PAUL’S CAKE HOUSE

NAME OF BUSINESS: PAUL’S CAKE HOUSE

NAME OF THE OWNER: KIMANI M PAUL

INDEX NUMBER: 5521053096

COURSE NAME: DIPLOMA IN CATERING AND

ACCOMMODATION MANAGEMENT

COURSE CODE: 2819

CENTER NAME: RIFT VALLEY INSTITUTE OF SCIENCE AND

TECHNOLOGY

CENTER CODE: 511101

EXAM SERIES: JULY/AUGUST

NAME OF SUPERVISOR: REGINA KIMANI

SUBMITTED TO: KENYA NATIONAL EXAMINATION COUNCIL

DATE OF SUBMISSION

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Table of Contents
DECLARATION............................................................................................................................iv
DEDICATION.................................................................................................................................v
ACKNOWLEDGEMENT..............................................................................................................vi
CHAPTER ONE..............................................................................................................................1
1.0 Business background..............................................................................................................1
1.1 Business name........................................................................................................................1
1.2 Business location....................................................................................................................1
1.3 Form of ownership.................................................................................................................1
1.4 Type of the business...............................................................................................................2
1.5 Justification of opportunity....................................................................................................2
1.5 The industry...........................................................................................................................3
1.6 Entry and Growth strategy.....................................................................................................3
1.7 Goals of the business..............................................................................................................4
CHAPTER TWO.............................................................................................................................5
1.0 MARKETING PLAN............................................................................................................5
1.1 POTENTIAL CUSTOMERS.................................................................................................5
1.2 COMPETITION.....................................................................................................................6
1.3 Pricing strategy......................................................................................................................6
1.4 Distribution strategies............................................................................................................8
1.5 promotion and advertisement.................................................................................................8
1.6 sales tactics.............................................................................................................................8
1.7 Market share...........................................................................................................................9
CHAPTER THREE.......................................................................................................................11
Organizational management..........................................................................................................11
3.1 Organization.........................................................................................................................11
3.2 organizational structure........................................................................................................11
3.3 Recruitment training and promotion....................................................................................13
3.4 Remuneration and incentives...............................................................................................14
3.5 licenses permits and by-laws................................................................................................14
3.6 support services....................................................................................................................14
CHAPTER FOUR.........................................................................................................................17

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4.0 operational and production plan..............................................................................................17
4.1 Production facilities and capacity........................................................................................17
4.2 Production strategy..............................................................................................................18
4.3 production process...............................................................................................................19
4.4 Operation affecting operations.............................................................................................19
CHAPTER FIVE...........................................................................................................................20
5.0 Financial plan...........................................................................................................................20
5.1 Pre-operational cost..............................................................................................................20
5.2 Direct funding......................................................................................................................20
5.3 Working capital requirement...............................................................................................21
5.4 projected cash flow statement for Paul’s cake house...........................................................22
5.5 Proforma balance sheet for Paul’s cake House....................................................................23
5.6 Proforma income statement for Paul’s cake house..............................................................24
5.7 Breakeven level....................................................................................................................25
5.8 Profit ratio............................................................................................................................25

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DECLARATION
I declare that this business is my personal work submitted to the Kenya national Examination
council diploma in Catering and Accommodation.

Student name: Paul Muriuki Kimani

Signature ______________________________

Date ________________________________

Supervisors name: Mrs Regina

Signature _____________________________

Date _______________________________

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DEDICATION
It is my sincere gratitude to dedicate this business plan to my beloved parents and the family for
the maximum support. I will deeply remain indented to my friends for assisting me with relative
information, materials and ideas while writing this business plan.

v
ACKNOWLEDGEMENT
I would like to give most thanks to my parents who gave me their moral and financial support
throughout the course. I will not forget to acknowledge my mentor who has given me sincere
support as a supervisor of my business plan. My classmates Mershark, Nicole and Mary and
others support and advice.

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 CHAPTER ONE
1.0 Business background
The name of the owner will be Paul Muriuki Kimani who is a Kenyan Citizen by birth. He
comes from Nakuru County. He started primary education in the year 2003 and later joined St
Francis Secondary School in the year 2013 to 2016 for the secondary education having
performed well in the Kenya Secondary Certificate examination. He later joined Rift Valley
Institute of Science and technology in the year 2018 to pursue a diploma course in catering and
accommodation management interested in food industry and this pressured her to start and run a
cake house.

1.1 Business name

The proposed name of the business is Paul’s cake house. The reason for the proposal is that the
owner is interested trying new method of baking cakes and producing different types of cakes.
He also have the skills in production of cakes. Paul’s cake House falls under food industry since
it deals with cakes and cakes are for consumption by human beings. Paul’s cake House will
operate under some mission and vision so as to attain its target. The mission of the business is to
grow make profit, produce quality food and open more branches around the country. The vision
is to develop a healthy eating habits for good health. This guide and help run the business since it
has got mission and vision to fulfill as it runs.

1.2 Business location

Pauls cake House will be located at Nakuru County, at Nakuru town. It will be located along
Kenyatta Avenue in shoppers building 2nd floor. The building is located at the center of the town
hence it is easily accessible by anyone. This area is approximately 50km square with a total of
75000 people. Paul’s cake house will be contacte using telephone and past office. The telephone
number is (254)401089 or mobile number +25479605545. The email address will be 131 Nakuru
and email address is paulscakehouse@gmail.com.

1.3 Form of ownership

Paul’s cake House operates under sole proprietorship. The owner decides the above form of
ownership because of the following reasons.

i. The owner wants to exercise his skills – The owner having learned on how to bake cakes,
he wants to put those skills into practice

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 ii. He believes in himself – The owner has the confidence or running the business in his own
since he is capable in doing so.
iii. Own boss – The owner of the business becomes the boss of the business hence it is easy
to run and manage the business swiftly
iv. The decision maker – The owner makes the decision easily since he is the boss therefore
it saves on time since the final decision is made quickly without any references from
anyone and other than the other forms of the business like the partnership.

1.4 Type of the business

The major customers of the Paul’s cake house are the students, children, the youth and elder
people, also the institutions, weddings, churches and the market places around the town. The
above target of the customer will be attained due to the favorable location of the business. Since
the business is located at the center of the Nakuru town, it is easily accessible by anyone around
the town and the passers by.

1.5 Justification of opportunity

The owner have skills in production of quality food and tries to produce different types of cakes
and methods of producing them. He will be able to meet customers needs and satisfaction as
follows.

i. Producing quality products cakes – The owner of the Paul’s cake house will ensure that
the products produced are produced under favorable conditions and in a hygienic
standard in order to produce quality products that will satisfy the customers.
ii. Saving time during the production – the owner ensure that the cakes produced on time
inorder to produce on time, the plans to use modern technology and machines like buying
of maxing machines and also trolleys for moving the cakes from the point of production
to the point of packaging and transportation
iii. Meets customers satisfaction – The owners will ensure that the cakes produced are of the
right quantity and quality. The case produced should be satisfiable to the customers.
iv. Concentration on the customers – The owner will ensure that the attention of the
customers is paid as they order cakes from different location since the business offers
deliveries services so as to take the right products as ordered by the customers.

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1.5 The industry
Paul’s cake house os categorized under the food industry and its expected to serve customers in
the nearly region and therefore spread to customers nationally and regionally after a scheduled
expansion. The farm is expected to increase in productibity and also expand to become a large
one due to advancement of technology of improving products and the entire industry.

The major activities of Paul’s cake house includes the following

I. Cakes

The Paul’s cake House will be producing different tyoes of cakes such as the black forest cakes,
chocolate cakes, fruit cakes, poundcake, red velvet cake, carrot cake, sponge cakes, genoise cake,
chiffon cake, Hummingbird cake, lady Battimore cake and flourles cake. The order cakes are for
ceremonies like the birthday parties, wedding ceremonies, Graduation ceremonies among others.
It will also produce cakes for retail shops such as chocolate chip cockies, strawberry soft cheese
cake, orange and blueberry chocolate muffins, macaroons, New York cheesecake, truffles butter
jam cookies and orange cake.

II. Take away

The owner decided to produce cakes for take away as well because of the people who will be
buying and packed for them to carry instead of taking them at the cake house.

1.6 Entry and Growth strategy

Paul’s cake house runs under stiff competition from other cake house operators business and the
owner tries to win at the end of the day. The owner enhances high quality of cleaningness in the
working area, production of quality food, offering maximum service to the customers, ensures
proper and appropriate communication to the customers. This will help to corp up with
competition. Also ensuring that the working staffs has medical check up results. The owner also
needs the businesses to grow and therefore will give offers on weekends to families, children,
youths who visits the cake house. The first twenty people who buys two cakes or more will get
one free cake without any charges. This strategies will help run and growth of the cake house.
Promotion methods are offering discounts, after sale service offer credit services for the purpose
of attracting and retaining more customers. Also more promotions will be done through use of

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packaging paper bags, posters, exhibitions and various announcements made over the radio and
television.

1.7 Goals of the business

a) vision

aiming higher to become a business or a company of good performance both nationally and
regionally

b) objectives
 good production rate to meet the demand – the rate of production should be good and
efficient
 production of high quality and affordable products to the customers
 maintain high quality management to ensure the achievements of the set objectives and
goals
 to satisfy the customers needs
c) means of achieving the goals and objectives
 Recruiting fully skilled and qualified personnel who are to ensure that quality products
and services are produced to meet the needs of the customers
 Better customers carry-proper handling of customers – Always ensure that they buy
products at Paul’s cake House and also improving customer relations.
 Improving quality of the products enhances catch of customers therefore Paul’s cake
house intends to tirelessly work in order to improve the packaging system, the quality of
the products to satisfy the customer needs.
 Good management Paul’s cake House is to recruit competent personnel who are well
qualified to carry out productive work. This is to enhance proper decision making process
and good follow up of the set goals and objective to ensure that they are all achieved.

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 CHAPTER TWO
1.0 MARKETING PLAN
1.1 POTENTIAL CUSTOMERS
The potential customers of the business is to consist of both local and commercial customers
whom are adults and youths since it is located in the town where there is a large population and a
number of institutions. The cake House is to cater for all age groups i.e children, youths middle
aged in daily business. The customers are categorized as follows.

 Civil servants from neighboring institutions

 Commercial customers
 Schools and colleges
 Residents of the area
 General public

These residents being the ones contributing to the higher population have same good income
hence they have potential to buy provided that they have the demand. Therefore the enterprise is
likely to have customers to buy well and in cash.

a) Residents of the market: Since the area is highly populated thus the business is to expect
a large number of customers in the area i.e Job seekers who are looking for employment
and all the people dwelling in the market and general public. Since Nakuru market has
three market days it is attract all categories.
b) Civil customers. It is to consist of hawkers or traders in the town who is to be operating
small scale business. They are to buy already packed cakes with the aim of reselling to
the final customers.
c) Commercial customers. These are customers who will buy products from our cake house
in the purpose of selling them. The type of commercial customers include supermarkets,
the market cnter sales and people dealing with cakes. They will buy products offered by
the business in wholesale prices in order to make profit.
The potential customers will be purchasing the products and services at day time from 8
am to 9 pm in the evening through the week, a month a year and so on. The potential
customers will be individuals from the region and those who work in the near by
institutions e.g near by markets, schools, colleges and universities, hospitals and people

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 around the town. The business mainly target all age groups. The potential customers
will be purchasing the products and services in large quantity at a given time. The mode
of payment is cash and Mpesa.
d) Institution 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 selling to the
customers. This will attract and encourage customers to buy more products in the
business objectives. These institutions includes; KMTC, University in the town like
Kenyatta and Egerton Town Campuses, secondary schools like Utumishi e.t.c

1.2 COMPETITION
Within the trading center of Nakuru there will be other major competitors who will give stiff
competition to my proposed business. This include;-

A. Yummy cake house

This business is under large scale business specialized in the sale of cakes product as proposed
business. It is located at the outskirts of Nakuru town and it is of advantageous to the business
since there will be no sharing of customers but the business will put down strategic plans that
would attract more customers as compared to it.

B. Mwamba cake house

This business falls under small scale business located 500 meters from Yumm’s cake house. It
deals with sale of cakes products and is of advantageous to the proposed business since the
business would implement sale factors which could attract more customers from this stiff
competition.

C. Royal cake house

It is small scale business located one kilometer south of my proposed business. It is

advantageous to my business since it is an inconvenient place.

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1.3 Pricing strategy
1. Government policy – This includes liberization for example government taxation. The
enterprise therefore is to adhere to policies and pricing laws f the government.
2. Environment factors – The factors includes all conditions to be considered which may not
favour the preparation and selling of the products for example during dry season whereby
raw materials supply for production is to be slow but during rainy season the raw material
is to be in plenty and so the prices is to flexible but to be fixed in order to keep strategy
that is responsible to the market force as they fluctuate every now and then.

BUSINESS STRENGTHS WEAKNESS

NAME
PAUL’S CAKE  Good managerial skills  Low capital
HOUSE  Quick services/convenient  Insufficient space for
 Offer discounts after sales service expansion
 Able to meet the customers needs  Poor pricing policy
 Now in the business since
it is a start up business
MWAMBA’S  Quality products of fair prices  Poor technology
CAKE HOUSE  Use of modern equipments  Poor management skills
 Strategically located position  Poor planning
 Well skilled personel  Do not offer sales
discounts
YUMMY’S  Trained staff  Slow in production
CAKE HOUSE  High experience  Faces financial problems
 Offer discounts after sales service  Poor technology
 Good location of the business  Poor management skills
ROYAL CAKE  Good managerial skills  Poor financing method
HOUSE  Modern equipments available  Do not offer sales
 Quality production of products discounts
 Good advertising skills  Poor pricing policy
 Poor managerial skills

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 3. Demand oriented pricing – This is based on demand and supply the higher the demand
the higher the production and supply therefore it is to be easy to fix prices according to
the demand. And this is to make all the customers to come into large number.
4. Pricings – The proposed cake house is to offer its products at a slight low price but with a
maximum profit. All the aspects is to bring up benefits to the enterprises customers and is
to encounter competition from much other competition from much other competition in
the field.

1.4 Distribution strategies

The proposed business will intend to distribute its products to the customers. The products will
be distributed to various places after they have been ordered by the customers through the use of
trucks and motorbikes. There be also loading and off-loasing of the products hence it increases
the customers urge to buy more goods and also not to change the place of buying their products.
By this method of service it will increase more customers and due to better services offered them
will ensure quick growth of the prepared business.

1.5 promotion and advertisement

this refers to all marketing strategies that are adopted by the business in order to promote its
products by increasing its demand.

The business will promote its product through social media eg facebook, tweeters, whatsapp and
giving free product samples to our customers. The business can be also advertised through
television and radio stations of which people will see our products and get information about our
business. There will be free transportation of goods to their destination if they buy goods in bulk.

The owner is also to sell directly to the customers, thus is to enable her to understand the taste
and preference of the customers and she is to be in a position to serve best and therefore they
gain her confidence. Also during community based project , the manager is able to attend to ask
for a chance to express herself so that community to be aware of the business.

1.6 sales tactics

in order for the realization of more profit the price will be set in each a way that it will be slightly
lower than that of other competitors.

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The prices of each product offered for sale would be reduced by one shilling as considered to
that of other competitions prices. This will ensure attraction of more customers. The customers
will be informed of any new products in the stock and their prices. The sales will be directly to
the customer. The salesman will be making various orders from various institutions which they
will be required to visy in advance.

1.7 Market share

A market share is the expected proportion that Paul’s cake house intends in respect to
competition. The owner has done some research and noted that the total estimated population of
Nakuru town is about 20,000 customers who are willing and capable of buying products offered
to them . the proposed business targets about 10,000 potential customers. Though the region is
found to be having four competitors including the proposed business.

The table below shows the percentage share of customers

Item Population Percentage No. of

customers
Yummy’s cake house 15000 30% 4500
Mwamba’s cake house 15000 10% 3750
Royal cake house 15000 20% 3000
Paul’s cake house 15000 40% 6000

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 Yummy's cake
house
30%

Paul's cake house

40%

Mwamba's cake
house
10%

Rooyal cake house

20%

The proposed business is to face challenges from competitors due to lack of finance to expand
and growth of the business lack of credit facilities may lower the growth of the business. My
finance may limit lending money requested but this is to be encountered by good record keeping
and proper use of funds available in the firm.

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 CHAPTER THREE

Organizational management
3.1 Organization
Paul’s cake house is to operate as a sale proprietor form of business and will mainly be managed
by Paul as the owner with the help of my assistant manager who will help me in running the
business. The business will offer a wide variety of cakes products with good quality and
affordable prices. We will offer different types of cakes to our customers both retail and
wholesale and this will depend on the supply of raw materials to the establishment.

3.2 organizational structure

The organization chart below summarizes the management team and the people involve in day to
day running of the business. For the start of the business is to commence with 10 employees so
as to meet the growth of the business and to make profit

PAUL’S CAKE HOUSE

MANAGER

ASSISTANT MANAGER

ACCOUNTANT/CASHIER

CHEF CLEANING STAFF HANDWORK MEN SECURITY OFFICER

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EMPLOYE NUMBER QUALIFICATION DUTIES AND SALARIES
E OF RESPONSIBILITIES
PEOPLE
Manager 1  Should posses a  Training workers 50,000
certificate on food  Making decisions
beverage  Setting business bills
 Should be hardworking  Budgeting for the purchases
 Should be innovative for the business
and initiative
Assistant 1  Should have experience  Assigning duties to the 40,000
manager of 1 year workers
 Should be hardworking  Paying salaries to the
and honest workers
 Should passes a  Training workers
certificate on business
management
Accountant 1  Should have a certificate  Receive payments from
in accounting customers
 Should be able to  Keeping all the financial
communicate records
 Should be a hardworking  Issuring receipts
person
 Time keeper
Chef 4  Should have a certificate  To bake dough 30,000
in food and beverage
 Should have a health
certificate
 Should be hardworking
 Should have an

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 experience of 1 year
Waiter 2  Ability to communicate  Serving customers 20,000
 Should posses a good according to their orders
health certificate  Cleaning tables
 Should have knowledge
of catering service
 Should be hygenic
Security 2  Should be physically fit  Guarding over the premises 15,000
officer  Ability to communicate  Allocate packing
 Ability to keep time  Alerting incase of any
 Hardworking emergency
Operating 2  Should be punctual  Day cleaning of the business 15,000
staff  Should be hardworking premises
 Age 20-30 years  Keep the environment clean
Handwork 3  Should be of sound mind  Receiving goods as they 15,000
man  Should be hardworking arrive
 Should be punctual  Stocking the goods for
delivery

3.3 Recruitment training and promotion

Recruitment

This is done by the manager in conduction with the other management staff. This is done by
taking letters to the proprietor using posters media e.g radios, and local churches for first
announcement purpose than recruitment followed by interviews to ensure good selection of
workers.

Training

Will be done through various programmes as set up for the business. There will be a period
whereby the staff would be taken to workshop so that they can join knowledge of the business
commences. Also the continuous training will assist whereby their methodology will be

13
determining. The manager will also organize training programmes within the organization as part
time. The qualified will train the none qualified.

The qualified staff will train the non qualified through the following

 As part of rules government the business

 The staff feel appreciated
 To help the staff cape with challenges

Promotion

It will be done according to merit of the how they perform their duties and responsibilities. For
one to be promoted one should satisfy the management team of his/her working area as excellent
and training good record of working. The qualification and experience of a person will also be
considered in job promotion.

3.4 Remuneration and incentives

The business will make sure that employees receive their monthly payment on time. Incentives
will be offered staff meal, travelling allowances, promotion and set standards for reporting to
job. Also they can be motivated by giving tips organize parties and advisory services. The
manager will be looking at their academic level, their professional level which is very important
before employing any worker. We will also look at the workers trains such as honest, if he/she is
trustworthy and also the level of hard work. There also be overtime payment and overtime
bonuses for those working extra hours. There will be an award to those performances are the
best.

3.5 licenses permits and by-laws

The business formation will be done, started and constricted with the rightful authority from the
municipal council. The business will first ensure that it gets a clear authority from the municipal
council. The expected laws in the business are governmental rules and regulations e.g Trade
licenses by laws taxation policy insurance cover, building regulations. The business will also
adhere to local authority regulations, licenses and taxation. The business will also lock keenly
into environmental and health laws and regulations.

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3.6 support services
There are the services that will enable the business activities to operate fully, they are added in
business operations they include;

1. Banking services

The proposed business will open an account at co-operative bank of Kenya which will enable it
to serve its income. The business will also borrow loans from the bank if need be the proprietor
will be the one to bank the money of the business and also the one to withdraw.

2. Postal services

The business will open a postal service that would be used for outcoming and incoming letter
and mails, this will be done through postal Kenya P.O Box 131-2021 Nakuru

3. Garbage disposal

The business is with Wasafi garbage collection . the telephone number will ensure proper
collection of garbage form the business. Their number is 0721554565. This will ensure
cleanliness of the premises. The garbage collection will be done in a weekly basis.

Monthly expenses Cost

Electricity bills 600
Telephone 300
Transportation 4000
Insurance 1000
Water bill 1500
Advertising 5000
Postage 300
License 700
Renovation 5000
Total monthly expenses 13200

Total cost production = Total material requirement + Total labour requirement + Total month
salary

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=205,000

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Monthly labour requirement Number of personnel Cost (Ksh)
General manager 1 50,000
Assistance manager 1 40,000
Accountant 1 35,000
Cashiers 2 30,000
Chefs 4 30,000
Waiter 2 20,000
Security officers 2 15,000
Operating staff 5 15,000
Total 205,000

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 CHAPTER FOUR

4.0 Operational and production plan

4.1 Production facilities and capacity
Machinery and equipment’s

i. Computers

The machine will be used to store records for future references and also it is safe from theft and
damages. It will also be used for security purpose since it will be filled with CCTV cameras
which will be able to see all the corners of the business.

ii. Receipts books

These are booklets containing a quality and price in columns. These booklets will be used to
record quality purchased and its price after goods are delivered to the customers. The booklets
will be used to record quality p-purchased and its price after goods are delivered to the
customers. The receipt book will be showing the date in which the products or good were sold
and will indicate the amount paid.

iii. Calculator

The calculator will be used to perform basic arithmetic that is addition, subtraction division and
multiplication.

iv. Weighing machine

It will be used in measuring/weighing of goods as they required and as the order are made before
the packaging of delivery during the delivery.

v. Files and paper punch

The files will be used to store papers and documents after they have been sampled together using
the punch

vi. Fridge

Will be used to store milk and raw materials for cakes that need to be put in fridge. It will be
used to store perishable goods

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 vii. Blender

Will be used in blending of some fruits like bananas for baking the banana cakes.

viii. Measuring jug

To measure the water which will be used in making the dough

ix. Knives

Padding and chopping fruits

x. Sinks

It will be used for dealing fruits for baking and also the equipment’s

xi. Working tables

It will be used during the preparation of fruits and doughs and cake products

xii. Other fixed assets required by the business

The business plan to acquire more land for the expansion of the firm which will enable it to cater
for the demand of the customers, small retail, schools and wholesale traders who usually buy
goods in large quantities

4.2 Production strategy

Equipment Quantity Unit cost Total cost
Computers 2 35000 70000
Receipt books 20
Calculators 1 1000 1000
Weighing machine 2 3000 6000
Filers and paper 10 2 400
punch
Fridge 1 20000 20000
Blender 3 5000 15000
Measuring jug 4 50 200
Knives 5 40 200
Sinks 2 600 1200

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 Working tables 5 800 40000
Freezer 1 3000 30000
4.3 production process
the business will deal with cakes and cakes products. The products proposed to be produced will
be of good quality and of contract quantity so as to have steady flow of customers. For the
retailers who will be buying the small cakes and take away, they will be packaged in boxers and
containers with the establishments name of which it will be advertising the business. This
production method will advertise the business and market it. It will also attract customers to the
business. The business will produce at an affordable price to all the customers.

4.4 Operation affecting operations

a. Health regulation

This regulation will be from the local health facility which will empower the standards required.
There will be checking regularly on the employees legal health.

b. Environmental Act

This policy will ensure that is no environmental pollution of air and ensure clean environment.

c. Government regulation

The business will comply with the following regulation, operation license in certification tax
compliance and taxations.

d. Safety regulation

Workers safety will be given so as to avoid any accident occurring. All workers will be provided
with safety working gears e.g grooves, gumboots, aprons. Fire extinguisher will be installed in
the establishment and there will also be exit doors incase of fire breakage which will help the
workers to escape form the fire.

e. Trade mark

The business will be register with the trademarks. The Kenya Bureau of Standards (KEBS). This
will help the customers to know the safety of the services and products offered to them.

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 CHAPTER FIVE

5.0 Financial plan

5.1 Pre-operational cost
These are the costs incurred prior to starting of the business and they includes

ITEM AMOUNT (KSH)

Business registration 1500
Transport 4000
Eguipments 5000
License permit 700
Advertisement 5000
Water 1500
Electricity 600
Remuneration 205000
Miscellaneous 51000
Total 729600

5.2 Direct funding

The money that is gong to be used in the starting of the business will be from different sources
such as personal contribution, loans from banks friends and family members.

Personal contribution

As the owner of the business I will contribute the largest amount, which will be 500,000

Loans from banks

I will apply loans from the Equity bank to reinforce in the starting of my business and that would
be sh200,000

Friends

My friends who have been playing a very big role in my life assured me that they will be with
me when I am going to start my business and they will be contributing sh50,000

Family members
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I am going to ask my parents to support me start my own business and that the should contribute
to me sh100,000

5.3 Working capital requirement

These are the items dealing with on day to day activities as of the business, they include

Item Year 1 Year 2 Year 3

Cash in hand 150000 400000 60000
Cash at bank 300000 650000 80000
Stock of finished 300000 43000 50000
goods
Debtors 50000 70000 90000
Stock of material 50000 60000 80000
Totals 850000 1610000 2070000

22
 5.4 projected cash flow statement for Paul’s cake house
JAN FEB MARC APR MAY JUN JULY AUG SEPT OCT NOV DEC
H
CASH IN FLOW
Cash sales 50000 70000 100000 12500 15000 15000 19000 17500 11050 30000 30000 450000 217050
0 0 0 0 0 0 0 0 0
Debtors - 10000 4000 5900 5400 8000 12000 4000 5000 8000 2000 600 64900
Services - 15000 200000 10000 80000 15000 20000 50000 25000 15550 40000 600000 256050
0 0 0 0 0 0 0 0
Cash at hand 20000 - - - - - - - - - - - 200000
0
Total cash in 25000 23000 304000 23090 23540 30800 40200 67900 14050 46350 70200 105060 499590
flow 0 0 0 0 0 0 0 0 0 0 0 0
CASH OUT FLOW
Purchases 35000 18000 19000 21000 20000 40000 80000 30000 10000 22000 33000 27000 355000
Loan 20000 20000 20000 20000 20000 20000 20000 20000 20000 20000 20000 20000 240000
Rent 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 120000
Salaries and 26000 26000 26000 26000 26000 26000 26000 26000 26000 26000 26000 26000 312000
wages
Electricity 35000 1500 1400 1700 1800 1500 1500 1000 1250 1800 2000 2500 52950
Mailing 4500 4500
Creditors 41750 30000 20000 15000 10000 50000 10000 10000 8000 5250 25000 25000 250000
Licenses and 15000 - - - - - - - - - - - 15000
permits
Insurance 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 48000
Advertisement 1000 - - - - - 5000 - - - - - 6000
s
Repair - - - 5000 - - 2300 - - 1000 - 6600 14900
Total cash out 19225 10950 100400 10270 91800 15150 15880 10100 79250 90050 12000 121100 141835
flow 0 0 0 0 0 0 0 0
Net cash bal 57750 12050 203600 12820 14360 15650 24320 57800 61250 37345 58200 929500 357755
0 0 0 0 0 0 0 0 0
Cash bal b/f - 57750 120500 20360 12820 14360 15650 24320 57800 61250 37345 582000 264805
0 0 0 0 0 0 0 0
Accumulative 57750 17825 324100 33180 27180 30010 39970 82120 63925 43470 95545 151150 622560
cash 0 0 0 0 0 0 0 0 0 0 0

23
5.5 Proforma balance sheet for Paul’s cake House
As at 31st December 2020

Fixed assets sh Sh
Furniture
Machinery

Current assets
Stock of row material 150000
Stock of finished goods 300000
Stock of work in progress 200000
Debtors 50000
Cash at bank 300000
Cash in hand 150000
Total current assets 1050000 1050000
Current liabilities
Creditors 841070
Bank loans 200000 1040170

Financed by
Owners equity 500000
Contribution 150000
Add net proft 379905
Total 1029905 10290905

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5.6 Proforma income statement for Paul’s cake house
For the year ending 2021

Items Ksh Ksh

Sales
Less cost of sales 300000
Opening stock 30000
Add purchases 100000

Less closing stock 80000 240000

Profit 660000
Less expenses
Salaries and wages 205000
Rent 10000
Water and electricity 2100
Advertisement 5000
Insurance 1000
License 7000
Loan re-payment 10000
Miscelleous 20000
260100
Total expenses 260000
Net profit before tax 399900
Less 5% tax 199995
Net profit after tax 379905

25
5.7 Breakeven level
This refers to the point where revenue is equal to the total costs

Variable cost Amount (sh)

Expenses
Electricity 6000
Transport 4000
Purchases 100000
Office stationary 5000
Furniture filling 35000
Machinery and equipment 75000
Total variable cost 225000
Fixed cost
Salaries and wages 205000
Rent 10000
Insurance 1000
License permits 7000
Total fixed costs 2230000

5.8 Profit ratio

This is the expected profitability ratio of the business

GP
Gross profit = x 100
sales

660,000
x 100
900,000

= 73.3%

The return on equity

Net profit offer tax

Return on Equity = x 100
Owners equity

379,905
R.O.E = x 100
500,000

26
 = 75.98%

Net profit tax

Return on investment = x 100
total investment

379,905
= x 100
1,000,000

= 37.9905%

27