OL’LESSOS TECHNICAL TRAINING INSTITUTE

TITLE : BUSINESS PLAN

PRESENTED BY : URBANIUS KIPLAGAT KORIR

INDEX NO :

CENTRE CODE : 29541001

COURSE CODE :

PAPER NO :

COURSE :

SUPERVISOR :

PRESENTED TO : THE KENYA NATIONAL EXAMINATION COUNCIL IN

PARTIAL FULFILMENT FOR THE AWARD OF CERTIFICATE
IN ELECTRICAL AND ELECTRONICS.

SERIES : JULY 2022

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DECLARATION
I declare that this project is my original work which I obtain in my knowledge and skills.

Name of presenter : URBANIUS KIPLAGAT KORIR

Signature : ................................................................................

Date :.................................................................................

This project is submitted to Kenya national examination council after approval by.

Name of supervisor :
Signature : ...............................................................................

Date : ..............................................................................

ii
DEDICATION
This business plan is sincerely and highly dedicated to my Parents, brothers and sisters not
forgetting my friends for their moral support and guidance in writing this business plan.

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ACKNOWLEDGEMENT
I greatly and humbly acknowledge to my Parents , my brothers and sisters for their economic
and moral support.
My gratitude goes to my supervisor for spending his precious time to guide me in writing this
business plan.
Finally my appreciation goes to the Almighty God for granting me good health towards
successful completion of this business plan.

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Table of Contents
DECLARATION..........................................................................................................................................ii
DEDICATION............................................................................................................................................iii
ACKNOWLEDGEMENT.............................................................................................................................iv
EXECUTIVE SUMMARY.............................................................................................................................1
1.0 BUSINESS DESCRIPTION.....................................................................................................................1
2.0 MARKETING PLAN..............................................................................................................................1
3.0 ORGANIZATIONAL AND MANAGEMENT PLAN...................................................................................1
4.0 OPERATION/PRODUCTION PLAN.......................................................................................................1
5.0 FINACIAL PLAN...................................................................................................................................2
CHAPTER ONE..........................................................................................................................................3
BUSINESS DESCRIPTION...........................................................................................................................3
1.0 BUSINESS NAME AND SPONSOR........................................................................................................3
1.1 THE SPONSOR....................................................................................................................................3
1.2 BUSINESS LOCATION..........................................................................................................................3
1.3 FORM OF OWNERSHIP.......................................................................................................................4
CAPITAL CONTRIBUTION.........................................................................................................................4
1.4 NATURE OF THE BUSINESS.................................................................................................................4
1.5 THE PRODUCTS..................................................................................................................................4
1.6 JUSTIFICATION OF OPPORTUNITY......................................................................................................5
1.7 THE INDUSTRY...................................................................................................................................5
1.8 BUSINESS GOALS...............................................................................................................................6
1.9 ENTRY AND GROWTH STRATEGY.......................................................................................................6
1.9.1 GROWTH STRATEGY.......................................................................................................................6
CHAPTER TWO.........................................................................................................................................7
2.0 MARKETING PLAN..............................................................................................................................7
2.1 CUSTOMERS.......................................................................................................................................7
2.2 COMPETITORS...................................................................................................................................8
2.4 ADVERTISING AND PROMOTION STRATEGY....................................................................................10
2.5 PRICING STRATEGY..........................................................................................................................10

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2.6 DISTRIBUTION STRATEGY.................................................................................................................10
CHAPTER THREE.....................................................................................................................................12
3.0 ORGANIZATION PLAN......................................................................................................................12
3.1 ORGANIZATION CHART....................................................................................................................12
3.2 ROLES QUALIFICATION AND REMUNERATION OF PERSONAL.........................................................12
3.3 RECRUITMENT TRAINING AND PROMOTION...................................................................................14
3.3.1 RECRUITMENT..............................................................................................................................14
3.3.2 TRAINING......................................................................................................................................14
3.3.3 PROMOTION.................................................................................................................................14
3.4 REMUNERATION AND INCENTIVES..................................................................................................15
3.4.1 INCENTIVES...................................................................................................................................15
3.5 LICENSES PERMIT AND BY-LAWS.....................................................................................................15
3.5.1 LICENSES.......................................................................................................................................15
3.5.2 Permit...........................................................................................................................................16
3.5.3 By Laws.........................................................................................................................................16
3.6 SUPPORT SERVICE............................................................................................................................16
CHAPTER FOUR......................................................................................................................................17
4.0 OPERATIONAL/PRODUCTION PLAN.................................................................................................17
4.1 PRODUCT DESIGN AND DEVELOPMENT..........................................................................................17
4.2 PRODUCT FACILITIES AND CAPACITY...............................................................................................17
4.2 .1 MACHINERY AND EQUIPMENTS...................................................................................................17
4.2 .2 REPAIR AND MAINTAINANCE.......................................................................................................18
4.2.4 FIXED ASSETS................................................................................................................................18
4.3 PRODUCTION STRATEGY..................................................................................................................18
4.3.1 MONTHLY MATERIAL REQUIREMENTS.........................................................................................18
4.3.2 MONTHLY LABOUR REQUIREMENTS............................................................................................18
4.3.3 MONTHLY PRODUCTION EXPENSES..............................................................................................19
4.3.4 TOTALS COST OF PRODUCTION TABLE.........................................................................................19
.3 PRODUCTION PROCESS......................................................................................................................20
4.4 REGULATION AFFECTING OPERATION.............................................................................................20
CHAPTER FIVE........................................................................................................................................21
5.0 FINACIAL PLAN.................................................................................................................................21

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5.1 PRE-OPERATIONAL COSTS...............................................................................................................21
5.2 WORKING CAPITAL REQUIREMENT.................................................................................................21
5.4 PROJECTED CASH FLOW STATEMENT 2023.....................................................................................22
5.5 Proforma income statement for the first three years of operation for the years 2023-2025.........23
5.5 PROFORMA BALANCE SHEET...........................................................................................................24
5.6 BREAK EVEN LEVEL..........................................................................................................................25
5.6.1 TOTAL CONTRIBUTION MARGIN...................................................................................................25
5.6.2 CONTRIBUTION MARGIN..............................................................................................................25
5.6.3 TOTAL FIXED COSTS......................................................................................................................26
5.6.4 BREAK EVEN LEVEL OF SALES IN SHILLINGS..................................................................................26
5.7. EXPECTED PROFITABILITY RATIO....................................................................................................26
5.7.1 GROSS PROFIT %...........................................................................................................................26
5.7.2 Return on equity...........................................................................................................................26
5.7.3 Return on investment...................................................................................................................27
5.8 DESIRED FINANCING........................................................................................................................27
5.9 PROPOSED CAPITALIZATION............................................................................................................27
APPENDIX II: BUSINESS LOGO................................................................................................................29

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EXECUTIVE SUMMARY

1.0 BUSINESS DESCRIPTION.

The proposed business will be known as Korir’s Agrovet. It will be located in Nakuru County at
Nakuru town. The business will start its operation when he finishes his course. The business will
use the following contacts.

KORIR’S AGROVET
P.O. BOX 2000
NAKURU
Cell Phone:0717577008
Email: [email protected]

2.0 MARKETING PLAN.

Due to rapid increase in the number of farmers in the region, Korir’s Agrovet will be having
domestic customers industrial customers and other various customers. Despite the completion
threats, the firm will ensure that they sell quality and quantity products and have good and clear
image towards customers in order to outdo the competitors.

3.0 ORGANIZATIONAL AND MANAGEMENT PLAN

KORIR’S Agrovet will have a well developed organizational structure well defined with all the
six positions filled with people with different positions. The six positions will be filled after
thorough, vigorous and competitive recruitment in order to promote the image of the firm.

4.0 OPERATION/PRODUCTION PLAN.

KORIR’S Agrovet requires equipment and machinery for production of which will help the
organization. Some of the machines will be acquired through higher purchase and all the
regulations, affecting daily operations adhered to.

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5.0 FINACIAL PLAN.
In order to start the Agrovet business the initial capital required is 1,000,000 to ensure smooth
and efficient running. The sources will be as follows indicated in the table below.

SOURCE AMOUNT(Kshs
OWNERS EQUITY 400000
Equity Bank 200000
Family 250000
Friends 150000
TOTAL 1000000

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CHAPTER ONE

BUSINESS DESCRIPTION

1.0 BUSINESS NAME AND SPONSOR

The name of the proposed business is KORIR’S AGROVET and the contacts will be
KORIR’S AGROVET
P.O. BOX 20553
NAKURU
E-mail: Korir’[email protected]

1.1 THE SPONSOR

The owner of the proposed business is Urbanius Kiplagat Korir. He is aged 24 years old and
single.
Currently undertaking a Diploma course in supply chain management at Ol’lessos Technical
training Institute and hopes to complete in the year 2018 and be a manager and a businessman.

1.2 BUSINESS LOCATION.

The business will be located at Nakuru town along Nakuru farmers Sacco opposite Equity Bank
adjacent to Tuskys Supermarket.
The Agrovet will be reached through the following address.
PHYSICAL ADDRESS
KORIR’S AGROVET
PLOT NO 16
P.O. BOX 20553,
NAKURU
PHONE:0717577008

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1.3 FORM OF OWNERSHIP
The business intends to be owned by one person i.e sole proprietorship type of business.

CAPITAL CONTRIBUTION.
The amount intended to be invested is 1000000.The money is to be raised as follows.
SOURCE AMOUNT PERCENTAGE(%)
PERSONAL CONTRIBUTION 400,000 40
EQUITY BANK 200,000 20
FAMILY 250,000 25
FRIENDS 150,000 15
TOTAL 1,000,000 100

Equity bank charges on interest rate of 20% per annum.

1.4 NATURE OF THE BUSINESS

The business is a sole-proprietor type of business. This is start-up business which intends to
provide good customers relations recruit trained employee with good skills, provide fair prices
and also provide customer care service.

1.5 THE PRODUCTS

KORIR’S Agrovet will offer a range of products to the customers animal medication both tablets
and in liquid form, it will also provide animal breeding products animal feed and these products
will be made in a way that it will attract many customers. The uniqueness of the products is that
it will be of high quality and affordable prices. The firm will be selling its products both in larger
and smaller quantities and transportation of the same will be provided.

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1.6 JUSTIFICATION OF OPPORTUNITY.
The proposed business will search for many farmers who are customers. In the region very few
people have ventured into the same business and potential customers are many. The owner of the
from has decided to locate the business in the area so as to provide opportunities thus improving
the living standards of the people around and also the entire community the owner has
entrepreneurial skills and other technical skills necessary to enable him run the business, and also
expand it in the nearby future

1.7 THE INDUSTRY

The proposed business is in the livestock industry. The technology to be employed is modern. It
would start with a capital of Kshs. 900000.The products dealt with do not require heavy
machinery and thus therefore it is expected to yield a sustainable amount of profits which will be
approximately 20-30% of total sales. Many people in the area rear livestock and this will be of
great significance since they will be customers thus great profits. The following human resources
are to be employed in the business:
(a) Manager
(b) Salesperson.
(c)Supervisor
(d)Watchman.
(e)Driver
(f) Casual.

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1.8 BUSINESS GOALS.
A goal to be achieved in a business is very important in that the business will known whether it
is running at a loss or at a profit these goals are:
• Make profit with an objective of providing effective services to customers at a reasonable
price.
• The firm will also provide necessary services to customers.
• The firm will provide employment to qualified persons to render services to customers.
• Provide market for farmer/cattle keepers.

1.9 ENTRY AND GROWTH STRATEGY.

In-order to earn great acceptance and get good reputation in the market the business plan to use
several advertising methods. The suggested methods are:
• Free samples-the sponsors plans to get printed calendars bearing the name of business
they are to be issued to customers free of charge.
• Radio-It will be through citizen and Kiss FM radio station so as to reach many listeners.
• Posters are to be placed in the nearly markets e.g. in cattle dips junctions and in villages.

1.9.1 GROWTH STRATEGY.

The business will use the profit ploughed back in the business to get its own pick-up for
transportation. Further still the owner wishes to purchase a computer to boost in record keeping.
The firm will also build good customer relations by giving farmer incentives so as to ensure a
steady supply of products.

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CHAPTER TWO

2.0 MARKETING PLAN.

In developing the market plan, the entrepreneur will use the following methods.
• Observations
• Knowledge and experience
• Survey methods.

2.1 CUSTOMERS.
Those are quite a number of customers who are expected to seek the products and services from
the firm. The customers of the business would be classified as.

• DOMESTIC CUSTOMERS.

These will be customers who buy products in small quantity for home use only i.e. community
living within the firm which includes Pangani Estate . These customers usually purchase less
because of their low income. They usually purchase farm chemicals e.g. pesticides and they
usually pay on cash basis.

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• INDUSTRIAL CUSTOMERS.
These are customers whom they will be given tender so as to ensure firm products are taken on
high quantities at a wholesale price. i.e Olgata farm. The firm will give products of high quality
with good customers care services Korir’s Agrovet will operate daily from 7:00am to 10:00pm
to satisfy customers demands.

• OTHER CUSTOMERS.
These will be customer who will purchase products in large quantities at a wholesale and sell it
later at fair price to make profit they are grazing retailers and prestige enterprise

2.2 COMPETITORS.
For every business there exist competitors. Therefore Korir’s Agrovet has several competitors
they include.

NAME OF THE STRENGTHS WEAKNESS

PROPOSED BUSINESS
Chamtany Agrovet • Located in a strategic place • They have
where there are many farmers incompetent
• Charge fair and reasonable personal.
prices. • They don't know
• Quality products available. how to relate with
customers
Managiez Agrovet • They provide customers services • Poor management
because they transport products • Lack of courtesy
of their customers to the required • They are impolite
designation.
Ng'ombe Agrovet • They have many ranges of • Charges higher
products. prices
• Good communication skills • Not offering after
• Offer credit facilities sale services
View Point Agrovet • Always open early and close late • They sell
offer lectures and talks to expensively.
farmers • Lack wide range of
products.
• Poor Record
keeping

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In-order to capitalize on its competitors weakness as shown, he intends to advertise the business,
publicize all over the region improve on its public relations interested on the services offered by
the business and they purchase more.

2.3 MARKET SHARE.

Korir’s Agrovet firm will take 35% of the market share while its competitors take the remaining
percentage as shown in the pie chart bellow.

Sales
KORIR'S AGROVET CHAMTANY AGROVET MANAGIEZ AGROVET NGOMBE AGROVET

29%

41%

12%

18%

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2.4 ADVERTISING AND PROMOTION STRATEGY.
Advertisement
As the business is emerging it has to carry out perfect and frequent advertising in order to
penetrate into the market and to earn the advantages of its competitors. The firm would use the
following means to advertise.
Medium Cost per Number of Amount (Kshs)
advertisement Advertisement
Radio (Kiss FM) 250 6 1500
Magazine(Kass) 300 5 1500
TOTAL 550 11 3000

The advantage of using radio is that most of the people living in the area use the
kiswahili Language and thus they are able to listen and understand very well. The advantage of
Swahili is that everybody can understand it clearly.

2.5 PRICING STRATEGY.

The price of any product is based on cost of production overheads and profits before pricing any
product. The business will considers market conditions prevailing. It will include taking into
consideration demand and supply.
Government policies will also affect the prices strategy for example taxes and cost of acquiring
all relevant documents accumulated for.

2.6 DISTRIBUTION STRATEGY.

Distribution is done by the firm. The business will recognize the major customers and allow
them some percentage discount for the overall costs of purchasing.
Also the firm will arrange transportation of customers products at cheaper rates.

Distribution problems include:

• Inadequate delivery and transport services.
• Inadequate depots.
• Lack of individual customers attention.

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Solution to the above problems.
• Firm will try to acquire new vehicles and improve the existing ones.
• More depots to be created
• Customer care office to be established at every depot and also provision of telephone
numbers to report any dissatisfaction.

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CHAPTER THREE.

3.0 ORGANIZATION PLAN.

Korir’s Agrovet shall have an establishment of a management and support team to help in
attachment of organizational goal.

3.1 ORGANIZATION CHART.

MANAGER
MANAGER

SUPERVISOR

SHOP ATTENDANT ASSISTANT, SUPERVISORCASHIER

3.2 ROLES QUALIFICATION AND REMUNERATION OF PERSONAL

The proprietor of the business shall appoint each of the personal differently and according to the
required qualifications stipulated below.
PERSONAL QUALIFICATION DUTIES/RESPONSIBILITIES RENUMERATION.
MANAGER • A diploma • Overlook the daily running 15,000 Kshs per
holder in of the business. Month
business • Draw budget and make
administration transaction to the business.
• Excellent • Inspect, supervise the work
communication of all employees.
skills • Prepare meeting a gender.
• Proficiency in
MS office suite.
• Experience of 3
years will be an
added
advantage.
SUPERVISOR • Certificate in • Deputize the manager 10,000 Kshs per
veterinary • Provide technical skills Month
services about breeding systems.
• Fluency • Supervise the work of

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 communication. junior
• Business related
field certificate
an added
advantage.
• One year
experience
compulsory.
SALESPERSON • Certificate in • Maintain daily sale records. 7500 Kshs per
sales and • Advise the supervisor on Month.
marketing. ways of expanding sales.
• Competent and • Develop customer relation.
ready to work
under less
supervision.
• Below 24 years
of age.
• Knowledge of
veterinary added
advantage.
CASUAL • Must be honest • Make sure that products are 5500 Kshs per
and fluent in arranged and cleaned as Month
languages. required.
• A K.C.S.E mean • Carrying of stock from
grade of c-. vehicles to the premise.
• Age above 26
years.
• Energetic
DRIVER • Have a valid • Ensure that the goods are -4500 Kshs per
driving license delivered at the right time to Month
preferably AA. the customer.
• Four years • Collect and send mails for
experience in the firm.
driving. • Transport personal to
• Posses a various parts.
certificate of
good conduct
WATCHMAN • Have a • Security of the business is • s per
secondary maintained. Month
certificate • Able to direct the customers.
division IV or Di • Maintain records of entry
minimum and exit of both customers
• Able to cars and firms
communicate
well in both
English and

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 Kiswahili.
• Certificate of
good conduct a
must Below 38
years.
3.3 RECRUITMENT TRAINING AND PROMOTION.

3.3.1 RECRUITMENT.
Recruitment of the staff is to be done systematical and officially except for the manager because
he is the owner of firm. The following system is to be used; post of salesperson supervisor and
driver is to be advertised using posters notices put on strategic places e.g. shops, restaurants and
markets. The interested parties shall forward their qualification to the managers to select the best
qualified posts of the casuals are to be advertised on the business premises for customers to
benefit and it will be done by the managers with the support of other senior administration of
supervisor.

3.3.2 TRAINING.
The employee of the firm will be sponsored by the management in order to acquire advance
technical training to improve on their skills and knowledge. They will also be sponsored to
attend trade fairs. Exhibitions and seminars dealing with relevant service to the customer and
thus this enhances efficiency in operations of the business.

3.3.3 PROMOTION.
Promotion is the act of motivating employee in various field through salary increment employee
promotion will be done basic on academic qualification performance appraisal and also on
efficiency and experience in the job.

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3.4 REMUNERATION AND INCENTIVES.
The enterprise will pay wages and salaries and other remuneration differently from top level
management to bottom level depending on nature of job academic qualification and the
responsibilities.
The table below clearly show the remuneration would be done monthly.

PERSONEL HOUSE MEDICAL TRANSPORT BASIC TOTAL

ALLOWANCE ALLOWANCE SALARY
Kshs Kshs Kshs Kshs Kshs
MANAGER 3,500 2,500 1,500 15,000 22,500
SUPERVISOR 2,000 1,800 1,000 10,000 14,800
SALESPERSON 1,000 1,500 500 7,500 10,500
CASUAL - - - 5,500 5,500
DRIVER - - - 4,500 4,500
WATCHMAN - - - 3,500 3,500
TOTAL 6,500 5,800 3,000 46,000 61,300

3.4.1 INCENTIVES.
The owner of the proposed business will provide incentives to the hardworking employees in
order to motivate them they include:
(a) Short loans.
The owner has to have short loans to employee for which has to assist them. Payment will be a
monthly installments according to amount taken.
(b) Trips
Active and best performing employee would be given a long country wide during Easter
Holidays
(c) Parties
The owners will organize a party with management and will be called “End year Party” done
annually.
(d) Bonus.
The owner would give a bonus of 10% of the salary to the best personnel.

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3.5 LICENSES PERMIT AND BY-LAWS.

3.5.1 LICENSES.
The business will operate under the rules and regulations by acquiring an operating license from
Nakuru town council at a cost of 1200 per Month.

3.5.2 Permit.
Business permit will be acquired from ministry of agriculture to legalize operation and show that
is competent and operating under safety and health measures.

3.5.3 By Laws.
The business will operate under the stipulated by-law which will enable the firm to run smoothly
and efficient.

3.6 SUPPORT SERVICE.

The firm will need support services as listed below.
(a) Insurance Services.
The business and its equipment will be insured against fire and theft. The services will be
acquired from VIKES INSURANCE COMPANY at a cost of Kshs 15,000.The physical address
is:
VIKES INSURANCE COMPANY
P. O.BOX 52065.
NAKURU
TEL: 052-49621/0726 279619
(b) Banking Service.
The firm will acquire banking service from the nearby Equity Bank.
EQUITY BANK
P.O.BOX 634206
NAKURU
TEL:051-42301/0726 304590
(c )Legal Advice.
The entrepreneur will seek legal advice from the re-known Kiruogik Legal Consultants based in
Nakuru and the cell phone number is: 0720 850885.

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• Medical Service.
All services pertaining health will be catered for by Shaddylns Clinic and will liaise with the firm
the contacts are: 0716825422.

CHAPTER FOUR

4.0 OPERATIONAL/PRODUCTION PLAN.

Operational plan is a guide on how the firm will be operating in day to day basis objectives laid
are to bring the achievements of the organizational goals and to satisfy the needs of the
customers.

4.1 PRODUCT DESIGN AND DEVELOPMENT.

The proposed business is to purchase products which are ready for consumption. Products will
be subdivided into small qualities which will be easily affordable in terms of cost by the farmers.
The products are to be bought from Nakuru on Monthly basis and depending on the demand
products will be printed on variety of colours for good appearance and for attraction. Customers
will be provided with home delivery in-case of wholesale purchasing.

4.2 PRODUCT FACILITIES AND CAPACITY.

The proposed business tends to employ some facilities so as to boost the activities of the business
effectively.

4.2 .1 MACHINERY AND EQUIPMENTS

The tools and equipments available will include.
FACILITY QUALITY AMOUNT (Kshs) TOTAL COST
(Kshs)
Stationery 4 @ 6,000 24,000
Calculator 1 @2,000 2,000
Weighing machine 2 @20,000 40,000
Cello-tape 3 @250 750
Stapler. 2 @800 1,600
TOTAL 12 68350 68,350

Other Items Include

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 Items (Facility) Quantity Cost(Kshs)
Table 2 @ 3000 6000
chairs 2@ 500 1000
shelves 8@ 1200 9600
1@1400 14000
TOTALS 30600

4.2 .2 REPAIR AND MAINTAINANCE

The machinery of the firm will be required and maintained by suppliers who have all the know
how about the machinery. Since the machines used are distributed and repaired locally, the firm
facilities e.g weighing machines will be serviced in order to give accurate measurements and to
reduce double costs.

4.2.4 FIXED ASSETS

Fixed assets will include the tables chairs, counters and shelves and they will be affixed on the
walls. Proper maintenance should be ensure and repairing to defect ones.

4.3 PRODUCTION STRATEGY.

The maximum supply shall be obtained with minimum expenses. Unnecessary expenditure shall
be avoided. Provision of quality service with regard to customer tastes and preferences.

4.3.1 MONTHLY MATERIAL REQUIREMENTS.

MATERIAL QUALITY PRICE @(Kshs) TOTAL COST (Kshs)

Acaricides 2 cartons 2,000 4,000
Stock-lick 30Kg 120 3,600
Fertilizers 20 bags 2,600 52,000
Layer mash 3 bags 2,700 8,100
Chick mash 4 bags 4,000 16,000
Broiler mash 6 bags 5,000 30,000
TOTAL 65 16,420 113,700

4.3.2 MONTHLY LABOUR REQUIREMENTS

PERSONELL TOTAL(Kshs)
Manager 22,500

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 Supervisor 14,800
Salesperson 10,500
Driver 4,500
Watchman 3,500
Casual 5,500
TOTALS 61,300

4.3.3 MONTHLY PRODUCTION EXPENSES.

EXPENSES Kshs
Telephone 10,000
Electricity 6,000
Transport 2,500
Rent 16,000
Insurance 15,000
Water 2,000
TOTALS 74,000

4.3.4 TOTALS COST OF PRODUCTION TABLE

PRODUCTION Kshs
Monthly material requirements 113,700
Monthly labour requirements 61,300
Monthly production expenses 74,000
TOTALS 249,000

Total cost of production=[monthly material requirement+Monthly labour requirement

+Monthly Production expense]
i.e 113,700+61300+74000=249,000

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.3 PRODUCTION PROCESS.
The business does not process but it distributes its production to the customers. The procedure
starts from the customers entering he meets the salesperson, he/she request the items and select
them and pays directly to the salesperson. They are given the receipt by the salesperson. If it is
bulky the products are transport for the customer to the destination.

4.4 REGULATION AFFECTING OPERATION.

There exists several regulations affecting the operations of the business they are.

(a) Trade license.

The business will obtain trade license from Nakuru town council at a cost of 1,200 Kshs
Monthly.

(b)Health Regulations.
The proposed business will strive to maintain a high standard of hygiene by keeping nearly
environment clean and attractive. Dumping of liter in appropriate place.

(c) Employment Act(Cap 127)

It states rules and regulation of recruiting staff.

(d) Labour Laws.

The firm will ensure that all the employees are treated fairly. This is done according to
employment act and to prevent external intervention.

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(e) Environment Regulation (cap 128)
The regulation clearly stipulates the policies that should be adopted from the ministry of
environment through national environment management authority (NEMA) and the waste or
expired products be burned or buried deeply.

CHAPTER FIVE

5.0 FINACIAL PLAN

5.1 PRE-OPERATIONAL COSTS.

Those are the expected costs to be incurred into the business before it starts its operations.
ITEMS AMOUNT (Kshs)
Computers and other fittings 45000
Business registration 4000
Electricity and water 32000
License 2500
Legal fees 1000
Rentals fee 10000
Telephone 2000
Insurance 3500
TOTAL 100000

5.2 WORKING CAPITAL REQUIREMENT.

Working capital requirement shows the capital requirements for the first three years of operation.
ITEM YEAR 1 2019 YEAR 2 2020 YEAR 3 2021
(Kshs) (Kshs) (Kshs)
Stock of products 18,000 210,000 20,000

Work in progress 120,000 140,000 125,000

Stock of finished goods - - -

Debtors 90,000 70,000 100,000

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Cash in hand 100,000 90,000 120,000

Cash at bank 80,000 120,000 90,000

TOTALS 570,000 630,000 635,000

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5.4 PROJECTED CASH FLOW STATEMENT 2023

Item Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Total
Cash inflows Kshs Kshs Kshs Kshs Kshs Kshs Kshs Kshs Kshs Kshs Kshs Kshs Kshs
Cash sales 110000 130000 100000 115000 102000 105000 125000 100000 130000 122000 11000 140000 1389000
Collection from
debtors 25000 25000 25000 25000 25000 25000 25000 25000 25000 25000 25000 275000
Loan 110000 110000
Cash at hand 18000 15000 12000 18000 63000
Total cash inflow 238000 155000 125000 155000 127000 130000 162000 125000 155000 147000 153000 165000 1837000
Cash outflow
Cash purchases 24000 28000 35000 26000 42000 18000 25000 30000 42000 35000 18000 28000 351000
Pre-operational cost 100000 100000
Payment to creditors 3000 3200 2500 4000 4500 3000 4200 3000 3500 4000 3200 41600
Wages & Salaries 32000 32000 32000 32000 32000 32000 32000 32000 32000 32000 32000 32000 384000
Allowances 10200 10200 10200 10200 10200 10200 10200 10200 10200 10200 10200 10200 122400
Advertisement 1000 1000 1000 4000
Insurance 800 800 800 800 800 800 800 800 800 800 800 800 9600
Postage 400 300 500 200 600 400 100 500 600 400 600 500 5100
Electricity 1400 1100 1100 1100 1400 1100 1000 1000 1000 1400 1000 1000 13700
Telephone 1400 1400 1100 1100 1400 1100 1000 1000 1000 1400 1000 1000 15300
Transport 2500 1500 3500 1500 2000 2500 3000 1000 1000 2500 1500 2000 24500
Overheads 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 12000
Loan repayment 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 120000
Loan interest 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 10000
Total cash outflows 178200 79300 101400 90700 108400 84400 91100 94700 105600 101900 83200 92700 1211800
Net Cash 59800 75700 23600 64300 18600 45400 70900 30300 49400 45100 69800 72300 625200
Accumulated cash 59800 135500 159100 223400 242000 287400 358300 388600 438000 483100 552900 625200

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5.5 Proforma income statement for the first three years of operation for the years 2023-
2025
ITEMS YEAR 2023 YEAR 2024 YEAR 2025
1st 31st 1st 31st 1st 31st
Sales 1,375,000
Opening Stock 95,000 100,000
Add purchases 360,000 360,000 380,000
Goods available for sale 360,000 400,000 450,000
Less closing sales 100,000 105,000 109,000
Cost of sales 250,000 35,000 380,000
Gross Profit 1,125,000 1,025,000 1,070,000
Less Expenses
Wages and Salaries 384,100 384,000 384,000
Allowances 122,400 122,400 122,400
Insurance 9,600 9,800 10,000
Postage 5,000 6,000 6,500
Electricity 14,000 14,000 15,000
Telephone 15,300 15,400 15,500
Advertisement 4,000 4,500 5,000
Transport 24,500 24,600 24,800
Loan Interest 10,000 10,000 5,000
Repair and maintenance 12,000 12,000 6,000
Furniture and Fittings 5,000 5,000 3,000
Total Expenses 605,800 607,700 597,200
Net Profits before tax 519,200 417,300 472,800
of 10%
Provision for tax 10% 519,200 417,300 472,800
Net Profit after Tax 467,280 375,570 425,520

24
5.5 PROFORMA BALANCE SHEET.
ITEM As at 1st Jan 2023 As at 31st Dec 2025
Fixed Assets 45,000 4,200 45000 41500
Machinery &Equipment
Less Depreciation 3,000 3500
Furniture and fittings 5,000 5000
Less Depreciation 500 4,500 1000 4000
Motor Vehicle 18,000 180000
Less Depreciation 10,000 170,000 15000 165000
Total Fixed Assets
Add Current Assets 116,500 110500
Stock of Products 180,000 200000
Cash at hand 10,000 120,000
Cash at Bank 80,000 69,000 450000
Debtors 90,000 450,000 50,000 560500
Total Assets 566,500
Less Current Liabilities

Creditors 40,000 45,000

Accruals/dep 5,000 45,000 10,000 55000
Financed By: 521,500 505500
Owners Equity 300,000 30,000
Add Net Profit 71,500 205,500

Longer Term Liabilities

Loan (Bank) 150,000
521,500 505,500

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5.6 BREAK EVEN LEVEL
ITEMS VARIABLES LEVEL AMOUNT(Kshs)

Purchases 360,000

Telephone 15,300

electricity 14,000

Waterbills 2,000

postage 10,000

Advertisement 4,000

transport 24,500

Tax provision 40,000

TOTAL 469,800

5.6.1 TOTAL CONTRIBUTION MARGIN

Total contribution Margin=(Sales – Total Variable cost)

=1,375,000 – 469,800
=905,200 Kshs.

5.6.2 CONTRIBUTION MARGIN.

Contribution margin%=Contribution Margin x 100

Sales

= 905,200 x 100 = 66%

1,375,000

26
5.6.3 TOTAL FIXED COSTS

ITEM COST
Wages and salaries 384,000
Insurance 9,600
Rent 10,000
TOTAL 403,600

5.6.4 BREAK EVEN LEVEL OF SALES IN SHILLINGS

Break even level of sales =Total fixed costs
Contribution %

= 403,600 = 611515 Kshs

0.66

5.7. EXPECTED PROFITABILITY RATIO

5.7.1 GROSS PROFIT %

Gross profit % =Gross Profit x 100

Sales

= 1125000 x 100
1375000

= 81%

5.7.2 Return on equity

Return on equity=Net profit after x 100

Owner’s equity

= 467,280 x 100
300,000

= 155.76

27
5.7.3 Return on investment

Return on investment=Net profit after tax x 100

Total investment

= 467,280 x 100
1,000,000

= 46.73

5.8 DESIRED FINANCING

Item Amount
Pre-operational cost 1,000,000
Furniture and fittings 5,000
Fixed assets 566,500
Total 671,500

5.9 PROPOSED CAPITALIZATION

ITEM AMOUNT(Kshs)
Owner equity 400,000
Bank loan(Equity) 200,000
Family 250,000
TOTAL 1,000,000

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 APPENDICES
APPENDIX I: LOCATION OF THE BUSINESS

Nakuru county hospital

EQUITY BANK

Korir’s Agrovet
TUSKYS SUPERMARKET

FARMERS SACCO
East road
Bus stage
Mosque

Market place

Shops

Shops

Shops

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APPENDIX II: BUSINESS LOGO

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