BUSINESS PLAN

EXECUTIVE SUMMARY

1.0BUSINESS DESCRIPTION
The name of the business will be MUTGEO grocery situated along Thika road. It will
Be a start up and will basically be dealing with buying and selling fresh farm produce.

1.0 MARKETING PLAN

Potential customers of the enterprise will comprise of individual institution and commercial customers.
The business will capitalize on competitors loopholes to gain a higher market share and methods of
Promoting and advertising will target the customers satisfaction.

2.0 ORGANISATION AND MANAGEMAENT PLAN

This chapter entails recruitment, training and promotional activities of the firm. It highlights the business
Personnel qualifications and several duties, the organization chart, licence, permits and by-laws.

3.0 OPERATION AND PRODUCTION PLAN

This chapter deals with products design and development. It outlines monthly labor, requirements, monthly
Production, expenses, production process and government regulations.

4.0 FINANCIAL PLAN

It outlines the pre-operational costs, working capital requirements, the pro-forma income, statement projected
Cash flow statement for the three years,pro-forma balance sheet, break even analysis, profitability ratios anal
Desired financing and proposed capitalization.

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CHAPTER ONE

BUSINESS DESCRIPTION

1.0 BUSINESS NAME

The name of the business is referred to as MUTUGEO which aims at dealing with vegetables and
cereals. This name is derived from combination of initials of the name of the owners .The logo of the
business will be presented by some commodities which it will be offering and this will help to show
what the business is all about. The following are the sample of goods which will be included in the logo
cereals will be presented by maize, fruits will be presented by oranges and vegetables will include
cabbage.

1.1 OPPORTUNITY OF THE BUSINESS

The reason for choosing this type of business is because of high population in the area that needs fresh
vegetables, fruits and cereals and there is less competition in this area.

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1.2 BUSINESS LOCATION AND CONTACT

MUTUGEO grocery will be located in Thika town near Thika stadium, Avenue hospital. In this area
there is good infrastacture such has tarmac road, security , availability of raw materials and customers
since this area is highly populated.

ST MARK
ACADEMY KIAMBU FARM

MUTUGEO
KIBO GROCERY
HOTEL

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1.2.1contact of the business

It will be:

Address : MUTUGEO GROCERY

P.O Box : 490 THIKA

Telephone : 0725760437

Email :Geomut15@gmail.com

1.3 FORM OF ONWERSHIP

The business will be a partnership. We chose this kind of business since it is easy to start i.e. low cost of
starting the business and also risks and losses can be shared. Both partners are graduates and have
practiced management for a while.. Since our grocery will have many activities to be done the business
will employ more qualified personnel to assist in running the business. MUTUGEO farmer’s grocery
registration number is 01065.1.

1.3.1 Sponsor

The owner of the business

1.4 TYPE OF BUSINESS

It will be a partnership and will operate between 8.00am to 6.00pm.It will offer customers with fresh
and readily products and they will be packed using plastic bags which will be decorated by drawings of
products offered.

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1.5 PRODUCT/SERVICE

MUTUGEO supplies cereals e.g. maize, beans. Fruits such as mangoes, pawpaw etc and vegetables like
sukumawiki, cabbages and tomatoes e.t.c. since this commodities are fresh and available they will be
sold in retail and wholesale.

1.6 JUSTIFICATION OF THE BUSINESS

1.6.1 Strength

The reason for choosing this kind of business its because of high population and there is less
competition in this area.

1.6.2 Weaknesses

1.6.3 Opportunity

Thika being an agricultural town there is a lot of fruits ,vegetables and cereals which will enable the
business have a reliable source of acquiring products this will enable us to sell fresh products which will
attract many customers leading to expansion of my business.

1.6.4 Threats

Incase of weather changes this will affect the business e.g. lack of enough rainfall, natural calamity such
as flood might damage many crops causing shortage of vegetables, fruits and cereals leading to low
income.

1.6.5 Viability

The owners has the required skills to learn the business because they have 2 years experience in the
agricultural industry where they have worked as record managers. The business will hire few literate

5
workers when the business expands who will be assisting us. This business is located in an area with
good infrastructure such as tarmac road, electricity and security .

1.7 INDUSTRY

MUTUGEO will be under agricultural industry. This would deal with cereals, vegetables and fruits.
Food is widely spread all over the country since this is a basic need. The industry is well managed. It
does not fail the customers since their products are readily available i.e. cereals, fruits and vegetables. It
will generate a lot of money since the products are sold to schools, hospitals, colleges, churches, hotels
and to the working people and others who are nearby the town .he industry has an upward trend. It has
attracted and retained customers because of selling after sale prices i.e. transporting goods bought by
whole sale customers to their respective areas and because of this it will attract customers all over that
uplifting my industry.

1.8 BUSINESS GOALS

Expansion ,diversification

1. 9 ENTRY AND GROWTH SRATEGY

pricing

10.0 GROWTH STRATEGY

The competitive edge

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7
 CHAPTER TWO

2.0 Introduction

2.1 Customers

The aim of the business will cater for all customers in Thika town and outskirts. The aim and objectives
of proposed business is to satisfy customer’s needs up to high standards. However these customers will
be in different categories and will be severed according to their needs they include:

 Commercial customers

 Transit customers

 Institutional customers

 Domestic customers

Commercial customers

This are customers who buy goods either in wholesale or retail and then sells them in their trading
centre. In order to retain them they will be given free transport services, cash discounts, offer sale
service and this will contribute to expansion of the business by buying large quantity of goods at the
same time.

Transit customers

This are the customers who will be using Thika-Nyeri road since Thika town is very busy customers
who will be coming in the town will be buying goods from the business.

Institutional customers

This area is surrounded by many learning institution who requires the goods for them to make their
meals the business will cater for their needs.

Domestic customers

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This are people who live within Thika and most of them live in the town hence they will relay on this
business

2.2 MARKET SHARE

Market share will be determined by the number of customers. Each entrepreneur is able to serve and
since the business is growing fast this have resulted to massive migration of people due to good market
for the business product. According to data collected Thika town have a big population of which 50,000
are potential customers. Competitors like Mubena Retailers serves about 25% customers, Murigu
Groceries serves 15% while Kirore Fresh Produce 20% hence the business will able to serve and hold
the remaining 40% of the customers. The pie chart below shows the mart share.

MARKET SHARE
1 2 3 4

KIRORE
MUBENA 20%
25%
MURIGU
15%
MUTUGEO
40%

2.3 COMPETITERS

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Competition is expected from three main groceries as follows:

COMPETITORS SRENGTH WEAKNESS

Good customer relation. Poor location.
Good service. High price.
KIRORE GROCERY

Variety of products in the stock. Lack of qualified personnel.

Large market share. No skills on how to promote their products.
MURIGU
GROCERY
Staff have good skills. Pay low salaries and wages to their
MUBENA Have skills to promote their employees.
GROCERY products. Emphasize more on price and quality.

MURIGU Grocery is located 5 kilometers from Thika town. It has several assets like stores,
buildings, their own land and it has adequate employees who run the business. Their working hour is
from 7:00 am to 6:00 pm, where they target people as they come back home from their working place.
KIRORE is located 2 kilometer from Thika town it also poses assets like large acres of land where
they plant different kind of crops. Also they have weighing machines and refrigetors for wiping their
vegetables.
MUBENA Grocery is located 4 kilometers from the town, its operated though partnership it also has
assets like stores, adequate and skilled staff and they also own a piece of land. Other competitors
comprise of small group who buys products and sell for a profit but they normally faces many
challenges like lack of enough capital and poor management skills. Compared to its competitors,
MUTUGEO Grocery products are usually fresh and it is located in a well populated zone hence
MUTUGEO has many customers. It has skilled personnel who are equipped with adequate skills on how
to learn the business and it also motivates its staff.

2.4 PRODUCTS

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 The business will offer fresh products it also has indigenous vegetable which are on high demand
because they are good source of vitamin s and they prevent health problems. Products will be stored
in clean environment to avoid entry of germs, to avoid fermentation air will always be regulated.
Products will be arranged in shelves in such a way that customers can be in a position of selecting
what they need without difficulty. Lastly after customers purchase for products they will be packed
in clean nylon papers which are resistance to tear according to amount of quantity they buys

2.5 PRICING STRATEGY

This business intends to come up by introducing reliable and affordable prices to its customers. The
prices will be aimed at reaching the affordability and capability of their needs. It will consider the
following things:

a. .Economic status of the will be considered because sometimes it s very high or low

b. .After the rainy season when vegetables and cereals tend to be plenty in this season prices will fall
down due to rise in quality.

If a customer buy large amount of goods he or she will be given a few extra goods as a discount.
Credit will only be offered to potential customers whereby they are supposed to repay after three
days. The business will also reduce the price of goods by five shillings as compared to its
competitors so as to attract many customers.

2.6 SALES TACTICS

The business will have sales people who will be distributing the products to various part within the
entire town. They will be paid according to the total amount sold per day. They will also have the
responsibility of finding ways to attract customers e.g. they can go round the entire town announcing
what the business offer, the quality of products and their prices and this will always be done when
there are many people in town especially market days.

Recruitment of sales people will be carried out which enhances quality and competitive sales
personnel. It will be done through application of job and conducting interviews. The business will
find ways of motivating them in order for them to make more sales.

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 2.7 ADVERTISEMENT AND PROMOTION STRATEGY

The business aims at getting more customers and retaining them. It will be using various method of
advertisement i.e. through local radio like Inoro FM and Thika FM and use of Royal Media Citizen
Television which will cater for people who are from that locality but not familiar with local
language. These advertisement had to be made early in the i.e. 7:00 am before and after news and
before 9:00 pm news. The cost will depend on the particular days rate. It will also use posters and
distribute brochures and use friends. Promotion of each product in the business depends on the
quantity which will be purchased, if the customer will be purchasing in large volume they will be
given free transport of the product purchased.

2.8 DISTRIBUTION STRATEGY

The business has established a distribution channel. This channel goes as shown

Manufacture Retailer User

The advantage is that my business does not involve much processing and will get many
customers because of the service offered to them, for those who buy in wholesale their product will
be transported to their place by use of vehicles or mkokoteni to the nearby places this will be done
by my employees

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CHAPTER THREE
3.0 ORGANISATION AND MANAGEMENT PLAN

The business plan will move the following employees to ensure its smooth running.

i. Managing Director

ii. Production Manager

iii. Supervisor

iv. Accountant

v. 2 Watchmen

vi. Drivers

3.1 ORGANISATION STRUCTURE

MANAGING DIRECTOR

PRODUCTION ACCOUNTANT SUPERVISOR

MANAGER

WATCHMAN DRIVERS

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The above respective person should have the following qualification and should be performing the
following duties as shown in the table
Table one
POSITION AGE EDUCATION EXPERIENCE DUTIES
Managing 25-30 Diploma in 2 years Will be organizing how to
Director Management experience get raw materials and other
requirement of the business
and must be a person of
good character.
Production 26-30 Diploma holder in 2 years Will be coordinating the
Manager production and experience finance of the business
management Will involves in
coordinating of the business
transaction which may
produce raw materials and
payment of workers
Supervisor 25-30 Certificate holder 1 year Coordination of the workers
in management experience and ensuring that all
workers are there for work
and make sure that
All work is done in the
right time for easy growth
and expansion of the
business.
Watchman 27-32 Four leaver with a 3 years Guarding the business at
mean Grade of D experience night
2 Drivers 23-30 3 years 3 years To transport products to
experience experience respective customers and
advertising the firm’s
produce

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Employees will be paid their salaries at the end of every month and for those who will be performing
their work well will be receiving incentives e.g adding some amount of money on top of their salary.
This will stimulate output leading to a great efficiency and effectiveness in the business.

3.2 STAFFING
This function is extremely important. It will aim at obtaining and retaining competent person
and providing favorable environment which is conducive for superior performance in the
business. Staff of this business is clearly indicated in the organizational structure and their
function descried in the table one. They will be reporting any issue relating to the business to
the managing director.

The following are methods in which the owner will be evaluating her staff:

(a) Critical incident method

-this is where by she will be preparing list of statements of effective and ineffective behavior of
individual employee

(b) person to person comparison

in this method she will be comparing employee with some key people then relating them using
some factors like leadership, dependability and initiative. By using this methods she will be in a
position to know competent staff.

In order to motivate the staff the owner will be treating them with equity. Ensuring the supervisor is
friendly and kind to the other employee s by guiding them when make mistakes and encouraging them.
She will also be organizing get together to the employees whereby they will all meet have fun together,
discuss their problems and finding solutions to them. This will create good relationship between the
employees and they will fell that they are recognized contributing to good performance in the business.
Outstanding employees in the business will have to be rewarded by putting up their pictures and
engraving their names on a master plaque with words of recognition. Second giving them free dinner,

15
ticket to the best movies etc.Lastly paying a trip to them to enjoy with their family.

3.2.1 Remuneration and incentive

This will be made monthly for the managing director, production manager, accountant, supervisor,
watchman and drivers. It will be as follows:

Office Ksh per month Ksh per year

Managing director 17000 204000
Production manager 15000 180000
Accountant 15000 180000
Supervisor 12000 14400
Watchman 9000 108000
Drivers 8000 96000
Total 76000 768000

There will be overtime allowance which will amount to ksh 100 for the workers and 150 for senior
personnel.
3.2.2 Rules and regulations
The following are rules and regulations which will govern the business and the staff:
 No smoking

 Punctuality should be observed

 No inviting visitors during working hours

 Cleaning must be observed

 No sleeping during working hours

 Alcohol is not allowed in the business environment

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 3.2 PEOPLE SYSTEM

(a)RECRUITMENT AND SELECTION

Recruitment
The business owner will be obtaining her employees through advertisement. When there will be
a vacant in the business it will be made public through the use of newspaper, local radio and
citizen television. Last method will be unsolicited applicants these are those who come to the
business to serve as casual workers or reach the employer by letter, telephone or in person with
request for appointment against a real or presumed vacancy.

Selection
After getting the applicant the owner will select them using the following steps :
Preliminary interview-it is generally brief and it will help to eliminate totally unsuitable candidate.
Application blank-those who will be selected in the first step will be required to bring their resume
showing their name, age, qualification and experience in order to obtain the relevant information about
the applicant.
Employee test-it will be used to measure a sample of behavior in order to determine the fitness of a
particular job. This behavior includes ability, personality, interest, intelligence and attitude.
Employment interview-it will be face to face interview in order to get additional information about the
candidate.
Physical examination-since this business is dealing with food the candidate is required to bring a
certificate from the doctor showing his or her physical fitness in order to prevent cases like
communicable diseases and also to a certain that he or she is physically fit to perform the job.
Appointment letter- those who pass all the steps are given a letter on when to start the job.
(b) Training employee
Those who are on top management are the one who will be going for training. Due to technology
increase the business will be hiring consultants to provide specific type of training at the end of
every year. They will also be attending to seminars

c. PROMOTION AND APPRAISAL

Promotion
For the business to attract suitable and competent workers, conserve provided skills, training and ability

17
she will be promoting according to education qualification, training courses attended, previous working
history and experience.
Appraisal
The form shown below is the one to be used by person who will be appraising the performance of each
staff in the business

APPRAISAL FORM
MUTUGEO Grocery Appraisal Form

EMPLOYESS DETAIL
Name
Date hired
Job assignment
Department
Supervisor

NAME OF THE APPRAISE

Use(x) to candidate the following qualities of staff in the appropriate

EMPLOYEE’S DETAIL
Name………………………….
Date hired……………………
Job assignment……………
Department…………………
Supervisor……………………

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NAME OF THE APPRAISEE
Use(x) to candidate the following qualities of staff in the appropriate column
(a) very good (c)fair
(b) good (d)poor

A B C D
PERFORMANCE
Independence
Creativity
Initiative
Competent
Patient

PERSONAL A B C D
FACTORS
Punctuality
Attitude
Attendance of
meeting

VERALL RATING

Employees comment………………

Employees signature………………

Manager’s comment……………..

Manager’s signature……………..

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 3.4 LEGAL REQUIRMENTS
The business will recognize the following license
TRADING LICENSE
Trade license shall be obtained from Kiambu County. The license permits legal operation of the
business from the act chapter 267 of section 7 .This is under the rules that govern business registration.
The license shall indicate the type of business, its location and legitimacy of the business operations.
OCCUPATION LICENSE
Certificate registration of the business shall be issued by the standing registrar under the provision of the
business name act chapter 420 section 12(1) at a legal fee set by the office. With such certification the
business name shall be legal in all in all its operation and shall minimize an case of dubious activities
carried out in the name of the business.
BY- LAW
The business will be required to adhere to the by-laws of the Thika Sub-County where it will be
situated. The by-law will be under the new laws of the Kenyan constitution that govern agriculture in
Kenya.
HEALTH SERVICES
The business will ensure that proper health condition for its workers. This will help them remain healthy
and work perfectly for attainment of the business goals and objectives.

SUPPORTING SERVICE

The business requires the following services

(a)Account

The business will have an account with Equity Bank Thika branch which is located near Thika
District Offices next to KCB

(b)Accident policy

For the business to be insured against fire and theft it will get an insurance policy through

Blue Shield Company

P.O BOX 142, Thika

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 CHAPTER FOUR

OPERATION AND PRODUCTION PLAN

4.1PRODUCTION FACITIES AND EQUIPMENTS

The facilities required for this business are discussed as follows:

(a)Vehicles-this will be transporting goods to the wholesalers and retailers customers who are far
from the business

(b)Two Bicycles-used for transporting goods which are a gently needed by customers who lives
within the area who buy in wholesales

(c)Two mikokoteni and wheelbarrow-for transporting goods to the store area when they delivered
from producers

(d)Two computes –assists in keeping the records of the business in order to reduce paper work

The cost of this facilities are estimated in the table shown below

NUMBER EQUIPMENT ESTIMATED COST

1 Vehicle 300,000
2 Bicycles 4000
2 Mkokoteni (Handcart) 8000
2 Wheel barrow 6000
2 Computer 60,000

Other fixed assets are building, land and refrigerating machines.

4.2 REPAIR AND MAINTENANCE.

Incase of any repair to the machinery, the enterprise will partner with the local technicians who will
offer their techniques on the machines. they shall require spare from shops that deal with spares and
the cost will be resolved by the enterprise upon checking the spares quality at payment receipts

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 GROUND FLOOR /WORKSHOP LAYOUT OF THE BUSINESS.
PRODUCTION
SHELVES MANAGER’S STORE AREA
OFFICE

PRODUCTION
UNIT

SHELVES

TABLE WITH
WEIGHING
MACHINES

MANAGING
DIRECTOR’S
OFFICE

WASHROOM

RECEPTION
ENTRANCE EXIT

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4.3 PRODUCTION STRATEGY.
The business is wholly dealing with sales of vegetables, fruits and cereals all this are locally available
throughout the year. They will be transported by means of vehicles and bicycles and perishable goods
like fruits will be transported in trays to prevent them from being damaged during the transportation and
for cereals they will be packed in durable sacks which cannot be toned easily. The table below shows
how the business will be costed until the goods reaches the customers
Type Cost per month
Transport 600
Electricity 300
Labor and sales 15,000
Operation expenses 2000
Raw materials e.g. vegetables. Fruits ,cereals 10,000
Total 23,300

For the production to be efficient the business needs competent, hardworking and honest and fats
workers. Also the business will require receipt which will be offered to its customers after buying
goods.

4.4 PRODUCTION PROCESS.

The following is the production process
Ordering goods from different sources like small scale farmers

Receiving the goods which will be transported and checking their quality a

Arranging goods in shelves in terms of size and quality

Labeling the prices in each shelve for different goods

Selling and distributing the goods to various customers

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4.5 RULES AFFECTING OPERATION.

These are issues laid down by the government and the local authority that the business has to comply
with and undertake its operation effectively. This issues are external they include the following.

(a) health and safety act(chapter101)

The business certificate of health and safety after examination of the business by Thika municipal
council.

(b.)Certificate of registration

Business license also will acquire certificate of registration as required by law for it to carry out its
operation.

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(c.)Income tax (chapter 470)

The business will pay its revenue at the of every financial year to Kenya revenue authority.

(d.)Trading license (chapter 497)

The business will obtain trading license from Thika municipal council as prescribed.

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CHAPTER FIVE

5.0 FINANCIAL PLAN

MUTUGEO financial documents will be made. This is because the financial section shows the

expenses that are incurred in the business and the actual arrangement of the business. Proper financial

planning determines the limitations of the business and provides all the financial performance of the

whole business operation and reveals the sources of the business finance.

5.1 PRE OPERATIONAL COSTS

Below is the estimate cost prior to the operations

Items Cost
Machinery 1 0000
Furniture 30000
Refrigerator 5000
Other equipment 2000

Trade license 3000

Insurance policy payment 5000
Installation of water and electricity 50000
Advertisement 500
Legal fees 1 000
Consultancy fees 2000

Total 108,500

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 5.2 WORKING CAPITAL REQUIREMENTS

This part shows the working capital needs for MUTUGEO goceryin the first three year after starting

its operation.

Item Year 1 Year 2 Year3

Stock of raw materials 105500 108900 114300
Work in progress 756000 768000 792000
Stock of finished goods 15200 48600 62100
Debtors 2000 4600 8700
Cash in hand 1 10900 1 20600 142300
Cash in hank 95600 105000 115300

Total 1085200 1155700 1234700

Assumptions made in arriving at the figures above

 During the beginning of my business I will have few debtors to avoid bad debts

as my business will be young

 The business assumes that the grocery is ready to operate with the equipments and tools

budgeted. Also they are to remain in good conditions with minimal maintenance or

replacement. Profit margin of about 1 5-30% should be realized by the end of the first

month.

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MUTUGEO GROCERY PROJECTED CASH FLOW STATEMENT FOR THE YEAR 2015

DETAILS JAN FEE MARCH APR MAY JUNE JULY AUG SEPT OCT NOV DEC TOTAL
CASH IN FLOW

Opening cash 110900 71400 43100 258900 22350 23550 27150 32850 41750 55150 69350 84650 6081
Cash sales 40000 42000 50600 62400 65700 68900 71300 74600 78000 81200 84000 86400 8051
Debtors 500 7000 800 20
Total cash inflow 151400 113400 93700 89000 88050 92450 98450 107450 120550 136350 153350 171050 14152
CASH OUTFLOW
Cash purchases 10000 5000 4000 3000 1000 1000 2000 2000 20000 3000 3000 4000 400
Wages and salaries 63000 63000 63000 63000 63000 63000 63000 63000 63000 63000 63000 63000 7560
Waterbill 2000 100 300 200 200 300 200 100 100 200 300 200 42
Electricity bill 1000 900 400 300 300 300 300 200 200 300 300 400 49
Advertising 500 500 10
Transport 1000 800 100 150 200 100 200 100 400 100 300 25
Insurance 2500 25
Repair 400 200 100 500 12
Payment to creditors 1500 100 500 2000 1000 51
Total cash outflow 80000 70300 67800 66650 64500 65300 65600 65700 65400 67000 68700 69400 8174
Net cash B/F 101650 43100 258900 22350 23550 27150 32850 41750 55150 69350 84650 10165 5977
0

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MUTUGEO GROCERY PROJECTED CASH FLOWSTATEMENT FOR THE YEAR 2016
DETAILS JAN FEE MARCH APR MAY JUNE JULY AUG SEPT OCT NOV DEC TOTAL

CASH IN FLOW
Opening cash 101650 116150 135350 155850 175900 198700 218800 238700 260100 283600 309100 336300 2530200
Cash'sales 87600 89000 92000 94000 97200 99200 99300 101000 104000 106800 108300 112000 1190400
Debtors 1000 200 400 500 600 1000 900 4600
Total cash inflow 190250 205350 227750 249850 273600 297900 318100 339700 364100 391400 417400 449200 3725200
CASH OUTFLOW
Cash purchases 5000 5000 6600 8900 9400 12000 12900 13400 14000 14600 15200 15000 133000
Wages and salaries 64000 64000 64000 64000 64000 64000 63000 64000 64000 64000 64000 64000 768000
Water bill 200 100 100 200 200 300 400 200 300 400 400 600 3400
Electricity bill 400 300 200 300 400 400 500 500 600 700 700 900 5900
Advertising 500 1000 1500
Transport 300 800 100 150 200 100 200 100 400 100 300 2550
Insurance 300 200 300 350 400 300 2500
Repair 400 600 200 400 500 500 800 4850
Payment to creditors 500 400 300 200 500 600 1000 900 1200 1300 300 1400 8600
Total cash outflow 74100 70000 71900 73950 74900 79100 79400 79600 80500 82300 81100 84700 931550
Net cash B/P 116150 135350 155850 175900 198700 218800 238700 260100 283600 309100 336300 364500 2793050
— — -

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 MUTUGEO GROCERY PROJECTED CASH FLOW STATEMENT FOR THE YEAR 2017
DETAILS JAN FEE MARCH APR MAY JUNE JULY AUG SEPT OCT NOV DEC TOTAL

CASH IN FLOW

Opening cash 364500 389200 421000 251700 484100 513550 539850 569150 597250 622350 605250 671150 6270050

Cash sales 112500 114000 116000 118000 12500 122000 124600 126000 128000 130000 123000 136400 1481000

Debtors 1500 2000 200 500 1000 1000 8700

Total cash inflow 478500 505200 537000 571700 604600 635550 664950 695150 72650 752350 78050 808250 7759750

CASH OUTFLOW

Cash purchases 16200 16600 18200 20200 23700 25600 27900 29600 36000 38400 40300 43000 335700

Wages and salaries 66000 66000 66000 66000 66000 66000 66000 66000 66000 66000 66000 66000 792000

Water bill 400 300 200 200 100 200 300 200 300 400 400 500 3500

Electricity bill 600 500 400 300 350 400 400 300 500 300 500 600 5150

Advertising 1200 1500 2700

Transport 400 200 300 400 500 600 700 800 600 900 1000 6400

Insurance 3500 3500

Repair 300 400 800 700 500 700 3400

Payment to creditors 1000 500 300 200 500 700 600 400 300 400 500 600 6000

Total cash outflow 89300 84200 85300 87600 91050 95700 95800 97900 103900 106100 109100 112400 1158350

Net cash B/F 389200 421000 251700 484100 513550 539850 569150 597250 622350 605250 671150 695850 6601400

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5.4 PROFORMA INCOME STATEMENT
MUTUGEO GROCERY
PROFORMA INCOME STATEMENT FOR THE YEAR ENDING 2015

Amount Amount

Sales 805100
Less cost of sales
Opening stock
Add purchases 40000
Less closing stock
1 5200 24800
Gross profit 780300
Less expenses
Salaries and wages 756000
Water bill 4200
Electricity bill 4900
Advertising 1000
Transport 2550
License and insurance 2500
Repair and maintenance 1200
Depreciation of fixed assets
Machinery 1000
Furniture 3000 775350
Total expenses
Net profit before tax 4950
Less provision tax 30% 1485
Net profit after tax 3465

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MUTUGEO GROCERY

PROFORMA INCOME STATEMENT FOR THE YEAR 2016

Amount Amount
sa

Sales 1190400
Less cost of sales
Opening stock 15200
Add purchases 13300
Less closing stock 48600 99600
Gross profit 1090800
Less expenses
Salaries and wages 768000
Water bill 3400
Electricity bill 5900
Transport 4850
Repair and maintenance 3500
Depreciation of fixed assets
Machinery 900
Furniture 2700
Advertising 1500
Insurance and license 3000
Total expenses 793750
Net profit before tax 297050
Less provision tax 30% 89115
Net profit after tax 207935

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MUTUGEO GROCERY
PROFORMA INCOME STATEMENT FOR THE YEAR ENDING 2017

Amount Amount

Sales 1481000
Less cost of sales
Opening stock 48600
Add purchases 335700
Less closing stock 62100 322200

Gross profit 1158800

Less expenses
Salaries and wages 792000
Water bill 3500
Electricity bill 5150
Transport 6400
License and insurance 3500
Repair and maintenance 6000
Depreciation of fixed assets
Machinery 810
Furniture 2430
Advertising 2700
Total expenses 822490
Net profit before tax 336310
Less provision tax 30% 100893
Net profit after tax 235417

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 5.5 PROFORMA BALANCE SHEET

PROFORMA BALANCE SHEET AS AT 31STDEC 2015

Fixed assets As a Jan 2013

Machinery 1 0000 10000 9000

Less accumulated depreciation 1000
Furniture and fittings 30000 30000
Less ace depreciation 3000 27000

Total fixed assets 40000 36600

Current assets
Stock of raw materials 105500 105500
Stock of finished goods 15200 15200
Debtors 756000 756000
Cash at bank 2000 2000
Cash in hand 95600 95600

Total current assets 110900 110900

Less current liabilities 1085200 1085200
Creditors 8600 8600
Bank overdraft 5000 5000 13600
Net working capital 1071600

Total assets 1138800 1107600

Financed by
Owners equity 950000 950000
Add net profit 3465
Loan from equity bank 154135 154135

1107600

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34
 MUTUGEO GROCERY
PROFORMA BALANCE SHEET AS AT 31STDEC 2016

Fixed assets As at Jan 2013

Machinery 9000 9000
Less accumulated depreciation 900 8100
Furniture and fittings 27000 27000
Less ace depreciation 2700 24300

Total fixed assets 36000 32400

Current assets
Stock of raw materials 105500 108900
Stock of finished goods 15200 48600
Stock of work in progress 756000 768000
Debtors 2000 4600
Cash at bank 95600 105000
Cash in hand 110900 120600

Total current assets 1085200 1 1 5700

Creditors 500 3500
Bank overdraft 5000 10000
Total current liabilities 5500 13500
Net working capital 1079700 1142200

Total assets 1 1 26700 1174600

Financed by
Owners equity 950000 900000
Add net profit 207935
Loan from equity bank 154135 66665

1104135 1174600

40

35
 PROFORMA BALANCE SHEET AS
AT 31 ST
DEC 2017

Fixed assets As at Jan 2013

Machinery 8100 8100
Less accumulated depreciation 810 7290
Furniture and fittings 24300
Less ace depreciation 2430 24300 21870
Total fixed assets 32400 29160
Current assets
Stock of raw materials 108900 114300
Stock of finished goods 48600 62100
*

Stock of work in progress 768000 792000

'Debtors 4600 8700
Cash at bank 105000 115300
Cash in hand 120600 142300

Total current assets 115700 1234700

Creditors 3500 6000
Bank overdraft 10000 2500
Total current liabilities 13500 8500
Net working capital 1142200 1226200

Total assets 1201600 1255360

Financed by
Owners equity 900000 960000
Add net profit 235417
Loan from equity bank 66665 59943
1255360

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36
 5.6 BREAKEVEN LEVEL

i. Determine the sales and total variable costs. Calculate the total contribution margin
Item 2015 2016 2017
Salary 756000 768000 792000
Insurance and license 2500 3000 3500
Payment to creditors 8600 3500 6000
767100 774500 801500
Variable costs
Purchases 40000 133000 335700
Transport 2550 4850 6400
Advertising 1000 1500 2700
Electricity 49000 5700 5150
Repair and maintenance 1200 3500 6000
Water 4200 3400 3500

53850 152150 359450

Total contribution margin = Sales - Total variable cost

Year 1

Total contribution margin = Sales - Total variable costs

= 805100-53850

=751250

Year 2

Total contribution margin = Sales - Total variable costs

-=1190400-152150

=1038250
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37
 Year 3

Total contribution margin = Sales - Total variable costs

= 1481000-359450 =1121550

ii. Calculate the contribution margin percentage

Contribution margin% = Contribution margin x 100

Sales

Year 1

= 751250x 100
805100 =93.31%

Year 2

038250x 100
1 190400 =87.22%

Year 3

= 112I550x_100
1481000 =75.53%

i i i Determine the total fixed cost i.e. operating expenses for year

1st year

Fixed cost = Kshs 767100

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38
2nd year
Fixed cost = Kshs 774500

3rd year

Fixed cost = Kshs 801500

iv. Calculate the breakeven level of sales (in shillings)

= Total fixed costs

Contribution margin %

1sl year

=767100
93.1 =8220983817

2nd year

=774500
87.22 =8879844072

3rd

= 801500
75.73 = 10583655245

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39
 5.7 EXPECTED PROFITABILITY RATIOS

Gross profit percentage = Gross profit x 100

Sales

Year 1
= 780300 x 100
805100

=96.92%

Year 2
= 1090800 x 1OO
1190400

=91.63%

Year 3
= 1158800 x100
1481000
= 78.24%

Return on equity

= Net profit after tax x 100

Owner's equity

Year 1

=3465 x 100
950000

= 0.364736842%

Year 2

= 207935x100
900000

=23.10%
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40
Year 3
235417x 100
960000

= 24.52%

iii. Return on investment

= Net profit after tax x 100

Total investment

Year 1
=3465 x 100
1138800

=0.304%

Year 2

20793 5 x-100

1126700

=18.46%

Year 3

=235417 x 100
1201600

=19.50%

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41
 5.8 DESIRED FINANCING

Item Amount
Pre operational cost Working capital Fixed assets Plant 108500 1071600
and machinery Furniture and fitting
Total desired financing 10000 30000 1220100

5.9 PROPOSED CAPITALIZATION

Item Amount
Total investment 1138800
Your own contribution 950000
Funds from borrowing sources 154135

2242935

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