................................................................ 32
4.8. Marketing Costs ............................................................................................................. 34
4.9. Income and profit ........................................................................................................... 35
CHAPTER FIVE ........................................................................................................................... 37
Organizational/Managerial feasibility ........................................................................................... 37
5.1. Business structure .............................................................................................................. 37
5.2. Business founder ............................................................................................................ 38
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CHAPTER SIX .............................................................................................................................. 39
STUDY CONCLUSION ............................................................................................................... 39
6.1 Conclusion ........................................................................................................................... 39
6.2 Recommendations ................................................................................................................ 39
REFERENCES .............................................................................................................................. 40
Appendices .................................................................................................................................... 41
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LIST OF TABLE
Table 1.1 starting of our business .................................................................................................... 1
Table.1.2 time horizon ..................................................................................................................... 3
Table 2.1 survey questionnaire on the quality of competitors on laundry service ........................... 4
Table.2.2 SWOT analysis of a new business in relation to competitors .......................................... 5
Table 2.3 Data collected about consumers' opinions of the quality of a laundry service ................ 8
Table 2.4 Data analysis .................................................................................................................... 9
Table 2.5 data analysis about technique of washing ........................................................................ 9
Table 2.6 data analysis about service and method of holding of clients ........................................ 10
Table 2.7 data analysis about keep an appointment of the laundry service shops ......................... 10
Table 2.8 data analysis about like and dislike of the washing laundry machine ........................... 11Table 2.9 Sample questionnaire about market size and value ....................................................... 11
Table 2.10 Analysis table and respondents answer........................................................................ 14
Table 2.11Potential market for laundry service in Debre Markos town ........................................ 17
Table2.12 (a) Calculation of the size of the market for laundry service ........................................ 17
Table 2.12 (b) Calculation of the value of the laundry service markets ........................................ 18
Table 2.15 Sale projections for first year ....................................................................................... 21
Table 3.1 the machines to be installed are the following: .............................................................. 24
Table 3.2 List of Auxiliary Equipment .......................................................................................... 25
Table 3.3 List of Office Furniture & Equipment ........................................................................... 25
Table 3.4 Project Capacity ............................................................................................................. 26
Table 4.1 startup cost ..................................................................................................................... 29
Table 4.1 Fixed Investment Cost Schedule .................................................................................... 30
Table 4.2 Table Pre-Operation Expenditure Schedule................................................................... 30
Table 4.3 Table Fixed Asset Schedule ........................................................................................... 31
Table 4.4 Accounts Payable Schedule ........................................................................................... 31
Table 4.5 Net Working Capital Schedule ...................................................................................... 31
Table 4.6 Total Investment Schedule............................................................................................. 32
Table 4.7 Direct Operating Cost Schedule .................................................................................... 32
Table 4.8 Administrative Overheads Cost Schedule ..................................................................... 33
Table 4.9 Depreciation Cost Schedule ........................................................................................... 33
Table 5.1 job opportunity ............................................................................................................... 38
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CHAPTER ONE
INTRODUCTION
The fast change of trend from individualized laundry to commercial laundry services
coincides with rapid technological change as well as the fast, changing, and modern
existence of Debre Markos city. We can start this business right from home and grow
from there. It is a very profitable business, as not everyone that puts on clothes has the
time to do the laundry. Based on the survey conducted the reasons why, they go to the
laundry shops and there is chance of making a lot of money because this people will
definitely seek our services.
Table 1.1 starting of our business
Is there a demand for the
produce?
The current population of Debre Markos town is
above 104,000 including Debre Markos University
students. It shows that we have enough demand to
make our business effectively in this town/city.
Who is giving similar laundry
service to the community?
There are four laundry houses in Debre Markos
town/city those gives laundry service for the
community.
What is the cost of starting to
the business of automatic
washing machine service?
The price of the laundry machine service is starting
cost is 1,253,486.000 birr.The detergent cost is, based
on the cloth clients need and there number of cloth
they bring to our laundry service. Therefore, the
starting cost becomes (1,253,486.00 10%
contegency) birr. The operating costs of the laundry
service is depends up on the number of clients.
What is needed to make the
laundry service to the
community?
To make our business we need: Lots of water as
input, Detergents, The place we want to build the
business house. In addition, the automatic washing
machine controlled by simple programmed.
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1.1. Business Description
Debre Markos City as a built-up city in Ethiopia emerged too many businesses now a
days. It can be, seen that numerous schools and establishment are spotted around the area
advice to look for convenience due to their busy time. In addition, this gives a positive
outlook for some entrepreneurs who were just started in the industry to put their
investment in certain businesses particularly the Laundry business in which the field is
not that much penetrated.
1.2.
Business NameThe right name can make our company the talk of the town especially, when it is unique
and probably would catch their attention. Therefore, the proposed name of our business is
“Libanos Laundry Shop” originated from the word “the name of the largest Keble in
area in Gozamin wereda” that means we will wash clothes as hard workers as that Keble,
desire and believe.
1.3. General business model
Laundry/washing machine facility is one of the service areas that communities of our city
members would like to get nearby their living area. Laundry/washing machine service is
specially requires by the population of the city, which is currently facing various
problems in link with washing of clothes. The community has to spend considerable time
to wash their clothes; have to wait for some time to get free washing compartments; have
to wash within ragged compartments and dirty surrounding; and finally end up with
unsatisfactory wash quality.
1.4. Service Description
The Business concept of our laundry is typically homogeneous to those other existing
Laundry shops in the city. However, certain things will make it stand and that includes its
quality services, professionalism of its personnel towards its customers.
1.5. Quality Services
The quality services really matters in our Laundry. It is, planned to provide services such
as washing, pressing, ironing, and folding customer’s clothes and garments. It will be
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using quality equipment’s and machineries that could greatly help and make the business
exist. It shall offer affordable cleaning too, making sure that the output will reach its
quality standard.
1.6. Company Locations and Facilities
The laundry machine will be located in Debre Markos city, around Debre Markos
University. It will utilize 150 square feet (250 square meters).
1.7. Time horizon
Table.1.2 time horizon
Time April May
Data collecting X X X X X X X
Selection of the location of the business
center
X X X X
Showing Progress X X X X X X X
Data analysis X X X X
Feasibility document submission X
1.8. Environmental Impact
a) Water Issues
Washing machines are second only to toilets as the largest water users in the home,
accounting for 14 percent of household water use. In our business, we need lots of water
to success this means that we ask the administration of Debre Markos town to give this
permission.
b) Energy Issues
Supplying the water for washing machines consumes a considerable amount of energy. In
total, water supply and treatment facilities use about 5000 kilowatt-hours per year.
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CHAPTER TWO
MARKETING ASPECT
The marketing aspect will serve as the basis of the financial section through the projected
demand. This includes the area covered, target market, proposed location, competitors,
the demand and supply, demand analysis, marketing program and SWOT analysis.
2.1. Area Covered
This is to identify a point or an area of study. Geographic target is in Debre Markos City
located around Debre Markos University as a primary market. This location composes of
schools Endimata primary school, Debre Markos university; establishments; apartments
and boarding houses. From these components, we will determine the population of those
living in apartments and boarding houses where our target market is situated.
2.2. Market Need
The survey says that the needs of the market are of the following factors enumerated
below. Therefore, this would be our basis to achieve customer satisfaction and they will
be able to continue availing the service. These are quality of cleanliness, price,
timeliness, and customer service.
2.2.1. Sample questionnaire for a new laundry service
We prepare 50 numbers of questionnaires and distribute to the nearby peoples to the
laundry service. When we collect the questionnaires from the 50 questionnaires, 44’s are
able to return back but the other six are not permits to return the questionnaires.
Table 2.1 survey questionnaire on the quality of competitors on laundry service
Question Answers
1. Do you use laundry service to wash your cloth? Yes No
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1. Which type laundry service is best for you (in terms of the laundry
machine uses the material to wash the cloth)?
2. Is water or chemical?
Only water
Only chemical
Both water and
chemical
answer
3.
Do you think you want a best laundry service? Yes
No
Not sure
answer
Only 12% are not returns the paper and answer. From the answered questionnaires 80%
are say yes and both water and chemical. In addition, the remaining 8% answer is no.
From these questionnaires, it indicates that when we start our business we have enough
customers, make a very good, and fruit full laundry shop service. In our city Debre
Markos, there is scarcity of laundry service and the community needs best laundry
service with best client holding method, plus to that of day of appointment.
2.3. SWOT ANALYSIS
Table.2.2 SWOT analysis of a new business in relation to competitors
My proposed business Competitor A Competitor B Competitor C Competitor
D
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S
t
r
e
n
g
t
h
s
Using machines with
quality and brand
High profitability
because it is more
accessible to market
Quality output and
faster service
The location is on
the main city
nearest to the
boarding houses,
apartments and
schools
Location is just a
walking distance
Prices are relative,
competitive and
accords to what the
customers want
Does not need a
large amount of
capital
Accessibility of the
location
Good brand
image and
range of
products.
Nevertheless,
there is no
customer
satisfaction.
Good brand
image and
range of
products.
Nevertheless,
with high
price.
Laundry
service is
cheaper than
A and sells
well They
offer good
margin to
retailers.
Good brand
image and
range of
products.
Nevertheless,
with high
price
Accessibi
lity of the
location
.
W
e
a
k
n
e
Lack of experience
as this will be the
first time to
overcome the
market in the said
location
Service is
more
expensive
than B
example to
wash one
Service is
expensive
example to
wash one
woolen they
ask the
It is not only
expensive
but also they
not use
quality
detergents.
As the
machines
with brand
and quality is
expensive,
maintenance
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e
a
t
s
B. distribution
network and
failing to
make
deliveries.
distribution
network and
failing to
make
deliveries.
2.5. Marketing potential
Table 2.3 Data collected about consumers' opinions of the quality of a
laundry service
Question Summary of 44 replies
Very
good
Good Averag
e
Bad Very
bad
Total
1. What do you think about the service
of the laundry shops?
12 or
24%
28 or
56%
3 or
6%
1 or
2%
0 or
0%
44 or
88%
2. What do you think about the
technique of washing the cloth of the
laundry shops?
3 or
6%
4 or
8%
16 or
32%
12
or
24%
9 or
18%
44 or
88%
3. Do you like the service and method
of holding of clients of the laundry
service?
7 or 14% 20 or
40%
10 or
20%
6 or
12%
1 or 2% 44 or
88%
4. What do you think about the keep
an appointment of the laundry service
shops?
32 or
64%
4 or
8%
4 or
8%
4 or
8%
0 or 0% 44 or
88%
5. Do you like the washing laundry
machine?
14 or
28%
10 or
20%
16 or
32%
0 or
0%
0 or 0% 44 or
88%
6. What do you think about the
structure of the laundry machine of top
loading?
6 or 12% 15 or
30%
10 or
20%
13
or
26%
0 or 0% 44 or
88%
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7. What do you think about the
structure of the laundry machine of
front loading?
20 or
40%
15 or
30%
9 or
18%
0 or
0%
0 or 0% 44 or
88%
7. What do you think about the price
of the laundry per cloth?
5 or 10% 7 or
14%
20 or
40%
12
or
24%
0 or 0% 44 or
88%
Table 2.4 Data analysis
Question Summary of 44 replies
Verygood
Good Average Bad Very bad
Total
1. What do you think about the
service of the laundry shops?
12 or
24%
28 or
56%
3 or
6%
1 or
2%
0 or
0%
44 or
88%
From the 88% of the customer says that 24% of the service of the laundry shop is very
good, 56% of the service of the laundry shop is good, 6% of the service of the laundry
shop is average, and 2% of the service of the laundry shop is bad. From this, we can
conclude that the service of the laundry shop is mostly good. Therefore, this indicates to
us, we can start a very good laundry service shop.
Table 2.5 data analysis about technique of washing
Question Summary of 44 replies
Very
good
Good Average Bad Very
bad
Total
2. What do you think about the
technique of washing the cloth of the
laundry shops?
3 or
6%
4 or
8%
16 or
32%
12 or
24%
9 or
18%
44 or
88%
From the 88% of the customer say that 6% of the technique of washing cloth of the
laundry shops is very good, and 8% of the technique of washing the cloth of the laundry
shops is good. In addition, 32% of the technique of washing the cloth of the laundry
shops is average, 24% of the technique of washing the cloth of the laundry shops is bad,
and 18% of the technique of washing the cloth of the laundry shops is very bad. From
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this, we can conclude that the technique of washing cloth of the laundry shops is average.
Therefore, this indicates to us, we can start a very good technique of washing cloth of the
laundry shop.
Table 2.6 data analysis about service and method of holding of clients
Question Summary of 44 replies
Very
good
Good Average Bad Very
bad
Total
3. Do you like the service and
method of holding of clients of
the laundry service?
7 or 14% 20 or
40%
10 or
20%
6 or
12%
1or 2% 44 or
88%
From the 88% of the customer say that 14% of the service and method of holding of
clients of the laundry is very good, and 40% of the service and method of holding of
clients of the laundry is good. In addition, 20% of the service and method of holding of
clients of the laundry is average, 12% of the service and method of holding of clients of
the laundry is bad, and 2% of the service and method of holding of clients of the laundry
is very bad. From this, we can conclude that the service and method of holding of clients
of the laundry is good. Therefore, this indicates to us, we can start a very good service
and method of holding of clients.
Table 2.7 data analysis about keep an appointment of the laundry service shops
Question Summary of 44 replies
Very
good
Good Average Bad Very
bad
Total
4. What do you think about the
keep an appointment of the
laundry service shops?
32 or
64%
4 or
8%
4 or
8%
4 or
8%
0 or
0%
44 or
88%
From the 88% of the customer say that 64% of the keep an appointment of the laundry
service shops is very good, and 8% of the keep an appointment of the laundry service
shops is good. In addition, 8% of the keep an appointment of the laundry service shops is
average, 8% of the keep an appointment of the laundry service shops is bad, and 0% of
the keep an appointment of the laundry service shops is very bad. From this, we can
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2. When you use laundry service at most? Weekends
Holidays
Festivals
Appointments
Other days
(Circle your answer)
3. How much number of clothe do you wash at each
time?
Write amount in kg or
Number of cloths
4.
When are the times you use the service the least? Write answer
Weekends
Holidays
Festivals
Appointments
Other days
(Circle your answer)
About the market value:
5.
How much do you pay for a single clothe to wash? Write the amount in
currency
a) Trousers
b) Shirts
c) Sweaters
d)
Jackets
e) Women’s Dresses
f) Bed Sheets
g) Towels
h) Pajamas
i)
Others (average)
(Circle your answer)
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6. What is the price difference for different types of
clothes?
Write differences
7.
Does the price change at different times of the year?
Yes
No
Some times
(Circle your answer)
11. When is the price highest? Write answer
Weekends
Holidays
Festivals
Appointments
Other days
(Circle your answer)
12. When is the price lowest? Write answer
Weekends
Holidays
Festivals
Appointments
Other days
(Circle answer)
About the customer:
13. Would you say that you have a low, medium, or
high performance of cloths in your household?
Low
Medium
high
(Circle your answer)
14. In which age group do you belong and sex? Tick answer
1-20
21-40
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41-60
Male/Female
(Circle your answer)
About sales outlets:
15. Where do you usually get laundry service? Tick answer
Market stall
Local shop
Kiosk
Supermarket
Street hawker
Directly
from producer
Other
(Circle your answer)
Table 2.10 Analysis table and respondents answer
About the market size
Summary of 44 replies
Frequency of usage of
laundry service
Respondents %
Daily 0 0
Weekly 40 80
Monthly 4 8
Time of use oflaundry service at
most
Weekends 13 26
Holidays 25 50
Festivals 3 6
Appointments 3 6
Times of you use the
service the least
Weekends 39 78
Holidays 0 0
Appointments 4 8
Festivals 1 2
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About the market
pay for a single clothe
to wash
Type of clothe Average
weight perKG
Charge/unit in birr
Trousers 0.35 1.75
Shirts 0.18 0.40
Sweaters 0.50 0.75
Jackets 0.75 1.50
Women’s Dresses 0.35 1.00
Bed Sheets 0.35 1.00
Towels 1.00 0.50
Pajamas 0.45 0.65
Others (average 0.35
The price change at
different times of the
year
Answer Frequency Replies %
Yes 1 7 14
No 0 35 70
Some times … 2 4
Price become highest Replies %
Weekends 0 0
Holidays 44 88
Festivals 0 0
Appointments 0 0
Other days 0 0
The price is becoming
lowest
Weekends 0 0
Holidays 0 0
Festivals 0 0
Appointments 0 0
Other days 44 88
About the customer
performance of cloths Replies %
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in your household Low 4 8
Medium 36 72
high 4 8In which age group
do you belong and
sex?
1-20 2 4
21-40 37 74
41-60 5 10
Male 15 30
Female 29 58
About sales outlets
15. Where do youusually get laundry
service?
Replies %
Market shop 44 88
Local shop 0 0
Kiosk 0 0
Supermarket 0 0
Street hawker 0 0
Directly 0 0
from producer 0 0
Other 0 0
The help of the following equation fills the above table. We take the value of N=50
because we have been prepared 50 numbers of copies and distribute it to the nearby
community of Debre Markos city/town peoples and from those questionnaires, only 44
copies are returned back to our hand.
Percentage =
=
where:
R – Replies
N – Total numbers of questionnaires or Peoples asked
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Table 2.11Potential market for laundry service in Debre Markos town
Type of
customer
Number in each
category*
Amount of cloth washed
per month (kg**)
Amount of cloth washed
each time (kg**)
Low income 68,430 0.4 0.1
Medium
income
35,385 1.2 0.15
High income 185 2.25 0.45
The cost of laundry service in the market was 2.25birr per kg when washed in 10kg
amounts into customers' own cloth (washed by the majority of those who said they werein low income families). 3.1birr per kg when washed in 15kg jeans cloths (washed
mostly by medium income families) and 4.8birr per kg when washed in 45kg woolen
cloth (washed mostly by high income families). This data can be analyzed, as shown in
Tables 2.12 (a) and 2.12 (b), to calculate the total size and value of the laundry service in
this town. The size and value of the market, calculated in Table 13, indicate that low
income and medium income families form the largest part of the laundry service in this
town. The demand for woolen cloth of laundry was limited to high-income groups, which
formed only 0.2% of the market size and 3.8% of its value. A new business would
therefore be likely to focus on low and medium income families as its potential
consumers. This has implications for not only the type of packaging laundry service that
is used but also the types of advertising, methods of promotion and agreements with
shops that should be considered.
Table2.12 (a) Calculation of the size of the market for laundry service
Type of
customer
Number in each
category
Amount of cloth washed
per month (kg)
Total demand (kg per
month)
Low income 68,430 0.4 27,372
Medium
income
35,385 1.2 42,462
High income 185 2.25 416.25
TOTAL 70,250.25kg
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Table 2.12 (b) Calculation of the value of the laundry service markets
Type of
customer
Amount of cloth
washed each time(kg)
Cost per kg of
cloth washed(birr)
Number
of kg
Value of market
(birr per month)
Low income 0.1 2.25 27,372 6,159
Medium
income
0.15 3.1 42,462 19,745
High
income
0.45 4.8 416.25 900
TOTAL 26,804
2.6 Market share and competition
It is important from the outset, to estimate what is the proportion of the total market that
a new business could reasonably expect to have, it is known as the market share. It is
often difficult to estimate a realistic market share and the figure depends on a large
number of variables, but the table below can used as an initial guide. The estimated share
of the market for a new laundry service can be, calculated as follows:
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Total size of the market = 70,251 kg per month
Estimated share = 25-30%, with 30% selected.
This represents sales of 21,075.3kg of cloth per month with a potential value of
71,656.02 birr per month. When converted to daily laundry service rate, assuming 26
working days per month, the maximum production is therefore 810.59 kg per day.
The estimated share analysis is as follows
Taking 15% of total size of the market =
To get the potential value take the average of Cost per kg of cloth washed (birr)
Calculate average value =
∑
Potential value =
To get daily laundry service rate ,by assuming there are 26working days/month
Then daily laundry service rate becomes
2.7 Advertising and Promotion
This refers to raising customer awareness of the services and creating services loyalty.
1. Advertising material and promotional material
It will be distributed upon the opening of the shop so that the market will be able to
be informed that it is already available. The advertising material and promotional
material will be personally done by the owner of the shop which has a budgeted
amount of birr 3,000.00. Advertising material will include the following information:
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Services offered , Price list, Company address and contact number, Business hours,
and Business slogan.
2. Tarpaulin – will be placed in front of the shop. It will include the following
information: Business name, address and contact number, Business logo, Business
hours, and Business slogan.
3. Membership offering that will give customer discounts - to maintain the loyalty of
the customer we will offer membership.
4. Pick Up and drop service to increase more of the willingness of the customer to
avail of the laundry service, we will offer pick up and drop service as it shows in the
survey that 49% would like to have this kind of extra service for the convenience of
the customer.
2.8. Demand Analysis
The demand for the services of the project comes from the population of the city. The
population residing in the town including the town is above 104,000 in number. The
survey result obtained from a random sample of 50 persons indicates that about 80% are
willing to be users of the service. Out of the total number who sampled to be users, about
44 persons i.e. 88% of the total population are ready to expend some money for the
service. The total demand can, therefore be expressed as by the total weight of the clothes
in kilograms that these populations will deliver to the laundry/washing service facility for
washing during any given time such as day, month, or year. A number of factors
including the following affect this total demand of the laundry/washing service facility.
The number of times that the community washes his/her clothes, the weight of the
clothes that the population washes at a time, the quality of the service and the efficiency
of the service, and the price charged.
2.9. Supply and Competitor Analysis
Currently, no enough service provider, which is going to compete with the proposed
business. However, there is still the option of using the current manual facility. There are
various reasons for this: Price may be unaffordable and Machinery Breakdowns. In
addition, other business people may start the same kind of business in the surrounding of
the town and direct competition may come. The business has therefore to be efficient and
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attractive in all dimensions i.e. time, cost, quality, and price to win the competition that
may come later.
2.10. Sales Projection
The total expected sales of the project is determined by considering the current expected
demand, a reasonable growth of demand every year and the capacity of the machines to
be installed and the price per kilogram for the service. Considering the increase in the
city population every year, which is about 23%, and the additional customers that will be
attracted to the service form existing non-users, a reasonable sales growth of 18% is
assumed.
Table 2.15 Sale projections for first year
A Expected demand in a year Kg 294,179.00
B Projected capacity of 9 washers Kg 432,000.00
C Price per kilogram Birr 2.00
D Total sales for first year (A * C) Birr 588,358.68
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CHAPTER THREE
Technical Feasibility
The project needs some supplies in order to deliver its much-needed services to the
community. The supply items that the project requires include detergents, electricity,
water, and telephone.
3.1. Raw materials
a) Equipment required
We need different equipment’s that are used for our starting of new business venture.
This is used to decide the service of laundry machine required and the size (or 'scale' or
'throughput') that is needed. In doing this, decisions need to be taken on the relative
benefits of employing a larger number of workers or buying machinery to do a particular
job. The decisions on equipment requirements are influenced by the cost and availability
of machinery, the availability of people who are skilled in maintenance and repair of the
laundry machine. The availability and cost of spare parts and the possibilities of local
equipment fabrication
b) Packaging
These include the technical requirements of the service for protection against light,
crushing, air, moisture etc., the promotional and marketing requirements and the relative
cost and availability of different types of packaging. Selection of packaging materials
frequently causes the largest problems for small laundry services and is often the main
cause of delay in getting a business established.
c) Staffing levels
In laundry service processing, each day's work will initially involve preparation of the
raw materials and then move through processing to packaging. It is possible to have all
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workers doing the same type of activity throughout the day, but it is often more efficient
to allocate different jobs to each worker as the day progresses.
The materials are:
i. Detergents
In the case of our city laundry/washing machine service project, detergents of different
size shall be held in stock for sale to the community as per their requirements. The
detergents must however be sold to the community at cost. Industry reports show that on
average one wash cycle for 20 kilograms of clothes consumes five medium size
(200grams) powder soaps, which costs around Ethiopian Birr 2.50.
The total powder soap requirement given the current capacity will therefore be:
Current capacity = Number of packets * Number of day/month *cost of single packet *
Number of machines in the service shop
C = NP * ND * CSP * NM
C=40 packets x 30 days x 7.5 per packet x 9 machines
= 81,000.00 worth of detergents for nine (9) washing machines
ii. Electricity Supply
The machines, which are supplied, which are selected as the only heavy-duty commercial
or industrial coin machines in the country have a consumption rate of 12.5 KWH. The
machines require a electrical system which is available and supplied by the Ethiopian
Electric Power Corporation. The corporation charges Birr 9,000.00 for installing
kilowatt-hour meters. The total energy consumed by the washing and dryer machines will
be 12.5 times the total number of hours of operation.
iii. Water Supply
The washing machines have to be connected to a continuous pipe water system. The
machines will automatically regulate the flow and disposal of the water. The water
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consumption rate of the selected machines is 200 liters at rated capacity for one standard
load of 20 kilograms of clothes.
iv. Telephone Facility
The telephone lines are to be obtained from the Ethiopian Telecommunication
Corporation. The Corporation charges a one-time subscription fee of Birr 300.00 per line.
The total one time subscription fee for two lines will therefore be Birr 600.00. The
monthly expense for telephone is estimated to be 150 per month, which makes the annual
expense as Birr 1,800.00.
3.2.
Suitability of service technology
3.2.1. Technology Selection
The project requires a line of washing machines and dryers and other auxiliary
equipment. We have conducted a field survey of available washing and drier machines
and have found those imported by OMEDAD PIC appropriate for the project. The
justifications for the selection of these machines are:
1.
The machines to be installed must operate for long hours without breakdown &
failure. Coin operated machines manufactured for commercial/industrial use are
suitable for this purpose than machines manufactured for home use. The following
companies were contacted to provide their offers for heavy-duty washing machines.
The manufacturers are Addis Fana Sc, BT Red PLC, Glorious PLC, Ethiopian
Electronics Plc, and OMEDAD PLC.
3.2.2.
Descriptions of the Machines
Table 3.1 the machines to be installed are t he following:
Supplier OMEDAD PIC
Brand Grandimpianti (Italy)
Nature Heavy duty coin operated machines
Capacity Washers 20 Kilograms
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Dryers 15 Kilograms
Electricity Consumption 12.5 KWH
Water Consumption 200 Liters per load (cycle)
Water Inlet Pressure
Warranty 1 Year
Coins Supplied 15 per machine
Installation Free of charge
Price for one
machine
Washers Birr 94,000.00
Dryers Birr 46,000.00
3.2.3. Auxiliary Equipment
The project also requires auxiliary tools and equipment. The following is the list of
auxiliary equipment required in the project.
Table 3.2 List of Auxiliary Equipment
Description Number Cost/unit Total
Fire extinguishers 2 650.00 1,300.00
Scale 1 35.00 35.00
Fan 3 250.00 750.00
Trolley 3 100.00 300.00
3.2.4. Office Furniture and Equipment
Furniture and equipment are also required in the laundry/washing service room for proper delivery of the service. The following items are initially required.
Table 3.3 List of Office Furniture & Equipment
Description Number Cost/unit Total
Table (office) 3 500.00 1500.00
Chair (office) 4 300.00 1200.00
Folding table 2 700.00 1400.00
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Guest chairs 10 100.00 1000.00
Computer with printer 1 5,000.00 5000.00
Miscellaneous 600.00 600.00
3.3. Building and Civil Works
The laundry/washing machines must be permanently installed in a flat-cemented area.
The building must be ventilated & room temperature must be kept between 100c and
400c. Building constructed with hollow cement block (HCB) is ideal for the project. The
electric power & water supply system shall also be performed simultaneously as per
standards. The machinery will be arranged in such a way that there is enough space for
equipment, for working, for passage & equipment servicing, and for adequate ventilation.
The average space requirement of the building used for such service is about 250square
meters (M2). The total amount required for building & other civil works of the project
will be about Birr 140,521.00.
3.4. Capacity and Operation Process
3.4.1. Capacity
The project aims at giving efficient laundry/washing machine service to the community
of Debre Markos city. It must therefore have the required capacity to satisfy the huge
potential demand. The proposed capacity of the project is as shown below
Table 3.4 Project Capacity
Working hours per shift 8 hours
Number of shifts in a day 1 shift
Working day per annum 290days
Weight of clothed and dried per load 20 Kg
Hours record per load 45 minutes
Cleaning time between process 15 minutes
Total hour used per load 1 hours
Number of loads per shift in one machine 8 loads
Maximum weight of cloths washed and dried/ day 160Kg
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Total demand expected/day in Kgs 1400
Number of washing machines required to meet demand 9 units
Total weight of cloths washed and dried in a year on 9machines
160*9*290 = 417,600Kgs.
3.4.2. Operation/Washing Process
The washing service involves a sequence of flow of separate activities. The following
chart shows the whole processes involved in laundry/washing machine service.
Figure 3.1 Process laundry service layouts
a)
Receive- The laundry shop receives the clothes of the community
b) Weighing- The weights of the clothes of the customers are measured to
determine what the customer should pay.
c) Payment- The customer pays the amount determined and presents the receipt to
the attendants.
d) Tagging- the clothes of each customer are tagged with a specific number to
facilitate identification & delivery after washed and dried. The clothes will also
be separated as per color & fabric texture to avoid damages.
ReceivinPayment
Weighting
Tagging and
separation
Sorting anddelivery
Washing
Drying
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e) Washing- The clothes will then be washed using powder soap
f) Drying- The washed clothes will be manually transferred to a dryer machine.
g) Sorting & Delivery- The clothes are sorted as per the tag number previously
assigned and then delivered to the customer.
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CHAPTER FOUR
Financial feasibility
4.1. Estimate the total capital requirement
A) Start-up costs
The start-up capital is the amount of money that is needed to buy the facilities and
equipment, to register and license the business and get the necessary cleanliness
certificates. Working Capital includes the costs of raw materials, packaging, staff
training, service promotion etc. that have to be made before the business begins to
generate income from sales of the laundry service processing.
Table 4.1 startup cost
Description Amount in birr
Building and civil works 140,521
Machinery equipment 998,000
Auxiliary equipment 2385.00
Office furniture 10,700
Computer and accessories 5000.00
Feasibility study cost 11,000.00
Architects & survey fee 5,000.00
Other project planning costs 1,500.00
Salaries 1,850.00
Water charges 1,260.00
Electricity 20,700.00
Telephone expense 150.00
Detergents cost 27,000.00
Office supplies 1,000.00
Prepaid insurance 2,260.00
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Marketing cost 1,200.00
Payment for salaries 1,850.00
Payment for utilities 22,110.00Total 1,253,486.000
4.2. Analysis of Cost Estimates
4.2.1. Fixed Investment Cost
The fixed investment of the project includes the following items
Table 4.1 Fixed Investment Cost Schedule
Description Amount in birr
Building and civil works 140,521
Machinery equipment 998,000
Auxiliary equipment 2385.00
Office furniture 10,700
Computer and accessories 5000.00
Total 1,154,456.00
4.2.2. Pre-Operation Expenditures
This group includes all items that are incurred prior to commercial operation of the
project. The items included in this cost category are the following
Table 4.2 Table Pre-Operation Expenditure Schedule
Description Amount in birr
Feasibility study cost 11,000.00
Architects & survey fee 5,000.00
Other project planning costs 1,500.00
Total 17,500.00
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4.3. Fixed Assets
The fixed assets of the project will be the sum of fixed investment costs and pre-
operation expenditures described above.
Table 4.3 Table Fixed Asset Schedule
Description Amount in birr
Fixed investment cost 1,154,456.00
Pre – operation expenditures 17,500.00
Total 1,171,956.00
4.4.
Accounts Receivable and Accounts Payable
The account payable amount when the project operates at full capacity will therefore be
as follows
Table 4.4 Accounts Pa yable Schedule
Description Amount in birr
Salaries 1,850.00
Water charges 1,260.00
Electricity 20,700.00
Telephone expense 150.00
Total 23,960.00
4.5. Net Working Capital
The working capital requirement of the project is therefore for those items which must be
paid during/or at the end of the first month of operation.
Table 4.5 Net Working Capital Schedule
Description Amount in birr
Detergents cost 27,000.00
Office supplies 1,000.00
Prepaid insurance 2,260.00
Marketing cost 1,200.00
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Cash in hand (5% of total of other working capital) 2,896.00
Payment for salaries 1,850.00
Payment for utilities 22,110.00 Net working capital required 57,920.00
4.6. Total Investment Costs
The total investment cost of this project will be the sum of fixed assets and net working
capital of the project.
Table 4.6 Total Investment Schedule
Description Amount in birr
Fixed investment cost 1,154,456.00
Pre-operation expenditure 17,500.00
Fixed assets 1,171,956.00
Net working capital 57,920.00
Total project cost 2,401,832.00
4.7.
Production CostsThe production costs of the current project are as follows
1) Direct Operating Costs
Direct operating costs include material (utilities) and labor costs required for the
operation process of the business.
Table 4.7 Direct Operating Cost Schedule
Description Amount in birr
Electricity costs 248,400.00
water costs 15,120.00
Telephone costs 1,800.00
Labor cost 22,200.00
Total operating cost 287,520.00
2)
Administrative Overheads
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The most important cost items included in administrative overheads are insurance
charges, repair and maintenance costs, and office supplies
Table 4.8 Administrative Overheads Cost Schedule
Description Amount in birr
Insurance charge 2,260.00
Repair and maintenance 11,284.00
Office supplies 1,000.00
Total 14,544.00
3) Financial Costs
The project is assumed to be financed with 100% equity contribution. There are many
reasons for this assumption.
a)
The project aims at giving a basic service, which most cities must avail to their
population. The administration of Debre Markos city have a positive attitude to the
availability of this service and are willing to see the possibilities of financing the
project
b) The Credit Union, Amara regional state that provides many services to the
community at discounted prices may be interested to venture from its own funds.
c) Private business organizations or individuals may be interested in the business and
may require some amount of loan from banks. However, since the site is being
selected to be within the places of the Debre Markos town/city, it will be difficult for
entities far from the city to operate a business within the city.
4) Depreciation Costs
The total project cost has to be depreciated or pay back as per applicable laws.
Table 4.9 Depreciation Cost Schedule
Description Total Annual depreciation
Building & civil works 140,521.00 5,806.25
Machinery and accessories 998,000.00 99,800.00
Auxiliary equipment 2,385.00 567.00
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Office furniture 10,700.00 1,280.00
Computers 5,000.00 1,250.00
Pre-operation expenditure 17,500.00 3,500.00
4.8. Marketing Costs
Income statement
For one month
Sales 588,358.68
Operating expenses:
Total operating expense 57,920.00
Net income 530,438.68
Statement of owner’s equity
For one month
Investment during the month 71,656.00
Net income for the month 530,438.68
Less withdrawals 3000
Increase in owner equity 527,438.68
Our Capital for one month 599,094.68
Balance sheet
For one month
Assets
Cash 2896.00
Supplies 220,000.34
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Land 400,158.34
Total asset 623,054.68
Liabilities
Accounts payable 23,960
Owner’s equity
Our capital 599,094.68
Total liabilities and capital 623,054.68
4.9. Income and profit
From the market survey, the estimated market size and share enables the expected sales
to be calculated. The gross profit (or gross loss) is the difference between the expected
income and the total operating costs over the first year, including any loan repayments.
Income is therefore calculated as follows:
Income = Selling price per unit x number of units sold
The income clearly depends on both the price of the laundry service and the amount of
cloth that is washed. When selecting a price for the laundry service, two approaches can
be taken: First, the price can be based on laundry service costs and it is set to ensure that
income exceeds the total costs. This however, does not take account of competitors'
prices and to be successful, the new laundry service should be priced at or below the
price of other similar services.
The second approach is therefore to set the price to compare favorably with existing
laundry services and calculate the likely profit at the planned scale of wash service. In
many countries, this profit is normally 10-30% of the value of each pack. In addition,
there are distribution costs and perhaps special promotion costs that should be included.
The price that is charged for the laundry service should therefore allow the service maker
to make an adequate profit. In the laundry service, the income to the service maker i.e.
our group is the sale price less 10% for retailer's profits is
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= (3.4 - 10% 0f 3.4 = 3.06birr/kg).
When the service costs and income are compared using the second approach, the
operation of the business should be above the breakeven Point. Above this point is the
minimum level of service that can enable the enterprise to make a profit (Figure below).
Breakeven point can be calculated as follows:
calculate the contribution for variable costs per pack
subtract the value obtained from the sale price to obtain the 'unit contribution'
calculate the total fixed costs per year
divide the fixed costs by the unit contribution to obtain the annual production rate
that will allow the business to break even
In the laundry service, the contribution for variable or depreciation costs/kg
=112,203.25Birr/126,444kgs per year = 0.887birr.
The sale price per kg = 3.06/kg/3.4/kg = 0.9birr/cloth
Unit contribution = sale price - (variable + labor contributions) = 0.9-0.887 = 0.013
Total fixed costs per year = 1,171,956.00birr
Breakeven = fixed costs/unit contribution =1,171,956.00birr/0.013 = 90,150,462kgs/year
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37
CHAPTER FIVE
Organizational/Managerial feasibility
5.1.
Business structure
The final organizational structure of the proposed project depends on the management style and
control techniques of the investor in the business. Assuming that the Debre Markos town
administration is interested to run the project incorporating it under its organizational setup, a
structure for this particular division is recommended as follows.
Figure 5.1 Proposed Organizational
Cleaner/att
endant
machine
1_3
Secretary/
CasherSupervisor
Cleaner/att
endant
machine
3_6
Cleaner/att
endant
machine
6_9
Laundry service
head
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38
Table 5.1 job opportunity
Position Sex Nu
mb
er
Qualification Age Experience Monthly
salary
Annual
salary
Laundry
service
head
Male 1 Advanced college
diploma
25 up
to 35
2 year and
above in
washing
machine
servicing
850.00 10,200
Shift
supervis
or
Male 1 Advanced diploma in
management
Above
25
1 year in
supervising
750.00 9000
Secretar
y/casher
Female 1 Advanced diploma in
information technology
or accounting
Above
23
2 and above 750.00 9000
Cleaner/attendant
Female 4 Who take ECLC andhave 1.5and above
Above20
If they areexperienced
they
become
preferable
400.00 4,800
Total 7 2,750.00 33,000
5.2.
Business founder
The Coin- operated laundry business is usually run, as a self-service business in most countries
abroad and no work force might be required. However, in our case, the project is planned to be
staffed with key essential personnel to ensure proper handling of the machines, protect theft of
clothes and misuse of facility, and to provide efficient continued service.
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CHAPTER SIX
STUDY CONCLUSION
6.1 Conclusion
Debre Markos city has not enough laundry service for the community. The scarcity of such
facility has affected the community in particular since they have to allocate part of their active
time to wash their clothes in the current manual facility which is time taking, tiresome, and
inefficient. The majority of the communities of the town/city have asserted the importance of the
service of laundry/washing machine facility by stating that the issue is now becoming a health
concern in addition to the usual problems outlined previously.
This feasibility study report has investigated the possibilities of service of a laundry/washing
machine service facility in the city. The study has assessed the marketing aspects, the
technological aspects, the resource requirements, the organization and management aspects of
the project, and the financial commitments of the project. The project has been evaluated in
terms of the return that it generates to the investor, the present value of the future cash flows of
the project expected throughout the project life and the number of years that the project takes to
pay back all the initial investment made on the project. The project is found acceptable by all of
the above evaluation criteria. The impact of changes on the project has also been assessed and
the project is still feasible using the above appraisal methods.
6.2 Recommendations
We recommended to the town management in connection with this project is:
1) The city management should consider the service as basic and must concentrate all the
required assistance for the implementation of the project
2) The city is specifically recommended to invest in the project since the revenue generated
from the business helps the city to cover part of its expenses from its own sources.
3) After implementation of the project, proper care and maintenance shall be given to the
machines to ensure the continued availability of the service.
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REFERENCES
[1] F. Hillier & G. Lieberman, Introduction to Operations Research, McGraw Hill Co., 7th
ed., New York, 2001, Project Management With PERT/CPM, PP 469-485
[2] P. Chandra, Projects: Planning, Analysis, Selection, Financing, Implementation, &
Review, Tata McGraw-Hill Publishing, 6th ed., New Delhi, 2006
[3] P. Kotler & G. Armstrong, Principles of Marketing, Prentice Hall of India, 11thed., New
Delhi, 2006
[4] R. Meigs, J. Williams, S. Haka, & M. Bettner, Financial Accounting, Irwin McGraw
Hill, 10th ed., New York, 2001
[5] W. Behrens & P. M. Hawranek, Manual for the Preparation of Industrial Feasibility
Studies, United Nations Industrial Development Organization, Vienna 1991
[6] Coin Laundry Association of America, Coin Operated Laundry Industry Overview,
www.claa.org
[7] Iowa Small Business development Center, Operating a Coin Laundry, USA,
www.iabusnet.org
[8] Small Business Development Resource, Opportunity Study for Laundries, Pakistan,
www.smeda.org
http://www.iabusnet.org/http://www.iabusnet.org/
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Appendices
You do not need to write your name.
Thank you,
1) Personal Information
Gender
Male Female
Age if you are student Class Year
2) Are you an on campus student?
a) Yes
b) No
3) How do you get your clothes washed?
a) I manually wash in campus facility
b) I take home for washing
c) I Hire janitors to wash my clothes
d) I use other means (Please Specify)
4) How often do you think students wash their clothes?
a) Every week
b) Every 2 weeks
c) Every 3 weeks
d) Every month
e) Other (Specify)
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5) How do you evaluate the current facility for washing clothes?
a) Very Poor
b) Poor
c) Fair
d) Good
e) Very Good
6) Do you think washing of your clothes takes some time?
a) Yes
b) No
7) How much of you total time do you allocate for the following activities (in %)
a) Studying
b) Leisure
c) Sleep
d) Washing of clothes
e) Others
8) How much is your total expenditure for detergents/soaps every time you wash
Clothes? _______________________________________________________________
9) Do you hire the janitors in your residence blocks to wash your clothes?
a) Yes
b) No
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10) If the answer to the above question is yes, how much do you pay for the
service? _________________________________________________________
11) Do you wash your clothes in campus?
a) Yes
b) No
12) If your answer to question 11 is no, where do you wash your clothes?
a) At home
b) Laundry
c) Other (please specify)
13) How many units of the following clothes do you wash every time you wash clothes? Please
write the quantity of each item in the third column of the following table
Description Average Weight per unit
(KG)
Number of units You wash at a
time
Trousers 0.35
Shirts 0.35
Jackets/sweater 0.18
Women’s 2.25
Dresses 0.35
Bed Sheets 0.35
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Towels 1.00
Pajamas 0.45
Others (average) 0.35
14) Will you be a user, if a laundry machine (an automatic washer and drier) is installed in your
campus?
________________________________________________________
15) How much can you afford to pay at a time for the service?
________________________________________________________
16) What benefits do you see with the introduction of an automatic laundry system in your
campus?
_______________________________________________________________
17) What problems do you see with this system?
_______________________________________________________________
18) If you have any other comment, please indicate below
______________________________________________________
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