SKYLINK TECNOLOGIES

P.O BOX 505-20200

NAKURU

TITLE: BUSINESS PLAN.

CENTER NAME: RIFT VALLEY INSTITUTE OF SCIENCE AND TECNOLOGY.

CENTER NUMBER; 511101

INDEX NUMBER: 275111010271

PRESENTER: BENSON OCHIENG.

PRESENTED TO: KENYA NATIONAL EXAMINATION COUNCIL IN PARTIAL

FULFILMENT OF THE AWARD OF DIPLOMA IN INFORMATION

AND COMMUNICATION TECHNOLOGY.

PAPER NO: 1920/107

SUPERVISOR: Anderson K. Maritim.

SERIES: OCT/NOV 2019.

TABLE OF CONTENTS
DeCLAR ATION..............................................................................................................................................i
Dedication...................................................................................................................................................ii
Acknowledgement......................................................................................................................................iii
Executive summary.....................................................................................................................................iv
CHAPTER ONE..............................................................................................................................................1
1.1 Background information........................................................................................................................1
1.2 Nature of the business...........................................................................................................................1
1.3 Business location and address...............................................................................................................1
1.4 Forms of ownership...............................................................................................................................2
1.5 Type of business....................................................................................................................................2
1.6 The product /services............................................................................................................................2
1.7 Justification of business opportunity.....................................................................................................3
1.8 Industry.................................................................................................................................................3
1.9 Goals of the business.............................................................................................................................3
1.10 Entry and growth strategy...................................................................................................................4
Chapter two.................................................................................................................................................5
2.1 customers..............................................................................................................................................5
2.2 Market share.........................................................................................................................................5
2.3 competition...........................................................................................................................................6
2.4 The market share...................................................................................................................................7
2.5 Advertising and promotion strategy......................................................................................................9
2.6 SALE TACTICS.......................................................................................................................................11
2.7 Distribution strategies.........................................................................................................................12
CHAPTER THREE........................................................................................................................................13
3.0 Organization and management...........................................................................................................13
3.1 Organization........................................................................................................................................13
3.2 Recruitment training and promotion...................................................................................................18
3.3 License permits and by-laws................................................................................................................19
3.3 Supportive services..............................................................................................................................20
CHAPTER FOUR..........................................................................................................................................21

i
4.0OPARATIONAL FACILITIES.....................................................................................................................21
PRODUCTION PLAN...................................................................................................................................21
4.1 PRODUCTION FACILITIES AND CAPACITY.............................................................................................21
OFFICE LAYOUT..........................................................................................................................................22
4.2 PRODUCTION STRATEGY......................................................................................................................23
4.3 PRODUCTION PROCESS........................................................................................................................26
4.4 GOVERNMENT REGULATIONS.............................................................................................................27
CHAPTER FIVE............................................................................................................................................28
5.0 FINANCIAL PLAN..................................................................................................................................28
5.1 PRE OPERATIONAL COST.....................................................................................................................29
5.2 WORKING CAPITAL REQUIREMENT.....................................................................................................30
5.3 SKYLINK TECHNOLOGIES DISTRIBUTORS PROJECTED CASH FLOW STATEMENT FOR THE YEAR ENDING
31st DECEMBER 2019.................................................................................................................................32
5.4 SKYLINK TECHNOLOGIES DISTRIBUTORS PRO-FORMA INCOME STATEMENT......................................33
FOR THE YEAR ENDED 2019.......................................................................................................................33
5.5 SKYLINK TECHNOLOGIES DISTRIBUTORS BALANCE HEET AS AT 31 ST DECEMBER 2019........................34
5.6 BREAK EVEN LEVEL..............................................................................................................................35
5.7 PROFITABILITY RATIONS......................................................................................................................38
5.8 DESIRED FINANCING............................................................................................................................39
5.9 PROPOSED CAPITALIZATION................................................................................................................40

ii
DECLAR ATION

I declare that this business plan is my original work and has never been presented for

examination purposes to any examination council before.

Signature ……………………………

Date ………………………………2019

Supervisors name………………………..

Date …………………………………2019

iii
DEDICATION

I dedicate this manuscript to my family, for their effort in my academic excellence.

iv
ACKNOWLEDGEMENT

I first thank God for his protection, love and grace through the writing of this business plan. I

also express my deep gratitude to thank my parents including my entrepreneurship lecturer Mr.

Anderson K. Maritim. They all contributed into the success of the writing of the business plan.

v
EXECUTIVE SUMMARY

Business description

The proposed business plan Skylink technologies computer services will be sole proprietor. He

pursued a DIPLOMA course in information communication technology at Rift Valley I institute

of Science and Technology.

The business will deal with computer services and will be located within county

Market plan

Marketing is the key managerial function which is targeted at finding a good market for the

product produced finding what the customers’ needs monitoring change in the market place for

business survival. This chapter will show the customers and competitors to the proposed business

and this will help the business to its marketing strategies, policies and tactics required to exploit

the market opportunities.

It will also enable the business to develop marketing strategies policies and tactics and also help

the business to show the strength and weaknesses of the competitors

Organization plan

The business will have a manager, accounts, clerk, sales men and two watchmen for the smooth

running of the business.

vi
Operational plan

For the business to succeed qualified personnel will be employed and the manager shall design

the brand which will be used to market the product and draw a plan how a business will use its

cash flow.

Financial plan

Financial plan is very important for any business for its plans it shows the financial position of

the proposed business by calculating all the transactions that takes place in the business.

Financial plan keeps the business to know when an operation is profit /loss. The chapter contains

the pre-operational cost statement, working capital, requirement statement, projected cash flow

and outflow, pro-forma income statements, pro-forma balance, breakeven point; desired financial

and proposed capitalization business capital will be ksh.1000000

vii
viii
CHAPTER ONE

1.1 BACKGROUND INFORMATION

The entrepreneurs name GIDEON. he is 19 years old single resident KERICHO town
KERICHO district , Bomet County currently .he is pursuing a DIPLOMA course in human
resource management at rift valley institute of science and technology I have decided to open a
phone distributor after my course . I obtained my knowledge. Through business exhibition and
the course undertaking.

1.2 NATURE OF THE BUSINESS

The business proposed to be started operations under the name SKYLINK TECHNOLOGIES to
all and china is the country were the phone are exported from .the 2business shall be located at
plot 525025 and it will be registered from the name Benson Ochieng.

The activities of the enterprise will be iPad selling the product such as cards charging system
Sims Card replacements

1.3 BUSINESS LOCATION AND ADDRESS

The business location will be Kericho Nakuru highway, it will be situated because of enough

security and good communication networks and hence it will be near stage were all people

travelling will access to the shop.

The business address will be

SKYLINK TECHNOLOGIES DISTRIBUTORS COMPANY

PO BOX 22 KERICHO

1
1.4 FORMS OF OWNERSHIP

The business shall be registered under sole proprietorship having its requirement and legal
DIPLOMA from the district and municipal council of Kericho.

The capital of the business shall be obtained as the owner shall contribute 90% on saving and the
cash will be 10% be borrowed from friends

1.5 TYPE OF BUSINESS

The type of the business I will start will be sole proprietorship for rendering services of computer

and offering computer lessons and typing.

1.6 THE PRODUCT /SERVICES

Skylink technologies Distributors Company will mainly be dealing with offering services and

teaching computer lessons. It will ensure that they sell services which are of high quality i.e. CDs

.the proposed business will use polythene bags for packing its product these polythene bags

should be printed with the name of the business as a way of advertising the business. Through

selling quality services at an affordable price the business will gain more customers thus making

a reasonable profit as compared to the competitors. Also in the case of CDs he will be supplied

with the original those composed with song and they will reduce piracy.

2
1.7 JUSTIFICATION OF BUSINESS OPPORTUNITY

The business is expected to succeed because of the following;

Good means of transport along the road, Labor market, and high demand the operation of phone
center.

1.8 INDUSTRY

SKYLINK TECHNOLOGIES will be operating word wide as means of communication.

According to my location there will be no landlines and people asses to communication

networks.

1.9 GOALS OF THE BUSINESS

 Making profits. This by increasing of product and all closing needed by customers.
 Improving standard of people around by creation of employment.
 People became modern by using modern phones.

3
1.10 ENTRY AND GROWTH STRATEGY

It should have license from local authority so as to operate will legality. The advertisement
should be through all language, radio station and newspapers. The entire phone will be on market
to profit all people from different classes. The shop will be giving out credit to all customers.

Growth strategy

My shop will be customer oriented business will improve their living standard.

4
CHAPTER TWO

2.1 CUSTOMERS

The business will be located at Kericho and comprise of all the potential customers who stay
near the shopping center.

2.2 MARKET SHARE

This will bring awareness to all customers because of analysis of the market. The stock will be
there for customers to get all they need. And see demand of type of phone because of different
varieties.

5
2.3 COMPETITION

The competition is very high hence I will ensure I give each customer 20% discount to be fair
and get many customers.

The competitors will be;

Competitors Strength Weakness

MALIMALI Famous Irregular opening
Regular opening Too expensive
Proper stock Poor customer relation
CHAMALUK Good customer relation The business is located in
Good time managers rural area
Good methods of Poor road transport
advertisement
CHINA Enough employees Many customers congestion
Proper stoking Very small shop
Good sell Located near the road hence
poor environment

6
2.4 THE MARKET SHARE

This refers to the segment of the market that an enterprise is capable of achieving to serve in

relation to the competitors. The business is aiming at attaining 50% of the market share within

the first three years of its operation. The main reason is the business will be targeting a great

number of customers whose needs are not catered for. The proposed business will attain the

proposed market share through the following ways:

Building customer’s satisfaction

This will be done through offering quality services at an affordable price. Then the following:

Hygiene

By ensuring that the firm compound and rooms are clean and tidy

Good customers’ relation

He will ensure that he employees trained sales personnel who will treat the customers well as

required.

Pricing

He will offer fair prices for highly qualified products to ensure that customers can be able to

afford.

7
After sale services

He will offer discount to commercial and institutional customers.

Table and pie chart below shows the market share

China Mobile Distributors 50%

Mid-west Phones 25%

Chamaluk 15%

MALIMALI 10%

market share

CHINA
MID WEST
CHAMALUK
MALIMALI

8
2.5 ADVERTISING AND PROMOTION STRATEGY

This will be done to inform the customers of the existence of the business. It will be done

through the following ways:

Posters

He will put posters around the town shopping center indicating the services offered and prices

and location of the business.

Calendars

The calendars bearing the name of the business and the picture of the firm will be printed and

offered to customers at the beginning of each year.

Radio

Advertisement will be run every second week of the month in the evening in kiss fm and citizen

the 7.00 pm news. These two channels are ideal because they transmit the news in Kiswahili and

English and widely listened.

Pricing strategy

Pricing is the value of the product by the market expressed in monetary form. It determines how

the firm product will be valued in the market.

9
As for the proposed business price will be dependent on the amount of items. These include:

i. Price of the competitors

ii. The cost of production

iii. Demand and supply

iv. Quantity of the product

The selling price will be well determined by the following:

Expenses: total cost incurred during the production process

Demand; when the demand is high the prices are high

Transport cost: increase in transport cost means increase in prices of the commodities and vice

versa.

10
2.6 SALE TACTICS

The owner of the business will introduce payment installment where the customer pays deposit

which is half the price when bought in cash.

The following are the methods used in selling the products/services.

i. Sales in the field

ii. This is where products like CDs and stationeries are taken where they are inadequate.

iii. Trade fair and exhibition

This is the care where products are taken to show and sold. The selling method he will employ

will be selling directly to the customers. Regular customers will be provided with gift to

encourage them in coming back to the premises for more goods and services thus engaging

friends and relatives.

11
2.7 DISTRIBUTION STRATEGIES

The business will deal directly to its customers this will enable the management to be in close

contact with its customers thereby monitoring their responses in regard to satisfaction,

dissatisfaction new request, comment and suggestion sales people will be used to link distance

customers with the business. The mean of transport to be used will be road transport from town

to the firms destination it will cost ksh.500 per month.

12
 CHAPTER THREE

3.0 ORGANIZATION AND MANAGEMENT

3.1 ORGANIZATION

A good proposed qualified management is required for the business to attain its target. Good

organization and management plan will enable the business to expand and also to profit any

growth.

MANAGER

SUPERVISOR

COMPUTER WATCHMAN
TEACHER SALESMAN

13
THE MANAGER-BENSON OCHIENG

The manager of the business will be the owner of the business because he has all the skills

required by the business.

Duties and responsibilities

i. Paying employees

ii. Decision making

iii. In charge of promotion and demotion

iv. Solving problems in the organization

v. Assigning duties

vi. Plans the business activities

14
Key management personnel number and duties

Classification of jobs means that in the proposed business classes of work in the business exist

for the efficient duties to be done and hence customers to be served at the right time without

delays.

Manager

The manager is responsible of all activities that take place in the business.

Qualifications and experience

i. Must be 23-40 years

ii. Must have good communication skills

iii. Should have DIPLOMA in computer studies

iv. Must have gone through entrepreneurship training

v. Should have related skills apart from computer literacy

Supervisor

Qualification and experience

i. Must be 24-40 years

ii. Should have related skills and authoritative personnel

iii. Must be fluent in communication

iv. Should be self-drive and discipline person

15
Duties and responsibilities

i. Responsible for all the supervision duties in the business

ii. Should be self-driven and discipline

iii. To supervise the attendance register for the employees in the business

Computer teacher

Qualification

i. He should be a holder a diploma in computer science

ii. Should be discipline and self-driven

iii. Should be aged 25-35 years

iv. Duties and responsibilities

v. Should be able to communicate both Kiswahili and English

vi. He should supervise attendance register for students

vii. Should be able to control the computers

Sales men

Qualifications

i. Should be a holder of a diploma in sales and market

ii. Should have good public relation and trustworthy

iii. Should be a good time keeper

iv. Should be aged 23-35 years

16
Duties and responsibilities

i. All the business transactions are kept by him

Watchman

Qualifications

ii. Should be aged 30-35 years

iii. Should have a DIPLOMA from Security Council

iv. Should be trustworthy

v. Duties and responsibilities

vi. Should be responsible for all the security in the business

vii. Should keep the records of visitors coming into the business

Monthly salary schedule

Title Salary

Manager 10000

Supervisor 8000

Salesmen 4500

Watchman 7000

Computer teacher 7000

Total 36500

17
3.2 RECRUITMENT TRAINING AND PROMOTION

The manager of the business will be advertised on a local newspaper and interested part is

required to part is required to apply for the vacancy he suits and all the recruitment.

Training of computers

The managers, supervisor and computer teacher will be first people to be trained in the firm so as

to enable than to gain experience concerning the business. The manager should also ensure that

all employees are trained and attend seminars so as to improve their skills.

Promotion of employees

After training the employees their salary should be increased promotion only goes according to

the levels of education and hardworking in place of work can be measured by assignment of

duties by the manager and its productivity. The promotion given to employees is meant to

motivate and encourage them to put more effort hence earning good return in business.

Remuneration and license

Employees will be remunerated for the work done. The benefit got from the business will assist

both the employer and employee. The incentive given to workers encourages them to put more

efforts hence increasing the production.

Incentives the manager can use for his production include:

i. Paying employees satisfactory salaries

ii. Giving employees a chance of seminars

18
 iii. Promotion

3.3 LICENSE PERMITS AND BY-LAWS

The business must be licensed by central government and local authorities for it to start its

operation. The ministry of trade will have to approve the report of the business and forward it the

applicant indicating the names of the business and the types of the business.

Legality of the business will prove that it will be started and run through a required government

regulation. It will also include direct licensing insurance and taxation. Different types of license

required are:

Trade license which certifies that the business has been allowed to operate

Health license in which proper sanitation and hygiene condition in general are considered

19
3.3 SUPPORTIVE SERVICES

The firm will employee supportive services that will work hand to hand for the smooth running

of the business. The banker of the business will be equity it will be depositing and

withdrawing money in the account opened by the business. This is where also it will require

loans. The accountant of the business will be the supervisor of the business. The business advisor

will be Mr. Shan owns a cyber café in the town.

Support services include:

Banking services

The accountant will deposit money in weekly basis the bank charges per month will be ksh.750

Insurance services

Insurance policy covers the risk of fire by registering with

Electricity

The business will use electricity from Kenya power and lightning company .Their charges will

vary on usage.

20
CHAPTER FOUR

4.0OPARATIONAL FACILITIES

PRODUCTION PLAN

When a business is in operation, lit needs various machines and equipments to ensure smooth
running of the business and good performance. It will also ensure there is easier efficiency in
customer services.

4.1 PRODUCTION FACILITIES AND CAPACITY

The business being a newly establihed one will require equipment and facilities to start it
operation efficiently.

The following table is a summary of equipment and facilities required and the manner of
acquisition and each facility.

Machinery and Suppliers Quantity Total costs

equipment

Neo mobile phones Eldo mattresses 125 pieces 50,000

Mobile charges Eldo mattresses 60 pieces 2,000

Scratch cards Gillats Safaricom 160 pieces 10,000

dealers
Electricity K.P.L.C - 30,000

Working table Maisha furniture 3 1,500

Chairs Naito furniture 5 1,500

Typing machine Eldo mattresses 1 7,500

Mobile Gallots safricom 16 pieces 10,000

dealers
Other facilities Eldo mattresses 5,000

Total cost 117,500

21
OFFICE LAYOUT LIBRARY STAFF
ROOM
CLASSES

CLASSES

MANAGERS OFFICE SHOP

PHOTOCOPIER & ROOM

SUPERVISOR

RECEPTION

22
4.2 PRODUCTION STRATEGY

a. Monthly material requirement

Material Quality Cost per unit Total cost

Phones 100 5000 500,000
Charger 200 150 30,000
Scratch cards 200 50 10,000
Earphones 200 100 20,000
Total 560,000

23
 b. Monthly production expense

Production Cost
Rent 1000
Electricity bill 5000
Stationary 1000
Advertisement 1500
Transport 4000
Total 12,500

Cost of production = monthly material requirement + monthly labor requirement + monthly

production expenses

= 560,000 + 12,500 + 29,500

= 602,000

24
Monthly labor cost

Labor Number of employees Cost (Kshs)

Manager 1 10,000

Human resources 1 5,000

Accountant 1 4,000

Security 1 3,500

Salesman 1 3,000

Watchman 2 4,000

Total 29,500

This involves the additional of all monthly material, labor expenses and monthly operational
expenses

25
4.3 PRODUCTION PROCESS

Although the business enterprise will commonly deal with a heady produced products from the
manufacturer. Some products will be required to be made within e.g. connecting the phones that
may be in parts.

 First machine and equipment are assembling ready for the day’s activities.
 Phones chargers are displayed at their position.
 Selling price tag is then indicated each equipment according to its quality.
 Record at day to day transactions sales to know how sales are either at a profit or loss
then for store purposes.
 At the end of month the accountant is supposed at the balancing of the whole month to
know how the business is at a profit.
 The work is then closed after. All operations are made and clarifying to the owner.

26
4.4 GOVERNMENT REGULATIONS

Regulation of the government are rules and laws governing the business should follow the law
and how it is stated in the Acts i.e. the business should have a trade license which the owner
must ensure registration is done or time so as to facilitate the daily running with no problem. The
warning condition safety and proper salary should also be ensured.

a.) Health regulations

According to the Kenya laws and regulation, healthy process should be observed as applied in
company’s Act (cap 266) of laws of Kenya.

b.) Registration

The business will be registered with the register of business for its legality according to the
registration Act (cap 274) of Kenya laws of governing business i.e. newly developing business.

c.) Environmental legislation

This is under the ministry of local government Act (Cap 265) of Kenya’s law in conjunction with
National Environmental Management.

d.) Permits and license

The process of obtaining license and permit of business is under government Act (cap 499)
which allows an entrepreneur to obtain a sole proprietorship license to run the business

27
CHAPTER FIVE

5.0 FINANCIAL PLAN

This is where all financial to be incurred proposed business are shown such finances operational
cost, working project cash flow, pro-forma balance heet, break-even level expected probability
ratio designed financial and capitalization.

28
5.1 PRE OPERATIONAL COST

This is the amount of money required by the proposed business to acquire its facilities to enable
it to run its daily operations.

ITEMS AMOUNT (KSH)

Insurance 25,000
Trade license 1,200
Telephone 1,800
Water installation 2,000
Electric installation 2,500
Advertisement 1,500
Furniture 100,000
equipments 60,000
Total 194,000

29
5.2 WORKING CAPITAL REQUIREMENT

CURRENT ASSETS YEAR 1 YEAR 2 YEAR 3

Stock of raw material 410,000
Working in progress 25,000 12,000 34,000
Stock of finihed goods 390,000 360,000 400,000
Debtors 12,000 7,000 3,000
Cash in hand 40,000 50,000 60,000
Cash at bank 72,000 76,000 82,000

Total 949,000 505,000 579,000

30
 5.3 SKYLINK TECHNOLOGIES DISTRIBUTORS PROJECTED CASH FLOW STATEMENT FOR THE YEAR ENDING
31ST DECEMBER 2019

ITEM JAN FEB MAR APRIL MAY JUNE JULY AUG SEP OCT NOV DEC TOTAL
Cash inflow Ksh Ksh Ksh ksh Ksh Ksh ksh Ksh ksh Ksh Ksh ksh ksh
Cash sales 130,0000 100,000 100,000 95,000 115,000 105,000 120,000 110,000 120,000 11,000 105,000 90,000 1,201,000
Collection from 10,000 120,000 10,500 11,000 15,000 1,200 1400 13,000 10,000 15,000 207,100
debtors
Cash at bank 130,000 10,000 140,000 175,000 6,000 15,000 7,000 8,000 9,000 12,000 10,000 9,000 531,000
Cash at hand 200,000 400,000 60,000 100,000 150,000 50,000 10,000 180,000 20,000 150,000 10,000 11,000 1,341,000
Total cash inflow 470,000 510,000 420,000 380,500 282,000 185,000 138,200 299,400 162,000 183,000 125,000 125,000 3,280,100
Cash outflow
Purchases 40,000 50,500 10,000 72,000 20,000 180,000 14,000 12,000 26,000 50,000 20,000 30,000 524,500
Loan repayment 1000 1000 1000 1000 1000 1000 1,000 1000 1000 1000 1000 1000 12,000
Rent 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 24,000
Salaries & wages 35,000 35,000 35,000 35,000 35,000 35,000 35,000 35,000 35,000 35,000 35,000 35,000 420,000
Transport 500 300 400 300 300 500 400 250 350 200 300 400 4,200
Water 1800 1,600 1,500 1000 1,300 1,000 1400 1300 1400 1300 1600 1300 16,500
Stationery 10,000 500 500 400 600 500 500 40,000
Postage 500 400 600 300 700 500 200 600 700 500 400 600 6,000
Electricity 1,500 1,200 1,200 1,500 1,500 1200 1000 1000 1000 1200 1200 1000 14,500
Telephone 1,500 1,500 1,200 1,200 1,500 1200 1000 1000 1000 1200 1200 1000 14,500
Insurance 2,500 2500
Advertisement 2,800 1,800 1,600 800 800 800 800 800 800 800 800 800 13,400
Maintenance 100 200 100 200 180 160 200 240 280 160 220 160 2200
Total cash 99,200 96,000 54,600 115,800 64,280 223,760 57,600 55,190 69,530 93,860 64,220 73,260 1,094,300
outflow
Net cash 370,800 414,000 365,400 264,700 217,720 38,760 80,600 244,210 92,470 89,140 60,780 51,740 2,185,800
Tax % 18,540 20,700 18,270 13,235 10,886 1938 4,030 12,210.5 4623.5 4457 3,039 2,587 109,290
Net cash after tax 352,260 393,300 347,130 251,465 206,834 36,822 76,570 231,999.5 89,847 84,683 57,741 49,153 2,076,510

ASSUMPTION TAX 5%

32
5.4 SKYLINK TECHNOLOGIES DISTRIBUTORS PRO-FORMA INCOME
STATEMENT

FOR THE YEAR ENDED 2019

Sh. Sh.

Sales 1,201,000

Opening stock 410,000

Add purchases 524,500
544,500 544,500
Gross profit 656,500

Less expenses
Salary and wages 420,000
Telephone 14,500
Electricity 14,500
Water 16,500
Transport 4,200
Postage 6,000
Insurance 2,500
Advertisement 13,400
Stationery 40,000
Repair & maintenance 2,200 533,800
Net profit 122,700
Tax 5% 6135
116,565

33
5.5 SKYLINK TECHNOLOGIES DISTRIBUTORS BALANCE HEET AS AT 31ST
DECEMBER 2019

Fixed assets Sh. Sh. Sh.

Cost Dep B.v
Furniture 100,000 2,000 98,800
Equipment 60,000 1,200 58,800
157,600
Current assets
Stock of raw material 410,000
Stock of finihed goods 390,000
Debtors 12,000
Working in progress 25,000
Cash in hand 40,000
Cash at bank 72,000
949,000
Current liability
Loan repayment 12,000 937,000
Financed by
Owner’s equity 800,000
Add net profit 122,700
Loan from equity bank 14,300
937,000
Assumption
Depreciation 2% on
Furniture

34
 Equipment

5.6 BREAK EVEN LEVEL

VARIABLE COST AMOUNT

Transport 4,200

Water 16,500

Stationary 40,000

Postage 6,000

Electricity 14,500

Telephone 14,500

Advertisement 13,400

Maintenance 2,200

Total 111,300

35
FIXED COST ANALYSIS

FIXED COST AMOUNT

Salaries & wages 420,000

Insurance 2,500

Rent 2,000

Total 424,500

36
Total contribution margin

= sales – Total variable cost

= 1,201,000 – 111,300

= 1,089,700

Contribution margin percentage

= contribution margin x 100

Sales

= 1,089,700 x 100
1201,000

= 90.73%

Breakeven level of sales

Total fixed cost x 100

Contribution margin

= 424,500 x 100
90.73

= 467,871.7

37
5.7 PROFITABILITY RATIONS

i. Gross profit percentage

= Gross profit x100
sales

= 656,500 x 100
1,201,000

=54.663%

ii. Return on equity

= Net profit after tax x 100
Owners equity

= 116,565 x 100
800,000

= 14.57%

iii. Return on investment

= Net profit after tax x 100
Total investment

= 116,565 x 100
814,300

= 14.31%

38
5.8 DESIRED FINANCING

ITEM AMOUNT

Pre – operational cost 194,000

Working capital 949,000

Fixed assets 424,000

Total 1,567,000

39
5.9 PROPOSED CAPITALIZATION

ITEMS AMOUNT

Total investment 560,000

Owners contribution 800,000

Friends or relatives 100,000

Bank loan 14,300

Total 1,474,300

40
 DIRECTION TO THE BUSINESS PREMISES

APPENDICES

HIGHWAY

T
o

T
Family
o
Bank
w
n

Skylink
Go Down
Technologies

Stage

KEY
SOTIK ACADEMY PRIMARY & SECONDARY

AIC CHURCH

VITAL SUPERMARKET

NATIONAL BANK

41