HAMZAH’S ELECTRICAL ENTERPRISE

P.O BOX 52 KAMURAI

TEL: +25479205396
Email: [email protected]

PRESENTER NAME : HAMZAH GODAN

SUPERVISOR'S NAME : MR. BETHWEL KIPTUI

INDEX NO : 57810939

COURSE CODE : 2601/2

COURSE : DIPLOMA IN ELECTRICAL AND ELECTRONICS

ENGINEERING

CENTER NAME : THE ELDORET NATIONAL POLYTECHNIC.

PRESENTED TO: THE KENYA NATIONAL EXAMINATION COUNCIL IN

PARTIAL FULFILLMENT FOR AWARD OF DIPLOMA ELECTRICAL AND
ELECTRONICS ENGINEERING

EXAM SERIES : JULY2024

1
 DECLARATION

I declare that this is my original work and has not been submitted to the Kenya National
Examination Council for the award of any diploma in Electrical and electronics engineering.

STUDENT: HAMZAH GODAN

Signature: Date:

SUPERVISOR: MR. MICAH RONO

Signature: Date:

i
 DEDICATION

I would like to dedicate this work to my beloved parents and the rest of the family members
whose love I always cherish for the advice and encouragement they gave in throughout the
process of coming up with this document.

ii
 ACKNOWLEDGEMENT

My most sincere thanks and gratitude goes to my supervisor Mr. Micah Rono for his efforts
towards the success of my business plan.

I also thank the Eldoret National polytechnic, Engineering Department for availing their
entrepreneurial knowledge.

Thanks to my classmates for the ideas, advice and encouragement that we shared during the
project development.

Finally thanks to Eldoret National polytechnic students fraternity for making my stay worthy
remembering.

May God Bless you all!

iii
TABLE OF CONTENTS

DECLARATION.........................................................................................................................................i
DEDICATION...........................................................................................................................................ii
ACKNOWLEDGEMENT...........................................................................................................................iii
CHAPTER ONE........................................................................................................................................1
1.1 DESCRIPTION...................................................................................................................................1
1.2 BUSINESS NAME AND LOGO............................................................................................................1
1.3 BUSINESS LOCATION AND ADDRESS................................................................................................1
1.4 FORM OF OWNERSHIP.....................................................................................................................2
1.5 TYPE OF BUSINESS...........................................................................................................................3
1.6 PRODUCTS/ SERVICES......................................................................................................................3
1.7 JUSTIFICATION OF OPPORTUNITY....................................................................................................3
1.8 INDUSTRY........................................................................................................................................4
1.9 GOALS OF THE BUSINESS.................................................................................................................4
1.10 ENTRY AND GROWTH STRATEGY...................................................................................................5
CHAPTER TWO.......................................................................................................................................6
2.0 MARKETING PLAN............................................................................................................................6
2.1 CUSTOMERS....................................................................................................................................6
2.2 MARKET SHARE................................................................................................................................6
2.3 COMPETITION..................................................................................................................................8
2.4 METHODS OF PROMOTION AND ADVERTISEMENT.........................................................................9
2.5 PRICING STRETAGY........................................................................................................................10
2.6 SALES TACTICS...............................................................................................................................10
2.7 DISTRIBUTION STRETAGY..............................................................................................................11
CHAPTER THREE..................................................................................................................................13
3.1 ORGANISATION STRUCTURE..........................................................................................................13
3.2 KEY MANAGEMENT PERSONNEL/BUSINESS MANAGERS...............................................................13
3.3 OTHER BUSINESS PERSONNEL.......................................................................................................15
3.4 RECRUITMENT, TRAINING AND PROMOTION OF PERSONNEL......................................................16
3.5 LICENCES, PERMITS AND BY-LAWS................................................................................................17
Table showing the type of document, where it’s obtained and the cost of........................................18
3.6 OTHER SUPPORT SERVICES............................................................................................................18
CHAPTER FOUR:...................................................................................................................................20
4.0 OPPERATIONAL/PRODUCTION PLAN.............................................................................................20
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4.1 PRODUCTION FACILITIES AND CAPACITY.......................................................................................20
4.2 PRODUCTION STRATEGY................................................................................................................22
4.3 PRODUCTION PROCESS..................................................................................................................23
4.4 REGULATIONS AFFECTING THE OPERATIONS................................................................................24
CHAPTER FIVE......................................................................................................................................26
5.0 FINANACIAL PLAN..........................................................................................................................26
5.1 PRE- OPERATIONAL COSTS............................................................................................................26
5.2 WORKING CAPITAL........................................................................................................................27
5.3 CASH FLOW STATEMENT...............................................................................................................28
5.4 PROFORMA INCOME STATEMENT.................................................................................................31
5.5 PROFORMA BALANCE SHEET.........................................................................................................32
5.6 BREAK EVEN POINT........................................................................................................................34
5.7 PROFITABILITY RATIOS...................................................................................................................37
5.8 DESIRED FINANCING......................................................................................................................37
5.9 PROPOSED CAPITALIZATION..........................................................................................................38

v
EXECUTIVE SUMMARY
1.0 BUSINESS DESCRIPTION
The proposed business name will be Star Electrical Enterprise. It will be dealing with the sale
of Electrical tools and equipment in general at Malaba market along Malaba -Uganda road. It
will be a sole proprietor kind of business and will require capital of Ksh. 800000 in order to
start and operate.

2.0 MARKETING PLAN

Star Electrical Enterprise will market its products within the stated locations. At the
beginning, the business will capture 20% of the entire population and 80% when it reaches its
climax the competitors will be Kenny Electrical Shop and Manken Electrical Shop. The
business will advertise its products through posters, radios, newspapers, during public
meetings like crusades, Barraza and marketing places. The targeted customers will be
individuals, commercial customers, institutions and outside businesses.

3.0 ORGANISATIONAL AND MANAGEMENT PLAN

The proposed business will be sole proprietor. It will require five employees and more as the
business expands. The business will require a license, business registration, permits, by-laws,
banking services, accounting, postal, telephone and electricity in order to meet the legal
requirements from the county council of Busia

4.0 OPERATION AND PRODUCTION PLAN

The business will be operating on a continuous basis. The production process will increase in
future when the business becomes stable. It will operate under some personnel like the
manager, supervisor, sales person and other personnel. The business will be affected by
factors like health regulations, safety, pricing policy, taxation and trademarks. The cost of
hiring the Electrical, purchasing the material and transportation will also be expensive.

5.0 FINANCIAL PLAN

The pre- operational costs that the business will incur are Ksh. 109,500 and working capital
approximation by the business is 75.78%. The calculated net profit after tax for the first year
is Ksh. 640,260. The proposed capitalization of the business is Ksh. 800,000.

vi
CHAPTER ONE

BUSINESS DESCRIPTION

1.0 DESCRIPTION

Hamzah’s Electrical Enterprise is located in Malaba Town it is a sole proprietor type of

business owned by hamzah Godan as the manager assisted by five employees.
1.1 BUSINESS NAME AND LOGO

The proposed business name shall be “HAMZAH’S ELECTRICAL ENTERPRISE” The

name is derived from the love of stars by the owner of the business so as to have a sense of
ownership and pride in the business.

1.2.1 Business Logo

HAMZAH’S ELECTRICAL ENTERPRISE

P.O BOX 06,

MALABA
TEL: 0792905396
Email: hamzah’[email protected]

1.2.2 Mission

To equip the individual and society with high quality products at affordable and fair prices.

1.2 BUSINESS LOCATION AND ADDRESS.

1.3.1 Business Location

The proposed business will be located at Malaba Town at the post office along the Malaba
Street. It lies opposite the junction which is 25 Km away from the owners house.

1.3.2 Business Address

The proposed business address will be:

HAMZAH’S ELECTRICAL ENTERPRISE

1
 P.O BOX 06, MALABA
TEL: 0792905396
EMAIL: hamzah’[email protected]
1.3.3 Map of the Business Location

STAR ELECTRICAL ENTERPRISE

MALABA
TOWNSHP

GIDEE GUEST
HOUSE

MALABA TO UGANDA ROAD

MALABA
ACK
PRIMARY
SCHOOL
KENNY
JUNCTION ELECTRICALS
SHOP

MALABA MARKET

1.3 FORM OF OWNERSHIP

Star Electrical Enterprise will be a sole proprietor kind of business due to the following
features:

 It requires less capital

 It is simple and easy to manage

 Requires less legal formalities

Benefits/ advantages

 One becomes independent

 Decision making is easy

 There is good control of the business

2
  It is easier to know customer choice

1.4 TYPE OF BUSINESS

The proposed business will be trade oriented because it will deal mainly with electrical that is
cables, bulbs, conduits, solar panels, pipes, meter boxes, earth rods.

1.5 PRODUCTS/ SERVICES

Star Electrical Enterprise will intend to offer several products with different features such as
the shape, texture, and size and customer convenience. They will be supplying the business
with different electrical materials such as; cables, electrical conduits and conduit fittings,
circuit breakers, electrical connectors, lugs, lamps, meter boxes, earth rods, solar panels,
batteries, inverters, charger controllers, bulb holders, testers, pliers, side cutters, electrical
pipes, cable clips. The owner will have a team of persons who will be offering loading
services to customers, transportation services using shops vehicle and also the trained and
qualified personnel to carry out installation and repair services.

1.6 JUSTIFICATION OF OPPORTUNITY

The business will contribute to the local community by creation of employment, improving
the living standards through wage pay to workers. The advancement of new technology will
also increase the products in the business firm. The business site will be suitable because
there are many developments under progress and a large number of customers within the
town. The area has good infrastructure for easy transportation of products. There is also a
Vocational School nearby which trains students on Electrical and Electronics which will
boost the business market.

Suppliers will also access to the site easily as critical business services and products will be
offered.
1.7 INDUSTRY

The business will operate under trade industry because it will deal with the provision of
Electrical accessories and equipment to homesteads and companies at the right time and
price. It will be a medium sized and will cater for the demand for the population within the
region as well as the neighboring locations. The firms in the industry will be medium sized
since the business will develop slowly. The technology that will be used will be labour and
capital intensive as it does not require much skills to operate. The business intends to employ

3
five workers and increase on business expansion. The proprietor is supposed to know his
competitors by name, strategies they use in their businesses and capitalize on their
weaknesses to compete them.
The business will experience seasonal factors like:
 High competition in the external environment by competitors selling the same
products
 Free markets where by sellers go around selling the products at the market. The
business will face stiff competition as there will be other related businesses in the
region.
1.8 GOALS OF THE BUSINESS

The intended business will be vital if it will be able to achieve its desired goals and
objectives.
Long-term Goals
 The business will plough back the profits in business expansion by opening up new
branches at the neighboring centers.
 It will expand its operations by hiring more workers when the business expands.

Short-term Goals
 The business should work towards achieving profits which will be used to paying
back the loans borrowed at the start of business
 To provide customers with high quality products at affordable prices.
 Striving to employ more people to work in the firm.
 To buy all the necessary equipment and tools to ensure smooth running of the
business

1.9 ENTRY AND GROWTH STRATEGY.

1.9.1 Entry Strategy

The business will enter the market by the end of 2023. It will start by:
 Advertising the products through public media e.g. radio and television and printout
media such as newspapers and magazines
 Posters will be placed around the firm
Promotions will be done by offering customers with free samples such as cups, giving
discounts and free transport on goods bought in bulk
1.9.2 Growth Strategy
4
For the proposed business to grow, the owner shall be required to do the following:

 Ensure good management of the business and proper keeping of records.

 Carrying out of market research to identify the likes and dislikes of the customers

 Expanding the business from Electrical Shop to industry.

5
 CHAPTER TWO

2.0 MARKETING PLAN

Marketing will be the main objective of the business .The business aims at selling its products
and after sale services within Malaba Centre and outside regions.

2.1 CUSTOMERS

The potential customers for the business will be individuals who will be buying products for
use in the firms. The equipment and tools are conduits, electrical cables, consumer units,
meter boxes among others.

Institutions shall also be potential customers for the business. Schools within Malaba town
which will require electrical equipment for installation and repair of electricity in the School.

Commercial customers like the retail shops buy Electrical materials.

The business will not consider the age of the individual customers. All customers will be
served equally.

2.2 MARKET SHARE

Market share consists of the total market potential or population of the area. The business is
targeting a population of 30,000 of which Star Electrical Enterprise is 20,000, Kenny 7,000
and Manken 3,000.The table below shows the competitors market share indicating
percentages and degrees portioned by each competitor

6
 BUSINESS SIZE OF PERCENTAGE
POPULATION (%)

Star Electrical 20,000 66.7%

Enterprise
7,000 23.3%
Kenny
3,000 10%
Manken

Total
30,000 100%

Sales

Star Electrical Enterprise

kenny
Manken

Hamzah’s Electrical Enterprise expects to take the biggest share due to its accessibility and
generalized services offered. The bar chart will be as follows:

The percentage ratio of the market share will be as follows:-

Manken : Kenny : hamzah’s Electrical Enterprise

10 : 23.3 : 66.7

7
2.3 COMPETITION

Competition is a goal and desirable but too much competition can cause positive or negative
effects to the business competitors which causes consistence in the market. Competition must
be identified first in order to identify their strength and weaknesses of the competitors. The
competitors of Star Electrical Enterprise will be:-

1. Kenny Electrical Shop

2. Manken Electrical Shop

1. KENNY ELECTRICAL SHOP

It will be located near Malaba hospital which is 3 Kilometers from Star Electrical
Enterprise. It deals with the sale of a variety of Electrical tools and equipment.

Strengths

 Has a variety of products for sale

 Offers high quality services

 Has sound knowledge of the market seasons.

Weaknesses

 Offers goals at expensive prices

 They do not offer credit facilities or discounts

 Numbers of customers in the area are few.

2. MANKEN ELECTRICAL SHOP

It will be situated 5 kilometers from the premise. It will be dealing with simple tools such
as electrical cables, conduits meter boxes among others

Strengths

 Offers goods at fair prices

8
  Good experience in repair of simple tools

 Offer discounts on goods bought in large quantities.

Weaknesses

 The simple tools do not meet the demand of the customers.

 The products are of low quality.

Hamzah’s Electrical Enterprise as compared to these other competitors will be offering high
quality goods of different varieties hence meeting the customers demand. Packaging of
materials will also be made available and customers will also be offered discounts on goods
bought in bulk.

To capitalize on the weakness of the competitors, hamzah’s Electrical Enterprise will

increase the quality of the products and services to be offered.

2.4 METHODS OF PROMOTION AND ADVERTISEMENT

2.4.1 Advertisement
To create awareness to the public about the existence of the business. It is an important aspect
to be put into consideration. This will be through stations such as Radio Citizen, Emuria FM
and West FM. A sign post bearing the name of the business and name of the operation will be
placed on the firm.

2.4.2 Promotion
Promotion of the products will be done during the market days at Malaba Market and in the
nearby trading centers or institutions found within the firm. The business will plan its
promotion campaigns after every year by moving with products using pick-ups and
announcing to the public about the products. Regular promotions will be done monthly and
the cost will be Kshs.8000 per year and ksh.500 per month.

2.5 PRICING STRETAGY

Pricing Services will be calculated by the following formula:

Sales - Marginal cost = Contribution

The following will clearly determine the mode of pricing strategy.

9
Pricing cost

This will be the sum total of transport, labour, materials and many others.

Competitors pricing

Hamzah’s Electrical Enterprise will be offering products at fair and affordable prices to both
the low and high income earners.

The Government pricing policy

Government rates are fixed and others are Liberal. The proposed business will be Liberal
through ‘though when setting prices, license, and council trading license shall be considered.

Market condition

The number of customers who will need the services and their income should be considered.
The proposed business will also consider the classes of people whether low or high income
earners. As pricing is done, it will be placed to fit the market condition to avoid losses of
customers and the business running into losses.

2.6 SALES TACTICS

This will be done through the following ways:-

i. Personal selling
The owner will employ a sales person to create awareness of the products hence increasing
profits.
ii. Sales promotion
This will be carried out through the media, newspaper, magazines, and use of sign posts.
iii. Offering discounts
This will be done to frequent customers who come to purchase the products in the premises.
iv. Forms of payments

The business will obtain its pays through banker’s cheques and credit cards in order to
increase the state of security.

Recruitment will be done by announcing vacancies through the newspaper, radio stations and
placing posters. This will stimulate the individuals to apply for the jobs required in the firm.

10
Selection will be done to applicants in order to choose the right employees for the required
job. It will also be done through interviews for proper selection.

Retention of the employees will be done by providing a conducive working environment

conditions, proper way of remuneration and through incentives. Distributors and agents will
be provided with proper security to ensure better distribution and sales. They will be
motivated by providing fair remuneration after the realization of the firms goals and
objectives.

2.7 DISTRIBUTION STRETAGY

Hamzah’s Electrical Enterprise will be purchasing goods in bulk needed by the customers
and serving them to make profits. The owner intends to hire a pick-up and a lorry for
transportation purposes. Service distribution strategy will be done using roads. This will cost
the business Kshs.10, 000 per month

Distribution problems

 The condition of the roads i.e. too much pot holes

 Accidents may cause delays during transportation period

 Traffic officers may cause delays by locking up vehicles for legal reasons.

Remedies

 Setting the premise on good roads

 Ensuring that vehicles are in good conditions and have all the legal requirements put
in place.

 Driver should be careful to avoid accidents

The business plans to expand its distribution channel by hiring more number of Lorries and
pick-ups or even tractors for transportation purposes. It will ensure that high quality goods
and services are distributed for the customers.

11
12
 CHAPTER THREE

ORGANISATIONAL/MANAGEMENT PLAN

3.1 ORGANISATION STRUCTURE

Star Electrical Enterprise organization structure will be vertical where the authority will flow
downward from the higher management to the lower management. The business will operate
in such organization as its economies and effective as it permits rapid decision-making and is
less expensive. This is because it will not need to hire a specialist. After some year of
operation, the business will change to line and staff organizational structure where specialists
will be hired to provide expert knowledge.

3.2 KEY MANAGEMENT PERSONNEL/BUSINESS MANAGERS

The business will operate under the key manager as the manager, supervisor and accounts
clerk.

MANAGER

The manager of the proposed business will be the sole owner Mr. Gerald

Qualifications and experience

13
  Has a certificate in BA, BM

 Has a two year experience

Duties and responsibilities

 Provision of operational skills and support to other departments;

 Policy and decision making

 Recruiting staff

SUPERVISOR

The supervisor will be Ms. Caroline Itep

Qualifications and experience

 Certificate in BA

 Good communication skills

Duties and responsibilities

 Responsible for supervisory work by ensuring health and safety working conditions

 Answerable to the managing director on consumer likes and complaints

 Appointing and distributing work to the managing technicians

ACCOUNTS CLERK

Qualifications and experience

 A certificate in bookkeeping and office management

 At least has a two years’ experience in a busy accounting firm.

 Computer literacy

Duties and responsibilities

 Keeping all business records for the finances and office management
14
  Ensuring proper implementation of financial policies and procedures

3.3 OTHER BUSINESS PERSONNEL

Apart from the key personnel, one sales person, two casual workers and two watchmen will
be employed in the firm.

Sales person

Qualifications and experience

 Should be a diploma holder in purchasing, sales and marketing

 Below thirty years of age

 Three years’ experience

Duties and responsibilities

a) In charge of sales and advertisement

b) Developing promotions and other aspects of sales plan

c) Relate with different customers to negotiate with

Casual workers

Qualifications and experience

 Certificate in o level education

 Good conduct

Duties and responsibilities

 Will ensure good arrangement of goods

 To ensure the firms structure and warehouse

Watchman

Qualifications and experience

15
  KCPE certificate

 Fluent communication in Kiswahili and English

 Disciplined and hardworking

Duties and responsibilities

 To ensure the business is well secured

 Security to the customers

 Keeping records of the visitors to the business

3.4 RECRUITMENT, TRAINING AND PROMOTION OF PERSONNEL

3.4.1 Requirement
Apart from the managing director, all other persons are to be interviewed during their
recruitment. This will be done by putting vacancies to be advertised through local media and
posters. The post of accountant, sales persons and supervisor will be advertised in the media
and use of advertisement notices.

The qualified persons are requested to attend interviews after which the best will be chosen.
The post of casual workers and watchmen will be fitted by simply placing notices in the
business locations area for people to come with their supportive qualifications.

3.4.2 Training
This will be done to make them adopt to new technologies changes of new equipment and
machinery. It will also be done to make them acquire higher levels of employment than the
level they had before entry. Training will be done through off-jobs training where employees
go for training after some weeks. They will also be attending seminars periodically to keep
them updated with current technologies to be adopted in the business.

Employee’s performance appraisal will be done to determine whether the employees are
working. The manager can observe the workers during working period and come up with a
solution. Customer’s response on products and services offered by employees tells the owner
about the business development. The number of rejects each employee produces gives the
opportunity to evaluate the business well.

3.4.3 Promotion

16
 This will be done on merit of handwork, discipline and commitment to work. The
hardworking staff will be promoted by giving those incentives, allowances and increasing
their job quality. The employees in the business may be separated by the retirement i.e. when
one reaches the required years of working. Death can also separate when one dies. Dismissal
can also separate a worker i.e. when they are not required by the public and may also be
dismissed due to poor performance.

3.4.4 Remuneration and Incentives for Personnel

The business will remunerate its employees to their positions in the business as shown in the
table below. The table showing the position, basic salary, allowance and the net pay of the
employees:-

POSITION Basic salary Allowances Net pay

Manager 85000 3000 88000

Supervisor 68000 3000 71000

Technicians 56000 4000 60000

Accountants 45000 5000 50000

Salespersons 3000 5000 8000

Casual worker 28000 2000 30000

Watchman 10500 1000 11500

Total 318500

A part from the salaries the employees will be offered certain incentives e.g. leave like
maternity leaves. Providing the 10:00 o’clock tea, staff uniforms like overalls and end of the
year party. It will also promote and give allowances for the well performing employees to
motivate those while non performing employees will be advised to improve on their weakness.
The business also requires registering with trade unions like COTU and should be members of
NSSF so as to assist workers after retirement.

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 3.5 LICENCES, PERMITS AND BY-LAWS

All legal documents necessary for the businesses to operate are to be obtained for Smooth
running of the day today activities. These include licenses from Municipal council, permits
from District Commissioners office, medical license from the Public health department,
certificate of registration from a county council. Licenses will cost 3000 and will be renewable
yearly at Ksh.4000. Local taxes will also be payable.

Table showing the type of document, where it’s obtained and the cost of obtaining.
Type of document Where obtained Cost

Trade license Municipal council 3000

Permit Dcs office 1000

Medical license Public health department 1500

Certificate of registration County council 1500

Total 7000

3.6 OTHER SUPPORT SERVICES

For the business to progress effectively, the enterprise is to have special services e.g.

Banking services

The business will acquire loans from banks and banking services from Barclays Bank e.g.
saving, depositing and withdrawal of money. The business will also open an account to
facilitate the same.

Postal and telephone services

The Malaba branch postal office will provide postal services while telecom Kenya Malaba
branch will provide telephone services alongside the mobile operations.

Insurance services

The business is to be ensured so that compensation may be made in case of any risks. This is
to prevent the business from incurring losses that may arise.

18
Wema insurance
Pox box 420,
Malaba.
Legal services
The business will have a lawyer who will deal with legal matters by safeguarding the
business and will also ensure advice is directed to the business.

19
 CHAPTER FOUR:

4.0 OPPERATIONAL/PRODUCTION PLAN

The business will ensure that proper operational policies are put in place to ensure quality
goods and services are given to customers. It will operate in a rental premise when operations
commence. The business will be large in size which is efficient and gives enough room for
operation. It will have the following production and operational objectives:-

 To employ the latest technology and design products that meets the customers test
and preference in terms of satisfaction.
 To ensure that customers orders are produced at the right time so as that customers
are not disappointed.
 To expand the business by opening branches in the neighboring towns.

4.1 PRODUCTION FACILITIES AND CAPACITY.

The business will acquire the following facilities and equipment before the start of its
operations:-

Tools, machinery and No Capacity Unit Total cost Acquired

equipment cost
Electric drill 2 4,000 8,000 Purchased
Meter box 10 Assorted 350 3,500 Purchased
Consumer unit 6 Assorted 1500 9000 purchased

Sockets 4 250 1000 purchased

Switches 10 Assorted 150 1500 purchased
Tape measure 5 Assorted 100 500 Purchased
Computer 2 30,000 60,000 Purchased
Screw drivers 2 250 500 Purchased
Circuit breakers 5 Assorted 400 2,000 Purchased
Generator 1 35,000 35,000 Leased
Levels 6 Assorted 200 1,200 Purchased
Total 53 72,200 122,200

20
The business will require those materials from retailers and factories by cash. They will be
affordable as the business will grow and expand. They will be few and cheap in cost. The
business also has a plan to purchase some of the tools and equipment which will be highly
demanded by the customers. These materials will be supplied as soon as possible after the
purchase.

The business will hire the Electrical and transportation means like the vehicles before the
business starts operating. This will ensure efficiency in running the business. Repair and
maintenance of the equipment will be done to any machine component and be retrieved
monthly for its maintenance. The manager intends to give technical department the
responsibility for all repairs of the firm. The cost of spare parts will be allocated for smooth
running of the business. The ground plan for the business is as follows:-

Accountant
Managers Toilet office sales person
Office

Secretarys supervisors
Office Technicians office

KEY
Reception
Plans for expansion

4.2 PRODUCTION STRATEGY

The main objective of the firm is to sell products of high quality and to satisfy the demands of
the customers. It will require some monthly materials which will be acquired from retailers in
big Electrical Shop have and save from factories like cement. The table below shows the
monthly materials:-

21
 Monthly materials required Cost Supplier
Ream papers 400 Malaba stationery
Receipt book 350 Malaba stationery
Note book 200 Mwanzo stationers
Pencils, erasers and sharpeners 100 Wote stationers
Envelopes and organizers 600 Dortmund stationery
White board 1,000 Mwema agencies
Staples and paper clips 800 Malaba stationery
Markers 500 Mwema agencies
Pens and pen holders 200 Dortmund stationery
Brooms 250 Khetias supermarket Malaba
Moppets and moppets bucket 400 Khetias supermarket Malaba
Total 4,800

The means of transport will be by use of hired vehicles and it will cost the firm Ksh.5000 per
month. The number of skilled employees will be five and that of semi-skilled shall only be
one. The total labour costs per month will be as shown below:-

22
NO. OF EMPLOYEES JOB TITLE SALARY CLASS
1 Manager 7,500
1 Supervisor 5000
1 Accountant sales person 3750
1 Sales person 2750
3 Casual worker 2330
2 Watchman 1100
Total 22,430

The business will also incur some preliminary products per month. The table below shows
the preliminary products costs:-

PARTICULARS AMOUNT
License 3000
Rent deposit 4500
Electricity deposits 2000
Business registration 3000
Water bills deposits 1500
Totals 14000

The total cost of production or operational costs per month will be:-

Total monthly operational cost = cost of labour +Total expenses.

The cost of production per month will be cost of production per unit = Total cost

4.3 PRODUCTION PROCESS

The production of the firm will be as follows:-

Purchasing of products, tools and equipment from the preferred suppliers. The products will
then be stocked in the firms’ premises where they will be arranged in shelves according to
their categories.

As for the equipment such as barbed wire and iron sheets, they will be sold with their set
prices which are majority determined by the manufactures plus the cost incurred by the firm
23
in availing the products to the premise. Paints and other small tools will be sold according to
their sizes and manufacturers prices.

At first, the products will be sold mainly in cash and therefore, credit to the trustworthy
customers. The business will offer cash discounts and quantity discounts. The business will
likely to have factors that will affect the business. These are external and internal factors.

Internal factors

 There will be transportation problem due to inadequate funds to hire vehicles.

 Inadequate personnel in the advertising and promotion department.

 Lack of enough capital to increase the stocks.

External factors

 The attitude of the local people towards the purchase.

 The economy of the surrounding locality.

 The government policy and other legal requirements.

4.4 REGULATIONS AFFECTING THE OPERATIONS

The business requires some regulations in order for it to operate as required. These
regulations include business license, permit, medical certificate, business registration
certificate and an insurance cover which will secure the firm against risks or losses that may
occur.

The business will require some approvals in order to operate. These include:-

a) Health regulations

The business will maintain good health standards as per the health regulatory board by
ensuring that;

i. The Electrical Shop is well ventilated

ii. Electrical Shop will have cloak rooms for both sexes and should be clean

24
 iii. The labour force should have clean uniforms

iv. Smoking shall not be allowed in the warehouse

b) Safety regulations

The business should have the following to ensure safety in the business firm.

i. Fire extinguishers to be installed at strategic places within the Electrical Shop for easy
fire control in case of fire outbreak

ii. An insurance cover for all workers

iii. All Electrical Shop attendants to put on safety attires.

iv. The workshop should be provided with first aid kit to be used in case of any accident
in the Electrical Shop

25
 CHAPTER FIVE

5.0 FINANACIAL PLAN

This is how the business will efficiently manage its finance in order to maximize profits and
minimize losses. Financial plan objectives will be as follows:

 To ensure personnel in charge of finances is competent, well trained and experienced

in financial field

 To ensure proper keeping of records

5.1 PRE- OPERATIONAL COSTS

These are the costs that the owner will incur before commencement of business. They are
shown in the table below:

ITEM AMOUNT
Rent 5000
Renovations 10000
Installation 20000
Water 1500
Electricity 2500
Telephone 1000
License 4500
Permit 4000
Machines and equipment 50000
Stationery 3000
Miscellaneous 8000
Total 109500

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5.2 WORKING CAPITAL

This is the money needed for the running of the business. Below is a list of items to be
considered when calculating the working capital for the first three years.

ITEM 2022 2023 2024

Current assets
Cash 8300 20000 32700
Bank 200000 400000 800000
Stock 60000 72000 86000
Debtors 42000 60500 70550
Total current 310300 552500 989250
assets
Current liabilities
Creditors 19000 39000 99000
Total C/L 19000 39000 99000
Working capital 291300 513500 890250

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 5.3 CASH FLOW STATEMENT
5.3.1 CASH FLOW STATEMENT FOR YEAR 2022
Cash in flow Dec Jan Feb March April May June July August Sept Oct Nov Total
Opening cash 800000 773500 830000 990000 103900 1023000 1174300 1274330 1546240 1818034 1923407 1923400 14180111
Sales 95000 100000 120000 112230 140000 147000 150000 151000 160000 130000 150000 170000 1625230
Debtors 55000 40000 40000 45000 35000 45000 40000 30200 43000 30000 30000 50000 483200
Total 950000 913500 990000 1147230 278900 1215000 1364300 1455530 1749240 1978034 2103407 2143400 16288541
Rent 5500 5500 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 61000
Insurance 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 18000
Transport 2000 1500 1500 1500 1000 1000 900 1000 1500 1000 1000 1000 14900
Electricity bill 1500 1600 1000 1000 1200 1200 1200 1300 1450 1000 900 800 14150
Telephone 1800 1000 1000 500 500 1200 1000 1000 1100 1000 1200 1200 12500
Advertisement 5000 2000 3000 2000 1500 1500 1000 1000 1100 1000 1200 1200 2150
Repair 0 0 0 500 0 1000 200 0 0 0 2500 0 4200
Postage 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 12000
Loan repayment 2500 2500 2500 2500 2500 2500 2500 2500 2500 2500 2500 2500 30000

Salaries 48000 48000 48000 48000 48000 48000 48000 48000 48000 48000 48000 48000 576000
Total outflow 79000 65000 63800 64050 63100 64000 63500 62850 64350 62710 65610 62900 780870
Net cash flow c/f 871000 848500 926200 102725 1101900 1177000 1149500 1292650 1417980 1483530 1942424 2080507

5.3.2 CASH FLOW STATEMENT FOR YEAR 2023

Cash in flow Dec Jan Feb March April May June July August Sept Oct Nov Total

Opening cash 1923400 2100000 2120200 2302300 2500000 2550000 2650000 2700000 2780000 2800000 2890000 2900000 30215900

28
Sales 170000 172000 100000 180000 185000 95000 200000 195000 80000 112000 180000 175000 1844000

Debtors 45000 55000 35000 65000 75000 75500 85000 70000 80000 90000 100000 98000 873500

Loan 20000 15000 30000 65000

Rent 5200 5200 5200 5200 5200 5200 5200 5200 5200 5200 5200 5200 62400
Insurance 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 18000
Transport 1000 900 800 1000 1000 1500 800 700 500 1000 900 800 10900
Electricity bill 1100 1000 900 1300 1200 900 900 900 1100 800 700 600 11400

Telephone 700 500 550 400 300 500 300 250 300 200 150 150 4300
Advertisement 1000 900 800 1950 1000 700 900 750 800 700 700 850 11050
Postage 900 900 900 900 900 1000 900 900 900 900 900 900 10900
Loan repayment 2500 2500 2500 3000 3000 3000 3000 3000 3000 3000 3000 3000 34500
Salaries 50000 50000 50000 50000 50000 50000 50000 50000 50000 50000 50000 50000 600000
License 10000 10000
Total outflow 74100 63700 63900 65550 64500 65650 63740 63400 63450 63500 63250 63160 773850
Net cash flow c/f 214820 2263300 2211300 2496750 2695500 2628440 2901260 2901600 2876550 3748500 3106750 3109840 32988040

5.3.3 CASH FLOW STATEMENT FOR YEAR 2024

Cash in flow Dec Jan Feb March April May June July August Sept
Opening cash 2900000 3000000 2990000 3000000 3163920 3300000 3528120 3600000 37700232 3877077 3980222 4023172 69752743

Sales 185000 200000 222200 185000 199000 299200 230000 200022 19900 300029 299972 301029 2641352
Debtors 98000 99000 200000 75000 95000 100000 210290 200310 301200 200290 211209 269272 2270780
Loan 30000 25000 21000 30000 106000
Total 3213000 3324000 3433200 3260000 3457920 3699200 3968410 4000332 38021332 4377396 4491403 4623473
Rent 6000 6000 6000 6000 6000 6000 6000 6000 6000 6000 6000 6000 72000
Insurance 1600 1600 1600 1600 1600 1600 1600 1600 1600 1600 1600 1600 19200
Transport 1300 1200 900 900 880 570 600 700 1000 1200 1100 900 11250

29
Electricity bill 500 1500 300 400 200 500 1200 1100 100 1000 1250 1300 9350
Telephone 500 350 500 1500 1000 900 900 1500 1000 800 900 900 10750
Advertisement 900 850 900 900 900 900 900 900 900 900 900 900 10750
Postage 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 12000
Loan repayment 25000 25000 25000 25000 25000 25000 25000 25000 25000 25000 25000 25000 300000

Salaries 55000 55000 55000 55000 55000 55000 55000 55000 55000 55000 55000 55000 660000
Total outflow 107800 95940 91500 92510 91920 91760 92500 93150 91890 92890 93135 92890 1036125
Net cash flow 3205200 3238060 3341700 3167490 3366000 3607440 3875910 3907182 37938440 4284506 4398268 4530583 75853249
c/f

30
5.4 PROFORMA INCOME STATEMENT

ITEM 2022 2023 2024

Sales 1625230 1844000 2641352
Cost of sales 400000 380000 350000
GROSS PROFIT 1176000 1680000 1122000
EXPENSES
Wages/salary 576000 600000 660000
Rent 66000 62400 72000
Water 18000 21600 24000
Telephone 12500 4300 10750
Electricity 21000 24000 24000
Stationery 6000 7200 9600
Postage 7200 8400 9600
Transport 49000 96000 70050
Repair 40000 50000 60000
Interest 11400 10200 9000
Insurance 18000 18000 19200
Miscellaneous 41500 32200 26000
Depreciation 2000 2000 1000
Total expenses 868600 936300 995200
Profit before tax 307400 743700 126800
Tax (10%) 30740 74370 12680
Net profit after tax 276660 669330 114120

5.5 PROFORMA BALANCE SHEET

The Proforma balance sheet at the start up to the end of the first two years in operation will
be as follows:

Proforma balance sheet as at 2022- 2024

ITEM OPPENING 2023 2024

31
 DATE 2022
ASSETS
Current assets
Cash 8300 20000 32200
Debtors - 42000 27000
Stock 50000 72000 80000
Work in progress 40000 75000 80200
Raw materials 80000 90000 100000
TOTAL CURRENT 178300 299000 319400
ASSETS
FIXED ASSETS
Machinery and 50000 30000 15000
equipment
Furniture and fittings 20000 15000 10000
Accumulated - - -
depreciation
Total fixed assets 70000 45000 25000
Total assets 248300 344000 344400
LIABILITIES
Current Liabilities
Creditors 5000 20000 30000
Total current 5000 20000 30000
liabilities
Long term liabilities
Bank loan 90000 140000 98400
Capital 150000 160000 200000
employed(equity)
Profit 3300 24000 26000
Total long term 243300 324000 324400
liabilities
Total liabilities 248300 344000 354400
PARTICULARS VARIABLES COSTS FIXED COSTS
Purchases 354000 -
Rent - 72000
Salaries - 480000
Interest on loan - 11400

32
 Electricity 21000 -
Water 18000 -
Security - 72000
Repair 40000 -
Postage 7200 -

Transport 49000 -
Miscellaneous 41500 -
Total 530700 635400

Total Assets = Total Liabilities + Capital

5.6 BREAK EVEN POINT

The break-even point for Star Electrical Enterprise for the year 2022 will be as follows:-

 Contribution Margin = Total Sales- Variable costs

=1,625,230-530,700

=1,094,530

 Contribution Margin Percentage = Contribution Margin * 100

Total Sales

=1094530 *100 =67.35%

1625230

 Breakeven Point = Fixed Costs

33
 Contribution Margin

= 635400 =9434.30

67.35

BREAK EVEN POINT OF STAR ELECTRICAL ENTERPRISE FOR THE YEAR

2023

PARTICULARS VARIABLES COSTS FIXED COSTS

Purchases 376000 -
Rent - 96000
Salaries - 540000
Interest on loan - -
Electricity 24000 -
Water 21600 84000
Security - -
Repair 50000 -
Postage 8400 -
Transport 96000 -
Miscellaneous 32200 -
Total 608200 720000

 Contribution Margin = Total Sales- Variable costs

= 1844000-608200

=1235800

 Contribution Margin Percentage = Contribution Margin * 100

Total Sales

= 1235800 * 100 =
67.02%

1844000

 Breakeven Point = Fixed Costs

34
 Contribution Margin percentage

= 720000

67.02

=10743.06

BREK EVEN POINT OF STAR ELECTRICAL ENTERPRISE FOR THE YEAR 2024

PARTICULAR VARIABLES COSTS FIXED COSTS

S
Purchases 396000 -
Rent - 96000
Salaries - 600000
Interest on loan - 9000
Electricity 24000 -
Water 24000 -
Security - 96000
Repair 60000 -
Postage 9600 -
Transport 120000 -
Miscellaneous 26000 -
Total 659600 801000

 Contribution Margin = Total Sales- Variable costs

=2641352-659600
= 1981752
 Contribution Margin Percentage = Contribution Margin * 100
Total Sales
=1981752 * 100
2641352 =75.03%
Break-even Point = Fixed Costs
Contribution Margin percentage = 801000

75.03

35
 = 10675.73

5.7 PROFITABILITY RATIOS

i. Gross Profit percentage (%) = Gross Profit * 100

Total Sales
1st year 2022 = 1176000 * 100 = 72.36%
1625230
2nd year 2023 = 1680000 * 100 =91.11%
1844000
3rd year 2024 = 1122000 * 100 = 42.49%
2641352
ii. Return on Equity = Net Profit after Tax * 100
Owners’ Equity
1st Year 2022 = 276660 * 100 = 181.44%
150000
2nd Year 2023 = 669330 * 100 = 418.33%
160000
3rd Year 2024 = 114120 * 100 = 57.06%
200000

5.8 DESIRED FINANCING

This is the total amount of money required to start off the business.

ITEM AMOUNT

Pre-operational Cost 109500

Working Capital 1695050

Fixed assets 946700

Machinery and equipment 95000

Electrical 45000

Total Financing Requirement 2,891,250

36
5.9 PROPOSED CAPITALIZATION

The proprietor of the proposed business will acquire its capital from her own savings,
borrowing from friends and relatives, loans from banking Institutions, gifts and Donations.

ITEM AMOUNT
OWNERS CONTRIBUTION 300,000
TOTAL BORROWED(FRIENDS & RELATIVES) 150,000
LOANS FROM BANK(S) 250,000
GIFTS & DONATIONS 100,000

37