BUSINESS PLAN

FOR

THE ROYALINK INTERIOR DESIGNS

PRESENTED BY : AGERO O. CALMAS

INDEX NUMBER : 1161020082

INSTITUTE : GODOMA TECHNICAL TRAINING INSTITUTE

PRESENTED TO : THE KENYA NATIONAL

EXAMINATION COUNCIL IN PARTIAL
FULFILLEMENT FOR THE AWARD OF DIPLOMA IN
BUILDING TECHNOLOGY

SUPERVISED BY :

SERIES : MARCH 2023

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 DECLARATION

I hereby declare that this project is my original work and has not been presented to any Institution of
the higher learning for the award of the diploma.

AGERO O. CALMAS

Signature: ………………………. Date: ………….…………….

Supervisor’s Declaration

This business plan has been submitted with my approval as the supervisor of the candidate

NAME:

Signature: ………………………. Date: ………….…………….

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 DEDICATION

I would like to dedicate this project to my brother for the financial and moral support he has accorded
me all through my entire course. May the Almighty God grant him peace that never fades?

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 ACKNOWLEDGEMENT

Sincere appreciation goes to my supervisor for his continuous devotion and support. My gratitude
also goes to my fellow classmates whose suggestions and criticism helped to expand my point of
view.

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 EXECUTIVE SUMMARY

1.0 BUSSINESS DESCRIPTION

The business will deal with interior fittings and fixing .The will entail in buying and the

carpentry finishing material from manufacturers and selling them in retail and wholesale .The

business will be located along Homa bay kisii road in sonyanko plaza .It will be a sole

proprietorship

2.0 MARKETTING PLAN

Marketing is the process of creating promoting and distributing products and services of the

business

The business will depend on individual customers institutional and others.

This will help in analyzing the weaknesses strength opportunity and threats of the

competitors.The methods of promotion are shown clearly.

3.0 ORGANISATIONAL AND MARKETTING

Management is important aspect for success Ina any business enables all business plans and

goals are achieved This is achieved by proper organization of the business in responsibilities and

duties for the employee s

4.0 PRODUCTION / OPERATIONAL PLAN

This is very key as for any operations to be effectively operated on use of equipment, tools and

machineries to production of the good and services. The design and development of the items is

very unique and clearly outlined in the chapter. The delivery services are also offered and the

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rules of the organization to ensure no Cho's takes place.

5.0 FINANCILA PLANNING

This chapter entails the financial plan of the organization. Financial plan is the financial aspect

of the business. It provides proposal of sources, amounts an use of the finances. It also shows the

cash flow statements and the balance sheet. After the estimation capital and financial flow in the

business is clearly outlined. Calculations of profitability ratios and the desire financing.

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 Table of Contents

DECLARATION............................................................................................................................i
DEDICATION...............................................................................................................................ii
ACKNOWLEDGEMENT...........................................................................................................iii
EXECUTIVE SUMMARY..........................................................................................................iv
CHAPTER ONE............................................................................................................................1
1.0 BUSINESS DESCRIPTION.....................................................................................................................1
1.1 BUSINESS NAME................................................................................................................................1
The business will be effectively owned immediately after completion of my studies in Diploma in
Building Construction and Technology................................................................................................2
1.1 CAPITAL DISTRIBUTION..................................................................................................................2
1.2 BUSINESS LOCATION AND ADDRESS..................................................................................................3
1.2.1 MAP LOCATION...........................................................................................................................3
1.3 FORM OF BUSINESS OWNERSHIP......................................................................................................5
1.4 TYPE OF THE BUSINESS......................................................................................................................6
1.5 PRODUCTS AND SERVICES.................................................................................................................6
1.6 JUSTIFICATION OF BUSINESS OPPORTUNITY.....................................................................................7
1.7 INDUSTRY...........................................................................................................................................8
1.8 OBJECTIVES OF THE BUSINESS..........................................................................................................8
1.9 ENTRY AND GROWTH STRATEGY.......................................................................................................9
CHAPTER TWO.........................................................................................................................10
2.0 MARKETING PLAN............................................................................................................................10
2.1 POTENTIAL CUSTOMER....................................................................................................................10
2.2 MARKET SHARE................................................................................................................................11
2.3 COMPETITION..................................................................................................................................12
2.4 PRICING STRATEGY..........................................................................................................................16
2.5 SALES TACTICS.................................................................................................................................17
SALES TARGET FOR ONE YEAR...............................................................................................................18
2.6 METHODS OF PROMOTION AND ADVERTISING..............................................................................19
2.7 DISTRIBUTION STRATEGY...........................................................................................................20
CHAPTER THREE.....................................................................................................................22
3.0 ORGANISATION AND MANAGEMENT PLAN.....................................................................................22
3.1 ORGANISATION CHART....................................................................................................................22

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 3.2 MANAGEMENT TEAM......................................................................................................................23
3.3 OTHER PERSONNEL..........................................................................................................................25
3.4 RECRUITMENT, TRAINING AND PROMOTION..................................................................................28
3.5RENUMERATION AND INCENTIVES...................................................................................................29
3.6 LICENCE REGISTRATION AND WORKING PERMITS...........................................................................31
3.7SUPPORTING SERVICES AND ADVISORY...........................................................................................32
CHAPTER FOUR........................................................................................................................33
4.0 OPERATION PRODUCTION...............................................................................................................33
4.1 PRODUCTION OF FACILITY AND CAPACITY......................................................................................33
4.2 PRODUCTION STRATEGY..................................................................................................................35
4.3 PRODUCTION DESIGN AND DEVELOPMENT....................................................................................37
.............................................................................................................................................................. 38
.............................................................................................................................................................. 38
4.4 PRODUCTION PROCESS..................................................................................................................38
4.5 REGULATIONS AFFECTING OPERATIONS (LEGAL REQUIREMENTS)..................................................39
4.6 INTERNAL RULES AND REGULATIONS..............................................................................................40
CHAPTER FIVE.........................................................................................................................43
5.0 FINANCIAL PLAN..............................................................................................................................43
5.1 PRE- OPERATIONAL COSTS...............................................................................................................43
5.2 ESTIMATION OF WORKING CAPITAL................................................................................................44
5.3 (A) CASHFLOW PROJECTION FOR THE FIRST YEAR......................................................................45
5.3(B) CASHFLOW PROJECTION FOR THE FIRST THREE YEARS...............................................................46
5.5 PREPARATION OF PRO-FORMA BALANCE SHEET FOR THE FIRST YEAR............................................48
5.6 CALCULATION OF BREAK EVEN POINT.............................................................................................49
878,000 ................................................................................................................................................. 49
5.7 CALCULATIONS OF PROFITABILITY RATIOS......................................................................................50
5.8 DESIRED FINANCING........................................................................................................................51
5.9 PROPOSED CAPITALIZATION............................................................................................................51

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 CHAPTER ONE

1.0 BUSINESS DESCRIPTION

1.1 BUSINESS NAME

The name of the proposed business will be ROYALINK INTERIOR DESIGNS. The business
activities will be; material that is mainly used in interior construction, hence the name.

The proprietor of ROYALINK INTERIOR DESIGNS will be AGERO O. CALMAS,

currently pursuing a Diploma in Building Technology at Railway Training Institute. After

completion of high school, he got a job at a Construction Company before joining Railway
Training Institute. He is optimistic that his idea of owning a business will go through basing on
his adjustment on the market and knowledge gained at school and experience.

The goods that should be offered will be exclusively building, plumbing and other construction
materials.

The services will include;

I. Servicing and repairs

II. Installations
III. Gypsum Ceiling installation
IV. Selling of ceiling materials
V. Transporting of goods bought in bulk

Reasons for choosing the business

I. To bring goods and services closer to people
II. To create good relationships with people am working with, country and also outside the
country so as to expand the business
III. To offer quality, affordable and lasting goods and services to people
IV. To be a responsible, respected member in the national building by paying government
revenues and participating in community development projects
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 V. To be a role model in the society and influence other youths
VI. To create job opportunities in the company and enhance independence thus raising the
standards of living of the people

Educational background of the owner

The owner of ROYALINK INTERIOR DESIGNS underwent his education as follows:

Year Of Study Institution Grade

2019 -2022 November Railway Training Institute Pursuing A Diploma In
Building Technology
2013– 2016 St.Pauls Boys Secondary Attained The Kenya
school Certificate Of Secondary
Education With a C Plain
2005 -2012 Landa Primary Attained The Kenya
School Certificate Of Primary
Education With 312marks

The business will be effectively owned immediately after completion of my studies in Diploma
in Building Construction and Technology.

1.1 CAPITAL DISTRIBUTION

The initial capital for the proposed business is Ksh. 1,000,000. The various sources of capital are
listed below:

Source Of Capital Amount Percentage

My Contribution 500,000 30%
Friend And Relative 300,000 23.3%
Cooperatives 100,500 6.7%
Lending institution 600,000 40%
Total 1,500,0000 100%

The proprietor owns six dairy cattle and 2.5 Acres of land planted with maize and beans and
hopes to make savings for one and a half years to realize the amount he has pledged.
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1.2 BUSINESS LOCATION AND ADDRESS

The business will be strategically located along HomA bay kisii road in sonyanko plaza adjacent
to cooperateive bank. The enterprise is also a few kilometers, 1Km to be exact from cold spring
hotel. The location will be ideal since it will be reach of target of customers and staff.

Reasons for the location

I. Availability of space storing any products and materials for easy access and to reduce
breakage and avoid damages and accidents.
II. Security: There is the Kenya a police station along the road . This reduces cases of
crime and robbery in the area.
III. Population: The area is densely populated due to the high end homes, numerous estates,
many institutions, malls and many other social amenities. This therefore helps the
business expect more customers.
IV. Competition: There are a few competitors in the area.
V. Popularity: Since I was born and bred in the area, am quite popular and conversant with
the place and mostly participated in youth activities in the surrounding will give me a
good start.

1.2.1 MAP LOCATION

Here is a map showing location of my business

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The address of the business will be:
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THE ROYALINK INTERIOR DESIGNS

HOMABAY, KENYA

07996666780

EMAIL:dishonowiti02@gmail.com

1.3 FORM OF BUSINESS OWNERSHIP

The business will be a Sole Proprietorship whereby the business is owned and operated by an
individual. There will be few legal requirements in starting and operating the business. Before
starting the business, the owner has to meet all legal requirements such as the Trade license.

The advantages/reasons of sole proprietorship are:/

I. Returns of the investments – All the profits earned from the business is all for the
owner.
II. Decision Making – The owner makes decisions on how he or she wants his or her
business to run. This makes the work easier since he does not suffer from
disagreements which may be caused by partners when deciding issues.
III. Easily handling of money- Handling money for the business is easier; there is no
cheating since the owner budgets everything and all money pass on his or her hand.
IV. The initial capital is low- The initial capital requires tom start this kind of business Is
low compared to other forms of business units since the boss requires few assets and
commodities
V. Raise of living standard of people – by opening the business, it creates employment
opportunities around the community hence raising of living standards
VI. Quick tax preparation- paying of tax is generally easier than in a co-operation.
VII. Ownership/ formation- the owner has the authority to make arrangements on behalf of
the company and the company formation simply little paper work is required for the
business name
Disadvantages Of Sole Proprietorship

1. No Liability Protection
2. Financing And Business Credit Is Harder To Procure

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 3. Selling Is Challenge
4. Lack Of Financial Control And Difficulty Tracking Expenses
5. Unlimited Liabilty

1.4 TYPE OF THE BUSINESS

The business will start so there is a need for purchasing of the materials, and equipment and the
entrepreneur will generate an idea about the kind of business he wants to undertake and the same
time to put it in trial for the first time with an aim of making profit.

The business will be opened daily apart from Sundays: open Monday 8:00am – 7:30pm, and on
Saturdays, opens at 7:30am and ends at 6:30pm

The business will remain open during the holidays since it’s time when people need to do service
and repair. For my workers will receive a bonus during this public holiday so as to motivate
them.

1.5 PRODUCTS AND SERVICES

The main product will be impervious material and plumbing for building and construction:
I. Products will be affordable price and one year warrant
II. Assistance on how to use the product will be affected for free at the shop and delivery
and affair price.
III. Products will be of different size, shape colours and texture
IV. Services will be offered by proffessionals
Benefits for the products and services
I. Employement due to the business

II. I willuse trade marks to market my products

III. Ordering of products online

IV. Packaging will be very unique

V. Pre- services of plumbling will be done for free

VI. Discounts on products and services

VII. Free transportation

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1.6 JUSTIFICATION OF BUSINESS OPPORTUNITY

The reasons for starting this kind of business are because of the following reasons:

(i) Less competition – There is less competition business around the location which offer
some services as this business since it offers high quality of products and services. This
gives a good opportunity that will help expand the business to reach out on more
customers.
(ii) Infrastructure- The location of the business is strategically located and has good transport
system i.e. the superhighway. It is surrounded by big malls, companies, a lot of public
and also private institutions, big hotels, beside the high end estates hence attract more
customers.
(iii) Availability of customers – There are more customers since I offer quality products and
services. Customers that come to ROYALINK INTERIOR DESIGNS are from public
institutions e.g. hotels, colleges, and malls.
(iv)Improved Technology – This business uses modern machines for car repair and
maintenance, also uses bill boards and signboards for advertisement. We advertised our
products in print media under classified sections. We have created pages in social media
platforms hence we are popularly known.
(v) Professionalism – The owner of the business will be having the necessary skills after
completion of his course. It will also employ skilled workers. This will enhance high
performance and high services to our customers
(vi)Government policy – These are few legal requirements needed to start the business i.e.
trade licenses, business permits and filing of returns/paying taxes.
(vii) Security – the location is more secure since it is located near the Kenya Defense
Forces barracks, next to a police station whereby theft and robbery is minimized.
1.7 INDUSTRY

The business falls under the Construction and Engineering Industry. This business is creating
opportunities for jobless youth hence potential employer. It also helps build the economy by
paying taxes. Due to availability of many customers it makes the area so busy and so need for
expansion to nearby towns. Also, since the business is well marketed and has a good reputation
other branches will be opened outside the country.

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1.8 OBJECTIVES OF THE BUSINESS

During the business operation, there would be some goals to achieve. It has both short-term goals
and long-term goals.

Short-term goals
I. Create job opportunities hence improving the living standards of people in local areas
and upcoming generations.
II. Be the best entrepreneur in the local area and even in this town by providing best
products and services which are affordable.
III. To maximize profit so as to enlarge the business and open more branches in different
towns.
IV. To bring goods and services closer to customers hence save on their time and costs.

Long term goals

I. To expand the business and put various branches in other cities in Kisumu and Nairobi
and even tap the market outside Kenya within 2 years of operation.
II. To become the leading business in car repair and maintenance, selling of Autospares and
other components in the region within 5 years.
1.9 ENTRY AND GROWTH STRATEGY

1. Entry strategy
The business will start in January 2024 The reason behind this is because the proprietor shall
have completed his diploma in accountancy course and also acquired the required knowledge of
the business.

That will be the time that he shall be fully settled for the business after acquiring all the
requireresources for the business.

Immediately at entry into the ROYALINK INTERIOR DESIGNS will come out with ways of
attracting more customers.

I. networking through friends, relatives and schoolmates.

II. Use Giving offers/discounts to sales that will not hurt its operation
III. Moving from door to door, churches, schools, malls telling people on the importance
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 of this business to the community
IV. Utilizing social media platforms to advertise
V. Giving out business cards showing the goods and services offered
VI. Social of posters and banners and also flyers which should be printed clearly and neat
so as to attract more customers.

Growth startegy
I. As the business improves market share, there will be need for it to engage in partnership
with the aim of injecting more capital for its expansion strategy
II. The company also intends to start selling shares to interested customers in order to
maximize the business sales
III. Increase of customers and demands of goods and services will be showing the growth of
the business
IV. Advertising on social media e.g. Facebook, Twitter, and Instagram etc. will lead to
growth of business cards and print media will market to business.
V. Expanding the company opening other branches in different places, towns and locations
CHAPTER TWO

2.0 MARKETING PLAN

Marketing is a system of business activity designed to plan price, promotion and distribution of
products and services to customers. A market plan for ROYALINK INTERIOR DESIGNS is
important because;

I. It helps one to plan the area a

II. T which the goods and services are to be produced.
III. It creates availability of market goods and services produced.
IV. It helps the customers to gain satisfaction by using certain goods and services.
V. Seller and customer relationship is also enhanced.

2.1 POTENTIAL CUSTOMER

Customers are business people, institution, and organization who purchases goods services regularly
from an enterprise. Major customers at ROYALINK INTERIOR DESIGNS will be; those
institution surrounding the business, home owners around, malls and commuters.
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Institutional and organizations customers

These are parastatals, hospital, colleges and universities,this type of customers deals on tenders and
contracts between the company and individual suppliers, mostly these are period customers and are
paid in cheques after period of time..

Others
These are people who are not within the surrounding but buy building materials in bulk.they get
supplies for goods in a period of time and they are of good importance.

This will be people who run day to day business at market place and have ready cash at hand at the
end of the day to do their budgeting. Others will be wholesalers and retailers.
2.2 MARKET SHARE

The business will have competition from other established companies in the surrounding selling
similar products and offering some services to the customers. The company’s shares the market as
follows:

Pie chart representation of market share

1. Mogora creators and design:1 \10*100=10%

2. Rukistar:2\10*100=20%
3. R.j interior :3\10*100=30%-
4. ROYALINK INTERIOR DESIGNS 4\10*100=40%

PIE CHART SHOWING MARKET SHARE

Sales
Rukistar 20%

Royalink 40%
Mogora 10%

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 RJ Interiors
30%

2.3 COMPETITION

The business will encounter tough competition from the already established enterprises namely;

(I)Mogora creators and designs

P.O. BOX 209, Homabay

It is located opposite tom mboya university.it is the largest in the market compared to the other
firms since it is strategically located whereby most customers make their entry point to the highway.
The competitors deal with imported spare parts and digital carpenter repair and maintenance.

(ii) Rukistar designs

P.O.BOX 125,

Homabay

It is located at the far end of St. Michael high school adjacent to Neema hospital.it is medium sized
firm that was established some years back. They sell refurbished spares and do minor repair and
maintenance services.

(iii) R J interiors

P.O.BOX. 502, Homabay

It is the smallest company in the market which was started recently.it is located at the entrance e of
the gate opposite safari park hotel.it repairs and maintains buiding matterials and sells local spares
from the second hand materials

The competition will be considered according to assests numbered of employees, sales volumes and
number of brands as shown in the table below.

Parameter Your Business Comp A Comp B Comp C

Assests 4 3 2 1

Sales volume 6 5 4 3

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 Numbers 7 6 5 4
employees

Number brands 10 5 4 3

Other (specify) 12 7 6 4

In comparing also of the competitors we consider also their performer,quality,reputation, after sales
services and other areas specific to my business.

Parameter Your Business Comp A Comp B Comp C

Performance 5 3 4 2

quality 4 3 2 1

reputation 5 4 3 2

Customer service 4 3 2 1

Other specify 4 3 2 1

In comparing competitors we also consider their benefits of customers, technology, location

management, distribution channels and other areas specific to my business as tabulated below.

parameter Your business Comp A Comp B Comp C

Benefits to to Customers 5 4 3 2

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Technology 4 3 2 1

Location 5 3 2 1

Management 5 3 1 2

Distribution channels 5 4 3 2

Institution Strength Weakness Opportunity Threat

Name
ROYALINK  Has many  Offers low  Has few  Have no
INTERIOR skilled discount customers demand for
DESIGNS employees  Few staff  Low their services
 Is  No security  No specific
accessible expansion levels customers
space  Poor outage

RUKISTAR  Services  Have no  Fixed prices

DESIGNS  Skilled offered fixed thus low
employees are of low prices customer turn
 Enough demand  At least out
capital  Few staff accessible  No specific
 Accessible  No customers
discounts
RJ  Has  No  At least  Low security
INTERIOR enough expansion covers a systems
DESIGNS capital space good  Low quality
 Offers  Low population services
high quality  Improved
quality services security
services  Few systems
employees

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 MOGORA  More  Favorable  Good  Other
CREATORS skilled but no customer competitors
personnel enough turn out try snatching
 Enough capital  Accessible away
space  High level customers
 Quality systems  False play by
services other
competitors
2.4 PRICING STRATEGY

The price of the goods and services will be determined by those of my competitors as I will be
ensuring that my price are slightly lower than those of my competitor until the business stabilizes.
There are several factors put in considerations whereby designing on pricing strategy they include;

I. COMPETITOR - The business should set up its own price putting into considerations on
their competitor’s price tags in the market as this will allow them on knowing how much
risk you will be putting on your customer.
II. TRANSPORT COST - After making price tags on the products and services the company
will consider offering free transport or quick and fast means of delivering goods at Avery
affordable costs.
III. COST OF PRODUCTION - The cost of producing products is considered before deciding
on the price of the item to be sold. This will prevent the business from failing since the
products should not be lower than its costs of production thus making the business grow.
IV. DEMAND OF THE PRODUCTS AND SERVICES - The Company will choose what is
more needed by the customers. This should at reasonable price.
V. BAIRGAINIG POWER IN THE MARKET - Other competitor may not have the bargaining
power on their products and services, this allow a little bargaining power to the customers
making them attracted to the company.

Price list
PRODUCTS & UNIT COST PROFIT MARGIN SELLING PRICE
SERVICES
GYPSUM BOARD 300 PER PAIR 200 500
MDF BOARD 150 PER METRE 50 200
SCREWS 700 300 1000
GYPROC FILLER 300 PER ROLL 200 500
PIPE THREADERS 200 50 250
MDF BOARD 400 100 500
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 CORDLESS DRILL 600 150 750
PLYWOOD 800 200 1000
STUDS AND 450 150 600
CHANEL
CABLE TRAY 700 100 800
TAPE MEASURE 100 100 200
2.5 SALES TACTICS

The following are anticipated sales tactics of goods and services at -giving trade discounts to potential
ROYALINK INTERIOR DESIGNS customers.

I. -Placing window display of the products and services.

II. -Having good relationship with customers plus free consultancies
III. -Offering aftersales services to products sold
IV. -Having high standards services with technology hence enabling the business to
grow.

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 SALES TARGET FOR ONE YEAR

Jan Feb March April May June July Aug Sep Oct Nov Dec
Product
50,000 6,000 7,700 5,400 9,000 9,800 8,200 6,400 21,000 32,00 46,000 54,00
BOARD
30,000 8,000 11,000 4,000 6,000 6,800 9,200 12,000 12,100 7,800 15,00 75,000
SCREW
100,000 15,000 15,950 20,150 60,150 19700 31,400 18,000 27,000 36,000 61,000 98,450
CABLE TRAY
70,000 9,280 8,800 8,900 9,190 10,900 8,300 9,300 6,100 9,200 8,900 12,00
FILLER

90,000 9,000 10,000 12,000 16,150 18,200 26,700 51,200 16,000 18,200 17,600 20,000
SINK
PLUNGER
110,000 15,000 7,050 8,150 21,600 19,700 26,100 11,600 17,500 21,800 19,000 25,600
THINNER

150,000 17,250 19,000 2,670 29,500 16,700 19,100 21,000 32,000 10500 25,100 17,600
CORDLESS
DRILL
600000 79,530 79,500 612,270 151,590 101,800 102,900 129,500 115,700 74300 137700 254050
TOTAL

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2.6 METHODS OF PROMOTION AND ADVERTISING

ROYALINK INTERIOR DESIGNS will use different ways of informing the public about the existence
of the business. This will be done through the following;

(i) Media(radio) - This is because for radio, it is found in phones and it is also cheap and it requires
low cost of advertising. Radio covers a large area geographical area. The radio station to be used
will be vernacular radio station which eases the understanding of the people in the remote areas
especially those who are unable to understand English or Kiswahili languages.

(ii) Posters - The owner will print some posters and fliers and pin them mostly in institutions,
shopping centers, public places and on roadsides for more exposure.

ATTENTION! ATTENTION! ROYALINK INTERIOR DESIGNS

OFFERING 10% DISCOUNT ON ALL GOODS AND SERVICES.

For more information, call 0799666780 O

(ii) Word of mouth - Some employees will be moving from one place to another telling people on
how their company is of importance to them. They will also carry some goods with them to show
people their quality.
(iii) Loud speakers in the shopping centers - This will be done mostly on markets days and in the
malls. The company chooses mall and shopping centers because they are always crowded. The
loud speakers are in order to reach every ear of the people in the market. Louder speaker also
attracts people to come close and hear the message.
(iv) Social media - The owner will create a page bearing the company name in face book, twitter and
advertise. These will large number of people. Friends and relative also share to their friends

(v) INSALE&AFTERSALES SERVICES - In sales services such as offering a cup of tea when the
goods bought are being packaged, newspaper, and catalogues, free WI-FI, customers will be kept
busy. Aftersales services offering business cards and inquiring if they were satisfied.

2.7 DISTRIBUTION STRATEGY

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 Distribution means to transfer of products and services from the business to customers.it can be
conducted directly or indirectly through the agents.the business will embrace on direct method of
distribution i.e goods and services flowing from the manufacturers to the customers.

MANUFACTURER
CONSUME
ADVANTAGES OF DIRECT METHOD OF DISTRIBUTION R
I. Financial resources makes it possible or affordable to consumers
II. It reduces extra payment
III. Its easy to persuade customers buy the products hence high sales promotion
IV. Enhance fast and quick delivery to customers
V. Satisfication of customers needs, directly from the manufatures and what seems
challenging them.
Mode Of Transport
To facilitate easy and safe transportation of products road transport is most preferabled to use since it
channels many places on the ground within and outside our region.

Advantages of road transport

I. Interconnection to many places within and outside our region
II. No terminals and stops required

The business will use the following levels of distribution channels;

Retailer to consumer level. - This will enable the entrepreneur to understand the customer more than the
ongoing chain of distribution. Customer in need of product will be coming to the business premises and
those with the faulty materials or spares will be bringing them for repair.

Retailer to salesman’s - This level has the advantage whereby salesman will do the research on behalf of
the business, take the products close to the customers and assist in advertising and publicizing the products,
the customers requiring repair and maintenance, installation of music devices, graffiti or those in need of b
bulky products will be offered free transport by the business by hiring of transporting vehicles.

Problems encountered when distributing goods:

I. Weather conditions - This will affect distribution especially on rainy season which renders some
roads impassable hence delay in delivering of goods and services.

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 II. Language barrier - One might not be able to understand directions quantity to be distributed
hence confusion
III. Traffic jam - This is experienced by the entrepreneur when delivering goods and services to the
customers to their homestead or working zones.
IV. Since the company is new, delivering goods at for distance will be a problem because hiring
means of transportation might be expensive.

Solutions

I. To overcome the weather condition; the rain the entrepreneur should use well tarmacked roads for
easy delivery also wear gumboots and protective clothes to prevent him from being rained on.
II. To avoid jams the entrepreneur should set up to wake up early so that hi/her transportation becomes
easy.
III. To overcome distance, the entrepreneur should use official language for easy understanding or
employ an interpreter.
IV. Finally, hiring security or provide security during the distribution of the products and services to
ensure safety.
CHAPTER THREE

3.0 ORGANISATION AND MANAGEMENT PLAN

Organization plan is the process of identifying an organization short and long term goals formulating and

monitoring speficic stratigies to achieve it.The business being a startup, it requires proper management

and good organization or various business activities. For the business to run smoothly, discipline and

integrity among workers is of importance since this will ensure the growth and maximum return in the

long term. The business intends to start its operations with a few employees namely; the manager,

assistant manager, account clerk, mechanic/technician, sales representative, security officer, cleaner and

cookout a business to be successful proper management will be first priory thus the business will have

proper procedure for delegating

3.1 ORGANISATION CHART

19
Various duties and responsivities to their employees, the organization is a shown in the organization chart
below

3.2 MANAGEMENT TEAM

1. MANAGER
The managing director is the sole owner of the firm and is liable for all activities in the company.
Qualification
Must be Diploma holder in Building Technolgy and Construction from a recognized institution.

.Must have working experience of minimum 3years Be

aged between 25-35 years
20
Should be able to speak both English and Kiswahili. Must be
of sober mind and fast in decision making

engaged as supervisor as site agent in construction

Duties and Responsibilities

The manager will be overserving the following managerial duties during the business operations;

I. Coordinating - This will entail the balancing and timing various activities in the business thus
ensuring that each department is running its activities without delay or interferences. This will ensure
time keeping and first response through the customer service in the business.
II. Planning - It involves consultations with various departments and others partners and making
important decisions like expanding, procurement and making sure that the business is kept up to date
concerning the emerging trends and issue in the field of mechanical engineering.
III. Organizing - The manager devices the work onto manageable activities and select people to
accomplish the task that need to be done.
IV. Decision -The manager is the mirror of the company therefore he makes the final decision on the
running of the business.

2. Assistant Manager

Qualification

I. Must be a diploma holder in civil or mechanical engineering from a recognized institutional of

learning.
II. Have at least 2years of experience.
III. Must be a Kenyan citizen.
IV. Must have at least certificate in building and construction technology
V. Aged between 25-30 years.
VI. Should be decent and have courtesy to customers.

Duties and responsibilities

I. The assistant manager will be in charge of the organization in the absence of the manager.
II. Should provide financial report and analysis to the business,
21
III. He/she is tasked with keeping the day to day operations smoothly.
IV. Designing the schedule for everyone.
V. Make good relations with the employees.
VI. Reporting to the manager on the business proceeding.
VII. Playing a supervisory role to the company.

3.3 OTHER PERSONNEL

1. Account/clerk

Qualification

I. Must have excellent knowledge in accounting package.

II. Must have a diploma in accounting or any other business related administration field.
III. Must have at least a good working experience of not less than 2 years.
IV. Must be a computer literate.
V. Good communication skills and customer service.

Duties and Responsibilities

I. Recording all the information discussed and the registers of the company.
II. Keeping inflow of accounts
III. Collecting and Banking of money.
IV. Receipting and stamping of goods and services
V. Payments of staffs and casuals
VI. Helps in supply and procurement.

2. Technicians/Mechanics/Constructors

Qualification

I. Must have certificate/craft holder and having gone through grade 1-3 in mechanical or civil
engineering/building construction.
II. Must have a knowledge on car repair and maintenance and automotive spare parts,
III. Must have experience of at least 2 years in practical installation work,
IV. Should be aged between 21 years and above.
22
 V. Have a good communication skills and fluent in both English and Kiswahili
Duties and Responsibilities.

I. buiding,construction repair and maintenance.

II. Testing of all the products that belong to the company if they are worthy to be used.
III. Installations and fixations of materials and equipments
IV. Procuring and disposing if they are worn out.
V. Customers service and Marketing.

3. Security Officer

Qualification

I. Must have certificate of good conduct from national police service.

II. Must be form leaver with a minimum of K, C.S.E grade D+
III. Must have at least 1 year of working experience.
IV. Must be able to demonstrate good working skills with employees and customer.

Duties and responsibilities

I. Maintains peace and order in the company.

II. Protect life and property.
III. To respond quickly and correctly during risks.
IV. Control Access and Patrolling.
V. Reporting any insecurities and handling security issues.

4. Sales Representative

Qualification

I. Must be a form four leaver.

II. Must have good communication skills and fluent I either English or Kiswahili.
III. Must be trustworthy and hardworking.
IV. Must be computer literate.
V. Must be aged between 18 years and above.
Duties and responsibilities
23
 I. Helps in marketing and sales of the company producers
II. Responsible for supplying and procuring of products
III. Helps in distribution of producers to the client

5. CLEANER/ COOK

The business needs a cleaner and a cook to clean the premises before and after business hours. Staffs also
need food or drinks to keep them active during work operations. The cleaner and cook should be 18 years
and above and doesn’t need experience and education. They should only have a national identification card.

Duties and responsibilities

I. Maintains high standards of hygiene in the whole company

II. Serving of tea and lunch
III. Transporting of messages

6.Casual Labourers

I. Must Be Aged Between 20- 30yrs

II. Able To Communicate In English And Kiswahili
III. Duties
IV. Loading And Unloading Of Products and any other assigned duties.

1. STORE KEEPER
Qualifications
I. revelant certificates in management and store keeping
Duties
I. keep an account stock in store by regulating the incoming and outgoing of the store and any other
assigned duty by his/her superior
3.4 RECRUITMENT, TRAINING AND PROMOTION

Recruitment
requirement is aprocess of finding and hiring the best qualified candidate for the job opening in timely and
cost effective manner.it aids in building the business name and income.
24
 The management will carry out recruitment in order to avoid irregularities and business fraud. The business
will advertise any vacancy on the posters, newspapers, noticeboards, social media and local media such as
televisions and radios.

The job titles, job specifications and descriptions, academic and professional qualifications, experience, age
limit, salary and allowance all mentioned. Interested persons are to send application, letters and CVs to the
management. The management then will shortlist and then choose the qualified candidates during the
interview.

Placement - The employee is placed at their respective positions after getting their job.

Training
this is the process of passing knowledge and skills of the business.it is the provisional of additional
knowledge the applicant already matched with the job

The company will enhance support in training staff members for efficient services, production and update
them with new technological changes. This will be done through:

I. On job training – Those workers recruited to work in the company shall go through on the job
training due to new emerging trends in technology changes and competition areas and items to be
familiar with them as they continue to do the job.
II. Seminars – this shall be carried out in every month to all departments once at a time. All rules and
regulations shall be read out and adhered to.
III. Orientation and team building – New employees will be oriented to familiarize themselves with the
operations and expectations in the business. For the old staff will be taken through team building to
enhance performance through knowing strength and weakness in their various departments.
Promotions
this is the mode of motivation based on employees hard work experience punctually an
conduct.trustworthy,efficiency,and hardworking employees shall have their salaries increased and
offered allowances.

Workers will gain the highest dedication to work and be promoted to highest level of working
depending on;

i. Discipline – Workers who are hardworking and trustworthy to the management and our customers will

25
 get promotions annually.
ii. Diligence – Those employers who are focused and determined to perform their duties potentially shall be
promoted.
iii. Creativity – Those who come up with new ideas and discoveries concerning the company progress shall
be motivated.
iv. Experience and additional certificate – An employee who will take our 5 years and take additional
academic credentials shall be promoted if he/she proves to be satisfying.

3.5RENUMERATION AND INCENTIVES

Renumeration is the money paid to the employees after every month as slaries incentives are allowances
given on top of salaries.The salary scheme of the working remuneration is as shown below:
SALARY SCHEDULE FOR ALL THE STAFF

JOB TITLE NUMBER OF MONTHLY YEARLY SALARY

PERSONEL SALARY (Ksh) (Ksh)
Manager 1 20,000 240,000
Assistant Manager 1 15,000 180,000
Accountant 3 7,000 252,000
Technician 6 15,000 180,000
Security 2 6,000 144,000
Sales Representative 2 10,000 144,000
Cleaner And Cook 2 1,200 114,000
Store Keeper 1 9,000 108,000
Pick- Up- Drivers 1 10,000 120,000
Total 14 121,200 1,482,000
Incentives
to lift high performing morale of the mployees my business has decidd to provide extra services ,
Incentives will enable the employers to be more focused in their activities hence the management will be
offering rewards as incentives to the employees, they include:

I. Transport allowances – will be considered to the employees so as to ensure that they arrive at the
premises on time hence ensuring customers punctuality and faster delivery of various goods and
services.
II. Holiday bonuses – during the holidays the company considers giving out presents to their
employees to help create and enhance morale among the employees hence making the company
prosperous.
26
III. Overtime – overtime worked by employees will be compensated since they worked extra time to
bring profits to the company. This will ensure the growth to the max of the company. Any person
demonstrating outstanding performances in his/her duties will receive rewards at the end of the
working years.
IV. Leaves – ladies will be entitled to maternity leaves with pay and also men will be given paternity
leave with pay.

EMPLOYEES ALLOWANCES OVERTIME FEE

Manager 15,000 5,000
Assistant Manager 10,000 4,000
Accounts 7,000 3,000
Sales Persons 3,000 2,000
Technician 5,000 2,500
Security 2,000 500
Cleaner/Cook 1,500 800
Store Keepers 1,200 700
Drivers 1,400 600
Totals 43,500 19,100
3.6 LICENCE REGISTRATION AND WORKING PERMITS

LICENSES
it’s a document that gives the business to carry out its daily activities
Licenses and permits are essential requirements needed to operate a legal business hence by acquiring
legal documents will enable the company to adhere with the law regarding the operation. The license and
permits will include the following:

LICENSE AMOUNT (Ksh)

Business registration 12,000
County council permit – single permit 7,000
NEMA Permit 5,000
NHIF 1,500
NSSF 400
KRA Tax Returns 6,000

27
 Rent and Land Rates 10,000
Total 40,900

PERMITS

Permits gives a temporary authority,for the business to operate legal within the region of its jurisdiction.

BY – LAWS

This are set of rules for a community scheme thar regulate a variety of matters.properinstallation of sewer
lines, electricity.
3.7SUPPORTING SERVICES AND ADVISORY

These are services offered by others instistutions which in one way or another will benefit the
enterprise.thet are advantageous especially to new business as they provide necessary operational
guidelines.
The services include:

I. Insurance services – in term of security purposes and accessibility the company will protect the
premises against risks such as fire, theft and life. This is more secure since it will safeguard
the capital invested in case of any of these risk occurs enabling the company to regain its strength.
The company will partner with Jubilee Insurance, addressed as: Jubilee insurance
P.O. Box 0053-00111
Nairobi, Kenya.
II. Water and Electrical Services – the company will install water supply. It will also consider buying
large tanks in order to harvest rain during rainy seasons hence minimizing the costs of water
supply and store it for future use in times of water shortages.
Electricity is important since company will need power in various electrical appliances and machines
for testing or repairing.
Homa bay Water Company P.O.
Box 64011-00100
Homa bay Kenya
III. Banking Services – since the company will be dealing with huge amounts of money, there will be

28
 need for bank accounts. The company will engage:
Kenya Commercial Bank
P.O. Box 1709 Nairobi,
Kenya
IV. Postal Services – the company’s postal address will be; THE
ROYALINK INTERIOR DESIGNS
P.O. BOX 7204-00100
Homabay, Kenya
CHAPTER FOUR

4.0 OPERATION PRODUCTION

The proposed business will develop its services by employing most competent and technology oriented
people.this is very vital tool in business operation becauseit helps to reduce production cost and inturn
maximize the profits .
it clearly indicates all the necessities undergone and all the facilities used throughout the entire
production process: the operational plans shows the services following production delivered to
customers.
the business opts to use unique economical and the best production plan to ensure it attaracts as many
customers compared to competitors,

4.1 PRODUCTION OF FACILITY AND CAPACITY

Production is the creation of manufacturing of goods from available resources for sale of personal
consumptions or used to meet the personal the needs. Facilities on the other hand are items or
Equipment’s ROYALIK INTERIOR DESIGNS will require in order to accomplish its operations and
activities.
The list below show some equipment and machinery the company should purchase of its growth.
Item Specifications Cost Per Unit Quantity Total Cost
Generators Yamaha 30,000 3 90,000
Computers Hp elite 45,000 4 90,000
Reflectors synthetic 1,000 20 20,000
Cutting machines 50,000 8 400,000
Pick- up Toyota 2,400,000 2 4,800,000
premises Workshops 500,000 1 500,000
29
 Printers Hp kyoceras 24,000 2 48,000
Pressure machines 78,000 1 78,0000

Machinery /equipment Lease/ hire purchase Months /years of Cost

lease
premises Lease 2 years 1,500,000

Pick- ups Hire 6 months 60,000

Generators Hire 1 month 3,000

Cutting machine Hire 4 months 18,000

Sproil level Lease 1 month 70,000

Total 1,588,000

maintenance and repair of the machinery/equipments will be done on monthly basis.the worn out parts
will be replaced in time and space parts of the major items will be available locally in the store.
the business layout will be composed of administration block that is receiving area ,manufacturing area
and sorting area and store for the manufactured products.
Ground Plan Of The Proposed Business\Site Layout

WASHROOM WORKSHOP

RECEIVING AREA

BUSINESS STORE ACCOUNTS OFFICE

30
PARKING AREA MANAGER’S OFFICE
SECURITY DESK
4.2 PRODUCTION STRATEGY

the production strategy affects to the pattern of the decision that the business takes to supply goods and
services production strategy is very vital for how resources are selected deployed and managed.

production raw materials will be plumbing pipes, fittings and impervious materials such as DPG,
paints,plastering with treated cement.
Materials Frequency Source Quantity Cost Per Total
Unit
Boards 1 Plysales 8 2,000 16,000
Suppliers
Gyprock filler 1 Bamburi 7 bags 650 4,500
Cement
Screws 1 Gyp Dealers I tonne 1,000 1,000
Drain Cleaner 1 Kenplast 2 700 1,400
Total 22,900

some of the materials will be readily available through out the year and the others expensive will be
bought when contractor has been received.

the raw materials will be transported by hiring a pick-up for long and short distances will be carried along
by the technicians.

direct labours refers to salaries and wages paid to workers that can be directly attributed to speficic
products or services.

indirect labours is the cost of any labour that supports the production process, but which is directly
involved in the active conversion of materials into finished products e.g supervisor purchasing staff.

Direct labour Cost per hour Hours per month

Casual Labour Ksh 30 240 Hours
Pick –Up Driver Ksh 40 240 Hours
Store Keeper Ksh 37.5 240 Hours

31
 Indirect Labour
Manager Ksh 83.5 240 Hours
Cashier Ksh 62.5 240 Hours
Security Guard Kshs 25 240 Hours

Cost Of Production = Cost Of Labour +Cost Of Material + Cost Of Overheads

Cost of materials Quantity Amount

Gyprock filler 50 Bags @ 600 30,000
Studs and channels 10 Metre @ 30 3,000

MDF 250 Per Roll 7,500

4.3 PRODUCTION DESIGN AND DEVELOPMENT

Production design will be concerned with how the product will be made in the business ROYALINK
INTERIOR DESIGNS .Design which are difficult to make result in poor quality products .During the
design stage itself the manufacturing aspect should be considered. The production design or design for
production includes simplification, standardation and modularity. The production design will also involve
the use of technology that is flexible and efficient in the production hence enabling the business to grow
its operations.
ROYALINK INTERIOR DESIGNS intends to look for suitable company who have good and effective
ideas which produces a high quality product.
services on installation and fixing of gypsum material will be done at fair price I order to meet the demands
of customers.
the materials will be obtained from well established companies.
NEW PRODUCT DEVELOPMENT

32
 intro ducti

4.4 PRODUCTION PROCESS

The production of services at ROYALINK INTERIOR DESIGNS will be divided into different sections.
These include, installation, sales maintenance, repairs worn out parts
1) Advertising - the business would advertise it products on social media, posters, radio and
television.
2) Order placing – the buyer places an order of spare parts and then sends the information to the
business and where the product will be delivered.
3) Delivery – the business delivers the products to the address given on time.
4) Payment – the goods are paid on delivery, as in cash on delivery.
5) Stocking will be done on a weekly basis.
6) Repair and maintenance – will be done at the site with qualified and skilled workers.
7) Customer care will be adhered to at all times. The
process of production will involve:

The external factors that will affect the business include :

I. competition from the other business that started earlier. They may be experienced in this field we
will make sure that we capitalize in their signs of weakness by providing quality goods and
services. We will also maintain good customer relation and service.
II. Design- required by the customers.

Internal factors that may affect the business may include:

33
 I. understocking done to cash, understaffing but we shall quickly find solutions for the business to
run smoothly.
II. All employees will be required to adhere to all rules and regulations and maintain high standards
of discipline. Customer’s complaints will also be handled with a lot of respect. The technicians
will ensure everything is in order and working.

4.5 REGULATIONS AFFECTING OPERATIONS (LEGAL REQUIREMENTS)

The company will be required to adhere to some of the necessary regulations for its smooth running.
These regulations include:

a) License – the company will acquire all licenses needed for it to run its operation. The licenses will
include all the business permits and business registration at the county council.

b) Insurance policy – all the employees will be insured with National insurance company for the
risks which may happen. This will allow them to work without any fear hence leading to the
growth of the company.
c) Income tax acts – the business will have to comply with government regulations by PAYE and
company returns on time to ensure that its operations are not disrupted in any way.
d) Labor law acts – all the company’s decisions shall be established in time with the labour laws of
the nation. These laws include dismissal, salary, retirement act, work injury benefit act etc. These
regulations may affect the business positively or negatively, directly or indirectly and they
include:
i. Occupational health and safety act (2011s)

It provides with legislation dealing with safety, health and welfare of all staff in the business.
The legal obligation of the employees is outlined below:

I. To provide safety equipment and clothing at work places that is safe to work in.
II. To provide guidelines and information, training and supervision as required ensuring health
and safety to all staff.
III. To provide good working conditions and secure environments for work.
ii. Work injury benefit act (2000)

It covers all employees and provides benefits for anyone who sustains injury or disease,
temporary disability, or permanent disability. The employer has the right to claim for
34
 compensation with the stipulated guidelines.

iii. Factory’s act (1961)

It requires the employer to guard machinery, the supply of lighting and heating to certain levels,
the provision of toilets and washing facilities.

It also stipulates on how to dispose the waste materials.

4.6 INTERNAL RULES AND REGULATIONS

The business has authoritative guidelines that are as follows:

i. The business will ensure that the employees work within the set time duration so as to ensure
no overworking hence this will motivate them the to dedicate their time and energy to the
business. Lateness will not be tolerated.
ii. The business will ensure that the working environment is conducive for the employees.
iii. Discipline will be highly observed among the workers. Smoking and drinking at the work
environs will not be tolerated. Indiscipline cases will be dealt with and any gross misconduct
will be severely punished, even dismissal.
iv. Proper codes of dressing in the company shall be adhered to. Workers may be required to
wear protective attires in their respective departments.
v. On holidays like Christmas, Easter and any other public holidays, the employees will be given
off work days to spend time with their families. Leaves will also be given to workers, both
paternity and maternity. Allowances will be given to the workers during holidays.
vi. Workers will be trained to operate machines that they aren’t familiar with.
vii. Always ask or consult whenever you need help provided prot

Operational expense budget for one month

Item Amount

Salaries 63000

Rent 10,000

35
 Electricity 35,000

Water 5000

Insurance 2000

Loan payment 2500

Interest 1400

Maintenance & repair 1800

Telephone and postage 700

Stationery & printing 500

Transportation 1500

Drawings 2000

Miscellaneous 900

Total expenses 126,300

CHAPTER FIVE

5.0 FINANCIAL PLAN

Financial plan is the final aspect of the business,it provides proposal of sources amount and use of the
finances.
Financial plans helps in measuring the degree of performance of each department I the business and the
entire business firm .financial position indicated and financial analysis to help future planning fir the
business growth.
This chapter determines how a business can afford to achieve its strategies, goals and objectives. It
describes each activity, resources equipment and materials needed to achieve these goods and objectives.

5.1 PRE- OPERATIONAL COSTS

This are the costs incurred before the business starts its operation

36
 ITEMS AMOUNT (Ksh)
Insurance 30,000
Licenses And Registrations 5,000
Transport 2,000
Promotion And Adverisement 3,000
Electricity And Installations 4000
Furniture And Fittings 10,000
Tools ,Machines And Equipments 30,000
Stationeries 500
Telephones 350
Rent And Deposits 45,,000
Totals 115,500
5.2 ESTIMATION OF WORKING CAPITAL

These are costs incurred in the course of doing business.

a) WORKING CAPITAL FOR THE FIRST THREE YEARS

Item Year 1 ksh Year 2 ksh Year ksh

Current Assists
Stock of raw materials 50,000 45,000 35,000
Work in progress 60,000 55,000 50,000
Stock of finished goods 30,000 25,000 20,000
Debtors 6,000 7,000 8,000
Cash in hand 20,000 18,000 16,000
Cash at bank 80,000 90,000 100,000

Total current liabilities 246,000 240,000 230,000

CURRENT LIABILITIES
Creditors 22,000 18,000 20,000
Bank loan 130,000 100,000 110,000
Total current liabilities 152,000 118,000 130,000

37
 Working capital 94,000 122,000 100,000

Current assests - current liabilities = working capital 246,000 –

152,000 = 94,000
240,000 -118,000 = 122,000
230,00 -130,000 =100,000

5.3 (A) CASHFLOW PROJECTION FOR THE FIRST YEAR

5.
5.3(B) CASHFLOW PROJECTION FOR THE FIRST THREE YEARS

ITEM YEAR 1 (KSH YEAR 2(KSHS) YEAR 3 (KSHS)

38
 Beginning cash 212000 16,386,432 16,708,401.6

Cash sales 16,809,672.4 17,650,156.02 18,490,639.64

Debtors 884,719.6 928,955.58 973,191.56

Total cash inflow (A) 17,694,392 18,579,111.6 19,463,831.2

Expenses

Purchases 934, 500 934,500 934 ,500

Rent 120,000 120,000 120,000

Salaries and wages 756,000 620,000 520,000

Electricity bill 392,170 300,000 280,000

Water bill 54 ,490 4,220 4,200

insurance 2,000 1,550 1,500

Loan repayment 28 ,510 24 ,410 24,430

Interest loan 16, 200 15,000 1,450
Maintenance a repair 21,790 19,550 18,530

Telephone 4,760 3,000 2,650

Postage 3,970 4,220 4,000
Stationer y& printing 5,140 5,000 4,500

Transportation 17,170 1,440 1,420

drawings 22,920 20,820 20,800
miscellaneous 9,900 9,000 8,600
Total cash out flow 1,519,8960 2,082,710 1,950,680
(B)
Net cash =A -B 16,174,432 16,496,401.6 17, 513,151.2

5.4 PROFORMA INCOME STATEMENT AS AT 31ST DECEMBER YEAR 1

ITEM YEAR 1 (KSHS) YEAR 2(KSHS) YEAR 3 (KSHS)
Sales 17,694,392 18,579,111.6 19,463,831.2

39
 (less purchase of 934,500 934,500 934,500
stock)
Gross profit ( A ) 16,759,892 17,644,611.6 18,435,881.2
Expenses

Rent 120,000 120,000 120,000

Salaries and wages 736,000 620,000 520,000

Electricity bill 392,170 300,000 280,000
Water bill 54,490 4,220 4,200
insurance 2000 1,550 1,500

Loan repayment 28,5410 24,410 24,430

Interest loan 16,200 15,000 1,450

Maintenance a repair 21,790 19,550 18,550

Telephone 4760 3,000 2,650

Postage 3970 4,220 4000

Stationery &printing 5140 5,000 4500

Transportations 17,170 1440 1420

Drawings 22,920 20,820 20,800
Miscellaneous 9900 9,000 8,600
Total expense (B ) 14,550,020 1,468,210 752,100

Profit before tax 15,304,872 16,176,401.6 17,683,781.2

Provision for tax 2,448,779.52 2,588,224.26 2,829,405

Net profit after tax 12,856,6092.48 13,588,177.54 14,854,376.21

5.5 PREPARATION OF PRO-FORMA BALANCE SHEET FOR THE FIRST YEAR

Performance balance sheet As at 31st Dec Year 1 As at 31st Dec Year 2 As at 31st Dec Year 3

Fixed assets 1,105,000 1,270,750 1,461,363

40
Assorted equipment’s (165,750) (190,613) (219,204)
Equipment dep (15%) 939,250 1,081,381 1,242,129

Current Assists
Debtors 884,720 928,956 973,192
Cash at bank 11,000,000 12,000,000 12,000,000
Cash at hand 69,215 514,282 830,225
Closing stock 10% 20% 25%
151,987 227,981 379,968

Current Liabilities
Creditors 13,045,772 13,779,357 150,045,576

Net Assests
Financed by Capital 212,000 212,000 212,000
Net profit 12,856,092 1,358,877 14,854,376.
Drawings ( 22,920 ) ( 20,820 ) ( 20,800 )
Totals 13,045,772 13,779,357 15,045,576

Return on investment =net profit tax x =100

Total investment

=12, 856092.48 x100

212,000 = 6064.19
5.6 CALCULATION OF BREAK EVEN POINT

Variable costs

ITEMS AMOUNT(Ksh)

41
 Maintenance and repair 21,790
Telephone 4760
Postage 3970
Stationery and printing 5140
Total variable cost 35,660

Fixed Costs

ITEMS AMOUNT (Ksh)

Rent 120,000
Salaries and wages 756,000
Insurance 2,000
Total fixed costs 878,000

Contribution Margin =Total Sales -Total Variable X 100

Total Sales

= 17,694,392 - 35,660 x 100

17,694,392
= 99.80%
Total fixed cost ×100
(i) Break Even Level = contribution margin%

878,000

99.80% = 8797.60

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5.7 CALCULATIONS OF PROFITABILITY RATIOS

𝑔𝑟𝑜𝑠𝑠 𝑝𝑟𝑜𝑓𝑖𝑡
Gross Profit = × 100
𝑡𝑜𝑡𝑎𝑙 𝑠𝑎𝑙𝑒𝑠

16,759,892 x 100

17,694,392

= 94.71%

𝑁𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡 𝑏𝑒𝑓𝑜𝑟𝑒 𝑡𝑎𝑥

Net profit = 𝑡𝑜𝑡𝑎𝑙 𝑠𝑎𝑙𝑒𝑠 × 100

136900
× 100 = 4.5%
3025000

Return of Equity = net profit after tax x100

owners contribution

= 12,856092.48 X 100

100,000

= 12,856.092

𝑛𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡 𝑎𝑓𝑡𝑒𝑟 𝑡𝑎𝑥

Return of investment = × 100
𝑡𝑜𝑡𝑎𝑙 𝑖𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡

= 12,856092.48 X 100

212,000

= 6064.19

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5.8 DESIRED FINANCING

ITEM AMOUNT (Ksh)

Pre – operational Cost 52,650
Initial Working Capital 159,350
Total 212,000

5.9 PROPOSED CAPITALIZATION

ITEM AMOUNT (Ksh)

Owners’ Equity 182,000
Bank loan 30,000
Total 212,000

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