INSTITUTION NAME : KISII NATIONAL POLYTECHNIC

COURSE NAME : DIPLOMA IN ELECTRICAL AND

ELECTRONICS ENGINEERING (POWER
OPTION)

COURSE CODE : 2601/306B

NAME OF PRESENTER : KEPHA OBIYE OMOI

ADMISSION NUMBER : DEEPJ17/233

INDEX NUMBER : 703101/0548

DOCUMENT TITLE : BUSINESS PLAN

BUSINESS NAME : KOBIYE ELECTRONICS SHOP

PRESENTED TO : THE KENYA NATIONAL EXAMINATIONS

COUNCIL FOR THE AWARD OF DIPLOMA IN
ELECTRICAL ENGINEERING (POWER OPTION)
SUPERVISOR : MR. NYACHIENGA
EXAM SERIES : JANUARY 2021

i
DECLARATION
I declare that this is my original work and has never been submitted to any other institution for
the award of Diploma In Electrical Engineering (Power Option)to the best of my knowledge.
Name: Kepha Obiye Omoi
Sign:…………………..Date:………………..

Supervisor: Mr. Nyachienga

Sign:…………………..Date:………………..

ii
DEDICATION
I dedicate this my project to those who supported me financially like my parents, brothers and
sisters, for all that they spent to ensure that I accomplish this project work.

iii
ACKNOWLEDGEMENT
I wish to acknowledge all that support I got from my lecturers who helped me to ensure that I
acquire the necessary knowledge as per the business plan writing is concerned.

iv
 EXECUTIVE SUMMARY
CHAPTER ONE: BUSINESS DESCRIPTION
It talks about KOBIYE ELECTRONICS SHOP its location district address and ownership which
will be sole proprietorship. It state the functions it will be dealing with and it will give its
objectives which will be satisfaction of its customers good price and its states also its long term
goals and primary goals of business

CHAPTER TWO: MARKETING PLAN

It contains the whole marketing plan which will contain objectives and market activities
including market share market growth and the share which is targeted. It shows the potential
customers members from surrounding communities’ institutional customers Government and
non-Governmental customers. The chapter also shows different competitors their strength and
weakness and states the way of overcoming their competitors through sales promotions and by
offering quality products and services.
CHAPTER THREE: ORGANIZATION AND MANAGEMENT PLAN
This chapter gives information about the management objectives thus ensuring that strategy
regulation and procedures laid down are followed. It also has employment styles and means of
motivation. It talks about promotions salaries and remunerations licensing permits and by laws
about its business accounts its legal advisors’ and the insurance company it has insured the
business with

CHAPTER FOUR: PRODUCTION PLAN

It starts with production plan which spells out the capacity of business for example the stock
their quantity and cost it also gives the production capacity which explains and gives out details
how long it takes customers to be served. It gives the layout of the business office.it also gives
the way services will be offered using modern techniques and rules and regulations which will be
taken in consideration to the assurance of good working environment for the employees
CHAPTER FIVE: FINANCIAL PLAN
The business pre operational costs to start off will be 2000000, and our working capital for the
year will be Ksh.250, 000. 2013s net profit will be Ksh.10, 000, for it will be Ksh.30, 000 and for
2016 it is a loss of 5000. The balance sheet amount for 2016 and 2017 will be Ksh.900000 and
Ksh.947000espectively.

v
Table of Contents
DECLARATION.....................................................................................................................................ii
DEDICATION............................................................................................................................................iii
ACKNOWLEDGEMENT......................................................................................................................iv
EXECUTIVE SUMMARY.........................................................................................................................v
CHAPTER ONE..........................................................................................................................................1
1.0 BUSINESS DESCRIPTION..............................................................................................................1
1.2 BUSINESS LOCATION AND ADDRESS.......................................................................................1
1.2.1 Business Location Map...............................................................................................................2
1.3 FORM OF BUSINESS OWNERSHIP AND REGULATION..........................................................2
1.4 TYPE OF BUSINESS.......................................................................................................................3
.................................................................................................................................................................3
1.5 PRODUCTS AND SERVICES.........................................................................................................3
1.6 INDUSTRY.......................................................................................................................................4
1.7 JUSTIFICATION OF OPPORTUNITY............................................................................................4
1.8 GOALS OF THE BUSINESS...........................................................................................................4
1.9 ENTRY AND GROWTH STRATEGY............................................................................................5
CHAPTER TWO.........................................................................................................................................6
2.0 MARKETING PLAN........................................................................................................................6
2.1 CUSTOMERS...................................................................................................................................6
2.2 MARKET SIZE.................................................................................................................................6
2.3 MARKET SHARE............................................................................................................................7
2.3 COMPETITION................................................................................................................................8
2.4METHOD OF PROMOTION AND ADVERTISEMENT.................................................................9
2.5 PRICING STRATEGY.....................................................................................................................9
2.6 SALES TACTICS.............................................................................................................................9
2.7 DISTRIBUTION STRATEGY..........................................................................................................9
CHAPTER THREE...................................................................................................................................10
3.0 ORGANIZATION AND MANAGEMENT PLAN.........................................................................10
3.1 ORGANIZATION CHART............................................................................................................10
3.2 MANAGEMENT TEAM................................................................................................................10
3.3 SALARY SCHEDULES.................................................................................................................12

vi
 3.4 RECRUITMENT TRAINING AND PROMOTION.......................................................................12
3.5 REMUNERATION AND INCENTIVES........................................................................................13
3.6 LICENSES, PERMITS AND BY-LAWS.......................................................................................13
3.7 SUPPORTIVE SERVICES.............................................................................................................14
CHAPTER FOUR.....................................................................................................................................15
4.0 PRODUCTION AND OPERATION...............................................................................................15
4.1 PRODUCTION FACILITIES AND CAPACITIES........................................................................15
4.2 MACHINERY AND EQUIPMENT................................................................................................15
4.3 PROMOTION/OPERATION STRATEGY....................................................................................16
4.4 PRODUCTION DESIGN AND DEVELOPMENT........................................................................16
4.5 PRODUCTION PROCESS.............................................................................................................16
4.5 OTHER EXPENSES.......................................................................................................................17
4.4 REGULATIONS AFFECTING OPERATION...............................................................................17
CHAPTER FIVE.......................................................................................................................................19
5.0 FINANCIAL PLAN........................................................................................................................19
5.1 PREOPERATIONAL COST...........................................................................................................19
5.2 ESTIMATED WORKING CAPITAL.............................................................................................19
5.3 CASH BUDGET.............................................................................................................................20
5.4 BALANCE SHEET.........................................................................................................................23
5.5 BREAK EVEN ANALYSIS............................................................................................................25
5.6 FINANCIAL RETIOS.....................................................................................................................25
5.6.1 PROFITABILITY RATIO CALCULATION...........................................................................25
5.7 DESIRED FINANCING.................................................................................................................27
5.8 PROPOSED CAPITALIZATION...................................................................................................27

vii
 CHAPTER ONE

1.0 BUSINESS DESCRIPTION

The name of the business will be NYAMIRA ELECTRIC AND ELECTRONICS WORKSHOP.
The name will be derived from the place that the business will be located. The name is popular in
his community and this will enable the owner to secure potential customers for the proposed
business.

1.2 BUSINESS LOCATION AND ADDRESS

KOBIYE ELECTRONICS SHOPwill be located at Nyamira County, Nyamira Township at
Nyamira town after Konate junction opposite Kenya Commercial Bank (KCB) Nyamira Branch
due to availability of customers within the town and the surrounding community. The business
will deal with electric cables which are of good quality and durable to help in ministering the
frequent purchase of the cables by end users.
Availability of well-developed infrastructure e.g the location of the business along the highway.
This will make transportation of goods to and from the business premise easy at the same time
availability of communication network will facilitate communication with the customers.
The banking services around will facilitate easy transfer of funds.
The available police station within the town will ensure that the security is well maintained
within the business premises.
The address of the business will be:
NYAMIRA ELECTRIC AND ELECTRONICS WORKSHOP,
P.O BOX 148,
NYAMIRA.
E-mail address: nyamiraelectrics@gmail.com
Tel: 0741301686

1
1.2.1 Business Location Map

KISII TOWN

Kisii Junction

Kemera

Sironga

Nyamira-Kebirigo Junction

Nyamira Highway

NYAMIRA Kebirigo Highway

ELECTRIC AND
ELECTRONICS
WORKSHOP

1.3 FORM OF BUSINESS OWNERSHIP AND REGULATION

The business will be a sole proprietorship where the starting capital will be Ksh.200,000. It will
have a management body which will be working under owner’s supervision as the managing
director of the business factors which will encourage the owner to choose a sole proprietorship
from other forms of the business units are:
Capital: the form of the business does not require huge amount of capital to start hence start the
business will be little capital.
Flexibility: the type of the business is flexible in that the owner will decide to replace the non-
moving stocks with the first moving stocks so as to make a profit.
Legal requirements: the business will require few legal requirements i.e the business permit and
trade license.
Decision making: with sole proprietorship, decision making is easy since there will be no need
for consultation of anybody on issues relating to the management and operation of the business

2
profit. The profit made from the business shall be registered by the county government of
Nyamira under the ministry of trade.

1.4 TYPE OF BUSINESS

KOBIYE ELECTRONICS SHOPwill be a wholesale type of business which will sell to
wholesale and retailers who will then sell to final consumers. The business will deal with selling
of electric cables which are of high quality some of which will be supplied by manufacturers and
Kenya Power and Lighting Company (KPLC).
The business logo will be:

NYAMIRA ELECTRIC

AND ELECTRONICS WORKSHOP

1.5 PRODUCTS AND SERVICES

The business will be offering services such as browsing of computer, repairing of mobile phones,
supplying of electronic gadgets such as fridge, microwaves, dishwashers and television. It will
offer all varieties of colours, shapes and sizes. The customers will benefit from the business
because their products last long and they are very convenient to users. The products can be used
to perform different functions like computers can perform various kinds of works.
The business will only sell the following cables:
a) 1.5mm2
b) 2.5mm2
c) 5.0mm2
d) 10.0m2
Aluminum cables which are used as earth wires.

3
1.6 INDUSTRY
KOBIYE ELECTRONICS SHOPwill fall under ministry of energy which will engage in
medium scale business because there is only one large scale and other small scale business and
this will enable business to compete efficiently with both small and large business firms.

1.7 JUSTIFICATION OF OPPORTUNITY

Being that the owner have been associating closely with people who work in electric companies
and worked with the KPLC, they used to advise the owner on how he can start and run the
business and basic skills needed.

1.8 GOALS OF THE BUSINESS

Primary Goals of the Business
The primary goals of the business will be search of materials, make profit only.
 Check new customers service process.
 Attract more customers
 Improving the quality of service to customers
 Maintaining affordable price to customers

Secondary Goals
 To increase the stock
 Increase the customer demand
 Improve the quality and quantity of goods

Long-term goals of the business

The business will expand into large-scale business which will be achieved by offering after sale
services, discount to the customers to increase their demand on any product.

1.9 ENTRY AND GROWTH STRATEGY

Pre-start strategy of the business

4
The pre-start strategy will be acquiring the stock for loan application, purchasing of equipment,
advance in the business.

At running strategy
 The business will purchase new goods
 Establishment of beached term
 Marketing of the products
 Creation of awareness to people and gifts, discount prizes and after sale services will be
given during the opening and advertisement will be done through magazines, radio,
television and e.t.c

At maturity strategy
 The business will maintain its customers by standardizing the price of the products so as
to attract more customers by selling of high quality products at affordable prices and
offering a better services to customers.

5
 CHAPTER TWO
2.0 MARKETING PLAN
The business will have customers from government sectors and private sectors and local
community which will turn up to about 70% of the customers. The business will create jobs of up
to a population of 30% within the first 5 years and it will increase to above average after the
business shall have been stable with stable customers thus more customers will be attracted. The
sales personnel will be employed to assist the business in order for the business to be able to
compete with her competitors.

2.1 CUSTOMERS
The business will receive customers regularly resulting to in and out of goods and services. The
customers fall into categories which will include:
2.1.1 Institutional Customers
The business will aim at offering product to schools, colleges and universities. The products
offered will be computers, heaters, television, videos which will be of high quality, efficient,
educed in price and efficient to use. They will buy using credit facilities or even using cash in
order to benefit fully from this services. This will be a good market to gain buyers throughout
financial year since they buy goods on large quantities.
2.1.2 Government and Ministries
The business will supply the electronics to the institution of government and this will contribute
to the profit in business.
2.1.3 Wholesalers
The business will also supply their electronic devices to wholesalers. This will enable the
wholesalers sell their products to retailers increasing profits in business.

2.2 MARKET SIZE

KOBIYE ELECTRONICS SHOPwill control approximately fourty five percentage of the total
market taken by the statistics of each item. The amount of sales will be per six months in a year.
The remaining percentage will be controlled by DANCE ELECTRONICS which they will
occupy thirty percent and WELL ELECTRONIC will occupy twenty five percent of the total
market size.

6
 2.3 MARKET SHARE
The business will supply over 38,000 people where the chart below shows the shares of potential
customers and other customers in the shop.
Before penetration
COMPETITOR NYAMIRA DANCE WELLS TOTAL
ELECTRIC AND ELECTRONICS ELECTRONICS
ELECTRONICS
WORKSHOP
Sales 180,000 25,000 100,000 100,000
Market share 45000 X 100 3000 X 100 25000 X 100
100000 100000 100000 100%
=45% =25% =25%
Degrees 1620 =1080 =900 3600

Sales

NYAMIRA ELECTRICALS
dance electronics
wells electronics

After penetration
COMPETITOR NYAMIRA ELECTRIC AND DANCE WELLS TOTAL
ELECTRONICS WORKSHOP ELECTRONICS ELECTRONICS
Sales 30,000 10,000 10,000 40,000
Market share 30000 X 100 10000 X 100 10000 X 100
100000 100000 100000 100%
=30% =10% =10%
Degrees 21.60 =7.20 =7.20 3600

7
 Sales

NYAMIRA ELECTRICALS
dance electronics
wells electronics

2.3 COMPETITION
The business will encounter competition from various businesses of the same kind already
running in the market. This is because it have large amount of product as compared to my
business.
Competitor 1: Nyamira Electronics and Electricals Enterprise
Area Strength Weakness Opportunity Threat
Product High quality They are small in size One should increase it in They have already
size established
Place Is located in Is densely populated One should migrate from
urban areas one place to another
Promotion It uses after- Does not have any One should use another Could be overtaken by
sale other method of method others.
services. promotion
Price Better Does not offer One should use a method Are expensive
promotion to promote the products
Competitor 2: Dan’s Electronics
Area Strength Weakness Opportunity Threat
Product High quality They are of low quality One should increase
the quality of the
product
Place Is located in a There are many people Should increase the
densely in need of the product product in the place

8
 populated area
Promotion It offers price They do not make more They should make less
discounts profits in the business price discounts
Price Better High prices Decrease the prices

2.4METHOD OF PROMOTION AND ADVERTISEMENT

To achieve a wide marketing in both locally and internationally, the business will use marketing
skills so as to reach potential and current customers.
The business will advertise its own products by use of mass media, posters and newspapers. It
will also offer price discounts, offer sales services in order to attract more customers. It will also
advertise its products monthly so as to alert and attract new customers in the business. The
promotion will cost at least thirty thousand to enable the business run smoothly.

2.5 PRICING STRATEGY

The business will serve the prices under its own principles. It will observe factors such as income
of clients targeted, prevailing market price and nature of competition at that time. The business
will also offer items she/he buys in a business. It will also offer after sale services like transport
services since the electronics are bulky. It will also give warranty services to the products and
services they offer.

2.6 SALES TACTICS

The proprietor will offer high products of her goods at a lower cost as compared to her
competitors. He will also offer direct selling of its products from the producer to consumer
directly. The distributors of the business will be given high profit margins according to the
geographical area they cover. The business will also offer indirect selling where it will employ
people to supply the products from one place to another.

2.7 DISTRIBUTION STRATEGY

The business will use sale representative to supply and distribute the product to both the current
and potential customers in the business. They will use the read transport to transport goods to
different parts since is safer and reliable. The cost of transport will be approximately twenty
thousand. The transportation will be also from the producer to wholesaler through means of train
since the goods are fragile and durable hence they can withstand the long travelling.

9
 CHAPTER THREE

3.0 ORGANIZATION AND MANAGEMENT PLAN

The business will be sole proprietorship and the owner will be the manager of the business.
There will be an assistant manager. Technical, salesman, accountant, watchman who will be
working to ensure steady flow of sales in the business.

3.1 ORGANIZATION CHART

GENERAL MANAGER

ASS. GENERAL MANAGER

ACCOUNTANT

SALESPERSON TECHNICIAN WATCHMAN

3.2 MANAGEMENT TEAM

3.2.1 General Manager
Duties
 Negotiating duties of workers
 Recruiting and employment of staffs
 Making development plans for the business
 Performing the functions of motivation, communication and encouraging team spirit.
 Receiving and seeking information concerning internal and external events
Qualification of the Manager
 Must have an experience of more than 3 years
 Must have age between 30-40 years
 Must be a degree graduate
 Must have good communication skills

10
3.2.2 Assistant Manager
Duties
 Take the responsibilities of the manager in his/her absence
 Qualifications
 Must be Diploma holder
 Must be between 27-35 years
 Must have an experience of 2 years
3.2.3 Accountant
Responsibilities
 Summarizing current financial status by collecting information, preparing balance sheet,
profit and loss statement and other reports.
 Substantiates financial transaction by auditing documents
 Maintain accounting control by preparing and recommending policies and procedures
Qualifications
 Have experience of 10 years
 Be a degree holder
 Be at the age of 20-30 years
 Have knowledge in computer

2.2.4 Salesman
 Supplying the equipment
 Giving description of goods to be sold
 Bargaining and negotiating on the price of goods with the customers
Qualifications
 Should be a diploma or certificate holder in sales in marketing
 Should have good communication skills
 Should have an experience of two years

3.2.5Technician
Duties
 To carry out series required by customers
 Testing and accessing the cables if are in the right date for use

11
Qualifications
 Should have good communication skills
 Should have experience of at least 2 years
 Should have a diploma certificate in electrical and electronics engineering

3.2.6 Watchman
Duties
 Taking care of business property and customers
 Maintenance of silence at the shop
 Ensuring that no property leaves the shop without passing the proper channel
Qualifications
Must be 24 years and above
 Must have an experience of not less than 5 years
 Must have a good communication skills
 Must have a form four certificate and above

3.3 SALARY SCHEDULES

TITLE NOUMBER BASIC SALARY (KSH) ANNUAL SALARY
Manager 1 15,000 180,000
Ass. Manager 1 13,000 156,000
Accountant 1 12,000 144,000
Technician 1 10,000 120,000
Salesman 1 8,000 96,000
Watchman 1 5,000 60,000
Total 6 63,000 756,000

3.4 RECRUITMENT TRAINING AND PROMOTION

3.4.1 Recruitment
This will be done by the entrepreneur by advertising through popular Daily Newspaper so as to
give people from all over the country a chance to apply. Those who qualify will be shortlisted for

12
the interview. Having set the interview date, applicants will be invited for the interviews from
which the best candidates will be invited. The above process will help avoid business
discrimination and will help create fairness in employment.
3.4.2 Training
Qualified applicants who fill in posts and other employees who will require further training for
upgrading for their skills, knowledge and aptitude, will be sponsored by the organization on part
time basis at recognized training institutions and will also have a number of seminars and
workshops organized. This will boost the workers morale and increase production for they will
have gained more knowledge and will be motivated to worker harder and become more
responsible.
3.4.3 Promotions
The proposed enterprise will be using various techniques in promoting its employees. The
hardworking, punctual and honest employees will be promoted and salary increased
immediately. Those of good morals and disciplined, always doing their best should be rewarded
with the certificate of good conduct and this will remove prejudice, favoritism and discrimination
and it will encourage all employees to be focused and to work hard for the promotion.

3.5 REMUNERATION AND INCENTIVES

3.5.1 Remuneration
The organization will offer attractive salaries and wages to employees so as to motivate and
retain them. it will also offer training to new employees in order to retain them.

3.5.2 Incentives
The employees will be offered incentives of overtime allowances, free medical cover,
commissions and lunch and tea break.

3.6 LICENSES, PERMITS AND BY-LAWS

The business will empty with following requirement licenses, permits and by-laws to help the
growth of business.
3.6.1 Licensing
License are usually given by the Nyamira County or council authorities to the business operating
within their localities so as to control the type and nature of business and their members so as to
13
allow healthy competitions of the business. This in return helps generate some income, which
they use to offer us some services such as construction and maintenance of the Roads parking
ways, Parks, Water Sewage System Nursery Schools, Social Halls for social function etc.

3.6.2 Permits
Working permits are usually offered by public health technicians within Nyamira County for the
purpose of protecting all against bad health habits or unhygienic habits. Other permits are issued
by NEEMA for protecting our environment.

3.6.3 By- Laws

They are issued by municipalities, counties or city counties for the purpose of town planning
especially where residential housing is to be put up, industrial projects are to be put up and
general business are located at. Hey also control the building as to the nature and types of the
buildings to be up.

3.7 SUPPORTIVE SERVICES

Banking
Banking will ensure security of the business whereby the business will operate with Kenya
Commercial Bank (KCB), Nyamira Branch.

Insurance
The invested money will be insured against theft and other damages which may interfere with
the business operation.

Poster Services
Rongo post Office will offer post services to the business to enable communication in the
business with the customers.

14
 CHAPTER FOUR
4.0 PRODUCTION AND OPERATION

4.1 PRODUCTION FACILITIES AND CAPACITIES

This will be part of production where assembling and manufacturing of goods takes place. For
any production to be productive, the production tools and equipment must be available within the
entreprise.
Availability of goods will be adequate to meet the demand imposed by the production plan.

4.2 MACHINERY AND EQUIPMENT

QUANTITY DESCRIPTION UNIT PRICE SUPPLIER TOTAL (KSH)
Printer For printing 5,500 Tuskys 5,500
Computer Testing and 35,000 Nakumatt 35,000
diagnosing supermarket
components
Calculator Arithmetic 700 Tuskys 2,100
calculation
Pens Drawing 100 Shivling 200
Steppler Pinning papers 150 Shivling 1,500
Tables 3m by 4m 1,000 Shivling 4,000
practical
activities
Chairs Arm chair 100 Tuskys 700
Multimeter Checking 500 Shivling 2,000
diameter of
cables
Plain papers Typing 500 Naivas 20,000
documents
Total 11,960 39,500

15
4.2.1 Enterprise Layout
MAIN
MANAGEMENT DIRECT OFFICE GATE TOILET
OFFICE
TOILET

FINANCE

ACCOUNTS
OFFICE

STORE

ELECTRICAL
SERVICES
WORKSHOP

4.3 PROMOTION/OPERATION STRATEGY

To increase the quality and standards of goods, the firm will lay down strategies which include
signing duties and responsibilities to the employees to ensure that all duties are attended to as
required.

4.4 PRODUCTION DESIGN AND DEVELOPMENT

The cost of the products will not be so high to customers so that they can get attracted and
develop interest on the shop.

4.5 PRODUCTION PROCESS

The enterprise shall deal on the high quality cables which will be supplied by the companies that
are authorized and related to Kenya Power.
The procedure will be followed in the service delivery and repair and maintenance of the
products.

16
 Customer Identify the fault in the machine

Customer care Identify the fault cables

Secretary Repair and replacing

Delivery of goods Testing whether the fault has

been repaired

Order of goods

4.5 OTHER EXPENSES

DESCRIPTION MONTHLY YEARLY
Electricity 900 10,800
Water 1,000 12,000
Rent 5,000 60,000
Advertisement 1,000 12,000
Insurance 500 6,000
License 7,000 84,000
Total 15,400 184,800

4.4 REGULATIONS AFFECTING OPERATION

For any existing business, there are rules and regulations that affects business.
They include:
i. Health regulations
ii. Safety regulations
iii. Trade licenses
iv. Environmental regulations

17
4.4.1 Health Regulations
The law requires good and clean working environment, good health to customers and workers.
The chief chef and other staffs are likely to be tested after every six months in an health centre.
Good sanitation shall be observed in and within the business.

4.4.2 Safety Regulations

The business will cater for safety and welfare of employees as per the Act (Cap.415). The
business will be insured against any catastrophe like theft and fire. In case of any risk, the
business can be compensated. The employees will be provided with gumboots and dust coats to
protect them from physical injuries and maintain them clean.

4.4.3 Trade Licence

The business will obtain the operation license from the county government of Kisii. These
licenses will help to identify the owner of the business and enable the business to run in a smooth
flow without any disturbance from the county inspectors.

4.4.4 Environment Regulation

The business will require conducive environment. Cleanliness will be highly considered to e
ensure good working environment to employees. Drainage system will be used to reduce water
borne diseases also dustbin will be dug where waste products will be placed.

18
 CHAPTER FIVE
5.0 FINANCIAL PLAN
The financial plan helps in giving the business the amount of finance to be used.
Financial plan also contains the project balance and the cash flow projection that will assist the
business transaction and it is critical that it will identify this business in running at a loss or
profit.

5.1 PREOPERATIONAL COST

There are expenses that will be incurred before the start of the business.
PARTICULARS AMOUNT PER YEAR (KSH)
Labour cost 756,000
Insurance 6,000
Tools and equipment 76,400
Transport 90,000
Stationary 15,000
Advertisement 100,000
Telephone and postage 8,600
Water bills 12,000
Electricity 10,800
License and permits 84,000
Total 1,158,800

5.2 ESTIMATED WORKING CAPITAL

ITEMS 1ST YEAR 2ND YEAR 3RD YEAR
Current assets 500,000 450,000 540,000
Purchases 200,000 600,000 350,000
Cash at bank 554,000 450,000 430,000
Cash at hand 150,000 350,000 640,000
Debtors 150,000 250,000 500,000
Current assets 155,400 2,100,000 12,460,000
Credit liabilities 630,000 450,000 650,000
Working capital = Current Assets – Current Liabilities
=6,114,000 – 1,730,000
=Ksh.3,384,000

19
5.3 CASH BUDGET
RECEIT JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTA
Opening stock 500,000 550,000 555,000 560,000 600,000 600,000 600,000 610,000 615,000 620,000 640,000 650,000 7,100,
0
Loan 100000 - - - - - - - - - - - 100,00
Debtors 100,000 150,000 160,000 170,000 180,000 180,000 180,000 185,000 190,000 200,000 210,000 220,000 2,012,
0
Sales 50,000 60,000 70,000 80,000 90,000 100,000 110,000 120,000 130,000 140,000 150,000 160,000 1,260,
0
cash 400,000 410,000 420,000 430,000 440,000 450,000 450,000 460,000 470,000 480,000 490,000 500000 5,009,
0
Total 5,019,4

Payment
Furniture 20000 20000 20000 30000 40000 50000 60000 70000 80000 80000 90000 100000 660,00
Machinery 10000 - - - - - - - - - - - 1,000
Rent 60000 60000 60000 60000 60000 60000 60000 60000 60000 60000 60000 60000 96,000
Electricity 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 48,000
Water 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 120,00
Advertisement 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 1,200,
0
Salaries 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 1,200,
0
Insurance 7000 7000 7000 7000 7000 7000 7000 7000 7000 7000 7000 7000 84,000
Creditors 1000000 1000000 1000000 1000000 1000000 1000000 1000000 1000000 1000000 10000000 1000000 1000000 18,000
0 0 00
Purchases 500000 520000 530000 540000 550000 560000 570000 580000 590000 600000 610000 620000 6,770,
0
Cash 100000 101000 102000 103000 104000 105000 106000 107000 108000 107000 111000 120000 1,176,
0
TOTAL 19393
Cash flow projection for the year 2021

PARTICULAR JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL

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 OPENING 30000 29000 10000 70000 10000 79000 76000 11000 805000 43000 20000 43000 116000
STOCK
Sales 40000 40000 40000 5000 4000 8022 8000 1000 15000 50000 40000 300000 2705500
Total inflows 200000 15000 74000 810000 940000 1045000 985000 125000 180000 150000 120000 180000 540000
EXPENSES
Salary 60000 60000 60000 60000 60000 60000 60000 60000 60000 60000 60000 60000 720000
Rent 8000 8000 8000 8000 8000 8000 8000 8000 8000 8000 8000 8000 96000
Transport 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 0 00 60000
Advertisement 2000 1000 1000 1000 500 1000 500 1500 2000 2000 2000 2000 16500
License 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 36000
Water 2000 600 750 700 680 600 370 400 420 410 400 380 6,710
Furniture 1000 10000 4000 - 1000 - - - 4000 2000 - 20000 65000
Purchase 12000 10000 30000 7000 9000 7000 5000 8000 7000 6000 4000 5000 30000
Electricity 1,000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 120000
Total out flows 87600 78500 79500 76500 10000 8500 60000 80500 60500 95500 65000 55000 800500
27622050
Closing balance 29000 10000 70000 10000 79000 76000 11000 805000 43000 20000 43000 182000

Cash flow projection for the year 2022

Cash flow projection for the year 2023

21
PARTICULAR JAN FEB MAR APR MAY JUNE JULY AUG SEPT OCT NOV DEC TOTAL
INFLOW
Cash sales 40,000 60,000 50000 800000 77836 90370 11804 65500 887200 60,000 199240 213674 720,000
Debtors 4000 3000 5000 6000 4000 6000 3000 7000 5000 4000 5000 8000 60,000
Depreciation 800 1200 1000 1400 1500 1600 1800 2600 2200 2400 2800 3300 22000
Total inflows 44800 64200 56000 87400 55500 67600 54800 79000 57200 66400 57800 111300 802000

Expenses - - - - - - - - - - - - -
Wages & salaries 16000 16000 16000 16000 16000 16000 16000 16000 16000 16000 16000 16000 192000
Electricity 300 500 400 700 400 500 400 600 400 500 400 900 6000
Advertisement 1200 600 900 800 700 600 500 500 500 500 500 500 8000
Water 200 300 200 400 200 300 400 200 200 300 200 700 3600
Stationery 1400 600 500 900 700 600 700 600 400 650 300 200 6000
Repair & Maintenance 500 600 500 700 800 900 1000 100 1200 1500 600 800 12000
Loan repayment 21666 21666 21666 21666 21666 21666 21666 21666 21666 21666 21666 21666 259992
Insurance 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 120000
Creditors payment 1000 1100 1000 1500 1000 1200 1400 1500 1100 1000 1000 200 15000
Total cash flows 4426 43166 42866 44266 44266 43166 43366 43366 43366 42865 43366 45566 522592
Net cash flow 534 21034 131668 431134 44266 24434 11434 35434 14334 23034 14434 65734 279408
Accumulated cash 60,000 50000 800000 77836 90370 11804 65500 887200 60,000 199240 213674 279408

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5.4 BALANCE SHEET
5.4.1 BALANCE SHEET AS AT 31ST DECEMBER 2021 (1ST YEAR)
Fixed Assets Cost (Ksh) Duration Net Book Value (Ksh)
Machineries % requirements 30,000 300,000 270,000
Furniture and fittings 200,000 100,000 190,000

Total Fixed Assets 460,000

Current Assets
Cash at hand 80,000 50,000 80,000
Cash at bank 500,000 500,000
Debtors 100,000 95,000
Stock 200,000 200,000

Total Current Assets 875,000

Liabilities
Current Liabilities
Creditors 10,000 10,000

Total Current Assets 10,000

Long term Liabilities
Bank loans 500,000 500,000

Total long term liabilities 510,000

Capital
Total Current Assets =(F.A + C.A) – C.L
=460,000 + 875,000
=1335,000 – 510,000
=Ksh.825,000
Financed by:
Loan = Ksh.250,000
Net profit = Ksh.50,000
Less drawings = 25,000

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 Total = Ksh.275,000
5.4.2 BALANCE SHEET AS AT 31ST DECEMBER 2022 (2ND YEAR)
Fixed Assets Cost (Ksh) Duration Net Book Value (Ksh)
Machineries % requirements 30,000 300,000 270,000
Furniture and fittings 200,000 100,000 190,000

Total Fixed Assets 460,000

Current Assets
Cash at hand 70,000 70,000
Cash at bank 100,000 50,000 1,000,000
Debtors 10,000 95,000
Stock 250,000 250,000

Total Current Assets 1,175,000

Liabilities
Current Liabilities
Creditors 15,000 15,000

Total Current Assets 15,000

Long term Liabilities
Bank loans 250,000 250,000
Net profit 100,000 100,000
Less drawings 20,000 20,000
Total long term liabilities 330,000

Total liabilities = 330,000 + 15,000

=Ksh.345,000
Total Assets 460,000 + 1,175,000
=1,635,000
Total Current Assets = 1,635,000 – 345,000
= 1,290,000

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5.5 BREAK EVEN ANALYSIS
This is the level at which the business must operate i.e profit or loss
Breaking even point = Fixed Cost
Fixed 2023 2024
Rent 240,000 240,000
Loan interest 20,000 15,000
Salaries and wages 1,080,000 1,080,000
Insurance 30,000 30,000
Total 1,370,000 1,149,000
Variable Cost
Electricity 30,000 30,000
Water 15,000 15,000
Telephone 30,000 30,000
Advertisement 70,000 40,000
Transport 112,000 74,000
Repair & Maintained 55,000 45,000

5.6 FINANCIAL RETIOS

5.6.1 PROFITABILITY RATIO CALCULATION

FOR THE FIRST YEAR
a) Gross profit ratio
=Gross Profit X 100
Sales
=585,000 x 100
725,000
=80.68% or 80.7%
FOR THE SECOND YEAR
=Gross Profit X 100
Sales
=657,000 x 100
791,000

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 =83%
FOR THE THIRD YEAR
b) Net profit ratio
=Net profit before tax X 100
Sales
=873,000 x 100
725,000
=120%
c) Return Investments

FOR THE FIRST YEAR

=Net profit after tax X 100
Total Capital invested
=785,700 x 100
14533000
=54%
FOR THE SECOND YEAR
=Net profit after tax X 100
Total Capital invested
=379,800 x 100
19111000
=1.9%
d) Return on Capital Employment
FOR THE FIRST YEAR
Return on capital employment
=Net profit after tax X 100
Net asset value
= 873000 x 100
14533000
=6%
FOR THE SECOND YEAR
=Net profit after tax X 100
Net asset value

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 =422000 x 100
19111000
=2.2%
e) Return on total asset ration
FOR THE SECOND YEAR
=Net profit before tax X 100
Fixed asset – current assets
= 873000 x 100
-71500
=-122%
FOR THE SECOND YEAR
=Net profit before tax X 100
Fixed asset – current assets
= 422000 x 100
415000
=-101.7%

5.7 DESIRED FINANCING

ITEM AMOUNT (KSH)
Working capita 1,013,000
Pre-operational costs 1,058,000
Fixed assets (optional)
Total Ksh.2,071,000

5.8 PROPOSED CAPITALIZATION

SOURCE AMOUNT (KSH)
Bank loan 500,000
Owner’s contribution 200,000
Overdraft
Total Investment Ksh.730,000

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