BUSINESS PLAN IMANI ELECTRICAL AND ELECTRONICS SHOP

INSTITUTION:LODWAR TECHNICAL AND VOCATIONAL TRAINING COLLEGE

COURSE:CERTIFICATE IN ELECTRICAL AND ELECTRONICS INGINEERING
COURSE CODE:1601
INDEX:501110006
PRESENTED BY:JOHNATAN KIPTOO LETTING
SUPERVISOR:IROYA SAMMY

Table of Contents
DECLARATION..................................................................................................4
DEDICATION......................................................................................................5
ACKNOWLEDGEMENT.........................................................................................6
EXECUTIVE SUMMARY....................................................................................7
CHAPTER ONE.................................................................................................11
1.0 BUSINESS DESCRIPTION..........................................................................11
1.1 BUSINESS.....................................................................................................11
1.2 BUSINESS LOCATION AND ADDRESS...................................................11
1.3 FORM OF BUSINESS OWNERSHIP..........................................................11
1.4TYPES OF BUSINESS...................................................................................13
1.5 PRODUCTS/ SERVICES..............................................................................13
1.6 JUSTIFICATION OF BUSINESS OPPORTUNITIES.................................14
1.7 INDUSTRY....................................................................................................14
1.8 BUSINESS GOALS.......................................................................................15
1.9 ENTRY AND GROWTH STRATEGY.........................................................15
B. GROWTH STRATEGY..................................................................................16

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CHAPTER TWO................................................................................................16
2.0 MARKETING PLAN....................................................................................16
2.1 CUSTOMERS................................................................................................16
2.2 MARKET SHARE.........................................................................................17
2.3 COMPETITION.............................................................................................18
2.4 PRODUCTION AND ADVERTISEMENT..................................................18
2.5 PRICING STRATEGY..................................................................................19
2.6 SALES TACTICS..........................................................................................20
CHAPTER THREE...........................................................................................21
3.0 ORGANIZATION MARKET PLAN............................................................21
3.1 Business manager and qualifications.............................................................21
3.3 RECRUITMENT, PROMOTION AND TRAINING....................................22
3.4 Remuneration and incentives.........................................................................22
3.5. Licenses, permits and all By- laws................................................................23
CHAPTER FOUR..............................................................................................25
4.0 OPERATION/PRODUCTION......................................................................25
4.1 PRODUCTION FACILITIES AND CAPACITY.........................................25
4.2 PRODUCTION STRATEGY........................................................................26
4.3 OPERATION PROCESS...............................................................................27
4.4 REGULATIONS AFFECTING BUSINESS.................................................28
CHAPTER FIVE................................................................................................29
5.0. FINANCIAL PLAN......................................................................................29
5.1 PRE-OPERATIONAL COSTS......................................................................29
5.2 WORKING CAPITAL...................................................................................30
5.4 PROFOMA INCOME STATEMENT...........................................................32
5.5 PROFOMA BALANCE SHEET...................................................................33
5.6 CALCULATION OF BREAK EVENT POINT............................................34
5.7 DESIRED FINANCING................................................................................35
5.8 PROPOSED CAPITALIZATION.................................................................35

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3
DECLARATION
I declare that the project is my original work and no one has ever presented it anywhere for the
award of craft certificate in electrical and electronics ingineering.
NAME:JONHNATAN KIPTOO LETTING
LECTURER:IROYA SAMMY

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DEDICATION
I dedicate this project to all my family members more especially my father for his tireless effort
to ensure my success in education and my mother for her positive contribution in my life and to
my future wife and children both born and unborn as a challenge to hard work and
determination.

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ACKNOWLEDGEMENT
My great appreciation goes to my lecturer MR. IROYA SAMMY for his guidance and efforts to
ensure the success of my business plan, sincere gratitude to my parents Mr. and Mrs. Macho for
their support both financially and emotionally. I also dedicate my apparition to all my colleagues
for their positive contribution through various ideas and advices in the move to success of my
plan. May the almighty God grant them everlasting peace of mind and success in all their
understanding.

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EXECUTIVE SUMMARY
CHAPTER ONE
The business will be registered by the name MACHO’S ELECTRICAL AND ELECTRONIC
DEALERS. The business will be located along Uganda road next to transnational bank. It will
also be sole proprietorship as well as I will be the owner of the business. The business will
majorly deal with the sale of electrical and electronic components like computers, mobile
phones, generators, electrical cables, circuit breakers etc. The business lies in electrical and
electronic industry and it will aim at expanding by opening other branches in different towns.
The business will create awareness to its customers by advertising its products on sign posts,
newspapers, etc, promoting sports and sponsoring bicycle rallies after which the business will
attract its customers by giving discounts, giving guarantee and offering other services at cheaper
price. Thereafter the business will diversify and open up a cyber cafe.

CHAPTER TWO
MARKETING PLAN
The business targets individual customers, institutions like Technical Schools and Hospitals,
commercial customers around Eldoret town. In the initial year the market shares for the
individual will be 40%, for commercial will be, 60% and for institutions will be 70%. The
business will employ new technology to overcome competition provided by other businesses like
vibes electronic dealers. They will carry out promotion by pricing methods and practice other
sale tactics.
MACHO’S ELECTRICAL AND ELECTRONIC DEALERS will practice both O level of
distribution and it will try as much to minimize the problem encountered during transporting of
goods and other products through employing competent drivers.

CHAPTER THREE
ORGANIZATION AND MARKETING PLAN
The business will have senior manager as the main or final person who will be myself. It will
also employ two technicians, an accountant, sales people, store keeper, secretary, security officer
and cleaner. It will obtain licenses like business identity license, marketing license and
advertisement license. It will also obtain health permit. The by-laws in business building shall
be, the presence of presidential portrait, working for slippery floor and instalment of fire
extinguishers. The business will bank with Kenya National Bank (NBK) and will use both
safaricom and airtel for communication.

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CHAPTER FOUR
OPERATIONAL/PRODUCTION PLAN
The business shall buy all facilities required for its sufficient operation which will cost
Ksh191,290. Technical staff employed by the business will repair the facilities in case of damage
or breakdown. As stated, the business employees will be paid their salaries according to where
they work, technician 10,000, sales officer 13,000, accountant 15,000, sales people 7000, store
keeper 8000, security personnel 6000 and cleaner 5000. The business shall practice both job
production and mass production to satisfy its customer. Even the business will be operating
where shall be regulations which will affect it.

CHAPTER FIVE.
FINANCIAL PLAN
The business will use 421100 at the start for preparing and the start of the business by buying
tools and equipment needed for smooth running of the business.
The estimated working capital of the business for the first three years will be Ksh 303,000,
394,000 and 404,000 respectively.
The performance income statement of the business for the first three years indicates that the
business will make net profit of 480,004,553,780 and 706,260 respectively.
The break-even point for the first three years shall be 698,159.55, 227,388.35 and 192,489.87,
respectively. The gross profit shall be 75.86%. Return on equity ratio will be 61.35%, return on
asset ratio will be 374.19%. The desired financing of the business will be 3,249,004 and the
proposed capitalization will come from bank loan, friends’ contribution and personal savings

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CHAPTER ONE
1.0 BUSINESS DESCRIPTION
1.1 BUSINESS
The business shall be named MACHO’S ELECTRICAL AND ELECTRONIC DEALERS. The
business name indicates the quality of both the products and services that will be offered by the
business to the customers. The business will specifically major in electrical and electronic
equipment as well as their services.

1.2 BUSINESS LOCATION AND ADDRESS

The business will be located in Eldoret town along Uganda road next to transnational bank
opposed to Kenya national library (KNL) which is the junction that interconnects Iten road,
Kisumu road and Uganda road. This will ensure ease to customers to access the business
premises. The place has high levels of security as well as good facilities such as paradise hotel,
Uasin Gishu District hospital, standard chartered bank, Barclays bank among others.
The address of the business shall be:

IMANI’S ELECTRICAL AND ELECTRONIC DEALERS,

P.O BOX 780-30100,
ELDORET.
MOBILE: 0724808608

1.3 FORM OF BUSINESS OWNERSHIP

The business shall be a sole proprietorship meaning I will own it hence be the overall boss. The
main reason as to why I choose this form of business is that I wanted to have something of my
own and enjoy all the profits obtained from the business alone. The major sources of capital for
the business shall be:
 Borrowing loans from financial institutions and repaying them after generating
profits.
 Selling of the personal assets, thereafter making profits rather than keeping those
assets.
 From the personal savings so that the business will generate more.
 Borrowing from friends whom I will repay after the business will have stabilized.

1.4TYPES OF BUSINESS
The business will be electrical and electronics of which the management activities to be carried
out are:

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  Importing electrical appliances like cables, generators, circuit brakers, and selling them to
customers.
 Importing electronic machines like computers, mobile phone, televisions, Wi-Fi systems
and selling them.
 Providing services like installing electricity in houses on requests by customers after
buying the electrical appliances.
Other minor activities that can be carried out in the business include:
 Buying old computers and other machines like television and refurbishing them for
resale.
 Installing computer software in order to widen the margin for many customers.
The business has not yet commenced but shall commence in the next 11 months due to the
following reasons:
The bank shall offer me loan in 8 months to come.
The house that I intend to carry out my operation is still under construction.
Personal assets that I have to sell to get capital shall have appreciated.

1.5 PRODUCTS/ SERVICES

The products that the business shall majorly deal with are electrical appliances and electronic
machines. The table 1 below indicates specifically the products and the targeted market.
PRODUCT TYPE LINE MARKET
ELECTRICAL Generators Germany type Individuals
APPLIANCES Honda type Commercial
Tiger type Young businessmen
COMPUTERS Lap-tops Hp-type Students
Lenove type Institutions
Toshiba
Personal computers Hp-type Individuals
Intel Commercial
Main frames High speed Commercial
Medium speed Institutions
Low speed
MOBILE PHONES Motorola L6 Working class
C113 Students
Nokia 2630 Business people
2300 Bankers
1110 Engineers
F713 Accountants
T47 lawyers

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I will always be reliable, promptly and responsive. Therefore, my products shall be of high
quality in order to overcome competitors in the same field.

1.6 JUSTIFICATION OF BUSINESS OPPORTUNITIES

The major indications of business success are:
i. High demand due to increased population of people who will buy many products from
business.
ii.
iii. Introduction of rural electrification by the government that has led to a rise in demand for
electrical appliances of which my business will be selling.
iv. Development of communication technology which entity depends on electrical
components and computers system. This justifies my succession in the business.
v. Development of new software in computers like google, Facebook etc which are very
vital for today’s technology thus people will come for my services to install in their
computers.
vi. Advancement in use of computers in many fields will make my business sell more due to
high techniques and software I will be installing hence leading to succession.

1.7 INDUSTRY
The business is in the electrical and electronic industry. The industry majorly deals with
manufacturing, supplying products and services like installing electrical appliances and computer
software.
The sector of the business is distributing and serving of electrical appliances, electrical
components and software. In the same sector there are so many registered companies like vibes
electrical thus indication of high completion which should be outweighed by: -
i. Offering reliable services
ii. Advertising products on newspapers and posts.
iii. Motivating my customers by giving them discounts and offering after sale services.
Due to change in technology, my business shall be flexible to changes. There shall be enough
and qualified employees who will serve the customers to the required standard. However, there
shall be high competition the business shall have its distinct characteristics to remain ahead of
the competitors like:
i. Opening early the business and closing late.
ii. Cost focus and good leadership.
iii. Offering focus and good leadership.
iv. Offering promotion and frequent advertisement.
v. Widen the margin of the customers by offering cheap services.
The industry characteristics are that:

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 i. Many customers buy products of the company during the end month.
ii. Most computer services are done during school days.
iii. Many of the products are imported from Japan but mine shall be imported from China.

The main hope of the business is that due to change to high standard of technology of
communication and use of power electricity in almost every aspect the business intends to grow
in the nearby future.

1.8 BUSINESS GOALS

The business has set up goals which should be achieved in two distinct periods of time.

a) Business short term goals

Within the first year of business writing the business shall:
i. Advertise its products through mass media and posts to make its clients understand the
products offered by the business.
ii. Carry out promotion activities such as offering T-shirts printed on them the products and
services offered by the business.
iii. The business shall hold seminars to create awareness among customers by educating
them about the products and services.
b) Long term goals.
The business as well intends to:
i. Open barnacles in other more especially across the boards in Eldoret town to expand
market for its customers.
ii. Open up a training school to offer technical skills on carrying out installing services.
iii. The business shall begin to give loans to its employees.

1.9 ENTRY AND GROWTH STRATEGY

A. ENTRY
The Macho’s electrical and electronic business being new to its customers, it will first create
awareness to the customers through:
i. Advertising its products on sign posts.
ii. Advertising its products through mass media.
iii. Promoting sports and sponsoring bicycle rallies.
After creating awareness, the business shall attract the customers by:
i. Giving discounts to customers who buy in bulk.
ii. Offering services at cheaper prices compared to the competitors.
iii. Giving quantities to the machines bought by customers.

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B. GROWTH STRATEGY
After the business will have created awareness it will:
Open other sub-branches to offer the same products and services.
Diversify to off services related to the business like opening up a cyber café.
Import same products from different countries.

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CHAPTER TWO
2.0 MARKETING PLAN
2.1 CUSTOMERS
The customers targeted are individual customers and institutions.
1) Individuals
i. a) Young people of age between 18-35 years will come to buy computers and
laptops due to advanced technology in communication with friends and the world
through e-mail and Facebook.
b) Current generation cannot do without phones so they will also come to buy
phones for the same purpose of communication.
c) Young people will come for new technology services like updating of software
in their phones and computers.
2) a) Many people aged 35-60 are buying plots in Eldoret and building houses, so they are
targeted to buy electrical appliances from the business and also come for the installation
services.
b) Both male and female in Eldoret are driving, they are targeted to come per the
services like installing alarm and sensors on their vehicles for security purposes.
c) Both male and female who have done construction are targeted to come and buy
electrical material for house installation.

11. Institutions
A. Institutions like The Eldoret National Polytechnic have started using computers in the
communication networks. They are targeted to buy more computers.
B. Presence of schools and computer colleges which have increased student enrolment and
thus they will come for more computers.

2.2 MARKET SHARE

The business targets individuals beginning with persons of age 18-35 years because their needs
are very high and their populations is also high hence factors in business growth.
After a period of three months, adults both men and women will now be targeted after a period
of six months the business will have stabilized and will target institutions like Eldoret Institute
who will buy in bulk.

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The table below shows the market share of the business. (Target number/target populationx100)
Customers title Initial year Second year unexploited Competitor
Individuals (1000/1800) (1200/18 (600/1800) 34%
X100 X100
=55% =33%

00) X100
=66%
Institutions (4/6) X100 (45/60) X 100 (15/60) X100 17%
=66% =75% =25%
Commercials (38/60) X100 (45/60) X100 (15/60) X100 25%
=63% =75% =25%

They shall be achieved through

i. Offering more efficiency services to customers.
ii. Offering faster services than competitors like main enterprise.
iii. Employing high skilled personnel.
iv. Locating business at an accessible place.
v. Offering services faster to the customers.

2.3 COMPETITION
There are many competitors in the same business. Distractors competitors like vibes electronic
and enterprise e.t.c.
Table below shows their location and size with their activity.
NAME OF LOCATION SIZE ACTIVITIES
COMPETITOR
Vibes electronics Near customers’ Medium Sells computers and
gates phones
Mains electronics Along Oloo road Large Sells electrical
applies
Classic electronics Opposite Uasin Gishu Medium scale Offer computer
and electronics Hospital service and
installation
The table below shows their weaknesses:
COMPETITOR WEAKNESSES THREATS
Vibes electronics Services offered are slow. Established long before.
Unskilled personnel.
Mains electronics Insecurity in the located Already created awareness.
place. Has many brands.
Sells stake products.
Classic electrical and Services are offered at high Business has stabilized.

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electronics costs. Business has many
Opening the business late has customers.
poor public relation.
The business intends to capitalize on their weaknesses by:
i. Opening the business early.
ii. Closing the business late.
iii. Cost leadership and cost focus.
iv. Widening the margins of customers by offering also very cheap services.

2.4 PRODUCTION AND ADVERTISEMENT

a. Promotion
i. The business intends to offer promotion to customers who will buy in bulk by giving
discounts.
ii. The business intends to offer customers with calendars printed on them products and
services offered.
iii. The business will offer clothes branded its name on it.
iv. The business will practice psychological pricing and loss leadership keeping.

b. Advertisement
The business shall advertise its products and services through newspapers, sign posts, television
and business cards.
Although during advertisement, it will incur some costs but the main benefits are:
i. Customers will be informed about the business and for the services.
ii. The business will outweigh its competitors.
iii. The business will grow by name and people will require its services.
The effectiveness of the business promotional companies will be measured by the number of
customers who will come for the services and profit made in a given period of time.

2.5 PRICING STRATEGY

Though pricing will lead to growth and creation of high profits due to increased customers, the
main factors that might affect the business are:
Government policy- high production by government results into low profits.
Cost of offering services and generating up other components will affect the price of the final
component or service.
Demand – increase in demand will lead to increase in price thus high profit generation, the
reverse is true.

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Consumer characteristics –characteristics like buying on credit and bringing might affect the
business planning.
Methods of pricing that will be used are cost oriented raising demand oriented pricing and price
discrimination.

Pricing table
PRODUCTION FROM TARGET AMOUNT IN KSH
Laptops Lecturers, teachers and 40,000
students 32,000
Personal computers Institutions 45,000
Individuals 40,000
Mobile phones Lecturers 12,000
Students 5,000
Business people 8,000
Cables Commercials 8,000
Institutions 10,000
Individuals 7,000

2.6 SALES TACTICS

The sales tactics that will be complied in the business are:
i. O-level selling direct to customers.
ii. One level–business selling to commercials who will sell to final customers who buy in bulk.
iii. Two- level–selling to commercial who might sell to wholesalers then to final consumers.
The business will be forced to transport some goods from one place to another so the main
means of transport will be hiring trucks.
The business will spend about 5000 shillings for transport per month.
The likely problems to be experienced during transport are:-
i. Theft before the goods reach the destination.
ii. Road accidents leading to distortion of computers.
iii. Difficulties in transportations due to impassable roads caused by heavy rainfalls.
iv. Breakdown of computer elements during transportation.

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However, the efforts that will be made to ensure these problems are overcome include:
i. High security during transportation to guard against theft.
ii. Have competent drivers to reduce road accidents.
iii. To ensure business is safe from theft and accidents.

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 CHAPTER THREE
3.0 ORGANIZATION MARKET PLAN

Senior manager

Sales officer Technician Accountant

Security
Sales person Cleaner Storekeeper Secretary
officer

3.1 Business manager and qualifications

The business will be managed by me and will also employ other personal to work in different
sectors. The reason why I will be the manager is:
i. I have management skills so that the business will not collapse.
ii. I have the knowledge about the services offered by the business that is higher diploma in
electrical and electronic engineering.
iii. I have tactics on handling customers hence the business will attract many customers.

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PERSONNEL, NUMBER AND QUALIFICATION
The table below shows the number of employees employed in the business and their
qualification.
PERSONNEL NUMBER QUALIFICATION
Sales officer 1 Diploma in sales and
marketing
Technicians 2 Diploma in technology
Accountant 1 Degree in accounting
Sales people 1 Form four leavers
Store Keepers 2 Certificate in store keeping
Secretary 1 Certificate in secretary
Security persons 2 Three years’ experience
Cleaner 1 Form four leaver

3.3 RECRUITMENT, PROMOTION AND TRAINING

a. Recruitment
i. Accountants will be subjected to a written interview and the best will be absorbed.
ii. Depending on his or her working experience, the security will be absorbed.
iii. Security officers will be recruited on the basis of their body muscular and height.
iv. Technicians will submit their application letters and they will be shortlisted to come for
interview.
v. Cleaners and sales people will be employed on the basis of first come.

b. Promotion
i. Accountant salary will be increased after the business will have stabilized.
ii. Technicians will be promoted by grouping from working scale A-D etc.
iii. Sales person will be promoted from one position to another example from sales person to
general sales officer.
iv. Security will be promoted by increasing their wage.
v. Secretary will be promoted on their working position as from secretary to assistant
accountant.

c. Training
i. Technicians will be asked to attend frequent workshop to acquire more skills.
ii. Accountant will be taken out to attend seminars to improve more skills.
iii. Security officers will be taken for field training once per week.
iv. Sales people will have a sales training.
v. Store keepers will visit other businesses to develop more skills on store keeping.

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3.4 Remuneration and incentives
a. Remuneration
i. Sales people shall be given up to 2% commission on their sales.
ii. Technicians as well shall be given commission on their services to customers.
iii. Accountants and secretaries shall be given allowances after the business has stabilized.

b. Incentives
The business shall offer its employees the following for motivation:
i. The technicians will be provided with dust coats to use while at work.
ii. The technicians will be given two pairs of uniforms.
iii. All employees shall be provided with meals during weekends.
iv. All employees shall be given transport allowances every Friday.
v. All employees will be taken out for a tour during all public holidays.

3.5. Licenses, permits and all by- laws

a. Licenses
Before the start of the business, it shall obtain the following licenses:
LICENSE COST
Business Identity License 15,000
Marketing license 7,000
Advertisement license 8,000

b. Permits
The business capacity within Eldoret, the following permits shall be obtained:
NAME OF PERMIT COST
Health permit 5000
Post advertisement permit 2000
Car parking permit 3000
Registration permit 11000

c. By-laws
The business building shall contain the following:
i. Fire extinguishers in the building.
ii. Alarm system in the building for the purpose of alert during theft or fire outbreak.
iii. There shall be presidential portraits in the building.
iv. There shall be waiting bay for customers.

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 v. There shall be air conditioners for air refreshment.

d. Support services
The business having been established in Eldoret town will run smoothly due to the following
support services.
Presence of national bank of Kenya will make it easier to secure the business money.
Presence KCB also will help the business grow since it offers business loans.
Presence of insurance company will make it make easy for the business to insure itself against
them and like fire outbreak.
The business shall use both Airtel and Safaricom systems of communication which are readily
available, effective, cheap and easy to operate.
Poor transport services which are located opposite to the business building will hire the business
for transportation of goods

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CHAPTER FOUR
4.0 OPERATION/PRODUCTION
4.1 PRODUCTION FACILITIES AND CAPACITY.
The facilities that the business will use to avail products and services to customers’ are us shown
in the table below.
FACULTY SUPPLIER QUALITY PRICE PER TOTAL COST
PRICE UNIT
Voltmeters 1 24000 24000
Desktop 1 30000 30000
Electric bill 1 40000 40000
Ammeters 2 2400 4800
Calculator 3 1600 1600
Plies 3 400 1200
Screw drivers 18 50 900
Soldering gun 5 250 1250
Allan Keys 4 sets 600 2400
Phase tester 3 300 900
Digital meter 3 3400 10200
Drawing wire 4 600 2400
Testers 3 100 300
Tool book 1 3500 3500
Galvanometer 2 1200 2400
Hacksaw 3 500 1500
Office table 3 800 2400
Cabinet 1 1800 1800
Photocopier 1 28000 28000
Telephone 3 6800 20400
Stationery 2 binds 500 1000
Total cost 191,290

a. Repair and maintenance

1. Repair: incase the faculties mentioned are damaged; they will be repaired by
technicians employed by the business itself.
2. Maintenance: all the faculties will be maintained to avoid distortion by:
A) cleaning electrical appliances regulating to minimize its effects on working
conditions.
B) Replacing the broken part on computer or to her faculty to maintain its working
condition.
C) Replacing the fated tubes and other equipment for sufficient working.

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Labour requirements
The business as stated will employ skilled people, semi-skilled people and unskilled persons to
work in various sections.
The following shows types of employment and cost per month.
RANK NUMBER OF POSITION COST PER TOTAL COST
WORKERS MONTH
Skilled
1 Sales officer 13,000 13,000

2 Technicians 10,000 20,000

1 accountant 15,000 15,000

Semi-skilled
2 Sales person 7,000 14,000

1
Store keeper 8,000 8,000
1
Security 9,000 9,000
1
Marketing 1,600 1,600
manager
Unskilled 2 Security officer 6,000 12,000

1 cleaner 5,000 5,000

Total cost per 89,000 112,000
month

Premise layout
The layout of the premises will be as shown in the appendix ii and it is located such that
customers can be able to see the displayed items and access them easily.

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 4.2 PRODUCTION STRATEGY
The business will only practice two forms of production.
i. Job production -The business dealing with services in electrical and electronic
components, the services will be done on request by our customers.
ii. Mass production
iii. The Hilstar dealers shall also produce other goods in plenty like computers and other
electrical appliances so that when the customers come for them they will be readily
available.

PRODUCTION/OPERATIONAL PLANNING AND CONTROL

The table below shows the plan of the operation of the business and control.
SERVICES EXECUTIVE EQUIPMENT TIME DURATION
Instant computer Technician 1
software
Repairing computers Technician 2 Digital meter, screw
driver, sensors
Selling of computers Sales people Receipt books Fourteen hours per
and electrical day
appliances
Keeping records Secretary Pens and record Fourteen hours per
books day
Calculation of Accountant Calculator, pens and Fourteen hours per
business sales cashbooks. day.
Cleaning rooms Cleaner Brooms and pails Twice per day.
Guarding the Security officer Twelve hours per
business premises day.

4.3 OPERATION PROCESS

The diagram below shows the production process of the business.

Sales
Store
Manufacturing peopl
Security officer Secretary
company keeper e

Technician customer

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The business will order productions from manufacturing on reaching the business premises, the
security officer on duty will check the goods carried before the security records them.
Appliances will be stood by the store keeper where they will be deported to the technician for
installation of software in computers then to the sales people for sell to the customers.
The business will ensure that the customers are well served.

4.4REGULATIONS AFFECTING BUSINESS

1. Trade licensing act- the function and power entrusted in the county government including
regulation of professions to provide licenses to certain traders especially those involved
in regulated trade for example whole sale and retail trade.
2. Income tax act- an act of parliament which provides for taxation of income earned by
individual or business value added tax. A sticks which introduces a tax as value added tax
on goods delivered, sold in the country as well as certain services.
3. Faculties’ act- this makes provision per the health safety and overcame of person
employment in factors and other places.
4. Employment act- an act of parliament which among other things set out contract of
services and provisions on such matters as summary dismissed terminating services of
employees and keeping of records by employer since the states that it is an offence to pay
an employee his/her wages and terminate benefits.

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CHAPTER FIVE
5.0. FINANCIAL PLAN
5.1 PRE-OPERATIONAL COSTS
This indicates the items and their cost expected at the start of the business. The table below
indicates the expected pre-operational items and their costs.
ITEM COST
Calculator 1600
Stationery 1000
Electricity deposit 2600
Water deposit 15000
Furniture and fittings 80000
Meters and testers 18700
Rent deposit 100000
Advertisement costs 20000
Insurance 25000
Trade license 22000
Ovals 14000
Toolbox 35000
Total cost 334,900

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5.2 WORKING CAPITAL
This is the amount required for daily running of the business. The table below shows the amount
required to run the business for the first three years.
Working capital =current costs- current liabilities

ITEMS YEAR 1 YEAR 2 YEAR 3

CURRENT ASSETS
Stock of raw 7,000,000 400,000 305,000
materials
Stock of finished 270,000 700,000 600,000
products
Depots - - 400,000
Cash at bank 780,000 90,000 900,000
Cash at hand 600,000 61,000 430,000
Total current assets
Current liabilities
Creditors - 180,000 185,000
Salaries 1,536,000 1,536,000 1,536,000
Bank loans 11,000 121,000 131,000
Overhead 10,000 95,000 90,000
Rent 120,000 120,000 120,000
Electricity 85,000 80,000 78,000
Water 45,000 35,000 32,000
License 50,000 49,000 49,000
TOTAL 2,047,000 2,216,000 2,231,000
LIABILITIES
Working liabilities 303,000 394,000 404,000
C.A-C.L

28
TABLE
5.4 PROFOMA INCOME STATEMENT
This profoma income statement for the first three years is shown below.
YEAR 1 2 3
Item Ksh Ksh Ksh
Sales 3,314,100 3,400,000 3,600,000
Cost of sales 800,000 780,000 750,000
Gross profit 2,514,100 2,620,000 2,850,000
Expenses
Salaries 1,536,000 1,536,000 1,536,000
Water 1500 1500 1500
Advertisement 1200 15000 12,000
Transport 24,000 30,000 30,000
Insurance 24,000 24,000 24,000
Repair 24,000 28,000 28,000
Stationery 5000 5000 5000
Loan repayment 90,000 100,000 12,000
Depreciation 15,000 16,000 17,000
Maintenance 25,000 25,000 25,000
Rent 120,000 120,000 120,000
Electricity 24,000 24,000 24,000
Total expenses 1,906,500 1,938,000 1,956,000
Net profit before tax 607,600 682,000 894,000
Provision tax 21% 127,596 143,220 187,740
Net profit 48,004 553,780 706,260

29
 5.5 PROFOMA BALANCE SHEET
The business profoma balance sheet is shown in the table below.
ITEM AT THE AT THE END OF AT THE END OF
BEGINNING OF YEAR 2 YEAR 3
YEAR 1
Current assets
Cash at hand 900,000 900,000 900,000
Cost at hand 700,000 800,000 700000
Debtors - - -
Stock 750000 750000 750000
Total assets 2350000 2450000 2530000
Fixed assets
Equipment 100000 100000 100000
Furniture and fitting 80000 80000 80000
Depreciation 10000 10000 10000
Total fixed assets 190000 190000 190000
Total assets 2540000 2640000 2720000
Short term liabilities
Bank loan 165000 190000 190000
Creditors 5000000 525000 545000
Total 665000 715000 755000
Long term liabilities
Interest 260000 270000 260000
Net profit 4180004 490004 50004
Owners’ equity 750000 800000 810000
Labor 3400000 350000 360000
Total long term 1860004 191004 1940004
liabilities
Total liabilities 2525004 2625004 2704004

30
5.6 CALCULATION OF BREAK EVENT POINT
The business after it has attended stability the following table indicates the particulars and
amount for three years.
ITEM AT THE AT THE END OF AT THE END OF
BEGINNING OF YEAR 2 YEAR 3
YEAR 1
Ksh Ksh Ksh
Insurance 80,000 80,000 80,000
Rent 120,000 120,000 120,000
Salary 128,000 128,000 128,000
Purchase 125,000 125,000 125,000
License 70,000 70,000 70,000
Total fixed cost 523,000 523,000 523,000
Variable cost
Electricity 120,000 100,000 110,000
Telephone 80,000 70,000 78,000
Advertisement 130,000 90,000 100,000
Taxes 150,000 120,000 115,000
Transport 150,000 180,000 140,000
Repair and 80,0000 90,000 80,000
maintenance
Stationery 1500 60000 68000
Water 80,000 75,000 83,000
Total variable costs 845,000 785,000 774,000

(607,600/314,000) x100%
=193.5%
Returns on assets ratio= (net profit before tax/fixed assets) x100%
= (607,600/175,004) x100%
=1347.91%

5.7 DESIRED FINANCING

ITEM COST (KSH )
Pre-operational cost 421,000
Working capital 30,300
Fixed assets 252,504
Total desired financing 703804

31
5.8 PROPOSED CAPITALIZATION
The finance for the business will come from the sources named below:
SOURCE AMOUNT(KSH)
Bank loan 2,000,000
Friends contribution 600,000
Personal savings 500,000
Family contribution 149,100

32
 5.3 CASH FLOW STATEMENT
ITEMS JAN FEB MAR APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC TOTAL
CASH IN
FLOWS
Opening cash 50,000 52,000 52,000 55,000 55,000 55,000 57,000 58,000 58,000 59,000 60,0000 60,000 671,000
Debtor 1,000 15,000 1500 1500 2000 2000 23,000
collection
Sales and 390,000 393,000 400000 410000 400000 420000 410000 420000 420000 420000 420000 430000 4893000
services
Total inflow 440,000 445000 452000 465000 455000 455000 478000 483000 459000 480000 482000 492000 5262500
CASH OUT
FLOW
Cash purchase 80000 90000 70000 60000 60000 50000 30000 40000 50000 30000 40000 30000 630000
Electricity 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 18000
Water 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 12000
Telephone 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 18000
Rent 8000 8000 8000 8000 8000 8000 8000 8000 8000 8000 8000 8000 96000
Insurance 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 14400
Advertisement 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 24000
Stationery 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 12000
Transport 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 24000
Credits 2000 1500
Repairs 500 500 500 500 500 500 500 500 500 500 500 500 6000
Salaries 128000 128000 128000 128000 128000 128000 128000 128000 128000 128000 128000 128000 1536000
TOTAL 223700 233700 213700 203,700 193,700 173,700 183700 195700 173700 20370 184,700 173700 2357400
OUTFLOW
Net cash flow 216300 211300 23830 261300 251300 261300 304300 281300 204300 302300 297300 318300 3147600

33
 APPENDIX 1

3 7
4

2
6

1 5

11
1. ELDORET TTI 13
10
2. KCB 12
3. UG DISTRICT HOSPITAL
4. OLOO ROAD
5. TULIN SUPER MARKET
6. FAMILY BANK
7. KHETIA SUPERMARKET
8. JAMUHURI STREET
9. OGINGA ODINGA ROAD
10. POLICE STATION
11. NATIONAL BANK
34
12. TARGETED BUSINESS PREMISES
13. ROYAL CAFÉ HOTEL
 APPENDIX II 1. SECURITY ROOM
2. SALES
THE PREMISES LAYOUT 3. MAIN STTORAGE OF GOODS
4. RESTING PLACE
5. LADIES
6. MEN
7. MEN’S CHANGING ROOM
8. LADIES CHANGING ROOM
1 9. ACCOUNTS OFFICE
ENTRANCE 10. MANAGER OFFICE
11. REPAIR AND MAINTANCES
12. WORKSHOP AREA

4 5 6 7
2

8
12

3
35
10
11