PRESENTED BY: POWER HOUSE ONLINE GARAGE

INDEX NUMBER:
KIPRUTO BRIAN

CENTRE NAME
5341011210

COURSE:
RIFT VALLEY TECHNICAL TRAINING INSTITUTE

COURSE CODE:
DIPLOMA IN AUTOMOTIVE ENGINEERING

PRESENTED TO: 2503

THE KENYA NATIONAL EXAMINATION COUNCIL IN

PARTIAL FULLFILLMENT FOR AN AWARD OF

SUPERVISOR:
DIPLOMA IN AUTOMOTIVE ENGINEERING

EXAMINATION SERIES:
MRS.JOAN KIRWA

NOVEMBER 2021
DECLARATION
I declared that this business plan is my own work and has not been presented to Kenya National
Examination Council for the award of Diploma in Electrical and Electronic Engineering.
STUDENT NAME:

Sign.

Date.

NAME OF SUPERVISOR:

Date.

Sign..
I dedicate this business plan to my dear parents for their loving kindness and working tirelessly to pay my fees for
whole course without failures. May God bless them in mighty way.

ACKNOWLEDGEMENT
I feel most indebted to express my gratitude to all those individuals who helped me in one way or another in
preparation of this project.

I would however like to pass special thanks to the following people to their tireless effort and whose contribution
made the compiling of this project possible.

To my parents who sponsored me to pursue this course and my brother and sister, very grateful for the moral
financial they gave me and their loving kindness. To my teacher madam Ruth who fully advised and supervised
me for completion of this project. To my God for giving grace to this work.
Table of Contents
DECLARATION.
DEDICATION
ACKNOWLEDGEMENT.
CHAPTER ONE.
1.0 BUSINESS DESCRIPTION.
1.1 BUSINESS NAME.
1.2 BUSINESS PHYSICAL LOCATION. 1
1.3 FORM OF OWNERSHIP. 2
1.4 TYPE OF BUSINESS 3
1.5 PRODUCTS/SERVICES.
1.6 JUSTIFICATION OF OPPORTUNITY.
1.7 INDUSTRY.
1.8 BUSINESS GOALS
1.8.1 SHORT TERM GOALS
1.8.2 LONG TERM GOALS
1.9.1 ENTRY STRATEGY
 2.0 MARKETING PLAN 5
2.1 POTENTIAL CUSTOMERS
2.2 MARKET SHARE 6
2.3 COMPETITION 6
2.3.2 ANALYSIS TABLE. 7
2.4.1 TRADE PROMOTION.
2.4.2 ADVERTISEMENT

2.6 SALES TACTICS ·99

2.7 DISTRIBUTION STRATEGY
CHAPTER THREE.
3.0 ORGANIZATION PLAN/MANAGEMENT 10
3.1 KEY MANAGEMENT PERSONNEL .10
3.3ECRUITMENT,TRAINING AND PROMOTION
3.4 REMUNERATION AND INCENTIVES 15
3.5 LICENSES,PERMITS AND BY-LAWS.
3.6 SUPPORT SERVICE.
CHAPTER FOUR.
4.0 PRODUCTION/OPERATION PLAN .17
4.1 PRODUCTION FACILITIES AND CAPACITY
4.2 PRODUCTION STRATEGY 19
4.4 REGULATIONS AFFECTING PRODUCTION

CHAPTER FIVE. ...........235.0

FINANCIAL PLAN ...........23

5.2 Estimation of working Capital ...................23

5.2.1 GROWTH AND EXPANSION
5.2.2 TABLE OF ANTICIPATED FUNDING ...23
5.2.3 DEAL ON OFFER (D.O.O). 23
5.3 Proforma cash flow projected for 12 months 25
PROJECTED CASH FLOW FOR THE YEAR 2 27
5.4 PFORMA INCOME STATEMENT CALCULATION FOR 1ST YEAR 28
5.5 PROFORMA BALANCE SHEET PROJECTED FOR THREE YEARS 29
5.6 CLACULATION OF BREAK EVEN. 30
5.7 CALCULATION OF RATIOS
5.8 PROPSED CAPITALIZATION 32
CHAPTER ONE
1.0 BUSINESS DESCRIPTION
A smart toy is an interactive toy which effectively has its own intelligence by virtue of on-board electronics. These
enable it to learn, behave according to preset patterns, and alter its actions depending upon environmental stimuli
and user input. Typically, it can adjust to the abilities of the player. A modern smart toy has electronics consisting
of one or more microprocessors or microcontrollers,volatile and/or non-volatile memory,storage devices, and
various forms of input-output devices. It may be networked together with other smart toys or a personal computer
in order to enhance its play value or educational features.Generally,the smart toy may be controlled by software
which is embedded in firmware or else loaded from an input device such as a USB flash drive, Memory Stick or
CD-ROM.Smart toys frequently have extensive multimedia capabilities,and these can be utilized to produce a
realistic, animated, simulated personality for the toy. Some commercial examples of smart toys are Amazing
Amanda,Furby and i Dog.
1.1 BUSINESS NAME
Barno electrical toy enterprise is the preferable name for the proposed business. Eagle's is a term which is very
unique or original name. Thus Eagle's is a concrete ward that can attract many people.It act as an advertisement.

1.2 BUSINESS PHYSICAL LOCATION

The business will be located at Kambi Mtu Market centre which is in Bondeni area. North-West form Nakuru town
and 10 KM way. This place is monthly preferred because it is along the road enhancing easy transportation of
goods and services. It is also at a market place hence it will attract many people as customers. There is full
security as there is a police post.

The business address is:-

BARNO ELECTRICAL TOY ENTERPRISE

P.O BOX 18
NAKURU
E-mail barno@yahoo,co.ke

BUSINESS LOCATION
1.3 FORM OF OWNERSHIP
This business will be a sole proprietorship kind of business as it will be runned by one person. This will be so
because of the following reasons:-
(a) He will be the boss of his own thus run the business without any interruption
(b)Easy to make decisions

(c) He will enjoy all the profits as he I will be the chief controller of the business.

1.4 TYPE OF BUSINESS

This business is to engage much in the following

(a)Selling of electrical materials like cables, switches insulators, lighting systems etc,electrical tools like phase
resters, electrical tool boxes and any other electrical related tools or equipment.

(b) Repairing of faulty electrical gadgets in different capacitors.

(c)Motor winding, rewinding, dismantling, repair and sell the rewinded motors.

Leasing out services like lighting system, music stereo type. Microphone etc in special occasions like
funeral,political meetings,weddings etc.

1.5 PRODUCTS/ SERVICES

The products produced will be of high qualities, convenient and cheap for customers to afford. Also the services
will be affordable to all people sufficient smart toys. All these will be achieved by having skillful personnel and
having a large stock to begin with. The products and services will be readily available because of its location in
situated in a market centre along the road.
Action figures.
Animals.
Cars and radio controlled.
Construction toys.
Creative toys.
Dolls.
Educational toys.
Electronic toys

1.6 JUSTIFICATION OF OPPORTUNITY

The assurance that the success of this business will be profound because of the following,

(a)Availability of knowledge and skills required to run any business which was got through three years in
college,also from the experience got during attachment andlastly the entrepreneurial skills.

(b) The business will be situated in an area reachable many people enhancing the business to grow. Also
transportation of materials and workers will be easy as the business will be near the road.

(c)Research will be done and more consultations on how to grow in business.

1.7 INDUSTRY
This business will be both a commercial and service industry as it will base on purchasing materials,tools equipment etc to

sell them to customers as well as doing services like repairing, rewarding of motors etc. This industry is suitable because

transportation of these materials will be easy due to the access of road, there is market as the business will be located in an

area where there is less competition, availability of skilled personnel and tools / equipments required hence quality products

and services offered

1.8 BUSINESS GOALS
In this changing world, the business will be very resourceful to many people as it will have the following goals.

1.8.1 SHORT TERM GOALS

(a)The business will create job opportunity to self and to others

(b) To establish a very successful business which can win customers interest at large within a very short period of
time possible.

(c) To provide the best and quality products and services.

(d) To employ qualified personnel to assist in running the business thus efficient production of work.

1.8.2 LONG TERM GOALS

(a)To maximize profit

(b) To expand into a bigger business dealing with large quantity of stock hence increasing the capacity of sales
and services and workers.

(c)To open other branches that is 2 -3 branches elsewhere so as to reach many people with our services and
products hence grow bigger in business.

(d) To venture into other small business beside this one e.g. opening a cyber café,video show etc.

(e)To make sure all the personnel involved in the business get knowledge and skills with time i.e.as the world
changes,technology changes also so they need to be updated.
1.9.1 ENTRY STRATEGY
The business will employ many tactics and ways of penetrating the market e.g.

(a) By offering low prices to some products and services

(b) Offering promotions like giving discounts and incentives

(c) Making more advertisement through posters radio,TVs,Road shows etc.

1.9.2 GROWTH STRATEGY

For the business to grow into a large enterprise, the following is required
(a)Employing dedicated and qualified personnel who can manage the business well
(b) Creating more space for expansion of the business e.g. buying land or plots.
(c)Buying a vehicle which can be used in transporting materials hence reducing cost of transportation and also
time wastage.
(d) Training the untrained staff so as to improve their production hence effective work
(e)Steady carrying out of advertisement and frequent promotions
(f) Buying electronics devices like computer or laptop to help in storing information and other necessary work.
(g) Motivating all the workers.

CHAPTER TWO
2.0 MARKETING PLAN
Barno electrical toy enterprise has many strategic plans to achieve its objectives and to reach the market
demands. These are like expanding its operation and space and also employing skillful personnel to help in
management. The business will be located in a central place which can be reached by many thus capturing many
customers. The business will do throughout advertisement of its services and products, offer promotions, discount
etc to win the interest of people. The
pricing of items and services will be relatively cheaper as compared to other competitors.These
products and services will always be readily available

2.1 POTENTIAL CUSTOMERS

The business targets to win both domestic and commercial customers.The domestic customers will be general
public especially people around Bondeni market who are most targeted as they will buy as well bring their items
for service. The commercial customers will be the middlemen and hawkers who will buy goods from the business
and sell them to the market.

2.2 MARKET SHARE

Through research done thoroughly on the market in Bondeni area, the business is expected to reach and serve
2,800two thousand eight hundred customers who are potential.

There will be competition from other businesses like Bush Electro Shop, Obash workshop (electrons) Buya
electrons and others
 NAME OF BUINESS PERCENTAGE SHARE TOTAL NUMBER OF
(%) CUSTOMERS

Bush electro shop 23 650

Obash workshop
21 600
Buya electronics
19 520
Barno electrical toy
enterprise 26 730
Others 11 300

Totals 100 2,800

2.3 COMPETITION
Barno electrical toy enterprise will face stiff competition from other business like bush,obash, buya and others who
were established 4 years ago. The buiness will base on the competitors weakness to conguer the buiness scene.
Despite these competition, the enterprise will have measures to cope and analyze competition i.e.

(a) Developing Excellency in product and services provision

(b) Increase the size of the buiness by expanding its operations and shop flour.
(c) Persuading more customers through promotions

(d) Improving the quality of goods and services each day

(e) Choosing the right and low cost technology with high volume.

SWOT ANALYSIS TABLE

BUSINESS NAME STRENGTH WEAKNESS

BUSH ELECTRO SHOP · Its centrally located ·Poor relation
Long term experience High prices

OBASH WORKSHOP Readily available · No promotion offered

personnel
Quicker and better
services
 BUYA ELECTRONICS Many employees Lazy personnel who are
not always available

Low prices Little capital

EAGLE'S
Quality goods and
ELECTRONICSENTERPRISES services

Technical expertise
Promotion

Famous in the market

OTHERS Famous in the market Few workers

2.3.2 ANALYSIS TABLE

BUSINESS Product Pricing Promotion Personnel Location Size Total
NAME service

Bush 2 3 2 4 5 2 18

ElectroSho
p
Obash 3 2 1 3 2 1 12
Workshop

Buya 2 2 1 3 4 3 15
Electronics

4 5 4 5 3 3 24
EAGLE'SElectronicsEnterpri
se

Others 1 1 2 3 3 2 12

Total 6 6 6 6 6 6 36

2.4.1 TRADE PROMOTION

This will be done by the business through

(a) Offering discounts on goods and services bought from the buiness

(b) Employing good character and well hovered employees who can attend to all customers without favour or fear.
(c) Purchasing enough stock of materials or items required to make sure that customers don't miss anything

(d) Offering free samples on goods bought hence attracting more people

(e) Marketing the services and products through business exhibitions and shows.

2.4.2 ADVERTISEMENT
The enterprise will employ the following advertisement methods.

(a) Through posters where all the activities and location of the business will be written on the posters and spread
all over the Bondeni market

(b) Through local F.M radio e.g. Murembe F.M,West F.M or Radio Mabo who can pass information in local
language to many people.

(c) Use of sign post to show where EAGLE'S ENTERPRISE can be found.

(d) Through local newspaper like Kambi Faily Asubuhi Nisikize etc. which are locally written and do reach many
people around.
(e) Through direct email to the middlemen who can be potential customers.

(f) All these methods will ensure that customers are, well informed about the direction,location operating time and
kind of services provided.

2.5 PRICING STRATEGY

The business will adopt different pricing strategies like:-

(a) Competitive pricing where competitors prices will be analyzed and compared then come up with a suitable
price which is relatively cheap for the products and services.

(b) Cost plus where prices will be determined through the cost of materials used or involved

(c) Psychological pricing where goods and services are blended to capture the customers psychology

(d) Discriminating pricing where the enterprise will be selling a commodity at two different in cost e.g.time pricing
where by during the day charges can be different from that of evenings.

2.6 SALES TACTICS

There are many sale tactics that business is going to use e.g.

(a) Opening its doors for long hours make sure that customers get what they want at any time.

(b) Having enough stock and offering the best quality products and services

(c) Adopting an attractive way of pricing where goods or services wont be priced so high hence affordable to
everyone

(d) Advertise frequently goods and services of the business through the radio,posters,newspaper etc.
(e) Employing very polite, humble, friendly,net and educated workers who will attend to customers and any other
persons correctly.

2.7 DISTRIBUTION STRATEGY

The enterprise will employ both direct and indirect channels of distibuting its goods and services to customers.Goods and
services will be sold to customers directly from he shop floor or sensing experts to them to services or repair their items. Also
goods may reach the customers indirectly from the business through agents, distributions or hawkers.

CHAPTER THREE
3.0 ORGANIZATION PLAN/ MANAGEMENT
3.1 KEY MANAGEMENT PERSONNEL

Organization structure

(a)Manager

Qualifications

Should have a diploma in Electrical Engineering

Should be computer literate 10

Should have 30 and above years

Should have a five years experience in the field of electrical

Should be fluent in English and Kiswahili

Duties and responsibilities

He will be the custodian of the business i.e the owner and head of the business.

Supervise business transactions and operations

Carrying out short term and long term planning of the business

Recruit the required personnel or staff

·Paying salaries to employees

SUPERVISOR

QUALIFICATION

· Should have a diploma in Electrical Engineering Should have enough experience in electrical field
Should be above 25 years

Duties and responsibilities

To supervise all the operations of the business

Analyze and report sales performance

Generate new ideas on how to run the business

Serving customers

Takes over responsibilities in absence of the manager. 3.2 OTHER PERSONNEL,DUTIES AND NUMBER

SECRETARY

The proposed business will have one secretary

Qualification

Should be at least a stage II module and above with basis knowledge ON BOOK keeping and office practices

Should also be computer literate

DUTIES AND RESPONSIBILITIES

Responsible for office records and book keeping

To handle issues relating to customersi.e.acting as receptionist

Receive and make calls on behalf of the business organization.

TECHNICIAN(2)

The business will employ two technicians

QUALIFICATION
Should be a certificate holder or above in electrical engineering

Should be computer literate

Duties and responsibilities

Look for contracts of work

Design and cooperate all electrical projects.

ARTISANS

The proposed enterprise will have three Artisans

Qualifications

They should have skills atleast in determining any faults, knowledge on electrical gadgets etc.

Should be able to communicate either in Kiswahili or English

Duties and Responsibilities

Should be able to detect any fault in an equipment and service or diagnose

Carrying out duties delicated to them by the seniors.

Security officer

The business will have one security officer

Qualification

Should be a form four leaver and above

Should have a 5 years experience in security forces

Duties and Responsibilities

·Keeping Vigilant security during the night and day time

3.3 RECRUITMENT,TRAINING AND PROMOTION RECRUITMENT

·The business will make advertisement of its job opportunities through local newspaper,local F.M radio like West
F.M etc.

There will be interviews for the recruits done by the manager questions will be asked concerning the job
ascertained. Individual's dignity honour will be considered so as reach to the satisfaction of the customers.

Employees will have at least a week to adopt and be familiarized with the business.

Training

The new employees will be trained according to their qualification s to improve their efficiency and knowledge

They will be taught safety measures,their roles etc. in the business.

They will also be attending seminars or workshop

PROMOTION

The employees will be promoted according to their performance and ability working

The following will be considered when promoting employees.

Their level of performance

Training and qualification of each individual

Punctuality and accountability

Good public relation

Loyalty to the enterprise

Trust worthiness

Diligence
 Creativity

3.4 REMUNERATION AND INCENTIVES

Remuneration will be done so that salaries set for employees c an be realistic according to their experience and
level of education

Employee's earnings will include salaries and allowances monthly.

INCENTIVES

(i) Financial incentives

Employees will be paid money according to their productivity and hours worked for.Also they can earn overtime,
bonus and interests

(ii)Non-Financial incentives

There will be safety at work place, health facilities, sick pays,transportation to and from work, free lunch,free tea,
safety clottingetc.

REMUNERATION AND INCENTIVES TABLE

JOB TITLE NUMBE SALARIES MEDICA OTHER TOTAL

R OF KSHS P.M L SPECIFY (KSHS)
PERSON ALLOWA
NEL NCE
The business will require legal procedures for it to start its operations

These will include clearances, permissions, licenses etc from the government ministries and other agencies.Some
of these legal documents are:-

(i) Trading license from eh Ministry of Trade which is free of charge

(ii) Certificate of ownership from the register of ownership (chargeable)

(iii) Labour laws governing the employees Insurance whereby employees will be insured by the business.

(iv) Public health Act which deals with sanitation drainage, ventilation, hygiene.

3.6 SUPPORT SERVICE

The most vital services include:-

(i) Banking services where the business will open an account with Equity Bank in Nakuru Branch
(ii)Auditing books of account; auditors will be hired and be paid daily upon delivering an auditing report Medical
services which will be provided by the local dispensary at Bondeni market.

Water will be provided by the pipe water project from Nandi Hills and also from bore holes.

Security will be provided by the officer in charge and also the business will be located near a police post hence
there will be security.

Power will be supplied from K.P.L.C and also there will be a generator.

Postal services will be provided

Legal service which will be provided by

SINJILA VALECHE AND ADVOCATE COMPANY

P.O BOX 721

NAKURU

CHAPTER FOUR

4.0 PRODUCTION/OPERATION PLAN

4.1 PRODUCTION FACILITIES AND CAPACITY

Electrical Poles Distribution Company shall be offering a wide range of stock and services to customers.To cope

up with the inherent situation the owner intends to own some of the facilities that will be required.
FACILITY NO UNIT TOTAL CONDITION SOURCE WHEN
REQUIRED

Premises 430000 430000 Old family At start

Machinery
 Action figures 2 1500 3000 New Purchase At start

Computer 1 64500 64500 New Purchase At start

calculator 3 500 1500 New Purchase At start

TOOLS

Hammer 2 250 500 New Purchase At start

Screw driver 3 100 300 New Purchase At start

Pliers 2 200 400 New Purchase At start

Wire cutter 1 400 400 New Purchase At start

Chisel/mullet 1 350 350 New Purchase At start

Tape measure 2 100 200 New Purchase At start

EQUIPMENTS

Chairs 3 400 1200 New Purchase At start

Tables 2 700 1400 New Purchase At start

Ohmmeter 1 1500 1500 New Purchase At start

Ammeter 1 950 950 New Purchase At start

Phase tester 2 125 250 New Purchase At start

C.R.O 1 1950 1950 New Purchase At start

Total 73525 78400

TOTAL LABOUR COST PER MONTH

This is to include the salary for all the workers of Electrical Poles Distribution Company.
WORKERS SALARY

MANAGER 11000

ASSISTANT MANAGER 9000

ACCOUNTS CLERK 8000

FOREMEN 9000

WATCHMAN 1500

TECHNICIAN 5500

SALESMAN 4000

TOTAL 40000

PRODUCTION OVERHEAD AND ITS AMOUNTS COSTS

 PARTICULARS COST(KSH)

Repairs and maintenance 3500

Insurance 15000

Water bill 1000

Advertisement 2000

Postal rent 300

Electricity bill 5000

Rent

Transport 6500

Miscellaneous 3500

TOTAL 36800

All the facilities will be on permanent basis because the business will buy its own facilities.All
facilities will be required at stat and some will be added when the business expands.
The premise pf the business is a family owned building therefore it needs some improvements to suit the
organization structure of the firm.
4.2 PRODUCTION STRATEGY
i) Production design
the entrepreneur will ensure that all the services and products needed more frequently by the customers are
always available so as top retain customers. This will ensure that once a customer has entered the salon services
must be offered immediately and perfectly.
ii) Labour utilization
Electrical Poles Distribution Company will try to balance the work with employees so as to ensure that employees
are not overworked and if they work overtime they are paid immediately per hour.
The business owner will employ qualified workers to ensure they have productive to the kind of work will increase
the profit and thus all the customer willbe retained have to good work or source done to them.
iii)Production control procedures
in order to maintain and encourage customers to come more frequently and reduce unnecessary costs,the
proprietor will ensure that all the employees are at work all given hours. The materials to be used are availed on
time.
iv) Inventory stock control
All the goods will be bought from potential suppliers, who are willing to supply and are capable to supply, so the
delays can be avoided. The records of stock in bound and out bound will be kept and this will assist in the growth
of the business.

5.3 PRODUCTION PROCESS

Since specialties of TAWFIQ include selling and repairs as major activities,the following process will be employed
regarding the selling of goods.
i) Placing an order of goods from the suppliers
The clerk and the foreman will be required to write an order of goods to the supplier.The

manager and the clerk sign the cheques to pay for the ordered goods.
ii)Transportation of goods
After the payment is made the suppliers signs release documents to warranty the delivery of goods from the

purchasing point to the business premise.

Transportation facilities are offered by hired vehicle from BIZA contractors.

iii)Reception of goods.
The goods will then he received in the business premise.The foreman technician,clerk and the transporters are
supposed to sign a form certifying the reception of goods. The goods will the be kept in store after which will only
be removed when the stock in the stock goes down.The release of goods from the store is satisfied by signing
release documents.
iv) Selling
The goods are then stocked in the shop, which will then be sold to customers at the counter by the salesman.

Reception of Customers Equipment and provision of services will be done through a formal method.The owner is

to employ the following procedure in order to provide the desired services efficiently

Customer arrival reception faulty diagnosis/Inspection

costing_comment of repair payment collection

ELECTRONICS
As the customers arrives they are recited into the workshop at the reception fault diagnosis/inspection is done to the equipment by

technicians under supervision of the foreman. After the fault has been established the cost isstated if the customers agree to ay the stated

cost then customers pays for the cost after which he/she collected the repaired equipment.

ELECTRICALS
The customers are received into the workshop. The customer requests for the electrical equipment in the workshop or

allocate the electrical installation work to be done. The prices are agreed upon and the date and time when the services is to
be offered.

4.4 REGULATIONS AFFECTING PRODUCTION

Licence Act (cap 497)
Licenses are always issued by government to any business operator to allow the business to operate legally.
TAWFIQ ELECTRONIC& ELECTRICAL is to follow this order and obtain it from Eldoret municipal council.

Insurance Act (cap 14050)

This is a law which protects the business against losses that the business may incur from certain risks e.g
fire,theft,accidents etc.
The business is to get insurance cover from AMACCO insurance company.
Trade mark Act (cap 286)
This act is enforce to show that the goods are from a specific manufactures incase of abnormality of the goods the
pay victor will be able to sue the suppliers incase the supplier denies the goods.
So the entrepreneur will make sure that all the products have trademarks.
Public Health Act (cap 242)
The proprietor is to obtain health demand from the municipal council which complies with health regulations of the
business as the act states.
CHAPTER FIVE
5.0 FINANCIAL PLAN
5.1 PRE-OPERATIONAL COST
PARTICULARS AMOUNT (KSHS)
Fixed assets 307,400
Registration & license 15,000
Initial stock 121,700
Recruitment of employees 16,700
Advertisement 9,000
Initial insurance 10,000
Research 12,400
Contingency expenses 11,840
Total Amount (Kshs) 505,040
5.2 Estimation of working Capital
PARTICULARS AMOUNT (KSHS)

Salaries and wages 994,600

Transport 25,500
Repair and maintenance 12,600
Telephone and postage 4,300
Advertisement 9,000
Water 12,000
Electricity 13,500
Stationery 2,000
Insurance 10,000
Annual Expenses 6,0000
Total 1,089,500

20
5.2.1 GROWTH AND EXPANSION
PARTICULARS AMOUNT (KSHS)
Additional premises 120,000
Additional machinery 100,000
Additional labour 150,000
Additional stock 120,000
More advertisement 7,000
Further research 8,000
Total 505,000
5.2.2 TABLE OF ANTICIPATED FUNDING
STAGES TOTAL EQUITY LOAN SALES PROFIT
Pre-operational cost 505,040 400,000 150,000 - -
Operational cost 1,089,500 1089,500
Growth and expansion 505,000 250,000 900
Total amount 2,099,540 650,000 150,000 1089500 615,000
5.2.3 DEAL ON OFFER (D.O.O)
D.O.O Borrowed Resources x 100%
Total resources
Borrowed resources=loan=150,000
s=loan=150,000
irces=loan+Eq
Total resources = loan +Equity +pupil
150,000+650,000+615,000=1,415,000
00+615,000=1,415,0
1,415,000
D.O.O.=150,000x1000=1
D.O.O.=150.000x1000=10.1%
1415,000
 5.3 Proforma cash flow projected for 12 months
MAR APRIL
PARTICULARS JAN FEB MAR APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC TOTAL
Inflow
Balance b/f 87,150 87380 94580 96270 81720 101630 95030 88200 141745 128745 128950 144910 1281510
Sales 80000 89500 94000 100000 120000 110000 120000 125000 108000 115000 13000 150000 1341500
Debtors - - - - - - 20000 22000 - 28000 - 70000
Total inflow 167150 176880 193580 196270 201720 211630 215030 233200 271745 243945 286950 294910 2639010
OUT FLOW
Salaries & wages 90700 90700 90700 90700 90700 90700 90700 90700 90700 90700 90700 90700 1088400
Purchases 20000 - - 35000 24000 40000 50000 - 64000 30000 65000 60000 388000
Advertisement 2000 900 1000 - - - 1000 1100 1500 - - 1000 8500
Electricity 800 1000 1050 950 1200 1050 1150 1075 1250 1125 1350 1400 13500
Water 1000 950 900 900 1050 800 1050 900 1100 1000 1050 1300 12000
Insurance - - - - - - - - - - - 10000 10000
Creditors - - - - - - - 15000 10000 25000
Loan payment 12500 12500 12500 12500 12500 12500 12500 12500 12500 12500 12500 12500 150000
Interest on loan 2500 2500 2500 2500 2500 2500 2500 2500 2500 2500 2500 2500 30000
Repair & 400 1200 900 5000 800 800 740 600 400 800 420 440 12500
maintenance
Transport 4500 2000 1900 1500 1700 2650 1500 1350 3000 1200 2400 1800 25500
Telephone 600 530 610 500 490 560 620 500 490 400 400 300 6000
Postage
Stationery 300 360 150 250 150 100 120 130 110 100 110 120 2000
General expenses 520 530 600 500 550 600 480 450 300 420 560 490 6000
Drawing 500 680 950 800 1000 890 1200 1200 1500 1800 1600 1850 12790
Total outflow 79770 77300 97310 114550 1000090 1166000 126830 91455 142800 114995 1420040 147850 1351590
A/C cash 87380 99580 96270 81720 101630 95030 88200 141745 128915 128950 144910 147060 1341420
A-B
Particulars JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL
Cash flow
Beginning cash 472793 494093 539701 590718 644348 701676 760018 819668 894627 969194 1050469 1133053 9070533
Sales 198000 204000 210000 216000 222000 228000 234000 240000 246000 252000 258000 264000 2772000
Debtors 6000 5000 6500 17500
Total cash inflow 670793 69803 755701 806718 929676 994018 1064668 1140627 1227694 1308469 1397053 11859853
Cash outflow
Purchases 66000 68000 70000 72000 74000 76000 78000 80000 82000 84000 86000 88000 9244000
Salaries 65000 65000 65000 65000 65000 65000 65000 65000 65000 65000 65000 65000 780000
Rent 7000 7000 7000 7000 7000 7000 7000 7000 7000 7000 7000 7000 84000
License & permits 6000 6000
Electricity 1500 1200 1400 1500 1100 1500 1800 1400 1200 1500 1200 1400 16700
Loan repayment 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 120000

25
Interest on loan 2500 2292 2083 1875 1667 1458 1250 1041 833 625 416 208 16248
Transport 1500 1200 1300 1200 1400 1600 1500 1400 1500 1400 1500 1400 16700
Creditors 4000 5000 4000 13000
Advertisement 3000 3000 3000 9000
Insurance 10000 10000
Telephone 1200 1200 1200 1300 1000 1100 1300 1200 1400 1200 1300 1300 14700
Miscellaneous 3000 2500 300 2500 3500 3000 3500 3000 2500 2500 3000 3500 13700
Total cash outflow 176500 158392 164983 162375 164667 169658 174350 170041 171433 177224 175416 180608 2045848
NET 494093 539701 590718 644343 701676 760018 819668 894627 969194 1050469 1133053 1216445 9814005

PROJECTED CASH FLOW FOR THE YEAR 2

Particulars JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL
Cash flow
1216445 1291545 1384945 1493945 1600545 1702748 1811744 1940645 2063745 2181343 2318645 2453845 21465840
Beginning cash
5
Sales 270000 276000 282000 288000 294000 300000 306000 312000 318000 324000 330000 336000 3636000
Debtors 6000 5000 6000 17000

Total cash inflow 1486445 1567545 1672945 1718945 1894545 2002745 2128445 2252645 2380745 2511345 2648645 2789845 25118840

Cash outflow

Purchases 90000 92000 94000 96000 98000 100000 102000 104000 106000 108000 110000 112000 1212000
Salaries 70000 70000 70000 70000 70000 70000 70000 70000 70000 70000 70000 70000 840000
Rent 8000 8000 8000 8000 8000 8000 8000 8000 8000 8000 8000 8000 96000
License & permits 6500 6500

Loan repayment

Interest on loan
Transport 1200 1100 1300 1200 1000 1400 1200 1300 1400 1200 1300 1300 14900
Creditors 5000 4000 20000

Advertisement 3000 3000 3000 2500 11500

Insurance 10000 10000

Telephone 1300 1200 1500 1400 1300 1500 1600 1400 1200 1300 1400 1500 16600

Miscellaneous 3500 4000 3000 3500 4000 3000 3500 3000 3500 3000 3000 2500 39500

Total cash outflow 194900 182600 179000 181400 191800 185300 185300 187800 188900 192700 194800 203000 2282600

NET 1291545 1384945 1493945 1600545 1702745 1817445 1940645 2318645 2453845 2586845 22836240

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5.4 PFORMA INCOME STATEMENT CALCULATION FOR 1ST YEAR
Sales = cash sales x credit sales(10% of cash sales)
1341500+10%x1341500
Ksh 1475,0650
Purchase=Cash purchase +credit purchase
Credit purchase=10%x 388000
= Ksh 426,800
Cost of goods available for sale=Stock+additional purchases
150,500+426,800
Ksh 577,300
Closing Stock = total goods available for sale
No of months(12)
577,300
12
=Ksh 48,108

1,475,650-529,192
Kshs 946 458
Assist depreciate by 15%
Depreciation =15% x 535160=Ksh 80274
SECOND YEAR CLACULATION
Since the business anticipates a growth increase in sales by 270% which the expenses grows by
12% for second and third year
Sales=1475,650+27% 1475650
Kshs 1874076
Purchase=426,800x1.12
Kshs 535,378
Opening stock = 2nd year closing stock =Ksh 43844
Cost of the goods available for sales=stock+purchases
es=stock+
=43844+535378
Ksh 579 222
Closing stock=Ksh 48209
Gross profit=Sales-cost of sales
2380,077-530953
= Kshs 1,849,124
PROFORMA INCOME STATEMENT
PARTICULARS YEAR1 YEAR 2 YEAR3
Sales 1,475,650 1874076 2,380,077
Opening stock 150,500 48,108 43844
Add purchase 426,800 478,016 535,378
Goods available 577,300 526,124 579,222
Lessclosing stock 48,108 43844,482,2801,391,79 48,269,5309531,849,12
Gross Profit 529,192946,458 6 4
Total Gross profit 946,458 1,391,796 1,849,124
Exposés
Salaries & Wages 649,800 784,200 784,200
Transport 25,500 28,560 31,987
Telephone & Postage 6,000 6720 7,526
Water 12,000 123440 15,053

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 Electricity 13,500 15,120 16,934
Interest on loans 30,000 - -
Insurance 10,000 11,200 12,544
Advertisement 8,500 9,500 14,662
Stationery 2,000 2,240 2,509
Repair & maintain ace 12,500 14,000 15,680
General Expenses 6,000 6,710 7,526
Drawing 12,790 14,325 16,044
Depreciation 80,274 868,864 80,274,986,314 80,274 1000939

5.5 PROFORMA BALANCE SHEET PROJECTED FOR THREE YEARS

PARTICULAR YEAR 1 YEAR 2 YEAR 3
S
COST DEP BKV COST DEP BKV COST DEP BKV
Fixed Assets
Premises 430,000 64500 365500 430000 129000 301000 430000 193500 236500
Machinery 91,800 13770 78030 91800 27540 64260 91800 41310 50490
Tools 2,860 429 2431 2860 858 2002 2860 1287 1573
Equipments 10500 1575 8925 10500 3150 7350 10500 4725 5775
TOTAL 536760 80274 454886 535,160 160,598 374612 535160 240822 294338
CURRENT
ASSETS
Stock 48108 43844 48269
Debtors 264668 523530 902341
Bank 100000 150000 20000
Cash in hand 47060 36766 754140 37193 1187803
Less

current

liabilities
Creditors 29918 37600 50000
Working capital 429918 716540 1237803
Capital 884804 109152 1532141
Employment

Financed by capital

Equity 700000 700000 700000

Net profit 77594 777594 405477 1105477 848185 1548185
Let drawing 12790 14325 16044
764804 1091152 153214
Liabilities
1

Loans 150000
Less repayment 30000 120000
884804 153214
1091152
1

5.6 CLACULATION OF BREAK EVEN

Break even point is a point where the revenue generated equals the cost incurred. It may be regarded as the
value of sales which neither makes a profit or loss.
Fixed costs
Fixed costs are those which do not change with the inverse in sales volume or production Breakeven point for
1st year
FIXED COSTS AMOUNT

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 Insurance 10,000
Advertisement 8500
Salaries & Wages 994,600
Interest on loans 30,000
Total 1,043,100

Variable cost
Those cost which do not change in production or sales
Variable COSTS AMOUNT
Transport 25500
Telephone and postage 6000
Water 12000
Electricity 13500
Stationery 2000
Repair and maintenance 12500
General Expenses 6000
Drawing 12790
Depreciation 80274
Total 170504

BEP=Fixed cost
Contribution margin
Contribution margin=sales -variable cost
1475,650-170504
=1305086
Contribution margin %= contribution margin x 100
Sales
BE P=fixed Cost
Contribution margin
=698,300
88.4%
=789.562
BREAK EVEN POINT FOR 2ND YEAR

2ND
FIXED COSTS AMOUNT
Salaries & wages 784,200
Insurance 11,20
Advertisement 9520
Total 804,920

VARIABLE COST AMOUNT

Transport 28,560
Telephone and postage 6720
Water 13440
Electricity 15120
Stationery 2240
Repair and maintenance 14000
General expense 6720

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 Drawing 14325
Depreciation 80274
TOTAL 181399

B.E.D=Fixed cost x sales

Sales-variable cost
804920x 1874076
1.874076-181.399
891,181
Break even Point for 3rd year
VIRIABLE COSTS AMOUNT
Transport 25,500
Telephone & postage 6000
Water 12000
Electricity 13500
Stationery 2000
Repair & maintenance 12500
Current expense 6000
Drawings 12790
Depreciation 80274
Total 170564

B.E.P=Fixed Cost x sales

Sales-Variable cost
=807406x 2380077
=2,380077-193,523
=878870
5.7 CALCULATION OF RATIOS

Sales
YEAR ONE YEAR TWO YEAR THREE
G.P.M 946458X100 G.P.M=1391 796 X100
.P.M=1391 796 X100 GPM=1849124 X100
1475650 2380077
1874076
=64.14% =74.77% =77.69%

(II) Net Profit margin (NPM) = net profit x100 n(NPM)=net p

Sales
YEAR ONE YEAR TWO YEAR THREE
77594x100 465,477x100 848185 X100
1,475,650 1874076 2380077
=5.26% =21.64% 35.64%

(iii) Liquidity Radio (L.R) = current Assets x100

Current liabilities
YEAR ONE YEAR TWO YEAR THREE
= 459,836x100 754,140x100 1,187 803x100
=29918 37600 50000
=15:1 =20:1 =24:1

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 irn over=Cost Sales=Avera (iv) Stock turn over=Cost Sales=Average stock deposit
Where average stock=opening stock + closing stock
2
YEAR ONE YEAR TWO YEAR THREE
529192x100 482280x100 530953 x100
99304 45976 46057
=5.33 =10.49 =11.53

5.8 PROPSED CAPITALIZATION

This is the net capital owned by the business. It involves contribution by the owner and borrowed capital.
SOURCES OF CAPITAL AMOUNT (KSHS) AMOUNT (KSH)
Personal saving capital 270,000
Borrowed capital
Bank loan 150,000
Family 430,000 580,000
850,000

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