Small and medium enterprises have been perceived as a dynamic force for sustainable economicrngrowth because they play an important role in creating job opportunity for individuals graduatedrnfrom a different sector, reducing poverty, enhancing technological innovation, and developingrnentrepreneurial skills. The general purpose of the study was to identify the factors affecting capacityrnutilization of metal and engineering work (MEW) in a small and medium enterprise (SME) in therncase of Arada sub-city administration. The study determines factors affecting the capacity utilizationrnof the case sector. Both Primary and secondary data were used for this study. Data were collectedrnfrom 81 respondents of SMEs. The data collected were analyzed using appropriate descriptivernstatistics and linear multiple regression techniques. The data have been analyzed with the help ofrnStatistical package for social science (SPSS). The findings of this thesis indicated that the significantrnfactors impacting capacity utilization of the case sector are market demand, finical access, humanrnresource, raw material good governess, innovation, and on job training. And also working on eachrnsignificant factor in such a way to decrease their effect on capacity utilization helps the case sector tornuse their installed CU more intensively. The conceptual map also developed that helps the enterprisernto use the installed capacity efficiently and effectively by improving the significant factors. And itâ€˜srnfound that the proposed conceptual map will pose a positive change to the existing capacityrnutilization of those selected enterprises from the group discussion with the owner of the enterprisernthat are selected from the sample size.