BUSINESS PLAN

TITLE
MANLUX SOLUTIONS

By

JULIUS KIPNGETICH

ADM NO: 121R05615

INDEX NUMBER: 5441012207
COURSE CODE: 307

Supervisor,
Miss Joan Kirwa

A BUSINESS PLAN SUBMITTED TO THE KENYA NATIONAL

EXAMINATIONS COUNCIL (KNEC) THROUGH THE RIFT VALLEY
TECHNICAL TRAINING INSTITUTE
IN PARTIAL FULFILLMENT FOR THE AWARD OF DIPLOMA IN
MECHANICAL ENGINEERING, PRODUCTION OPTION

Copyright July, 2024

DECLARATION
I Julius Kipngetich declare that this is my original work and has never been submitted before any
other college or any other institution of higher learning for the award of Diploma
Signed…………………………… Date: …………………

ii
DECLARATION BY SUPERVISOR
This research proposal has been submitted with my approval at The Rift Valley Technical Training
Institute.
Supervisor: ………………………………………………..
Sign.........................................Date......................................
For and on behalf of Rift Valley Technical Training Institute.

iii
DEDICATION
This business proposal is dedicated to almighty God the creator and giver of all things, to my
parents, my allies for their love, patience, kind, heartedness and gentle encouragement which
helped me get through this process.

iv
 ACKNOWLEDGEMENT
I take this opportunity to thank all people who made a contribution in my academic life so far.
I would like to express gratitude to my supervisor Madam Joan whose tireless efforts have made
this dream a reality, you restored hope in me when I felt hopeless, you invoked the hitherto hidden
abilities in me; a reason I will always walk with my head high. No amount of words can express
my sincere gratitude for your unending support during the research period. May the good Lord
reward your efforts.
I am greatly indebted to my colleagues and lectures for their support and effort they instilled in me
and not forgetting my Mum for the advices. May the good Lord bless you all.

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TABLE OF CONTENTS

DECLARATION......................................................................................................................................... ii
DECLARATION BY SUPERVISOR ...................................................................................................... iii
DEDICATION............................................................................................................................................ iv
ACKNOWLEDGEMENT .......................................................................................................................... v
TABLE OF CONTENTS .......................................................................................................................... vi
CHAPTER ONE ......................................................................................................................................... 9
1.0 EXECUTIVE SUMMARY ........................................................................................................................ 9
1.1 Introduction ........................................................................................................................................ 9
1.2 Business Description ........................................................................................................................... 9
1.3 Marketing Plan .................................................................................................................................... 9
1.4 Organization / Management Plan ....................................................................................................... 9
1.5 Operational and product plan............................................................................................................. 9
1.6 Financial Plan ...................................................................................................................................... 9
CHAPTER TWO ...................................................................................................................................... 10
BUSINESS NAME...................................................................................................................................... 10
LOCATION OF THE BUSINESS .................................................................................................................. 11
TYPE OF BUSINESS................................................................................................................................... 12
NATURE OF THE BUSINESS ...................................................................................................................... 12
INDUSTRY ................................................................................................................................................ 12
PRODUCT AND SERVICES ........................................................................................................................ 13
OPERATIONAL RESOURSES ..................................................................................................................... 13
THE MARKET ........................................................................................................................................... 13
ENERGY AND GROWTH SRATEGEY ......................................................................................................... 14
ANALYSIS TABLE ...................................................................................................................................... 15
CHAPTER THREE .................................................................................................................................. 16
MARKET PLAN ......................................................................................................................................... 16
MARKET ANALYSIS .................................................................................................................................. 16
TARGET MARKET ..................................................................................................................................... 16
SALE POTENTIAL ...................................................................................................................................... 16
PROMOTIONAL METHOD........................................................................................................................ 17

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 MARKET SEGMENTATION AND MARKET SHARE .................................................................................... 17
MARKET RESEARCH ................................................................................................................................. 18
THE PRODUCT AND SERVICE ................................................................................................................... 19
DEMAND ANALYSIS ................................................................................................................................. 19
MARKETING STRATEGY/DISTRIBURIBUTION .......................................................................................... 19
PRICING POLICY....................................................................................................................................... 19
CHAPTER FOUR..................................................................................................................................... 21
ORGANIZATION AND MARNAGEMENT PLAN ......................................................................................... 21
ORGANIZATION STRUCTURE .............................................................................................................. 21
KEY MANAGEMENT PERSONNEL ............................................................................................................ 22
OTHER MANAGEMENT PERSONNEL ....................................................................................................... 22
REQUIREMENT, TRAINNING AND PROMATION ...................................................................................... 23
REQUIREMENT ........................................................................................................................................ 23
TRAINING ................................................................................................................................................. 23
PROMOTION ........................................................................................................................................... 23
REMUNERATIONS AND INCENTIVES ....................................................................................................... 23
INCENTIVE ............................................................................................................................................... 24
LICENSE, PERMITS AND BY-LAW ............................................................................................................. 24
BY-LAW.................................................................................................................................................... 24
CHAPTER FIVE ...................................................................................................................................... 26
OPERATIONAL/PROMOTION................................................................................................................... 26
PRODUCTION FACILITIES AND CAPACITY ................................................................................................ 26
MONTHLY OVERHEADS ........................................................................................................................... 27
PRODUCTION OPERATION COST ............................................................................................................. 28
PRODUCTION PROCESSS ......................................................................................................................... 28
FACTORS AFFECTING THE PRODUCTION PROCESS AND POSSIBLE SOLUTION ....................................... 28
THEFT .................................................................................................................................................... 28
SOLUTION............................................................................................................................................. 28
COMPETITION ..................................................................................................................................... 28
SOLUTION............................................................................................................................................. 28
TRANSPORT ......................................................................................................................................... 29
SOLUTION............................................................................................................................................. 29

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REGULATION AFFECTING THE BUSINESS ....................................................................................... 29
CHAPTER SIX ......................................................................................................................................... 30
PRE-OPERATIONAL COST ........................................................................................................................ 30
WORKING CAPITAL.................................................................................................................................. 30
PROFORMA INCOME STATEMENT .......................................................................................................... 31
PROFORMA BALANCE SHEET .................................................................................................................. 32
BREAK EVEN POINT 1ST YEAR.................................................................................................................. 32
FIXED COSTS ............................................................................................................................................ 33
BREAK EVEN POINT 2ND YEAR .................................................................................................................. 33
VARIABLE COST ....................................................................................................................................... 33
FIXED COSTS ............................................................................................................................................ 34
VARIABLE COSTS ..................................................................................................................................... 34
FIXED COST .............................................................................................................................................. 35
PROFITABLEBILITY RATIOS ...................................................................................................................... 36
DESIRED FINANCING ............................................................................................................................... 36
PROPOSED CAPITALIZATION ................................................................................................................... 36

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CHAPTER ONE
1.0 EXECUTIVE SUMMARY
1.1 Introduction
Manlux Solutions will be providing service to the clients such as managing and disseminating
both digital and manual records to clients at their demand.

1.2 Business Description

The proposal type of business will be a service kind of business and it will be a sole proprietor
type of business. The business location is at Eldoret town Nairobi Uganda highway next to
family bank opposite K.C.B bank under a building named Petresha house

1.3 Marketing Plan

The business will create a stable and consistent market though the services offered. The business
occupy 40% market share which will increase up to 70% after 4years of operation for fulfilment
of its objectives the business will engage in aggressive marketing of its services through the
advertisement, promotion, public relations among others so as to win more customers since there
are many competitors who has already penetrated into the market.

1.4 Organization / Management Plan

The organization / structure will be simple though it is expected to expand in future whereby all
the duties and responsibilities flow from top to the bottom. Training and recruitment will be done
to ensure qualified personnel are obtained and also to improve employees’ morale through
motivating and job appraisal.

1.5 Operational and product plan

The business laid down comprehensive strategies concerning its products and services offered to
the esteem customers, by doing this the proprietor will provide a unique and high quality product
and services which will make the business to yield more profit and to develop gradually.

1.6 Financial Plan

The business will set its operational cost at Ksh. 500000. The amount proposed will help the
proprietor to purchase the required materials before the business starts
The proposed business capital will be from
Personal savings
200 000
Grants from friends and relatives 250 000
Bank loans
50 000

9
CHAPTER TWO

BUSINESS NAME
The business name will be Manlux Solutions. The business will operated under the following

address.

MANLUX SOLUTIONS

P.O BOX 588

ELDORET

PHONE NUMBER: 0724603853

EMAIL: juliuskipngetich364@gmail.com

Website: manluxtech.co.ke

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LOCATION OF THE BUSINESS
The business location is at Eldoret town Nairobi Uganda highway next to family bank opposite

K.C.B bank under a building named Petresha house

K.V.D.A PLAZA

NAIROBI ROAD UGANDA ROAD

FAMILY MANLUX K.C.B BANK
BANK SOLUTIONS

NAKUMAT SUPERMAKERKET

ORANGE HOUSE TILIL HOUSE SAFARICOM HOUSE

R.V.T.T.I

From (H.G.S.S.) sos children village

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TYPE OF BUSINESS
The business will be a sole proprietorship that the owner will be the boss and will share the profit

with nobody else. The business will be providing service to the clients such as managing and

disseminating both digital and manual records to clients at their demand. The reason for deciding

the sole proprietorship is to enhance and be making quick decision and be my own boss

NATURE OF THE BUSINESS

The business will be a start-up because of the public demand, in the are there is no other business

which is offering the service that it will venture into and therefore no consumption after conducting

market study the business will have no competition because no computer repair plus the knowledge

have attained in my institution hence there is need to start one. The business will be offering since

there is available of Faiba (JTL) and Safaricom internet service at a cheaper rate updating

managing of information resources in digital format will be easier by the click of a button thus

making works easier. Also the business will offer cheaper hard drives such as hard disk, flash disk

and memory cards which is widely used in this digital world which the main business target.

INDUSTRY
The size of the business will be small since this the start-up business, but will be growing as the

time goes by and as it gets established in the market. The business will grow in terms of service

provided and opening of other branches in town, and in other places such as Nakuru town. The

business will provide current services and will go with the taste and fashion 0f customers. In future,

the business will intend to expand and open other branches in different towns since the digital

world is rapidly growing in Kenya considering laptops are made to be thought form nursery

schools. It will also improve the service such as providing online communication teaching and

learning.

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PRODUCT AND SERVICES
The business will offer different product such as quality and current information materials in flash

disk memory cards and laptops e.g. HDMI, interface cables among other stationary will be

available. Services which will be offered is acquisition of information materials, management of

information resources in e-fortamt, formatting of broken windows, installing software’s like VLC,

ashampoo, adaptors, printers and monitors. The business will use the motto “super value ever” and

so the products and services produced or provided will be of high standards so as to attract many

customers. High qualities products will be sold in the business.

OPERATIONAL RESOURSES
The business will require human resource financial recourses and institutional resources. The

business will require trained personal that can efficiently operate the computer when the software

engineer is handling a different product. It will also need capital which will be a start capital

amount to ksh.600000 this will be required through various shares for expansion capital, the

business will get from its own savings and profits. The business will also need premises such as

the building room, facilities to work on such as chairs table which will be purchased from the start

up capital. The business will as well need computers and other necessary machine to work on

which will be purchased form Lenovo, hp, dell, compact companies, and this company produces

much durable and quality product hence much decreases of breakdown and customers trust worthy.

THE MARKET
The business will benefit from clients or customers. The majority customers will be institutional

like Moi University student among many new collages including Nairobi aviation, secondary

schools and primary schools locally. There will be also individual customers who will also benefit

from commercial customers such as family bank which is next to the building where the firm will

be located. Updating of virus regularly is essential to every computer. Also availability of face

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book, twitter, whatsapp and other form of media like television and radio broadcasting will boost

awareness of the public on our products and services

ENERGY AND GROWTH SRATEGEY

The business will use different methods to create awareness of the business since it is a start up

and not well established in town. The business will advertise the business will invest in

advertisement on various platforms. These will alert customers about the awareness and existence

of the business. In growth strategy, the business will use fair discounts which will motivate

customers to come back and use the services and products. After sale service will be provided to

the business frequently customers.

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ANALYSIS TABLE
AREA STRENTH WEAKNESS THREATS

Personal  Having Inadequate trained

qualified personnel

learned

personnel

 Loyal workers

Products  Having quality High priced product

products

 Modern

products

Environment  Not Powerful fluctuations  High

competitive government

 Close to taxation

customers

Competition No stiff competition

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CHAPTER THREE
MARKET PLAN
MARKET ANALYSIS
The business will conduct a survey to the area so as to gather information about the customers.

The survey will help to know what business likes and dislikes and also to know the kind of products

and services to introduce to the business. The analysis will also help the business in determining

the pricing of the services and products comparing with the competitors. The business will use

penetration pricing so as to overcome the competitors. The business will also use post base pricing

method so as to make maximum profits. The market analysis will also help the business to know

the customers income and the capability of purchasing and using the services.

TARGET MARKET
The business will benefit from different customers in the area. The major targeted customers are

institution such as Moi University, rift valley technical training institute and also east Africa Barton

University. The business also targeted individuals who go far to look for computer services and

therefore the business will capture them. Commercial customers are also targeted such as co-

operative bank, Kenya commercial bank (KCB) which is near to the business. They will use the

service such as updating computer antivirus and purchasing products. The income of the targeted

customers flows throughout the time because majority individuals are working; and the mode of

payments is cash daily.

SALE POTENTIAL
The business will have high expectations of making sales simply because there will be no high

competition and also the sited area is close to the customers. The business will increase the sales

16
by giving out discounts to the esteemed customers, giving customers warranty guaranties of six

months in each and every product purchased and also by advertising the business though posters

so as to bring the awareness and alert people about the new business.

PROMOTIONAL METHOD
The business will employ different strategies to bring awareness about the products and services

offered in the business. The aim of this promotion is to archive four objectives i.e. attention, create

interest, arise the desire and obtains action. This objective will be driven by advertising which will

be done through posters and giving discounts to the customers as well. Bulletins will also be used.

Advertisement will create awareness about the new business hence having high market share.

MARKET SEGMENTATION AND MARKET SHARE

After the business has carried out the market analysis, it will now divide the market so as to meet

the needs of customers. The business will go by the taste and fashion of the key customers. It will

be divided according to the customers’ purchasing power of the products and services and then

modes of income such as those who earn daily, monthly, or even weekly will be much put into

consideration. The products will be affordable to all customers since the targeted customers are

both institutional, commercial and individual and therefore their time of opening and closing or

working hours will be highly considered so as to catch up with each and everyone.

The business will get business shares from commercial bank in form of a loan amounting to 40%,

individuals will give 30%, owner will contribute 20% and the family will give a share of 10%. The

following pie chat represents the total market share.

 Loan= 20 /100 x360

=144

17
  Individual = 30/100 x 360

= 108

 Owner = 20/100 x 360

=72

 Family = 10/100 x 360

=36

family, 1.2

owners
share, 1.4

individuals shares, bank loan shares,

3.2 8.2

MARKET RESEARCH
This business will carry operations in the market to identify the customers’ needs. This will help
to bring in service and products which have meaning and needed by customers. It will avoid
purchasing products which will be stagnant in the market. This operation will also help to know
much about the competitors, how they sale and price their products and changes their services so
that the business can know how to do about competing with them. It will also help to know the
quality of their products and from which companies they purchase from. This research will enable
to look for a good site/location on the business i.e. close to customers easily accessible and security
will also be considered.

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The following is the procedure which will be followed

 Identify the problem and go to solve that problem.

 Identify the area to carry out the market research.
 Go to the field and collect data.
 Compile and write a report.
 Give conclusions and recommendations.
 Implement.

THE PRODUCT AND SERVICE

The business will disseminate information and information resources and also sell
stationeries such as flash disk, memory card, CPU, monitors, laptops tablets, mouse,
Keyboards, adaptors and power cables some electrical equipment will also be available such
as extension power cables will be available, the services offered will be in soft copy mostly
and thus aforementioned aids will be of good help.

DEMAND ANALYSIS
This will be achieved by observing on the rate of customers getting into the business. The
tare on how the products will be getting finished in the business will show the demand of them.
Also the suggestion box will be put in place so as to get feedback about the business. Through
the customers’ requests for some products will as well show what they mostly need and go for
it. The faster the products get finished, the higher the demand is and this will be the major way
of analysing the needs of the customers.

MARKETING STRATEGY/DISTRIBURIBUTION
The business will address the customers’ needs will currently being met in the market
place. The business will use one price to attract customers, replacement of products will be
allowed. The business will offer high quality products, discounts will be given in accordance
to the frequently esteemed customers. The customers will get our products directly from the
business so as to cut down the expenses of distribution. The following is the chain of
distribution of products.

MANUFACTURER RETAILER CUSTOMER

PRICING POLICY
The pricing of the products and service will be affordable to all customers. This will be
achieved through following market research and analyzing carried out. The business will use

19
post base pricing method where it will identify the product then decided on the price so as to
get profit.

Price = cost of product + profit. The business will also tend to use penetration pricing where
it will reduce the price of the product to manageable price depending on the market demand.
This will make sure that all potential and targeted customers can afford the business changes
in service.

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CHAPTER FOUR
ORGANIZATION AND MARNAGEMENT PLAN
For the business to run effectively, it will need clear and open organization structure and
goods management plan. This will enable the employee to know;

 Who is the supervisor

 The order and chain of command
 How to communicate and pass information clearly
 How to work efficiently

Whom to see in case of a problem

ORGANIZATION STRUCTURE

MANAGER

ASSISTANT MANAGER ACCOUNTANT

WATCHMAN CLERKS TECHNICIAN CLEANERS

SERVANTS/SURERVISOR

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KEY MANAGEMENT PERSONNEL
The business will run under the manager and assistant both are technician as the key personnel.
The business will also have clerks who will be employed. The following shows the personnel, their
duties and qualifications.

PERSONNEL DUTIES/RESPONSIBILITIES QUALIFICATIONS

Manager  Co-ordination  Have a diploma in
 Decision making computer science
 Organizing the business  Two years working
activities experience
 Planning for the duties  Good public relation
 Ready to work with
no close supervision
Assistant manager  Assist in planning  Have a diploma in
 Assist in business computer science
decision making  One year experience
 Assist in controlling  Good public relation
 General management  Ready to work with
assistant no close supervision
Accountant/clerk  In charge of cash  Have diploma in
payment accounting
 Cash transaction i.e.  One year experience
depositing,  Ready to work with
withdrawing no close supervision
 Manage business  Computer literet
records

OTHER MANAGEMENT PERSONNEL

The business will have other personnel who will help the business to run efficiently. Such
personnel will have their roles to play so as to meet the objective of the business.

PERSONNEL DUTIES/RESPONSIBILITY QUALIFICATION

Janitors  Watching the business  Have a Kenya national
premises overnight id
 In charge of general  Have certificate of
security of the business good conduct
 Good public relation

Cleaners  In charge of general  Have certificate from

cleanings and public health
preparing meals for the  Have certificate of
workers good conduct
 Good public relation

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  Computer literate is
and advantage
Supervisor/attendant  In charge of  Should be skilled and
supervising and knowledgeable in
attending to customers computers
 Make sure the maintenance with a
customer has been diploma
fully served  Good public relation
 Handle warranty  Ready to work with no
closed supervision
Technician 1&2 In charge of repairing,  Should be skilled and
maintaining, installing drivers knowledgeable in
from a computer and other computers
electrical accessories maintenance with a
diploma
 Good public relation
Ready to work with no closed
supervision

REQUIREMENT, TRAINNING AND PROMATION

REQUIREMENT
The business will employ a very professional way of recruiting its staff. The business will advertise
the vacancies and those who are to apply through the address which will be provided. The qualified
applicants will be called for an interview. The business will give all details about the requirements

TRAINING
The business will orient the qualifies which will be considered as part of training and the
circulation will take two days. The business will be conducted a workshop so that the stuff can get
to be familiarized with the premises and get to know it well. All this will take place in the first few
days.

PROMOTION
The business will promote the stuff after analyzing their performance. The promotion will take
place after year and this will be carried out by the managers. This promotion will lead to motivation
of workers hence working with extra efforts.

REMUNERATIONS AND INCENTIVES

The business will have different packages of payments this will be based following their duties
and responsibilities. The following table shows the remuneration of the stuff.

23
 EMPLOYEE POST SALARY PER SALARY PER TOATL SALARY
MONTH YEAR
Manager 1 15,000 15,000 * 12 180,000
Assistant manager 1 14,000 14,000 * 12 168,000
Accountants/clerks 2 12,000 12,000 * 12 *2 288,000
Janitors 1 8,000 8,000 * 12 96,000
Cleaners 1 5,000 5,000 * 12 * 2 120,000
Supervisor 3 9,000 9,000 * 12 *3 320,000
Technician 1 9,000 9,000*12 108,000
Total 72,000 1,284,400

INCENTIVE
The business will employ different ways to boost and give morale to employee. The following are
some of the incentives

 The business will provide fringe benefit which will be given to each stuff
 The business will provide tea break daily to employees and this will prevent lose of time
especially when the stuff goes out looking for a place to take tea
 The services will also be given an allowances if only the stuff produces a letter from the
recognized hospital with an official stamp
 There will be a reward of certificate of merits to those employees who will have no
absenteeism in the role call register. These will motivate the stuff and stop being absent
without permission.

LICENSE, PERMITS AND BY-LAW

The business will have to get the legal requirement and abide to the government regulations and
policies. The business will get license, will be issued by the country council of Eldoret at one
thousand shillings and it will be paid yearly. This required under the municipality council Act Cap
239 section 5 which states that “the business should obtain a permit for it to operate in the town”.
This is a legal document and government requirement.

BY-LAW
The business will employ and put in place some by-laws which will be strictly followed.

These by-laws are:

 No smoking in the business. The business will be a no smoking zone since this is unhealthy
to the customers and also to other stuff.
 No putting marks on the table, walls and machines. O names will be allowed with an
exception of the owners. Names of identification done by the authorized persons.
 Working hours will be strictly followed. The opening and closing hours will only be
alternated with the permission from the manager.

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 No sharing of the machines or computers is allowed. This will avoid malt-tasking which if
done can make the machine to hung-up
 When assembling computer parts should be firmly fixed.
SUPPORT SERVICE
The business will need assistant from other organization and will work in conjunction with
them so as to benefit from their services and be able to meet the specified goals. Such
services are:-
 BANKING SERVICES
The business will majorly need banking services which will help making
transactions such as deposit and withdrawals of cash. They will also assist in giving
security to the cash after we deposit to avoid cash theft, these services will be gotten
from KENYA COMMERCIAL BANK ELDORET and in addition to that they are
our esteemed customers
 POSTAL SERVICES
The business will as well need some postal assistant especially to get the postal
address and telephone landline and those services will help in communication
through mails and telephone calls. These services will be opposite to the KEHYA
POSTAL SERVICE ELDORET
 INSUARANCE SERVICE
The service will help in giving security to the business which will be issued in case
of fire and theft. These services will assure the business compensation after any of
the two has occurred. These services will be gotten from Africa Air Rescue( A.A.R)
insurance, it will be selected because their charges are negotiable.

25
CHAPTER FIVE
OPERATIONAL/PROMOTION
In this section the business will have different production aspects as how the business will
produce its products and service and how it will operate the business

PRODUCTION FACILITIES AND CAPACITY

The business will need production facilities and will as well require some right machines so
as to operate. The table below depicts the facilities required in the business.

ITEM QUANTTITY SUPPLIER UNIT COST TOTAL

COST
Computers (cpu) 10 Dell 10*9000 90,0000
Furniture 15 Mandela 15*1000 15,000
furniture
Curtains 3pcs Erick tailor 3*100 300

Dust coasts 8pcs “ 8*200 1,600

Stationeries 5 ctns Eureka 5*1,500 7,500

bookshop
First aid kit 1 box “ 1*1000 1,000

Electric van 1 box Sonny 1*1,500 1,500

company
Bulbs(florescent) 2pc Havel’s 2*800 1600

Mob/brush 2pcs Nakumat super 2*500 1,000

TOTAL 124,020

PRODUCTION STRATEGEY
The business will have different production way which will be laid down by the managers
there will be many procedural ways which will be adopted so as to meet the goals. These
will be raw materials such as computer. Stationeries which will be sold to customers,
registration fee will also be set aside, insurance and other preliminary expense will be
considered.

Item Cost
26
 Rent 5000
Electricity 1500
Labour 7200

Registration 2000

Advertisement 3000

Receipt book 200

Miscellaneous 10000
Total 93700

MONTHLY OVERHEADS
The business will need different things which should be done within the first month so that it can
operate and they are legal and major requirements, the table below shows the monthly
requirements. The table below shows the monthly requirements.

Item Amount
Electricity 1500
Telephone bill 1000
Water bill 500
Insurance 5000
Advertisement bill 5000
Transport bill 1000
Maintenance/repair 5000
License/permit 1500
Rent 5000
Labour 72000
Stoke 20000
Total 117500

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PRODUCTION OPERATION COST
ITEM AMOUNT
Raw material 50000
Labour 72000
Overhead expenses 117500
Total 239500

PRODUCTION PROCESSS
Since the business is a selling desk, the customers once gets into the business will be directed to
the right section such as specification and process of using it to avoid confusion. The customer
then will service for him/herself so as to have a clear mind set of the product and the functionality
but their will be personnel assistant in case the customer gets stack. He will be assisted or in case
the machine develops some problems. After the customer has finished, the payments will be made
at the counter and obtain a relative recipient of the services obtained. This will help in accounts
transactions and to analyze the market performance of the business.

FACTORS AFFECTING THE PRODUCTION PROCESS AND POSSIBLE SOLUTION

The business will get difficulties which might affect it negatively, such constraints are:-

THEFT
The business may find it hard to crud the upraising theft in the town and then will
make it not easy to operate up to late hours hence hindering the approximate
working hours

SOLUTION
The business therefore will employ janitor who will keep guarding overnight and
also this will raise he alarm. Directors will also be put in place to detect and sense
any possible act or theft around and in the business then necessary action will be
taken immediately.

COMPETITION
The business will find if hard to penetrate into the market especially at this start up
time competitors are many and this might affects the business especially the first
month. It will be required to set aside some money for advertisement.

SOLUTION
The Business will keep some money so as to employ some advertisement
techniques so as to make people aware of the business. It will also be required to

28
 have unique products and services which will motivate customers. special offers
will be made to attract many customers in the market, modern technologies and
service.

TRANSPORT
The business won’t find it possible to get products from manufactures to the
business and this will affect it since it will be expensive especially when required
to hire its own vehicle to transport the products

SOLUTION
The business will organise and make good relationship with the manufacturers so
that they can bring the products to the business at no cost. This will be done by
maintaining one supplier all the time

REGULATION AFFECTING THE BUSINESS

 Employment Act Cap 229 of KENYAN CONSTITUTION.
The Act outlines conditions and regulations governing the relationship between the
employer and employees. All the regulations have to be followed. They include the
National social security fund which each and every employer must get registered.
National health insurance fund must also be paid. This affects the overall business
performance

 Government policies
These are regulations which are brought in by the ministry of trade and threats to
the business such as import taxation which are very high and unbearable or
unaffordable. This high taxation will affect the business negatively. The price
control units also whereby tend to give much instructions which may lead the
business from not making maximum profit of the products are expected.
 Registration and trade mark Act
The business will find it hard to go about getting some registrations from the
council which is a must and very expensive. The business has to get its own
trademark (logo) and for it to be put through it has to pay some money. The license
ad permit also needs prior preparation and spending out of money hence being a
threat to the business

29
CHAPTER SIX
PRE-OPERATIONAL COST
DETAILS AMOUNT (KSH)
Rent 5000
Electricity 1500
Salaries 72000
Registration 2000
Advertisement 3000
Receipts books 3000
Telephone 1000
Water 1000
Insurance 500
Total 90200

WORKING CAPITAL
ITEM 1ST YEAR 2ND YEAR 3RD YEAR
Cash 100000 15000 200000
Loan 200000 250000 300000
Creditors 50000 60000 75000
Stock 50000 65000 80000
Working capita 400000 525000 655000

30
 PROFORMA INCOME STATEMENT
ITEM 1ST YEAR 2ND YEAR 3RD YEAR
Sales 4820000 32974000 3,061,850
Cost of goods 1,030,000 750,000 705,000
Profit 3,790,000 2,497,400 2,356,850
Expenses
Salaries 864,000 864,000 960,000
Rent 60,000 60,000 72,000
Water bill 9,750 8,700 8,250
Telephone bill 17,600 9,700 7,850
Electricity bill 25,000 19,700 17,250
Advertisement 23,600 14,000 26,500
Stationeries 60,500 116,000 106,800
Maintenance/repair 10,500 12,500 19,000
Cash purchase 215,000 140,000 103,000
Insurance 60,000 60,000 72,000
registration 2,000 2,000 2,000

Total 1,347,950 1,306,250 1,394,650

Profit before tax 2,442,050 1,191,150 962,200
Tax provision 1,709,435 833,805 673,840

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PROFORMA BALANCE SHEET
ITEM YEAR 1 YEAR 2 YEAR 3
CURRENT ASSETS
Cash at hand 100,000 225,650 254,400
Cash at bank 100,000 20,000 30,000
TOTAL CURRENT 200,000 245,650 284,400
FIXED ASSET
Machinery/equipment 90,000 100,000 140,000
Furniture/fittings 15,000 20,000 25,000
Total fixed asset 105,000 120,000 165,000
Total assets 305,000 365,650 449,400
CURRENT
LIABILITY 50,000 60,000 75,000
Creditors 50,000 60,000 75,000
TOTAL CURRENT
LIABILITY

LONG TERM 200,000 250,000 300,000

LIABILITIES 100,000 225,650 254,400
Bank loan 300,000 475,650 554,400
Capital employed
Total LONG TERM
LIABILITY
TOTAL LIABILITY 350,000 535,650 629,400

BREAK EVEN POINT 1ST YEAR

TOTAL SALES FOR 1ST YAER =482,000

VARIABLE COST

ITEM AMOUNT

Telephone 17,600

Advertisement 25,000

Water 9,750

Maintenance/repair 10,500

Electricity 23,600

Stationary 60,500

Cash purchase 215,000

32
Total variable cost 361,950

Contribution margin= total sales – variable

= 4,820,000 – 361,950

= 4,458,050

Contribution margin % contribution margin ÷ TOTAL sales

=4,458,050 ÷ 4,820,000

=0.924%

FIXED COSTS
ITEM AMOUNT

Rent 60,000

Insurance 60,000

Registration 2,000

Salaries 864,000

Total fixed costs 986,000

Break even point = fixed cost ÷ contribution %

986,000 ÷ 0.924% = 1,067,099

BREAK EVEN POINT 2ND YEAR

VARIABLE COST
ITEM AMOUNT

Telephone 9,350

Advertisement 14,000

Water 8,700

Maintenance 12,500

Electricity 19,700

Stationary 116,000

33
Cash purchase 140,000

Total variable costs 320,250

Contribution margin = total sale – variable costs

= 3,247,400 – 320,350

= 2,927,150

Contribution margin % = contribution margin ÷ total sales

= 2,927,150 ÷ 3,247,400 = 0.9%

FIXED COSTS
ITEM AMOUNT

Rent 60,000

Insurance 60,000

Registration 2,000

Salaries 864,000

Total fixed costs 986,000

Break even point = fixed cost ÷ contribution margin %

= 986,000 ÷ 0.9

= 1,095,556

BREAK EVEEN POINT 3RD YEAR

Total sale for 3rd year = 3,061,850

VARIABLE COSTS
ITEM AMOUNT

34
Telephone 7,850

Advertisement 26,500

Water 8,250

Maintenance 19,000

Electricity 17,250

Stationeries 106,800

Cash purchase 103,000

Total variable costs 288,650

Contribution margin = total sale - variable cost

= 3,061,850 – 288,650

= 2,773,200

Contribution margin % = contribution margin ÷ total sales

= 2,773,200 ÷ 3,061,850

= 0.91%

FIXED COST
ITEM AMOUNT

Rent 72,000

Insurance 72,000

Registration 2,000

Salaries 960,000

Total fixed cost 1,106,000

Break even point = fixed cost ÷ contribution margin %

= 1,106,000 ÷ 0.91

35
 = 1,215,385

PROFITABLEBILITY RATIOS
RATIO TYPE WORKING YEAR 1 YEAR 2 YEAR 3
FORMULA
GROSS PROFIT GROSS PROFIT 3,790,000 * 2,497,400 * 2,356,850 * 100
RATIO *100 100 100 3,061,850
TOTAL SALE 820,000 3,247,400 =76.9%
= 79.9% =76.9%
RETURN ON NET PROFIT *100 1,709,345 8,338,805 673,840 * 100
EQUALITY Owner equity *100 *100 254,400
10,000 225,650
Return on Net profit * 100 1,709,435 * 833,805 * 100 673,840 * 100
investment Total investment 100 1,306,250 139,650
1,344,950

DESIRED FINANCING
ITEM AMOUNT KSHS
Pre-operational cost 90,200
Working capital 400,000
Furniture/ fitting 15,000
Machines / computers 90,000
Production facilities 124,000
Total financial investment 719,220

PROPOSED CAPITALIZATION
ITEM AMOUNT KSHS
Owners 1,000,000
Total borrowed (fund) 100,000
Loans (bank) 500,000
Creditors 200,000
Total investment 1,800,000

36