LAUNDRYWASHING MACHINE SERVICE IN THE DEBRE MARKOS TOWN.pdf

8/17/2019 LAUNDRYWASHING MACHINE SERVICE IN THE DEBRE MARKOS TOWN.pdf

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FEASIBLITY STUDY OF LAUNDRY SERVICE

FOR DEBRE MARKOS TOWN

ELECTRICAL AND COMPUTER ENGINEERING GROUP 7

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%


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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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


Verygood

Good Average Bad Very bad

Total


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


Very

good

Good Average Bad Very

bad

Total


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


Very

good


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


Very

good


bad

Total


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


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)



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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


11. When is the price highest? Write answer

Weekends

Holidays

Festivals

Appointments

Other days


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


14. In which age group do you belong and sex? Tick answer

1-20

21-40


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41-60

Male/Female


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


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**)


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


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


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


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


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


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


Detergents cost 27,000.00


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


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


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


Insurance charge 2,260.00

Repair and maintenance 11,284.00


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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FEASIBLITY STUDY OF LAUNDRY SERVICE FOR

DEBRE MARKOS TOWN

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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39

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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40

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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41

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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42

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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43

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

______________________________________________________

LAUNDRYWASHING MACHINE SERVICE IN THE DEBRE MARKOS TOWN.pdf

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