OL’LESSOS TECHNICAL TRAINING INSTITUTE

BUSINESS PLAN
ENHANCE BEAUTY SALON

PRESENTER : VALLARY

KOGEI

INDEX NUMBER : 29541101265

CENTRE CODE : 29541101

PAPER NUMBER : 307B

COURSE CODE : 2804

PRESENTED TO : KENYA NATIONAL EXAMINATION COUNCIL

IN PARTIAL FULFILLMENT FOR THE AWARD OF DIPLOMA IN

CERTIFICATE IN LIBRARY SCIENCE.

SUPERVISOR:

SERIES: NOV. 2019

i
Declaration
I declare that this is my original work and the work of my hands.

This document has never been presented to any institution of learning for verifying or
documentation.

I am the only person who has thought about it, written it, published it and also touched it
because I believe no form business that can be promoted, licensed, approved, advertised,
discussed or verified without prior permission from the author.

All terms and conditions apply

Copy right 2019

VALLARY KOGEI

Signature………………………. Date:………………………..

This document has been submitted with the approval of my supervisor

SUPERVISOR:

Signature………………………. Date:………………………..

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Dedication
The original business plan is dedicated to my mother, father, and brother, sister for their support
and encouragement to continue pressing on to achieve my goals in life.

I expand this dedication to my teachers, colleagues, friends for being a special part of me for
their unending care. I am happy for their financial support, moral support, social support and
economic support.

My academic life is the key to successful life.

I believe offering me education is a life given by the almighty God.

MAY GOD BLESS THEM ALL

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Acknowledgement
I acknowledge my parents, brothers, sisters, aunts, uncles and friends for giving this opportunity
to learn and better my life.

I also acknowledge my school, teachers, staff and colleagues for contusive environment for
learning.

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Table of Contents
Declaration.................................................................................................................................................ii
Dedication..................................................................................................................................................iii
Acknowledgement.....................................................................................................................................iv
CHAPTER ONE.....................................................................................................................................1
1.0 Business Description.....................................................................................................................1
1.1 Business Location....................................................................................................................1
1.2 Form of Ownership.........................................................................................................................2
1.3 Price List...............................................................................................................................................3
1.4 Companies supplying the products......................................................................................................4
1.5 Business Technology.............................................................................................................................4
1.6 Competitors..........................................................................................................................................4
1.7 Business Characteristics........................................................................................................................5
1. 8 Entry, Growth And Strategies..............................................................................................................6
CHAPTER TWO............................................................................................................................................7
2.0 Market Plan....................................................................................................................................7
2.1 Potential Clients/Customers.................................................................................................................7
2.2 Strengths and Weakness of the Business (S.W.O.T).............................................................................8
2.3 Psychological Pricing.............................................................................................................................9
2.4 Sales Tactics/Strategy.........................................................................................................................10
2.5 Market Share......................................................................................................................................10
2.6 Distribution, Strategies and Challenges..............................................................................................11
CHAPTER THREE.......................................................................................................................................12
3.0 Organization and Management Plan..................................................................................................12
3.1 Structure of the Organization.............................................................................................................12
3.2 Staffing and Their Qualifications.........................................................................................................13

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3.3 Staff Duties or Responsibilities...........................................................................................................14
3.4 Salaries and Remunerations...............................................................................................................14
3.5 Rules and Regulations of the Business................................................................................................15
3.7 Recruitment........................................................................................................................................15
CHAPTER FOUR.........................................................................................................................................17
4.0 Production and Operation Plan..........................................................................................................17
4.1 Business Layout..................................................................................................................................18
4.2 Capacity and Size................................................................................................................................19
4.3 Health and Safety Regulations............................................................................................................20
4.4 Environmental Regulations.................................................................................................................20
5.5.1 PROJECTED CASH FLOW MONTLHY DATA FOR THE YEAR 2020....................25

5.5.2 PROJECTED CASH FLOW MONTLHY DATA FOR THE YEAR 2021....................26

5.3 PROJECTED CASH FLOW MONTHLY DATA FOR THE YEAR 2022.......................27

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CHAPTER ONE

1.0 Business Description

Enhance beauty salon is a full-service beauty salon dedicated to consistently providing high
customer satisfaction by rendering excellent service, quality product and furnishing an enjoyable
atmosphere at an acceptable price value relationship.

1.1 Business Location

Eldoret stadium

City market Bama Meat Market

ToEldoret Town

Uchumi supermarket
Enhance Beauty
Salon

To Eldoret
Airport

Roundabout

Colleges

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1.2 Form of Ownership
Enhance beauty salon is a sole proprietorship business venture
(i). Reasons for putting up the business
a) The area is heavily populated but lack business that provide quality services and
products of a beauty salon, thus I could lure clients with easy access, convenient
parking, a skilled staff and affordable pricing.
b) Passion for beauty
As beauty is my passion that’s why I have an interest to start this business
c) Entrepreneurial dream
It is my dream to became an entrepreneur in the beauty industry
d) Serve on under-served market
The area lacks salon that can fulfill the needs of all the clients in the area, thus there
is a gap that needs to be fulfilled.
(ii). Challenges faced
a) Finding good employer
There is difficulty in finding hardworking, trustworthy employee as most employees
want to work less and get paid more.
b) Raising capital for startup
Trying to convince investors about something that doesn’t exist is definitely a
challenge, also that you are trustworthy and equal to the task especially when you are
building your first business.
c) Finding good customers
Finding good customers who are loyal is a challenge in this industry. Bad customers
will always look for a loophole in the company’s policy to exploit and make a few
gains.
d) Dealing with competition

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 Most individuals see competition as a plague but I see competition as a good
challenge, as a benchmark for creativity. Without competition, there will be no
invention and without innovation the world will be stagnant.
e) Unforeseen challenges and expenses
Unexpected challenges can come in the form of :
i. Unexpected law suits
ii. Inconsistent government policy
iii. Unpaid bills and taxes
iv. Loss of market share

1.3 Price List

Service Amount (Ksh)

Coloring 1200
Weaving 1500 a piece
Chemical relaxing 1000
Shampooing, conditioning and treatment 500
Body massage 1500 an hour
Massage and body works 1500 an hour
Facials 1500
Manicures 350
Pedicures 350
Waxing 500
Tweezing 700
Threading 150
Facial make-up 1500

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1.4 Companies supplying the products
A. St.lves
B. Nivea
C. Himalayas
D. Oriflamme
E. Lorrys
F. Miadi range of products
G. Legono spa salts
H. Luron nail enamel

1.5 Business Technology

Enhance beauty salon will have the latest technology that will help the salon make work easier
and make it stand out. These things include:

a) Personal computer for:

i. The accountant to help with the ledger accounts, calculations and balance sheets.
Basically, it will help him/her manage the finances of the salon.
ii. The store keeper will also need a personal computer to keep stock of the products
available.
iii. The receptionist to manage all the client traffic in the salon.
b) An online portfolio and website to help all the walk-ins and clients in general fee, what
services and products we offer.
c) Cashless payments will also be introduced in the form of various pay bill numbers, visa
payments and loyalty card payments.

1.6 Competitors

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 Enhance beauty salon wants to set itself apart from other beauty salons that may offer
only one or two types of services.
There are a number of salons like ours but they are mainly in the very high income parts
of my town and surrounding areas. We do not intend to compete with these so called
“day spas”. We wish to offer a middle ground for those who can’t quite afford these
high-end luxury salons.
Our business atmosphere will be a relaxing one where clients can lay back and be
pampered. Soft drinks will be offered to clients as they enter for service.
Televisions will be located in the waiting and hair drying area.

1.7 Business Characteristics

For my salon to be successful we follow the lead of other successful salons and spas, as
clients expect certain qualities in the establishments they visit frequently. These include:
A. Talented staff
The staff will be highly trained and experienced individuals. They will be a
combination of veterans and people will less experience.
The less experienced staff members can pick up trade secrets from one and their
co-workers, while the staffers with the most experience give the salon a positive
reputation and the talent it needs to thrive.
B. Comforting aesthetic
Nobody goes to the salon looking for high energy, exciting environment. Spas
and salons are designed for customers to relax and unwind while focusing on
their appearance and mental-well-being, and the aesthetics of your business
should reflect that.
C. Location
Nairobi has consistently over the last few years been voted as the one of the best
place to live and work in Kenya.
This place has an educated population on cosmetology and correlates to earning
population. The saloon will be adjacent to the mall so it’s perfect location.

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 D. Sense of identity
Not all salons are identical, even if they have certain things in common. Your
salon should have its own sense of identity to differentiate it from the
competition. For example, you may choose to offer deals, specials and incentives
on a regular basis to keep customers coming back for a bargain.

1. 8 Entry, Growth And Strategies

With entry to the beauty industry, I hope to have grown my business to at least have gained
(10%) of the market share and have a number of branches.

Enhance will rely on three separate strategies to grow market share. The first is superior
customer service. They will be blown away with the level of service they receive.

We will also be leveraging our high traffic store front location in a shopping centre to drive
people into the store.

Lastly we will use financial incentives early on to build a large, loyal, customer population.

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CHAPTER TWO

2.0 Market Plan

Our marketing strategy or plan is a simple one. Satisfied clients are our best marketing tool.
When a client leaves our business with a new look, he or she is broadcasting our name and
quality to the public. Most of our clients will be referrals from existing clients.
No major advertising companies are anticipated. Our research has shown that word of mouth
is the best advertising for this type of business. We will, however, run specials throughout
the week. We will also ask clients for referrals and reward them with discounted or free
services depending on the number of clients they bring.
There are plans for a lottery that will offer a free trip to , say, cancan, a client would simply
refer new clients to us, and we will place a card in a box for each client, he/she brings, the
more they bring, the more chances they have to winning the trip.

2.1 Potential Clients/Customers

To attract the client we will use four key marketing strategies

a) Buddy with local partners
b) Transform our website into a new client magnet
c) Boom/build our client database with social media
d) Spread the word to potential new clients

A. Buddy with local partners

Networking used to be scary especially for the shy and new to town. I know networking
breakfast meeting had me quaking in my shoes.

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 But those days are long gone. Instead harness the formidable networking power of social
media. Love it or hate it. The advent of social media has meant people are willing to
engage. To chat, to share ideas on how we can all work together.
B. Transform our website into a new client magnet
Internet marketing for salons is an essential investment if you want to attract new clients.
Social media hasn’t taken over the world. Google is alive and kicking and if you want
new clients to discover your salon online then you must rank highly on Google.
C. Boom/build our client database with social media
Social media alone will not drive new customers through your salon door. However, use
facebook as a combo with say e-mail marketing and you have got yourself a powerful
crowd-puller.
D. Spread the word to potential new clients
The salon owners who work with me know I am ardent supporter of introducing a
friendship system. I believe they are one of, if not the best way, to attract new clients to
your beauty salon.

2.2 Strengths and Weakness of the Business (S.W.O.T)

i. Strengths
Identifying the strengths of a beauty salon can, at times, be as easy as looking at the
clientele. A beauty salon with an abundant clientele list is a sign of successful marketing,
good operation and strong clientele management, still a strong analysis will identify
these strengths are strengths.

ii. Weakness
Weakness can be reflected in the beauty salon’s register receipts, but not always. For
instance, lack of proper staff training and poor customer care can hinder the beauty
salon’s income, but still not limit it.
iii. Opportunities
While strengths and weakness are internal aspects of the beauty salon analysis, the
opportunities and threats portion of the S.W.O.T evaluate the external aspects of the

8
 salon. The ever-evolving beauty trends and styles can present many opportunities for the
salon.
Opportunities can involve introducing new beauty methods and make up, introducing
new product lines and brands in the salon’s inventory and attracting a new client market.
iv. Threats
A beauty salon threats are things that threaten the livelihood of the business.
These can range from new competition to changes in the industry’s law and regulations
while many threats cannot be changed, the salon should identify threats in order to create
strategic adaptations to overcome impending challenges.

2.3 Psychological Pricing

These are the few ways you can get people to say yes to what you are asking. Anyone
who sells things should abide by the following principles
A. Reciprocity
This means that when someone gives us something, we feel compelled to give
something back in return.
B. Commitment and consistency
This principle says that people will go to great lengths to appear consistent in
their words and actions, even to the extent of doing things that are basically
irrational. As retailers, we can get customers to make a small commitment to our
brand (use signing up for our e-mail newsletter) they are likely to purchase from
us.
C. Social links
People are likely to purchase if its recommended to them by someone they know
and trust. We make sure that our products pages have links to Twitter, Facebook
and Whatsapp, so that our customers can tell and show other trends about the
great product they found on our site.

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2.4 Sales Tactics/Strategy
Enhance beauty salon sales strategy will be based on extremely professional interactions with
the customers. Typically the “quick salon” concentrates on being quick and expensive, often at
the expense of customer service. Anytime that a prospective buyer is speaking with someone at
enhance beauty salon the employee will have an opportunity to impress the customer. Employee
training will emphasize seizing these opportunities.

Enhance will also have the opportunity to increase sales of their retail hair and beauty care
products every time they have a customer in the chair. Enhance offers deep discounts on the hair
and beauty products to encourage usage so they can explain to the customers about their
personal experience.

Additionally, enhance offers a product- based commission structure for the beauty care products
to the employees on commission for selling the items to their customers.

2.5 Market Share

The beauty industry is highly fragmented with national chains such as Maybelline, which
operates diverse franchise catering to all the market segments and also including thousands of
“mom and pop” salons that are very restricted in scope and services. This makes for as highly
competitive market that has low barriers to entry and exit.

With this in mind, the company’s goal is to increase the number of clients served by at least
20% per year.

Enhance beauty salon will target three different market segments

i. Females will typically make up 70-75% of the clientele

ii. Females who cannot afford an upscale salon
iii. Young mothers with children

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 MARKET SEGMENTS

Rest of the females

females who cannot

afford upscale salon

Young mothers with

children

2.6 Distribution, Strategies and Challenges

This is the method we will use to get our products and services through a distribution channel

Manufacturer Franchise Consumer

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CHAPTER THREE

3.0 Organization and Management Plan

Enhance will be organized and managed in a creative and innovative fashion to generate very
high levels of customer satisfaction, and to create a working climate conducive to a high degree
of personal development and economic satisfaction for employees.

Training classes to help improve employee product knowledge and skills will be conducted on a
regular basis. As the business grows, the company will consider offering an employee benefit
package to include health and vacation benefits for everyone.

3.1 Structure of the Organization

Salon owner

Manager

Beauticians and technicians

Receptionist

Salon assistant

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3.2 Staffing and Their Qualifications
i. Manager
 Should have done a course in cosmetology
 Should have at least 2 years working experience
 Able to handle difficult clients tactfully and also work satisfactorily under
pressure
 Be able to work with and be comfortable working with everyone
ii. Beauticians and technicians
 Be able to get along with and be comfortable working with everyone
 Trustworthy, discrete and dependable
 Be able to work in an unobtrusive, non-invasive manner
 Have steady hand and be detail-oriented
 Have excellent time and stress management skills
iii. Receptionist
 Committed to provide exceptional customer service to clients and co-workers
 Highly skilled in courtesy and how to handle people from different walks of life
 Exceptional knowledge in computer and relevant software application
 Capability of keeping the reception area clean and organized
 Able to handle difficult clients tactfully and also work satisfactorily under
pressure
iv. Salon assistant
 Able to follow directions
 Able to work within time frames
 Neat personal experience
 Able and willing to follow instructions
 Reliable and punctual

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3.3 Staff Duties or Responsibilities
i. Manager
 Drive salon sales for both products and service
 Ensure exceptional customer care services
 Responsible for maintaining consistent and regular attendance of all salon
associates
 Maintaining a positive and professional relationship with all departments
ii. Receptionist
 Greeting visitor when they arrive
 Distributing mail
 Administrative duties e.g. manages the calendar of senior salon team members
iii. Salon assistant
 Maintain work areas by sweeping floors and cleaning benches and shelves
 Prepare refreshments for clients
 Assist senior staff with tasks
 Display and maintain stock of hair and beauty products
 Assist with salon receptionist duties such as answering calls, making
appointments, seating clients and taking payments

3.4 Salaries and Remunerations

We plan to pay our salaries as a combination of salaries and commission. When we hire a new
beautician, he/she would get a salary. She meets a certain criteria (retail % at a certain level and
request rate at a certain level). He/ she would convert to a 45% commission.

Commissioned beauticians are generally employees of the salon since they are employees; we
do gain a good deal of control over the business. Commission rates vary greatly, but usually
range will be in 42-55 % while the technicians are employees, they will also be paid on the sales
they bring to the business.

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3.5 Rules and Regulations of the Business
i. Sanitation

Sanitation must be to priority to ensure we meet industry and client cleanliness standards

ii. Uniform

Every employee should always have a clean and right uniform at all times

iii. Time

Every employee should observe time, one should not leave before.

iv. Absenteeism

Absenteeism without permission will not be tolerated

v. Client

The client should be the first priority for every employee

vi. Lunch period and break

Lunch and break should be about thirty minutes

vii. The salon property should be the property used e.g. machines

3.7 Recruitment
Salon recruitment step by step

Step 1: advertise vacancy

Because you do not want your employees travelling too far to get to work, you need to advertise
locally to attract local candidates.

15
Step 2: receive written applications

Good beauticians have great communication skills, personal pride and bags confidence. These
admirable traits will be reflected in the layout, clarity and content of their written application

Step 3: conduct telephone interviews

Clients facing salon employees need to have great communication skills and it is important that
you like them. Let’s face it you will be working in each other’s space and you all need to get
along well

The telephone interviews will give you your first impression of your possible new employee and
you will get a very important first-look at their telephone manner and verbal communication
skills.

Step 4: conduct face to face interviews

The face to face interviews are to determine which candidates to shortlist o come back for the
trade test.

Step 5: trade test

Should be designed to stretch the candidate and they should be invited to carry out multiple craft
skills to demonstrate their competency, creativity and ability to multi-task clients.

Step 6: make your decision fast and make a job offer

Once you have made your final decision, call the winning candidate and congratulate them on
winning the job. Then send a written job offer.

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CHAPTER FOUR

4.0 Production and Operation Plan

Our production system shall strive to attain service excellence in addition to manufacturing safe,
quality products. This shall be undertaken through the engagement of modern production
techniques using up to date assembly technology.

This will also result in low production costs being attained by the company. We also intend to
ensure that the suppliers we engage are committed and reliable so as not to let down the final
consumer in terms of the quality of the product and time of delivery.

In order to improve productivity in our salons we intend to reduce waste and duplication in our
breweries by streamlining administrative functions and promoting and instilling a business
culture that focuses on the team work rather than individual productivity. By the undertaking the
above we will optimize our productivity given our available resources.

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4.1 Business Layout

Kitchen

Office massage room

Storage Toilets

Dustbins shampooing facial room

Dryer
Coloring

Beauty stations
Styling lockers

Entrance
Nails

Reception

Beauty stations
Waiting area
Refreshments

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4.2 Capacity and Size
Our salon is 4000 square feet and we have divided it accordingly

a) Massage area

50 x 70

b) Reception area

20 x 10

c) Office area

10 x 10

d) Beauty stations

40 x 20

e) Facial areas

25 x 20

f) Styling and shampooing area

70 x 70

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4.3 Health and Safety Regulations

Business acts/ regulations

In Kenya a Private company is defined in the act (section 30) as which by its articles:

i. Restricts the right to transfer its shares; and

ii. Limits the number of its members to 50, exclusive of persons in the employment of the
company and persons formally in the company’s employment
iii. Prohibits any invitation to the public to subscribe for any shares or debentures

Furthermore, an exempt private company is a private company which satisfies the following
conditions.

i. Nobody corporate holds any of its shares or debentures

ii. No other person other than the holder has any interest in its shares
iii. Nobody corporate is a director

4.4 Environmental Regulations

Reduce, Reuse, Recycle

Salons are going green and it makes good sense. The average salon uses a range of chemicals
and consumes important resources such as water and energy.

i. Reduce
a) Limit chemical exposure
b) Consume water
c) Minimize waste

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 d) Conserve energy
ii. Reuse
a) Give used magazines to other organizations, friends and customers
b) Make empty containers and cardboard available to other businesses
c) Require suppliers to take back empty refillable containers
iii. Recycle

Install recycling bins for office paper, cardboard, plastic, magazines

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 CHAPTER FIVE

5.0 FINANCIAL PLAN

This chapter contains information on pre-operation, working capital requirement; projected cash flow
statements, pro-forma income statements and the pro-forma balance sheet. It will also show the break-
even point, calculation of the profitability ratios, desired financing grand proposed capitalization.

The business will be established using Sh. 1,000,000 as its initial capital which will be used to purchase
assets and pay all the preparation expenses like licenses and stationery.

5.1 PRE-OPERATIONAL COSTS

These are costs which must occur before business activity commences. They comprise the following:

ITEM AMOUNT

Licenses 5,000

Opening Stock 300,000

Computers and Printers 40,000

Furniture and Fittings 50,000

Printing Papers 3,000

Writing Pads
1,000
Pens
1,000
Total 760,000

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5.2 WORKING CAPITAL REQUIREMENTS
These are the estimates of the sources of funds for the daily activities in the running of the
business. This will include the current assets like stocks, debtors and cash in hand. The table

below shows the working capital requirements for 2020.

ITEM Amount (Ksh)

Stock 300,000

Cash 900,000

Total
1,200,000

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5.3 PROFORMA INCOME STATEMENT
These are accounts at the end of the trading period to determine profits or losses from the operation. It
helps in circulation and decision making.
Pro-forma Income Statement as at 30th December 2021

Kshs. Kshs.
Sales 3,235,000
Less Cost of sales

Opening Stock 300,000

Add purchases 373,000
673,000
Less Closing Stock 300,000
Goods available for sale 373,000
Gross Profit 2,862,000
Less expense
Salaries 3841000

Electricity 38400
Postage 20,800
Telephone bills 44,800

Insurance 5,000
Water 23,400
Repair and Maintenance 42,000
Stationery 13,000
566,400
Net Profit before tax 2,295,600
Tax 30% 688,680
Net Profit after tax 1,606,920

24
5.5.1 PROJECTED CASH FLOW MONTLHY DATA FOR THE YEAR 2020
PARTICULARS JAN FEB MAR APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC TOTAL
Cash Balance 1400000 2051000 2887000 4029000 5021000 5664000 6346000 7028000 7501000 8183000 8852000 9730000 68692000
Cash inflow
Cash sales 1200000 1300000 1300000 1200000 1200000 1300000 1300000 1200000 1300000 1400000 1200000 1200000 15200000
Data collection 400000 450000 450000 700000 350000 300000 300000 200000 300000 200000 600000 300000 4750000
Loans 300000 350000 306000 200000 400000 400000 300000 200000 3000000 2450000
Total cash inflow 1900000 2100000 2056000 19000000 1750000 2000000 2000000 1700000 1800000 1900000 1800000 1500000 22400000
Total cash 3300000 4157000 4943000 5929000 6771000 7664000 8346000 8728000 9301000 100083000 10652000 11230000 91092000
available
Cash outflow
Rent 50000 50000 50000 50000 50000 50000 50000 50000 50000 50000 50000 50000 600000
Salaries 148000 148000 150000 150000 148000 148000 148000 150000 150000 1520000 1520000 1520000 1796000
Raw materials 626000 626000 626000 626000 626000 626000 626000 626000 626000 626000 626000 626000 7512000
Transport bill 50000 50000 60000 60000 50000 50000 50000 60000 60000 60000 70000 70000 690000
telephone bill 10000 10000 12000 11000 11000 12000 12000 12000 11000 10000 11000 11000 132000
Repairs &maint 20000 20000
Stationery 5000 5000 6000 5000 6000 6000 6000 5000 6000 6000 6000 6000 67000
Loan repayment 320000 370000 420000 210000 420000 420000 320000 210000 320000 2890000
Consultancy 15000 15000 150000
Miscellaneous 5000 5000 6000 6000 5000 6000 6000 5000 6000 6000 6000 7000 70000
Total cash 1249000 1264000 1344500 908000 1107000 1381000 1318000 1227000 1118000 1231000 9229000 922000 13492000
outflow
Net cash out flow 2051000 2887000 4029000 5021000 5664000 6346000 7028000 7501000 8183000 8852000 9730000 10308000 77600000

5.5.2 PROJECTED CASH FLOW MONTLHY DATA FOR THE YEAR 2021
PARTICULARS JAN FEB MAR APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC TOTAL
Cash Balance 10308000 1108800 11889000 12867000 1356500 1496200 1595800 1694700 1789800 188690000 10068000 21362000 22453000

2
5 ,
1
 0 0 0
Cash inflow
Cash sales 1400000 1500000 1600000 1600000 1600000 1700000 1600000 1600000 1600000 1700000 1700000 1700000 1930000
Data collection 400000 300000 400000 500000 300000 400000 350000 400000 500000 600000 400000 300000 4950000
Loans 200000 300000 400000 300000 400000 200000 300000 400000 2500000
Total cash inflow 2000000 2100000 2400000 21000000 2000000 2300000 2400000 2150000 2300000 2200000 2300000 2500000 26750000
0
Total cash 12308000 1318800 14289000 14967000 1596500 1726200 1858000 1909700 2019800 21069000 22368000 23862000 21293100
available 0 0 0 0 0
Cash outflow
Rent 50000 50000 50000 50000 50000 50000 50000 50000 50000 50000 50000 50000 600000
Salaries 160000 160000 160000 160000 160000 160000 160000 170000 170000 170000 170000 170000 1970000
Raw materials 650000 650000 650000 650000 650000 650000 650000 650000 650000 650000 650000 650000 7800000
Transport bill 100000 100000 120000 120000 120000 120000 120000 100000 110000 100000 100000 100000 1320000
telephone bill 10000 9000 10000 12000 12000 10000 9000 8500 7000 8000 6000 7000 107500
Repairs &maint 30000 30000
Stationery 5000 5000 6000 5000 6000 6000 6000 5000 6000 6000 6000 6000 67500
Loan repayment 320000 370000 420000 210000 420000 420000 320000 210000 320000 2890000
Consultancy 150000
Miscellaneous 5000 5000 6000 6000 5000 6000 6000 5000 6000 6000 6000 7000 70000
Total cash 1220000 1299000 1422000 1002000 1003000 1324000 1411000 1199000 1329000 1001000 1006000 1409000 14650000
outflow
Net cash out 11088000 1188900 12867000 139657000 1496200 1595800 1694700 1789800 1886900 20068000 21362000 22453000 19832600
flow 0 0 0 0

2
6 ,
1
5.3 PROJECTED CASH FLOW MONTHLY DATA FOR THE YEAR 2022
PARTICULARS JAN FEB MAR APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC TOTAL
Cash Balance 22453000 23578000 2485600 26033000 2727050 2826400 2941100 30627000 3174300 32858000 84064000 35258000 34396000
0 0 0 0 0
Cash inflow
Cash sales 1700000 1700000 1800000 1800000 1800000 1800000 1800000 1800000 1900000 1900000 2000000 2000000 22000000
Data collection 300000 200000 300000 300000 400000 350000 400000 500000 600000 400000 300000 4950000
Loans 200000 300000 400000 300000 300000 400000 300000 2500000
Total cash inflow 2300000 2300000 2450000 26000000 2400000 2650000 2300000 22000000 2200000 2600000 2700000 2650000 29550000
Total cash 24953000 25878000 2728600 28633000 2967050 3091450 3171100 3227000 3394300 35458000 36764000 37908000 375946000
available 0 0 0 0 0
Cash outflow
Rent 50000 50000 50000 50000 50000 50000 50000 50000 50000 50000 50000 50000 600000
Salaries 170000 170000 170000 170000 180000 180000 180000 180000 180000 180000 180000 180000 2120000
Raw materials 650000 650000 650000 650000 650000 650000 650000 650000 650000 650000 650000 650000 7800000
Transport bill 150000 150000 150000 150000 160000 160000 160000 160000 160000 150000 160000 150000 1860000
telephone bill 10000 11000 11000 10000 12000 10000 10000 10000 12000 11000 12000 11000 130000
Repairs &maint 15000 15000
Stationery 5000 5000 6000 6500 7000 6000 6000 7000 7000 6500 7000 6500 78000
Loan repayment 320000 210000 320000 320000 420000 320000 420000 2680000
Consultancy 150000
Miscellaneous 5000 5000 6000 6000 5000 6000 6000 5000 6000 6000 6000 7000 77000
Total cash 1375000 1042000 1253000 1362500 1406000 1503500 1084000 1084000 1085000 1394000 1506000 1395000 15490000
outflow
Net cash out 23578000 24836000 2600330 27270500 2826400 2941100 3062700 31743000 3285880 34064000 35258000 36573000 360456000
flow 0 0 0 0 0

2
7 ,
1
5.5 PROFORMA BALANCE SHEET AS AT THE END OF DECEMBER 2020
This is a financial statement showing asset and liabilities at the end of the year.

Fixed Assets

Cost (Kshs) Depreciation (Kshs) Net book Value (Kshs)

Furniture and fittings 50,000 5,000 45,000

Equipment 150,000 15,000 135,000

200,000 20,000 180,000

Current Assets

Stock 300,000

Debtors 100,000

Cash 80,000

1,794,222

Less Current
10,000
Liabilities creditors 820,000

Working capital
1,000,000

Financed by
Owners equity
200,000
Loan from bank 500,000

Friends contribution 300,000

Net Profit 1,606,920

1,000,000

28
5.6 BREAK-EVEN LEVEL
This is a point where sales are equal to expenses where total sales revenue is equal to the cost.

Variable Cost Amount (Kshs)

Electricity 34,300

Postage
20,800
Telephone bills 44,800

Water bills 23,400

Repair and Maintenance 42,000

Stationeries 13,000

Fixed cost

Salaries and Wages 384,000

Total 562,300

Contribution margin = sales - variable cost

325,000 - 562,300 = 2,672,700

Contribution margin = Contribution x 100 = 1000000 x 100 = 31%

Sales 3,235,000

Break even sales = Fixed cost

Contribution sales ratio

3,841,000 x 100
31

= 1,242,316.40

29
5.7 DESIRED FINANCING
This is the total amount required to start the business.

ITEM AMOUNT (KSH)

Pre-operational cost 534,500

Working Capital
1,200
Fixed Assets
200,000
Total Desired Financing 1,939,500

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5.8 PROPOSED
CAPITALIZATION Amount
Item
500,000
Bank loan
200,000
Own salary
300,000
Friends contribution
1,000,000
Total investments
5.9 EXPECTED PROFITABILITY RATIO
The expected profitability ratio of the proposed business

(i) Gross Profit Margin = Gross profit x 100

Sales

Net Profit after tax x 100

(ii) Return on bank =
Owner equity

(iii) Return on investment = Net Profit after tax x 100

Total capital employed

32