The project
The project is a flat-pack and fitted-furniture plant in Accra, Ghana, in a leased 800 m² factory at $4.20 per m² a month. The plant cuts and edges melamine board on CNC machines and sells through three routes: an online catalogue of flat-pack items, fitted projects (kitchens and closets, priced per m²), and, in the recommended plan, room packages for hotels and serviced apartments.
The owner funds the plant with equity only; there are no loans. Other private investors may join later through shares. The study covers five years from lease signing, in US dollars excluding VAT.
| Item | Setting |
|---|---|
| Location | Accra, Ghana |
| Factory | 800 m² leased at $4.20 per m² a month ($3,360) |
| Rent | 36 months paid at signing ($120,960), accepted by the client |
| Set-up period | 3 months from lease signing to first production |
| Working pattern | One shift: Monday–Friday 8 hours, Saturday 6 hours (about 199 machine hours a month) |
| Funding | Equity only, no loans |
| Horizon and currency | 5 years from lease signing; USD, excluding VAT |
| Tax | Corporate income tax 25% |
| Cost of capital | 21.07% a year (cost of equity, explained on the financial page) |
What the study is meant to decide
- Decide whether the owner should commit equity to the plant, and on what conditions.
- Set a price level the Accra market can accept, and test it against Kitea Ghana and local makers.
- Size the equipment, staff and working capital for one shift, and find the bottleneck.
- Show the funding need month by month, and the equity instalments that cover it.
- Name the risks that decide the result, with red flags that tell the owner when to act.
What each option assumes
| Rule | Base (client prices) |
|---|---|
| Prices | Client item cost × 1.6, unchanged (online catalogue average $199 an order; projects $205.7 per m²) |
| Project volume | 300 m² a month at full volume, as the client planned (price within 3% of the recommended plan's; the gap to the Accra guide is a risk both options share) |
| Online catalogue | 18.1 orders a month at the end of the ramp instead of the client's 20: fewer desks and shelves, which are priced 37–49% above Kitea |
| Project materials | 55% of the client's cost (our bill-of-materials check points higher) |
| Management and installation | Not given by the client; our estimate added: management team $3,500 and one installation crew $1,200 a month |
| Insurance, vans, accounting; hidden-cost allowance | Not included (zero) |
| Equity | Two instalments: at signing and at production start |
Caveats to read with this option
- Prices built on the client's cost sit at 1.5–3 times Accra retail for catalogue items and about 33% above the Accra guide for projects.
- The client's cost appears to spread labour and depreciation over very low output, or to count cutting twice. Any double counting inflates prices, not costs, in the model.
- Against Kitea Ghana the client's storage items are close or cheaper, but the desks and the wall shelf are 37–49% dearer, so Base expects fewer of those orders.
- Insurance, vans, accounting and a hidden-cost allowance are still not in the client's case.
| Rule | Recommended (Scenario 2 with improvements) |
|---|---|
| Prices | Higher of production-module cost × 1.6 and the comparable Kitea Ghana price |
| Lines | Online catalogue, fitted projects, B2B room packages, installation as a separate fee |
| Delivery | Paid by the customer |
| Working pattern | One shift |
| Equipment | As listed by the client (CNC router included) |
| Cost base | Full: factory, installation and management salaries, utilities, insurance, marketing |
| Equity | Commitment of $850,000 in three instalments |
The four improvements (all on in this option)
| Improvement | What it changes |
|---|---|
| L1 | Lean staffing: 11 operators and 14 helpers at full volume (manual stations are underused) |
| L2 | Order-book target between year 1 and year 2: an extra B2B contract signed in year 1 for delivery in year 2 (3 contracts in year 2 instead of 2) |
| L3 | Website running cost $150 a month instead of $500 |
| L4 | Project customers pay a 50% deposit 30 days before installation (B2B deposit is already in the base case) |
Each improvement is modest on its own. Together they lift the five-year NPV from ($93,671) to $17,197 and the IRR from 15.9% to 22.0%.
What it takes to open
| USD | Year 0 |
|---|---|
| Equipment and fit-out (machines duty-paid, installed) | 371,000 |
| Rent paid in advance (36 months) | 120,960 |
| Working capital (placeholder) | 60,000 |
| Contingency | 39,260 |
| Operating and pre-opening costs before production | 29,100 |
| Total start-up investment | 620,320 |
Machines are taken as duty-paid and installed, as the client confirmed. Working capital is the client's placeholder. The monthly cash flow shows a peak need of $602,053; with the operating losses of the first months, equity paid in totals $641,313.
| USD | Year 0 |
|---|---|
| Equipment and fit-out (depreciated) | 431,000 |
| Permits, registration, fire and environmental | 8,000 |
| Website and e-commerce build | 10,000 |
| Feasibility study fee | 7,500 |
| Rent paid in advance (36 months) | 120,960 |
| Opening stock (working capital, year 0) | 37,625 |
| Contingency (10% of equipment and fit-out) | 43,100 |
| Total start-up investment | 658,185 |
Equipment and fit-out includes the client's list plus assembly benches, dust extraction and two installation vans. Opening stock follows the stock policy on the operations page. The equity needed ($718,405) is higher than this total because of the cash used before production pays its way.
What the study does not cover
- VAT: excluded from the study, as agreed.
- Loans: dropped. A financial decision for later years, if needed.
- A second shift: considered only once the bottleneck passes 85%.
- Changes to the client's equipment list: the list stays as given.
- Confirmed market data: no further client data is available, so project volume, project price and capacity remain stated assumptions. They are conditions for a final go.