BUSINESS PLAN

TITLE: MALI CONSTRUCTION HARDWARE

PRESENTED BY : IGNATIUS ERIPON EPEGESEN

COURSE : CRAFT CERTIFICATE IN ELECTRICAL AND

ELECTRONIC CERTIFICATE

INSTITUTION : THE MOIBEN TECHNICAL AND VOCATIONAL

COLLAGE

CENTRE CODE: 26578101

INDEX NUMBER : 265781013707

PAPER NO :

SUPERVISOR : MR. SOLO

PRESENTED TO: THE KENYA NATIONAL EXAMINATION COUNCIL

IN PARTIAL FULFILLMENT FOR THE AWARD OF DIPLOMA IN
ELECTRICAL

EXAM SERIES : NOVEMBER 2021

DECLARATION
I declare that this business plan is my own original work and that it has

never been presented to Kenya National Examination Council.

Student Name: IGNATIUS ERIPON EPEGESEN

Signature ………………………………………………………..

Date ……………………………………………………………..

Supervisors Name: Mr. SOLO

Signature ……………………………………………………….

Date …………………………………………………………….
PREFACE
The type of business declared upon by Shine is aimed at meeting demand of customers

and also trying to solve their worrying issues. Availability of the product in this locality

will cut down the cost of transport used by customers who travel to the town centre to

acquire the same products.

The rising population and demand of construction will ensure the smooth running of the
business and enhance the good relationship among individual customers and
entrepreneur. The business will sell all products basing on changes in technology and
high experienced or skilled staff so as to fit the competition in the field.
ACKNOWLEDGEMENT
My special recognition goes to my supervisor Mr. Mica Rono for the sacrifices he made
through advice, correction encouragement and guidance for the success of the business
plan. I also want to thank my parents, friends and classmates for the support they gave
me. May God bless you all
TABLE OF CONTENTS
DECLARATION.................................................................................................................5
PREFACE............................................................................................................................6
ACKNOWLEDGEMENT...................................................................................................7
DEDICATION.....................................................................................................................8
EXECUTIVE SUMMARY.................................................................................................9
BUSINESS DESCRIPTION...............................................................................................9
MARKETING PLAN..........................................................................................................9
ORGANIZATION PLAN...................................................................................................9
PRODUCTION PLAN......................................................................................................10
FINANCIAL PLAN..........................................................................................................10
CHAPTER ONE................................................................................................................11
BUSINESS DESCRIPTION.............................................................................................11
1.1 BUSINESS NAME.................................................................................................11
1.2 BUSINESS LOCATION AND ADDRESS...........................................................11
1.3 FORM OF BUSINESS OWNERSHIP.................................................................11
1.4 TYPE OF BUSINESS.................................................................................................12
1.5 PRODUCT / SERVICE..........................................................................................12
1.6 JUSTIFICATION OF OPPORTUNITY................................................................12
1.7 INDUSTRY............................................................................................................13
1.8 GOALS OF THE BUSINESS.....................................................................................13
LONG TERM GOALS......................................................................................................13
SHORT TERM GOALS....................................................................................................14
1.9 ENTRY AND GROWTH STRATEGY.............................................................14
CHAPTER TWO...............................................................................................................15
2.0 MARKETING PLAN...............................................................................................15
2.1 CUSTOMERS........................................................................................................15
INSTITUTIONAL CUSTOMERS.............................................................................15
DOMESTIC CUSTOMERS.......................................................................................15
COMMERCIAL CUSTOMERS................................................................................15
2.2 MARKET SHARE.................................................................................................16
2.3 COMPETITION..........................................................................................................17
COMPETITION ANALYSIS TABLE..............................................................................18
2.4 METHOD OF PROMOTION AND ADVERTISING..........................................19
2.5 PRICING STRATEGY...............................................................................................19
2.5.1 COST PLUS.............................................................................................................19
2.5.2 COMPETITIVE PRICING....................................................................................19
2.5.3 PSYCHOLOGICAL PRICING................................................................................19
2.6 SALES TACTICS.......................................................................................................20
2.7 DISTRIBUTION STRATEGY...................................................................................20
CHAPTER THREE...........................................................................................................21
3.0 ORGANIZATION AND MANAGEMENT PLAN...........................................21
3.1 KEY MANAGEMENT PERSONNEL.................................................................21
Duties and Responsibilities................................................................................................21
ORGANIZATION CHART..............................................................................................21
CHIEF ACCOUNTANT (ONE).................................................................................22
 Qualifications...............................................................................................................22
Duties and Responsibilities.........................................................................................22
SECRETARY....................................................................................................................22
Qualifications.....................................................................................................................22
Duties and Responsibilities................................................................................................23
SALES MEN (TWO)........................................................................................................23
Qualifications.....................................................................................................................23
Duties and Responsibilities................................................................................................23
WATCHMAN...................................................................................................................24
Qualifications.....................................................................................................................24
Duties and Responsibility..................................................................................................24
3.3 RECRUITMENT, TRAINING AND PRODUCTION.........................................24
RECRUITMENT...............................................................................................................24
TRAINING........................................................................................................................25
PROMOTION....................................................................................................................25
3.4 REMUNERATION AND INCENTIVES..............................................................25
3.5 LICENSE, PERMITS AND BY LAWS.....................................................................26
3.6 SUPPORT AND SERVICES...............................................................................26
Banking..............................................................................................................................26
Postal services....................................................................................................................26
Business lawyer.................................................................................................................26
Auditing services...............................................................................................................26
Medical services................................................................................................................27
Security..............................................................................................................................27
Water services....................................................................................................................27
Power.................................................................................................................................27
CHAPTER FOUR.............................................................................................................28
4.0 OPERATIONAL AND PRODUCTION PLAN....................................................28
4.1.3 REPAIR AND MAINTENANCE............................................................................30
i. Regular maintenance..................................................................................................30
ii. Corrective...................................................................................................................30
iii. Preventive...............................................................................................................30
iv. Break Down............................................................................................................30
v. Scheduled Maintenance..............................................................................................30
4.2 PRODUCTION STRATEGY................................................................................31
4.2.1 PRODUCTION DESIGN AND DEVELOPMENT...............................................31
4.2.2 MATERIAL REQUIREMENT..............................................................................32
4.2.3 MONTHLY LABOUR REQUIREMENTS.............................................................32
4.2.4 MONTHLY PRODUCTION COST........................................................................33
4.3 PRODUCTION PROCESS...................................................................................33
STEP I ARRIVAL.............................................................................................................33
STEP II COUNTER REQUISITION................................................................................33
STEP III PAYMENTS......................................................................................................34
STEP IV PACKAGE.........................................................................................................34
STEP V AFTER SALE SERVICE....................................................................................34
4.4 REGULATIONS AFFECTING OPERATIONS...................................................34
HEALTH SAFETY FOR WORKERS AND CUSTOMERS...........................................34
CHAPTER FIVE...............................................................................................................35
FINANCIAL PLAN..........................................................................................................35
5.1 PRE OPERATIONAL COSTS..............................................................................35
ESTIMATION OF WORKING CAPITAL.......................................................................36
LIABILITIES....................................................................................................................36
LIABILITIES....................................................................................................................37
YEAR 3.............................................................................................................................38
LIABILITIES....................................................................................................................38
5.3 CASH FLOW PROJECTION.....................................................................................39
5.4 PROFORMA INCOME STATEMENT......................................................................40
5.5 PROFORMA BALANCE SHEET..............................................................................41
5.6 BREAK EVEN PONT ANALYSIS............................................................................42
5.7 PROFITABILITY RATIOS........................................................................................43
5.8 DESIRED FINANCING.............................................................................................45
5.9 PROPOSED CAPITALIZATION...............................................................................45
APPENDIX........................................................................................................................46
BUSINESS LOCATION...................................................................................................46
EXECUTIVE SUMMARY
BUSINESS DESCRIPTION
The proposed business is centered in building and construction. The business name will

be Shine Construction Hardware. It is located in Rift Valley Province, Tran s – Nzoia

West District Central Division Kibomet Sub location around Kitale town (1 km from

Kitale town) The business will be a sole proprietorship dealing with purchasing and

selling construction materials, tools and equipment’s with an aim of making a profit. To

achieve this, proprietor’s experience and technical knowhow from training will be the

key factors. Advertisements will be also used as a reinforcement when too business

commences

MARKETING PLAN
It will contacted under customers’ demands. Commercial customers will buy products for

resale while individual customers will be schools, colleges and other institution. Pricing

strategy will be based on the surrounding and competitive price.

Sale of product will be done directly to the customers. Advertisement of products will be

through posters and Imani F.M radio.

ORGANIZATION PLAN
The business will have employees such as managing director, chief accountant Secretary,

salesmen and Bank men.

Recruitment of employees will be based on academic merits and experience.

Salary / wages of workers will be determined depending on the type of job handled by an

individual. The business will also obtain legal document like permits and licenses from

concerned government bodies. Support services such as Banking, insurance, business

advisory services, telephone and medical services, power and water will be boosters in

smooth running of the business.

PRODUCTION PLAN
Purchased items total to kshs 145,560. Business layout shows, secretary room, store, counter and

accounts room, repair and maintenance will be on annual basis. Monthly material requirement

summed to Kshs 10,000 and monthly labour requirement summed up to Kshs 56050. Regulation

affecting the business will lead to renewing of licenses and permits annually and adhere to factory

acts and laws governing quality of product

FINANCIAL PLAN
The pre-operational costs had a total of Kshs 195,000 and too estimated working capital

Kshs 328,000 for year 1.

In the cash flow, total sales was 1,966,000 and a net surplus of 643356 similar to accumulated.

In the proforma income, statement cost of sales year1, kshs 196,600, year2, 2,066,000

and year3 2,166,000. The gross profit for the three consecutive years was 1,565,000,

1,962,000 and 2,166,000. The gross profit for the three consecutive years was 1,565,000.

1,962,000 and 2,017,000.

In the performer balance sheet fixed assets for year 1,302,532, year 2,348,082 and year

3,402,722, and total liabilities of the three consecutive years was 1,052,532, 1,168,032,

1,0992,782. In break-even point analysis total variable costs were 1,002,000 and a

contribution of Kshs 964,000. The profitability ratio were year 1 79.6 % year 2 95 % year

3 98 %. Return on equity for year 1,2 and 3 consecutively were 321 %, 384 % and 492 5,

Bank loan of Kshs 320,000 and owners’ equity 200,500 and a total investment Kshs

1,052,532
CHAPTER ONE
BUSINESS DESCRIPTION
1.1 BUSINESS NAME
The name of the business is Shine Construction Hardware. The first name is just the

initial letters for the owner’s and the second is to the shop that deal with building

materials and equipment and plus tools of construction. The business address

SHINE CONSTRUCTION HARDWARE

P.O BOX 4422

KITALE

1.2 BUSINESS LOCATION AND ADDRESS

The business is located at Kibomet, one Kilometer from Kitale town on Cherangani

highway thus six hundred meters from Kapenguria – Cherangani junction

The owner chose the place because it is on a highway thus easening transport activities,

less competition and also due to high demand for supply of constructing materials

because it is developing into an estate thus many people are constructing residential

houses.

1.3 FORM OF BUSINESS OWNERSHIP

The business is a sole proprietorship that is owned by an individual, as the name suggests

Shine Construction Hardware.

The supplier plays a big role by supplying goods in lump sum to the retailers which is

owner’s business all through.

Also providing business incentives such as credits, advertisements through mass media

and posters. Being the owner of the business she will shoulder all risks to be incurred in
the businesses. he is due to carry out all the activities to be undertaken except those

assigned to workers and also have no time for orientation. On the other hand she is the

boss of the business and therefore he is responsible for his own decisions. he will enjoy

all the profits and benefits from the business. he is responsible for keeping his secrets of

the business to himself and he is also in charge of herself.

1.4 TYPE OF BUSINESS

The business started as a small scale enterprise and it deals with construction materials

such as cement ,nails ,iron sheets , reinforcement bars ,paints ,plywood locks, putty,

hinges, screws ,binding wires, ceiling boards ,construction tools like hammer all kinds of

saw ,screw driver ,chisel , mallet pliers ,shovel ,trowel, spades, plumb bob ,spirit level;

vertical and horizontal squares etc

1.5 PRODUCT / SERVICE

The owner will employ two other workers to assist in selling the products and rendering

services like, transport to customers who come from within

The workers will be employed basing on qualification and experience in the business

field. They will be motivated by being paid overtime allowances, medical allowances and

fair pay.

All these are done to increase production and also to attract more potential customers.

1.6 JUSTIFICATION OF OPPORTUNITY

By carrying out thorough survey and research, proves that the area selected will provide

average income due to high demand of production and service to be offered to the

customers. The area is developing into an estate and the residents are potential customers.
Also there is less competition because one shop offering the same thus making some of

the customers running for services in town due to congestion.

By providing high quality reliable services, soothing words being professionals in this

field of construction will make the owner to win more customers.

Good transport communication network and security are clear justifications of the

opportunity.

Training obtained from the institution by the owner of the business will also be an added

advantage plus some experience obtained from the family’s similar business.

1.7 INDUSTRY
The business is categorized under commercial industry. This shows that existing business

in this industry are of moderate size and they use old technology of service.

The indented business will be of moderate size but uses modernized technology when

rendering the services required.

The business will provide quality products due to skilled personnel. Thus making the

shop to sale excellently making it to obtain maximum profits. The business is expected to

expand rapidly and will only have two employees at the beginning.

1.8 GOALS OF THE BUSINESS

LONG TERM GOALS
These are goals which will be initiated after a duration of one and half years after

commencement of the business. They include

 Expanding the mother enterprises to a wholesale hardware and also opening a

construction works office.

  Fair pricing and offering transport services to customers who buy in bulk to the

construction site.

 Providing tendering services to contractors thus becoming a suitable contractor.

SHORT TERM GOALS

 Maximize profits on any opportunity at hand as much as possible

 Provide quality goods and rendering better services to customers

 Creation of employment to skilled persons thus through interviews.

1.9 ENTRY AND GROWTH STRATEGY

The opening of shine construction hardware will be advertised through media and posters

in parts of the town and on the highway.

The posters will contain prices of the goods. The business looks forward to give out a

10% discount for every customer purchasing goods worth 8,000 and above also transport

will be offered to customers who purchase goods worth 35,000 and above. The average

daily sales is expected to be 18,000 which will amount to 540,000 per month. The

intended building will operate on rented premises which has two large rooms. The

business is intended to sale a lot due to the high demand in the locality.
CHAPTER TWO
2.0 MARKETING PLAN
2.1 CUSTOMERS
Shine construction hardware shop will have three categories of customers thus;

(i) Institutional Customers

(ii) Domestic Customers

(iii) Commercial Customers

INSTITUTIONAL CUSTOMERS
The business will sell its commodities to schools around e.g. Kibomet secondary school,

legacy primary school, Almond preparatory school, Naisambu primary school St Terezas

secondary school and also medical health like legacy and Naisambu dispensary.

DOMESTIC CUSTOMERS
These are individual customers who will come from within and outside Kibomet area.

Since the residents are constructing they will provide ready market for the goods.

COMMERCIAL CUSTOMERS
These are also known as middle men. The business expects to have commercial who will

buy products and sell too customers within their locality.

2.2 MARKET SHARE

The estimated population of the area is around 3,200 people and the business is expecting

to at least possess a larger average share of the customers.

NAME OF BUSINESS % MARKET SHARE TOTAL NO OF

CUSTOMERS
KIBOMET STORES HARDWARE 768 x 100 768
3200

= 24%
HIGHWAY HARDWARE 320 x 100 320
3,200

= 10%
SHINE CONSTRUCTION 1,120 x 100 1,120
3,200
HARDWARE
=35%
CHERA STORES HARDWARE 544 x 100 544
3,200

= 17%
KAMWANA HARDWARE SHOP 448 x 100 448
3,200

=14%
TOTALS 100% 3,200

2.3 COMPETITION
The field study has shown that there are two kinds of competitors that Shine construction

hardware will face, that is

(i) Direct competitor

(ii) Indirect competitor

But the business expects stiff competition from four direct competitors

NAME OF BUSINESS WEAKNESS STRENGTH

KIBOMET STORES  Has poor personnel  Located at the heart

HARDWARE of the area

HIGHWAY HARDWARE  Very small and sell  Can be easily

very little products sported by

 customers

SHINE CONSTRUCTION  Doesn’t render after  Well skilled and

HARDWARE sales services trained personnel

CHERA STORES  Poorly located  Has experienced

HARDWARE personnel

KAMWANA  Poor personnel  Well located

HARDWARE SHOP

COMPETITION ANALYSIS TABLE

NAME OF PRODUCT PRICING PERSONNEL PROMOTION SIZE LOCATION TOTAL

BUSINESS

KIBOMET 4 2 2 3 4 5 20

STORES

HARDWARE

HIGHWAY 2 2 1 2 1 3 11

HARDWARE

SHINE 3 5 5 3 4 5 25

CONSTRUCTION

HARDWARE

CHERA STORES 3 4 3 1 3 2 16

HARDWARE

KAMWANA 1 3 1 2 2 4 13

HARDWARE

SHOP
MAXIMUM 6 6 6 6 6 6 36

SCORE

Use a score card

1-6

1- Worst

6- Best

2.4 METHOD OF PROMOTION AND ADVERTISING

To create awareness of the business to the customers the business will print media like

posters and sign posts, electronic media may also be used if need be thus local FM radio

(Imani radio).

Promotions will be done by giving discounts to customers and also free transport will be

offered to those who buy in bulk say goods worth 30,000 at ago.

The business will also participate in trade shows and exhibitions especially at Kitale ASK

show that comes annually (in November) to create awareness to the customers outside the

location of the business.

2.5 PRICING STRATEGY

The price of products will be determined by cost of production, cost of labour, transport

cost and profit mark up.

2.5.1 COST PLUS

In pricing cost of products at production and labour charge will be considered.
2.5.2 COMPETITIVE PRICING
Adjustments on pricing will be observed depending on the prices prevailing on the

market in order to maintain the degree of integrity of the business.

2.5.3 PSYCHOLOGICAL PRICING

This will be done basing on the customers’ demands and the potentiality, the prevailing

condition, season or occasion

Other pricing methods could be, products on low demand one priced low and to see first

running products are priced high.

2.6 SALES TACTICS

Various tactics will be used in order to observe success in the business. These are high

standards of neatness, quick service, good public relations to the customers, selling high

quality products and moderate pricing of products.

2.7 DISTRIBUTION STRATEGY

This is how goods reach the customers. It may be directly or indirectly, thus from the

producer, direct to the producer or from the producer, to the service provider, to the

agent, then to the retailer and finally to the customers.

SHINE CONSTRUCTION HARDWARE

AGENT

CUSTOMER RETAILER
CHAPTER THREE
3.0 ORGANIZATION AND MANAGEMENT PLAN
3.1 KEY MANAGEMENT PERSONNEL
The managing director of shine construction hardware shall be Kipruto Hillary a diploma

holder in Electrical and Electronics

he has knowledge and skills in entrepreneurship.

he has a certificate in computer from a recognized institution.

Duties and Responsibilities

 Responsible for recruitment of staff

 Supervising day to day activities of the business and workers

 Carrying out long term goals

 Paying salaries

 Sourcing for the funds

ORGANIZATION CHART
MANAGING DIRECTOR

CHIEF ACCOUNTANT

SALESMEN SECRETARY WATCHMAN

3.2 OTHER PERSONNEL NUMBER AND DUTIES

CHIEF ACCOUNTANT (ONE)

She will be in charge of all finances in accounts department

Qualifications
 Be a bearer of C.P.A I and II

 Must be computer literate

 Fluent in both English and Kiswahili

 Must have working experience of more than 2 years

Duties and Responsibilities

 Will carry out all financial transactions

 Updating of all accounts books

 Prepare budget and statement of account

SECRETARY
Qualifications
 Diploma holder in secretarial studies from a recognized institution

 Computer literate

 Age 20-25

 Four or more years of working experience

 Fluent in Kiswahili and English languages

 Should have a good typing speed

Duties and Responsibilities

 Do all the typing in the business
  Booking appointments for the managing director

 Receive mails and telephone calls

SALES MEN (TWO)

Qualifications
 Fluent in both English and Kiswahili language

 Computer literate

 Craft certificate in sales management

Duties and Responsibilities

 Handling correspondence accordingly and informing the manager

 Preparing orders of the customers

 Can receive cash where necessary

 Handling customers inquiries

WATCHMAN
Qualifications
 Must have O level of education

 Must be of sound mind

 Must be healthy and has proof from a recognized medical institution

 Working experience of not less than three years

 Certificate of good conduct

 Must have a referee

 At least 30 years of age

Duties and Responsibility
 Provide maximum security

 Act as a messenger

 In charge of security dogs

3.3 RECRUITMENT, TRAINING AND PRODUCTION

RECRUITMENT
Recruitment of staff will be done through advertisement e.g. by use of posters and local

FM radio also through friends

Interview will be done after receiving applications thus through the manager and those

who meet the requirements will be selected for jobs

TRAINING
Training shall cover partnership scheme and seminars

Students on attachment shall also be given consideration

PROMOTION
Employees will be promoted basing on the following

 Hard work / production

 Trust worthiness / honestly

 Responsible and self-disciplined.

3.4 REMUNERATION AND INCENTIVES

Besides the proposed salary or wages, employees will enjoy benefits such as allowances

as shown in the table below;-

JOB TITLE NO OF SALARY HOUSE MEDICAL TRAVELING OTHERS TOTAL

PERSONNEL ALLOWANCE ALLOWANCE ALLOWANCE SPECIFY

M.D 1 10,000 - 3,000 5,000 - 18,000

. ACCOUNTS 1 6,800 1,500 1,200 2,000 - 11,500

SALESMEN 2 3,500 500 1,000 1,500 300 13,600

SECRETARY 1 2,000 500 8000 1,200 - 4,500

WATCHMAN 1 1,300 250 600 300 300 2,900

TOTALS 50,550

3.5 LICENSE, PERMITS AND BY LAWS

Small scale enterprises just like larger one exists in land are governed by law. When you

start and run a small business, certain loyal procedure may be undertaken.

shine business will obtain its license from local government and a trade license from the

ministry of trade and industry, science and technology.

Healthy certificate from public health works and insurance from CFC insurance. All

these are estimated at a cost of around 13.500.

3.6 SUPPORT AND SERVICES

The supportive and advisory services include

Banking
The business intends to open an account with co-operative bank Kitale branch.

The business savings will act as security to obtain loans for its expansion.
Postal services
The business will use the proprietor’s postal address thus at Kitale post office and the

proprietors cell phone for the time being before installation of telephone services.

Business lawyer
The business will obtain a lawyer from Ujenzi advocates.

Auditing services
The business will hire an auditor annually to go through all the accounts records to ensure

the business is not running at loss but making reasonable profit.

Medical services
Medical services will be provided by Kitale district hospital

Security
Security will not be hired but will be organized by the owner locally

Water services
Water services will be provided by Nzoia water company services

Power
Electricity services will be provided by Kenya power and lighting company, Eldoret

branch, Kitale sub branch.

CHAPTER FOUR
4.0 OPERATIONAL AND PRODUCTION PLAN
These are directives that facilitates the smooth running of the business in order to produce

effective service.

4.1.1 PRODUCTION FACILITIES AND CAPACITY

These are equipment/ items required in the business to necessitate, operations of the

enterprise. The table below shows a summary of items /equipments to be purchased

ITEM QUANTITY UNIT PRICE TOTAL

Chair 3 820 2,460

Computer 1 65,000

Calculator 2 13,000

Electronic tax register 1 70,000

Tables 2 1,800

Telephone 1 5,000

Total 145,560
4.1.2 ENTERPRISE LAYOUT

ACCOUNTS COUNTER
TABLE

STORE

SECRETARY
TABLE

4.1.3 REPAIR AND MAINTENANCE

The enterprise will ensure repair and maintenance is done on tools and equipment

in order to cut down on the cost of purchasing new ones due to wearing out. This

will be done as follows

i. Regular maintenance
Undertaken on daily basis e.g. oiling in order to improve on durability
 ii. Corrective
Ensuring that the tools or equipment performs its initially intended task to avoid

damage or destruction, thus promoting effectiveness / efficiency

iii. Preventive
These measures will be undertaken on tools and equipment before they get

spoiled or worn out thus cutting down the cost of repair

iv. Break Down

This is done on machine that have stopped performing their duty due to one of its

parts failing and this ensures that the equipment is not totally destroyed beyond

repair

v. Scheduled Maintenance
This is repair and maintenance done on tool and equipment on particular dates of

the month or year and the enterprise may be closed down for sometimes if need

be. This promotes efficiency and effective services of tools and equipment.

4.2 PRODUCTION STRATEGY

4.2.1 PRODUCTION DESIGN AND DEVELOPMENT

 4.3 OPC

BAMBURI CEMENT

DUMU ZAZ
4.2.2 MATERIAL REQUIREMENT
ITEM AMOUNT

Iron sheets 84,000

Cement 92,000

Hoop iron 8,000

Nails 12,000

Paints 10,000

Reinforcement bars 50,000

Wheelbarrows 25,000

Total 281,000

4.2.3 MONTHLY LABOUR REQUIREMENTS

PERSONNEL AMOUNT

Managing director 18,000

Chief accountant 11,500

Sales men 13,600

Secretary 4,500

Watchman 2,950

Total 50,550
4.2.4 MONTHLY PRODUCTION COST
ITEM AMOUNT

Labour 50,500

Material 281,000

Transport 8,000

Tools and equipment 145,560

Repair and maintenance 15,000

Electricity 1,500

Advertisement 2,500

Total 418,110

4.3 PRODUCTION PROCESS

The following steps will be taken in the enterprise to ensure that effective services are

rendered to the customers.

STEP I ARRIVAL
The customer is saluted and welcomed

STEP II COUNTER REQUISITION

The customer is kindly asked on the products or services he/she may require

If the customer places an order, it is short listed and the prices indicated on each for the

awareness of the customer.

STEP III PAYMENTS
If the customer is in agreement with the prices, totals are taken and he/she is informed on

the exact amount to be paid

STEP IV PACKAGE
An official receipt is written and the commodities are released from the store and packed

if necessary.

STEP V AFTER SALE SERVICE

If the customer has placed a large order, transport services are provided as a way of

appreciation and he / she is thanked and welcomed for next time.

4.4 REGULATIONS AFFECTING OPERATIONS

Environment protection

Careless disposal of waste will not be tolerated by the enterprise management, its

surrounding will be kept neat always.

HEALTH SAFETY FOR WORKERS AND CUSTOMERS

Protective clothing e.g. gloves and overalls will be provided to customers and workers to

protect against dirt and injuries

Sanitary facilities will also be provided. Workers will be allowed to join trade unions for

protection of their rights and education on their responsibilities as employees in the

enterprise.

The enterprise will ensure that all rules and regulation of the government are observed
CHAPTER FIVE
FINANCIAL PLAN
5.1 PRE OPERATIONAL COSTS
NO DESCRIPTION COSTS

1 Permits and expenses 13,500

2 Production facilities 145,560

3 Rent 31,500

4 Water and telephone 8,000

5 Advertisement 2,500

6 Transport 10,000

7 Wages 5,500

Grand total 195,000

ESTIMATION OF WORKING CAPITAL

WC=CA-CL

ASSETS

DESCRIPTION KSHS

Cash at hand 450,000

Cash at bank 185,000

Debtor 80,000

Movable assets 75,000

Fixed assets 45,000

Totals 835,000
LIABILITIES
DESCRIPTION KSHS

Bank loans 320,000

Creditors 60,000

Co-op loans 127,000

Total 507,000

WC =CA-CL

835,000-507,000

= 328,000

YEAR 2

DESCRIPTION KSHS

Cash at hand 480,000

Cash at bank 200,000

Debtor 70,000

Movable assets 75,000

Fixed assets 45,000

Totals 870,000
LIABILITIES
DESCRIPTION KSHS

Bank loans 250,000

Creditors 70,000

Co-operative loans 120,000

Totals 440,000

WC = CA – CL

= 870,000 – 440,000

= 430,000

YEAR 3
DESCRIPTION KSHS

Cash at hand 430,000

Cash at bank 280,000

Debtor 100,000

Movable assets 75,000

Fixed assets 50,000

Totals 935,000

LIABILITIES
DESCRIPTION KSHS
Bank loans 300,000

Creditors 70,000

Co-op loans 120,000

Total 490,000

WC= CA-CL

935,000-490,000

=445,000
 5.3 CASH FLOW PROJECTION
ITEMS JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL

CASH INFLOWS
Cash sales 180,000 120,000 150,000 185,000 160,000 120,000 161,000 165,000 180,000 180,000 170,000 195,000 1,966,000
Discount received 25,000 20,000 21,000 27,000 15,000 10,000 10,000 20,000 20,000 25,000 193,000
Collection from 80,000 92,000 90,000 80,000 70,000 65,000 50,000 80,000 75,000 80,000 90,000 91,000 943,000
debtors
Totals inflows 285,000 232,000 261,000 292,000 245,000 195,000 221,000 245,000 255,000 280,000 280,000 311,000 3,102,000
Purchase 100,000 100,000 100,000 145,000 120,000 100,000 99,000 120,000 150,000 180,000 190,000 190,000 1,594,000
Transport 10,000 10,000 10,000 10,000 9000 10,000 6,000 10,000 10,000 10,000 10,000 11,000 116,000
Rent 31,500 31,500 63,000
Salaries 56,050 56,050 56,050 56,050 56,050 56,050 56,050 56,050 56,050 56,050 56,050 56,050 672,600
Permits 13,500 13,500
Electricity 1,500 1,500 1,000 1,000 1,000 1,000 1,000 1000 1,000 1,500 1,500 1,500 14,500
Telephone and water 8000 5000 3000 2,500 2,500 2,500 2000 2000 2000 2000 2000 2000 35,500
Total outflow 220,550 172,550 170,050 214,550 188,550 169,550 195,550 189,050 219,050 249,550 259,000 260,550 2,509,600
Surplus deficit 64,450 59,450 90,950 77,450 56,450 25,450 25,450 55,950 35,950 30,450 21000 50,450 593,450
Accumulated 64,450 123,900 214,850 292,300 348,750 374,200 399,650 455,600 491,550 522,000 543,000 593,450
 5.4 PROFORMA INCOME STATEMENT
DESCRIPTION YEAR I YEAR II YEAR III

Sales 1,966,000 2,066,000 2,166,000

Discount Received 193,000 243,000 293,000

Collection from Debtors 943,000 963,000 983,000

3,102,000 3,272,000 3,442,000

Cost of Sales 1,537,000

Gross Profit 1,565,000 1,962,000 2,017,000

Expenses

Electricity 14,500 15,500 16,500

License 13,000 13,500 14,000

Rent 63,000 63,000 64,000

Telephone and Water 35,500 36,000 36,500

Salaries and Wages 672,600 692,600 7,126,600

Total Expenses 799,100 820,600 844,100

Net Profit before Tax 765,900 1,141,400 1,172,900

16% tax of N.P 122,544 182,624 187,664

Net profit after tax 643,356 958,776 985,236

 5.5 PROFORMA BALANCE SHEET
DESCRIPTION YEAR 1 YEAR II YEAR III
Fixed assets
Production facilities 145,560 155,560 165,560
Vehicle 75,000 95,000 120,000
Computer 60,000 80,000 100,000
Furniture fittings 45,000 45,000 50,000
Total 325,560 375,560 435,560
Less depreciation
Production 5 % 7,278 7,778 8,278
Vehicle 10 % 7,500 9,500 12,000
Computer 10 % 6,000 8,000 10,000
Furniture fittings 5 % 2,250 2,250 2,500
Total 23,028 27,528 32,778
Total fixed assets 302,532 348,032 402,782
Current assets
Cash at hand 480,000 500,000 520,000
Cash at bank 200,000 230,000 260,000
Debtors 70,000 90,000 110,000
Total 750,000 820,000 890,000
Total assets 1,052,532 1,168,032 1,292,782
Current liabilities
Bank overdraft 400,000 480,000 500,000
Creditors 352,000 382,000 412,000
Total 752,000 832,000 912,000
Long term liabilities
Long term loan 100,032 86,000 180,782
Owners’ equity 200,500 250,032 200,000
Total 300,532 336,032 380,702
Total liability 1,052,532 1,168,032 1,092,782

5.6 BREAK EVEN POINT ANALYSIS

DESCRIPTION KSHS KSHS

Sales 1,966,000

Variable costs

Purchases / cost of sales 537,000

Telephone and water 35,500

Rent 63,000

Creditors 352,000

Electricity 14,500

Total variable costs 1,002,000 1,966,000

Contribution = total sales – variables

Contribution 964,000

(i) Contribution – margin

= Contribution x 100
Total sales

= 964,000 x 100
1,966,000

= 49 %
FIXED COSTS KSHS

Salaries and wages 672,600

Licenses / permits 13,800

Insurance 20,000

Loan repayment 100,000

Loan interest 15,000

Fixed total cost 821,100

(ii) Break even level on sales

Fixed costs x 100

Contribution margin

821,100 x 100
49

= Kshs 1,675,714

5.7 PROFITABILITY RATIOS

(a) Gross profit margin = Gross profit x 100
Sales

Year 1 = 1,565,000 x 100

1,966,000

= 79.6 %

Year 2 = 1,962,000 x 100

2,066,000

= 95 %

Year 3 = 2,017,000 x 100 = 98%

 2,066,000

(b) Return on equity

Net profit after tax x 100

Equity contribution

Year 1 = 643,356 x 100

200,500

= 321 %

Year 2 = 958,776
250,000

= 384 %

Year 3 = 985.236
200,000

= 492 %

(c) Return on investment

= Net profit after tax
Total investment liability

Year 1 = 765,900 x 100

1,052,532

= 73 %

Year 2 = 958,776 x 100

1,168,032

= 82 %

Year 3 = 985,236 x 100

1,092,782

= 90 %
5.8 DESIRED FINANCING
Pre – Operational Costs 195,000

Working Capital 328,000

Desired Financing 523,000

5.9 PROPOSED CAPITALIZATION

Bank loan 320,000

Owners equity 200,500

Cooperation loan 532,032

Total investment 1,052,532

APPENDIX
BUSINESS LOCATION

DC’S OFFICE WESTERN SEED COMPANY

DISTRICT
HOSPITAL

LIONS CLUB

MOI CAMPUS

KAPENGURIA
CHERANGANI

SINENDET
SHINE CENTRE
HARDWARE