NAME OF THE BUSINESS: EDITHAN ELECTRICAL & ELECTRONICS

BUSINESS :

NAME : MAUTIA ISAIAH

INSTITUTE : THIKA TECHNICAL TRAINING INSTITUTE

INDEX NUMBER :

COURSE : DIPLOMA IN ELECTRICAL AND

ELECTRONIC (POWER)

PRESENTED TO : KENYA NATIONAL EXAMINATION COUNCIL

YEAR OF EXAMINATION

SUPERVISOR : MR.JOHN KAMAU

SERIES : JULY 202_

DECLARATION
I declare that this project is totally my own effort from concept of research up to documentation of it.

This is my original work and has not been presented before. Photocopying of this copy or extract without

my full consent is prohibited.

NAME :

SIGNATURE :

DATE :

Declaration by the supervisor

NAME :

SIGNATURE :

DATE :

ii
DEDICATION
I dedicate this work to my beloved mother Kemuma, my sister Joyce and my brother Shadrack for their

moral and financial support during my studies and the writing of this work.

iii
ACKNOWLEDGEMENT
My greatest gratitude goes to the almighty God for giving me a gift of life and good health. I

acknowledge my friends and family for the support during the entire time I was writing my business plan.

Without their inspiration, prayers and financial support I would have given up. I also acknowledge Thika

Technical Training Institute for the provision of good and conducive learn environment. Lastly, I thank

my supervisor Mr. John Kamau for the guidance and support when needed.

iv
Table of Contents
DECLARATION............................................................................................................................................................ii
DEDICATION..............................................................................................................................................................iii
ACKNOWLEDGEMENT...............................................................................................................................................iv
EXECUTIVE SUMMARY..............................................................................................................................................vii
1.0 BUSINESS DESCRIPTION......................................................................................................................................vii
2.0 MARKETTING PLANNING....................................................................................................................................vii
3.0 ORGANISATION AND MANAGEMENT PLANS......................................................................................................vii
4.0 OPERATION /PRODUCTION PLAN......................................................................................................................viii
5.0 FINANCIAL PLAN................................................................................................................................................viii
CHAPTER ONE............................................................................................................................................................1
BUSSINESS DESCRIPTION...........................................................................................................................................1
1.1 BUSSINESS NAME.................................................................................................................................................1
1.2BUSINESS LOCATION AND ADDRESS.....................................................................................................................1
Business location.......................................................................................................................................................2
1.3FORM OF OWNERSHIP..........................................................................................................................................3
1.4 TYPES OF BUSINESS..............................................................................................................................................3
1.5 PRODUCTS AND SERVICES....................................................................................................................................4
1.6 JUSTIFICATION AND OPPORTUNITY.....................................................................................................................4
1.7 INDUSTRY.............................................................................................................................................................5
1.8 GOAL OF THE BUSSINESS.....................................................................................................................................5
1.9 ENTRY AND GROWTH STRATEGY.........................................................................................................................6
CHAPTER TWO...........................................................................................................................................................7
2.0 MARKET PLANNING..............................................................................................................................................7
2.1 CUSTOMERS.........................................................................................................................................................7
2.1.1 Institutional customers.....................................................................................................................................7
2.1.2 Construction sites.............................................................................................................................................7
2.1.3Individual customers..........................................................................................................................................7
2.2 MARKET SHARE....................................................................................................................................................7
2.3 COMPETITON.....................................................................................................................................................10
2.4 PROMOTION AND ADVERTSMENT.....................................................................................................................12
2.4.1 Promotion.......................................................................................................................................................12
2.4.2 Advertisement.................................................................................................................................................12
2.5 PRICING STRATEGIES..........................................................................................................................................13

v
2.6 SALES TACTICS....................................................................................................................................................13
CHAPTER THREE.......................................................................................................................................................15
3.0 Organization and Management Plans................................................................................................................15
3.1 Organization plans and management................................................................................................................15
3.2 PERSONNEL, NUMBER AND DUTIES...................................................................................................................15
3.3 RECRUITMENT, TRAINING AND PROMOTION....................................................................................................18
3.3.1 RECRUITMENT.................................................................................................................................................18
3.3.2 TRAINING........................................................................................................................................................18
3.3.3 PROMOTION...................................................................................................................................................18
3.4 RENUNERATION AND INTENSIVE.......................................................................................................................18
3.5 LICENSE, PERMITS AND BY-LAWS.......................................................................................................................19
3.6 SUPPORT SERVICES............................................................................................................................................19
CHAPTER FOUR........................................................................................................................................................21
4.0 PRODUCTION FACILITIES AND CAPACITY...........................................................................................................21
REPAIR AND MAINTAINANCE...................................................................................................................................21
4.1 PRODUCTION STRATEGIES.................................................................................................................................21
4.2 PRODUCTION PROCESSES..................................................................................................................................22
4.5 GOVERNMENT REQULATION.............................................................................................................................23
4.5.1 Registration of business act cap 145...............................................................................................................23
4.6 WORKSHOP LAYOUT..........................................................................................................................................24
CHAPTER FIVE..........................................................................................................................................................25
5.0 FINANCIALPLANING...........................................................................................................................................25
5.1 PRE-OPERATIONAL COST....................................................................................................................................25
5.2WORKING CAPITAL..............................................................................................................................................25
5.2.1 ESTIMATION OF WORKIMG CAPITAL..............................................................................................................25
5.2.2 RRO-FORMA INCOME STATEMENT.................................................................................................................26
5.4 BALANCE SHEET...........................................................................................................................................27
5.7 BREAK EVEN LEVELS.........................................................................................................................................28
5.8 PROFITABLITY RATIOS........................................................................................................................................29
APEDIX..................................................................................................................................................................... 31

vi
EXECUTIVE SUMMARY

1.0 BUSINESS DESCRIPTION

The firm name is Edithan Electrical and Electronic. The business will be located at Kisii

town, Gorofa Moja plaza, house number 002.phone number is0710316848 Email of the

business isedithanelectronic7@gmail.com. Business website www.edithanelectronic.co.ke

The business is sole proprietor ship business managed and operated by business manager

2.0 MARKETTING PLANNING

Potential customer of Edithan Electrical and Electronics expected to be individual

customers and institutional customers, potential customer will purchase goods at any time

of the day, to the customers who buys variety of goods from the firm will be awarded free

items as an offer, free delivery will be for all customers who buy goods from the firm. The

main method to be used in the business is advertising method, this is because it can reach

a large number of people at a very short time. while determine the price of our service and

product it will vary with quantity of the product.

3.0 ORGANISATION AND MANAGEMENT PLANS

The business will have a well-structured organization plan to ensure easy and effective

achievement goals. The film will be managed by the manager. The firm will employ

around each and every worker must have some qualifications so as to get the job. He /she

must have some duties and responsibilities to do in the firm. Advertisement of the

business will be done in the local radio stations. Training will be done to the employees as

a way of sharpening their skill for better performance of the business, for an employee to

be promoted he /she must have some qualities.

vii
4.0 OPERATION /PRODUCTION PLAN
The firm requires some important items so as the business to continue. Business items

should be maintained by the workers. Repair of broken items should be done to make sure

the business goes on smoothly. The design of the product will be a system design. The

firm has to take alone from Equity bank, which will be returned after one year. The

business needs license acquired from municipal council of Kisii.

5.0 FINANCIAL PLAN

The business requires some computers for the calculation and data storage. The

salesperson cannot do without the computer which enables him/her to keep records of 2

years. The business also requires the CCTV for security purpose.

viii
 CHAPTER ONE
BUSSINESS DESCRIPTION

1.1 BUSSINESS NAME

The name of the business will be Edithan Electrical &Electronic. Reason for giving the business this title

is because I wanted to honor the name of my late loved grandma. I want the business to be a success and

help the economy. The business will be officially being opened this January 2025.The main aim to start

this business is to produce goods and services of best quality to the customers.

1.2BUSINESS LOCATION AND ADDRESS

The firm name is Edithan Electrical and Electronic. The business will be located at Kisii town Gorofa

Moja plaza, house number 002.phone number is 0710316848 Email of the business

isedithanelectronic7@gmail.com. Business website www.edithanelectronic.co.ke

The address will be:

EDITHAN ELECTRICAL AND ELECTRONICS,

P.O.BOX 4554,

KISII.

1
 Business location

Kisii – Kisumu
highway
Kisii national
polytechnic
Kisii town PAG
Edithan Church
Electrical &
Electronic

Kisii-Nairobi highway

Kereri girls’
highschool Kisii School

Kisii University
Kisii – Kilgoris road

2
1.3FORM OF OWNERSHIP
The business will be owned and operated by the manager.

He is qualified personnel in since he obtained Diploma in Electrical and Electronics in Thika technical

training institute.

The entrepreneur will employ about three workers in the business.

The business will be a sole proprietorship.

Advantages of sole proprietorship:

 Fewer registration fees

 More straight forward banking

 Simplified business ownership

 Easy to maintain

 Easy in decision making

 Easier process and fewer requirement for business taxes

 Less paperwork to get started

1.4 TYPES OF BUSINESS

It will be a start-up business.

The owner will install playbill for the customers.

The owner of the business intents to start the business once she is done with the certificate.

The initial capital is= 900,000

Personal contribution =270,000

Family contribution =270,000

Loan from bank =90,000

Friends and others=270,000

3
1.5 PRODUCTS AND SERVICES
The business will provide products such as:

Home accessories: TVs, decoders, aerials, sound systems and DVDs.

Phones accessories: chargers, screenprotectors, phone covers, headphones and earphones.

Electrical tool: screws drivers, pliers, hammers, side cutter, hacksaws, drill and insulting tape.

All kind of electrical fittings: sockets, switches bulbs, bulb holders, pattress boxes and PVS pipes.

Lighting fittings: Chandeliers, wall brackets, ceilings lights and downlighters

The offer will be available such as free delivery to the customers. Those products will be high quality and

long lasting so that they cannot rust. Products will be of the same size, shape and color according to the

customers.

The business will operate daily for six days, starting from 7: OO A.M to 7:00 p.m.

1.6 JUSTIFICATION AND OPPORTUNITY

Reason for choosing this form of business is because they are few electrical and electronic shops in the

region. Employment opportunities will be provided to the youths around the economy. Computers will be

used for calculation of the price.

Contribution that the business makes to the local community:

 There will be source of employment due to need of man power

 Provision of goods and service for the local community

 Good mode of transport and communication

 Increase living standard since they are getting payment

 Provision of security to avoid theft

4
1.7 INDUSTRY
The business will medium in size so as to accommodate all the products required by the customers. The

level of technology will be applied, use of the computers and CCTV will be also available.

1.8 GOAL OF THE BUSSINESS

The aim of the business is to make profit and to provide goods of high quality to the customers. Products

will be of fair price to the customers.

Opening of the business early in the morning will be strictly be followed.

The following are the long-term goals:

 Repayment of loan from the bank

 To satisfy client while earning profit

 Building pricing programs based on the assumption

 Creating a brand

The following are the short term:

 Attracting engaging customer

 Promote products and services

 To establish customer services

 Educate on product and services offered

5
1.9 ENTRY AND GROWTH STRATEGY
Edithan Electrical and Electronic will have the following strategy for the business:

 Will open a branch in various town for selling products

 Will improve by building as soon its own premises and expand to whole sale in future

 The business will also improve standard of people and expand of the business

 The following are ways to penetrate and gain acceptance in the business

 Considering the competitive advantage

 Looking at the weakness among competitors

 Through advertising in the social media

 Through attracting engaging customer

The owner of the business will use his /her creativity in innovation of new idea for producing goods and

services hence facilitating the growth of the business for more expansion.

6
 CHAPTER TWO
2.0 MARKET PLANNING

2.1 CUSTOMERS
The potential customers of Edithan Electrical and Electronic are expected to be individual customer,

construction sites and institutional customers.

2.1.1 Institutional customers

These customer purchase goods for industrial purposes, they include government and non-government

organization.

2.1.2 Construction sites

These are the sites which are upcoming or are under construction who we will sell our product to enable

them to do piping and fitting.

2.1.3Individual customers
These are potential customers who are going to buy directly from the business. These include the passer

buy who passes near the shop and decide to buy. Potential customers will purchase goods at any time of

the day either in the morning or in the morning.

Customer will be of any gender, region and the occupation as long as they are willing to purchase the

product. The purchasing pattern of the customers will be on weekly basis, the customers will be provided

with till number as mode of payment once they have purchased the goods.

2.2 MARKET SHARE

The market shares it sales measured as a percentage of an industry total revenue. the film hopes to obtain

its share of the market which is expected to be 36% of the total population. The percentage is expected to
7
rise as the film establishes. The film will ensure loyalty to its customers through providing best quality

services. Other electrical and electronics will have, Khaniaty 29% Nyacheki 25% and Linear 10%

The following is the pie chart representing the percentage of each business: -

Sales
36

Edithan
130
Khaniaty

90 Nyacheki

Linear

106

Edithan
130/360*100=36%
Khaniaty
106/360*100=29%
Nyacheki
90/360*100=25%
Linear
36/360*100=10%

8
The following table shows expectation of the market share in Edithan electronic &electronics stores and
its competitors and their customers

competitors name Individual customer Institutional Total

customers
Edithan 500 300 800
Khaniaty 400 200 600
Nyacheki 300 250 550
Linear 200 100 300

9
 2.3 COMPETITON
Competitors Strength Weakness Opportunity Threats
name
EDITHAN  Affordable  availability of  Lack of
ELECTRICAL& price good workers customer
ELECTRONICS  Wide market  good mode of  High level
 Quality product transport and of
 Offers product communication competiti
 Free delivery  availability of on
 Modernized social media
sales network that
 Moore offers free
experience advertise
 Adequate  its near busy
working space road
 Experienced  the business in
workers near the market
 Adequate
capitals

KHANIATY  wide market  Long working  The business is  Lack of

ELECTRICAL&  favorable hours near the source enough

10
ELECTRONICS location site  Lack enough  Availability of employee
 good working stocks in the goods s
experience business  Lack of  Poor
 experienced  Inadequate reliable mode of
personnel working space customers transport
  Lack of
customers
 High level
of
completio
n
NYACHEKI  Suitable  Inadequate  Improved  No
ELECTRICAL& location finance infrastructure banking
ELECTRONICS  Good customer  Low quality  Availability of services
service staffs goods  Poor
 Good work  poor working  Availability of mode of
experience conditions network transport
 High  Lack of
population customers

LINEAR  Sufficient  Lack enough  Improved  Lack of

ELECTRICAL& working workers infrastructure customers
ELECTRONICS  Good working  Inadequate  The business is  High level
experience stocks near the market of
 Adequate  Lack of  Availability of customers
capital adverse goods  No
 Affordable technology  God made of banking
price  Inadequate transport services
 Suitable finance
location 

11
2.4 PROMOTION AND ADVERTSMENT

2.4.1 Promotion
The business will adapt suitable methods to attract the customers. The major way includes offering
samples where can browse internet

To those customers who buys a lot of things from the business will be added one extra item as a discount
and free delivery of good to their destination.

2.4.2 Advertisement
The business will be advertised before it is established. The advert will be made through posters which
will cost 2,000.

The business will use posters which will be put in different location in order to inform and get customers.
The business will pass information to potential customers by use of door-to-door campaigns, walking in
the streets and providing information about the importance of the goods. This is to attract more customers
thus improving sales

Trough social media platforms such as Whatsapp, Facebook, and

YouTube to advertise their products and services.

2.5 PRICING STRATEGIES

While determining the price of our services and products it will vary with quantity of the product. At the
start of the business products directed to the customers will be selling at the affordable price

Some of the factors to be considered include

Government policy

The government control price will be highly considered such as tax when added the item cost will be
added.

Competitors’ price

12
If the competitors’ price will be high, the price of the items will also be added to be close to the
competitors in order the business to glow

Transport cost

Transport cost of raw material will be determining factors for pricing

Buying price

The original price of the item will determine how much the item is to be sold when it arrives in the shop.

2.6 SALES TACTICS

The sale method to be used will be as follows:

Direct

This is whereby the customers will get the products themselves by coming physically to the business.

Indirect

This is whereby the customer’s goods will be delivered to the place after their order. They don’t need to
come to the business. The customers will be given free samples once they purchase the products.

Geographical area

The price will be distributed within the Kisii town and Keroka. Good customer’s languages of being
courteous, trustworthy, polite and respect will be used and thus will encourage and maintain customers.

Distribution strategies

The main distribution strategy is transporting goods from the source of raw material, the cost of transport
is Ksh8,000. The kind of distribution that the owner will employ is from producer to customer’s which is
direct.

13
 CHAPTER THREE
3.0 Organization and Management Plans

3.1 Organization plans and management

The proposed business will be a sole proprietorship. The business will have a well-structured
organization plan to ensure easy and effective achievement of goals. The business will run on smoothl

The following charts shows: -

14

manager
 Accountant Delivery personnel Sales person

3.2 PERSONNEL, NUMBER AND DUTIES

BUSSINESS MANAGER AND QUALIFICATION

The business manager will be Isaiah Mautia who will be proprietor himself.

Qualifications

 The manager must be 26 years old and above.

 Should be a graduate with a diploma in Information Technology.
 Should have good social and communication skills.
 Should have entrepreneur skills.
 Should have experience of at least one year.

Duties and responsibilities of an accountant

 The manager will be in charge of internal relationship and operations

 He/she will be give directions and orders to other employees
 He/she will direct matters pertaining finance and budgeting
 He/she will be the overall supervisor

Salaries

The manager is expected to have a basic salary of Ksh. 15,000, house allowance of Ksh 3,000 and
medical allowance of Ksh. 2,000 per month.

ACCOUNTANT

Qualifications
15
  The accountant is 24 years’ old and above.
 He/she has graduated in certificate in information technology.
 He/she has a work experience of 3 years.
 He/she has acquired good communication skills.
 He/she should be expert in computer skills.

Duties and responsibilities of an accountant

 He/she will be a secretary of the management team where he is required to be writing report.
 He/she will be the one to receive payment of the product.
 He/she will be preparing payroll every month.
 He/she will be keeping the business records.

Salaries

 The accountant is expected to have a basic salary of ksh 12,000, house allowance of 3,000 and
medical allowance of ksh1,000 per month.

SALES PERSON

Qualification

 Have age of 18 and above.

 He/she has graduated in certificate in business and marketing.
 He/she has to be good at record keeping.
 He/she has acquired good communication skills.
 He/she should be expert in computer skills.

Duties and responsibilities of a sales person

 He/she will be keeping records.

16
  He/she will make sure goods are kept safe.
 He/she to give records goods on store and those out of stock.
 He/she will make sure goods are proper displaces for easier customer viewing
 He/she to have knowledge on items sold in the shop.

Salaries

 The accountant is expected to have a basic salary of ksh 10,000, house allowance of 3,000 and
medical allowance of ksh1,000 per month.

DELIVERLY PERSONNEL

Qualification

 Have age of 26 and above.

 He must be a form four leaver.
 He must have valid in driving license.
 He must have experience of at least 2 years.

Duties and responsibilities delivery personnel

Delivering the products to the required place in a safer condition.

Salary

 The delivery person will be earning a basic salary of ksh 8,000, house allowance ksh 2,000 and
medical allowance of ksh1, 000 per month.

3.3 RECRUITMENT, TRAINING AND PROMOTION

3.3.1 RECRUITMENT
The business ill advertises the vacancies in the classified section. The potential employee will apply for
the job in his/her own handwriting letter enclosed with photocopy of relevant certificate testimonial. The
manager will go through all the application letters to determine the suitable candidate of which she will
short list the potential candidate. Those short listed will be invited for the interview the successful

17
applicants will strictly be determined by the merits. The selected employees will be placed to their post
after which all the invitation will be sent indicating the job commencement and orientation

3.3.2 TRAINING
On the day of reporting the employees will be requested to assemble outside the workshop in which the
whole day will be orientation. Training of the employees will be mean of sharpening their skills for better
performance of their business.

3.3.3 PROMOTION
Promotion motivates the employees to work hard because the business may decide to go to a trip or hold
a party to celebrate a certain goal achieved in the business.

For an employee to be promoted he/she:

 Must be hardworking.
 Must have worked in the business more than four hours.
 Must have good records in daily attendance and performance.
 Must be a creative employee.

3.4 RENUNERATION AND INTENSIVE

The employee’s salary will be determined by their qualification, hard work and task they perform. The
manager is the one to earn the highest then the accountant and the delivery many the lowest.

3.5 LICENSE, PERMITS AND BY-LAWS

The business requires legal trading license from municipal council in order to run the business smoothly.
The license will cost ksh 6,000 per year.

Permits will also be required for municipal council of Kisii. This will show that the business is legal and
it can be operating. The by –law enacted by the local government will also be followed e.g.; cleanliness
of the premises rooms and sanitation standards.

All taxes required by the government will be done at the right time.

3.6 SUPPORT SERVICES

Besides having qualified personnel, the business will have required other support services to enable
achieve its set goal. The entrepreneur will open a current account with Equity bank branch at Kisii town.

18
EQUITY BANK,

P.0.BOX 020,

KISII.

TEL 0702004004

The business will also post offices box through post office Kisii branch in Kisii town for communication
it will cost 3,000 per month.

KISII POST OFFICE,

P.O BOX 001,

KISII.

The business manager will take insurance policies with blue shield insurance branch in Kisii town. This
will cover the business against theft and fire, it will cost ksh5,000 per month

BLUE SHIELD INSURANCE COMPANY,

P.O.BOX 6754,

KEROKA.

TEL 0702243630

The business will be registered as a sole proprietorship with the ministry of trade and trade

The firm also acquire the advocate

MR. RICHARDADVOCATE,

P.O.BOX 473,

KISII.

TEL 0762764523

19
 CHAPTER FOUR
4.0 PRODUCTION FACILITIES AND CAPACITY
The required equipment and machinery are listed below with their cost:

ITEM QUANTITY COST/UNIT KSHS TOYAL COST

Monitor 5 4,000 20,000
CPU 4 6,000 24,000
Electrical toolbox 2 5,000 10,000
Working table 3 1,500 4,500
Mouse 3 200 600
Keyboard 3 200 600
Chairs 5 800 4,000

20
Pens 10 10 100
Notebooks 5 200 1,000
total 64,800

REPAIR AND MAINTAINANCE

Repair and maintenance will be attended by the supplier. The business through the manager himself will
have acquired enough knowledge to maintain and repair it. Workers will also take care of the machines
and equipment in the workshop. If no spare parts around the area they will be ordered from the place of
supply

Preventive measures

This is checking tools and machines which have been used longer time and are worn out.

They may be replaced or modified to make it more attractive to customers.

4.1 PRODUCTION STRATEGIES

The design of the product will be a system design. The products will be affordable price to the customers,
so as the business cannot stop and make more profit.

EXPENSES AMOUNT
Advertising 2,000
Opening stock 200,000
Transport 10,000
Furniture 12,500
License 6,000
total 230,500

MONTHLY PRODUCTION OVERHEAD

EXPENSES AMOUNT

21
Rent 10,000
Water 1,000
Telephone 2,000
Electricity 3,000
Insurance 1,500
Advertisement 2,000
Salaries 61,000
TOTAL 80,500

4.2 PRODUCTION PROCESSES

Steps needed to be followed in the production of products:

1st step – ordering of good from the manufacture/supplier

2nd step – delivering products

3rd step – pricing of goods as per pricing strategy

4th step – sale of goods to the customers

The problem that is likely to affect the operation process are powering rationing, whereby the work may
delay for some while. Breaking down of machines may also cause delay of production. The internal
factors likely to affect the production process is lack of the skilled personnel, that is the employees are
not able to update them self with the technology

Some of the ways to avoid this factor include:

We can buy a standard generator in case of power blackout.

The owner can also buy uninterruptable power supply as a backup.

One can equip the unskilled personnel by training them through seminars and workshop.

22
4.5 GOVERNMENT REQULATION

4.5.1 Registration of business act cap 145

It is a government act which provides training license and permits to start a business.

The license will be acquired from county council of KISII.

Employees act cap 158

This is a government act which set out contract of services and provision of matters terminating services
of employees and keeping of records for employees. The act states that it is a big offence by failing to
pay an employee his /her wages and benefits.

Labour law

The business will provide a conductive working environment and pays the wages on time according to
the employment contrast.

Public health act

Local authorities are empowered to make regulations such as observing hygiene in the premises to
maintain health.

Workman’s compensation act cap 473

An employee is liable to provide appropriate compensation to his /her employees in case of an accident
or death while one is on service.

Taxes

Income tax is the basic for all income matter, it helps to avoid poor business reputations.

23
4.6 WORKSHOP LAYOUT
The rent for each month is ksh 10,000. The business will comprise five rooms.

Room 1- manager room

Room 2-accountant office, this is where all payment will be done

Room 3- display and advertisement will be done in this room

Room 4 –working area /production, this is where all computers will be kept

Room 5-store room, all equipment that are worn out will be kept here

CHAPTER FIVE
5.0 FINANCIALPLANING

5.1 PRE-OPERATIONAL COST

The preoperational cost that the owner of the business will incur is as follows:-

ITEM COST( KSH)

Opening cost 200,000
Tools and equipment 5,000
Furniture’s and fittings 12,500
Permits &license 6,000
Rent 10,000
Insurance 1,500

24
Water deposit 1,000
Electricity deposit 3,000
Telephone deposit 2,000
Advertisement 2,000
Salaries 61,000
Total 304,000

5.2WORKING CAPITAL

5.2.1 ESTIMATION OF WORKIMG CAPITAL

CURRENT ASSETS Year 1 Year 2 Year 3
Stocks of goods 200,000 350,000 600,000
Cash In hand 20,000 70,000 50,000
Cash at bank 180,000 130,000 200,000
Debtor 0 5,000 50,000
Total 370,000 55.5000 900,000
Creditor 30,000 40,000 50,000
Miscellaneous 10,500 60,000 120,000
Total 40,500 100,000 170,000
Working capital 229,500 273,000 300,200

5.2.2 RRO-FORMA INCOME STATEMENT

Item Year 2025(ksh) Year2026(ksh) Year2027(ksh)

Sales 1,400,000 2,000,000 3,800,000

Debtors 0 5,000 50,000
Total 1 1,400,000 2,005,000 3,850,000
Add opening stock 67,750 67,750 90,750
Add purchase 362,250 770,000 770,000
Add creditor 20,000 20,000 20,000

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Less closing stock 50,000 60,000 100,000
Total 2 500,000 917,750 980,750
Gross profit 900,000 1,082,250 2,869,250

EXPENSES
Insurance 6,000 6,000 6,000
Salaries 732,000 732,000 732,000
Transport 10,000 10,000 10,000
Postal services 2,400 2,400 2,400
Advertisement 24,000 24,000 24,000
Rent 120,000 120,000 120,000
Telephone 24,000 24,000 24,000
License 6,000 6,000 6,000
Stationary 3,000 5,000 6,000
Total 927,400 929,000 930,000
Net profit 27,400 153,250 1,939,250
Assumptions
There were no good returned after sale
There are no infractions
Price charged remained constant

5.4 BALANCE SHEET

ITEM AS AT 31ST DEC AS AT 31ST DEC AS AT 31ST DEC
2025 2026 2027
FIXED ASSETS
Furniture’s 6,800 6,500 5,000
Machines 32,000 30,000 30,000
Total 38,800 36,500 35,000
Current asset
Stocks 147,800 150,900 300,000

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Debtors 30,000 20,100 50,000
Cash 270,000 303,000 500,000
Bank 20,000 80,000 97,000
Total 467,800 554,000 947,000

Total assets fixed 506,600 590,500 982,000

+current
LIABILITIES
Creditors 30,000 40,000 55,000
Drawing 78,000 60,000 50,000
Owner of equity 229,500 300,000 435,000
Investment 80,500 90,500 120,000
Profits 88,600 100,000 115,000
Total liabilities 506,600 590,500 675,000

Assumption
Furniture’s and machines depreciate in value by16%

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5.7 BREAK EVEN LEVELS
ITEM YEAR 1 YEAR 2 YAER 3
Sales
Cash 1,000,000 1,000,000 1,500,000
Credit 400,000 700,000 500,000
Total 1,400,000 1,700,000 2,000,000

Transport 120,000 120,000 120,000

Water 12,000 12,000 12,000
Telephone 24,000 24,000 24,000
Electricity 36,000 36,000 36,000
Total 192,000 192,000 192,000
Total contribution margin 1,208,000 1,508,000 1,808,000
Contribution% age 94.4% 96% 96.6%
Fixed cost
ITEM YEAR1 YEAR 2 YEAR 3
Salaries 732,000 732,000 732,000
Postal 2,400 2,400 2,400
Advertisement 24,000 24,000 24,000
Rent 120,000 120,000 120,000
Insurance 18,000 18,000 18,000
License 6,000 6,000 6,000
Total 902,400 902,400 902,400

Net profit 497,600 797,600 1,097,600

Breakeven level 955,932.20 940,000 934,161.50

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Total contribution margin= sales –variable cost

1st year is 1,400,000-78,000=1,322,000

2nd year is 1,700,000-75,000=1,625,000

3rd year 2,000,000-68,000=1,932,000

Contribution margin %age =contribution margin/sales*100

1st year is 1,322,000/1,400,000*100=94.4%

2nd year is 1,625,000/1,700,000*100=96%

3rd year is 1,932,000/2,000,000*100=96.6%

Breakeven level=fixed cost/contribution margin% age*100

1st year is 902,400/94.4%*100=90,240,000/94.4=955,932.20

2nd year is 902,400/96%*100=90,240,000/96=940,000

3rd year is902,400/96.6%*100%=90,240,000/96.6=934,161.50

5.8 PROFITABLITY RATIOS

Gross profit %age = gross profit/sales*100

For the year 2025

497,600/1,400,000*100=35.54%

For the year 2026

797,600/1,700,000*100=46.92%

For the year 2027

1,097,600/2,000,000*100=54.88%

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Return on equity=net profit/owner equity*100

For the year 2025

497,600/1,750,000*100=28.43%

For the year 2026

797,600/3,000,000*100=26.6%

For the year 2027

1,097,600/3,500,000*100=31.36%

Return on investment = net profit interest /total investment *100

For the year 2025

60,000/500,000*100=12%

For the year 2026

500,000/1,200,000*100=41.67%

For the year 2027

950,000/1,800,000*100= 52.78%

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APEDIX

Edithan Electrical &

Electronic

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