Motor vehicles spare parts

BUSINESS TITLE: BUSINESS PLAN

PRESENTED BY:

INDEX NO:

CENTRE NO:

CENTER NAME: RIFT VALLEY INSTITUTE OF SCIENCE AND

TECHNOLOGY

PRESENTED TO: KENYA NATIONAL EXAMINATION COUNCIL

INPARTIAL FULFILMENT FOR THE AWARD OF IN

COURSE:

PAPER CODE:

SUPERVISOR:

EXAM SERIES:

1
TABLE CONTENTS

DECLARATION.............................................................................................................................

DEDICATION.................................................................................................................................

ACKNOWLEDGEMENT...............................................................................................................

EXECUTIVE SUMMARY.............................................................................................................

CHAPTER ONE..............................................................................................................................

1.0 BUSINESS DESCRIPTION.................................................................................................

1.1 THE BUSINESS NAME.......................................................................................................

1.3 FORM OF OWNERSHIP....................................................................................................

1.4 TYPE OF OWNERSHIP.....................................................................................................

1.5 PRODUCTS/SERVICES....................................................................................................

1.6 JUSTIFICATION OF OPPORTUNITY.............................................................................

1.7 INDUSTRY.........................................................................................................................

CHAPTER TWO...........................................................................................................................

2.0 MARKETING PLAN.....................................................................................................

2.1 CUSTOMERS.....................................................................................................................

2.3 COMPETITION..............................................................................................................

2.4 METHODS OF PROMOTING AND ADVERTISEMENT...............................................

2.5 PRICING STRATEGY.......................................................................................................

2.6 SALES TECTICS................................................................................................................

2.7 DISTRIBUTION STRATEGIES........................................................................................

CHAPTER THREE.......................................................................................................................

3.0 ORGANIZATION AND MANAGEMENT PLAN............................................................

3.1 BUSINESS MANAGER AND RESPONSIBILITIES.......................................................

3.3 RECRUITMENT, TRAINING AND PROMOTION....................................................

3.5 LICENSE PERMIT AND BY-LAWS............................................................................

3.6 SUPPORT SERVICE.....................................................................................................

2
CHAPTER FOUR.........................................................................................................................

4.0 PRODUCTION PLAN........................................................................................................

4.1PRODUCTION FACILITIES AND CAPACITY................................................................

4.2 PRODUCTION PROCESS.................................................................................................

4.3 REGULATION AFFECTING OPERATIONS...................................................................

CHAPTER FIVE...........................................................................................................................

5.0 FINANCIAL PLAN............................................................................................................

5.1 PRE-OPERATIONAL COST.............................................................................................

5.2 ESTIMATION OF WORKING CAPITAL.........................................................................

5.3 PROJECTED CASH FLOW...............................................................................................

5.4 PROMA INCOME STATEMENT......................................................................................

5.5 PRO-FOMA BALANCE HEET..........................................................................................

5.6 BREAK EVEN POINT...................................................................................................

5.7PROFITABITY RATIO.......................................................................................................

5.8 DESIRED FINANCING.....................................................................................................

5.9 PROPOSED CAPITALIZATION..................................................................................

APPENDIX: LOCATION MAP...................................................................................................

3
DECLARATION

I hereby declare that this is my original work obtain through research and technical
knowledge from the entrepreneurial skills and submitted to Kenya National Examination
Council as a requirement for the award of

NAME:
SIGNATURE …………………………
DATE ………………………

SUPERVISOR:
SIGN………………………………
DATE ……………………

4
DEDICATION

It is my sincere gratitude to dedicate this business plan to my parents ,friends and classmates
for their support on giving me ideas ,material support and much appreciation goes to my civil
group for their time in analysing every aspect of my business plan

5
ACKNOWLEDGEMENT

I deeply acknowledgement my supervisor MRS.ROTICH for her untiring effort in guiding

me towards the completion of this business plan and his technical advices and
encouragements throughout the writing and completion of this business plan it made it ends
successfully.
My sincere thanks go to my parents who gave me their moral and financial support
throughout the course.

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EXECUTIVE SUMMARY

1.0 BUSINESS DISCRIPTION

In this chapter as indicated the business name the location and address of my business. Also
express is the form of ownership, type of ownership and different service offered also
included is the justification of opportunity the industry in which it belongs and in goals of
business, explain also is the entry and growth strategy.
2.0 MARKETING PLAN
It describe clearly the customers, the market share and competition, method of promotion and
advertisement, pricing strategy, sales tactics, distribution strategy being unlimited.

3.0 ORGANIZATION AND MANAGEMENT

This is more about the manager’s qualification, the number of personnel including their
duties, recruitment, training and promotion employee’s remuneration and incentives. It
clearly explains the license, permit and by- laws, support service being also describe

4.0 OPERATIONAL PLAN (PRODUCTION PLAN)

Production will be the main objective process and the business will rely much at this stage in
its operations. The business will require wide range of machinery and requirements for the
effectiveness and efficiency purpose of the business operations. These will include computers
for stock management, stationary for documentation, drawers for display, loading machine
and pick-up transportation.

5.0 FINANCIAL PLAN

These are the financial plans that the business will incur before the production commences. It
will also require a sum of money for it to efficiently operate the enterprise.
Working capital = Current assets – current liabilities
The financial expenses will be trade licenses and registration, installation of water and
electricity, pre-paid rent, shelves and racks, computer systems installation and public health
certificate.

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CHAPTER ONE

1.0 BUSINESS DESCRIPTION

1.1 THE BUSINESS NAME

The name of the proposed business will be Spikes Motor Vehicles Spares which deals with
selling of Motor Vehicle spare parts. The proposed form of business ownership will be sole
proprietorship. The owner of the business will be JAMES MULI KYALO who is currently a
Automotive Engineering student at Rift Valley Institute of Science and Technology .Having
learnt for two years I have gained some knowledge and skills dealing with motor vehicle
spare parts.Moreover I will employ both skilled and unskilled personel to help in providing
quality services to clients

1.2 BUSINESS LOCATION AND ADDRESS

The business will be located at NAKURU town along NAKURU -ELDORET highway. The
business will be situated here so that the road will provide easy accessibility to my clients and
also for easy transportation of incoming stock and outgoing sales.
The business address will be:

SPIKES MOTOR VEHICLES SPARES LTD,

P.O Box 72-20100
NAKURU
MOBILE: 0797413725
EMAIL: muli787@gmail.com

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 NAKURU –ELDORET
HIGHWAY
TO NAKURU

KCB
BANK

SPIKES MOTOR
VEHICLES SPARES
MATUMATT
LTD
MALL

ROOTS
ACADEMY SIZZLERS

9
1.3 FORM OF OWNERSHIP

The source of capital to my business is from my personal savings, short term Loan from KCB
Bank and my Family and friends contributions.
The table below shows sources of capital and contribution amount
SOURCE AMOUNT PERCENTAGE OF TOTAL
CONTRIBUTION
Personal savings 400,000 40%
Bank (KCB) 300,000 30%
Family and Friends 300,000 30%
Total contribution 1,000,000 100%

1.4 TYPE OF OWNERSHIP

The proposed business ownership is a sole proprietorship. The owner of the business will
take all responsibilities of managing and organizing the business. This business is a startup
business and it should display a clear-eyed attention to the matter hand. In addition, this type
of business will be having institutional, commercial and domestic customers since there is a
lot of vehicles coming in and out the county.

1.5 PRODUCTS/SERVICES

The proposed business will be dealing with buying and selling of Motor Vehicles Spare Parts
e.g. Engine, Brake system, Cooling system, gearbox, Battery and all other parts needed for
vehicle purposes will be available.
The products and services offered will be of high quality and at fair prices which is
reasonable to my institutional and domestic customers in order to attract them from other
competitors.

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1.6 JUSTIFICATION OF OPPORTUNITY

The proposed business will:

 Create employment opportunities.
 Improve living standards of the people.
 Utilize available local resources
 Meet local demand.
 Ensures equitable distribution of resources.
 Enhance balanced regional development.
 Increase in technological innovations.

1.7 INDUSTRY

The proposed business will be under service industry. The business will involve buying and
selling of Motor Vehicles Spares. Also offering transport services
The business will be under medium sized business. Products offered by the business will be
sold within NAKURU Town and throughout the entire surrounding of the County.
The business will be operated by several employees including me as the owner and the
manager of the proposed business.

1.8 GOALS OF THE BUSINESS

The owner of the business saw it necessary to start this type of business in order to meet the
following goals:
 To make profit.
 Growth goals expansion in future.
 Create good connection with suppliers of goods and Finances.
 To maintain sound industrial relation with the society around.
 To reduce inflation in the region.

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1.9 ENTRY AND GROWTH STRATEGY
Due to high competition in the market place, the proposed business will be offering its
products and services in large scale. In addition to that the business will be offering better
quality products and operating at reasonable prices to attract more customers for it to have a
fast growth rate.
The following are key factors for the business success:
 Offering fair and reasonable prices to the customers.
 Ensuring that the products offered are of high Quality.
 Advertising the business through Radio Alpha FM NRG, KTN Television
and creating sign boards so that people can be aware of its existence.
 Operating within the legal systems.
 Also the business is interested in expanding its operation in future
probably in about 3 years to come when it would have meet enough funds
for expansion.
 The proposed business is also interested in opening branches particularly
in Marigat and Kabartonjo in order to ensure equitable distribution of
resources and to reach more customers in the town areas

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CHAPTER TWO

2.0 MARKETING PLAN

Marketing plan include dealing with customers and competitors in the business. It also
contain uncertainties in the business

2.1 CUSTOMERS

SPIKES MOTOR VEHICLES SPARES LTD is located in a county which is developing in

infrastructure and also advancing in technology.The situation of my business is at the centre
of customers and institutions
Domestic customers
These are individual customers who will purchase goods and services in small quantities for
their personal use. I aim to handle these categories of customers with outmost care as they
will form the base of retail sales. The turnover of these individual customers will of great
importance to the survival and growth of the business in the first place.
Institutional customers
These categories of customers will be expected to purchase goods and services in bulk for the
use in institutions. The entrepreneur intends to give discounts after sales service to these
customers because of their bulk purchase of goods. This will intend to attract and encourage
to repeat orders my business set objectives.

2.2 MARKET SHARE

A market share is the expected proportion or size that and shop intends in respect to
competition. Through the research conducted by the manager he noted that the total estimated
population of the area is about 20000 customers who are willing and capable of buying
products offered to them. The proposed business targets about 80000 potentials customers.
Though the region is found to be having four competitors including the proposed business

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 Item population Percentage No of customers
Spikes Motor Vehicles 20000 40% 8000
Spares Ltd
Sizzlers spares works 20000 25% 5000
Stage spares 20000 20% 4000
Reliable spares 20000 15% 3000

MARKET SHARE

reliable spares
15%
SPIKES MOTOR
VEHICLES SPARES
stage spares LTD
20% 40%

Sizzllers
sparesworks
25%

More customers will be coming to my proposed business because the products I will offer are
authenticated as compared to the ones of other competitors. This shows that the percentage
proportion may even raise higher in the second year since the enterprise will be gaining more
popularity in the region due to its better services offered to them.

2.3 COMPETITION

Within the trading center NAKURU town there will be three other major competitors who
will give stiff competition to my proposed business this include
SAVANA SPARE

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This business fall under large scale business specialized in the sale of motor vehicles spare
parts as the proposed business .It located 500 meters east of S One spare and its of
disadvantageous to the business because its near to the proposed business since there will be
co sharing of customers but the business intent to put down strategic plans that would attract
more customers as compared to it
STAGE SPARE
It is small scale business located one kilometer south of my proposed business. It is
advantageous to my business since it is in a an inconvenient place
RELIABLE SPARE
This also falls under small scale business located 400 meters north of S One spare. It deals
with sale of motor vehicle spare parts and is of advantageous to the proposed business since
the business would implement sale tactics which would attract more customers from this stiff
competition.

NAME STRENGTHS WEAKNESS

SPIKES MOTOR Good managerial skill New in business since
VEHICLES SPARES LTD Knowhow of it is as startup
customers’ needs business
Quick service Low quantity goods
Offer discount after Don’t offer after sale
sale service service
Poor pricing policy
STAGE SPARE Well known in the Quality goods but
area since was high prices
already existing Not in strategic plan
Trained staff Very slow in
Accommodation production
provided Lack of enough man
Have good pricing power in the business
policy

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 SAVANA SPARE Sales are relatively Poor motivation to
cheap employees
Large spaces for No accommodation
service Cannot be notify
Quick service and easily
production Faces financial
Better advertising problems
skills
RELIABLE SPARE Strategically located Lack of incentives to
position employees
Use of professional Quality goods but
staff reduced quantity
Modern equipment Poor management
used skills
Quality product of Lack of sale tactics
fair prices

2.4 METHODS OF PROMOTING AND ADVERTISEMENT

The SPARE will use various modes of advertising to familiarize and acquire the customers
with the location of the business. It would advertise the business through radio broadcast and
in particular Radio Injili Fm which is located near NAKURU town, Citizen TV a station
which most of the people in the area likes most, and construction of many billboards as
possible within NAKURU town. The proposed business intends to use press advertising such
as newspapers, magazines and journals since it suitable for image building information
dissemination and sales campaigns and also it is very affordable
The business intends to prevent itself and its products the enterprise will offer after sale
service

To customers who buys goods in bulk to their destination

Also the business would contribute to social causes e.g. by contributing to charitable
donations to

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The surrounding society in order to encourage and motivate them

2.5 PRICING STRATEGY

Pricing strategies refers to putting prices on goods and offered so as to attract potential
customers to express their willingness. This pricing of products will be done after considering
the following factors.
Cost of production

This is the summation of costs directly and indirectly for each product offered this will be
taken into consideration pricing of each market price of that product. It will also include one
percentage of profit to be considered for the growth of the business

Demand
This is the ability and willing of the customers to purchase the product. The price will be
priced in such a way that if will be flexible according to the demand and market price.

Competitor’s price
Pricing of products will depends upon how competitors put price on their products of The
same kind, comparing the price is necessary in order to avoid setting high prices which may
be unaffordable to my customers.

Government policy
Pricing strategy will be done in such a way that does not go astray with the government rules
and regulations .it will be ensured that it does not go beyond the pricing would of the
government which may enlarger my business to unwarranted liabilities.

2.6 SALES TECTICS

In order for the realization of more profit the price will be set in such a way that it will be
slightly lower than that of other competitors. The price of each product offered for sale
would be reduced by one shilling as considered to that of other competitors’ price this will
ensure attraction of more customers.
Customers will be informed of any new products in the stock and their price; the sales will be
directly to the customers

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The salesman will be making various orders from various institutions which they will be
required to visit in advance

2.7 DISTRIBUTION STRATEGIES

The proposed business will intend to distribute its products to the customers. The sales
representative will be calling on customers in specific localities to take order and arrange for
delivery of the products by the use of the business pick-up .in doing so, several products are
delivered at once adhering enough volume to justify the cost of direct sales also loading and
off-loading service hence this will boost the business set objectives. in addition it would
motivate more customers to be frequently coming to purchase the products offered by the
business due to this better services offered to them hence ensure quick growth of the
proposed business.

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CHAPTER THREE

3.0 ORGANIZATION AND MANAGEMENT PLAN

3.1 BUSINESS MANAGER AND RESPONSIBILITIES

Since the proposed business is a sole proprietorship business. The owner will be the overall
manager
Hence the owner will be required to be responsible for the following activities in the business
in order to ensure effective and smooth running of the business for if to achieve

It set goals and objectives

 To delegate responsibilities, give credit where due maintain disciple and ensure team
work
 Maintain the image of the business
 Recruit workers of the business
 To give instruction and directions
 To co-ordinate all the activities of the business
 To supervise all sections in charge of office services

The basic salary is 20000 per month.

3.2 PERSONAL NUMBER AND DUTY
ACCOUNTANT
Qualification
 Must have at least diploma in accountancy
 Must be computer literate.
 Should be honest and trustworthy
 Should have at least 2 years training experience in similar position
 Should be able to work with minimal supervision.
Duties and responsibilities
 To prepare annual financial reports
 Establishing tables of accounts and assigning entries to proper accounts
 Ensuring safety custody of accountable documents

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  Prepare the payroll
 Ensuring proper maintenance of the assets register. The basic salary is 16000
per month
 Prepare cash receipt and ensure that all cash and sales and other receipt and
promoting account for and banked.
 To review financial system creditors and cash flow policies and process and
recommends changes as and when necessary
 To ascertain profit or loss made in the business

SECRETARY
Qualification
 Should have at least diploma in secretarial studies
 Must be computer literate
 Should have at least 2years training experience in relevant field
 Must be tactful and host
Duties and responsibilities
 Drafting and typing
 Promote business image
 To keep proper record of office document
 Add in position of manager in the absence of the management
The basic salary is 14000 per month
SALESMEN
Qualification
 Must have at least diploma in sales and marketing
 Must be at least 26 years of age
 Must be computer literate
 Should be able to work with minimal supervision
 Should be honest and hardworking
Duties and responsibilities
 Advises customers by providing information on product
 Lip dating customers profile records

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  Processes payment by totaling purchases processing checks, cash
and stores.
 Contributes to team effort by accomplishing results as needed
 Welcome customers by greeting them; offering distance.
The basic salary is 12000 per month.
DRIVER
QUALIFICATIONS
 Must have a clean driving license
 Should be able to express herself/himself properly either in English or
Kiswahili
 Must have at least KCPE certificate
 Be a computer literate is added advantage
Duties
 Deliver goals to the customers
 Transport the purchased goods to the business
 To perform any other duty that may be assigned by any other recognized
person

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WATCHMAN
Qualification
 Should be physically fit
 Have qualification from training organization e.g. national youth service
 Must be able to communicate well either in English or Kiswahili
 Holder of KCPE certificate is an added advantage

Duties and responsibilities

 Provide security for the goods, premise and workers
 To direct guest and prepare daily logs and monthly reports on the status of
property’s security
 Provide check for incoming and outgoing visitors
 Maintains proper records of daily activities in and out of the business
The basic salary is 8000 per month

3.3 RECRUITMENT, TRAINING AND PROMOTION

RECRUITMENT
The recruitment of employees in the business will be done in the following steps:
 Advertising vacancies available through the use of poster, radio e.g. radio
Maisha and newspapers.
 Selection of applicants according to qualification statement set by
business.
 After applicants have been selected then they are shortlisted
 Interviewing of applicants is done after short listing in order to get
applicants who will meet the qualification standards
 Notification of successful persons is done immediately to acquit successful
applicants.

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  The business will sent a regret letter for those who did qualified in order to
encourage them to repeat the same when any vacancy available is
advertised

TRAINING
Employees in the business will be given induction in which they will be taught and shown the
must learn and familiarize themselves with the business
Training of employees will be normally done for the first week at work which simply
involves observation with experienced worker showing the new hand’ the ropes.
In addition, staff may be encouraged to attend the seminars and workshops to learn new skills
and get new ideas hence this will boast the business productivity

PROMOTION
Those workers who will perform excellent in their field will be given higher position in their
work. This will be done without favor as those promoted will have their salaries increased

3.4 REMUNERATION AND INCENTIVES REMUMERATION

Employees will be promoted according to their performance and loyalties in achieving the
business goals. Levels of experience would be a considerable factor in promoting employees
in the proposed business.
Also academic qualification would be an added advantage in promotion employees.
Employees who provide quality services will be considered first in their promotion
REMUNERATION
The proposed business will reward employees being on the following standards:
 Academic qualification and professionalism of each and every employee
will determined their basic pay.
 The position holds in the business
 Rewards to my employees will be 2% more than the market rate.
 Amount of work done would be considered.
 In addition experience admired by employees will determine their
remuneration INCENTIVES

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Monetary incentives
 Giving bonuses to employees at each year
 Employees will be given overtime allowance in order to encouraged them to
work for long hours in the business
 Retirement benefit will be given to employees when they retire and after
working for more than 213 years in the business
 Employees will be reimbursed according when they are quit for official duties
Non-monetary incentives
 Giving free medical insurance to employees
 Entertainment would be provided to employees during weekends
 Giving acknowledgement letters
 Gift will be gives to employees who performed accordingly

3.5 LICENSE PERMIT AND BY-LAWS

LICENCE
The business license will be obtained from Baringo county council. This license will provides
layer of protection for consumers by regulating and monitoring business operators to ensure
that they are meeting all the standards of governing by-laws while operating in the business.
Business registration will be done according to the trading laws of Kenya.

PERMITS
The business permits will be obtained from Baringo ministry of health. These permits will
ensure that the business conducts its activities within the government geographical
jurisdiction. This will ensure no violation of state laws.

BY LAWS
These are laws will create in the business which will increase my accountability and
transparency and encourages my board to pay close attention them. My board should review
them regularly and amend them according as my business evolves
Some SPARE shall be as much as possible to be loyal by law.

3.6 SUPPORT SERVICE

KCB BANK

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The banking and financial services will be facilitated by KCB Bank, NAKURU Branch. Its
address is P.O.BOX 72-30400 NAKURU.
KENYA RE- INSURANCE COMPANY
The insurance services will be provided by AMACO insurance company NAKURU head
office P.O BOX 72-30400, NAKURU, TEL: 0700171400
NAKURU POST OFFICE
Postal services will be offered and facilitated by NAKURU post office, P.O. BOX55,
NAKURU, TEL: 0544-662451
DON ADVOCATES,
The law enforcement will be taken care off by Don Advocates, their address will be
P.O BOX72-30400, NAKURU, TEL: 0721532992

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CHAPTER FOUR

4.0 PRODUCTION PLAN

4.1PRODUCTION FACILITIES AND CAPACITY

My proposed business will use the following tools and equipment’s in order to increase
insufficiency and its work ability, hence, will ensure smooth running of daily activities of the
business
Computer
It is used for recording all daily transactions of the business.
Calculators.
It is used for computing arithmetical and logical operations.
Commercial weighing scale
It is need for weighing accurate weights of different items to be transacted.
Printers
Used for printing vouchers and essential documents of the business.
Telephone
Used for conveying information from one office to another hence essential tool for
communication
Business layout

Work area
Accountant office Secretary’s Manager’s office
Work area office

Reception

Office Cloak rooms

Storage area

26
The proposed business will ensure that it provides sufficiency products to the business to
meet the customers demand; this can be achieved by ensuring proper provision of the
following requirement.
Monthly material requirements
Item Costs [shs]
stock raw materials 580000
stationary 4500
gloves 1800
4dust costs @300 1200
3trolleys@400 1200
5brooms @50 250

Totals 588950

Monthly labour requirements.

Personnel Cost[ shs]
manager 20000
secretary 14000
accountant 16000
sales person 12000
driver 10000
watchman 8000
Total 80000

Monthly production expenses.

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 Item Cost [shs]
water bills 1200
electricity 800
telephone bills 500
postage 300
transport 6000
insurance 1000
total 9800

Cost of production
588950+80000+9800=678750

4.2 PRODUCTION PROCESS

My business will start operation as salary as at 6.00am in the morning during this opening
time my workers would stats cleaning exercise first before commencement of any activity.
Exactly at 7:00am all cleaning exercise should be through, therefore the business transactions
commenced in accordance to the laid down policies and regulations.
From 7:00am 1:00pm daily business will be taking place. Items will be first checked before
selling them or in case of storage. These will be done by experts and after the analysis of any
faults there on, immediate actions should be taken.
My business will allow hour lunch break which starts as exactly 100pmto 200pm and there
shall be time observing
From 2: pm to the closure time which is 7: pm daily business transitions will be taking place.
From 7.00 pm I and the accountancy we will be taking cash book in the computer system also
we will be thoroughly examining all the business vouchers and balancing accounts

28
4.3 REGULATION AFFECTING OPERATIONS

Health regulations
My proposed business will adhere to the following health regulations:
Maintain preventive medicine programmers that develop health hazards and regular
examination for everyone risk
To carry out pre-employed medical examination regular checks on those exposed to
risk
Isolate hazards process and substances so that workers do not come into contact with
them to trade mark
TRADE MARK REGULATIONS
Avoiding a trade mark which is closely identical to the already existing party’s mark
COPYRIGHTS
Economic rights which allow the rights owner to device financial reward from the use the use
of his work by others
Moral rights which are the rights to claim authorships to oppose changes to the work that
could harm the creator’s reputation
SAFETY REGULATIONS
Safety programmer’s deal with the prevention of health avoiding working conditions
business will adhere accordance with the following safety to keep premises and machinery
clean and free from toxic substances
Providing protective equipment’s, but if changes to the design process or specification cannot
completely remove the hazard
Train workers to avoid risk
ENVIRONMENT REGULATIONS
My business will adhere to the following environment regulations
Maintaining plant and equipment to eliminate the possibility of harmful controlling the use of
Eliminate the hazard at source through design and process engineering

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CHAPTER FIVE

5.0 FINANCIAL PLAN

5.1 PRE-OPERATIONAL COST

These are costs incurred by the business prior to its commencement

item Amount (ksh)

fittings and furniture 60000
Installation of electricity 8000
Installation of water 7000
Advance rent payment 30000
License 5,000
Insurance 10,000
TOTAL 120000

5.2 ESTIMATION OF WORKING CAPITAL

ITEM YEAR 2023 YEAR 2024 YEAR 2025

Stock of low 580000 980000 1104000
materials 144000 152000 160000
Working in progress 607700 1040900 1140800
Stock of finished 24000 20000 25000
goods 106865 186500 200000
Debtors 179950 214000 250000
Cash in hand 1642515 2593400 2879800
Bank
Total

5.3 PROJECTED CASH FLOW

JAN FEB MAR APR MAY JUNE JULY AUG SEPT

Cash inflows Kshs Kshs Kshs Kshs Kshs Kshs Kshs Kshs Kshs
Cash sales 179592 178700 18021 182001 179432 180530 17892 181005 17984
Cash in hand 8905 8500 8333 8400 8652 8923 8864 9027 8720
Cash at bank 15000 16431 14998 15004 14532 15614 14838 15001 14634

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Debtors - 2000 3000 1500 2300 1800 2400 1500 1500
Total cash inflow 203497 205631 207352 206905 204916 206867 205004 206533 2046
Cash outflows
Cash Purchases 49500 48600 46100 50200 48600 49300 4800 50100 4860
Loan repayment 27500 27500 27500 27500 27500 27500 27500 27500 27500
Rent 5000 5000 5000 5000 5000 5000 5000 5000 5000
postage 3000 200 300 200 400 400
salaries 80000 80000 80000 80000 80000 80000 80000 80000 80000
Electricity 800 750 600 700 800 850 600 500 550
water 1200 1100 1050 1000 1000 950 1200 1100 800
stationery 1500 1000 1000 1000 500 1000 500 1500 750
Repair and maintenance 1600 1800 2000 1400 1500 1300 2000
Insurance 3000 3000 3000 3000 3000 3000 3000 3000 3000
Permits and license 5000 5000 5000 5000 5000 5000 5000 5000 5000
Transport 6000 5000 4500 3000 4000 5000 2000 7000 2000
Advertisement 2500 1000 1200
Total cash out flow 182300 176750 175850 179400 177000 179500 174100 183900 17360
Net cash 21197 26881 31502 27505 27916 27367 30904 22633 31094
Less taxation 1059.85 1344.05 1575.10 1375.25 1395.80 1368.35 1545.20 1131.65 1554.
Net cash after tax 20137.15 25536.95 29926.90 26129.75 26520.20 25998.65 29358.80 21501.35 29539
Accumulated cash 20137.15 45674.10 75601 101730.75 128250.95 154249.60 183608.40 205109.75 23464

Tax is 5% loan repayment increases loan interest of 30000

5.4 PROMA INCOME STATEMENT

item sh Sh
Sales
2155100
Less cost of goods sold
Opening stock 200000 300000
Purchases 580000 1855100
Closing stock (480000)
Expenses
Rent 60000

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Postage 2500
Salaries 960000
Electricity 8100
Water 11600
Stationery 12500
Repair and maintenance 14100
Insurance 36000
Advertisement 6400
License and permits 60000
Transport 45000
Depreciation 1200
Loan interest 30000 1247400
Net profit before tax 607700
Less taxation 5% 30385
Net profit after tax 577315

5.5 PRO-FOMA BALANCE HEET

FIXED ASSETS Acc dep ksh Net book value sh

Furniture and fittings (60000-1200) 58800
CURRENT ASSETS
Stock of raw materials 580 000

Stock of finished goods 607700

Debtors 24000

Cash 106865

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Bank 179950
1498515
CURRENT LIABILITIES

Bank loan (300000) 1198515

1257315

Financed by:
Owners’ KCB 680000
Net profit 577315
1257315

5.6 BREAK EVEN POINT

Fixed costs Amount sh

Item

33
Loan repayment 330000
Insurance 36000
Rent 60000
Salaries 960000
Licenses and permits 6000

Total 1446000

34
Variable costs
Item Amount
Purchases 580000
Postage 2500
Electricity 8100
Stationery 12500
Repair and maintenance 14100
Transport 45000
Advertisement 6400
total 668,600

Total contribution margin

Sales – total variable cost
= 2155100 – 668600
= 1486500

Contribution margin percentage

= contribution margin x 100%
Sale
= 1486500 x 100
2155100
= 0.6898 or 68

5.7PROFITABITY RATIO

This ratio method is used to measure the management of effectiveness in generating sales to
increase the returns for the business
Gross profit percentage = gross profit x 100 %
Sales
= 1855100 x 100%
2155 100
= 86.08%

Net profit margin= net profit after x 100%

35
 Net sales
= 577315 x 100%
2 155100
= 26.79%
Return on investment = net profit after tax 100%

Total investment\
= 577315 x 100%
1557315
= 37.07%

Total assets turnover = net sales

Total asset
2155100 x 100%
1557315
1.4%

Break –even point

=fixed assets
Sales ratio
=1446000
0.6898
=sh 2096 260

5.8 DESIRED FINANCING

ITEM AMOUNT KSH

Pre-operational cost 120000
Working capital
36
Furniture and fittings 1642515

60000
Total 1822515

5.9 PROPOSED CAPITALIZATION

ITEM AMOUNT KSH

Friends and relatives 400,000
Owners contribution 300 000
Bank (KCB) 300 000

Totals 1,000,000

APPENDIX: LOCATION MAP

37
 NAKURU –ELDORET

KCB
BANK

SPIKES MOTOR
ROOTS VEHICLES SPARES
ACADEMY LTD

MATUMATT
MALL
SIZZLERS
METAL
WORKS

38