School: Thika school of medical and health sciences

Admission: DCHDT/J-0021/THI/20
Address: p.o.box 01000-2009

Email: paulian982@gmail.com@gmail.com

Name:Ian Paul Okayo

Course name:Diploma in community health and development.
Presented To: Kenya national examination council

ACKNOWLEDGEMENT
I kindly express my gratitude to all those who were involved in one way or another
to make this business plan successful. I also thank my supervisor for the information
and procedure to come up with this business plan. Finally I greatly appreciate the
guidance and help from the almighty God.
 DEDICATION
I dedicate this business plan to my loving parents who morally and financially
helped me to carry out the business plan and also the entire training period. Lastly,
not forgetting my friends for the idea support.

TABLE OF CONTENTS
DECLARATION……………………………………………………………………………...i
ACKNOWLEDGEMENT……………………………………………………………………ii
DEDICATION……………………………………………………………………………...…iii
TABLE OF CONTENTS……………………………………………………………………...iv
CHAPTER ONE………………...……………………………………………………………...1
EXECUTIVE SUMMARY……….…………………………………………………………....1
1.0 Business description………………………………………………………………………1
1.2 Marketing plan……………………………………………………………………………..1
1.3 Organization and management plan……………………….............................................1
1.4 Operational plan…………………………………………………………………................2
1.5 Financial plan……………………………………………………………………………….2
CHAPTER TWO………………………………………………….............................................3
2.0 BUSINESS DESCRIPTION………………………………………………………….........3
2.1Business name………………………………………….........................................................3
2.2 Business location and address…………………………………………………………….3
2.3Form ownership……………………………………………………………………………..3
2.4Type of Business…………………………………………………………………………….3
2.5Product/service……………………………………………………………………………....4
2.6Justification of Opportunity……………………………………………………………….2
2.7Industry………………………………………………………………………………………3
2.8 Entry and Growth strategy………………………………………………………………..4
CHAPTER THREE…………………………………………………………………………….6
3.0 MARKETING PLAN……………………………………………………………………...6
3.1Customers…………………………………………………………………………………...6
3.2Market share…………………………………………………………………………….......7
3.3 Competitors…………………………………………………………………………………8
3.4Method of promotion and advertising…………………………………………………...9
3.5 Pricing strategy……………………………………………………………………………...9
3.6 Sales tactics…………………………………………………………………………………..9
3.7 Distribution strategy……………………………………………………………………...10
CHAPTER FOUR……………………………………………………………………………...11
4.0 ORGANIZATION AND MANAGEMENT…………………………………………....11
Business manager(s) qualification…………………………………………………………..11

4.1 Personnel, number and

duties………………………………………………………………………………………..12
4.2 Organization charts………………………………………………………………….........13
4.3 Recruitment, training and promotion
recruitment…………………………………………...…………………………………….14
4.4 Remuneration and incentives……………………………………………………………15
4.5 Licenses, permit and by-laws
licenses………………………………………………………………………………….…..16
4.6 Supportive service………………………………………………………………………...17
CHAPTER FIVE……………………………………………………………………………….18
5.0 OPERATIONAL/PRODUCT PLAN…………..………………………………………..18
5.1 Production facilities and capacity……………………………………………………….18
5.2 Production strategy………………………………………………………………………..19
5.3 Production process………………………………………………………………………...21
5.4 Government and regulation affecting operation……………………………………...23
CHAPTER SIX…………………………………………………………………………………24
6.0 FINANCIAL PLAN………………………………………………………………………..24
6.1Pre-operational cost………………………………………………………………………. 24
6.2 Working capital cost………………………………………………………………………24
6.3 Projected cash flow statement…………………………………………………………...25
6.4 Kibara woodwork enterprise projected cash flow statement for the period ending
31stdec 2020. 26
6.5 Pro forma income statement……………………………………………………………..29
6.6 Pro forma balance sheet…………………………………………………………….…….30
6.7 Break-even analysis…………………………………………………………………….....31
6.8 Profitability ratios………………………………………………………………………....31
6.9 Desired financing………………………………………………………………………….34
6.10 Proposed capitalization………………………………………………………………...34

CHAPTER ONE.
EXECUTIVE SUMMARY.
1.0 BUSINESS DESCRIPTION.
Ian woodwork enterprise is a sole–proprietor type of business that will avail building
materials to the residents of Kariobangi South and its surrounding areas. The main aims
of the business is to cover the whole part of Kariobangi.

1.2 MARKETING PLAN.

There is an increase demand for housing and building materials each year due to
increase in population and upcoming investors for various business. Therefore Ian will
cater the needs of individuals, branches and institutional customers for building
materials.
In order to achieve this aggressive sales promotion must be considered to ensure that
potential customer attention is captured. The correct channel of distribution must be
put in place to ensure that the goods penetrate into the market. Good communication
network is done to enhance success.

1.3 ORGANIZATION AND MANAGEMENT PLAN.

The woodwork enterprise will be a sole-proprietor form of business, organization and
management duties will be wholly undertaken by the owner. The entrepreneur of the
proposed business is well qualified enough to undertake this responsibilities given the
fact that he has acquired entrepreneurial skills in Thika school of medical and health
sciences. Recruitment, training and promotion will be done according to the business
policy.

1.4 OPERATIONAL PLAN.

The initial capital for the proposed business amount to Kenya shillings 1600000 which
will be acquired from the owners KCB loan from bank, relatives and friends
contribution.

CHAPTER TWO
2.0 BUSINESS DESCRIPTION.

2.1 Business Name.

Name of the proposed business will be Ian woodwork enterprise. The name
Ian was derived from quality of work am intending to deliver to my
costumers. The business is scheduled to commence its operation march 2020.

2.2 BUSINESS LOCATION AND ADDRESS.

The business will have two location. The showroom will be located in
Kariobangi `s light industry area, along uttering Road, next to co-operate
bank of Kenya, Kariobangi Branch.
The work shop will be located in kariobangi South, off Mutarakwa Road, next
to Zetech University.

The business will operate under the following address:

IAN WOOD WORK ENTERPRISE.
P.O. BOX 01000-2009
THIKA.
TELEPHONE: +254704569769
EMAIL: paulian982@gmail.com

2.3 FORM OF OWNERSHIP.

Ian woodwork enterprise is a startup principal officers who will be investing

significant amount of their own capital into the company and will also be

seeking a loan to cover start-up cost and future growth.

2.4 Type of business.

The enterprise will be a sole proprietor business type.

2.5 Product/services.

Ian woodwork enterprise will deal with various type of furniture product

and services.

Household’s including:

-Sofa sets -Beds

 -Wall units -Kitchen units

-Entertainments units -Book shelves

-Coffee table -Chopping board

-Dinning table -parquets

Office furniture:

-Work station -Drawers

-Desks -Mobile bulk filling units

-Cabinet shelves -Ergonic and orthopedic chairs

-Demountable partitions

Others:

-Staircase

-Door frames -Molding

-Lining -Scatting

-Patterns -Cornice

These product will be unique as compared to those offered by competitors in the

following way:

Ian woodwork products. Competitor products.

- Top quality finishing as - Low quality finishing due to

 business will invest in latest use of normal tools and

technology in the market. outdated methods.

- Reasonable and competitive - Reasonable prices but no

prices with seasonal price discounts.

slashes and discounts.

- Diversification in variety of Concentrate mostly in household

products which include both furniture.

house hold and office

furniture with other ranges of

services.

- After sales services and No after sales services nor hire

introduction of hire purchase purchase schemes.

schemes.

2.6 Justification of Opportunity.

A market research and a feasibility study of the catchment`s

areas of the businesses were carried out. The catchment
areas include kariobangi, light industry, kariobangi south,
Huruma, Pioneer estate and outering. It was established that
there exist an opportunity for furniture business owing to
the increase in number of business, institution and
residential house. Also there are a few well organized
furniture dealers who can offer quality services.
 Business mentioned include small and medium size
enterprises mostly concentrated in Kariobangi light
industry, which include Solai paints, Apituprotec, Crown
Feeds and Guild Ford Drycleaners.

Institution including financial institution such as Equity

bank, co-operative bank and Jamii Bora. Schools and colleges
include Moi Forces Academy. Day spring Junior, and
Anointed, Ashley’s Beauty collage Pioneer high school and
Outering High School.

Residential houses under construction mostly in Kariobangi

also offer new potential customers.

2.7 Industry.

The business falls under manufacturing industry in furniture

and fittings, which has greatly developed due to changes in
technology and the need for good quality furniture. The
growth of the industry has led to importation of furniture
from overseas.

(a) Industry size.

The number of competitors in the industry is increasing at

an alarming rate due to the freedom to enter the industry
and promising future of the industry. It is characterized by
the fair returns as indicated by survey of sales conducted for
different furniture stores.

(b) Industry Trend.

Industry is characterized by a growing trend with a very

high rate of growth. With the release of Youth Funds, SME
(Small Medium Enterprises) Funds and Government
 Commitment to improve the economy .The industry will see
an increase in number of investors.

(c)Industry Characteristics.

 Capital requirement: Amount of capital required depend on

the size of the business one is intending to start. If the owner
wants to engage in a wide range of product it will require
sum of capital.

 Technology: Initially many furniture makers used

conventional method and tools but changes in technology
have led to the introduction of smother, planners and
interlocking machines which have increased production.

 Distribution: Chain of distribution in this industry flows

from manufacture to consumer mostly using two types of
channel.

1.1 Goals of the Business.

1. To increase its market share.

The business will aim at increase its market share from the
expected 25% in February 2017 to 32% in December 2017, by
improving quality and timelines of services by instituting
procedures that will avoid delayed schedule to build up a
reputation of better quality services.

Open new showroom and Branches.

 The business will aim at opening more showrooms in
Nairobi, identified areas are Roasters along Thika road,
Nairobi West, Parklands and Westlands. The business also
intends to open other branches in other towns.

Maximize profit.

The business will aim to increase its net profits from the
budgeted Ksh. 300,000 July 2020 to Ksh.600000 in July 2021.

Diversification.

The business intends to venture into other product such as

wall painting, woodcarving, carpet making, curtains and
cushions to increase its turnover.

Community and Social Responsibility.

The business will aim at training youth and ultimately

employing them. It will also get involved in carrying
extreme make over in educational institution by carrying out
repair and fitting as a mean of giving back to the society.

2.8 Entry and Growth Strategy.

When entering the market, the business will conduct a

SWOT (Strength, Weaknesses, Opportunities and Threats)
analysis to analyze the strength, weaknesses, opportunity
and threats of the business. This will enable us make
maximum utilization of the available opportunities and take
advantages of competitors’ weaknesses.

STRENGTH WEAKNESS OPPORTUNITIES THREATS

 Prime and suitable New Provide a variety of Government

 location with easy access environment products which are policies , for

from all corners. it will take not provided by example high tax

time to others. on licenses and

establish permits

itself.

 Well trained personnel. Serve local Increased

institutions. competition.

 Flexibility to offer To satisfy the Change in

competitive market unsatisfied needs of technology and

prices. residents. taste of

preference.

 Ability to raise up Unfavorable

sufficient amount of economic

startup capital. conditions.

CHAPTER THREE.

3.0 MARKETING PLAN.

Marketing plans refers to that system of business activities that design on how to offer

product and services that are of acceptable quality to the customers. This may be

attributed to such terms as: Prices, promotion and distribution.

Marketing plan is of great importance because it facilitates success and growth of a

business. The catchments area of Ian woodwork will cover Kariobangi, Light Industry,

Huruma, Kariobangi south, Pionieer estate, Outering and other surrounding areas.

The major competitors of the business are B-Plan carpentry, Manita de Furniture and

Afrotoiler woodwork.

3.1 CUSTOMERS.

Customers are people who demands a particular product or its substitute and also have

the purchasing power and capability to buy the product. Our customers will comprise

individual buyers, business enterprises and institutions.

 Individual buyers.

These are areas resident who lives in the surrounding areas. We shall target both old

and new resident. To capture old resident who may be loyal to our competitors we shall

create the need to buy our own product by creating new products and design which are

essential. Individual buyers also include workers in the local enterprises mainly

concentrated in Light Industry, who do not live in the vicinity.

 Business enterprises.
Numerous numbers of industries have developed which include paint manufacturers,

weigh and scale makers, millers, confectioneries and bakeries which also require

furniture and fittings.

 Institutions

Can be categorized into two:

(i) Learning Institutions: Learning institutions in the area including primary,

Secondary schools and Technical colleges e. g Dayspring, Moi Forces Academy,

Marura Primary School, Ndururuno Primary School, Daima Primary School,

National Jua kali and Ashley’s Beauty Collage. These institutions require large

volumes of furniture such as desks, chair, cupboards and shelves to cope with

the increase number of students. Hence the institution will contribute a large

percentage of total sales.

(ii) Financial Institution: A number of financial institution have established

branches in Kariobangi. They include co-operative Bank of Kenya, Equity Bank

and Jamii Bora which is a Micro Financial Institution. These institution offer

tenders for supply and repair of furniture. We shall offer favorable terms to win

these tender.

3.2 MARKET SHARE.

From the total customers within the target market, Good Plus woodwork is expected to

take 25% of total share, at its up period, putting into consideration the degree of

competition in the market. The remaining share of 75% will be taken by the furniture
dealers the area. This market share is expected to increase because we intend to build a

good reputation of quality services at fair prices.

The total market share is approximately 30,000 customers and the figure is expected to

grow by 15% due to increase population and development projects.

Name Target customers percentages

B-plan carpentry 9000 25%

Manita de Furniture 6600 22%

Afrotoiler woodwork 6900 23%

Kibara 7500 30%

B-plan carpentry Manita de furniture Afrotoiler woodwork kibara

3.3 COMPETITORS.
 Refers to those businesses selling similar products as well as close substitutes

and competing for same customers in the market. Different competitors have

different strength and weaknesses and hence any customer who buys from

any furniture store would wish to have the right quality of product or service

at the lowest cost possible.

A survey carried out in the areas revealed the following major competitors

and their competitive strengths and weaknesses.

Name. Location. Number of Strength. Weaknesses.

Employees

B-plan Approximately  Well established.  Lack of fare

carpentry. 1 km from Ian  Offer transport. dealing with

10
woodwork. customers.

 Fixed prices.

Manita de Approximately  Fair dealing with  Sell on retail basic

furniture. 3 km from Ian customers. only.

woodwork. 8  After sales  Concentrate in

services. house furniture

only.

Afrotoiler Approximately  Offer credit  No discounts.

woodwork. 500 m from Ian facilities.  Situated in

5
woodwork.  More qualified unfavorable place.

personnel.

3.4 METHODS OF PROMOTION AND ADVERTISING.

Promotion and advertising refers to the creation of awareness of the

existence of a particular product or services in the market. Ian woodwork
enterprise will use the following advertising and promotional strategies:-

 Putting up a signboard.

 Producing calendars and diaries.

 Introducing hire purchase schemes and credit facilities.

 Attractive showroom.
 Advertising in the advertiser and digger classified.

 Strategic location of the business which is easy to access.

 Engaging in the community activities such as clean up campaigns,

planning trees dust bins within the estates.

3.5 PRICING STRATEGY.

This refers to the layout which the business employs in setting the prices
of the commodities.

Most of the products to be offered will be produced by the business. Thus

considering the cost of raw materials and production, transport, labor and
other expenses plus a percentage of profit will arrive at the price. The
pricing strategy will generally depend on the government policies,
taxation and demand in the market.

3.6 SALES TACTICS.

Besides promotional activities the business will be engaged in other

strategies not only to create awareness of its products but also ensure
large of its goods. These strategies include seasonal price cuts, after sales
services and discounts on large quantities of goods. The business will also
introduce trade fares.

3.7 DISTIBUTION STRATEGY.

The business will have a distribution plan to quit individual demands of

its customers. It will offer transport services for goods within Nairobi and
cost sharing for goods outskirts of Nairobi depending on the bulk.

The mode of distribution to be adopted by firm will be as follows:

RETAILER CONSUMER
 CHAPTER FOUR

4.0 ORGANISATION AND MANAGEMENT.

The business will have proper organization and management plan. This will be

achieved through the employment of competent personal in the running of the

business enterprise. Key personal to be recruited will comprise of an Accountant to

keep records of all the financial transactions a salesman to market the business and

its products to public, three carpenters to initiate production of goods and two

security guards to the two premises.

4.1 BUSINESS MANAGER(S) QUALIFICATION.

The business enterprise will be a partnership type of business. To avoid

conflict of interest I will be the chief executive officer while my partner
will be chief operational officer. Both of us will constitute the Board of
 directors which has the mandate in policy making and ensuring their
implementation.

(a) Chief executive officer.

Duties.

1. Mobilizing the available resources toward attainment of business goals

and objectives.

2. Ensuring unity of action and goal congruency among workers.

3. Making strategic plans and budgeting the resources of the business.

4. Procurement of any goods and services required.

b) Chief operational officer.

Duties.

1. Supervise day to day activities of the workshop.

2. Product creation and development of production processes.

3. Foresee adoption of new technology in production.

4. Recruitment and training of new employees.

Academic qualification.

1. A holder of a diploma in woodwork for SOS technical institution.

2. A holder of certificate in entrepreneurship.

3. Five years ‘experience as a carpenter managing his own business.

4.2 PERSONNEL, NUMBER AND DUTIES.

Accountant (1 post)

Duties.
1. Ensuring proper books of account are kept.

2. Preparation of financial statements.

3. Advice the management on financial matters such as loan application.

4. Payment of salaries, and other expenses.

Qualification.

1. Possess at least C.P.A II or ACCA part II.

2. Knowledge of accounting packages e.g. spread sheet and quick book.

3. Two years of experience in the same position.

4. Good communication skill.

Salesman (1 post).

Duties.

1. Market business at and its services to local residents.

2. Order taking and follow up of customers.

3. Prospecting that is finding new market and opportunities.

4. Debt collections and handle complaints.

5. Organize promotion of firm products.

Qualification.

1. Ideal candidate should have certificate in sales and marketing.

2. Good track record in salesmanship.

3. Two year experience as a salesman.

4. Good communication skills.

5. Can make good relation with people.

Carpenters (3 posts).

Duties.

1. Create and service products.

2. Create new designs.

3. Good arrangement of the workshop.

Qualification.

1. Certificate in woodwork.

2. Five year experience.

3. Good communication skills.

4. Guards (2 posts).

Duties.

1. Guarding the business premises. (Both showroom and workshop).

2. Ensure peaceful working environment.

Qualification.

1. Aged between 35 – 40 years of age.

2. Experience of at least five years.

3. Good communication skills

4.3 ORGANIZATIONAL CHART.

The business will have a clear organizational chart, which will show the
flow of authority and chain of command from the top to level

BOARD OF DIRECTORS
 management to the lowest of subordinate staff. Below is an organizational
chart of the proposed business.

CHIEF EXECUTIVE OFFICER CHIEF OPERATIONAL OFFICER

ACCOUNTANT SALESMAN CARPENTERS

WATCHMAN

4.4 RECRUITMENT, TRAINING AND PROMOTION RECRUITMENT.

Refers to the process of obtaining new employees to fill the vacant positions in an
organization. The business will identify the job opportunities available then place an
advertisement in the local newspapers and also by use of posters with the job
specifications clearly stated to enable the qualified person to apply. On receiving the
application, the most favorable candidates will be sort listed and then invited for
interview. After the interview, the most appropriate candidates will be identified
according to laid down procedures and they will be offered the job.
TRAINING.
This is the process of enhancing knowledge and skills of doing a particular job. After
recruitment process, the management will offer training to the new employees to
increase productivity and sharpen their skills.

The employees will be allowed to attend seminars and exhibition and to enroll in
technical institutions to brand themselves.

PROMOTION.
Refers to the appointment of an employee top a position of higher responsibility. To
ensure equity and fairness, the business will have a well- established promotion
procedures, which will be guided by clear set rules and regulation.

4.5 REMUNERATION AND INCENTIVES.

This refers to the reward given in exchange of human labor, while remuneration
includes salaries and wages, incentives are benefits given to employees, to boost
their morale and productivity e.g. good working conditions, job security and gifts.

The following is a summary of employer`s salary scale:

Job title No. of Monthly salary Total
employees
Chief executive officer. 1 20,000 20,000
Chief operational officer. 1 20,000 20,000
Accountant 1 15,000 15,000
Carpenters 3 10,000 30,000
Salesman 1 8,000 8,000
Watchman 2 6,000 6,000
Total salary 105,000

INCENTIVES.
These include financial and non-financial:-
a) Financial incentives:
Gifts.
The employees will be given shopping vouchers according to their
performance.

Bonuses
 When profit exceeds the projected limits, a portion of the excess will be
distributed to employees inform of bonuses.
Overtime pay.
Will be issued according to number of excess hours working.

b) Non-financial incentives

Job security.

No irregular dismissals.

Promotions.

Well desired system of promoting employees according to working

experience.

Good working conditions.

Employers would be provided with good working environment and safety

regulations.

Transport.

Transport would be provided for employees who up to late hours of the day.

4.6 LICENSES, PERMIT AND BY-LAWS LICENSES.

For business to start its operation it will have to be issued with trading licenses, one
from the ministry of trade and other from city council. This is to ensure that the
business has complied with all legal requirements.

PERMITS.
 Business will be required to acquire a permit from public health officers to ensure
that the premises are fit for operation and that the business complies with all the
requirement of the Health Act.

BY-LAWS.

Refers to those laws passed by the local government in the regard to business
premises and employees. The business will ensure that the premises are located in
an authorized location by the city council. The business will also comply with the
requirement of Health Act e.g. provide adequate toilets and proper waste disposal.
The business will ensure it abides to the labor law e.g. the workers compensation
act.

4.7 SUPPORTIVE SERVICES.

1. Insurance services

The business will insure its property against risks as fire and theft by taking
comprehensive insurance policy with C.F.C insurance group, and register its
employees in case of accidents at the workplace with AmIana Insurance Group
(A.I.G). Later the business plans to take life insurance for its employees.

2. Banking services.

The business will open an account with cooperative bank, Kariobangi branch.
This will be convenient as the bank is adjacent t the proposed business
showrooms.

3. Legal services.
 Legal services will be provided by Shake & Co. Advocate, located at utalii
House, 1st floor along Uhuru Highway.

4. Security services.

The business will employ its own guards and also will depend in the security
provided by Buruburu and Kasarani police station as it falls within areas
manned by the two police stations.

5. Telephone services.

The business will acquire a telephone wireless service from Telkom Kenya.

6. Internet services.

Later, the business plans to launch its own website and install Telkom ADSL
services.

CHAPTER FIVE

5.0 OPERATIONAL/PRODUCTION PLAN.

Refers to the arrangement of activities and facilities of a business by the

entrepreneur to enable him/her carry the business effectively and efficiently.

5.1 PRODUCTION FACILITIES AND CAPACITY.

Besides capital and labor, other facilities will be needed for the business to
operate effectively. Such facilities should be readily available and suitable. They
include:

5.1.1 Premises.
The showroom will cover approximate of 500 square feet. This will be rented at a
rate of Ksh. 15,000 per month. The workshop will cover 1000 square feet. It will
not be rented as it is owned by one of the partners.

5.1.2 Motor vehicle

The business will lease a second hand Nissan hard-body pick-up owned by one
of the relatives at a cost of Sh 20,000 per month. It will be convenient for
transporting raw material into the workshop and other goods.

5.1.3 Equipment and machinery

For mass production and optimum efficiency, the business will invest Ksh.
720,000 in three state of art machines which are:

Name Cost

1. Planner & Thickness 250,000

2. Cross cut 120,000

3. Spindle molder 350,000

Total 720,000

The business will invest a total of Ksh 866,200 on all the equipment and
machinery. Inventory and servicing. Although on expensive venture this will
enhance our efficiency and maximum profit.

5.2 PRODUCTION STRATEGY.

To avoid stock out of raw materials which may lead to loss of firm`s goodwill,
the business will ensure it sets an optimum re-order level of stock. Stocks
(materials required) which will be ordered monthly include:
 Materials cost per unit No. of units suppliers Total cost

Timber Variable - Wajoyce sales 28,375

Manufactured boards 1800 10 Wajoyce sales 18,000

plywood 430 20 Ruaraka Hardware 8,600

Nails 80 20 Ruaraka Hardware 1,600

varnish 1600 10 Ruaraka Hardware 16,000

Glue 400 15 Ruaraka hardware 6,000

Bolts 60 30 Ruaraka Hardware 1,800

Mini fix 40 40 Ruaraka Hardware 1,600

Connectors 40 50 Ruaraka Hardware 2,000

Screws 5 1000 Ruaraka Hardware 5,000

Sand paper 30 50 Ruaraka Hardware 1,500

White spirit 900 10 Ruaraka Hardware 9,000

99,475

Timbers include:

Type Cost per unit No. of units Total cost

Mahogany 120 50 6,000

Camphor 120 60 7,200

 Mvule 140 40 5,600

Grevillal silky oak 40 50 2,000

Cypress 45 60 2,700

Pine 35 75 2625

Cinder 45 50 2,250

28,375

Purchasing of materials from major suppliers and at large quantities will lead to
economics of scale reducing cost. The business will also sell materials which are
in excess to other furniture dealers making profit.

The business will have some well laid production strategies that will enable the
business to establish itself and grow. Such strategies include:

a) Formation of a design team comprising of chief operational officer,

carpenters and salesman who will discuss cheaply on the current market
demands and how to develop unique products to satisfy consumers.

b) To achieve time utility, punctuality will be keenly observed. Thus at high

season (i.e. when the demand is at its peak), overtime and night-shifts will
be introduced and adopted.

c) Availability of the state of art machinery will enable mass production of

goods reducing cost and will also enable diversification to suit different
market segments.
 The business will strategize on the preliminary operational requirements such as
telephone services, power supply, water supply and advertising.

EXPENSES COST

Telephone services 8,000

Power supply 15,000

Water supply 2,000

Advertisement 10,000

Stationery 3,000

License 7,000

Total 45,000

As concerns waste from finished products, the business will implement a

waste management programme, by- products will be used to earn the
enterprise some revenue though reselling and recycling.

5.3 PRODUCTION PROCESS

These are control processes involved in converting raw material into

finished goods required to satisfy the needs and wants of organization
existing and potential customers. The production process will mostly be
carried out by the machines. But the following processes will be followed:
a) Drawing: Design team will sit down; convert their ideas into
product sketches to fit consumer wants. Brain storming will be done
to perfect the drawing and assess if it is possible to produce them.

b) Cutting list: All the costs involved in the production process will be
laid down and summed up together with the profit the business
intends to make from the product. After the price tag has been set,
the customer will be informed to give a go ahead by placing an
order.

c) Selection of materials from store: Raw materials required will be

selected from the store and the equipment’s/machines needed,
tested to they are functioning efficiently.

d) Marking and cutting: Using pencils and other drawing tools, the
raw materials will be marked and cut as required using the cross-
cut for materials which are to be molded, the spindle molder shall
be used to achieve desired model or pattern.

e) Planning: After the materials have been cut and molded, materials
will be planned to smoothen their surfaces.

f) Joints: To produce joints will be calculated and marked on the

edges of the wood. The cutting gauge of the machine will be
adjusted to produce the required joints. To produce joints manually
a chisel shall be used.

g) Finishing: Apply first coat of varnish. Sand paper the first coat.
Apply the second coat of the varnish.

h) Assembling: Glue the joints and fit in the nails or screw. Plane all
the joints and varnish the edge. Wax everything to produce
glimmering product.
 Ground layout

m
Chief executive Accounts office Meeting room Salesman

Officer ’s office
mCCCHIEFebbcb

Toilets

Toilets

Showrooms
 5.4 GOVERNMENT REGULATION AFFECTING OPERATION

1. Registration of business Name (cap 499)

Acts of parliament making provision for registration of sale proprietorship

or partnership. The business will be registered according to this Act and a
certificate of registration will be given to the partners.

2. Trade licensing Act (cap 497).

Government emphasizes that enterprise be registered and issued with a

trading licensing before it commences its operations. The validity of the
license ranges from six months to twelve months.

3. Employment Act (cap 226).

The act provides protection to workers. It provides the laws to any

employer who starts a business and intends to employ personnel. The act
regulates that:-Salaries be paid on monthly bases as agreed upon, any
contract of services of more than six months be in writing, the employers
should make necessary statutory deduction such as:- PAYE and NSSF and
remit them to relevant authorities. It also state that there must be at least
one day each week for the employees to rest.

4. The public Act (cap 242)

Require clean, healthy and safe working condition be provided to all
employees. Conditions such as proper sanitation, clean water,
subjecting staff to health examinations and having their health status
satisfied, provision of safety devices such as helmets and overalls.
These regulations ensure safety of the staff of the business.

5. Insurance Act (cap 507)

Government requires that insurance policies be obtained to ensure

safety of premises and personnel working in the business against
certain risks such as fire, earthquakes and accidents. This will help to
protect the business premises and the employees against any
unforeseen risks or occurrence.

CHAPTER SIX

6.0 FINANCIAL PLAN

Concerned with the economical procurement and profitable use of

funds. It also involves the determination of objectives, policies and
procedures relating to financial function.

6.1 PRE- OPERATIONAL COSTS

Preliminary expenses or costs incurred before the actual

commencement of the business operation. The pre-operational costs of
the business will comprises the following:-

Cost/Expense Amount

Registration and Trade license 7,000

Rent Deposit 30,000

Telephone Installation 8,000

Advertisement 10,000

Stationery 3,000

Furniture and Fittings 10,000

Equipment & Machinery 866,200

Total 934,200
 2019 K
YEARS KSH 2020
S
H

500,000
CURRENT 250,000
ASSETS

STOCK

CASH IN 100,000 150,000

HAND
30,000
CASH AT 250,000 600,0000
BANK

CURRENT
LIABILITIES

CREDITORS
60,000 120,000

BANK 120,000 180,000 240,000

LOAN

420,000

6.2 WORKING CAPITAL REQUIREMENTS

Working capital refers to capital in circulation. It is in excess of current

assets to current liabilities i.e working capital = current assets – current
liabilities. The table below shows the proposed working capital structure
of the business:-
 6.3 PROJECTED CASH FLOW STATEMENT

A cash flow statement showing in details the total cash inflows and
outflows of business during a particular financial year. It indicates the
sources from which the funds were acquired and how they were spent.
It acts as an important planning tool for a business because it shows the
level of cash balances and the amount of desired financing.

6.5 PROFORMA INCOME STATEMENT.

This is a hypothetical profit and loss statement showing the budgeted
sales, cost of sales and expenses of the business. It helps in planning the
business before the actual operation starts. This will help in assessing the
funds required as well as other resources needed to start the business. It
will also help to gauge the viability of the business.

6.6 PROFORMA BALANCE SHEET

 A proforma balance sheet is a statement which normally shows the
financial position of an enterprise of the end of any given period. It shows
the assets and liabilities of an enterprise.
2020 KSH 2021 KSH 2022 KSH
FIXED ASSESTS
Motors vehicle - 450,000 405,000
Less Dep.10%
Machinery 866,200 929,480 836,622
Less Dep.10%
Computer & Printer 34,000 30,600
Less Dep.10%
Current Assets
Cash in Hand 50,000 70,000 100,000
Cash at Bank 1,117,683 402,676 276,522
Debtor 120,000 150,000
Total Assets 2,033,883 2,006,256 1,798,744
Short Term Liabilities
Creditors 130,000
Long term liability
Bank loan 1,110,000 870,000 240,000
Capital + Retained profit
Capital 600,000 600,000 600,000
Profit per year 323,883 536,256 828,744
2,033,883 2,006,256 1,798,744
KIBARA WOODWORK ENTERPRISE PROFORMA INCOME
STATEMENT AS AT 31ST DECEMBER 2020 – 2022.

6.7 BREAK-EVEN ANALYSIS.

Study of relationship between cost volume and profit at various levels of activity. At
this point the business neither makes profit nor loss because, Income= Expenditure.
Breakeven point (B.E.P) = FIXED COST

Sale - Variable

YEAR 2020
Fixed costs Amount Variable Amount
Salaries 1,260,000 Fuel 105,000
Rent 195,000 Telephone 63,000
Loan 90,000 Electricity 102,000
Stationary 9,000 Water 30,600
Lease 240,000 Advertisement 60,000
Insurance 28,000 Repair 10,000
TOTAL 1,822,200 370,600

B.E.P = Fixed cost x sales

Contribution (sales –Variable Cost)
= 1,822,200 X 4,920,000

4,920,000 – 370,600
= KSH. 1,970,638.766

6.8 PROFIT ABILITY RATIOS.

Profitability ratios normally indicate the degree of success in
achieving profit levels. These ratios evaluate the profit
earning capacity of a business in relation to capital
employed.
1. Gross profit Ratio
Gross profit Ratio = Gross profit x100
Sales

It represents the gross profit as a percentage of sales.

Sales = 4,920,000

Purchases = 1,468,425

Gross profit = 4,920,000 -1,468,425

= 3,451,575.

Therefore Gross Profit Ratio = 3,451,575 x 100

4,920,000

Net Profit Ratio

Net Profit Ratio = Net profit before tax x 100

Sales

Expresses net profit as a percentage of sales.

=385,575 x 100
 4,920,000

= 7.84%

Shows the business efficiency with which it turns each Ksh.100 invested into
a net profit of Ksh 7.84.

Return on Equity.

Compares net profit after tax to equity that shareholders have invested into
the firm.

Return on Equity = Net profit after tax x 100

Owner’s equity
Net profit after tax = 323,883
Owner Equity = 600,000
Return on Equity =323,883 x 100
600,000
= 53.98%.
RETURN ON INVESTMENT.
Compares net profit after tax to the firm’s total investment.
Return on investment = Net Profit After tax x 100
Total Investment
Net profit after tax = 323, 883
Total Investment = 2,466,200
Return on Investment = 323,883 x 100
2,466,200
= 13.98%.

6.9 DESIRED FINANCING.

This is the total amount needed to start the business.

ITEM AMOUNT

Pre-operational cost 934,200

Working capital 665,800

Fixed assets 866,200

Total desired financing 2,466,200

6.10 PROPOSED CAPITALIZATION.

SOURCE AMOUNT
Owner’s Equity 600,000

Bank loan 1,000,000

TOTAL 1,600,000