BUSINESS PLAN

BUSINESS NAME : HOPE’S FASHION HOUSE

PRESENTER : ESTHER MUTHONI MWAURA

INDEX NUMBER :2070010082

COURSE CODE :1906
PAPER CODE : 107
PRESENTED TO : KENYA NATIONAL EXAMINATION COUNCIL FOR
THE AWARD OF CERTIFICATE IN BUSINESS
MANAGEMENT.

CENTER NAME : THIKA TECHNICAL TRAINING INSTITUTE

SUPERVISOR : MADAM SALOME

EXAM SERIES : NOVEMBER 2021

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DECLARATION

I declare that this is my own that has never been presented anywhere.

AUTHORS NAME: ESTHER MUTHONI MWAURA

SIGNATURE:.........................................................

DATE:.....................................................................

This business plan is presented for examination in Thika Technical Training Insttitute

SUPERVISOR:

i
ACKNOWLEDGEMENTS

I wish to acknowledge my dear parent for their moral support during my studies
for………………... Special regards to my supervisor …………… for his time discussion on
matters pertain the plan preparation.

I also acknowledge my classmates in proving me with positive feedback and attention to

enrich my business plan. May God bless you all.

Table of Contents

ii
DECLARATION....................................................................................................................................i
ACKNOWLEDGEMENTS...................................................................................................................ii
EXECUTIVE SUMMARY
BUSINESS DESCRIPTION..............................................................................................................1
MARKETING PLAN..........................................................................................................................1
ORGANISATION AND MANAGEMAENT PLAN........................................................................1
OPERATION AND PRODUCTION PLAN.......................................................................................1
FINANCIAL PLAN............................................................................................................................1
CHAPTER ONE...................................................................................................................................2
1.0 BUSINESS DESCRIPTION...........................................................................................................2
1.1 BACKGROUND OF THE OWNER...............................................................................................2
1.2 BUSINESS NAME.........................................................................................................................2
1.3 BUSINESS LOCATION.................................................................................................................2
1.5 TYPES OF BUSINESS...................................................................................................................4
1.6 PRODUCT AND SERVICES.........................................................................................................4
1.7 JUSTIFICATION OF OPPORTUNITIES.......................................................................................4
1.8 INDUSTRY.....................................................................................................................................5
1.9 GOALS AND OBJECTIVES..........................................................................................................5
1.10ENTRY AND GROWTH STRATEGY.........................................................................................5
1.11 Entry Strategy................................................................................................................................5
1.1.2 Growth Strategy...........................................................................................................................5
CHAPTER TWO...................................................................................................................................6
2.0 MARKET PLAN.............................................................................................................................6
2.1 CUSTOMERS.................................................................................................................................6
2.1.1 Individual customers....................................................................................................................6
2.1.2 Institutional customers..................................................................................................................6
2.2 MARKET SHARE/ SIZE................................................................................................................6
2.3 COMPETITORS.............................................................................................................................6
3.4 METHOD OF PROMOTION AND ADVERTISEMENT..............................................................7
2.5PRICING STRATEGY...................................................................................................................M
2.6 SALES TACTICS...........................................................................................................................7
2.7 DISTRIBUTION STRATEGY.......................................................................................................8
CHAPTER THREE...............................................................................................................................9
3 10 OPERATION AND MANAGEMENT PLAN..............................................................................9
3.1MANAGEMENT TEAM.................................................................................................................9
3.1.1 Marketing manager.......................................................................................................................9

iii
3.1.2 Production manager......................................................................................................................9
3.1.3 Financial Manager........................................................................................................................9
3.2 OTHER PERSONNELS..................................................................................................................9
3.3 RECRUITMENT TRAINING AND PROMOTION.....................................................................10
3.3.1 Recruitment................................................................................................................................10
3.3.2 Training......................................................................................................................................10
3.3.4 Promotion...................................................................................................................................11
3.4 RENUMERATION AND INCENTIVES.....................................................................................11
3.5 LICENCE PERMIT AND BY- LAWS.........................................................................................11
3.5.1 License.......................................................................................................................................11
3.5.2 Permit.........................................................................................................................................11
3.5.3 By- Laws....................................................................................................................................12
3.6 SUPPORT SERVICE....................................................................................................................12
CHAPTER FOUR...............................................................................................................................13
4.0PRODUCTION/ OPERATION PLAN...........................................................................................13
4.1PRODUCTION FACILITIES AND CAPACITIES.......................................................................13
4.2 PRODUCTION STRATEGY........................................................................................................15
4.3 PRODUCTION PROCESS...........................................................................................................16
4.4 PRODUCTION REGULATION...................................................................................................16
4.4.1 Health Regulation.......................................................................................................................16
50 FINANCIAL PLAN.......................................................................................................................17
5.1PRE-OPERATION COST..............................................................................................................17
5.2 PROFORMA BALANCE.............................................................................................................18
5.3 PROJECTED INCOME STATEMENT........................................................................................19
PROJECTED CASHFLOW STATEMENT FOR YEAR 2................................................................21
5.3.1 PROJECTED CASHFLOW STATEMENT FOR YEAR 3........................................................22
5.4 Pro-Forma Income Statement........................................................................................................23
5.5 Pro-forma Balance sheet................................................................................................................24
5.6 Break-Even Analysis.....................................................................................................................25
5.7 Expected Profitability Ratios.........................................................................................................26
5.8 Desired Financial...........................................................................................................................28

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1.0 EXECUTIVE SUMMARY

.1 BUSINESS DESCRIPTION
The name of the business will be Hope’s Fashion House situated at Thika.

It will be a start up and will basically be dealing with Unisex clothes.

.2 MARKETING PLAN
Potential customers of the enterprise will comprise of individual institution and commercial

customers.

The business will capitalize on competitors’ loopholes to gain a higher market share and

methods of promoting and advertising will target the customers’ satisfaction.

3 ORGANISATION AND MANAGEMAENT PLAN

This chapter entails recruitment, training and promotional activities of the firm. It highlights

the business personnel qualifications and several duties, the organization chart, licence,

permits and by-laws.

4 OPERATION AND PRODUCTION PLAN

This chapter deals with products design and development. It outlines monthly labor,

requirements, monthly production, expenses, and production process and government

regulations.

5 FINANCIAL PLAN
It outlines the pre-operational costs, working capital requirements, the pro-forma income,

statement projected

Cash flow statement for the three years, pro-forma balance sheet, break even analysis,

profitability ratios analysis desired financing and proposed capitalization.

1
CHAPTER ONE
1.0 BUSINESS DESCRIPTION
1.1 BACKGROUND OF THE OWNER
Hope’s Fashion House is a sole proprietorship business. The owner of the business is Esther
Muthoni Mwaura. The sole proprietor is Nineteen years old. The owner is a student at Thika
Technical Training Institute.

1.2 BUSINESS NAME

Hope’s Fashion House is due to the important production in the business. The products in the
business are unique as per the name that is also unique.

Hope’s Fashion House produces women’s wear accessories and men’s and children’s wear
of quality product from fibres

1.3 BUSINESS LOCATION

Hope’s Fashion House will be located along Kenyatta Street opposite Athi House inside
Thika Arcade

Its address is as follows

HOPE’S FASHION HOUSE,

PO BOX 91-01000,

THIKA

Phone number 0779 342031

Email Address : hope’sfashionhouse@gmail.com

2
 HOPE’S FASHION
HOUSE MACVAST HOTEL KCB BANK
GG222ZZZZZZZZZZZNC

THIKA PORK MASTERS

GATUMAINI PRIMARY SCHOOL

THIKA
POLICE
STATION

MAATHAI SUPERMARKET

3
1.4 FORMS OF BUSINESS OWNERSHIP

Hope’s Fashion House will be sole proprietorship and it will be managed by the owner.
Advantages of sole proprietorship are self-reliant, the profits earned will be helps expand the
business since there will be no sharing of profit, the owner will develop a report with the
employees and this will result to diligence and self-motivation and the owner will be to tap
and exploit the talents with external interference. There will be flexibility in terms of
expansion of the business.

Disadvantages of the sole proprietorship

- Business has high competition which can cause closure

- Business can gain losses which may cause decline

1.5 TYPES OF BUSINESS

Hope’s Fashion House is a new venture which intends to commend its event in January
2021. The owner has not engaged in this business to the past. In this business there will be
selling of accessory,non-binary clothes,shoes and children’s wear. The business will be
purchasing the goods from Dubai and outside country.

1 6 PRODUCT AND SERVICES

Hope’s Fashion House will be offering clothes, shoes and cosmetics. Business will be
covering for children, women’s and men’s garments. In this business there will be gifts for
the customers when they purchase goods in Hope’s Fashion House are unique and durable
for the customers. The goods will be given warrant of one month in case of complications.

1.7 JUSTIFICATION OF OPPORTUNITIES

Due to the high population of Thika areas of which most of the occupants are students from
universities, colleges and secondary schools. The demand is high because there are many
youths. We shall offer credit facilities to our customers with our location we are easily
reached and the security around is very tight since there are guards within the building

4
1.8 INDUSTRY
Hope’s Fashion House falls under the industry of manufacturing and production which will
be dealing with selling readymade and new fashionable clothes, shoes and all types of
cosmetics to meet the needs of the surrounding communities. This business is expected to
grow largely. It will be offering products that are in high demand and the design fashion thus
making it hard to the competitors to compete with Hope’s Fashion House maximizing our
profits

1.9 GOALS AND OBJECTIVES

Hope’s Fashion House Business will be set with aim of capturing all customers working and
living in this area. The clothes will be of good and high quality leading to achievements of
the business. The short term goals include making sure electricity bills, salaries and rents are
paid on time. Machines are also well maintained and serviced and inspected. The long term
goals include best providers in the industries best network with many branches in the area,
expansion of the business, organizing training seminars of the employees and also buying a
vehicle for distribution of the garments

This opportunity is attractive because there are a few competitors that will help achieve a
large market share of the products to be made, originally because the business we deal with
unique makers, availability of raw materials helpful in the community of the business

1.10ENTRY AND GROWTH STRATEGY

1.10.1 Entry Strategy
Hope’s Fashion House business will use penetration pricing strategy so as to gain more
customers for our products also advertising strategy will be used during entry of the market
to make people aware of our existence in the market

1.10.2 Growth Strategy

Hope’s Fashion House will be using promotional pricing strategy during its growth and
existence in the market. Thbusiness will employ skilled labour to ensure better services are
offered

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CHAPTER TWO
2.0 MARKET PLAN
2.1 CUSTOMERS
Hope’s Fashion House concentrates on two types of customers; individual customers and
institutional customers.

2.1.1 Individual customers

The individual customers of Hope’s Fashion House hold individuals who are men,
women,non-binary and children according to their sizes, shapes and the prices.

2.1.2 Institutional customers

The institution customers of Hope’s Fashion House holds are supermarket uniforms, school
uniforms and the hospital uniforms.

In Thika the customers are workers and students in the school. The parents in Thika are
employed permanently and others have their own business so are well up in the point of
income.

Most of the customers of Hope’s Fashion House have enrolled in the business tactics and on
how to consult in the customer and sell.

In the proposed business the products which are sold there are of friendly price and the
customer are given discounts and after sale services eg warranty.

2.2 MARKET SHARE/ SIZE

In the Hope’s Fashion House it sells 10 shoes, 4 men’s shirts, 4 trousers, 10 skirts, 10
blouses, 50 uniforms, 50 necklaces, and 30 bungles per day. The business covers the entire
Thika like to Makongeni, and 10% of the outside areas in Thika like Juja.

3.3 COMPETITORS
Hope’s Fashion House competes with some boutiques in Thika which sell almost the same
products. The competitors of Hope’s Fashion House are

1. Millennium Boutique PO BOX, 1852-01000, Thika

2. Fancy Boutique PO BOX 6687-0100 Thika,

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 3. Smart Shine Clothe Designers PO BOX 24-0100, Thika.

Their strengths are that they have more customers, has good management, give offer to the
customers. Their weaknesses are they have small workspaces, no credit facilities, no
advertisement; they open late and close early. They are located a hundred meters away from
my business.

2.4 METHOD OF PROMOTION AND ADVERTISEMENT

Hope’s Fashion House used radio advertisement and print media to advertise the products
and services are covered. The cost of the advertisement is 25% of the profit per month which
it is decreasing the profit of the business from 15% to 20% per day. Also the promotion
complain like road show is done to promote the business and to increase the demand of the
goods be offering free goods during the road show.

2.5 PRICING STRATEGY

Before setting the price of the products in the business will consider the prices of the
competitors, cost of labour, and desired profit in the business transaction cost among others.
After analyzing the factors they will decide use in setting the prices. Also we will consider
the prices set by the government on their prices, which will be affordable to our customers.

The business will sell from the manufacturers in Thika in single good in bulk thus being
cheap to purchase and also will be sold at a favorable price.

2.6 SALES TACTICS

Since the business is supplying clothes, it will be getting order for lab coats and uniforms
from schools and hospitals. Credit facilities to well established customers will be extended
for example institutional order for the new students. Also you should offer after sale to the
customers through middle men hence the middle men will be motivated by the salaries and
some gifts. The geographical area will cover one agent one agent at the near market
(Makongeni) to capture the customers.

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2.7 DISTRIBUTION STRATEGY
The goods and products will reach the customers through agents and the promotion statics be
holding shows and some distributors who will be your middlemen. Some trolley for the sort
distance will be in the business to transport goods for the customers. For the long distance
and bulky good there will be pick up for transport goods which will be offered free to the
customers to be after sale services.

8
CHAPTER THREE
3.0 OPERATION AND MANAGEMENT PLAN
3.1MANAGEMENT TEAM
Hope’s Fashion House, I will be the managing director. I have an experience of 6 years in
business ventures. I have worked as a production manager in Thika Cloth Mill for 3 years

The business will have 3 members of management marketing manager, production manager
and finance manager.

3.1.1 Marketing manager

The duties of the marketing manager will be booking appointments in the institutions head
for equipment of market, making sure that the business is marketed, making sure that the
agent and the middle men are effective.

3.1.2 Production manager

The duties of production manager will be to make sure that the production is running
smoothly, checking that all machines are well maintained.

3.1.3 Financial Manager

The duties of the financial manager will be making the financial reports for instant time.

The qualification of the marketing manager should have a diploma in business management,
diploma in textile and in garment making, at least should have an experience of two years. In
the production management the qualification of the financial manager should have a degree
in accounting and business management, diploma in human resource management and at
least one experience of two years in the accounting and financial department

3.2 OTHER PERSONNELS

In the proposed business there are other personnel who will work with the above managers:
security officers. The security officers will make sure that nothing is left out or locked outside
after the work. He should be having an experience of work for three years as a security
officer

The cleaner should be having a certificate of K.C.S.E and should also be a computer literate
and should have an experience of work for two years

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 Job title No.of employees Qualifications Proposed pay/month

Security officer 2 Should have an Ksh 6000

experience of work

for three years

Cleaner 4 Should be a form 3000

four leaver with a

certificate

3.3 RECRUITMENT TRAINING AND PROMOTION

3.3.1 Recruitment
The business will employ the qualified personnel for staffing achievements. The business will
use advertisement method. This method of advertising the opportunities will be accompanied
by the interviews shortlisting

3.3.2 Training
The business will implement training to the employees through on job training by orientation,
seminars, upgrading workshops. Hope’s Fashion House being in market will require the
employee orient themselves with machines, market and products. Orientation will be simple
and cheap since most of the employees have experience in the department. The business will
also organize seminars –which will involve training good communication, effective working
and management business discipline internet excitement and ways of curbing unhealthy
competitors due to the variation of factors.

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3.3.4 Promotion
Hope’s Fashion House will need to promote as a worker for higher efficiency since
promotion bring about motivation. The process will depend on the workers defiance,
behavior, skills and education level.

The business will employ this after every five years; this will be continuous process since
promotion and retrieving go hand in hand. Promotion will help to motivate to work hard and
this will help bring a steady in the business production.

3.4 RENUMERATION AND INCENTIVES

Hope’s Fashion House will give the possible remuneration to the employees.

The business will give the employees the following remunerations and incentives
commission, overtime, vacation trips, gaming enters, competition holiday ventures, medical
allowances.

The business will also consider paying an increment of 7% of the current salary.

The reason for remuneration and incentives is to motivate the employees and encourage them
to work well.

3.5 LICENCE PERMIT AND BY- LAWS

3.5.1 License
The business will be licensed by the business under the ministry of the technology to enable it
trade. The license will be given to the business by the county government. It will require six
thousand only.

3.5.2 Permit
The business license will secure business for 5 month before the commencement. This will be
done in the office of the registrar of the business and will pave the ways for the granting
business permits and qualify the legality of the business.

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3.5.3 By- Laws
The Hope’s Fashion House the employees should respect each other. If there are problems it
should be forwarded to the head of the management. All the meetings should be hold by the
manager and the director in the business.

3.6 SUPPORT SERVICE

Hope’s Fashion House requires several external services to running the business smoothly.
The services include banking, insurance, and maintenance

Banking services – the business will open an account with equity bank this will require
10,000 as minimum cost of the new account holder insurance. The business will be insured
itself with an insurance company. The business will be paying 1500 as a monthly premium.
Thika town being big has many engineers who will repair the machine one equipment. This
service will support the business for it to run smoothly and successfully.

12
CHAPTER FOUR
4.0PRODUCTION/ OPERATION PLAN
4.1PRODUCTION FACILITIES AND CAPACITIES
Hope’s Fashion House will require certain facilities to assist in purchasing and setting of the
products.

Computers Quantity Cost

Computers 3 45,000
Shelves and stands 6 2,500
Counters 3 10,000
Tables 2 1,500
Chairs 5 2,500
Wall mirrors 3 1,000
Fire extinguisher 1 3,000
Total 63,250

Hope’s Fashion House has set aside 10,000 shillings for the repair and maintenance for the
equipment. Business will be enquiring an electrician from the market because there are
several electricians who are qualifies in repairing the equipment

LAYOUT

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Fitting room Women’s wear
 Men’s wear Fitting room

Children’s wears Fitting room

Accessories

Managers office Production officers

offices

Cash wrap

Inspection room

Wash rooms

FACILITIES NEEDED

FACILITY QUANTITY COST

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Warehouse 1 15,000
Offices 2,000
Washrooms 500
Electricity 1,000
Water 500
Total 9,000

4.2 PRODUCTION STRATEGY

Hope’s Fashion House will use the modern technology in production

The goods and products are readymade then are bought by Hope’s Fashion House and then
are prepared in pairs, single and closed to be sold to the customers. The production manager
will be taking holder of the materials needed and keep records of the hold.

The raw materials which will be in Hope’s Fashion House.

The products hooded in the Hope’s Fashion House are; dresses, trousers, skirts, shoes and
accessories, tape measures dummies and shirts.

Services of equipment would also be done workers middlemen and agents. The supplies will
be at Thika Millers and others in Thika Town limited. PO BOX 2001- 0100 Thika.

The middlemen and agents will be marketing and supply oriented. Hope’s Fashion House
will be producing 10 units in each unit that will be needed in the business. In a month the unit
will be 300 units per unit and in a year the unit will be 3600 units per unit in a year.

4.3 PRODUCTION PROCESS

These are stages which production of the goods will undergo. Shirts will be horded
accordingly to the sizes of the dummies, for children, adults and ladies blouses. Dresses will
also be horded according to the sizes of their dummies for the children and adults dummies.
Trousers will be holded in the men’s designer shops and with the dummies for the children

15
and adult trousers. Shoes will be holded in the shoes warehouse. The shoes will be for
children, women, men according to their sizes and also women accessories.

Competition. In Thika there are many boutique and fashion shops which will competing with
Hope’s Fashion House hence this will affect the business.

Hope’s Fashion House will use modern technology in each stage of production of the
products. The products will be first purchased, marking will be then and transferred with the
trolleys and then arrange ready to be sold.

4.4 PRODUCTION REGULATION

4.4.1 Health Regulation

Competition of the workers will be compensated according to the commitment of the worker
and hard work. Registration of the business name will be sole proprietorship. Location of the
business will be located in a conducive environment free from pollution and contamination.
Trade licensing will be licensed and granted permit be the government be the ministry of
commerce. The business will make sure that the warehouse to prevent accidents to the
workers. The business will be located far from the factories to ensure that a conducive
environment

CHAPTER FIVE

5.0 FINANCIAL PLAN

5.1PRE-OPERATION COST

16
ITEM COST

Tools 20,000

Equipments 10,000

Licences and permit 4,000

Electricity 1,500

Insurance 12,000

Advertisement 2,000

Transport 500

Telephone 1,000

Total 51,000

5.2 PROFORMA BALANCE

BALNCE SHEET FOR YEAR 2021, 2022, 2023

Assets ksh ksh ksh

Fixed assets

Machinery 70,000

Furniture 8,000
17
Total fixed assets 78,000

Current assets

Stock 300,000

Debtors 50,000

Cash in hand 25,000

Total current assets 375,000

Less current liability

Creditors 3500

Total current liability 3500

361500

Working capital 459,500

5.3 PROJECTED INCOME STATEMENT

Project income statement

AS AT 31st DECEMBER 2021

Sh sh

Sales 120,000

Net sales 120,000

Cost of sales

Purchase 30,000

Less closing stock 10,000

Total 140,000

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Less gross profit

Expenses

Rent 2,000

Salaries 4,000

Electricity bills 500

Banking fee 5,000

Total 13,800

Gross profit- expenses= profit

Profit = 126,200

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 PROJECTED CASH FLOOW STATEMENT FOR THE YEAR 1
MONTH JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
CASH IN FLOW
Opening Balance 730,825 784,550 856,175 935,175 1,024,075 1,123,875 1,241,575 1,362,175 1,502,675 1,659,075 1,808,375
Savings 600,000
Loan 1,000,000
Sales 300,000 320,000 340,000 360,000 380,000 400,000 420,000 440,000 460,000 480,000 500,000 520,000
TOTAL 1,050,82 1,124,55 1,216,17
INFLOW 1,900,000 5 0 5 1,315,175 1,424,075 1,543,875 1,681,575 1,822,175 1,982,675 2,159,075 2,328,375

CASH
OUTFLOW
Purchase 99,475 99,475 99,475 110,000 115,000 120,000 125,000 130,000 135,000 140,000 145,000 150,000
Salaries 105,000 105,000 105,000 105,000 105,000 105,000 105,000 105,000 105,000 105,000 105,000 105,000
Stationery 3,000 3,000 3,000
Rent 30,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000
Lease 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000
Fuel & Transport 6,000 6,500 7,000 7,500 8,000 8,500 9,000 9,500 10,000 10,500 11,000 11,500
Repair &
Maintenance 5,000 5,000
Telephone 2,500 3,000 3,500 4,000 4,500 5,000 5,500 6,000 6,500 7,000 7,500 8,000
Electricity 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 11,000 12,000 13,000 14,000
Advertisement 10,000 10,000 10,000 10,000 20,000
Equipment &
Machinery 866,200
Loan Repayment 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000
License 7,000
Insurance 15,000 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200
Water 2,000 2,100 2,200 2,300 2,400 2,500 2,600 2,700 2,800 2,900 3,000 3,100
TOTAL
OUTFLOW 1,169,175 266,275 268,375 281,000 291,100 300,200 302,300 319,400 319,500 323,600 350,700 342,800
BALANCE
CASH FLOW 730,825 784,550 856,175 935,175 1,024,075 1,123,875 1,241,575 1,362,175 1,502,675 1,659,075 1,808,375 1,985,575

20
PROJECTED CASHFLOW STATEMENT FOR YEAR 2

ITEM/MONTH JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL
Balb/f 724000 1520000 2142000 2754000 3127000 3223000 3392000 3538000 3923000 3987000 4041000
CASH IN-FLOW
Sales 700000 800000 600000 550000 600000 500000 550000 600000 700000 600000 500000 600000 8600000
Bank Loan 300000 250000 400000 350000 300000 300000 350000 250000 350000 200000 250000 200000 3800000
Debtors 350000 400000 450000 500000 300000 200000 150000 200000 200000 150000 200000 300000 3420000
TOTAL RECEIPTS 1350000 2174000 2970000 3542000 3954000 4127000 4273000 4442000 4788000 4873000 4937000 5141000 42571000
CASH OUT-FLOW
Purchases 170000 180000 200000 190000 200000 250000 230000 240000 220000 250000 250000 245000 2625000
Rent 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 120000
Electricity 7000 7000 8000 7000 9000 10000 9000 7000 9000 9000 8000 9000 99000
Water 6000 6000 6000 6000 6000 6000 6000 6000 6000 6000 6000 6000 72000
Telephone 5000 6000 9000 8000 7000 8000 9000 6000 8000 8000 7000 9000 90000
Transport 18000 15000 20000 27000 20000 25000 25000 30000 30000 28000 30000 30000 298000
Salaries/Wages 70000 80000 75000 90000 85000 90000 87000 95000 94000 95000 96000 95000 989000
Insurance 25000 30000 45000 50000 40000 35000 42000 45000 41000 45000 42000 45000 485000
Licenses 10000 0 0 0 0 0 0 0 0 0 0 0 10000
Tax 100000 100000 120000 125000 110000 120000 125000 125000 120000 115000 125000 128000 1413000
Creditors 180000 200000 300000 250000 300000 300000 300000 300000 280000 290000 290000 300000 3290000
Advertisement 10000 10000 10000 12000 12000 49000
Stationary 15000 20000 35000 25000 40000 40000 38000 40000 35000 30000 32000 40000 390000
TOTAL PAYMENT 626000 654000 828000 788000 827000 904000 881000 904000 865000 886000 896000 929000 9988000
NET CASH FLOW 724000 1520000 2142000 2754000 3127000 3223000 3392000 3538000 3923000 3987000 4041000 4212000 36583000
C/F

21
5.3.1 PROJECTED CASHFLOW STATEMENT FOR YEAR 3

ITEM/MONTH JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL
Balb/f 4212000 4397000 4443000 4535000 4592000 4978000 5077000 4997000 5007000 5204000 5374000 5687000
CASH IN-FLOW
Sales 500000 550000 600000 500000 600000 650000 550000 500000 600000 550000 700000 600000 6900000
Bank Loan 250000 200000 250000 250000 300000 150000 200000 300000 250000 300000 450000 400000 3300000
Debtors 250000 150000 200000 250000 450000 300000 150000 200000 300000 250000 150000 200000 2850000
TOTAL RECEIPTS 5212000 5297000 5493000 5535000 5942000 6078000 5977000 5997000 6157000 6304000 6674000 6887000 71553000
CASH OUT-FLOW
Purchases 190000 200000 250000 240000 250000 245000 255000 260000 255000 240000 250000 255000 2900000
Rent 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 120000
Electricity 9000 10000 10000 10000 9000 8000 9000 9000 10000 10000 10000 10000 114000
Water 7000 7000 7000 7000 7000 7000 7000 7000 7000 7000 7000 7000 84000
Telephone 9000 8000 9000 9000 8000 9000 9000 8000 8000 9000 9000 9000 104000
Transport 25000 28000 35000 32000 35000 35000 33000 35000 30000 32000 35000 35000 390000
Salaries/Wages 95000 98000 100000 100000 110000 120000 115000 110000 100000 98000 110000 120000 1276000
Insurance 50000 48000 52000 50000 50000 52000 49000 50000 48000 50000 55000 55000 609000
Licenses 10000 0 0 0 0 0 0 0 0 0 0 0 10000
Tax 120000 135000 135000 130000 125000 135000 134000 135000 130000 133000 135000 130000 1577000
Creditors 250000 260000 280000 300000 300000 310000 305000 310000 300000 290000 310000 300000 3515000
Advertisement 15000 15000 10000 15000 55000
Stationary 40000 50000 55000 55000 50000 55000 54000 56000 55000 51000 56000 55000 632000
TOTAL PAYMENT 815000 854000 958000 943000 964000 1001000 980000 990000 953000 930000 987000 1001000 11376000
NET CASH FLOW 4397000 4443000 4535000 4592000 4978000 5077000 4997000 5007000 5204000 5374000 5687000 5886000 60177000
C/F

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5.4 Pro-Forma Income Statement

Pro -foma income statement for the year ending

31st Dec 2021 31st Dec 2022 31st Dec 2023

Sales 8600000 6900000 6750000

Less cost of goods 940000 900000 970000
sold
Gross profit 7660000 6000000 5780000
Less expenses
Wages & salaries 989000 1276000 1398000
Electricity 99000 114000 120000
Water 72000 84000 84000
Rent 120000 120000 144000
Telephone 90000 104000 102000
Transport 298000 390000 413000
Advertisement 49000 55000 60000
Repairs 9000 10000 10000
Stationary 390000 632000 668000
TOTAL EXPENSES 2116000 2785000 2999000
Profit before tax 2686000 1738000 1869000
Tax provision 2000000 789000000 799000
Net profit after tax 858000 688000 113000

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5.5 Pro-forma Balance sheet

Proforma balance sheet as at

1st Jan 2022 31st Dec 2022 31st Dec 2023

ASSETS Shs Shs. Shs.
Fixed Assets
Machinery and 275000 285000 275000
Equipment
Furniture & Fittings 105000 95000 105000
Motor vehicle - - 500000
Total 380000 380000 880000
Current Assets
Cash at hand & Bank 400000 420000 450000
Debtors 300000 340000 320000
Stock 850000 870000 895000
Total 1550000 1630000 1665000
Total Assets 1930000 3010000 2545000
Liabilities
Current liabilities
Creditors 9500 7000 10000
Total 9500 7000 10000
Long term liabilities
Bank loan 972500 971000 1006000
Capital employed 948000 1032000 1529000
1930000 2010000 2545000

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5.6 Break-Even Analysis

Break-even point measures the number of units of service the business will render in a given

period, without making profits or losses. Only variable and fixed costs will be met.

Fixed costs Amount Variable costs Amount

(Kshs) (Kshs.)
Rent 10000 Debtors receipts 350000
Electricity 10000 Cash sales 700000
Water 7000 Cash purchases 170000
Wages/Salaries 110000 Creditors paid 180000
Taxes 100000 Transport 18000
Insurance 50000
Licenses 10000
Advertisement 10000
Total 307000 Total 1418000

i) Gross Profit Margin = Gross Profit x 100

Sales

1st Year 2022 = 7660000 x 100

8600000

= 89.07%

2st Year 2023 = 6000000 x 100

6900000

= 86.96%

3st Year 2024 = 5780000 x 100

6750000

= 85.63%

Breakeven level

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 i) Breakeven level = Total Fixed cost
Gross profit Margin

1st Year 2022 = 307000

89.07

= 3412.6

2st Year 2023 = 320000

86.96

= 3679.9

3st Year 2024 = 314000

85.63

= 3666.9

5.7 Expected Profitability Ratios

Gross Profit Percentage = Gross Profit x 100

Sales
= 7660000 x 100
8600000

= 89.07%

Return on Equity = Net Profit after tax x 100

Owners’ Equity

= 113000 x 100
250000

= 0.452 x 100

= 45.2%

Return on Investment = Net Profit after tax x 100

Total Investment

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 = 113000 x 100
600000

= 0.188 x 100

= 18.8%

Return on Sales = Net Profit after tax x 100

Net Sales

= 113000 x 100
970000

= 0.116 x 100

= 11.6%

5.8 Desired Financial

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This is the amount of money required to start business

Particulars Amount

Total Pre-operational costs 29500

Working capital 457000

Fixed Assets 850000

Total Start up Finance 1366500

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