NAIBEI’S CAKE SHOP

P.O BOX 252 - 00100, KABARNET

PRESENTED BY: NAIBEI CHEMTAI SYLVIA

INDEX NO.: 5781010790

COURSE: CRAFT CERTIFICATE IN FOOD AND BEVERAGE

DEPARTMENT: HOSPITALITY NUTRITION AND DIETETICS

COURSE CODE: 1802/205

SUPERVISOR: MADAM NELLY JEMUTAI

PRESENTED TO: KENYA NATIONAL EXAMINATION COUNCIL AS A

PARTIAL FULFILMENT FOR THE AWARD OF CRAFT CERTIFICATE IN
FOOD AND BEVERAGE PRODUCTION SALES AND SERVICE.

SERIES: JULY 2021

DECLARATION

I hereby declare that this business plan is my original work. I also affirm that it has not been
presented to this institution or any other college for academic purposes, or for any other purpose.

NAME : NAIBEI CHEMTAI SYLVIA

INDEX No. 5781010790

Signature Date

This business plan has been submitted to Kenya National Examination Council with my approval
as the supervisor

SUPERVISORS NAME: MADAM NELLY JEMUTAI

Signature Date

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DEDICATION

To my parents and my siblings, may God really bless you.

ii
ACKNOWLEDGEMENT

I acknowledge my supervisor Madam Nelly Jemutai. for the guidance and efforts in making this
business plan success.

Not forgetting my Colleagues who motivated me all through the process of business plan
writing.

I also acknowledge my parents and siblings for financial and moral support.

God Bless you all!

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TABLE OF CONTENTS

DECLARATION..............................................................................................................................i

DEDICATION................................................................................................................................ii

ACKNOWLEDGEMENT..............................................................................................................iii

EXECUTIVE SUMMARY...........................................................................................................vii

CHAPTER ONE: BUSINESS DESCRIPTION..............................................................................1

1.1 BACKGROUND OF THE OWNER.........................................................................................1

1.2 BUSINESS NAME AND LOGO..............................................................................................1

1.2.1 Business Name................................................................................................................1

1.2.2 Business Logo.................................................................................................................1

1.3 BUSINESS LOCATION...........................................................................................................2

1.3.1 Location...........................................................................................................................2

1.4 FORM OF OWNERSHIP..........................................................................................................2

1.5 TYPE OF BUSINESS...............................................................................................................3

1.6 PRODUCTS AND SERVICES.................................................................................................3

1.7 JUSTIFICATION OF OPPORTUNITY...................................................................................3

1.8 INDUSTRY...............................................................................................................................3

1.9 GOALS /OBJECTIVES OF THE BUSINESS..........................................................................4

1.9.1 GOALS...........................................................................................................................4

1.9.2 OBJECTIVES.................................................................................................................4

1.10 ENTRY AND GROWTH STRATEGY..................................................................................4

1.10.1 ENTRY PLAN..............................................................................................................4

1.10.2 GROWTH PLAN..........................................................................................................4

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 1.11 SWOT ANALYSIS............................................................................................................4

1.11.1 STRENGTH..................................................................................................................4

1.11.2 WEAKNESS.................................................................................................................5

1.11.3 OPPORTUNITIES........................................................................................................5

1.11.4 THREAT.......................................................................................................................5

CHAPTER TWO: MARKETING PLAN................................................................................6

2.1 CUSTOMER..............................................................................................................................6

2.2 MARKET SHARE OR SIZE....................................................................................................6

2.3 COMPETITION........................................................................................................................6

2.4 METHOD OF PROMOTION AND ADVERTISEMENT.......................................................7

2.6 SALES TATICS........................................................................................................................8

2.7 DISTRIBUTION STRATEGY.................................................................................................9

CHAPTER THREE: ORGANIZATION AND MANAGEMENT PLAN..........................10

3.1 ORGANIZATIONAL PLAN..................................................................................................10

3.2 OTHER PERSONNEL............................................................................................................11

3.3 RECRUITMENT TRAINING AND PROMOTION..............................................................12

3.3.1 RECRUITMENT...........................................................................................................12

3.3.2 TRAINING....................................................................................................................13

3.3.3 PROMOTION...............................................................................................................13

3.4 REMUNERATION AND INCETIVES..................................................................................13

3.4.1 REMUNERATION.......................................................................................................13

3.4.2 INCENTIVE..................................................................................................................13

3.5 LICENSES, PERMITS AND BY-LAWS...............................................................................13

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3.6 SUPPORT SERVICE..............................................................................................................14

CHAPTER FOUR: PRODUCTION /OPERATIONAL PLAN..........................................15

4.1 PRODUCTION FACILITIES AND CAPACITY...................................................................15

4.2 PRODUCTION FACILITIES AND CAPACITIES...............................................................16

4.2 PRODUCTION STRATEGY..................................................................................................16

4.3 PRODUCTION PROCESS.....................................................................................................17

4.4 PRODUCTION AFECTING OPERATION...........................................................................17

CHAPTER FIVE: FINANCIAL PLAN.................................................................................19

5.1 PRE-OPERATIONAL COST.................................................................................................19

5.2 PRO-FORMA BALANCE SHEET.........................................................................................20

5.3 WORKING CAPITAL............................................................................................................21

5.4 CASH FLOW PROJECTION.................................................................................................21

5.4.1 CASH FLOW PROJECTIONS FOR THE YEAR ENDING 2019..............................22

5.4.2 CASH FLOW STATEMENT.......................................................................................23

5.5 PROFOMA INCOME STATEMENT (Trading profit and loss account)...............................24

5.6 BREAK EVEN ANALYSIS FOR YEAR 2019......................................................................25

5.7 DESIRED FINANCING.........................................................................................................26

5.9 PROFITABILITY RATIOS....................................................................................................27

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EXECUTIVE SUMMARY

Naibei’s Cake Shop is a start-up business and it will be located at Dynamic Building ground
floor room 12 in Kabarnet town, Baringo County it expects to catch the interest of a regular loyal
customer base with its abroad variety of baked products

BUSINESS DESCRIPTION

The proposed business will be of a manufacturing type dealing with baked products. The
business name will be Naibei’s Cake Shop. It will be located in Kabarnet town. The business
address will be as follows:

NAIBEI’S CAKE SHOP

P.O BOX 252 - 00100, KABARNET
TELEPHONE: 0780580735
Email: naiberispastry@gmail.com
The business will be owned by Sylvia who will also be the manager of the business. The
business will be offering bread, queen cakes, biscuits and cakes that will be of medium sizes and
large sizes. The proposed business will require a stating capital of Ksh 300,000. This will be
acquired from own equity, parents’ contribution and borrowing from friends.

MARKETING PLAN

The potential customers of the proposed business will be students from institutions within,
travelers and other people from the surrounding area and far. The competitors of the business
will mainly be Classic bakers and Shakers bakers. For the popularization of the business, it will
be done by advertisement done locally and by use of posters.

The customers will get access to the products sold to the directly and also it will be distributed to
supermarkets around and other nearby retail shops.

ORGANIZATION AND MANAGEMENT PLAN

The business will be managed by Sylvia, who is also the owner of the business. The business
will require five employees at the start, but this number is expected to grow with time as the

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business grows. The total monthly salary will be ksh 38, 000. The key support services that will
be needed by the business will be insurance and banking services.

PRODUCTION PLAN

The business will require certain things before it commence its operations; these include the
premises, capital, tools and equipment’s. The purchase of the equipment’s will be ksh109, 000
and a startup capital of Ksh 25,000.

FINANCIAL PLAN

For the business to manage its finances well, the proprietor will be required to recruit qualified
personnel who can keep the records well. All the financial transactions will be recorded and cash
flows to be balanced well. The balance sheet will be done on yearly basis. The pre-operational
cost for Nota bakers is anticipated to be ksh145, 000. The break-even point for the proposed
business will be calculated on yearly basis. For the first operational year, the breakeven point is
expected to be ksh10, 029.23

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CHAPTER ONE: BUSINESS DESCRIPTION.

My business is about baking cakes for various occasions i.e. Birthdays, Anniversaries,
Weddings, Pre-weddings, Graduations, Retirement parties, Congratulations parties, Baby
showers, gift and Appreciation cakes. I will prepare the following types of cakes; Vanila,
Redvelvet marble, chocolate ,Banana cake, Carrot, Black forest, White forest, Pinnacolada and
Chocolate cakes.

1.1 BACKGROUND OF THE OWNER

The owner is qualified as a baker due to practices in production and a lot of practicing at home

1.2 BUSINESS NAME AND LOGO

I derived the name “NAIBERI” by selecting my daughter’s first name and my first name.

1.2.1 Business Name

NAIBEI’S CAKE SHOP

P.O BOX 252 - 00100,

KABARNET, KENYA.

1.2.2 Business Logo

NAIBEI’S CAKE SHOP

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 P.O BOX 252, 00100, KABARNET

1.3 BUSINESS LOCATION.

The business will be situated at Dynamic Building in Kabarnet town, Baringo county.

1.3.1 Location

ARENA

KABARNET HIGHWAY

KABARNET

KABARNET
TOWN
NAIBEI’S
PASTRY

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1.4 FORM OF OWNERSHIP.

It is a sole proprietorship business. The reason why the owner chosed this form of ownership is
because it requires little capital. The owner is her own boss enjoying the profit and also power to
make crucial decisions within a short time. The disadvantage side is that if products are not sold,
it will spoil leading to loss also marketing around people who prefer buying cakes from
supermarket than cause it is cheap.

1.5 TYPE OF BUSINESS.

It is a startup business and the owners’ expectations are high to last long and create employment
in future. The activities at Naiberi will mainly consist of baking, packaging and delivery i.e.
Buying of the required materials, weighing washing and drying of baking tins greasing and
dusting, mixing and preparation of butter, pre-heating of the oven, setting temperatures time
checking of the cake until its baked, removing from the oven then placing on a cooling rack
.While its cooling one prepares the icing or fondant for decoration. Then finally delivering or
placing on display rack waiting for a buyer.

1.6 PRODUCTS AND SERVICES.

Naiberi will once in a while offer free cake tasting or throw in promotions here and there like
encouraging the sale of a kilogram of cake to get an extra half a kilogram. The business will also
ensure that there are well pre-packed cakes in small boxes on a board for easy transportation.

1.7 JUSTIFICATION OF OPPORTUNITY.

Since it is the owner path of professionalism and so she intends to do this business with a lot of
passion, in the past the owner met with all kinds of customers with different tastes and
preferences i.e. diabetics or customers who do not take eggs. It will be the sole objective of
Naiberi pastry to meet and exceed every customer’s needs and expectations. She will also keep
up with technology to meet the demands that are ever changing with regards to baking skills,

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new decoration styles and new flavours. She will ensure that the infrastructure around the
business is good and security too. The materials and equipment will be safe.

1.8 INDUSTRY.

This type of business belongs to the hospitality industry. The industry trend is sometimes stable
and seasonal. There will be certain times when the cakes demand will be higher especially during
holidays because this is when a lot of functions/ceremonies take place.i.e Pre-weddings or
weddings .On the other hand the business will receive fewer orders for birthdays among other
parties here and there.

1.9 GOALS /OBJECTIVES OF THE BUSINESS.

1.9.1 GOALS.
In the future, the business should consider expanding into a bigger bakery and venture into
baking of other products like bread, scones, queencakes for ready markets such schools and
shops.

1.9.2 OBJECTIVES.
The business’ objectives will be to meet the needs of its customers by providing quality products
in order to increase sales, make profit to be able to purchase the required materials in bulk so as
to minimize unnecessary costs.

1.10 ENTRY AND GROWTH STRATEGY.

The business would like to market its products through close friends and relatives. Naiberi will
use social media like a facebook account among other means to market its products. There will
be other promotions that will be conducted within its environs.

1.10.1 ENTRY PLAN.

The business will be located in an ideal location with fewer competiton from the nearby
supermarket. This business will produce only quality cakes to give it an edge in the market
around it. It will highly consider the customer’s needs and preferences in terms of the cake’s

4
size, shape, design and be as affordable to all as possible. The business will then try to market
the product through local radio stations, televisions and visit functions that will be hosted within
its vicinity to network and interact with potential customers.

1.10.2 GROWTH PLAN.

When the business starts to receive more orders than expected that will a clear indication that it
is growing .It will constantly give new ideas to its customers and advise them on what they can
offer better, make a production plan and set a target each month just to test whether it will
achieve it.

1.11 SWOT ANALYSIS.

1.11.1 STRENGTH.
To build up a healthy relationship with the major players in the cake industry that is the
suppliers’ material.?

1.11.2 WEAKNESS.
Being a business that is still new in the market, it will take us some time to attract customers but
will be overcome by the laid down strategies the business will undertake with time and generate
more income.

1.11.3 OPPORTUNITIES.
The availability and convenience of an already existing market like schools, canteens, shops
which cannot do without their daily supply of cakes will favour the business immensely.

1.11.4 THREAT.
The business will most likely face some threats and challenges from unfavorable government
policies and presence of existing competition within the same location.Atmost there will be
nothing the business would do but be optimistic that it will survive such instances and bare
enjoyable fruits.

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CHAPTER TWO: MARKETING PLAN

The owner will have to come up with a good marketing plan.

2.1 CUSTOMER.

The owner will have to understand her potential customers or current customers for successful
running of the business and because there will be need to determine who they are e.g.
Wholesalers, retailers, individuals or institutions like schools, churches and hospital.

Naibei’s Cake Shop will have to also determine the location of its potential customers. e.g. How
many they are, their ages, occupation e.tc. The business will strive to find out what its potential
customers will be looking for in its products or services .e.g. In terms of price, quality
appearance colour of the product, shape and volume.

2.2 MARKET SHARE OR SIZE.

The owner should know the amount in estimate costs for a month that is if the business sells 3kgs
in a week that would be kshs 3,000 then per quarter will be kshs 3,600.If per week is kshs 3,000
per month then per month it will make kshs 12,000.

By estimating the market size, the owner will need to list down the businesses selling similar
products by visiting their places so that she estimates hers not too high or too low.

2.3 COMPETITION.

The business will have to consider what others are doing especially by analyzing factors that will
have contributed to their success or failure, determine how they are maintaining their customers
and keeping the business burning, know what has lead to their success in business especially
during off season and their prices and if they normally reduce or maintain, if there is a place
where they get cheap materials or supply of raw materials. It will also be required to determine
whether there is something they are not doing right so as to take advantage of that to win more
customers. Naibei’s Cake Shop will need to identify its potential competitors ,volume of sale by

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just being around their premises and see how many customers they serve by day also know if
they have big sets than what the business intends to make.

The business will try to investigate the competitor’s weakness or strength then use them to
improve in its operation especially during production of its products. The owner will have to plan
to capitalize on the weakness of competitor that is if they are not delivering, Naibei’s Cake Shop
will deliver for its customers if it’s within its location, to prevent a customer from travelling for
long way to pick the cake.

2.4 METHOD OF PROMOTION AND ADVERTISEMENT.

The business will be required to choose which media it intends to use whether electronic or print
media. First it will choose business magazines, pay for a small space for an advertisement, use
county screens to also increase its visibility.

It will also try to use the local and TV stations, try billboards around busy road and streets, use
flyers and road shows to intensify the marketing of its products. By using billboards, the business
will have to use a good picture showing its products; it will have to call a professional
photographer for quality portrait. The image should be able to showcase quality products that
there will be no different from the real products.

In case the business will use the county screens, it will advertise on it at least once a week, they
are cheaper than advertising through media houses like televisions or business magazines. The
county screen can cost upto kshs 2,500 once per five minutes.

At the end of the one or two weeks the business should analyze if it will have more orders than
previous weeks, if there will be a slight improvement that would be a good sign of growth.
Customers will be encouraged to call and make their orders which will be processes after making
some down payments.

2.5 PRICING STRATEGY.

The business will plan well on how to price its products and services ,this will be done by
calculating the total cost of raw materials and weighing of one kilogram cake to come up with

8
final pricing including the owners labour and energy used plus phone call that she will be making
in knowing what the customer needs.

Also the owner will know the size of the cake by using the right measuring things and scale also
the right procedure to produce quality products. The owner will need to play safe wither pricing
so as not to lose her customers, it cannot be neither too high nor too low. The prices ought to be
pocket friendly. The owner will also be required to know the different market pricing of raw
materials for other suppliers so that she can end up with fair prices ensure that she will procure
quality materials not too cheap with short expiries.

The owner needs to learn the competitors behavior if they are too serious on closing and opening
times. She should also get the right selling price for the products are reasonable price after
calculating the buying price of raw materials, labour and energy. Naiberi plans to offer free cakes
at least once in a week to its loyal customers. This promotes the sale of a kilogram of cake for
they will automatically get a half a kilogram for free.

The owner will only give credit to worthy and regular customers whom she really knows well in
terms of their business location and place of residence. This will act as her collateral and can
help in following up of the repayment through a payment plan.

The business will weigh depending on its income when to give out discounts; preferable
quarterly .This move will help boost the business’ revenue. She also plans to give an extra
kilogram of cake monthly to customers who will buy more than 1 kilogram.

Naibei’s Cake Shop will deliver the orders for free to the customers destination e.g. to the
wedding venue. She will also set it up on its stand for free, offer free wine with two glasses and
the cutleries required.

2.6 SALES TATICS.

The business intends to sell some cakes to test the market and see if she will be making a profit
or loss. Since the business will be small and growing the owner will need a strong base.

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2.7 DISTRIBUTION STRATEGY.

The owner will need to look for a motorbike to distribute to customers meanwhile and possibly
hire taxi to cover longer distances; they are slightly affordable and provide some level of comfort
depending on a customer’s choice of means of transportation. The motorbike belongs to the
owner hence minimal costs will be incurred i.e. fuel and rider.

The owner expects to grow into a bigger bakery in the future and a good supplier within its
environs, creating a good relationship with schools, shop and supermarket. She will try to
concentrate with what she loves doing to increase revenue.

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CHAPTER THREE: ORGANIZATION AND MANAGEMENT PLAN.

Naibei’s Cake Shop intend to hire very few qualified employees.i.e. A cleaner, an Assistant in
cake production then the owner will be the General Manager.

3.1 ORGANIZATIONAL PLAN

Because the business will be a sole proprietorship, the owner will not need to work with many
people only few who will work on contract basis, especially cleaning equipment and the
production area. The owner plans to be both the Production and Finance Manager.

Managing
Director

HRM

Finance Marketing Procurement

Manager Manager Manager

3.1.1 MANAGING DIRECTOR (MD).

The owner will be the Manager until the business becomes stable:

Responsibilities.

i. General overseeing of the business.

ii. Keeping records.

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 iii. Taking orders and delivering them.
iv. Stock taking
v. Keeping accounts accurate.

3.1.2 PROCUREMENT MANAGER.

This will also be the responsibility of the owner;

i. Stock taking record.

ii. In case of shortage of raw materials the owner will buy them on time.
iii. Purchase of new equipment and repair.\

3.2 OTHER PERSONNEL.

ACCOUNTANT/ CASHIER

 Accountants/cashier must have certificates in KATC with a working experience of 2years

in the same field
 Should be aged between 25-28 years
 Should be a Kenyan Citizen.

STORE KEEPER

1. They are found in the store room

2. They will be serving the product to the customers

DISTRIBUTORS/ TRASPORTERS

Should be having Kenya Certificate of Secondary Education.

CLEANERS

1. They maintain hygiene. Clean the surface and various equipments for the storage of
fruits.

2. Report on any faulty equipment

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 3. Maintain the blending area neatly.

SECURITY GUARD

1. Ensures security

2. Perform any other duty that may be assigned by the supervisor

3. Directs the customers to the enterprise and should recognize if they are the right people.

The enterprise will offer the following incentives for employee

i. Token

ii. Medical allowance (N.H.I.F)

iii. Overtime allowance

iv. Annual leave.

Incentives are given to employee as a way of motivating them towards the job

3.3 RECRUITMENT TRAINING AND PROMOTION.

The recruitment of other employees will depend on employee inefficiency, incompetence or

increase in orders that would overwhelm the owner.

3.3.1 RECRUITMENT.
In case the business growth is felt through increase of cake orders, then the owner will hire more
staff but on contract basis since such businesses are seasonal. The job positions will be
advertised through media and posters.

The other employees will hired by word of mouth especially the cleaners.

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3.3.2 TRAINING.
The owner will induct to the newly employed staff to introduce the kind of business she is
running what is expected of them so as to increase production to reach the set targets.

3.3.3 PROMOTION.
This will solely depend on employee performance, the most creative will stand a chance to be
retained in the business and further promoted.

3.4 REMUNERATION AND INCETIVES.

3.4.1 REMUNERATION.
Due to its contract basis, time of payment will depend on the employees’ advice; they may wish
to be paid salaries/wages on a daily or weekly basis.

3.4.2 INCENTIVE.
There will be high seasons when the business will reach it targets, and that is when the owner
will provide commissions to her employees, teas and lunches just to ease operation ,save on time
and energy.

3.5 LICENSES, PERMITS AND BY-LAWS.

The owner will ensure that the business is licensed to prevent rubbing shoulders in the wrong
way with the county council workers and further ensure the smooth running of the business .The
Bakery shop intends to be operational every day except on Sundays.

3.5.1 LICENSES.

The owner will pay kshs 3,000 annually for the license at the City council for them to give
permission to run the business.

3.5.2 PERMITS.

The business will need to comply with Kenya Bureau of Standards (KBS)

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3.5.3 BY-LAWS.

The business has to comply with the by-laws issued by the Municipal Council: The owner must
ensure that it has Food Certificate handlers and that the vaccine is given and always renewed
after every six months. There is also a typhoid vaccine given to help control food poisoning or
contamination to customers.

3.6 SUPPORT SERVICE.

The owner will open a business bank account to help with savings of profits made.

3.6.1BANKING SERVICES.

The owner will also ensure that the business has a savings account at (C.F.C) Stanbic bank,
Kabarnet branch to help in management of funds avoid spending on unnecessary things and to
have savings for emergency cases. It is also recommended to save money in the bank in case the
business will need a loan to expand in the future.

3.6.2 INSURANCE SEVICES.

The business has to be insured in case of fire caused accidentally by electricity and or cooking
equipment. If the business premise will be in a secure location, then the owner will not have to
take an insurance against theft. The cost will be kshs 30,000 per year with Britam Insurance
Company.

3.6.3 CONSULTING SEVICES.

The owner will be consulting with another businessman who is in the industry as well. She will
consult in whatsap groups, facebook page for bakers on issues surrounding the business, its
challenges and solutions.

In case the owner decides to expand in the future, she will need a lawyer to help in drafting
contract letters. The legal firm will be ‘BIRCH ADVOCATES.

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CHAPTER FOUR: PRODUCTION /OPERATIONAL PLAN.

The business will have a list of to-do on a daily basis; this will help manage and organize the
daily production.

4.1 PRODUCTION FACILITIES AND CAPACITY.

This type of business which involves cake production and marketing requires three rooms, one
for storage, kitchen and selling place. The budget for rent will be kshs 15,000 per month. It will
need the following equipment; ovens, mixers, a fridge, mixing bowls, basins, boards, and boxes
and weighing scale.

The oven will cost kshs 60,000,mixer kshs 60,000,fridge kshs 30,000,mixing bowls kshs
5,000,basins kshs 500,boards kshs 5,000,boxes kshs 5,000 and the weighing scale kshs
5,000.The owner plans to use the washroom as a changing room as well as it is a bit spacious.
There will be an emergency fund of kshs 20,000 set aside to cater for any faults, the tears and
wears of machinery.

Below is the Factory layout.

SELLING
POINT
KITCHEN

WASH STORE
ROOM

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The production per day is projected to be 20 cakes during off season .i.e. this just the normal
sales without wedding and engagement cakes. The minimum projection per day will be 15 cakes.

Naiberi intends to expand into a bigger bakery with fewer employees on permanent basis. It will
venture into making other products like bread, doughnuts and pies. It will also increase facilities
with more rooms and have every department dependant.

4.2 PRODUCTION FACILITIES AND CAPACITIES.

ITEM QUANTITY COST CAPACITY

Office 5 rooms 30,000 3 office personnel
Store 1 room Removal materials
Motorbike 1 70,000
Electricity 3 phase 30,000 1,000 km

KITCHEN DISPLAY
SELLING
FINISHING PLACE
ROOM
MANAGER
ACCOUNT

OFFICE

STORE
WASHROOM

4.2 PRODUCTION STRATEGY.

The owner will start by collecting all the ingredients and weighing them, sieving flour,
separating of eggs and mixing with essence, weighing of margarine and sugar and start mixing in
mixer meanwhile sleeve the flour then start adding eggs one by one with the butter then add flour
bit by bit while mixing and the process pre- heat the oven and dust the baking tins after all butter
is ready place it in oven and wait for 45 minutes has you set the 26 ◦c after its minutes check for

17
cake is ready. If it is ready by inserting a skewer into it or pallet it comes clean then cake is
ready. Remove it and places in cooling rack to cool.

The owner will use the creaming method for mixing all the ingredients together. She must
always be on the lookout for any new technologies because things change day to day especially
with cake decorations. The business will purchase most of its supplies from wholesalers shop in
bulk then store them, reorder when they are almost finishing. The other alternative source is a
supermarket.

The monthly cost of production is kshs 42,000 a kilogram cost 1500 ×10 kilograms per day ×

28 days per month =42,000 buying ingredients two crates of eggs per day that is 600 gram per
day.600+260+190 =1,050 × 28 =6,180.The business will use tokens to pay for electricity at kshs
2,500 per month, water will consume kshs 1, 000, essence of kshs 500 = 10,180 purchasing and
stock control method will be transacted in cash on delivery basis.

4.3 PRODUCTION PROCESS.

The following are the stages the owner will use while producing the cakes; Firstly, she will
collect all the required raw materials i.e. flour,eggs,milk,margarines,essence,baking tins, sugar
among others.Sencondly,she will pre-heat the oven upto a certain temperature, and finally weigh
the required baking ingredients ready to start the process.

The business owner recognizes the fact that there will be some external factors that can affect the
production process if not prevented i.e. competitor cake pricing; the owner will try to minimize
such effects by controlling her prices in order to meet the customer’s needs and expectations .She
will also conduct promotions to win the market.

Other factors that may affect production include power outages. The frequent power cut will
interfere with the baking process hence tampering with the quality of cakes; she will have to
figure out how to counter such a challenge when it occurs.

4.4 PRODUCTION AFECTING OPERATION.

4.4.1 HEALTH REGULATIONS.

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The owner of this business will ensure that she adheres to all the requirements and regulations set
by the Public health Ministry like ensuring all her food handlers are certified and vaccinated
against typhoid among other contaminating diseases.

4.4.2 SAFETY.

In order to ensure safety the owner must adhere to the safety regulations by providing all the
required PPE’s and equipment.

4.4.3 ENVIRONMENTAL REGULATIONS.

It will be the duty and responsibility of the owner to ensure that all the environmental regulations
are adhered especially when disposing off waste. She will always do returns by filling, using
E.T.R machines to produce receipts, participate in community activities like sweeping of the
streets, raising of funds for the less fortunate people, or plant trees to sustain the environment.

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CHAPTER FIVE: FINANCIAL PLAN

This chapter will illustrate how the business intends to plan the funds it will receive; it involves
analyzing, financial requirements and developing of financial plans.

Objectives of financial plan.

i. Maintain health liquidity position throughout the trading period.

ii. Maintain return on owner’s equity.
iii. Realize a steady growth on income.
iv. Maintain and control expenses.
v. Effective accounting system.

FINANCIAL ASSUMPTIONS.

If to receive funds comprises analyzing of financial requirements or business and developing

financial plans then creditors are to be increased by a certain percentage per year. Debtors are
also to increase by certain percentage per year and finally the business intends to plough back
any realized net profits

5.1 PRE-OPERATIONAL COST.

ITEMS COST
Research travelling 1,000
Designing 5,000
Lincenses and Permits 3,000
Advertisement 2,500
Recruitment 3,000
Professional fee 1,500
Installation 3,000
Rent deposit 45,000
Utility bills 15,000
Total amount 235,500

20
5.2 PRO-FORMA BALANCE SHEET.

This is a financial statement that shows the financial position of the business for a certain period
of time.

ASSETS (Fixed)
Building at cost 25,000
Land
Motorbike 3,500
Less depreciation 10% 3,150
Furniture & fittings 25,000
Less depreciation 2% 24,500 = 81,150

CURRENT ASSETS
Stock 100,000
Cash at Bank 50,000
Cash at Hand 30,000
Debtors 5,000
Pre-payments 2,000 =187,000

LESS CURRENT LIABILITIES

Creditors 20,000
Accruals 10,000
Bank overdraft 50,000
WORKING CAPITAL 500,000
Financed by;
Opening capital 500,000
Add profit 15,000
Less drawings 5,000
Closing capital 50,000
Loans 25,000

5.3 WORKING CAPITAL.

This is the Current assets –Current liabilities

WC = CA- CL

187,000 -80,000 = 107,000

CURRENT ASSETS
Cash at Hand 30,000

21
 Cash at Bank 50,000
Debtors 5,000
Stock 100,000 =187,000
LESS CURRENT LIABILITIES
Creditors 20,000
Bank overdraft 50,000
Accruals 10,000 =80,000
Working Capital

5.4 CASH FLOW PROJECTION.

It shows cash in and cash out of the business. It includes sales, payment from debtors discount
received, rent received and loans. Transactions that may reduce cash in business include
purchases, salaries/wages, rent payment, payment to creditors, standing order and finally
discount allowed.

22
5.4.1 CASH FLOW PROJECTIONS FOR THE YEAR ENDING 2019.
MONTHS

LOAN

SALES

DEBTORS

DISCOUNT RECIEVED

January

25,000

20,000

1,000

3,000

February

15,000

750

750

March

10,000

500

800

April

20,000

800

23
500

May

18,000

1,000

900

June

30,000

18,500

900

100

July

20,000

400

200

August

25,000

1,200

300

September

22,000

500

24
250

October

21,000

1,000

800

November

23,000

1,500

1,000

December

30,000

600

1500

PAYMENTS

MONTHS

PURCHASES

SALARIES & WAGES

CREDITORS

DISCOUNT ALLOWE

January

25
205,500

25,000

5,000

500

February

20,000

10,000

2,000

150

March

15,000

10,500

3,000

100

April

30,000

15,000

5,000

2,000

May

28,000

15,500

5,500

1,000

June

26
22,000

15,000

3,000

500

July

20,000

18,000

2,000

800

August

50,000

18,000

1,500

1,000

September

55,000

19,500

1,000

2,000

October

53,000

20,000

800

1,500

November

27
58,000

25,000

2,000

3,000

December

60,000

30,000

5,000

4,000

Cash flow

211,500

Balance b/d

Balance c/d

28
29
 5.4.2 CASH FLOW STATEMENT
PARTICULAR JAN FEB MAR APR MAY JUNE JULY AUG SEPT OCT NOV DEC TOTAL
Cash sales 83333 83333 83333 83334 83333 83334 83333 83334 83334 83333 83333 83333 1,000000
Bank 30000 300000
0
Family, friends relatives 25000 250000
0
Owners capital 20000
0
Total received 83333 83333 83333 83334 83333 83334 83333 83333 83334 83334 83333 83333 1750000
3
Purchases 16383 16383 16383 16383 16383 16383 16384 16383 16383 16384 16383 16385 196600
Rent 6000 6000 6000 6000 6000 6000 6000 6000 6000 6000 6000 6000 72,000
Electricity 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 36000
Water bill 800 800 800 800 800 800 800 800 800 800 800 800 9600
Licenses 36000 36000
Salary 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 300000
Insurance 500 500 500 500 500 500 500 500 500 500 500 500 6000
Miscellaneous 750 750 750 750 750 750 750 750 750 750 750 750 9000
Loan interest 25000 25000 25000 25000 25000 25000 25000 25000 25000 25000 25000 25000 300000
Loan payment 25000 25000 25000 25000 25000 25000 25000 25000 25000 25000 25000 25000 300000
Telephone 600 600 600 600 600 600 600 600 600 600 600 600 7200
Medical 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 12000
Net cash flow 85133 85133 85133 85133 85133 85133 85133 85133 85133 85133 85133 85133 1014400
Net cash 74820 1800 1800 1801 1800 1801 1799 1800 1801 1800 1800 1800 1,014400
0
Balance B/F 71580 71760 71940 72120 72380 72480 72660 72840 73020 73200 73380 73560
0 0 0 1 1 2 2 2 3 4 4 4

30
5.5 PROFOMA INCOME STATEMENT (Trading profit and loss account)

ITEM YEAR 2019

Sales 400,000
Cost of sale 90,000
Gross profit 216,000
Interest on loan 10,000
Salaries 211,500
Rent 210,000
Water 25,000
Telephone 30,000
Postage 10,000
Transport 20,000
Taxation 20,000
Insurance 3,000
Net profit before tax 236,400
Net profit after tax 212,760

31
5.6 BREAK EVEN ANALYSIS FOR YEAR 2019.

a. Contribution Margin
Total sales –Variable cost
1,220,000 – 551,940 =668,060

b. Contribution Margin Percentage.

¿ Total sales – Variable costs

Total sales

1,220,000−551,940
= 1,220,000

c. Breakeven level

¿ costs
= Contribution margin

¿ 1,000,000
668,060

= 1,497

YEAR 2019
FIXED COSTS AMOUNT
Rent 210,000
Telephone 30,000
Wages 150,000
Supply 25,000
Electricity 30,000
Transport 50,000
Total 495,000
Variable Cost
Purchases 205,500
Electricity deposit

a. Contribution Margin
Total sales –Variable cost

32
 1,220,000 – 551,940 =668,060

b. Contribution Margin Percentage.

¿ Total sales – Variable costs

Total sales

1,220,000−551,940
= 1,220,000

= 0.5475

. Breakeven level

¿ costs
= Contribution margin

¿ 483,000
906060

= 0.533

5.7 DESIRED FINANCING.

ITEM AMOUNT
Pre-operational costs 235,500
Working Capital 107,000
Fixed Asset 81,150
Total 423,650

5.8 CAPITALIZATION.

ITEM AMOUNT

33
 Personal Saving 500,000
Borrowed funds 50,000
Total 550,000

5.9 PROFITABILITY RATIOS.

G. P ×100
a. Gross profit ratio =
sales

2, 160 , 000 ×100

40 ,000

=5,400

NP ×100
b.Net profit ratio =
Owner equity

236,400× 100
40,000

= 591

N .P
C .Return on equity = ×100
Owner equity

591×100
700,000

=0.084

sales revenue
d. Asset turnover =
Assets

212,760
500,000

=0.425

Current assets−Stock
e. Quick ratio =
Current liabilities

34
 1,504,000−530,000
= 540,000

= 1,803

Current assets
f. Liquidity ratio =
Current liabilities

150,400
=
540,000

=2,785

35