BUSINESS PLAN

BUSINESS NAME: FREDY ELECTRICAL AND ELECTRONICS SHOP

DEPARTMENT: ELECTRICAL AN D ELECTRONICS ENGINEERING

PRESENTED BY: OKELLO FRED AGERO

CENTER CODE: 741105

SUBMITTED TO: THE KENYAN NATIONAL EXAMINATION COUNCIL IN

PARTIAL FULFILMENT FOR THE AWARD IN DIPLOMA IN
ELECTRICAL AND ELECTRONICS ENGINEERING

INSTITUTION: THE KISUMU NATIONAL POLYTECHNIC

EXAM SERIES: JULY 2024

i
DECLARATION
I declare that the information contained in this document is my own original work that has never been
presented anywhere for academic award. I therefore submit it to the Kenya National Examination Council
(KNEC) partial fulfillment for the award of Certificate in Electrical Engineering.

NAME: OKELLO FRED AGERO

SIGNATURE:…………………………………..
DATE:…………………………………………

DECLARATION BY SUPERVISOR

NAME: LAMECH MISATI

Signature…………………………. Date………………………………..

ii
DEDICATION
I dedicate this business plan to Sister for her support throughout my research and planning of the business plan, I
also dedicate this to my friends for their ideas and support during the preparation of this document.

iii
 ACKNOWLEDGEMENT
I gratefully acknowledge THE KISUMU NATIONAL POLYTECHNIC INSTITUTION and the Electrical and
Electronic Engineering Department for providing me the opportunity and the environment to initiate and complete
my business plan.

I also extend my gratitude to my family for their financial and moral support throughout my studies.

iv
EXECUTIVE SUMMARY
BUSINESS DESCRIPTION

FREDY ELECTRICAL AND ELECTRONICS SHOP will be the name used to distinguish the business from
others that can be operating in the same locality. The business will be located in Kisumu town along Nyalenda
opposite mega city mall 250 meters from the CBD.

P.O BOX 115- 40100, KISUMU

Email address is fredyjuno25@gmail.com.

The business will be under my supervision as the owner and will provide services of supplying, distributing,
maintain and installing of electrical accessories.

MARKETING PLAN

The enterprise will include residents of Kisumu Town and out of the town and those who are private residents
and institutions around the area.
The business will also be connected with organizations such as hospitals, schools and homes where electrical
items are required.
The business will use tactics such as promotional advertising.
ORGANIZATION PLAN

The business will be operating under priorities where I will be the business manager, finance controller as well
as monitor daily operations.
FINANCIAL PLAN

The business intends to start up with a capital base. This will be used for purchase of the necessary commodities
required for business growth. At the end of every Proforma Income Statement a balance sheet will be prepared
at the end of every month.
PRODUCTION/OPERATION STRATEGY
Idea generation which involves generation of ideas for new products or improvement to existing to existing
products.

Idea screening which involves evaluation of ideas based on factors such as market potential etc.

v
Concept development and testing which entails detailed product concepts based on the selected ideas including
features and pricing.

vi
TABLE OF CONTENTS
DECLARATION .............................................................................................................................................................................. ii
DEDICATION ................................................................................................................................................................................. iii
ACKNOWLEDGEMENT .............................................................................................................................................................. iv
EXECUTIVE SUMMARY .............................................................................................................................................................. v
CHAPTER ONE ............................................................................................................................................................................... 9
1.0BUSINESS DESCRIPTION ................................................................................................................................................... 9
1.1 BACKGROUND OF THE OWNER ......................................................................................................................................... 9
1.2 BUSINESS NAME ............................................................................................................................................................ 9
1.3 BUSINESS LOCATION AND ADDRESS ...................................................................................................................... 9
1.4 FORM OF OWNERSHIP ...................................................................................................................................................... 9
1.5 TYPE OF BUSINESS ........................................................................................................................................................... 10
1.6 PRODUCTS/SERVICES ..................................................................................................................................................... 10
1.7 JUSTIFICATION OF OPPORTUNITY ............................................................................................................................ 10
1.8 THE INDUSTRY ...................................................................................................................................................................... 10
1.9 GOALS OF THE BUSINESS .................................................................................................................................................. 11
1.10 ENTRY AND GROWTH STRATEGY ................................................................................................................................ 11
1.10.1 Entry strategy ...................................................................................................................................................................... 11
1.10.2 Growth strategy ................................................................................................................................................................... 11
CHAPTER TWO ............................................................................................................................................................................ 12
2.0 MARKETING PLAN ............................................................................................................................................................... 12
2.1 CUSTOMER ANALYSIS ........................................................................................................................................................ 12
2.2 MARKET SIZE AND SHARE ................................................................................................................................................ 12
2.3 COMPETITION ANALYSIS .................................................................................................................................................. 12
2.4 PROMOTION AND ADVERTISING STRATEGIES .......................................................................................................... 13
2.5 PRICING STRATEGY ............................................................................................................................................................ 13
2.7 SALES TACTICS ..................................................................................................................................................................... 14
2.8 DISTRIBUTION STRATEGY ................................................................................................................................................ 14
CHAPTER THREE........................................................................................................................................................................ 15
3.0 ORGANISATION AND MANAGEMENT PLAN................................................................................................................. 15
3.1 ORGANIZATION STRUCTURE ........................................................................................................................................... 15
3.5 RECRUITMENT AND TRAINING POLICY ....................................................................................................................... 17
3.5.1 RECRUITMENT ................................................................................................................................................................... 17

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3.5.2 TRAINING OF EMPLOYEES ............................................................................................................................................ 17
3.5.3PROMOTION ....................................................................................................................................................................... 17
3.6REMUNERATION AND INCENTIVES................................................................................................................................. 17
3.6.1 Remuneration policy ............................................................................................................................................................. 17
3.6.2 Incentives program ................................................................................................................................................................ 17
3.7 LEGAL REQUIREMENTS (LICENSES, PERMIT AND BY-LAWS) ............................................................................... 18
3.7.1 Trade and Health License ..................................................................................................................................................... 18
3.7.3 By-Laws .................................................................................................................................................................................. 18
3.8 SUPPORT SERVICES ............................................................................................................................................................. 18
3.8.1 Banking services .................................................................................................................................................................... 18
3.8.2 Insurance Services ................................................................................................................................................................. 18
CHAPTER FOUR .......................................................................................................................................................................... 19
4.0 PRODUCTION/OPERATION PLAN .................................................................................................................................... 19
4.1.1 Production Facilities and Equipment ................................................................................................................................... 19
4.1.2 Layout of The Business Premise ........................................................................................................................................... 19
4.2 PRODUCTION/OPERATION STRATEGY ......................................................................................................................... 19
4.3 PRODUCTION PROCESS ...................................................................................................................................................... 20
4.4 REGULATIONS AFFECTING OPERATION ........................................................................................................................ 1
CHAPTER FIVE .............................................................................................................................................................................. 2
5.0 FINANCIAL PLAN .................................................................................................................................................................... 2
5.1 PRE-OPERATIONAL COST.................................................................................................................................................... 2
5.2 WORKING CAPITAL ............................................................................................................................................................... 2
5.3 PROJECTED CASH FLOW STATEMENT ..................................................................................................................... 3
5.4 PROFORMA INCOME STATEMENT ................................................................................................................................... 2
5.5 PROFORMA BALANCE SHEET ............................................................................................................................................ 2
5.6 BREAK-EVEN POINT .............................................................................................................................................................. 3
5.1DESIGNED FINANCING....................................................................................................................................................... 4
APPENDIX I ..................................................................................................................................................................................... 5
CRITICAL RISKS ........................................................................................................................................................................... 5
APPENDIX 11 .................................................................................................................................................................................. 6
REFERENCE ................................................................................................................................................................................... 6

viii
CHAPTER ONE
1.0BUSINESS DESCRIPTION
1.1 BACKGROUND OF THE OWNER
The name of the owner of the business will be OKELLO FRED AGERO, aged 21 years old and still single. A student
pursing Diploma in Electrical and Electronics Engineering (Power Option) at the institution of The Kisumu National
Polytechnic, Diploma Two. Have decided to start this Electrical shop and services due to love and passion I have in
managing electrical equipment’s.

1.2 BUSINESS NAME

FREDY ELECRICAL AND ELECTRONICS SHOP will be the proposed name for the business. The name means
passion giving a good view, point of view or the way of thinking. The aim of the business is to satisfy the customers
and to offer affordable and cost of electrical and electronics equipment’s.

1.3 BUSINESS LOCATION AND ADDRESS

The business will be located in Kisumu town along Nyalenda opposite mega city mall 250 meters from the CBD.
2

P.O BOX 115- 40100, KISUMU

Email address is fredyjuno25@gmail.com.

FREDY ELECTRICAL SHOP

KAKAMEGA HIGHWAY
KACHOK
NYALENDA ESTATE

MEGA CITY MALL GREEN VIEW ACADEMY

1.4 FORM OF OWNERSHIP

It is asole proprietorship form of business ownership and main reason of choosing this kind of ownership is because its
easy to establish and also start up costselow

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1.5 TYPE OF BUSINESS
My type of business is an ongoing form of business.And the activities of this business will be customer services,
technical support, Electrical services, store maintenance, employee management and also products display

1.6 PRODUCTS/SERVICES
Products Description Prise Ksh
AC Boxes 8cm by 12cm 8,000
Bulb holders Basic -6holders 700
Capacitors 10F, 15F, 25F 3,000
Pliers Size 10 7,000
Testers Line and phase testers 12,000
Screw driver Number 3 750
Spanners Number 8, 12, 18 4,000
Hammers Size 36 3,700

1.7 JUSTIFICATION OF OPPORTUNITY

The reasons of choosing this kind of business is to increase the market gap of the goods, enhance on good
infrastructure, creates job opportunities for the unemployed youths, increases the supply demand, exploitation of the
available electrical resources and also to advance the means of technology

1.8 THE INDUSTRY

It is a form of electrical industry. And the growth trends in these industry keeps on growing with time intervals. And the
shop will be located in the business will be located in Kisumu town along Nyalenda opposite mega city mall 250 meters
from the CBD.

And the target customers will be the residence of Kisumu at large. And my competitive of my business will be other
electrical shop within my setup, Kenya Power shops which provides cheap price on goods, hardware stores and also
online retailers. And the challenges of this kind of industry are; competition from other sources of industry, supply
chain distribution, Environmental concerns, Cyber security, rising and fluctuation cost of raw material, technological
changes.

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1.9 GOALS OF THE BUSINESS
GOALS
The goals of my business are;
• To create job opportunities
• To provide quality of goods to the customers.
• To fulfill customers need by selling long lasting bulbs and sockets.
OBJECTIVES
The objectives of my business are;
• Increase sales
• Maximize profits
• To expand my business by advertising in radios, televisions, newspapers and also social media as well.

1.10 ENTRY AND GROWTH STRATEGY

1.10.1 Entry strategy

Competitive advantage of my business is that my products have high quality values compared to other forms of
electrical supplied shops. And the weakness of my competitors is that there is always price fluctuation in their product
as compared to constant price in my products. And the prices of my products always depend on the demand of the
customers that is the criteria I always use while projecting my pricing plan. And the methods I used to attract excellent
customers are; Re-contact old customers, offer discounts, offer excellent customer services and also to define my target
audience

1.10.2 Growth strategy

These are the plans I made to ensure smooth growth plan strategy in my business.
1. Market research and analysis as I conduct in depth market research to identify new opportunities, trends and
customer needs
2. Market and branding strategies as I develop a comprehensive marketing plan to increase brand visibility and
awareness
3. Monitoring and evaluation as I implemented a monitoring framework to track key performance indicators and
growth progress.

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 CHAPTER TWO
2.0 MARKETING PLAN
2.1 CUSTOMER ANALYSIS
My potential customers include; Retailers, wholesalers, individual shareholders and institution
NAME POPULATION NUMBER
Supermarket 4,000 10
Markets 7,000 5
Minishop 30,000 11
Schools 20,000 8
Hospitals 15,000 3
Church 50,000 10

What customers looks in my commodities are prices of the commodities, quality of the products, physical appearance,
colour of the commodities, shape and also type of the material. And most of my customer are electricians and
technicians dealing with electrical commodities. And the location of my customers mostly, they are within the locality
and also outside world.

2.2 MARKET SIZE AND SHARE

My estimated expected total sales in units per month is ksh 2670
Competitors Otieno Jeneza Freeky Fredy Total
electronics electronics electronics electronics
shop shop shop shop
Sales 580 620 640 830 2670
Market share 28% 22% 35% 15% 100%

2.3 COMPETITION ANALYSIS

The following are the things my competitors are doing;
I. Pricing and competitive positioning which includes pricing points, discount, promotions and pricing structures.
II. Market share and expansion.
III. Products and services, as they identify the range of products and services including their features, pricing and
quality.
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IV. Marketing and sales strategies, they evaluate their sales channels, distribution networks, promotion activities and
customers engagement strategies.
Factors that contributed to the success of my competitors in business include, market demand, high quality products or
services, customers satisfactions, competitive advantage monitoring and managing cash flow, talent and team
development.
Strength of my competitors are;
❖ Customer loyalty
❖ Financial resources
❖ Brand recognition
❖ Market share
❖ Product innovation
Weakness of my competitors are;
❖ Poor customers service
❖ Limited products range
❖ Luck of market differentiation

2.4 PROMOTION AND ADVERTISING STRATEGIES

The following are the methods I used in promotion and advertising my products
1) Digital marketing which involves the use of social media marketing.
2) Traditional marketing which involves print advertising, radio and television advertising, outdoor advertising.
3) Event marketing that involves trade shows and exhibitions, hosted events, sponsoring events.

2.5 PRICING STRATEGY

Methods I used for calculating the selling price of my products and services are demand.
Factors influencing my pricing setting includes;
❖ Cost of raw materials
❖ Income of targeted clients
❖ Prevailing market prices
❖ Nature of competition
The types of credit I will be offering my customers are;
❖ Trade credits
❖ Installment credits

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 ❖ Store credits
❖ Credit cards
The credit I will be offering monthly and the customers are expected to pay back the credit at the end months.

2.7 SALES TACTICS

The business will sell its products daily to its customers. The consumers are free to visit the premise any time any day,
weekends and weekdays. The business has chosen the strategy because when goods are sold through intermediaries, the
price tends to increase. Besides intermediaries might also mishandle the consumers.

The business will therefore recruit and train salespeople with good public relation background in order to create an
enabling environment and good customer relationship. Receptionist with good communication skills will also be hired
to promote company.

2.8 DISTRIBUTION STRATEGY

The business will get its products to reach its customers by wholesalers. And also, the business will use road transport
as its means of transportation of goods and services.

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CHAPTER THREE
3.0 ORGANISATION AND MANAGEMENT PLAN
As sole proprietorship business FREDY ELECTRICAL & ELECTRONICSSHOP is managed by one person I
myself and also as the manager who will be running all the activities in the business. For a business to run
smoothly as a good manager and the owner too will be taking part in giving out all the required item like; giving
my employees protective gears and providing all necessary requirements.

3.1 ORGANIZATION STRUCTURE

Member of my management team includes the following;
❖ Managing director
❖ Marketing manager
❖ Finance manager
❖ Production manager
a. Managing director
- He/she establishes company goals and objectives both short term and long term.
- Develops business plans and strategies
- Advice board of directors on strategic issues.
- He/she must have a master’s degree depending on the nature of business that is sales and marketing.
- Must have a work experience of 10 years at a managerial level.
b. Marketing manager
- He/she creates marketing strategy and budgets.
- He/she undertake market research
- He/she must have higher diploma or master’s degree in business marketing.
- Must have a work experience of 8 years at the marketing level.
c. Finance manager
- Planning the financial budget of an entity.
- He/she must have master’s degree in finance
- Also, must have a work experience of 15 years at the financial level.
d. Production manager
- He/she responsible for determination of quality control standards.
- He/she must have master degree in production services.

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 - Must have 10 years’ experience at production level.
Other personnel
Title No. Qualifications Duties
Security 2 K.C.S.E at least In charge of
experience security
Accountant 3 Bachelor of commerce in Budgeting,
finance payment of
salaries and
financial reports
Sales 5 K.C.S.E mean grade of B Distribution of
representatives or Diploma in sales and products and
marketing sales promotion
Secretary 2 At least diploma in In charge of
secretarial studies maintaining
diaries and
arranging
appointments

3.2 ORGANIZATION PLAN

GENERAL
MANAGER

SALES &
FINANCE
MARKETING
MANAGER
MANAGER

ACCOUNTS PRODUCTION
SECRETARY PRODUCTION
CLERK OFFICER

SALES
REPRESENTATIV SECURITY
E

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3.5 RECRUITMENT AND TRAINING POLICY

3.5.1 RECRUITMENT
The organization will announce the vacancies available through various sources and allow for various applications.

3.5.2 TRAINING OF EMPLOYEES

After hiring of new personnel, the company will offer relevant training to employees to ensure their productivity
and competence.

3.5.3PROMOTION
Promotion of various employees will depend on one’s performance, qualifications and need to do so.

3.6 REMUNERATION AND INCENTIVES

My firm policy on remuneration is just to offer good salaries to employees so as to motivate them.
3.6.1 Remuneration policy
Title No. Monthly pay Allowance Total

Managing director 1 80,000 32,000 112,000

Marketing director 1 65,000 18,000 83,000

Finance director 1 78,000 30,000 108,000

Production director 1 59,000 43,000 102,000

Security officer 2 25,000 each 10,000 each 35,000 each

Accountancy 3 55,000 each 18,000 each 73,000 each

Sales representatives 5 40,000 each 22,000 each 62,000 each

Secretary 2 29,000 each 15,000 each 44,000 each

3.6.2 Incentives program

The incentives for my employees are; salary, raises, monetary bonuses, additional vacation days, professional
development opportunities and also profits sharing plans.
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3.7 LEGAL REQUIREMENTS (LICENSES, PERMIT AND BY-LAWS)

3.7.1 Trade and Health License

As required by the regulation, license is required to start a business. After acquiring so, I will ensure I act upon its
renewal from time to time to avoid its expiry. The business will apply for so from the local authorities at a cost of
7,500/=

3.7.2 Permit

Operations permit will be provided by the County Government of Kisumu to allow for easy operation.

3.7.3 By-Laws
Reasons why business must comply with the by-laws of county council includes; it is impossible to include detailed
legislation together with the main legislation and hard for legislators to anticipate future changes in the business
environment so for my business to succeed with no disturbances from the government, I must just comply to the by-
laws of the county council.

3.8 SUPPORT SERVICES

3.8.1 Banking services

Banking services will be provided by Kenya Commercial Bank Kisumu Branch.

3.8.2 Insurance Services

There are major risks involved in any organization e. g fire, theft and this may lead to the collapse of the business
and for this reason insurance is important in that it will help the business organization return to its state before the
occurrence of risk.

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CHAPTER FOUR
4.0 PRODUCTION/OPERATION PLAN

4.1.1 Production Facilities and Equipment

Facilities required includes; office, store, pick-up,, electricity and items like computers, barcode reader etc.
Items Quantity Cost Capacity

Office 3 rooms 120,000 6 people

Store 4rooms 160,000 2 tons of tools

Pick-up 2 1,000,000 30 tons

Electricity Single phase 50,000 1500kw

Computers 3 150,000 6 people

4.1.2 Layout of The Business Premise

MANAGER’S OFFICE SECRETARY’S

OFFICE

SALES FINANCE

STORE SECURITY

4.2 PRODUCTION/OPERATION STRATEGY

Process of goods developments includes;

❖ Idea generation which involves generation of ideas for new products or improvement to existing to existing
products.
❖ Idea screening which involves evaluation of ideas based on factors such as market potential etc.

19
 ❖ Concept development and testing which entails detailed product concepts based on the selected ideas including
features and pricing
❖ Business analysis which involves conducting a comprehensive business analysis to assess the market
opportunity
❖ Testing and validation which entails conducting product testing to ensure that the prototype meets quality
standards

Cost I will incur while developing my new products

Products Price Quantity Total

Cables, 1.5 200 1,000 200,000

2.5
270 2,000 540,000

Sockets; single 280 500 140,000

Double
310 800 248,000

Bulbs
36A fluorescent bulb
500 200 100,000
Normal bulb
250 300 75,000

TOTAL 1,303,000

And the methods I used while developing my new products are; common methods is through market research, and
where I source my products is from main supplies.

4.3 PRODUCTION PROCESS

The organization will have a properly laid down channel to carry out its production and
services process in terms of cash flow, labour supply, availability of tools and machinery
and supply of
materials, transportation of employees.

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4.4 REGULATIONS AFFECTING OPERATION
Health regulation

Health regulations while handling company goods so as to ensure of both employees and
consumers are;

1. Wash hands regularly with soap and water before and after handling goods.
2. Wear appropriate personnel protective equipment such as gloves and mask when
handling goods.
3. Maintain cleanliness and sanitization of workstation and equipment’s.
4. Dispose of any damage or contaminated goods properly
5. Following proper food safety guidelines is handling food products.

Safety

Measures used to guard against physical injuries in my company includes;

• Wearing of face masks

• Wearing of safety boots.
• Encouraging employees to report any safety concerns or hazards they may encounter.
• Maintaining a clean and organized work environment to prevent slips, trips and falls.

1
CHAPTER FIVE
5.0 FINANCIAL PLAN
5.1 PRE-OPERATIONAL COST
Financial planning is key in an organization in that it ensures or determines if the company is
making profit or loss and for transparency and accountability.

Item Cost
Machinery and equipment 70,000
Cash at hand 205,000
Furniture and fittings 10,000
Licenses and permission 12,000
Rent 5,000
Advertisement and promotion 5,000
Insurance deposit 2,500
Power installation 5,000
Transport 2,000
Telephone and meeting People. 3,000
TOTAL 319,500

5.2 WORKING CAPITAL

Using book keeping equations where; asset is equal to
Working capital=Assets-Liability e.g.
The table below show, working capital.
Current Liabilities
ITEM AMOUNT
Creditors 100,000/=
Cash in hand 300,000
Cash at Bank 100,000 Taxation 2000/=

Stock 200,000 Total=102,000/=

Debtors 20,000
Total 620,000

Working Capital=622,000-102,000
=520,000/=

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 5.3 PROJECTED CASH FLOW STATEMENT

ITEMS JAN FEB MAR APR MA JUN JUL AUG SEPT OCT NOV DEC TOTAL
Y
Opening 162, 157,8 149,5 170, 181, 212, 245,6 300, 375, 436,6 511,4 291,440
Cash 400 00 00 400 500 600 00 000 700 00 00
Bank 200, 200,000
Loan 000
Sale 80,0 72,5 80,50 100,5 120, 119, 150, 160,0 165, 160, 168,0 105,0 1,482,00
00 00 0 00 400 600 000 00 500 000 00 00 0
Own 200, 200,000
Equity 000
Debtors 25,00 25,000
0
Total 480, 234, 238,3 250,0 290, 311, 362, 405,6 466, 535, 604,6 641,4 4,821,40
Cash 000 900 00 00 800 100 600 00 400 700 00 00 0
Flow
Cash
Flow
Purchase 150, 18,5 30,00 20,00 40,0 20,0 52,0 45,00 30,0 40,0 35,00 20,00 500,500
s 000 00 0 0 00 00 00 0 00 00 0 0
Creditors 100, 2,00 20,0 120,000
000 0 00
Rent 2,00 2,00 2,000 2,000 2,00 2,00 2,00 2,000 2,00 2,00 2,000 2,000 24,000
0 0 0 0 0 0 0

3
Wages/ 49, 491, 491, 491, 491, 491, 491, 491, 491, 491, 491, 491, 589,
Salaries 100 000 000 000 000 000 000 000 000 000 000 000 200
Teleph 2,0 1,20 1,50 2,00 1,50 500 800 1,00 2,00 1,00 500 2,00 16,3
one 00 0 0 0 0 0 0 0 0 00
Electric 8,0 2,50 2,00 2,00 2,10 1,90 1,00 2,00 2,00 1,50 1,40 2,00 22,7
ity 00 0 0 0 0 0 0 0 0 0 0 0 00
Adverti 5,0 5,00 10,0
sement 00 0 00
Insuran 2,0 2,00 2,00 2,00 2,00 2,00 2,00 2,00 2,00 2,00 2,00 2,00 24,0
ce 00 0 0 0 0 0 0 0 0 0 0 0 00
Transp 3,0 2,00 2,00 24,0 25,0 1,80 2,00 1,60 1,50 1,80 1,20 3,50 24,1
ortation 00 0 0 00 00 0 0 0 0 0 0 0 00
Loan 2,00 2,00 2,00 2,00 2,00 2,00 74,0
paymen 0 0 0 0 0 0 00
t
License 2,0 2,00
s 00 0
Total 317 771, 88,8 79,6 99,3 98,5 117, 104, 90,7 99,1 93,2 83,3 1,34
cash ,60 000 00 00 00 00 000 700 00 00 00 00 8,90
out 0 0
flow
Net 162 157, 149, 170, 191, 212, 245, 3,00, 375, 436, 511, 558, 3,47
cash ,40 800 500 400 500 600 600 900 700 600 400 100 2,50
0 0

1
5.4 PROFORMA INCOME STATEMENT
This shows profit or loss made by or business for a particular year.

ITEM AMOUNT (KSHS)

Services 1,500,000
Less purchases 50,500
Total goods profit 981,500
Less expense
Rent 24,000
Salaries & wages 589,200
Telephone 16,000
Electricity 22,700
Advertisement & promotion 10,000
Stationery 2,100
Insurance 2,000

Transportation 24,100
Loan payment 14,000
License 200
Total cost of expenses 728,400
Net profit before 253,100
Less tax 8% 20,248
Net profit after tax 232,852

5.5 PROFORMA BALANCE SHEET

Profoma balance sheet for FREDY ELECTRICALS AND ELECTRONCS SHOP

Machinery 7,000
Building 24,000
Furniture &fitting 6,000
Motor vehicle 350,000
Total fixed assets 365,400
CURRENT ASSETS
Cash at hand 10,000
Cash at bank 50,000

2
Debtors 25,000
Stock 200,000
Total current Assets 373,500
Total assets 738,900
CURRENT LIABILITIES
Creditors 100,000
Taxation 30,000
Total current liability 103,000
LONG TERM LIABILITIES.
Owner’s equity 200,000
Loan 200,000
Net profit 232,852
Total 738,900

5.6 BREAK-EVEN POINT

5.6.1 Variable Cost.
ITEM AMOUNT IN CASH
Electricity 22,700
Telephone 16,300
Transport 24,100
Advertisement 10,000
Stationary 2,100
Total 75,200
a) Contribution margin = sale – total variable cost
1,482,000-75,200 = 1,406,800
b) Percentage contribution margin = contribution ×100
Sales
1,406,800×100
1,482,000
=94.93%

3
5.6.2 Fixed Cost for One Year.
ITEM AMOUNT (KSH)
Rent 24,000
License 2,000
Loan payment 14,000
Insurance 24,000
Salaries 49,100
Total 113,100.

Breakeven level for sale.

Fixed cost× 100
Total contribution margin percentage
113,100×100
94.93
= 119,140.42.

5.1 DESIGNED FINANCING.

For an effective business, there should be enough finance that is needed to facilitate the
operation.
The designed financing for the proposed business will be as follows.
ITEM AMOUNT IN KSH
Preparation cost 345,000
Fixed assets 257,852
Total 602,852

6.7: PROPOSED CAPITALIZATION.

Personal savings 300,000
Loan from equity bank 100,000
Donation from family 46,354
Amount obtained from credit 100,000
Total 546,354

4
APPENDIX I
CRITICAL RISKS
The risks expected to be encountered during the operation of the business include the
following:
Over taxation in the in the region may affect the operational budget of the enterprise
Presence of attackers in the region such as Al-shabaabs may threaten and scare the customers
and daily operation of the enterprise
In case of any fire-outbreak, most of the facilities used to run the enterprise may be damage
hence affecting the enterprise negatively.
Presence of corruption by some of the members may affect the business negatively
Theft of the existing stock may also affect the operational activities of the business
The mitigation to be used during the operation of the business includes the following:
Insurance cover

Prudence management and adherence to corporate

Maintain enough working capital

Develop risk management plan.

5
APPENDIX 11
REFERENCE
Graham, F & Stetan Z (2014). Guide to Business Planning. Profile Publishers.
Economist Edition
Hirsch, R. D (2015). Entrepreneurship 6th Edition McGraw Hill Publishers New Delhi.
Kuratko, D & Hodgetts, R (2015). Entrepreneurship in the New Millennium. India
Edition. 5th Edition
Kuratko, Donald H and Richard M. Hodgetts, R (2014).Entrepreneurship: A
Contemporary Approach. South West Division of Thomson Learning.

Manu George and Thiongo John (2014). Entrepreneurship Education in Vocation and
Technical Training. UNDP/ILO Geneva, Turin and Nairobi Kenya.
Salemi, N.A (2015). Fundamentals of entrepreneurship.
www.bplans.org