BUSINESS NAME: OGOTI FARM

NAME: OMBUI BRIAN OGOTI

CENTER NAME: KISII NATIONAL

POLYTECHNIC

CENTER NO: 703101

INDEX NO: 2052

PRESENTED TO: KENYA NATIONAL &

EXAMINATION COUNCIL FOR THE
PARTIAL
FULFILMENT FOR THE AWARD OF A
DIPLOMA COURSE IN GENERAL
AGRICULTURE

EXAM SERIES: JULY 2024.

TABLE OF CONTENTS
Declaration......................................................................................................................................................i
DEDICATION...............................................................................................................................................ii
AcKNOWLEDGEMENT.............................................................................................................................iii
Executive summary.......................................................................................................................................iv
Chapter one....................................................................................................................................................1
1.0 BUSINESS DESCRIPTION....................................................................................................................1
1.1 Back Ground Information........................................................................................................................1
1.2 Name of the Business...............................................................................................................................1
1.3 Business Location and Address...............................................................................................................1
1.4 Form of Ownership..................................................................................................................................3
1.5 Type of Business......................................................................................................................................3
1.6 Production an Services.............................................................................................................................3
1.7 Justification of Opportunity.....................................................................................................................4
1.8 The Industry.............................................................................................................................................4
1.9 Business Goals.........................................................................................................................................5
1.10. SWOT Analysis................................................................................................................................5
CHAPTER 2..................................................................................................................................................7
2.0 MARKET PLAN.....................................................................................................................................7
2.1 Customers Description.............................................................................................................................7
2.2 Market Share............................................................................................................................................8
2.3 Competition..............................................................................................................................................8
2.4 Methods of Promotion and Advertising.................................................................................................10
2.5 Pricing Strategy......................................................................................................................................10
2.6 Sales Tactics...........................................................................................................................................11
2.7 Distribution Strategy..............................................................................................................................11
Chapter three................................................................................................................................................12
3.0 ORGANIZATION AND MANAGEMENT..........................................................................................12
3.1 Key Management Personnel and Business Managers...........................................................................12
3.2 Other Business Personnel......................................................................................................................13
3.3. Recruitment, Training and Promotion of Personnel.....................................................................14
3.4 Remuneration and Incentives for Employees........................................................................................14
3.5 Licenses, Permits and Laws...................................................................................................................15

2
3.6 Other Supperating Services....................................................................................................................15
CHAPTER FOUR........................................................................................................................................16
4.0 OPERATION AND PRODUCTION PLAN.........................................................................................16
4.1 Production Facilities and Capacities and Utilization Equipment (Guardian Tool Table).....................16
4.2 Production Strategy................................................................................................................................18
4.3 Production Process.................................................................................................................................19
CHAPTER FIVE.........................................................................................................................................23
5.0 FINANCIAL PLAN...............................................................................................................................23
5.1 Pre Operational Cost..............................................................................................................................23
5.2 Working Capital.....................................................................................................................................23
5.3 Projected Cash Flow Statement.............................................................................................................24
5.4 Proforma in Come Statement.................................................................................................................25
5.5 Proforma Balance Heet..........................................................................................................................26
5.6 Break Even Point...................................................................................................................................26
5.7 Expected Profitability Ratios.................................................................................................................28
5.8 Desired Financing..................................................................................................................................29
5.9 Proposed Capitalization.........................................................................................................................30

3
DECLARATION
I hereby declare that this business plan is my own work did my personal research and compiled

relevant ideas to make this business plan

This business plan is an original idea and has never been presented to any institution of higher

learning.

Name ………………………………………………………………………….

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

Supervisor …………………………………………………………………….

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

i
DEDICATION
My special dedication goes to my beloved mum for her continuous support throughout this

period. I also dedicate this business plan to the memory of my family members at large who was

always been a source of encouragement

ii
ACKNOWLEDGEMENT
I highly dedicate my gratitude to Almighty God for his care and provision throughout the period.

I thank my family especially my dear parents for their support in prayers, finances and advice

throughout the period.

Finally I would like to thank the DGA 27 class, lectures and the whole RVIST at large for giving

me great ideas and equipping me with knowledge for a better person I am.

God bless you all.

iii
EXECUTIVE SUMMARY
OGOTI FARM is leading sale proprietor type of business that is operated under well defined

plan and objective. The business is registered and owned by Brian Ogoti. The business is

situated in Kisii County kisii central District and will supply different market like Daraja area,

Leshau area and Kisii town. The business will deal majorly in growing and propagating

vegetable and fruits. The proposed business will commence its operation with a capital of

200,000.00 with equity contribution of 180,000.00 and 20,000.00 from friends. Ogoti Farm

horticulture is among the leading green farm in the division and best vegetables suppliers from

Kisii location. Although there is stiff completion from other business like Davis farm and other

small scale farmers the advantages is that it was establihed earlier and has won most of the

customers. The Ogoti is always stocked with the goods; therefore its customers don't go

uncertified. The targeted hospitals which have managed to take a market share of about 70 %

though some depend on substitution crops like maize.

The organization plan of Ogoti horticultural farm will be under the control of the management

of the business. The employment of workers will be based on the qualifications and experiences

which will be increased yearly depending on the level of performance.

The licenses and legal permits will be obtained from the respective bodies and the by - laws.

Banking will be insured against risk like theft accidents by Amaco insurance company.

iv
OPERATIONAL AND PRODUCTION PLAN

The operation and co-ordination of the business will be done by the owner. In this way he will

make sure that field preparations, setting of the seed nurseries, purchasing of the fields materials

and equipment is properly done. He will also ensure that activities are carried in appropriate time

and in great efficiency by the workers

FINANCIAL PLAN

The start of the business requires a total of two hundred thousand shillings (200,000) the sources

of the finance will be mainly from areas. Source of finance

i. Parents savings and benefits

ii. Fundraising from friends and relatives

iii. Inheritance from parentis

The expenses on the capital includes

i. Starting cost

ii. Assets

iii. Licenses

iv. Operating cost stock

v. Cash at hand and bank

Give that the source of funds were personal savings, inherit and assistance from friends and

relatives will be no repayment to the bank loan.

v
 CHAPTER ONE
1.0 BUSINESS DESCRIPTION
1.1 Back Ground Information
The owner of the business will be Mr Brian Ogoti who is aged 23years. The business deals with

the production and propagation of vegetables and fruits.

1.2 Name of the Business

The business name will be Ogoti Farm, Ogoti is my Sir name,. The name constitute of me and

my lovely family.

1.3 Business Location and Address

OGOTI FARM

P.O. BOX 30

KISII.

BUSINESS LOCATION

OGOTI FARM is situated along the Hospital Road which connects Kisii nakuru Highway to kisii

Migori road.

The location and site of the business considered accessibility by many customers traveling along

the road. It is also accessible during rainy seasons.

The district is highly populated by many buyers from Kisii and Suneka town, who buy produce

in large quantities and take to urban area to sell in small scale hence. Most of the soil in this area

is very fertile and good for producing crop like tomatoes, carrots and vegetables. This area is

high altitude zone producing almost all types of crops. It has good transport, a well-developed

1
communication and more importantly availability of electricity power. Finally the business is

mostly considered suitable location because it is situated few kilometers from its main customers

like Daraja high secondary and Kisii secondary school and college like KNP.

QUICKMATT
naivas MALL

HOSPITAL ROAD

Ogoti farm

2
1.4 Form of Ownership
a) Registration

Ogoti Farm will be registered legally under the laws and policy of the G OK as a sole proprietor

business and will be managed by the owner. This type of owner ship is considered most suitable

because the decision making is fast, the owner enjoy all the profits.

b) Sponsorship.

This business is sponsored by Brian Ogoti aged 23year he will manage the business well

because of her good personality and sufficient knowledge and skills in the business venture

1.5 Type of Business

The business is both manufacturing and service of business because it grows crops and supplies

it to the customers.

1.6 Production an Services

The following products will be offered in the proposed business

a) Vegetables

i. Sukuma wiki (kales)

ii. Onions

iii. Capsicum

b) Fruit

3
i. Tomatoes

1.7 Justification of Opportunity

This business was given higher priority because there are few given shops in Kisii Ann center

which are not able to meet the demand of the rapidity growing population , schools, college and

others residents of the town .

Due to lack of skills and knowledge to the trader who operates this type of business, they are not

able to offer the production in large quantities., secondly they lack good customer being that

goods offered are highly perishable these other traders do lose their stocks due to lack proper

preservation and poor under small- scale business, they are not able to supplier customer. Like

collage school, which requires after sale service payment. This drives the owner to drive into the

business with high spirit of meeting the demand by offering large quality and product. . This

business will also contribute highly to the growth of economy by offering employment use of

local resources and provision of goods and services.

1.8 The Industry

The propose business will be operating under the section of horticulture and commercial

industry, which mainly fall under food industries. The size of this industry in my business

community is small since there is only little horticultural business around. The propose business

is medium in size and will require an average capital of Kshs 200 and three employees for the

start.

4
1.9 Business Goals
The main objectives of the proposed business are to provide the best good and services to the

population around, a vision to expand rapidly and penetrate major towns in the province.

Short term goals

By the end of the first year the business will be producing over 50 sacks of both fruits and

vegetables. The business will also expand its operation to different parts of the province. The

business will also add two more staff that is sales person and assistant manager.

Long term goals

At the end of three years the business will introduce other new farms in other areas where

horticulture farming is not well embraced. It will also increase the number of hectors from 10 to

20 hectares. The working tools will also be increased to ensure smooth working. The business is

plOgotiing to facilitate its transport by purchasing one lorry and one pick- up for transportation

of goods to customers.

1.10. SWOT Analysis

A SWOT analysis had to be undertaken to evaluate the strengths, Weaknesses, Opportunities and
Threats that may arise so as to plan well for future anticipation.

STRENGTH WEAKNESSES OPPORTUNITIES THREATS

Well trained business Lack of funds to Credits from banks are a Competition from
personnel. support your starting of great opportunity for a various people
the business. start of a business. practicing the same.

Proprietor should Lack of experience to High demand for Disease outbreak

have the required start and manage the chicken, eggs and white which may often

5
training in Poultry business. meat by customers. spread enormously to
keeping all birds.
Proximity of feeds Unfriendly Consultation with Taxation by the
and cereals for the environment will not professionals in the firm government.
birds to feed on. favor the business. of poultry keeping.

There should be Being involved in more Availability of ready Slow growth rate of
security for safety of than one business may market for The products. the business.
the birds. i.e.) employ not favor one, because
security guards to each of them requires
watch over the whole commitment and
homestead in general. attention for it to be
successful.
In erecting a poultry Young and Availability of feeds like Recession.
structure, there are unpredictable staff Chick mash, broilers
several requirements members. mash for The chicks,
that should be met in layers and broilers.
order to ensure high
comfort of the birds.

6
 CHAPTER 2
2.0 MARKET PLAN
2.1 Customers Description
OGOTI FARM is targeting two categories of customers.

a) The small scale and non-frequency buyers

b) Large scale and frequency buyers

a) Small-scale and non-frequency buyers

They are customers who buy in small quantities due to their small income they are not regular

they include.

i) Individual travelling will buy the products since the business is centrally placed in the

main bus stage.

ii) The village near the producing from who buy the products from the farm to use at

home.

iii) The casual workers in the area like Mjengo, the hawkers.

b) Large scale and frequently buyers and in large quantities.

They include.

i) The various hospitals within the town outside e.g. Ndaragwa health center, Nyahurur

General Hospital etc.

ii) College, the NIST and secondary schools around like Ndaragwa Girls and Uruku

among others.

7
 iii) The businessman and women in the town and its outskirt those selling in hotels

kiosks, butcheries

2.2 Market Share

The farm will have its customer coming from the nearby Ndaragwa market and its outspan. The

market comprises of the civil servants, hospitals, the colleges within, hawkers, hotels and

schools.

Consumption analysis pie chart

Sales
school civil servants
20% 14%

hotels
9% hospitals
24%
college
hawker 24%
9%

2.3 Competition
The propose business is expected to face stiff competition from the following competitors.

i. Davis farm

ii. Other small scall farmers farm

The business is small scale business which operates from 9.00am to 5.00pm

8
Strength

i. Well establihed

ii. Specialized and trained personnel

iii. Sell on credit to potential customers

iv. Have several branches within the town.

Weakness

i) The service are of low qualities

ii) The personnel not friendly to customers

iii) Poor packaging

iv) Situated away from the town

v) Sales at high prices

i) Davis Farm

This is the business situate 6 km from the proposed Ogoti farm.

Strength

i. It has been in the field along

ii. It is a most profitable business with sales of over 500.00sh per Ogotium

iii. It has well trained personnel

iv. Sell at a moderate price.

Weakness

i. It operates on hired premises

ii. Offers few products

9
 iii. Customers usually go unsatisfied

OGOTI FARM will capitalize on the weakness of its competitors buy ensuring that the business

is located in accessible area, it will also offer high quality products and services in addition to the

at it will also pack the goods different sizes.

2.4 Methods of Promotion and Advertising

The advertising of OGOTI FARM will be aggressing done through the radio. It products will be

properly described through, posters displayed in public places and free sample will also be given

The advertisement will also be done continuously to ensure that it penetrates the market with its

product.

The manager also tends to offer free sample to its customers after every three months. The

advertisement cost is estimated to be 3,000.00 per week.

2.5 Pricing Strategy

Ogoti Farm intends to produce its products to be able to serve the lower and higher parts of the

market this will allow customers buy according to their financing power. To the lower end

customers, the farm will pack its goods in small qualities like selling pineapple into small and

selling there in small amount like five shillings per slice

Vegetable and fruits will also be packed in the same mOgotier e.g. small business for small

amount like two shillings. One sack of Kale will sell at 1,000.00 during rainy season and 200.00

Kshs during dry seasons, and the same will apply to other products. To serve the customer who

are financially stable like business men who purchase in whole sale price. The farm will also

pack in large quantities e.g. creates of tomatoes, sack of vegetables. Attract customers to the

10
farm. Finally credit facilities will also be offered to customers like school, hospitals and who

credit is worthy.

2.6 Sales Tactics

The owner ensures well distribution by hiring competence sale person. He will also encourage

her distribution team by giving fringe benefits to those who sell more to sacks of vegetable and

facilities per day. The goods will also be transported to customers premises e.g. hospitals and

schools.

The Ogoti will offer discount to the customers especially those who buy in large information

concerning method of cooking, preparation and importance of the products especially those

which are not common.

2.7 Distribution Strategy

The farm will transport its products by use of Lorries to ensure that its products reach the market.

The means which is estimated to cost 4,000.00 per month and 50,000.00 per Ogotium.

The distribution chOgotiels will also be used to ensure that the goods reach the potential

customers. This will be through producers - wholesaler’s retailers - customers. Although the

distributing chOgotiels have problems like products reaching the consumer at low quality due to

perish ability the owner in tend to introduce transportation by refrigerant to preserve the products

and services like Ogoti Farm but approach to the competitors will be as follows :

a. Quality services: Ogoti Farm is out to offer its customers with quality services

because this will encourage them to buy more

b. Credit services and will offer credit facilities to its customers.

11
 CHAPTER THREE
3.0 ORGANIZATION AND MANAGEMENT
The proposed business will operate under line organization structure.

Manager

Security Form attendant Sales person Casher

3.1 Key Management Personnel and Business Managers

The owner will manage the firm

FARM MANAGER

QUALIFICATION DUTIES AND RESPONSIBILITIES

a) Holder of a diploma resource i. Formulate all then policies Create

management. supervision

a) Holder of certificate in ICT ii. Recruitment of staff

b) Under went training in public relations. iii. Allocations the finance salaries
Have good communication skills. will be 3,200,000

SALES PERSONS

QUALIFICATION EXPERIENCE DUTIES AND

RESPONSIBILITIES

a) Certificate in sales and i. At least one year ii. Packing

12
 marketing experience as a goods
salesman in a
company

b) Good communication iii. Updating

skills stocks

c) Computer literate iv. Organization

products at the
counters
3.2 Other Business Personnel
CASHIER

QUALIFICATION EXPERIENCE DUTIES AND

RESPONSIBILITIES

i. Owns a certificate in certified a) At least two years as anI. Receive all the sales
public accounts (CPA) Good accountant Clarks cash
communication skills

ii. Computer literate II. Bank the money

Maintain books of
account

iii. Ensure good and

appropriate services to
customers.

iv. Ensure good public

relations within the
customers.

The proposed salary is

350,000 per month.

FARM ATTENDANT

QUALIFICATION DUTIES AND RESPONSIBILITIES

Have skills in production, management Purchases input and machinery to be used in the form

13
 Has a certificate in plant and animal - Keep recodes of all, machineries and input used in

production. the farm at particular time

Pay all the field workers

3.3. Recruitment, Training and Promotion of Personnel

The above post will be advertised in the local newspaper and magazines, posters will also be used by

pinning them on the public will also be used by pinning them on the public places.

The shortlisted candidate will then be called foe interview which will be done by the manager friends

and relatives will assists in selection of trust worth employees

The suitable persons will be given practical work. All the management team is offered an opportunity

twice a year to attend seminars

And workshops on their relevant field promotion will be given on the basis of qualification and

hardworking employee.

3.4 Remuneration and Incentives for Employees

Position Salary per month Kshs Bonds yearly Leave days per year

Manager 4500.00 400.00 34

Sales person 1600.00 100.00 30

Cashier 3800.00 200.00 30

Security officer 1000.00 100.00 21

Farm attendants 3800.00 300.00 25

14
3.5 Licenses, Permits and Laws

OGOTI FARM requires a production and trade licenses from the e ministry of trade under trade act

section 7 cap 479 these essential document are required before the business begins its operations,

the licensing will be renewed yearly at a cost of 2,000.00 formal registration with the registrar of

society under the office of the attorney general at a fee of 600.00. The total requirement for

registration insurance and licenses is 2, 600, and 00

Trading license - 2,600.00

Registration - 1.000.00

3,600.00

3.6 Other Supperating Services

This will include

Services Provider Importance

Banking
Barclays Safe guarding of the money
Accounting
Legal matters Seron associates
Postal
Advertising m services

15
 CHAPTER FOUR
4.0 OPERATION AND PRODUCTION PLAN

The operation and production plan of the proposed business will be done under the following

objectives
4.1 Production Facilities and Capacities and Utilization Equipment (Guardian Tool Table)

No EQUIPMENTS QTY UNITS COST T.COST SUPPLER

I. Pangas 5 150.00 750.00 G suppler store
2. Jembes 10 180.00 1800.00 G suppler store
Wheel barrow 10 3000.00 3,000.00 G suppler store
4. Trowel 5 150.00 750.00
5. Garden line 15 20.00 300.00
6. Secateuers 10 100.00 1000.00
7. Rake 4 75.00 300.00
8. Garden fork 8 150.00 1200.00
9. Fork hoe 6 85.00 510.00
10. Knapsack 8 750.00 6,000.00
Total 81 4,660 42,610

Land and Building

Ogoti will undertake farming in a hires farm and premises in CBD\ building along the entrance

to main municipal market situated away from production farm. The 10 hector land will cost Kshs

4,000.00 per hector and the total amount will be 40,000 Kshs.

The farm machineries will be serviced and maintain by the machineries will be serviced and

maintain by the suppliers during the first year of guarantee. The above listed machineries and

equipment will be supplied at least six months before the business starts its operations

Production Plan Layout

16
17
4.2 Production Strategy
The monthly material within the first year will be mainly raw materials to be used for growing as
shown below

Raw materials required per month

TABLE I

S/No Raw materials Qty Total cost (Kshs) Suppliers

1. Seedling 20,000 1,500.00 Ruto suppler stores

2. Fertilizers

Primary 5000kgs 20,000.00

Secondary 200kgs 8,000.00

3. Manures 3000kgs 2000.00

4. Chemicals Packets 5,000.00

5. Support ticks 20.000 5,000.00

6. Seeds 1 O packets 15,000.00

Total 55,000

Monthly labour production expenses will include

i) Labour cost Kshs 25,000.00

ii) Material cost Kshs 60,000.00

Total Kshs 85500.00

18
TABLE II

Materials Kshs 60,000.00

Rent Kshs 20, 000, 00

Transport Kshs 3,000.00

Electricity Kshs 1,500.00

Advertisement Kshs 2,000.00

Fridge Kshs 2,000.00

Repair and maintenance Kshs 5,000.00

Indirect labour Kshs 8,000.00

TOTAL Kshs 101,500.00

4.3 Production Process

The production process varies in various crops but the material used are almost the same , the

variation are due to the requirement which differs in mainly vegetable crop as explained in

details below.

a) Onions

Ecological requirements

a) Altitude of 2,100 above the sea level

b) It does well in sandy of alluvial soil which are slightly alkaline (ph of 6-8)

c) The rainfall should be above 100mm per year. Irrigation is necessary if the area is dry.

19
Establishment

a) The crop is sown directly or through nursery.

b) Spicing of 30cm by 7 cm is good, it requires 40 - 50 tins from yard manure per hector

c) Also double super phosphate is applied at planting at a rate of 250kg peer hector.

Field management

a) Top dressing is necessary by calcium ammonium nitrate at 25kg per hectare

b) The field should be kept free of weeds

c) The soil is removed to expose bulb when it starts farming

Harvesting

a) The taps are broken when the leaves start to dry

b) Harvesting is done by digging as the bulbs.

c) The bulbs are then dried in shade and thereby being ready for market.

Tomatoes (Lycopersicon escullentum)

Ecological requirement

a) It is grown in warm climate

b) The altitude should range between 0-2100 in above the sea level.

c) Ogotiual rainfall should between 260-1300mm

d) Grow3s best in free drainage loam and slightly salty soils.

20
Establishment

a) Prepare then nursery finely breaking all the soil clods

b) Remove all roots and other planting materials.

Field management

 Dig deeply and remove all weeds especially the perennials

 Dig the holes 15 cm deep 60cm within the row and 90cm between the rows. Put 10 tons

of manure and 200kg of double supper phosphate per hole.

 Plant per one seedling per hole.

 Plant only one seedling per hole. + Keep the tomatoes free from weeds.

 Pruning is carried when leaves are many.

 Staking stick which is about 2.0 meters high

Harvesting

 Fruits are picked as soon as reddish color starts to appear to enable the fruit reach the

market when fresh.

 Kale (sukuma wiki)

 Ecological requirements

 Attitude of loom above the sea level.

 Rain fall of 2500mm and above

21
Establishment

 Keep the field free from weeds

 Seeds are sown in a nursery bed or planted directly

 Spacing of the rows is 55cm apart with about 35cm between plants

Field operation

 Apply NPK fertilizer before planting Top dress a nitrogenous fertilizer

Harvesting

 Harvesting after two to three months of transporting.

The limitation of the production

 Lack of enough water

 Over production

 Lack of enough man power

 Wilting of transplanting during transporting.

22
 CHAPTER FIVE
5.0 FINANCIAL PLAN
5.1 Pre Operational Cost

ITEM COST
Licenses 5,000.00
Insurance 8,000.00
Electricity 1,500.00
Water 3,000.00
Stock 30,000.00
Advertisement 2,000.00
Stationery 3,000.00
Rent 2,000.00
Transport 3,000.00
Tools and equipment 19,000.00
Furniture and fittings 9,500.00
Maintenance expenses 2,000.00
Business registration 2,000.00
Feasibility study 4,000.00
Miscellaneous 1,000.00
Refrigerators 4,000.00
Total 135,000.00

5.2 Working Capital

ITEM YEAR I YEAR II YEAR III

Stock s 30,000.00 40,000.00 45,000.00
Cash at hand and in bank 65,000.00 50,000.00 85,000.00
Debtors 5,000.00 12,000.00 16,000.00
Total 100,000.00 102,000.00 146,000.00

23
 5.3 Projected Cash Flow Statement
Months JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL
Cash in flow
BAL B/F 194720 191000 187300 192300 202960 21520 221080 237750 252080 272410 295710 2457830
Sales 80000 82000 83000 90000 95000 95000 97000 100000 100100 100200 105000 100000 1127300
Capital increase 200000
Total 280000 276720 274000 277300 287300 297960 307520 321080 337850 352280 377410 395710
Cash out flow
Purchase 60000 62000 63000 62000 61000 64000 63000 60000 62000 58000 64000 75000 754000
Transport 3500 3500 3500 3600 3600 3600 3700 3700 3800 3800 3800 3800 36000
Salaries 25000 25000 25000 25000 25000 25000 25000 25000 25000 25000 25000 25000 300000
Water 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 12800
Electricity 1600 1500 1500 1500 1500 1500 1500 1500 1500 1600 1400 1400 18000
Rent 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 24000
Insurance 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 12000
License 8000 8000
Stationery 3000 2400 3400 3000 3300 3000 25000 35000 3000 25000 3400 3000 36000
Miscellaneous 150 60 80 60 50 80 90 120 100 150 60 1000
telephone 400 400 400 400 400 400 400 400 400 400 400 400 4800
Total out flow 107650 100860 102880 101560 100800 103550 102180 100190 101820 97400 104150 114660
Net cash 172350 175860 171120 175740 186500 194410 205340 220890 236030 254880 273260 281050

24
5.4 Proforma in Come Statement

ITEMS YEAR 1 YEAR 2 YEAR 3

Sales 1,304,760.00 159,8760.00 1,597,450.00
Cost of goods sold 749,000.00 86,200.00 852,000.00
Gross profit 571,540.00 613,240.00 759,550.00
Expenses
Wages and salaries 300,000.00 300,000.00 320,000.00
Rent 24,000.00 24,000.00 24,000.000
Water 36,000.00 20,000.00 24,000,00
Telephone 4,800.00 4,800.00 4,000.00
Electricity 18,000.00 36,000.00 42,100.00
Stationery 36,000.00 24,000.00 24,000.00
Transport 36,000.00 40,000.00 60,000.00
License 8,000.00 8,000.00 8,000.00
Insurance 12,000.00 12,000.00 12,000.00
Interest 1,000.00 1,800 2,000.00
Miscellaneous 1,000.00 500.00 500.00
Total expenses 476,800 486,800.00 520,600.00
Profit before tax 94,740.00 126,440.00 23,8950.00
Tax provision (20%) 18,948.00 25,288.00 47,790.00
Net profit after tax 75,792.00 101,152.00 19,160.00

25
 5.5 Proforma Balance Heet

Item YEAR 1 YEAR 2 YEAR 3

CURRENT ASSETS Cash at

hand + bank
Stocks 98,700.00 98,700.00 17000.00
Total C.A 20,000.00 20,000.00 70000.00
FIXED ASSETS
Furniture and fittings 9,500.00 9,500.00 9025.00
Tools and equipment 19,000.00 19,000.00 18050.00
Refrigerator 40,000.00 40,000.00 40,000.00
Total assets 187,200.00 187,200.00 307075.00
LIABILITIES 2,500.00 2,500.00 32.000.00
Creditors
Repairer and maintenance 3,000.00 3,000.00 4100.00
Bank over draft 83,408.00 83,408.00 45699.50
Capital employed 15,866.00 15,866.00 152923.50
Profit. 82,426.00 82,426.00 101152.50
Total liability 18,7200.00 18,9950.00 307075.00

5.6 Break Even Point

This is when the input is equivalent to the total output. A breakeven point is a point where there
are neither losses nor profit. This is given in shillings
Contribution margin = total sales - variable cost
Total sales 1304760. 00 Kshs

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Variable cost Amounts

Cash purchase 749,000. 00

Credit paid 4,800.00

Telephone 4,800.00

Water 36,000.00

Electricity 18,000.00

Stationery 36,000.00

Repair 36,000.00

Insurance 12,000.00

Interest 1,000.00

miscellaneous 1,000.00

Total 898,600.00

Contribution margin = 140470-89600 = 406.160

Contribution margin % = Contribution margin x 100 %
Total sales
= 406,160 x 100
1,304,760
= 31 %
Total fixed cost

Expense for year I

That is : Amount

Wages and salaries 300,000

Rent 24,000

License 5,000

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 Insurance 8,000

Total 337, 000

Breakeven point (in sale) = fixed cost

Contribution margin %
337000 = 10870.00
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5.7 Expected Profitability Ratios

Ration type Working formula Year Year 11 Year III

Gross profit Gross profit x 100 Total 571540x100 1304760 613240x100 759550x100 1597450
ration sales = 33.6% 1598760 = = 43.3%
36.1%

Return on Net profit after tax x 100 75792 x 100 20000 101152x100 1911160x100
equity Owner equity =37.9%
200,000 = 200,000 =
50.6% 95.6%

Return of Net profit after tax x 100 75792 x 100 30317 = 101152x100 191160 x 100 172044
investment Total investment 40% 505776 =50% 90%

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5.8 Desired Financing

Item Amount

Pre -operational 135,000.00

Working capital 31,500.00

FIXED ASSETS

Furniture and fittings 9,500.00

Total and equipment 19,000.00

Refrigerators 40,000.00

Miscellaneous 1,000

Total 200,000

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5.9 Proposed Capitalization
ITEM AMOUNT

Owner contribution Total borrowed (Friends 180,000.00 20,000.00

+ Relatives)

Totals 200,000.00

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