BUSINESS PLAN

TITLE. : BUSINESS PLAN

BUSINESS NAME : BENSON ANIMAL FEEDS WHOLESALE

PRESENTED BY :MUTHAURA B. MWITA

CENTER NAME :BARINGO TECHNICAL COLLEGE

INDEX NO : 5171040608

PAPER CODE :2425

CENTRE CODE : 517104

SUPERVISOR : MR. ERICK KOMEN

PRESENTED TO : THE KENYA NATIONAL EXAMINATION COUNCIL FOR

AWARD OF DIPLOMA IN AGRICULTURE

SERIES : NOVEMBER 2021

DATE. :

i
DECLARATION
I MUTHAURA B. MWITA declare that the business plan is my original work. it has never been
presented to any learning institution in partial fulfillment of requirement for an award of
Diploma in agriculture.

NAME: ……………………………………………

DATE: ……………………………………………..

This business is submitted with my approval as the supervisor.

Supervisor name: Mr. Erick Komen

Sign: ……………………………………………..

ii
DEDICATION

This work is dedicated to my parents and siblings for their inspiration and support during my
study period. I sincerely appreciate their zeal, patience, sacrifice and understanding; to all may
God bless you abundantly.

iii
ACKNOWLEDMENT
First am grateful to almighty God for seeing me through this level of my education. He has been
helper, his grace and mercy has brought me that far and iam thankful.

Special thanks goes to my supervisor Mr. Erick Komen, for whose advice, counsel and guidance
have been valuable to the completion of this business plan.

iv
 TABLE OF CONTENT
DECLARATION..............................................................................................................................................ii
ACKNOWLEDMENT...............................................................................................................................iv
EXECUTIVE SUMMARY.........................................................................................................................v
CHAPTER ONE..........................................................................................................................................1
1.0 BUSINESS DESCRIPTION..................................................................................................................1
1.1 BUSINESS NAME...............................................................................................................................1
1.2 BUSINESS LOCATION AND ADDRESS...........................................................................................1
1.3 BUSINESS OWNERSHIP....................................................................................................................2
1.4 TYPE OF THE BUSINESS...................................................................................................................2
1.5 PRODUCT AND SERVICE.................................................................................................................2
1.6 JUSTIFICATION OF OPPORTUNITY................................................................................................2
1.7 INDUSTRY...........................................................................................................................................3
1.8 GOALS OF BUSINESS/ OBJECTIVES...............................................................................................3
1.8.1 GOALS OF BUSINESS.....................................................................................................................3
1.8.2 OBJECTIVES.....................................................................................................................................3
1.9 ENTRY AND GROWTH OF STRATEGY..........................................................................................3
1.9.1 ENTRY PLAN...................................................................................................................................3
1.9.2 GROWTH STRATEGY.....................................................................................................................4
CHAPTER TWO.........................................................................................................................................5
2.0 CUSTOMERS.......................................................................................................................................5
2.1 MARKET SHARE................................................................................................................................5
2.2 COMPETITION....................................................................................................................................7
2.3 METHODS OF PROMOTION AND ADVERTISEMENT..................................................................8
2.3.1 PROMOTION....................................................................................................................................8
2.3.2 ADVERTISING.................................................................................................................................8
2.4 PRICING STRTEGY............................................................................................................................8
2.5 SELLING TACTICS.............................................................................................................................9
2.6 DISTRIBUTION STRATEGY..............................................................................................................9
CHAPTER THREE...................................................................................................................................11
3.0 ORGANIZATION AND MANAGEMENT........................................................................................11
3.1 MANAGEMENT TEAM....................................................................................................................11

v
3.2 OTHER PERSONNEL........................................................................................................................11
3.3 RECRUITMENT, TRAINING AND PROMOTION..........................................................................12
3.3.1 Recruitment......................................................................................................................................12
3.3.2 Training............................................................................................................................................12
3.3.3 Promotion.........................................................................................................................................12
3.4 REMUNARATION AND INCENTIVES...........................................................................................12
3.5 LICENCES, PERMIT AND BY-LAWS.............................................................................................13
3.5.1 License.............................................................................................................................................13
3.5.2 Permit...............................................................................................................................................13
3.5.3 By-laws.............................................................................................................................................13
3.6 SUPPORT SERVICES........................................................................................................................13
3.6.1 Banking services...............................................................................................................................13
3.6.2 Insurance service..............................................................................................................................13
3.6.3 Consulting services...........................................................................................................................13
3.6.4 Legal services...................................................................................................................................14
CHAPTER FOUR.....................................................................................................................................15
4.0 PRODUCTION AND OPERATION PLAN.......................................................................................15
4.1PRODUCTION FACILITIES AND CAPACITY................................................................................15
4.1.1 FIRM LAYOUT...............................................................................................................................15
4.2 PRODUCTION STRATEGY..............................................................................................................16
4.2.1 Production process............................................................................................................................16
4.3 PRODUCTION AFFECTING OPERATION.....................................................................................16
4.3.1 Health regulation..............................................................................................................................16
4.3.2 Safety................................................................................................................................................17
4.3.3 Environment regulation....................................................................................................................17
CHAPTER FIVE.......................................................................................................................................18
5.0 FINANCIAL PLAN............................................................................................................................18
5.1 PRE-OPERATION COST...................................................................................................................18
5.2 PRO-FORMA BALANCE SHEET.....................................................................................................19
5.3 WORKING CAPITAL........................................................................................................................20
5.4 CASH FLOW PROJECTION.............................................................................................................21
5.5 PRO- INCOME STATEMENT FOR THE YEAR 31ST DECEMBER 2021.......................................22

vi
5.6 BREAK EVEN ANALYSIS...............................................................................................................23
5.6.1 BREAK EVEN POINT ANALYSIS................................................................................................23
5.7 DESIRED FINANCING.....................................................................................................................24
5.8 CAPITALIZATION............................................................................................................................24
5.9 PROFITABILITY RATIO..................................................................................................................25

vii
EXECUTIVE SUMMARY
The owner of the business is undertaking a course in Agriculture. The business is located in
Elkeiyo Marakwet county

Chapter one contains: business description, background of the owner, business name, location
and address, business ownership, type of business, product and services, justification of
opportunity, industry, goals and objectives, entry and growth strategy The owner of the
business is MUTHAURA B. MWITA who is twenty three years old, single and at Kalyet trading
center opposite Kapngetik primary school. It is a sole proprietorship and its address is 3584
Eldoret. The business will be a wholesaler selling animal feeds like fertilizers, animal feeds and
wheatbran s. The business is enjoyable and profitable and falls under agricultural industry. The
goals are achieved in long and short terms, it will penetrate to the market using by-pass and
business is expanded through market penetration, product development and diversification.

Chapter two entails customer, market share, competition, promotion and advertisement, selling
tactics and distribution. BENSON ANIMAL FEEDS WHOLESALE will deal with wholesaler
and retailer selling animals feeds and its animal feeds to farmers, nearby farms and small
agrovets. The manager who is the owner will carry out research to gather information by asking
questions. The total expected sale in unit per month is at least 55%. BENSON ANIMAL FEEDS
WHOLESALE decide to sell quality animal feeds at affordable price to out way the
competitors. The business will use free gifts, trade exhibitions and media, billboards, posters,
leaflets in promotion and advertisement respectively. It will employ direct selling to customers,
personnel selling and direct and indirect distribution.

Chapter three entails: organisation and management team ,recruitment,training and

promotion ,remuneration and incentives, licences,permit and by-laws, support services. The
business will be managed by the owner whose duties are to supervise, budget and paying salaries
to employees, other personnel include: other employees such as accountant, self representative
and security officers with different qualifications and duties. Recruitment are done based on
advantages, training through workshops and seminars and promotion after attaining
qualifications. Remuneration is done on daily basis and according to qualifications and
experience. Will get licence from county government, permit from agricultural industry and

viii
should comply with by-laws. It's support services are: banking service insurance service,
consulting service and loyal service.

Chapter four entails production and operation plan, production facilities and capacity, production
strategy, production affecting operation.

Equipments will enable business meet targeted sales. The total for acquiring equipments is four
hundred and fifty thousand and it will be purchased before the start of the business. The business
will use different strategy like giving discount to customers who buy goods in bulky. The
production process include: ordering, receiving and selling. The production affecting operation
are: health regulation, safety and environmental regulation.

Chapter five entails financial plan, pre-operational cost, pro-forma balance sheet, working
capital, cash flow projections, pro-income statement, break even analysis, desired financing,
capitalization, profitability ratios.

The main reason for preparing financial plan is to be in position that business provides profit and
be in position to borrow loans. The main objectives include: maintaining and controlling
expenses and health positions. In a balance sheet all assets are added and less liabilities and
drawings. In Cash flow projections receipts, sales contribution, discount received are added to
get total inflow while purchases, licence, insurance, transport, salary and wages, rent and
electricity are added to get the total outflow. cash flow and accumulated cash should balance at
the end. The net tax is 30%. BENSON ANIMAL FEEDS WHOLESALE makes a single product
with a price of sh.60,marginal cost of sh.20 and fixed cost of sh.270,000 in calculation of break
even analysis and ratios.

ix
 CHAPTER ONE

1.0 BUSINESS DESCRIPTION

The owner of the business will be MUTHAURA B. MWITA who is twenty three year’s old. He
is a pursuing a course in Agriculture. The owner is single. The address of the business will be
3584 Eldoret.

The business will be dealing with selling of animals feeds in wholesale and retail. The business
will be located at Kalyet trading center, opposite kapngetik primary school. It will be adjacent to
Katmok hotel. The site is ideal for the business. The place is convenient for the business due to
roads accessible, means of transport, power and security.

The population in kalyet tracentre grows fast. The owner’s objectives are to provide customers
need at affordable price.

1.1 BUSINESS NAME

The business name is Benson Animal feeds wholesale. The name was derived from the name of
the owner meaning a hardworking person .The owner choose the name because the business will
produce more animal feeds than its competitors.

1.2 BUSINESS LOCATION AND ADDRESS

The business is located in Elgeiyo Marakwet County. Its sub county is Marichor location
chepkorio Ward in kalyet trading centre. The business will be located opposite to kapngetik
primary school off Lelboinet- chepkorio

Its address is

BENSON ANIMAL FEEDS WHOLESALE

P.O BOX 3584,

TEL: 0743773269

EMAIL: mathauramwita@gmail.com
1
1.3 BUSINESS OWNERSHIP
The form of business ownership is a sole proprietorship. The owner chose this form of business
because it has advantages and disadvantages. Its advantage: one enjoys the profit, small capital is
required, financial support from friend and relatives, and one makes her own decision. Its
disadvantages: one suffers loneliness, in case of death, the business ends.

1.4 TYPE OF THE BUSINESS

The business will be wholesale business, selling animal feeds to farmers who buy in large
quantities and agrovets who sale animal feeds . The product are packed into different sizes of
fifty, twenty, ten kilogram bag. The animal feeds are affordable in prices.
The business start at 7pm to 9pm from Monday to Saturday at 9pm and there will be no service
on Sunday.

1.5 PRODUCT AND SERVICE

The main commodities the business will offer are animal feeds. Animal feeds will be sold
depending on kilos. The animal feeds are of high quality and affordable. The business gives
free tshirt containing the business name and contacts to customers who buy more commodities.
This will encourage our customers to buy more and assist in marketing the feeds.

1.6 JUSTIFICATION OF OPPORTUNITY

Animals feeds sale business is so enjoyable and profitable. Since high population like rose farm
animals and intensive farming done In the area, also farmers uses animal feeds to improve their
animals milk production. The business has employed trained workers who have skills and
experience. The business runs from Monday to Sunday as from 8.00 am to 8.00 pm. Climate in
Elkeyo Marakwet County is favorable for keeping animals. Also the security is very tight since
we have employed a watchman. Also infrastructure are available that is good road and telephone
networks.

2
1.7 INDUSTRY

The business falls under agricultural industry because it deals with selling of farm animal feeds
such animal feeds. The business does not have a lot of competition because it is located in place
where there is no other feeds wholesale so as to reduce the competition.

1.8 GOALS OF BUSINESS/ OBJECTIVES

1.8.1 GOALS OF BUSINESS

Goals are achieved in long terms and short terms.

In long terms:

 The business wants to become a quality leader

 To supply animal feeds all of the country to the other stores.

1.8.2 OBJECTIVES
(i)To create employment

(ii) To improve the living standard

(iii) To eradicate poverty

1.9 ENTRY AND GROWTH OF STRATEGY

1.9.1 ENTRY PLAN

Benson animal feeds wholesale business will penetrate to the market by the used of bypass, the
middlemen, also provision of free gifts, we will put our business online. The business will reduce
price of animal feeds so as to attract and motivates people to buy more animal feeds .

3
The business has also planned to train its workers and buy a pickup which is used to offer
services to its customers, and attractive packages of the animals’ feeds.

1.9.2 GROWTH STRATEGY

The owner decided to expand the business through market penetration, product development and
diversification of animal feeds.

4
 CHAPTER TWO

2.0 CUSTOMERS
These are people who purchase animal feeds . They are of different levels due to their basic
salaries. They earn per day, week or month. Some individual buy animal feeds in small
quantity, other in large quantity. My business will deal with wholesaler and retailers and a day
to day consumer. The business will sell its product to farmers, nearby farms and even small agro
vets. Due to the best services the business to customers, it will attract more customers to buy
animal feeds. The business will offer quality animal feeds at affordable price and discount
offered to those who will buy high quality product.

2.1 MARKET SHARE

Population in Kaplimo center and neighboring area increased and continues developing each day
good productive soil for farming hence keeping of livestock who feed on animal feeds. The
business will expect more customers to increase due to more demand of farm animal feeds. They
will make the business grow at a faster rate.
The manager who is the owner of the business will carry out research and gather information by
asking questions and obtaining answers from customers. The owner should direct the customers
on how the animal feeds are being sold. The total expected sale in unit per month is at least 55%.
The following graph represent market share of the other competitor before penetration
Before penetration

Kiptis animal feeds 50000X 100

100000 =50%

Chemu animal feeds = 20000 X 100

100000 = 20%

Ossen animal feeds = 30000 X 100

100000
=30%

5
 Kiptis Chemu Ossen
Sales 50000 20000 30000
Market share 50% 20% 30%

Series2
Series1

After penetration
Kiptis animal feeds = 40000 X 100 = 20%
20000
Chemu animal feeds = 60000 X 100
200000 = 30%

Ossen animal feeds = 55000 X 10

200000 = 27.5%

Benson animal feeds wholesale = 80000 X 100

200000 = 22.5%

6
 Kiptis animal Chemu Ossen BENSON
feeds animal animal feeds ANIMAL
feeds FEEDS
WHOLESALE

Sales 40000 60000 55000 80000

Market share 20% 30% 27.5% 22.5%

Series2
Series1

2.2 COMPETITION
The business will start with an aim of making profit of 15% due to research and analysis my
competitors in kabarnet sell their animal feeds with an aim of making 25% profit in every
product they sell.
My competitors are Kiptis animal feeds, Chemu animal feeds and Ossen animal feeds. The
business has found out that our competitors did not have strong competition. This makes them to

7
be strong; also they had enough axially services which assist them to succeed in the business.
Their weakness were that they produce goods at low quantity, they give customers small
discount, they sell goods at a higher price and also they had poor time management. Due to this
reason Benson animal feeds wholesale had decided to use their weakness to start up a business,
the business will sell quality product at affordable price and avail the product in every time.

2.3 METHODS OF PROMOTION AND ADVERTISEMENT

2.3.1 PROMOTION
Promotion will create more awareness of the business. There are various method that Benson
animal feeds wholesale business will employ to catch the attention of the customers. These is
when the business have sell good of high quantities to customers of over 2500 in sales
promotion, trade exhibition, there would be free gift of printed books which carry drawing of
the animal feeds. The business will also offer free services by delivering some of the animal
feeds to the customers. The business will measure the effectiveness of the promotion campaign
if customers will come and buy more animal feeds and also if they ask question concerning the
animal feeds being sold.

2.3.2 ADVERTISING

Benson animal feeds wholesale will employ advertisement method to create awareness of the
business. It will use a print media because it is cheap. They will produce and use posters
billboards, leaflets. Also they would use bypass middlemen and get the business online. The
business will be advertised after every three months. Leaflets would be decorated to attract
customers. Also posters and billboards would be placed and put at a strategic position. The
business will know if the advertisement is effective when there are positive remarks. The total
amount that will cost the business is 10000/=

8
2.4 PRICING STRTEGY
Benson animal feeds wholesale shall set a price in a manner that would be affordable by
customers. The business will reduce at least 8/= from every product from that of its competitors.
This will be done so as to remove customers from being exploited and to enable them to buy
more of the animal feeds . A free hen will be given to loyal customers. The business will offer
credit to loyal customers at the end of the month and the customers will pay back the credit after
two weeks. Kiti animal feeds will give high business will offer transportation and warrant to
loyal customers. The prices shall be compared with those of agro vets nearby and the price will
be set as follows.

ITEMS BENSON CHEMU OSSEN KIPTIS

ANIMAL ANIMAL ANIMAL ANIMAL
FEEDS FEEDS FEEDS FEEDS
WHOLESALE
Dairy mill 700 710 710 720
Wheat bran 1350 1400 1450 1380
Chick mash 200 250 230 220
Animal buster 450 480 550 500
feeds

In the above investigation the business finds that chemu and ossen animal feeds sells higher than
other animal feeds outlet in the center.

2.5 SELLING TACTICS

Benson animal feeds wholesale will employ direct selling to customers, personnel selling. will be
used to distribute to agent. The business will select middle men and distributors who have
already been used by other competitors and have high reputation. To motivate the middle men
the business will give them high profit cover. Business agent will cover Lelboinet - Chepkorio.

9
 2.6 DISTRIBUTION STRATEGY
Benson animal feeds wholesale will use both direct and indirect distribution to customers for
direct customers. For indirect distribution, the business will use motorcycles that will transport
animal feeds to the customers. The disadvantage of this method of transport is that it can stuck
and cause delay in time of rainy season. The business will estimate to spend 500/= on fuel, 200/=
being lunch, and travelling cost ksh.800. The total expenses on the business turn up profit. The
business will use the following distribution:

Producer Consumer

Producer Retailer Consumer

Producer Wholesaler Retailer Consumer

10
 CHAPTER THREE

3.0 ORGANIZATION AND MANAGEMENT

3.1 MANAGEMENT TEAM

Benson animal feeds wholesale business would be managed by the owner
Duties and responsibilities
 Supervises and control the business
 Enhance premising of material in organization
 Budgeting in organization
 Paying of salaries of employs

3.2 OTHER PERSONNEL

These include other employees who are not in the management team.

They include:

TITLE NO. QUALIFICATION DUTIES

Accountant 1 Diploma  Budgeting
 Financial
 Reporting
 Paying of
salaries.
Self-representative 2  K.C.S.E ( C )  Distribution of
 Certificate in animal feeds
sales & & sales
marketing promotion
Security officer 1 K.C.S.E at least Premises security
In experienced

11
 Organization chart

Manager

Accountant Self representative Security

officer

3.3 RECRUITMENT, TRAINING AND PROMOTION

3.3.1 Recruitment
The recruitment and selection of employees will be done based on advantages the business shall
advertise the selected post using posters.

3.3.2 Training
The training of employees will be done through workshop and seminars .This will enable
employee to be well conversant with job he/she supposed to be doing.

3.3.3 Promotion
Employees will be promoted after training and after attaining qualification and experience.

3.4 REMUNARATION AND INCENTIVES

The method of payment will be done on monthly basis. The employs will be paid according to
their qualification and experience at work

Title No. Monthly pay Allowances Total

Accountant 1 10000 3000 13000
Self- 2 5000 1000 6000
representatives
Security 1 3000 500 3500

12
3.5 LICENCES, PERMIT AND BY-LAWS

3.5.1 License
The business get license from county government. The purpose for the license is to identify the
business, to protect the public health and safety and to keep track of your finance for tax purpose.

3.5.2 Permit
The business will get permit from agricultural industry.

3.5.3 By-laws
The business will have to comply with by-laws because it directs the inner working of a
business.

3.6 SUPPORT SERVICES

3.6.1 Banking services

The business will open an account using equity account and its branch is in Eldoret town. It is a
business banking account because the business banking account give out loan, checking account
allows deposit and save money.

3.6.2 Insurance service

Equity insurance is the firm that will insure Benson animal feeds wholesale business. The
business needs to be insured against fire and debt, this will in position in case of risk, the
compensated insurance will take at most 4500/= per year.

3.6.3 Consulting services

Benson animal feeds wholesale business will require professions. Since the business will be
dealing with chicken production, the business will seek advice from agricultural office in Eldoret
town. One of the workers will be visiting agricultural office once per week to obtain information,
asking question and seeking for assistance in case of any problem. These will create satisfaction
to all customers.

13
3.6.4 Legal services
The business will reward legal business services when writing a contract, interpreting labor laws
and employment. The business will use Agricultural farm chem law firms as their legal services.
The business chose this firm because they have helped many business and they have many
advocates who can attend to a business very fast when they are needed. Also their services are
not expensive and their offices are located within our county.

14
 CHAPTER FOUR

4.0 PRODUCTION AND OPERATION PLAN

4.1PRODUCTION FACILITIES AND CAPACITY

For the prosperity of business plan, various equipment will be put in place for use. The
equipment will enable the business to meet targeted sales and making work easier for the
workers and entire customers.

Item Quantity Cost Capacity

Rent Two rooms 15000 -
Motor bike 1 120000 -
Electricity 6 months 10000 50 KJ
Mixer 1 year 30000 1ton
Furniture and fitting - 20000 -
Medicine - 2000 -
Total 44000
he total for acquiring equipment will be four hundred and fifty thousand and they will be
purchased before the start of the business to ensure efficiency and smooth running.

Motor bike, furniture and fitting would be repaired after every two years.

4.2 PRODUCTION FACILITY AND CAPACITY

4.2.1 FIRM LAYOUT

KITCHEN HUMAN STAFF BOARD
RESOURC ROOM ROOM
SECURITY E
DESK

ENTRANCE EXIT

15
 RECEPTIO ASSISTANT STORE
N DESK MANAGER

4.3 PRODUCTION STRATEGY

The business will obtain business idea from other successful firms. The business will employ
different strategy which will shy away on business competitors. The business will use cash
discount to customers who buy goods in bulky as to keep them coming. It will also offer services
of transportation to customers who are loyal.

4.4 Production process

These are stages that the business will use to operate.

1. Ordering

The manager will pass order to supplier in order to supply feeds in plenty.

2. Receiving

After ordering goods that is feeds, they are stored until demand arises.

3. Selling

After feeds have been stored, they are sold to feeds outlets and firms who purchase in large
quantity.

There are some of the external factors that hinder two process of supplying the commodities.
These are delays of in delivery of goods due to long distance, loss of power during rainy season.
These will really affects the distribution of feeds to clients. The business will be making an order
before the stock is complete. The business will also employ a security guard who will help in
case of any insecurity occurrence. The business will buy solar panels and battery to supply light
when electricity is off.

16
4.5 PRODUCTION AFFECTING OPERATION

4.5.1 Health regulation

The business will dig a well dip pit and also a dust bin where litters would be burn down and
keep the environment clean.

4.5.2 Safety
Benson animal feeds wholesale business will insure an insurance cover on fire and theft. It will
cover employees who will be involved in an accident. Also the employs will be given nose mask,
boots and dustcoat which will protect them when handling chemicals in the business.

4.5.3 Environment regulation

Environmental auditing will be done every two years as this well enable the business to
accommodate its goals. These are major trends and emerging issues will affect the business.

Environmental auditing will control environmental pollution for example disposal of untreated
effluents and loud noises because of good running business needs calm environmental.

17
 CHAPTER FIVE

5.0 FINANCIAL PLAN

The main reason for preparing financial plan is to be in position that the business provides profit

and be in position to borrow loans from financial institution. Benson animal feeds wholesale will

aim at achieving the following objectives.

A. Maintain and control expenses

B. Maintain healthy position through trading period

C. Realize a steady growth and income throughout the period

5.1 PRE-OPERATION COST

Item Cost

Advertisement 10000

Rent 15000

Electricity 10000

Feeds mixer 3000

Travelling 14000

Insurance 10000

Medication 2000

18
 Total 65000

5.2 PRO-FORMA BALANCE SHEET

Fixed assets sh.

Building 15000

Motor bike 120000

Furniture and fittings 20000

155000

Current assets

Stock 50000

Cash at hand 20000

Cash at bank 25000

95000

65000

Current liabilities

Creditors 10000

Family contribution 20000

Financed by

Capital 50000

Net profit 4000 90000

19
5.3 WORKING CAPITAL
Working capital = Current assets - Current liabilities

Current assets sh.

Stock 50000
Cash at hand 20000
Cash at bank 25000
(95000)
Current liabilities
Creditors 10000
Family contribution 20000
Working capital 65000

20
Receipt Jan Feb March April May Jun Jul Aug Sept Oct Nov Dec Total
Sales 60000 70000 80000 90000 68000 65000 66800 90000 70000 85000 95000 12000 959800
Contribution 20000 ---- ---- --------- ------- ------- ---------- -------- ----- -------- --------- ------- 20000
Discount 4000 3000 3000 2500 2000 1500 2500 3500 2500 3500 4500 5000 33500
received
Total inflow 84000 73000 83000 92500 69000 66500 69300 93500 72500 88500 99500 125000 1016300
Payment
Purchases 20000 22000 24000 25000 20000 10000 20000 25000 22000 20000 30000 35000 273000
License 4500 --- ---- ------- --------- ------- ------- ------- --------- ---------- --------- ---------- 4500
Insurance 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 120000
Transport 4200 3600 3000 4500 1300 1000 2000 2500 2500 1500 2500 2000 150000
Salary and 22500 22500 22500 22500 22500 22500 22500 22500 22500 22500 22500 22500 270000
wages
Rent 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 36000
Electricity 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 12000
Total outflow 65200 62100 64500 61000 47800 57500 63500 61000 59000 68000 74000 52500 736100
Cash flow 18800 10900 18500 31500 22200 9000 5800 32500 13500 20500 25500 44500 240000

Accumulated 29700 29400 50000 53700 31200 14800 38300 46000 34000 46000 240000
cash

5.4 CASH FLOW PROJECTION

21
5.5 PRO- INCOME STATEMENT FOR THE YEAR 31ST DECEMBER 2021
Sales 959800

Cost of goods sold sh.

Opening stock 50000

Purchase 273000

Goods average for sale 323000

Less closing stock 50000

Cost of sales 273000

Gross profit 686800

Expense

License 4500

Insurance 10000

Transport 17500

Salaries and wages 270000

Rent and electricity 240000

542000\

Net profit before tax 144800

Less taxation 30% 30 X 144800

1000 43440

Net profit after tax 101360

22
5.6 BREAK EVEN ANALYSIS
Break even analysis is where the total revenue equal total cost i.e. (break even analysis => T.R =
T.C)

The firm is earning profit or zero profit. If the total revenue is greater than the total cost the firms
make abnormal profit or super normal profit. If the total revenue is less than the total cost, then
the firm will make loses. Break even analysis is also known as cost volume analysis.

5.6.1 BREAK EVEN POINT ANALYSIS

The Benson animal feeds wholesale makes a single product with a price of shy 60 and marginal
cost of sh. 20 and fixed cost of ash. 270000 p.a. Calculate

1. Number of units to bark even

B.E.P (units) = fixed cost
Contribution (units)
Contribution units = selling price – marginal cost
Sh. 60 – 20
= 40
B.E.P (units) = 270000
\ 40
= 6750 units
2. Contribution/ sales
Contribution/ sales ratio = contribution units X 100

Selling price

= 40 X 100

60 = 66.67%

3. Target profit

Target profit = fixed cost = target profit

23
 Contribution units

= 270000 +101360

40 = 9284

4. Sales target

Sales target = (fixed cost + Target profit) X 60

Contribution units

= (270000 + 101360) 60

40 = 557040

5.7 DESIRED FINANCING

Item amount

Working capital 65000

Pre operational cost 65000

Fixed assets 155000

Li, S & Seale, C. (2007)

5.8 CAPITALIZATION
Owner’s contribution 180000

Borrowed capital 20000

200000

24
5.9 PROFITABILITY RATIO
Gross profit ratio =gross profit X 100

Sales

686800 X 100

959800 =71.56%

Net profit ratio = net profit X 100

Sales

= 101360 X 100

959800 =10.56%

Turnover ratio

Sales revenue

Assets (F.A + C.A)

959800

250000

3.8%

Liquidity ratio = current assets (C.A)

Current liabilities (C.L)

95000

30000 = 3.2

25