BUSINESS PLAN-ELECTRICAL SHOP

This chapter contains the name of the business i.e. ROSETTA ELECTRICAL ENTERPRISE
which originates from my name ROSSETA NYAMBURA MURUGAMI for a unique identity in
the business fraternity. There is full description of the location and address of the business, form
of ownership etc.

The business is majorly involved in selling and repair of electrical and electronic equipment and
offering services relevant to electrical. This chapter shows how the business enters into the
market as Tsunami as it employees different measures for increasing sales and profit
maximization e.g. advertisement low prizes of products / services, promotion discounts and after
sale services.

2.0 MARKETING PLAN

Chapter two describes different ways of trading and types of customers the business targets. The
business targets to serve 2,800 potential customers within its locality. Its growth will be
determined by the quality of goods and services offered hence determing the profit of the
business.

This chapter shows the competitors of ROSETTA business which are BUSH, OBASH, BUYA
and others and indicate how the business will capitalize on their weakness hence its success
methods of promotions and advertisement made to improve the business are clearly shown.

3.0 ORGANIZATION AND MANAGEMENT PLAN

Chapter three contains the management of the business and its organization structure. The
business has a manager,supervisor, secretary, technical, artisans and security officers with stated
responsibilities respective for their qualifications.

Recruitment of employees, training and promotion of workers and other important exercises are
clearly shown in this chapter. The chapter also shows how remuneration and incentives are done
and also the legality of the business.

4.0 PRODUCTION / OPERATION PLAN

chapter four contains production and operational plan for the business. The business is largely
dealing with sales and repair of electrical tools & equipments plus materials (facilities) hence
their estimated cost are shown.
It also shows the business layout, production strategies, design and development of the business,
calculations of monthly materials required for the business to operate. There are also the
regulations for the operations of business.

5.0 FINANCIAL PLAN

Chapter five include calculations and totals of different finance plans like the pre –operational
cost, the working capital etc.

It shows the cash flow projection for year one which is tabulated and the accumulated cash is
1,312,500/=

These other calculations include the proforma balance sheet, income statement which has net
profit after taxation, break even level of the business, contribution margin and the break even
level of sales.

It has the profitability ratios which shows how the level of success of the business are
calculated. 

CHAPTER ONE

1.0 BUSINESS DESCRIPTION

the proposed business that is ROSETTA ELECTRICAL ENTERPRISE will be dealing

specifically with the sale of electrical materials, tools and equipments and also will be offering
different services like repair of electrical equipment, tools or gadgets, winding of motors etc.

1.1  BUSINESS NAME

ROSETTA ELECTRICAL ENTERPRISE is the preferable name for the proposed business.
ROSETTA is an abbreviation for KEVIN KOSKEY which is very unique or original name. Thus
ROSETTA is a concrete and simple word that is catchy and can attract many people. It also acts
as an advertisement.

1.2  BUSINESS PHYSICAL LOCATION

The business will be located at Kaptembwa Market centre which is in kaptembwa area. West of
Nakuru town and a distance of about 10 KM from Nakuru CBD. This place is preferable because
it is along the road hence easy transportation of goods and services. Its strategic location at the
heart of the market market place hence it will attract many people as customers. there is full
security as there is a police post.
The business address is :-

ROSETTA ELECTRICAL ENTERPRISE

P.O BOX 168

NAKURU

Telephone N. 0792736749

E-mail :[email protected]

1.3 FORM OF OWNERSHIP

This business will be a sole proprietorship kind of business as it will be runned by one person.
This will be so because of the following reasons:-

(a)    He will be the boss of his own thus run the business without any interruption

(b)   Easy to make decisions

(c)    He will enjoy all the profits as he I will be the chief controller of the business.

1.4 TYPE OF BUSINESS

This business will engage much in the following

(a) Selling of electrical materials like cables, switches insulators, lighting systems etc, electrical
tools like phase resters, electrical tool boxes and any other electrical related tools or equipment.

(b) Repairing of faulty electrical gadgets in different capacitors.

(c) Motor winding, rewinding, dismantling, repair and selling of the rewinded motors.

Leasing out services like Lighting System, Music Stereo eg Microphone etc to events organizers
for occasions like funeral, political meetings, weddings etc.

1.5 PRODUCTS / SERVICES

The products produced will be of high quality, convenient and cheap for customers to afford. All
these will be achieved by having skillful personnel and having a large stock to begin with. The
products and services will be readily available because of its location as it is situated at the heart
of kaptembwa market centre along the road.

 
 

1.6 JUSTIFICATION OF OPPORTUNITY

The assurance that the success of this business will be profound because of the following,

(a) Availability of knowledge and skills required to run any business which was got through
three years in college, also from the experience got during attachment and lastly the
entrepreneurial skills.

(b) The business will be situated in an area reachable many people enhancing the business
growth. Also transportation of materials and workers will be easy as the business will be near the
road.

(c) Research will be done and more consultations on how to grow in business.

1.7 INDUSTRY

This business will be both a commercial and service industry as it will base on purchasing
materials, tools equipment etc to sell them to customers as well as doing services like repairing,
rewarding of motors etc. This industry is suitable because transportation of these materials will
be easy due to the access of road, there is market as the business will be located in an area where
there is less competition, availability of skilled personnel and tools / equipments required hence
quality products and services offered

1.8 BUSINESS GOALS

In this changing world, the business will be very resourceful to many people as it will have the
following goals.

1.8.1 SHORT TERM GOALS

(a) The business will create job opportunity to self and to others

(b) To establish a very successful business which can win customers interest at large within a
very short period of time possible.

(c) To provide the best and quality products and services.

(d) To employ qualified personnel to assist in running the business thus efficient production of
work.

1.8.2 LONG TERM GOALS

(a) To maximize profit

(b) To expand into a bigger business dealing with large quantity of stock hence increasing the
capacity of sales and services and workers.

(c) To open other branches that is 2 -3 branches elsewhere so as to reach many people with our
services and products hence grow bigger in business.

(d) To venture into other small business beside this one e.g. opening a cyber café, video show
etc.

(e) To make sure all the personnel involved in the business get knowledge and skills with time
i.e. as the world changes, technology changes also so they need to be updated.

1.9.1 ENTRY STRATEGY

The business will employ many tactics and ways of penetrating the market e.g.

(a)    By offering low prices to some products and services

(b)   Offering promotions like giving discounts and incentives

(c)    Making more advertisement through posters radio, TVs, Road shows etc.

1.9.2 GROWTH STRATEGY

For ht business to grow into a large enterprise, the following is required

(a) Employing dedicated and qualified personnel who can manage the business well

(b) Creating more space for expansion of the business e.g. buying land or plots.

(c) Buying a vehicle which can be used in transporting materials hence reducing cost of
transportation and also time wastage.

(d) Training the untrained staff so as to improve their production hence effective work

(e) Steady carrying out of advertisement and frequent promotions

(f) Buying electronics devices like computer or laptop to help in storing information and other
necessary work.

(g) Motivating all the workers.

CHAPTER TWO

2.0 MARKETING PLAN

ROSETTA ELECTRICAL ENTERPRISE has many strategic plans to achieve its objectives and
to reach the market demands. These are like expanding its operation and space and also
employing skillful personnel to help in management. The business will be located in a central
place which can be reached by many thus capturing many customers. The business will do
throughout advertisement of its services and products, offer promotions, discount etc to win the
interest of people. The pricing of items and services will be relatively cheaper as compared to
other competitors. These products and services will always be readily available

2.1 POTENTIAL CUSTOMERS

The business targets to win both domestic and commercial customers. The domestic customers
will be general public especially people around kaptembwa market who are most targeted as they
will buy as well bring their items for service. The commercial customers will be the middlemen
and hawkers who will buy goods from the business and sell them to the market.

2.2 MARKET SHARE

Through research done thoroughly on the market in Kaptembwa area, the business is expected to
reach and serve 2,800 (two thousand eight hundred) potential customers.

There will be competition from other businesses like Bush Electro Shop, Obash workshop
(electrons) Buya electrons and others

NAME OF BUINESS PERCENTAGE SHARE TOTAL NUMBER OF

(%) CUSTOMERS
Bush electro shop 23 650

Obash workshop 21 600

Buya electronics 19 520

Vapshi electrical enterprise 26 730

Others 11 300

Totals 100 2,800

2.3 COMPETITION

VAPISH ELECTRICAL ENTERPRISE will face stiff competition from other business like
BUSH, OBASH, BUYA and others who were established 4 years ago. The buiness will base on
the competitors weakness to conguer the buiness scene. Despite these competition, the enterprise
will have measures to cope and analyze competition i.e.

(a)    Developing Excellency in product and services provision

(b)   Increase the size of the buiness by expanding its operations and shop flour.

(c)    Persuading more customers through promotions

(d)   Improving the quality of goods and services each day

(e)    Choosing the right and low cost technology with high volume.

SWOT ANALYSIS TABLE

BUSINESS NAME STRENGTH WEAKNESS

BUSH ELECTRO SHOP          Its centrally located          Poor relation

         Long term experience          High prices

OBASH WORKSHOP          Readily available          No promotion offered
 personnel

         Quicker and better

services
BUYA ELECTRONICS          Many employees          Lazy personnel who are
not always available
VAPSHI ELECTRONICS          Low prices          Little capital
ENTERPRISES
         Quality goods and
services

         Technical expertise

         Promotion

         Famous in the market

OTHERS          Famous in the market          Few workers

2.3.2 ANALYSIS TABLE

BUSINES Product Pricing Promotio Personnel Location Size Total

S NAME service n
Bush 2 3 2 4 5 2 18
Electro
Shop
Obash 3 2 1 3 2 1 12
Workshop
Buya 2 2 1 3 4 3 15
Electronics
Vapshi 4 5 4 5 3 3 24
Electronics
Enterprise
Others 1 1 2 3 3 2 12
Total 6 6 6 6 6 6 36

 
 

2.4.1 TRADE PROMOTION

This will be done by the business through

(a)    Offering discounts on goods and services bought from the buiness

(b)   Employing good character and well hevared employees who can attend to all customers
without favour or fear.

(c)    Purchasing enough stock of materials or items required to make sure that customers don’t
miss anything

(d)   Offering free samples on goods bought hence attracting more people

(e)    Marketing the services and products through buiness exhibitions and shows.

2.4.2 ADVERTISEMENT

The enterprise will employ the following advertisement methods.

(a)    Through posters where all the activities and location of the buiness will be written on the
posters and spread all over the Kambimtu market

(b)   Through local F.M radio e.g. Murembe F.M, West F.M or Radio Mabo who can pass
information in local language to many people.

(c)    Use of sign post to show where VAPSHI ENTERPRISE can be found.

(d)   Through local newspaper like Kambi Faily Asubuhi Nisikize etc. which are locally
written and do reach many people around.

(e)    Through direct email to the middlemen who can be potential customers.

(f)    Al;l these methods will ensure that customers are, well informed about the direction,
location operating time and kind of services provided.

2.5 PRICING STRATEGY

The business will adopt different pricing strategies like:-

(a)    Competitive pricing where competitors prices will be analyzed and compared then come up
with a suitable price which is relatively cheap for the products and services.

(b)   Cost plus where prices will be determined through the cost of materials used or involved

(c)    Psychological pricing where goods and services are blended to capture the customers
psychology

(d)   Discriminating pricing where the enterprise will be selling a commodity at two different in
cost e.g. time pricing where by during the day charges can be different from that of evenings.

2.6 SALES TACTICS

There are many sale tactics that buiness is going to use e.g.

(a)    Opening its doors for long hours make sure that customers get what they want at any time.

(b)   Having enough stock and offering the best quality products and services

(c)    Adopting an attractive way of pricing where goods or services wont be priced so high hence
affordable to everyone

(d)   Advertise frequently goods and services of the buiness through the radio, posters, newspaper
etc.

(e)    Employing very polite, humble, friendly, net and educated workers who will attend to
customers and any other persons correctly.

2.7 DISTRIBUTION STRATEGY

The enterprise will employ both direct and indirect channels of distributing its goods and
services to customers. Goods and services will be sold to customers directly from he shop floor
or sensing experts to them to services or repair their items. Also goods may reach the customers
indirectly from the business through agents, distributions or hawkers.

CHAPTER THREE

3.0 ORGANIZATION PLAN / MANAGEMENT

3.1 KEY MANAGEMENT PERSONNEL

(a) Manager

Qualifications

         Should have a diploma in Electrical Engineering

         Should be computer literate

         Should have 30 and above years

         Should have a five years experience in the field of electrical

         Should be fluent in English and Kiswahili

Duties and responsibilities

         He will be the custodian of the buiness i.e the owner and head of the buiness.

         Supervise buiness transactions and operations

         Carrying out short term and long term planning of the buiness

         Recruit the required personnel or staff

         Paying salaries to employees

SUPERVISOR

QUALIFICATION

         Should have a diploma in Electrical Engineering Should have enough experience in
electrical field

         Should be above 25 years

Duties and responsibilities

         To supervise all the operations of the business

         Analyze and report sales performance

         Generate new ideas on how to run the buiness

         Serving customers

         Takes over responsibilities in absence of the manager.

3.2 OTHER PERSONNEL, DUTIES AND NUMBER

SECRETARY

The proposed buiness will have one secretary

Qualification

         Should be at least a stage II module and above with basis knowledge ON BOOK keeping
and office practices

         Should also be computer literate

DUTIES AND RESPONSIBILITIES

         Responsible for office records and book keeping

         To handle issues relating to customers i.e. acting as receptionist

         Receive and make calls on behalf of the buiness organization.

TECHNICIAN (2)

The buiness will employ two technicians

QUALIFICATION

         Should be a certificate holder or above in electrical engineering

         Should be computer literate

Duties and responsibilities

         Look for contracts of work

         Design and cooperate all electrical projects.

ARTISANS

         The proposed enterprise will have three Artisans

         Qualifications

         They should have skills atleast in determining any faults, knowledge on electrical gadgets
etc.

         Should be able to communicate either in Kiswahili or English

         Duties and Responsibilities

         Should be able to detect any fault in an equipment and service or diagnose

         Carrying out duties delicated to them by the seniors.

Security officer

         The business will have one security officer

Qualification

         Should be a form four leaver and above

         Should have a 5 years experience in security forces

Duties and Responsibilities

         Keeping Vigilant security during the night and day time

3.3 RECRUITMENT, TRAINING AND PROMOTION

RECRUITMENT

         The business will make advertisement of its job opportunities through local newspaper, local
F.M radio like West F.M etc.

         There will be interviews for the recruits done by the manager questions will be asked
concerning the job ascertained. Individuals dignity honour will be considered so as reach to
the satisfaction of the customers.

         Employees will have at least a week to adopt and be familiarized with the buiness.

Training

         The new employees will be trained according to their qualification s to improve their
efficiency and knowledge

         They will be taught safety measures, their roles etc. in the buiness.

         They will also be attending seminars or workshop

         PROMOTION

         The employees will be promoted according to their performance and ability working

         The following will be considered when promoting employees.

         Their level of performance

         Training and qualification of each individual

         Punctuality and accountability

         Good public relation

         Loyalty to the enterprise

         Trust worthiness

         Diligence

         Creativity

3.4 REMUNERATION AND INCENTIVES

Remuneration will be done so that salaries set for employees c an be realistic according to their
experience and level of education

Employees earnings will include salaries and allowances monthly.

INCENTIVES

(i) Financial incentives

Employees will be paid money according to their productivity and hours worked for. Also they
can earn overtime, bonus and interests

(ii) Non – Financial incentives

There will be safety at work place, health facilities, sick pays, transportation to and from work,
free lunch, free tea, safety clotting etc.

REMUNERATION AND INCENTIVES TABLE

JOB TITLE NUMBER SALARIES MEDICAL OTHER TOTAL

OF KSHS P.M ALLOWANC SPECIFY (KSHS)
PERSONNEL E
Manager 1 20,000 4,000 2,000 26,000

Supervisor 1 12,800 3,200 1,000 17,000

Technician 2 9,000 2,500 500 24,000

Secretary 1 7,000 1,300 8,300

Artisans 3 5,500 1,100 19,800

Security officer 1 3,800 1,100 4,900

Total         100,000

 
3.5 LICENSES, PERMITS AND BY – LAWS

The buiness will require legal procedures for it to start its operations

These will include clearances, permissions, licenses etc from the government ministries and
other agencies. Some of these legal documents are:-

(i)                 Trading license from the Ministry of Trade which is free of charge.

(ii)               Certificate of ownership from the register of ownership (chargeable)

(iii)             Labour laws governing the employees Insurance whereby employees will be insured by
the buiness.

(iv)             Public health Act which deals with sanitation drainage, ventilation, hygiene.

3.6 SUPPORT SERVICE

The most vital services include :-

(i) Banking services where the business will open an account with Equity Bank Nakuru

(ii)Auditing books of account ; auditors will be hired and be paid daily upon delivering an
auditing report

Medical services which will be provided by the local dispensary at kaptembwa market.

Water will be provided by the pipe water project from Nandi Hills and also from bore holes.

Security will be provided by the officer in charge and also the buiness will be located near a
police post hence there will be security.

Power will be supplied from K.P.L.C and also there will be a generator.

Postal services will be provided

Legal service which will be provided by

SINJILA VALECHE AND ADVOCATE COMPANY

P.O BOX 721

Nakuru
 

CHAPTER FOUR

4.0 PRODUCTION / OPERATION PLAN

4.1 PRODUCTION FACILITIES AND CAPACITY

ROSETTA electrical enterprise will require a premise to operate from. This premise will be
situated at Kaptembwa market area. The enterprise will require offices for manager, supervisor
and accountant (for this matter the secretary ). There are other facilities that will be required as
listed in the table below.

ITEMS QUANTITY UNIT COST TOTAL

Computer system 3 16,000 48,000

Furniture cabinet 2 1,200 2,400

Cash book 1 600 600

Telephone 1 3,000 3,000

Chairs / tables 6 1,000 6,000

Electrical tool box 1 6,000 6,000

Electronics tool box 1 6,000 6,000

Totals 15 33,800 72,000

4.1.2 ENTERPRISE LAYOUT

 

In the main workshop is where all the buiness operations will take place.

Motors will be rewarded in the motor rewinding room by experts (fault motors)

All the purchased stock will be stored in the store plus other important things

Book keeping and recording is done in the accounts office. This is where purchase of stock to be
sold is done

4.1.3 REPAIR AND MAINTENANCE

The following maintenance measures will be taken by ROSETTA ELECTRICAL

ENTERPRISE in maintaining the tools and equipments used.

(a)    Regular maintenance where tools and equipments will be checked for maintenance to make
sure they work effectively every tool or equipment to be checked thoroughly

(b)   Corrective maintenance where by tools and equipments shall be attended to when need a
rise so as to correct the prevailing situation e.g. sharpening of blunt parts greasing moving
parts etc.

(c)    Preventive maintenance where tools and equipments are kept clean or maintained in order to
prevent them from harm, rust destroy etc.

These maintenance will be done because of the following reasons.

(i)                 To increase the efficiency of the tools or equipments.

(ii)               The increase durability of tools or equipment.

(iii)             To increase the accuracy of the tools.

(iv)             Maintenance is done to improve safety when working with tools and equipments.

(v)               To reduce the cost of buying new one.

4.2    PRODUCTION

4.2.1        PRODUCTION DESIGN AND DEVELOPMENT

4.2.2        MONTHLY MATERIAL REQUIREMENT

MATERIAL ITEMS COST

Insulating tape 400

Receipt book 6,000

Superglue 200

Solder wire 300

News paper 300

Pens 100
Totals 7,300

4.2.3 MONTHLY LABOUR REQUIREMENT

PERSONNEL AMOUNT
Manager 26,000

Supervisor 17,0009

Technicians 24,000

Secretary 8,300

Artisans 19,800

Security officer 4,900

Total 100,000

4.2.4 MONTHLY PRODUCTION COST

ITEMS AMOUNT
Rent 12,000

Transport 6,000
Telephone 1,000

Labour 100,000

Insurance 2,000

Materials 7,300

Stationary 500

Water 400

Electricity 1,200

Repair and maintenance 6,000

Entertainment 1,000

Advertisement 3,000

Miscellaneous 1,000
Total 136,700

4.3.0 production process

ROSETTA Electrical Enterprise is a buiness that will deal with offering services like repair of
electrical accessories or gadgets, motor rewinding etc and also selling of electrical equipment,
materials, tools etc. therefore the following steps will be used in thr production process.

Step one

Purchasing of the stock i.e. materials, tools and equipment to be sold and used in the buiness.

STEP TWO

Transportation of the purchased goods to the place of business.

STEP THREE

Unloading of the goods from the tracks and storing them in the store. Sounb to be arranged in
shelves ready for sale.
STEP FOUR

Customers will be welcomed warmly into the premises so as to make their choice on purchase

STEP FIVE

Transactions (legal) will be made if the customer wants to buy items whereby he / she will be
issued with a receipt which consist of

(i) Name of enterprise

(ii) Name of the customer

The item bought

The date to which transaction was made

Signature of the salesman

STEP SIX

Packing of the purchased goods into cartoons or special bags and if transportation is needed,
special arrangements to be made between the enterprise and the customer.

STEP SEVEN

The customer leaves at his / her own will

STEP EIGHT

Replacing and purchasing of other items

When offering the services of repairs then the following steps will be taken for production

STEP ONE

Welcoming the customers to enjoy the services offered.

STEP TWO

To fault diagnose the gadget or equipment brought for service then advice accordingly.

Step three
Initiate payment over the work and agree on how to be paid

Step four

The customer to collect his / her item in good and working condition.

4.4  REGULATION AFFECTING OPERATIONS

For ROSETTA Electrical Enterprise to run well as it is dealing with already made goods, it will
have to adhere to regulation measures. The following are some of the regulations.

(a) Environmental protection

ROSETTA business will participate fully in cleaning and conserving the environment. The
premises will be kept tidy and all its surrounding. The enterprise will make sure that it does not
do anything to contract the environmental ac. Also all workers must be clean.

(b) Ventilation

The workshop and all offices will be well ventilated to allow fresh air in. this is to create a
comfortable working condition for the workers and also to give better conditions for storage of
source tools and equipment.

(c) SANITATION

ROSETTA Electrical Enterprise will build well trained sanitations like toilets and bathroom of
standards.

(d) PROTECTION GARMENTS

The enterprise will purchase protection clothes for every workers in the premises. This include a
pron or dust coat, helmets, boots gloves etc. The security men will be provided with raincoats
etc. these garments will protect the workers from harm when working within the premises.

(e) First aid kit

There will be a first aid kit in every room to help when there is an injury case or any other
problem. This kit will contain pain killers, bandages, disinfectants cottons wool etc.

(f)    Fire extinguisher

There will be a fire extinguishers in each room to help in over comng the menace of fire
outbreak. Every worker will be taught how to handle the situation and use the extinguishers.

(g)   Safety protection

The enterprise will ensure that all workers are protected from oppressions and other harm. They
have to put on protective closings.

(h)   Trade license

For legal operations of the buiness to take, the enterprise will obtain a trade license.

 
 

5.0 FINANCIAL PLAN

financial plan will be carried out by qualified personnel as it is very important. All buiness
transitions done will be shown in their specific records

5.1 PRE – OPERATION COSTS

the pre –operations cost are the sum of many required to cater for the materials and the
equipments before buiness operates. The pre – operational cost for Vapshi Enterprise will be
tabulated as follows.

Description Cost (kshs)

registration and fittings 3,000

Furniture and fittings 15,000

Machine tools and equipment 120,000

Stationary 8,000

Electrical installation 20,000

Water installation 12,000

Salaries and wages 100,000

Transport 10,000

Advertisement 5,000

Stock 50,000

Miscellaneous 4,000

Banking 10,000
Insurance 3,000
Total 360,000

5.1. STARTING CASH

To start the business /= will be required by Vapshi Enterprise from personal savings, family and
Friends contribution and bank loan i.e. Equity Bank. This will be as follows.

Sources Kshs
Personal savings 330,000

Bank loan 450,000

Family and Friends contribution 120,000

Total 900,000

The begging cash will be = proposed capital – Pre – operational cost.

= 900,000 – 360,000 = 540,000 /=

5.2 ESTIMATION OF WORKING CAPITAL

ITEMS YEAR ONE YEAR 2 YEAR 3

Currents assets Kshs Kshs Kshs
Opening stock 80,000 100,000 120,000

Cash at bank 150,000 2,200,000 2,600,000

Cash at hand 300,000 450,000 600,000

Debtors 20,000 25,000 30,000

Closing stock 40,000 60,000 80,000

Totals 590,000 2,835,000 3,430,000

 
CURRENT LIABILITIES KSHS KSHS KSHS
Creditors 50,000 20,000 40,000

Rent 18,000 18,000 18,000

Insurance 10,000 8,000 12,000

Totals 78,000 46,000 70,000

Working capital = Current Assets – Current liabilities

Working capital for year 1 = 590,000 – 78,000

= 512,000 /=

Working capital for year 2= 2,835,000 – 46,000

= 2,789,000 /=

Working capital for year 3 = 3,430,000 – 70,000

= 3,360,000 /=

 
5.3 CASH FLOW PROJECTION

DESCRIPTION JAN FEB MAR APR MAY JUN JUL AUG SEP
Cash in flow                  
Capital 330,000 - - - - - - - -
Loan 450,000 - - - - - - - -
Friends donation 120,000 - - - - - - - -
Cash sales 100,000 125,000 120,000 115,000 150,000 140,000 170,000 125,000 195,000
Debtors 70,000 20,000 15,000 18,000 12,000 20,000 18,000 22,000 15,000
Total inflow 1,270,000 145,000 135,000 133,300 162,000 160,000 188,000 147,000 210,000
Cash out flow                  

Rent 1,200 1,200 1,200 12,00 1,200 1,200 1,200 12,00 1,200
Salaries 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000
Water 300 300 300 300 300 300 300 300 300
Electricity 2,000 2,500 2,450 2,200 2,000 2,500 2,000 2,200 7,500
Interest Loan 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000
Creditors 4,000 4,000 5,000 3,000 1,000 1,200 1,800 2,000 2,000
Advertisement 15,000 10,000 8,000 - 2,000 - 6,000 - 10,000
Telephone 1,000 1,000 800 600 500 900 500 1,000 500
Licence 8,000 - - - - - - - -
Promotion 10,000 - - - - - - - -
Loan payment 10,000 10,000 8,000 6,000 10,000 5,000 15,000 10,.000 12,000
Insurance 8,000 - - - - - - - -
Furniture 20,000 - - - - - - - -
Miscellaneous 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000
Total out flow 181,500 131,000 127,700 115,300 119,000 113,100 138,800 118,700 130,600
Surplus 888,500 14,000 7,300 17,700 43,000 46,900 49,200 28,300 79,400
Accumulated 888,500 902,500 909,800 927,500 970,500 1,017,400 1,066,600 1,094,900 1,174,300

 
5.4 PROFORMA INCOME STATEMENT

DESCRIPTION YEAR 1 YEAR 2 YEAR 3

Cash sales 1,700,000 2,400,000 3,000,000

Discount received 175,000 180,000 220,000

Debtors 260,000 270,000 300,000

Totals 2,135,000 2,850,000 3,520,000
Less cost of sales 198,000 250,000 300,000
Gross profit 1,937,000 2,600,000 3,220,000
Less expenses      

Electricity 27,200 30,000 40,000

License 8,000 8,500 10,000

Telephone 9,600 9,000 9,500

Insurance 8,000 9,000 12,000

Creditors 27,700 30,000 40,000

Travel 6,500 8,000 10,000

Rent 14,400 15,000 20,000

Advertisement 72,000 65,000 80,000

Water 3,600 4,500 6,000

Salaries 1,200,000 1,200,000 1,200,000

Total expenses 1,377,000 1,379,000 1,427,500
Net profit before tax 560,000 1,221,000 1,792,500
Less provision of tax @ 16 % 89,600 195,360 286,800
Net profit after tax 470,400 1,025,640 1,505,700

 
 

5.5 PROFORMA BALANCE SHEET

DESCRIPTION YEAR 1 YEAR 2 YEAR 3

Fixed assets      

Production facilities 40,000 50,000 70,000

Furniture 15,000 10,000 12,000

Vehicle - - 200,0000

Computer 30,000 60,000 100,000

Totals 85,000 120,000 382,000
Less depreciation      

5% production facilities 2,000 2,500 3,500

5 % furniture fittings 750 500 600

10 % vehicle - - 20,000

10 % computers 3,000 6,000 10,000

Totals 5,750 9,000 24,100
Total fixed assets 79,250 111,000 357,900
Current assets      

Cash at hand 300,0000 400,000 500,000

Cash at bank 170,000 255,000 390,000

Stock 80,000 100,000 120,000

Debtors 260,000 270,000 300,000

Totals 810,000 1,025,000 1,310,000
Totals assets 889,250 1,136,000 1,667,900
Current liabilities      

Creditors 300,000 400,000 480,000

Bank overdraft 200,000 350,000 550,000

Total 500,000 750,000 1,030,000
Long term liabilities      
Bank loan 300,000 400,000 480,000

Owners equity 89,250 350,000 550,000

Totals 389,250 386,000 637,900
Total liabilities 889,250 1,136,000 1,667,900

5.6 BREAK EVEN ANALYSIS

DESCRIPTION KSHS
Sales 1,700,000
Variable cost  

Purchases 230,000

Telephone 9,600

Advertisement 72,000

Repair and maintenance 24,800

Water 3,600
Total variable cost 340,000

Contribution = Total sales – variable costs

= 1,700,000 – 340,000

= 1,360,000

(i) Contribution margin = Contribution x 100

sales

= 1,360,000 x 100

1,700,000

= 80 %
 

(ii) Break even level of sales

Fixed costs Kshs

Salaries 1,200,000

Licenses 8,000

Insurance 8,000

Loan Payment 113,000

Rent 14,400

Interest On Loan 12,000

Total fixed cost 1,355,400

Break even level of sales = Fixed cost x 100

Contribution margin

= 1,355,400 x 100

80

= 1,694,250

5.7 PROFITABILITY RATIO

(a) Gross profit margin = Gross profit x 100

sales

Year 1 – 1,937,000 x 100

1,700,000

= 113.94 %

Year 2= 2,600,000 x 100

1,700,000

= 152.94 %

Year 3 = 3,220,000 x 100

1,700,000

= 189.41 %

(b) Return on equity = Net profit after tax x 100

Equity contribution

Year 1 = 470,400 x 100

89,250

= 527.06 %

Year 2= 1,025,640 x 100

150,000

= 683.76 %

Year 3 = 1,505,700 x 100

237,900

= 632.91 %

(c) Return on investment = Net profit after tax x 100

Year 1 = 470,400 x 100

889,250

 
889,250

= 52.9 %

Years = 1,025,640 x 100

1,136,000

= 90.29 %

Year 3 = 1,505,700 x 100

1,667,900

= 90.28 %

5.8 DESIRED FINANCE

DESCRIPTION AMOUNT (KSHS)

Pre – operational cost 360,000

Working capital for year 1 512,000

Desired Financing 872,000

5.9 PROPOSED CAPITALIZATION

DESCRIPTION KSHS
Bank loan 450,000
Owners equity
89,250
Total investment 539,250

APPENDICES