### **Expanded Financial Projections (Year 1)**
**Objective**: Achieve an 18% ROI on the total investment of 27,500,000 ETB while ensuring sustainable cash flow.
---
#### **1. Revenue Breakdown**
| **Product Line** | **Price Range (ETB)** | **Units Sold** | **Revenue (ETB)** | **Margin** |
|-----------------------|-----------------------|----------------|--------------------|------------|
| **Cannes Line** | 4,400–8,250 | 1,200 | 6,600,000 | 65% |
| **Local Line** | 300–800 | 16,500 | 9,900,000 | 40% |
| **Total** | — | — | **16,500,000** | **50%** |
**Assumptions**:
- **Cannes Line**: Average price of 5,500 ETB/unit (mid-range of 4,400–8,250 ETB).
- **Local Line**: Average price of 600 ETB/unit (mid-range of 300–800 ETB).
---
#### **2. Cost of Goods Sold (COGS)**
| **Product Line** | **COGS/Unit (ETB)** | **Total COGS (ETB)** |
|-----------------------|---------------------|----------------------|
| **Cannes Line** | 1,925 | 2,310,000 |
| **Local Line** | 360 | 5,940,000 |
| **Total** | — | **8,250,000** |
**COGS Drivers**:
- **Cannes Line**: Hand-embroidery, imported silk blends, and artisan labor.
- **Local Line**: Economies of scale at Hawassa Industrial Park (organic cotton costs: 200 ETB/unit).
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#### **3. Operating Expenses**
| **Category** | **Cost (ETB)** | **Details** |
|-----------------------|----------------------|-----------------------------------------------------------------------------|
| **Rent** | 1,200,000 | Flagship store (Bole District) + pop-ups. |
| **Salaries** | 2,400,000 | 15 employees (designers, sales, logistics). |
| **Local Marketing** | 3,000,000 | Social media ads, influencer partnerships, event pop-ups. |
| **Cannes Activation** | 6,875,000 | Pop-up store, red carpet placements, VR experiences. |
| **Miscellaneous** | 762,500 | Utilities, insurance, legal fees. |
| **Total** | **14,237,500** | |
**Note**: The original projection listed operating expenses as 7,237,500 ETB, but this conflicts with the Cannes activation budget. Revised figures reflect total expenses.
---
#### **4. Net Profit & ROI**
- **Gross Profit**: Revenue (16,500,000) – COGS (8,250,000) = **8,250,000 ETB**.
- **Operating Profit**: Gross Profit – Operating Expenses (14,237,500) = **-5,987,500 ETB**.
**Issue Identified**:
- **Discrepancy**: The initial projection’s operating expenses (7,237,500 ETB) excluded the Cannes activation budget, leading to an unrealistic net profit. Including all expenses results in a **Year 1 loss**.
**Revised Strategy to Achieve 18% ROI**:
- **Year 1 Focus**: Build brand equity; defer ROI target to Year 2.
- **Adjustments**:
- Reduce Cannes activation costs by 30% (negotiate partnerships, use virtual events).
- Increase Local Line sales volume to 20,000 units (requires 1,667 units/month).
---
#### **5. Revised Financial Snapshot**
| **Metric** | **Original** | **Revised** |
|--------------------------|---------------------|-------------------|
| **Revenue** | 16,500,000 ETB | 20,000,000 ETB |
| **COGS** | 8,250,000 ETB | 9,000,000 ETB |
| **Operating Expenses** | 7,237,500 ETB | 10,000,000 ETB |
| **Net Profit** | 990,000 ETB | 1,000,000 ETB |
| **ROI (Year 1)** | 3.6% | 3.6% |
| **ROI (Year 2)** | — | 18% |
---
#### **6. Monthly Cash Flow**
- **Positive Cash Flow**: Achieved by staggering expenses and securing pre-orders:
- **Cannes Line**: Collect 50% deposits for limited editions ($150/unit).
- **Local Line**: Partner with TeleBirr for working capital loans.
- **Monthly Target**: 412,500 ETB (4,950,000 ETB annual cash flow).
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### **Strategic Recommendations**
1. **Phase Cannes Activation**: Spread the 6,875,000 ETB budget over 2–3 years to reduce Year 1 losses.
2. **Boost Local Sales**: Offer bulk discounts to schools/universities (e.g., “Back to Campus” bundles).
3. **Cost Control**: Switch to solar power at Hawassa facility to cut energy costs by 15%.
---
### **Conclusion**
The original financial projections contained critical inconsistencies, particularly in expense allocation and ROI targeting. By revising sales targets, phasing high-cost activations, and prioritizing cash flow management, Boaz Trading PLC can achieve sustainability in Year 1 and scale toward its 18% ROI goal by Year 2.