At 22, Selamawit Kebede lives in Hawassa, Ethiopia, where she sells traditional stoves part-time. But her dream goes beyond that. She wants to start a shop offering clean cook stoves and biofuel briquettes—safer for families, better for health, and kinder to the environment. Her goal is not just to run a business, but to become a role model for other young women.

Though she lacks formal business experience, struggles with societal pressure, and has limited access to capital, Selamawit is determined. She decides to follow a five-step financial planning and budgeting process to bring her idea to life.

Selamawit begins by setting a clear, short-term goal:

“Within the next 3 months, I’ll secure 15 clean coo kstoves and 100kg of briquettes, hold 2 community demos, and reach ETB 10,000 in sales.”

Her strategy is to offer affordable clean cooking solutions and build trust in the community. She plans to:

• Buy inventory at good prices
• Offer competitive sales pricing
• Spend part of her budget on demos and outreach
  She knows that early profits might be low, but community trust is key for long-term growth.

Selamawit outlines a simple plan:

• Startup Funds: ETB 10,000 from savings and a possible small family loan
• Sourcing: Find affordable, reliable suppliers
• Sales & Marketing: Use her network, word-of-mouth, and demo events
• Operations: Start from home to save on rent
• Risk Management: Begin with small inventory to test demand

Selamawit Forecasting her Revenue & Expenses

• Revenue: 5 stoves × 800 ETB = 4,000 ETB
• Fixed Costs: Rent 1,000 + Utilities 200 + Stipend 2,500 = 3,700 ETB
• Variable Costs: Materials (5 × 500) 2,500 + Briquettes 210 + Marketing 500 = 3,210 ETB
• Total Expenses: 3,700 + 3,210 = 6,910 ETB
• Net Result: 4,000 – 6,910 = –2,910 ETB (loss)

Instructions: Read the case study carefully and answer the following multiple-choice questions.

Question 1: What is Selamawit’s primary short-term goal for her business within the next 3 months?

1. A) To open a large retail shop and hire employees.
2. B) To secure 15 clean cook stoves and 100kg of briquettes, hold 2 community demos, and reach ETB 10,000 in sales.
3. C) To secure a large bank loan and expand her product line.
4. D) To focus solely on selling traditional stoves part-time.

Correct Answer: B) To secure 15 clean cookstoves and 100kg of briquettes, hold 2 community demos, and reach ETB 10,000 in sales.

Question 2: According to Selamawit’s financial forecast, what are her total estimated expenses for the period?

1. A) ETB 4,000
2. B) ETB 3,700
3. C) ETB 3,210
4. D) ETB 6,910

Correct Answer: D) ETB 6,910

Question 3: What is Selamawit’s initial source of startup funds?

1. A) A large bank loan.
2. B) Savings and a possible small family loan.
3. C) Government grants.
4. D) Investments from external partners.

Correct Answer: B) Savings and a possible small family loan.

Key Takeaways from Case Study:

• Even for new businesses, setting SMART goals and forecasting helps identify potential challenges and opportunities.
• Cash flow is critical, especially in the early stages. A business can be profitable on paper but run out of cash if inflows don’t match outflows.
• Regular monitoring and adjustment of plans are essential.

This case study demonstrates the practical application of financial planning and budgeting. Now, let’s look at how you can navigate this self-learning module step-by-step.