TITLE: BUSINESS PLAN

BUSINESS NAME: SMART TECHNOLOGICAL SOLUTIONS

BUSINESS ADDRESS: P.O BOX 81, MERU

TEL: 0790042241

EMAIL: mutumalivio@gmail.com

BUSINESS LOGO:

PRESENTED BY: MUTUMA LIVIO MUGENDI

INDEX NO: 3042010079

SUPERVISOR: ISIAH KAMWARA

COURSE: CERTIFICATE IN INFORMATION COMMUNICATION

TECHNOLOGY

INSTITUTION: MERU NATIONAL POLYTECHNIC

PRESENTED TO: KENYA NATIONAL EXAMINATION COUNCIL IN

PARTIAL FULFILLMRENT OF THE REQUIREMENT

FOR THE AWARD OF CRAFT CERTIFICATE IN

INFORMATION COMMUNICATION TECHNOLOGY.

SERIES: JULY 2023

DECLARATION
I declare that this is my original work which has never been presented by anybody to any
examination body for award of any certificate in certificate in information communication
technology.
Student: MUTUMA LIVIO MUGENDI
Index: 3042010079
Signature
Date:

i
DEDICATION
I dedicate this business plan to my family members

ii
ACKNOWLEDGEMENT
I highly acknowledge the good work of my lecturer Mr. kamwara who worked passionately and
tirelessly to ensure that I did my work effectively and successfully.

iii
Table of Contents
DECLARATION..............................................................................................................................i

DEDICATION................................................................................................................................ii

ACKNOWLEDGEMENT..............................................................................................................iii

EXECUTIVE SUMMARY.............................................................................................................1

CHAPTER 1....................................................................................................................................2

1.0 BUSINESS DECSRIPTION.....................................................................................................2

1.1 BACKGROUND PF THE OWNER.....................................................................................2

1.2 BUSINESS NAME................................................................................................................2

1.3 BUSINESS LOCATION AND ADDRESS..........................................................................2

1.4 FORMS OF OWNERSHIP...................................................................................................3

1.5 TYPE OF BUSINESS...........................................................................................................3

1.6 PRODUCT AND SERVICES...............................................................................................4

1.7 JUSTIFICATION OF OPPORTUNITY...............................................................................4

1.8 INDUSTRY...........................................................................................................................4

1.9 GOALS OF BUSINESS / OBJECTIVES.............................................................................4

1.9.1 GOALS...........................................................................................................................4

1.9.2 OBJECTIVES.................................................................................................................5

1.10 ENTRY AND GROWTH STRATEGY..............................................................................5

1.10.1 ENTRY PLAN..............................................................................................................5

iv
 1.10.2 GROWTH PLAN.........................................................................................................5

CHAPTER 2....................................................................................................................................6

2.0 INTRODUCTION.................................................................................................................6

2.1 CUSTOMERS.......................................................................................................................6

2.2 MARKET SHARE/SIZE.......................................................................................................6

2.4 METHODS OF PROMOTION AND ADVERTISEMENT.................................................8

2.5 PRICING STRATEGY.........................................................................................................8

2.6 SALE TACTICS................................................................................................................9

2.7 DISTRIBUTION CHANNEL...........................................................................................9

3.0 INTRODUCTION.............................................................................................................9

3.1 MANAGEMENT TEAM..................................................................................................9

3.2 OTHER PERSONEL.........................................................................................................9

3.3 RECRUITMENT, TRAINING AND PROMOTIONS.......................................................10

3.3.0 Recruitment...................................................................................................................10

3.3.1 Training.........................................................................................................................10

3.3.2 Promotions....................................................................................................................11

3.4 Remunerations and incentives.............................................................................................11

3.5 Legal Requirements.............................................................................................................11

3.6 External Support Services....................................................................................................11

3.7 General Organization...........................................................................................................12

v
CHAPTER 4..................................................................................................................................13

4.0 INTRODUCTION...............................................................................................................13

4.1 Production Facilities and Capacities....................................................................................13

4.2 Firm Layout.........................................................................................................................13

4.3 Production Process...............................................................................................................14

4.3.1 Quality Control.............................................................................................................14

4.3.2 Labour control..............................................................................................................14

4.3.3 Time control / working schedules.................................................................................14

4.4 Regulations affecting operation...........................................................................................15

4.4.1 Health regulations.........................................................................................................15

4.4.2 Safety............................................................................................................................15

4.4.3 Environmental Regulations..........................................................................................15

CHAPTER 5..................................................................................................................................16

FINANCIAL PLAN......................................................................................................................16

5.0 INTRODUCTION...............................................................................................................16

5.1 BOOKS OF ACCOUNTS...................................................................................................16

5.2 PRE-OPERATIONALCOST..............................................................................................16

5.3 ESTIMATION OF WORKING CAPITAL.........................................................................16

5.4 ESTIMATION OF FIXED ASSETS...................................................................................17

5.5 CASH FLOW PROJECTION.............................................................................................17

vi
5.6 PROFORMA INCOME STATEMENT..............................................................................19

5.7 PRO-FORMA –BALANCE SHEET...................................................................................21

5.8 BREAK EVEN -ANALYSIS..............................................................................................23

5.8.1 Profitability Ratios........................................................................................................25

5.8.2 DESIRED FINANCING..............................................................................................26

5.8.3 PRODUCTION LOANS..............................................................................................26

5.9 REFERENCES....................................................................................................................26

vii
EXECUTIVE SUMMARY
Smart technological solutions are a business located at Meru county Makutano town along Maua
Nanyuki highway. The business is expected to commence its operations by December 2023. The
ownership shall be sole proprietorship with the owner the cooperative bank as a source of
financial capital and other requirements. As an entry strategy the business is expected to begin
with few equipment and upgrade to higher equipment in the long run.
The business is expected to enjoy large market share in the area since it will be one of its kind.
The business shall have both individual and group customers. Individual customers shall be
parents in the area and the students. The fee shall be very affordable for clients at all level.
The organization structure of the business shall be consisted of the director, who shall be the
owner of the business, the general manager, computer analyst and the staff. Each personnel of
the business shall be allocated different roles depending on the clients demand. Recruitment
process shall be done in a formal manner with highest level of integrity. Remuneration shall be
based on merit and duties performed by individual staff. The owner shall acquire all the required
legal documents for operations.
The owner shall acquire the necessary production facilities for the business before the
commencement of operations. The management shall ensure that all the staff members are paid
their dues on consistency basis so as to boost their morale. The operations process shall be
structured in a way that ensure effective flow of activities in the business The business shall
analyze all the factors that are likely to affect it.
The business shall acquire enough financial resources so as to kick start operations. The owner
shall determine the working capital, cash flow projections, profits and loss accounts and the
balance sheets projection of the business. The owner shall also establish the financial ratios that
can be used to measure the performance.

1
CHAPTER 1

1.0 BUSINESS DECSRIPTION

1.1 BACKGROUND PF THE OWNER

The owner of the business will be Mutuma Livio Mugendi who has a degree in information
communication technology. He is currently 27 years old not married. He currently lives in Maua
which is in Meru County. He was working at ICT CONSULTING SERVICES LTD. He has 3
years of experience working as an ICT manager in the huduma Centre department.

1.2 BUSINESS NAME

The intended name of the business will be SMART TECHNOLOGICAL SOLUTIONS. The
business name is derived from family business name the name SMART was used by his
grandfather has his business name which meant smart and good services to the customers. The
name also means the business will offer and give best services to the customers. It is also a
popular name for the business.
The business logo will be:

1.3 BUSINESS LOCATION AND ADDRESS

The business will be located in Meru county Makutano town, along Maua Nanyuki highway.
Next to meru national polytechnic few meters Meru institute of business studies (MIBS)

Police Smart technological

Meru national
station solutions
polytechnic
tebusinest

Gitoro day
MIBS Cyber
Makutano Secondary
College
Market

2
Business address
Smart Technological solutions
P.O Box 81
Meru
Tel; 0790042241
EMAIL:mutumalivio@gmail.com

1.4 FORMS OF OWNERSHIP

The business will be a sole proprietor where it will be managed by the owner. The employees
will work under the owner of the business.
The owner decide that form of ownership because, he will be enjoying the profit by himself. He
will have total control of the business hence there will be good relationship among customers
and the employees. He will have authority to make decisions concerning the business. He will be
responsible for all accounts management.
Advantages
 The profit is enjoyed by the owner
 He has total control over the business and the employees
 It is easy to start and run
 He will have maximum privacy
Disadvantages
 Raising of the capital may be challenging
Solutions of the advantages
 He will borrow loans from banks to raise the capital of the business
 He will get loans from friends and family

1.5 TYPE OF BUSINESS

Smart Technological Solutions Will Provide High Advanced Computers, Laptops And Phones.
The Business Will Be A Startup Business With Good Technologic Materials. The Business Will
Be a Retail Type of the Business Which Also Will Be Selling Cctv’s. The Business Will Also
Offer Services like Repairing of phones laptops and computers.

3
1.6 PRODUCT AND SERVICES
The intended business will provide good products and proper services to the customers
The products will be selling of laptops, computers, phones, CCTV’S and there will also be
services of repairing laptops, phones, and the CCTV’S. The business will be different types of
computers like mainframe computers, workstation computers and minicomputers. There will be
also Hp laptops, Samsung laptops, apple laptops and wireless CCTV’S and IPhone, Samsung
phones, techno phones. There will be offers for customers who will get more products and
services. The customers will enjoy the benefits

1.7 JUSTIFICATION OF OPPORTUNITY

The business will do well due to computer school and cyber around because there will be a high
need of laptops and computers. There will be also high needs of phones and laptops by the
student around for learning. The services will go well because the people using the products in
the area are many. The products will be of high advanced technology which makes the business
favorable in the area. The security ensured hence safety of the business and the customers;
infrastructure also will attract more customers due to availability of good means of transport.

1.8 INDUSTRY
The business falls under the computer retailing and phones retailing. The computer and phones
retail industries produce high quality products which puts them above other industries in the
country. The industry has future of improving the technologies of productions and good
products. The industry is growing because it improves its products by advancing them after
every year. The industry also advertises and markets the products.
Characteristics of the industry
 it is the engine of the economic growth
 flexibility for customers
 affordable advertising and marketing

1.9 GOALS OF BUSINESS / OBJECTIVES

1.9.1 GOALS
 To open more branches around the country and other countries
 To become a bog leader of different business and make more profits

4
1.9.2 OBJECTIVES
 To expand the business
 To grow the profit being earned
 To increase the services being offered
 To attract a large number of customers

1.10 ENTRY AND GROWTH STRATEGY

The business intents to start in January 2025 the business will be located where there are two
other two computers, phones business but sells low and UN advanced products. The business
will be selling good products which will attract customers faster. The business will be selling at
good price to attract customers. There will be distribution of products for people who purchases
things above ksh.30, 000. There will be offered free services of repairing computers, laptops and
phones. There will be a promotion for anyone who purchases a product on the first three months.

1.10.1 ENTRY PLAN

The business will be selling products and providing services at a lower cost than the other
business around
The business will sell products of high quality compared to others around. There will be offers to
the customers to attract more customers than the other business around.

1.10.2 GROWTH PLAN

The owner will pay partnership with banks loan offerings groups to raise and run the business
well. The owner also plans to open another business branch.

5
CHAPTER 2

2.0 INTRODUCTION
Smart Technological solutions will ensure the customers are provided with good and high
products. The business will also monitor the weaknesses and strength of the competitors in order
to capitalize them. The business will sell the products and services are advertised well to attract
customers.
The business will price its products and services at affordable prices. There will be good sale
tactics to attract customers by treating them well and create good relationship with the
customers. The business will have good distribution strategy by selling to them directly.

2.1 CUSTOMERS
The business aims at selling products and services to individuals and institutions around
Makutano town in Meru County and the nearing Meru main town. The majority of the customers
will be people and the institutions around the area of the business. For instance Meru National
Polytechnic, Meru institute of business studies and other institutions needing products and
services in the area. The customers will be looking for advanced products and good services
which the business will be providing for example selling of wireless CCTV’S and advanced
laptops. The products and services will help the customers a lot because the products being sold
in the business are non-compared with the others being sold around.
The business will be selling products to the individuals, institutions and retailers around. The
position of the business will be very convenient for customers in Makutano town.

2.2 MARKET SHARE/SIZE

Before penetrating in the market
Kwavonza Kilimani Jirani smart Total
Sales 80000 110000 60000 250000
Market share 32% 44% 24% 100%

6
After penetration
Kwavonza Kilimani Jirani smart Smart Total
technologica
l
Sales 80000 110000 60000 70000 250000
Market share 25% 34.37% 24% 21.88% 100%

2.3 COMPETITION
Name of the Assets Sales Market share Profit
business
Kwavonza 290000 350000 29.66% 800000
Kilimani 410000 530000 44.92% 110000
Jirani smart 220000 300000 25.42% 60000

Sales

kwavonza
kilimani
jirani smart
smart technological

Number of employees strength weakness How to capitalize on

the weakness
7 The business has The business has no Have a working
skilled employees working schedule schedule in order to
run the business well.
15 The business have The business lack Provide with enough

7
 employees with enough products to products and offer
skilled personnel sell to the customers good services
10 Have enough supply Employees have no Have skilled
of products and offer skilled personnel employees.
good services.

2.4 METHODS OF PROMOTION AND ADVERTISEMENT

ADVERTISEMENT METHODS
News papers
The business will publish an article showing the location, address, operation days, hours, and
services provided the advertisement will be done every Tuesday on the newspapers; it will be
advertised on the meru daily news. The newspaper advertisement will be costing ksh 1500 on
every Tuesday.
Sign boards
The business will place a sign board along Meru Nanyuki highway for the customers to view.it
will be costing ksh 1200 for the boards that will be placed.
Online adverts
The business will create online adds and place them on various websites and media platforms as
browsers are potential customers. The adverts will be costing 5000 every month.
Road shows
The business will organize roadshows which will be done at every end month. The road
advertisement will be costing 15000 because it will be done on different roads.

PROMOTION METHODS.
After service offer
As a beginning business we will offer free services like repairing of computers and laptops to our
first customers. This will attract more customers.

2.5 PRICING STRATEGY

The price of the services and the products will be set in a way majority of the customers will be
attracted .products will be at a reasonable prices offering discounts to encourage prompt payment
when fixing prices.
The following factors will be considered;

8
  Income of the clients targeted.
 Prevailing market prices
 Cost of the products
 Nature of the competition
The business will set the actual selling price of the products by adding 18% to the
products. Credit will be offered to loyal customers with an interest of 10% per month.
There will be a cash discount when one pays promptly. The business free installation of
CCTV’S and warrant after every purchase.

2.6 SALE TACTICS

The business will be offering direct services i.e. face to face with the customers. This will create
good relationship with the customers. Also the customers will be able to state their wishes.

2.7 DISTRIBUTION CHANNEL

Services will be offered to customers directly. Also some products will be delivered directly to
the customers .delivery will be done through use of roads.

3.0 INTRODUCTION
Smart technological solutions will be managed by the owner. The business will ensure good
management and good training of the employees with the needed requirements. There will be
also legal requirements needed in the business.
3.1 MANAGEMENT TEAM
Smart Technological Solutions will be managed by the owner of the business who will be Livio
Mugendi. The business manager has a degree in information and communication technology.
The professional qualifications of the manager are;
 Good communication skills
 Professional experience
 confidence
 Good time management skills

3.2 OTHER PERSONEL

Personnel Number Qualification Duties and responsibility Salaries and benefit
Accountant 1  Should be  Maintaining Ksh.30,000.00
obedient statistical records of
 Should have a

9
 certificate in the products
accounting  Assisting in
 Should have at preparation of
least two years budget records
of experience

Supervisor 1 Should have To communicate Ksh.25,000.00

leadership skills organizational needs
should be patience
Manager 1 Have 2 years’ Making decisions KSH 35,000.00
experience Making payment of good
Good communication after arrival
skills
Sales person 1 Should have good Help customers find items Ksh
communication skills in the store 20,000.00
Technician 1 Should have a diploma Monitoring problems Ksh 25,000.00
Repairing equipment

3.3 RECRUITMENT, TRAINING AND PROMOTIONS

3.3.0 Recruitment
Recruitment of employees will be on academic qualifications and experience. The business will
advertisement the post and the candidate apply to the management then the applicant will be
shortlisted and the candidate will be called for an interview. Candidates who qualify will be
placed to respective job.

3.3.1 Training
The employees will be trained on the job training on the job training the employees will be
trained while still working. They will be shown how to create interpersonal relationship and
public relation

3.3.2 Promotions
Promotion will be on individual experience and the ability to work and coordination with other
workers also at minimum supervision loyalty and credibility will form a great consideration
when promoting the workers
10
3.4 Remunerations and incentives
The employees will work for nine hours per day this is from 7:00am-6:00pm , they will be paid
monthly and also an extra hour will be considered the employees will be offered annual leave
day off sick leave as a way of motivating them the employees will be expected to work under
minimum or no supervision at all.

3.5 Legal Requirements

No Requirements Registration Where Fee payable Remarks
obtained
1 Insurance 3491 Meru Sh.10,000 Year
renewable
2 License 3492 Meru Sh.9,000 Year
renewable
3 Labour laws 2690 Meru Sh.6,000 Monthly
renewable
4 Government 4080 Meru Sh.2,000 Year
renewable
5 Building 1865 Meru Sh.8,000 Year
regulations renewable

3.6 External Support Services

Banking services
The business will require support services from equity bank. The business will open an account
with the bank to deposit. Borrow bank overdraft and loans to support the business
Telephone services
The business will have Airtel , Telkom and safaricom lines to be used in the business
Postal services
P.O Box 61600
Meru

11
3.7 General Organization
There will be staff updates in the morning before work starts and in the evening work on any
issue arising

Manager

Accountant Supervisor

Sales person
Technician

12
CHAPTER 4

4.0 INTRODUCTION
Smart technological solutions is intending to deal with high quality products and on affordable
prices , the business will deal with computers, laptops .cctv’s , phones and services of repairing
the products

4.1 Production Facilities and Capacities

ITEM QUALITY COST TOTAL COST CAPACITY
Fire extinguisher 9 @1000 9000 4.5kg
Computer 7 @35000 245,000 Core 17 8 gb ram
1 tb hdd
Tables 8 @700 5600
Chairs 8 @600 4800
CCTVs 4 @3000 12000 2 mq ip camera
Benches 1 @1000 1000
electricity 4 phase @1200 4800 1000kw
Shelves 4 @200 600
Office 2 room @15000 30000

4.2 Firm Layout

Managers office
Entrance Shelves Tables
with a computer

Shelves

Exit Shelves Tables

Accountants

13
4.3 Production Process

4.3.1 Quality Control

The business will ensure that it purchases products from the company which produces high
quality products that are safe for use. The business will ensure it purchases genuine products
from the best suppliers.
The business will ensure advanced products with the best affordable prices; the business will
also ensure that the products purchases are durable and make sure they are good in the market.

4.3.2 Labour control

Activities Skills Education Staff assignment Remarks
Supervising Ability to Diploma in ict
supervise and Manager
ensure things
work well
Sales Have 3 years Diploma in sales Accountant
experiences and marketing
Security Two years’ KCSE Certificate Supervisor
experience
Drivers 5 years of Have a driving Supervisor
experience license

4.3.3 Time control / working schedules

The business will be opening from Monday from Monday to Saturday. The official time of
opening will be 8: 00 am to 6:00pm in the evening. There will be a break from 10:30am to
11:00am where the employees will be taking shift. The business schedule will also allow 45
minutes from 1:00pm to 1:45 pm for lunch break, the business will give a break on public
holidays

14
4.4 Regulations affecting operation

4.4.1 Health regulations

There will be ensured cleanliness within and around the business . the business will organize
regular checkups to ensure the employees are of good health . the business will organize
guidance and counseling section to ensure the health of the employees.

4.4.2 Safety
The employees will be provided with dust coat. The business will pay an insurance to ensure the
employees are safe. There will be CCTVs cameras to monitor around and ensure safety in the
business. There will be padlocks with alarms to ensure everything is safe.

4.4.3 Environmental Regulations

The business will ensure there is good dispose of waste products
There will be dustbins provided in the business to ensure the environment is clean

15
CHAPTER 5

FINANCIAL PLAN

5.0 INTRODUCTION
The owner will be cautious as far as finances are concerned to ensure smooth and well

running of the business. the owner will ensure and keep good record of the business.

5.1 BOOKS OF ACCOUNTS

Smart technological solutions will maintain books of account like cashbook for recording
cheques and cash received and cash paid.
General ledger for all bills or expenses purchased ledger for recording sales and Journals for
recording transaction in the business.

5.2 PRE-OPERATIONALCOST
ITEM AMOUNT
Rent 15000
Electricity 10000
Building and renovations 8000
Advertisement 4000
License 9000
Account opening fee 2000
Insurance 10000
Water 2000
Total 60000

5.3 ESTIMATION OF WORKING CAPITAL

ITEM AMOUNT KSH

Opening stock 98000
Cash at hand 50000
Cash at bank 70000
Total 218000
16
 5.4 ESTIMATION OF FIXED ASSETS

ITEM AMOUNT KSH

Computers 100000
Furniture 5000
Other tools 60000
Total 210000

5.5 CASH FLOW PROJECTION

YEAR ONE

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total
Cash inflow 200000 240000 290000 450000 240000 105000 200000 178000 190000 470000 350000 290000 3203000
Cash sales 290000 200000 170000 120000 118000 780000 640000 280000 100000 120000 420000 150000 3388000
Debtors 40000 70000 110000
Cash at hand 50000 74000 60000 52000 80000 78000 82000 91000 76000 75000 91000 9500 904000
Total cash 290000 350000 300000 470000 260000 310000 290000 190000 300000 480000 370000 390000 4520000
inflow
Cash outflow 90000 110000 10000 40000 10000 205000 90000 12000 110000 10000 20000 600000 1307000
purchases 120000 150000 130000 110000 105000 150000 140000 144000 175000 119000 121000 180000 1644000
Salaries 50000 50000 50000 50000 50000 50000 50000 50000 50000 50000 50000 50000 600000
Rent 15000 15000 15000 15000 15000 15000 15000 15000 15000 15000 15000 15000 180000
Electricity 1000 1090 2000 2050 2010 1500 1300 1500 1500 2000 1350 1400 18700
Advertisemen 4000 3000 5000 3000 7000 5000 4000 6000 4000 4000 7000 5000 57000
t
License 9000 9000
Renovation 5000 7000 8000 9000 29000
Insurance 10000 10000
Transport 2000 3000 1000 1000 3000 1500 1500 1000 1500 2000 2000 2500 22000
Opening 5000 5000
account
Miscellaneous 1400 1350 1270 1300 1530 1590 600 1430 1100 1250 1340 1200 15360
Telephone 500 900 850 930 8810
Water 1000 900 700 750 730 725 690 800 850 870 910 1000 9925
Loan 170000 50000 220000
Total cash 90000 110000 10000 40000 10000 205000 90000 12000 110000 10000 20000 60000 767000
outflow
Net cash 200000 240000 290000 450000 240000 105000 200000 178000 190000 470000 350000 290000 3203000
Cumulative 200000 190000 300000 340000 250000 200000 110000 150000 120000 170000 180000 90000 2300000
cash

17
 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total
Cash inflow 190000 200000 300000 174000 92000 110000 250000 510000 133000 100000 260000 250000 2569000
Cash sales 180000 290000 150000 300000 420000 310000 220000 188000 500000 350000 230000 400000 3538000
Debtors 70000 50000 120000
Cash at hand 95000 70000 100000 130000 150000 78000 480000 150000 210000 330000 150000 220000 2155000
Total cash 100000 90000 180000 158000 58000 44000 150000 210000 94000 52000 138000 144000 1418000
inflow
Cash outflow 90000 110000 120000 16000 34000 66000 100000 350000 39000 48000 122000 106000 1295000
purchases 130000 170000 95000 100000 210000 171000 190000 240000 210000 220000 200000 310000 2246000
Salaries 50000 50000 50000 50000 50000 50000 50000 50000 50000 50000 50000 50000 600000
Rent 15000 15000 15000 15000 15000 1500 15000 15000 15000 15000 15000 15000 180000
Electricity 1000 700 1500 4000 1000 600 4000 5000 4500 6000 6100 3000 37400
Advertisemen 5000 2000 4000 4000 4500 4500 4000 3000 5000 5000 7000 4800 52000
t
License 9000 9000
Renovation 7000 15000 110000 1000 1000 1500 2000 4000 1500 4000 5000 5000 165000
Insurance 10000 10000
Transport 500 400 700 500 400 400 670 690 700 750 720 900 7330
Opening 5000 5000
account
Miscellaneous 1580 1700 1590 1400 9000 1900 29870
Telephone 400 600 650 640 700 800 6740
Water 1000 700 1200 1340 1400 1100 1320 1450 1000 800 650 980 12940
Loan 400000 500000 420000 350000 300000 450000 200000 150000 230000 410000 300000 450000 4160000
Total cash 45000 60000 78000 90000 30000 28000 78000 180000 52000 21000 70000 92000 1237000
outflow
Net cash 45000 30000 102000 68000 28000 12000 72000 30000 42000 31000 60000 52000 572000
Cumulative 150000 100000 95000 110000 150000 95000 220000 110000 95000 78000 200000 95000 1498000
cash
Year two

Year Three

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total
Cash inflow 180000 210000 300000 330000 370000 190000 230000 510000 430000 79000 220000 340000 3389000
Cash sales 150000 170000 145000 360000 81000 180000 90000 60000 100000 200000 300000 420000 2984000
Debtors 65000 50000 115000
Cash at hand 90000 70000 65000 100000 150000 180000 200000 150000 180000 250000 100000 180000 1715000
Total cash 30000 110000 130000 120000 120000 112000 140000 360000 230000 34000 70000 150000 1912000
inflow
Cash outflow 150000 100000 170000 210000 250000 78800 90000 150000 200000 45000 150000 190000 1783000
purchases 80000 90000 100000 78000 82000 55000 62000 130000 150000 120000 180000 200000 1327000
Salaries 50000 50000 50000 50000 50000 50000 50000 50000 50000 50000 50000 50000 100000
Rent 15000 15000 15000 15000 15000 15000 15000 15000 15000 15000 15000 15000 180000
Electricity 1000 2000 1500 700 2000 3000 2200 3000 900 650 730 900 15580
Advertisement 7000 4000 5000 6000 5000 6500 7000 4000 3000 4500 7000 5000 64000
License 90000 9000
Renovation 8000 5000 4500 7800 6200 4300 50000 2200 6000 4800 5200 8000 112000
Insurance 10000 10000
Transport 700 900 1500 2000 700 2000 2200 1500 900 1000 1200 1900 16500
Opening 5000 5000
account
Miscellaneous 1400 1580 2000 9000 8000 15000 22000 21000 22000 16000 45000 10000 243980
Telephone 650 920 700 500 450 430 422 470 495 530 580 570 6717
Water 500 700 600 600 900 580 790 900 900 650 720 810 7150
Loan 9000 90000 110000 9000 100000 90000 27000 9000 70000 82000 40000 10000 726000
Total cash 10000 50000 70000 68000 50000 60000 70000 55000 100000 10000 30000 90000 663000
outflow
Net cash 20000 60000 60000 52000 70000 52000 70000 305000 130000 24000 40000 60000 943000
Cumulative 1400000 100000 150000 180000 60000 10000 110000 118000 210000 112000 90000 150000 1430000
cash
Cumulative
cash

Item Year 1 Year 2 Year 3

18
Net cash 3203000

5.6 PROFORMA INCOME STATEMENT

(Profit and loss account)

Revenue =cash sales + credit sales

Gross profit=revenue –cost of goods sold

Net income = gross profit – expenses
Gross profit=total income - expenses

Year 1

Item Amount ksh Amount Ksh

Total sales 3,388,000
Debtors 110,000
Cash in hand 904,000
Total income 4402000
Cost of goods sold
Opening stock
Purchases 1,644,000 164400
Total cost of goods sold
Gross profit 4,566,400
Expenses
Salaries 600,000
Rent 180,000
Electricity 18,700
Licenses 9,000
Renovations 29,000
Insurance 10,000
Transport 22,000
Miscellaneous 15,360
Water bill 9,925
Opening account 5,000
Loan 220,000
Total expenses
Net profit 1,118,985
Total expenses 3,447415
Net profit 51,7112.25
Tax @ 15% 3,447,415
Net profit

19
Tax =15/100*3447415
= 517,112.25

Year 2

Item Amount ksh Amount Ksh

Total sales 3,538,000
Debtors 120,000
Cash in hand 215,500
Total income 5,813,000
Cost of goods sold
Opening stock
Purchases 2,246,000
Total cost of goods sold
Gross profit 8,059,000
Expenses
Salaries 600,000
Rent 180,000
Electricity 37,400
Licenses 9,000
Renovations 165,000
Insurance 10,000
Transport 7,330
Miscellaneous 29,870
Water bill 12,940
Opening account 5,000
Loan 4,160,000
Total expenses
Net profit 5,216,540
Total expenses 2,842,460
Net profit 426,369
Tax @ 15% 2,842,460
Net profit

Tax =15/100*2842460
= 426,369

20
Year 3
Item Amount ksh Amount Ksh
Total sales 2,984,000
Debtors 115,000
Cash in hand 1,715,000
Total income 3,256,000
Cost of goods sold
Opening stock
Purchases 1,327,000
Total cost of goods sold 1,327,000
Gross profit 1,729,000
Expenses
Salaries 600,000
Rent 180,000
Electricity 15,580
Licenses 9,000
Renovations 112,000
Insurance 10,000
Transport 16,500
Miscellaneous 172,980
Water bill 7,150
Opening account 5,000
Loan 726,000
Total expenses
Net profit 1,854,210
Total expenses
Net profit
Tax @ 15%
Net profit

5.7 PRO-FORMA –BALANCE SHEET

A BALANCE SHEET FOR SMART TECHNOLOGICAL SOLUTIONS

YEAR 1

ASSETS AMOUNT LIABILITIES AMOUNT

Current assets Loan 100,000
Cash in hand 904,000 Rent 50,000
Cash at bank 500,000 Salaries 90,000
Debtors 700,000 Creditors 80,000

21
Stock 2,500,000
Fixed assets Long term
Computers 900,000 liabilities
Furniture 190,000 7 year loan 2,200,000
Chairs 200,000
Cctvs 150,000
Wi-fi 110,000

Year 2

ASSETS AMOUNT LIABILITIES AMOUNT

Current assets Loan 1,460,000
Cash in hand 2,155,000 Rent 14,000
Cash at bank 700,000 Salaries 10,000
Debtors 120,000 Creditors 70,000
Stock 1000,000
Fixed assets Long term
Computers 500,000 liabilities
Furniture 120,000 7 year loan -
Car 700,000
Building 900,000

Year 3

ASSETS AMOUNT LIABILITIES AMOUNT

Current assets
Cash in hand 1,715,000 Rent 20,000
Cash at bank 200,000 Salaries 40,000
Debtors 120,000 Creditors 60,000
Stock 1300,000
Fixed assets Long term
Land 900,000 liabilities
Car 1000,000 2 year loan 15,00000
Building 700,200

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5.8 BREAK EVEN -ANALYSIS

Gross margin % = (annual sales –variable sales) *100

Annual sales

Break even point = total fixed cost/gross margin %

Year 1

Variable fixed expenses

Item Amount Item Amount

Purchases 1,644,000 Salaries 600,000
Telephone bills 8,810 Rent 180,000
Advertisement 57,000 Electricity 18,700
Transport 22,000 Water 9,925
Miscellaneous 15,360 License 9,000
Loan repayment 220,000
Opening account 5,000
Renovation 29,000
Insurance 10,000
Total 1,747,170 1,081,625

Gross margin % = 3388000-1747170 *100

3,388,000

= 48.43%

Breakeven point = 1081625

48.43

=22,333.78

23
Year 2

Variable fixed expenses

Item Amount Item Amount

Purchases 2,246,000 Salaries 600,000
Telephone bills 6,740 Rent 180,000
Advertisement 52,000 Electricity 37,400
Transport 7,330 Water 12,940
Miscellaneous 29,870 License 9,000
Loan repayment 1,460,000
Opening account 5,000
Renovation 165,000
Insurance 10,000
Total 2,341,940 1,081,625

Gross margin % = 3538000-2341940 *100

3,838,000

= 33.81%

Breakeven point = 2479340

33.81

=73,331.56

YEAR 3
24
Variable fixed expenses

Item Amount Item Amount

Purchases 1,327,000 Salaries 600,000
Telephone bills 6,717 Rent 180,000
Advertisement 64,000 Electricity 64,000
Transport 16,500 Water 7,150
Miscellaneous 243,980 License 9,000
Loan repayment 726,000
Opening account 5,000
Renovation 112,000
Insurance 10,000
Total 1,658,197 1,712150

Gross margin % = 2984000-1658197 *100

2984000

= 44.43%

Breakeven point = 1713150

44.43

=38558.41

5.8.1 Profitability Ratios

i. Gross profit margin

Year 1 Year 2 Year 3
Gross profit
margin

25
 ii.

Year 1 Year 2 Year 3

Net cash

R.O.E = Net profit after tax *100

Owners

5.8.2 DESIRED FINANCING

ITEMS AMOUNT KSH Remarks

Owners’ equity 70,000 Cash
Loan KCB 200,000 Machine
Loan National bank 900,000 Cash
Loan transnational bank 700,000 Cash
Total 1,870,000

5.8.3 PRODUCTION LOANS

Funding Loan Rate of Periods of Interest on Total Remarks

section interest payment loan
KCB 200,000 10% 24 months 50,000 250,000
NATIONAL 900,000 15% 36 months 150,000 1,050,000
BANK
Transnational 700,000 15% 48 months 120,000 820,000
bank

5.9 REFERENCES

Lecturer notes

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