BUSINESS PLAN

TITLE : KIPKABUS BUILDING ENTERPRISE

INSTITUTION : KIPKABUS TECHNICAL TRAINING

INSITUTE
PRESENTED BY : ISAACL CHERUIYOT BETT
INDEX NO :

CLASS : DIPLOMA IN BUILDING

TECHNOLOGY

ADMISSION : 122R02109

SUPERVISOR : MR. LABALIA

COURSE NAME : DIPLOMA IN BUILDING

TECHNOLOGY
SERIES : JULY 2024

PRESENTED TO: THE KENYA NATIONAL EXAMINATION

COUNCIL FOR A WARD OF DIPLOMA IN BUILDING
TECHNOLOGY.
 DECLARATION
I hereby declare that this business plain is my original work and has never been presented
for the awards of any academic qualification either in whole or in part whatsoever.

NAME: ISAAC CHERUIYOT BETT

SIGNATURE:.....................................................
DATE: .................................................................

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 DEDICATION
I dedicated this business plan to entire family members especially my father and mother
for their financial materials and moral support they gave to me. Their opportunistic
concern to me through my business plan writing life takes this treasured moment to the
Almighty Lord and to bless my entire family for the undivided virtues towards my
Academic Endeavours would have achieved nothing without them.

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 ACKNOWLEDGEMENT
I thank the Lord for the strength and protection given unto me throughout all this period
of research till this juncture. My special regards goes to my supervisor for his assistance
contributions and guidance during my business plan writing. My beloved and precious
parents for the financial support throughout the research seasons.

I am grateful for the assistance of Kipkabus technical training institute fraternity for
having equipped me with knowledge and has made me innovative and creative hence
ensure me that things can easily be done ground without forgetting our school library.

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 TABLE OF CONTENTS
DECLARATION.................................................................................................................ii
DEDICATION...................................................................................................................iii
ACKNOWLEDGEMENT..................................................................................................iv
TABLE OF CONTENTS....................................................................................................v
EXECUTIVE SUMMARY.................................................................................................1
INTRODUCTION...........................................................................................................1
1.0 BUSINESS DESCRIPTION.....................................................................................1
2.0 MARKETING PLAN................................................................................................1
3.0 ORGANIZATION AND MANAGEMENT PLAN..................................................1
4.0 PRODUCTION AND OPERATIONAL PLAN.......................................................2
5.0 FINANCIAL PLAN..................................................................................................2
CHAPTER ONE..................................................................................................................3
1.0 BUSINESS DESCRIPTION.................................................................................3
1.1 BUSINESS NAME....................................................................................................3
1.2 LOCATION AND ADDRESS..................................................................................3
1.3 OWNER’S BACKGROUND....................................................................................4
1.4 FORM OF OWNERSHIP..........................................................................................4
1.5 TYPE OF BUSINESS...............................................................................................5
1.6 PRODUCT AND SERVICE.....................................................................................5
1.7 JUSTIFICATION......................................................................................................5
1.8 INDUSTRY...............................................................................................................6
1.9 ENTRY AND GROWTH STRATEGY....................................................................6
1.10 BUSINESS GOALS................................................................................................7
CHAPTER TWO.................................................................................................................8
2.0 MARKETING PLAN................................................................................................8
2.1 Potential Customers...................................................................................................8
2.2 MARKETING SHARE.............................................................................................8
2.3 COMPETITION........................................................................................................9
2.4 PRICING STRATEGY.............................................................................................9
2.5 METHODS OF ADVERTISING AND PROMOTION..........................................10
2.5.1 Promotion.............................................................................................................10
2.5.2 Advertisement.......................................................................................................10
2.6 SALES TACTICS...................................................................................................10
2.7 DISTRIBUTION STRATEGY...............................................................................11
CHAPTER THREE...........................................................................................................12
3.0 ORGANIZATIONAL AND MANAGEMENT PLAN...........................................12
3.1ORGANIZATION STRUCTURE............................................................................12
3.2 BUSINESS MANAGEMENT PLANT TEAM......................................................12
3.2.1 Business Manager.................................................................................................12
3.2.2 Accountants..........................................................................................................13
3.2.3 Sales and management representatives.................................................................13
3.3 OTHER PERSONNEL............................................................................................13
3.3.1 Security men.........................................................................................................13
3.4.2 Machine Operators/Labour...................................................................................14
3.4.3 Machine Repairers................................................................................................14

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 3.5 RECRUITMENT, TRAINING AND PROMOTION.............................................14
3.5.1 Recruitment...........................................................................................................14
3.5.2 Training.................................................................................................................15
3.5.3 Promotion.............................................................................................................15
3.6 REMUNERATION AND INCENTIVES...............................................................15
3.6.1 Remuneration........................................................................................................15
3.6.2 Incentives..............................................................................................................15
3.7 EXTERNAL RESOURCE PERSONS....................................................................16
3.7.1 License and Permits..............................................................................................17
CHAPTER FOUR.............................................................................................................18
4.0 PREPARATION/PRODUCTION PLAN...............................................................18
4.1 PRODUCTION STRATEGY..................................................................................18
4.1.1 Materials...............................................................................................................18
4.2 PRODUCTION COST OF LABOUR.....................................................................18
4.2.1 Direct Labour........................................................................................................18
4.2.2 Overhead Expenses...............................................................................................19
4.3 PRODUCTION PROCESS.....................................................................................19
4.3.1 Handling process..................................................................................................19
4.3.2 Operational Process..............................................................................................19
4.4 RELEVANT REGULATION.................................................................................20
CHAPTER FIVE...............................................................................................................21
5.0 FINANCIAL PLAN................................................................................................21
5.1 PRE –OPERATIONAL COST................................................................................21
5.2 ESTIMATES OF WORKING CAPITAL...............................................................21
5.3 PRESENTATION OF CASH FLOW PRESENTATION.......................................23
5.3.1 Bore hole drilling company 1ST CASH PROJECTION FOR 1ST YEAR..............23
5.3.2 Bore hole drilling company 2ND CASH PROJECTION FOR 2ND YEAR............24
5.3.3 Bore Hole drilling compan 3RD CASH PROJECTION FOR 3RD YEAR..............25
5.4 PROFORMA INCOME STATEMENTS................................................................26
5.5 PROFORMS BALANCE SHEET...........................................................................26
5.6 DESIRED FINANCING.........................................................................................27
5.7 PROPOSAL CAPITALIZATION...........................................................................27
5.8 BREAK EVEN LEVEL ANALYSIS......................................................................27
5.9 CALCULATION OF PROFITABILITY RATIO...................................................28
5.9.1 Gross profit ration (sales on investment)..............................................................28
APPENDIX........................................................................................................................29

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 EXECUTIVE SUMMARY
INTRODUCTION
This business plan is made up of five chapters concerning the executive summary,
business description, market plan, organizational plan, operation and production plan and
financial plan.

1.0 BUSINESS DESCRIPTION

The business name is to be; BICHERU HARDWARESis a startup business that deals
with building materials. The business will be located in Kipkabus near Kipkabus
Technical and Vocational College offKERICHO/Nairobi Highway.
The business is to enter into the market by advertising and will grow by favorable pricing
strategies that have to be taken.
Main aim or objective of the business is to provide employment. Business will be solely
owned.

2.0 MARKETING PLAN

The business is targeting individual, institution and government customers, hence
effective growth.
The business is expected to adopt a high percentage of market share compared to already
established competitors. The business is encountering strengths and exploit weaknesses
of existing competitors to complete favorably.
The business is to adopt the best pricing strategies depending on cost of materials,
periodic advertisements and promotion of the product to create awareness.

3.0 ORGANIZATION AND MANAGEMENT PLAN

The business is to be managed by the business manager in assistance of accountant, sales
and marketing representative, construction experts, security men and labourers with each
having specific duties and having met the required qualifications.
The manager will carry recruitment with the laid down procedures being based on merit
and employees will be paid as pre-determined salary scales.
The employees are to enjoy both financial and non-financial rewards. Other support
services like banking, legal services, and insurance shall be provided and the business is
to obtain permits and licenses before commencement from relevant government
authorities.

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4.0 PRODUCTION AND OPERATIONAL PLAN
The business will skillfully formulate it's production strategy so that it can be able to
meet the customer demand and the strength of the competitors. The business will require
purchasing of building tools and materials for its smooth running costing ksh 30,600. The
total production per month will be Ksh 155,200.

5.0 FINANCIAL PLAN

The business requires the capital of two million, I will be able to raise one million and the
remaining will be borrowed from Kenya commercial bank.
After the first succession of operation, all the net profit shall be re-invested bank into the
business until well established and shall then be taken to the bank as collateral for the
future.
Within the first year sales of building materials are expected to be 2,848, 000 this is to
result into a gross profit of 1,106,000. Net profit before taxation at a provision of 6.62%.
The profitability ratio or gross profit return or Barclays and returns on investment are
expected to be 83.25%, 104.65% and 61.59% for the first year of operation; this shall be
expected to rise as time goes.

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 CHAPTER ONE

1.0 BUSINESS DESCRIPTION

1.1 BUSINESS NAME

The business name is to be; Bicheru Hardwares. The name “BICHERU”, is a combination of
the business owners name I choose the name because it is popular known and simple.
The business name is concerned with building materials, tools and equipments.

Vision
To provide quality products and services to all citizens and to serve them equally with
respect.

Mission
To produce brilliant, responsible and God-fearing citizens ready to use the available
resources appropriately and face challenges in the society at large.

Core values
 Respect
 Honest
 Self-reliance
 Self-discipline
 Integrity
1.2 LOCATION AND ADDRESS
The business will be located at Brooke Centre 6KMs from Kericho Town on Kericho>
Nakuru Highway.
The business is located at this point because of the availability of ready markets. The
business is located 1km from Brooke Police Station that will offer security for the
business. Auxiliary services are available i.e.,Mpesa service, Banking services (co-
operative bank) legal services for effective operations of the business. Also, we have
availability of potential customers, Infrastructure and Raw Materials to be used.

1.3 OWNER’S BACKGROUND

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Isaac Cheruiyot Bett is the owner of the business. He is 22 years old from Kapsaos
Location, Ainamoi Sub County, Kericho County. He joined Kipkabus Technical Training
Institute in Uasin Gishu County to pursue a Diploma in Building Technology.

1.4 FORM OF OWNERSHIP

The business is to be solely owned i.e., sole proprietorship. The management is to be by
the owner. This kind of business ownership is quite advantageous as follows: -

a) Business secret on growth strategies will be maintained hence progress plan

compliable.
b) In this form of business ownership there are few legal requirements small amount
of capital is required hence minimal outsiders claim in the business.
c) Faster making and implementation of decisions hence delays are avoided in
important business procedures since there are minimal consultations.
d) There’s also no sharing of profit and as a result business profit can utilized in any
manner suggested by the owner.
e) The owner is own boss and alter business working hours to suite business booms
and depression customer flow.
Besides the above benefits this form of business ownership has some constraints as
outlined below:

a) There is no sharing of losses limited expansion capability due to unlimited

resources, authority and responsibility is remote.
b) The business may also cease to being existence in case the owner of the business
dies.
These constraints are to be overcome by obtaining family labor assistance to increase the
gap between revenues and expenses for increased profits to be realized for business
expansion.
The owner of the business is a business-oriented person young and energetic to work
tirelessly.

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1.5 TYPE OF BUSINESS
It is attributed by preparation, making and selling building materials.

1.6 PRODUCT AND SERVICE

As the name suggests the business is to deal with building materials. The product is to be
of right quality to be offered to its customers in different shapes, type and size in order to
meet customer requirements the customers are to be given free transport facilities for
customers who buy bore building materials as a way of appreciation to the customer.

1.7 JUSTIFICATION
When the business commences it expects to be the most dominant in the locality this is
because of the availability of location where no payment is required.
The market of the products is already assured which include bore hole equipment and
other products that it produces. There is no availability of cheap labour to meet both
present and future anticipated growth demands of the business.
The proposed capital is already available hence the business is to operate without
immediate capital stains. The high demand expected for the produce will offer large
sales hence greater profit margins. The mode of transport to be adopted is bicycle will be
able to penetrate all local markets without proper road network which cannot be accessed
by other modes.
The technology to be used is quite indigenous and therefore cheap cost of production
availability of raw materials. There’s also effective management with experts, staff and
owner (top manager) have management knowledge to assure informed business decisions
for the effectiveness of the business. The location is strategic and near auxiliary or
support services. All success is possible for the betterment and achievement of both short
and long term business goals.

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1.8 INDUSTRY
The kind of technology to be used is labour intensive. The average number of employees
expected are six permanently employed and the casual employees.
The desire of competition expected is very low since the competitors use outdated
technology and the business has no licenses. They register poor sales as place no
advertisings hence low profits margins. The seasonal factors that face that kind of
industry are lack of enough raw materials and hence increased production costs. The
business expects to come up with new sales technological development i.e. selling fairly
by maximizing output.

1.9 ENTRY AND GROWTH STRATEGY

The proposed business is expected to enter into the market as follows:

 For nearby customers’ posters and fliers are to because and signboards to be placed at
strategic zones to enable the public to be well informed of the existence and product
offered by the business.
 Adverts are to be placed in local media like radio: Kass Fm, Chamgei fm to reach a
wider range of potential customers regularly.
 The business advertisements are aimed at creating awareness to customers in business
existence description of product i.e. quality size price terms of payment and business
location.

1.10 BUSINESS GOALS

Short term business goals

The business short term goals are:
a) To reduce the distance of the client and suppliers

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 b) Providing sources of income to the owner
c) Source of employment opportunities to the locals
d) Offering quality products to the people of fair prices
e) To achieve 70% profit of the capital raised during the second month
f) Improving the living standards of the class

Long term business goals

They are:
a) To be a top bore hole equipments supplier to our clients
b) To become the specialty Bore hole drillers of choice across Kabarnet
c) Expanding and providing employment opportunities outside the locality
d) Regional development through attractions of related industries.
e) Contribute to national income through taxes for development of nation as a
whole.

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 CHAPTER TWO
2.0 MARKETING PLAN

2.1 Potential Customers

The customers expected by the business fall under the following categories:
The bulky of our client are secondary school, Primary schools, county offices,
universities, colleges and other private buuilders.

2.2 MARKETING SHARE

Immediately the business establishes its expected to cover an approximated target market
population of about 30,000 individual customers. This estimate also includes grouped
customers. This covers about an area of 20,000km 2. The business expects to face little
competition as predetermined in the schematic pie chart below representing the
competition market share and the percentage of the population in the area shown in the
pie chart.

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A table sowing area sizes with percentages and ratios of market share.
BUSINESS MARKET AREA SIZE (KM2 RATIO OF
SHARE % ) BUSINESS
TOTAL
Bahati centre 46 9600 23:50
Gosach Building 15 300 27:50
Mulinde construction 12 2400 6:50
equipments
Kimutai’s manufacturing 10 2000 550
building equipment
enterprise
Pure building shop 9 1800 24:50
Sarwot builders 8 1600 4:50
TOTAL 100 20000 50:50

2.3 COMPETITION
The business is going to face competitors like: Kericho Builders. The surplus is profound
in developed towns because of the market that emerging.
The strongest advantage is that they are already in progress and have established in areas
where there is a lot of raw materials and may therefore provide some competition in raw
materials.

2.4 PRICING STRATEGY

The following methods are to be employed in setting prices:
 Gross domestic product
 Income per capital
 Predetermined profits of competitors

Five factors to be considered: -

 The labour costs encourted is handling process
 Government regulations
 Statistics from the competitors
 The buying of raw materials and equipment

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The purchases of over Kshs. 4,000 shall be paid through the business accounts and
purchases of less than 4000 be paid in cash or account office.
Both cash and trade discounts shall be provided to customers who buy bore hole
equipment in large quantities credits shall also be given to customers who prove credit
worthiness.

2.5 METHODS OF ADVERTISING AND PROMOTION

2.5.1 Promotion
The methods to be used for promotion are: -
 Sales promotion through shows and exhibitions
 Offering calendar periodically to regularly customers
 Offering free gifts and samples at a period of three months
Each of these events shall be cost approximated to Kshs. 5000 annually.

2.5.2 Advertisement
These methods to be used are: -
 Use of posters and stickers at public places
 Use of signboards around business locality
 Adverts are to be placed with local media e.g. Radio Kiss fm and Kass FM.
Sales promotion are advertisements are to benefit the business by crating awareness of
the business existences and products offered.
This will also boost the public relation and reputation of the business. The approximated
cost of advertisement with approximately Kshs. 6000 annually.

2.6 SALES TACTICS

Sales and marketing representatives are to be in charge of this by employing both direct
and indirect methods.
a) Direct methods
 Offer high quality products
 Offering credits to credit worthy customers
 Offering discounts

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b) Indirect method
 Use of salesman to distant markets
 Good working hours i.e. 6:00am – 7:00pm
 Sponsoring the community in welfare services

2.7 DISTRIBUTION STRATEGY

The product is to reach different markets by use of road transport by help of motorbikes.
Selling will be made both direct and indirect.
Direct selling will be offered at business premises and indirectly by sales agents. The
transportation cost to other markets are to cost approximately 50,000/= per month.

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 CHAPTER THREE
3.0 ORGANIZATIONAL AND MANAGEMENT PLAN
3.1ORGANIZATION STRUCTURE
The enterprise will be managed by the business manager who is at the top of management
hierarchy assisted by other personnel as shown below:

Business Manager

Accountant

Sales and marketing representatives

Machine operators Machine Repairs Security

3.2 BUSINESS MANAGEMENT PLANT TEAM

3.2.1 Business Manager
Duties and Responsibilities
 Recruitment selection and placing of employees
 Making final decisions for the business
 Set rules and regulations and ensue compliance
 Liaise with owner to ensure adequate resources for business
 Staff training, welfare, overseas dismal and redundancies
 Making contacts with the owner, public and other business associates

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Qualifications
 Holders of a diploma in Civil engineering or related course of study.
 Should be aged at least 22 years in a busy business of firm
 Should be self-motivated and hardworking
 No criminal offence
 Compute literacy an added advantage.

3.2.2 Accountants
Duties and responsibilities
 Carry out daily deposits and withdrawals
 Keep financial records of the business
 Salary scales administration
 Carrying out internal audits
 Ensure taxation matters are attended to
 Does computation of buying and casting
Qualification
 Must have a certificate in accountings
 Must have serve in the same position for at least one year
 Aged between 20-35 years
 Computer literacy will be an added advantage
3.2.3 Sales and management representatives
Duties and Responsibilities:
 Sales promotion and distribution of goods
 Overseeing market research
 Customer follow up to ensure satisfaction
 Controlling selling expenses as per satisfaction
 In liaison with business accountant to ensure buying of quality goods
Qualifications
 Must have worked as salesman or woman for least six months with
business
 Holders of at least a certificate in supply chain management from a
recognized institution
 Must be able to work for long hours

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3.3 OTHER PERSONNEL
3.3.1 Security men
Duties and responsibilities
 In-charge of security of the business against all sorts of theft
 Guard the business against work violence
 Report to the manager any fraudulent or pilferage
 Serve as a receptionist and direct customers.

Qualifications;
 Holders of at least KCPE certificates
 Must be able to communicate both in Swahili, English and Kalenjin
 Must be aged between 18 – 35 years
 Must be a man
 Must physically and mentally fit
 Being a member of NYS is an added advantage
3.4.2 Machine Operators/Labour
Duties and responsibilities
 Transport raw materials from the firms to the business premises.
 Doing all activities of production of poor holes tools to produce final product
 All manual work required in the enterprises
Qualifications
 No academic qualifications required
 Those in charge of drilling bore hole will be required to have experience of two
years in related field
 Should be physically fit or smart
 Must be aged between 20 – 35 years
3.4.3 Machine Repairers
Duties and responsibilities
 Servicing machineries to ensure smooth running
 Report and breakdown to the manger for appropriate remedy
Qualifications
 Must have handled similar bore hole machinery for at least one year
 Have trade test three in craft maintenance

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  Age between 18 – 32 years

3.5 RECRUITMENT, TRAINING AND PROMOTION

3.5.1 Recruitment
a) Recruitment of potential employees is to be carried out by the business manger.
The recruitment procedure is to be as follows:
 Vacant position will be advertised at the notice boards and posters containing all
elements of jobs and personnel specification.
 The applications are then scrutinized and short listing done
 The short listed candidates are then invited for an interview and rejected
candidates are sent prompt courtesy letter for good business.
 Reference are obtained and successful candidates pieced after and induction
programme.
3.5.2 Training
On the job methods of training is to be used. Vestibule seminars and lecturers will also
be used to train the staff machines operators will be trained as they carry out their job.

3.5.3 Promotion
 Personnel will be promoted to vacant positions created by turn over growth
retrenchment and dismissal.
 Promotion will be based on merits, knowledge and skills (jobs requirements)
altitude and performance.
 Promotions are to be copied by increase authority and remuneration.
3.6 REMUNERATION AND INCENTIVES
3.6.1 Remuneration
Salary Scale
PERSONNEL NO. BASIC ALLOWANCE TOTAL
SALARY PER MONTH MONTH
Manager 1 6,000 2,000 8,000
Accountant 1 5,000 1,500 6,500
Sales & Marketing 2 3,500 1,000 9,000

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Representatives
Machine repairs 1 3,000 800 3,800
Labourers 6 2,800 500 3,300
Security men 2 2,600 450 6,100
TOTAL 13 2,200 400 2,600

3.6.2 Incentives
Employees are to be motivated and retained by being given incentives that include the
following: -
a) Financial Incentives
 Payment of overtime at rate of 2.5 per hour for normal overtime for evenings and
3.0per hour for double overtime that include Sunday s and public holidays.
 Annual salary increments depending on profitability of the business and work
done.
 Commission payment to sales and marketing representatives of large volume of
sales are met.
 Attending to emergence financial demands of employees e.g. sickness, funeral
etc.
 Food working environmental and conditions
 Job security unless under gross misconduct.
 Off duty during public holidays unless work demands and such will be
accompanied by overtime payment.
 Free uniforms for all staffs.

3.7 EXTERNAL RESOURCE PERSONS

The following services are to be provided to the business to ensure smooth running and
meet the legal requirements and regulations.
a) Banking Services
 The business account is to be maintained at:- Co-operative bank of Kenya.
KERICHO BRANCH
P.O. BOX 6486 – 035
KERICHO

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b) Legal Services
 All legal matters involving the business is to be attended to by:-
COMPANY ADVOCATE
4TH FLOOR, ROOM 18
ON ARISE AND SHINE BUILDING
P.O. BOX 100
KERICHO
c) Auditing
Annual business audits are to be carried out:-
Mr. Willy Nekuz
P.O. Box 644 - 220
Eldoret
d) Delivery Services
 All business correspondence is to be handled by: -
 Securicor (group 6 Securicor) Kenya.

3.7.1 License and Permits

 The business will obtain the permit form the municipal council at the cost of
8,000/=. It will be registered under the Act of registration so as to be given
commencement certificate and trade licenses at the cost of 5,000/= documents
concerning the welfare of workers shall be obtained to abide by the laws. Under
the public health act, the business shall strictly observe hygienic condition.

 All these facilities are to be bought except the handcart which shall be leased, one
week prior to the start of the business. In future the following facilities shall be
required.

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 CHAPTER FOUR

4.0 PREPARATION/PRODUCTION PLAN

4.1 PRODUCTION STRATEGY
4.1.1 Materials
ITEM QUANTITY SUPPLIERS COST ITEM TOTAL COST
Machine 10 Joan 20,000 200,000
Computers 5 Kebet’s electronic shop 12,000 60,000
Grease 2.5 kg Rotich 200 500
Steel raw 1500kg Mark’s manufacture 100 150,000
material
Furniture Kip’s workshop 100,000
Total 510,500
Transport of bore hole equipment products will be transported by used of pickup.

4.2 PRODUCTION COST OF LABOUR

4.2.1 Direct Labour
Title Skills Cost/month
Supply chain Supply chain management 5,000
management(2)
representatives
Machine Craft maintenance 3,800
Labour 98 people Working experience 3,500
Indirect labour
Manager (1) Managerial 10,000
Account (1) Accounting 8,000
Security Guarding 3,000
TOTAL 68,800

Total production cost per month = cost of materials+ labour costs

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=43, 480+68,800
=112,280

4.2.2 Overhead Expenses

EXPENSE COST (KSHS)
Trade license 10,000
Insurance 20,000
Permit 10,000
Advertisement/promotion 20,000
Telephone and postage 1,000
TOTAL 61,000

4.3 PRODUCTION PROCESS

The external factor likely to occur its pressure among the creditors to be paid back very
fast.
This shall be solved by agreement and negotiation through public relations.
4.3.1 Handling process

The steps of handling the merchandise will as follow: -

Steps 1: letter of Inquiry
-The manufacturer will send quotation to the suppliers indicating what they produce and
selling price and terms of payment.
STEP II: Quotation
-The manufacturer will send quotation to the suppliers indicating what they produce and
selling prices and terms of payment.
STEP III: purchasing order
 On receiving the quotation, the business will make an order to supply whose
conditions are favorable.
Step IV: Delivery Note
- The delivery note received will be checked by the accountant to ensure that all goods
have Been Delivered.

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Step V: Receipt
- The receipt of what will have been delivered to be issued to the business through the
manager.

4.3.2 Operational Process

Steps in operation of the business;

a) The customers are to make the order of goods through personal appearance
b) The manager shall sign the order receipt to ensure the indicated quantity and prices are
inclusive and correct
c) Delivery – goods shall be delivered to the customers upon payment
d) Payment- all payments shall be cheque unless for small purchase

4.4 RELEVANT REGULATION

The government rules and laws to be adhered will include.

a) License – the business shall commence only as the receiving of license to minimize
illegal supply of products which-will not have trademark
b) Health regulations- This shall be adhered to ensure cleanliness, hygiene, safety
environment free from accident. This shall take place through co-ordination with
public health officer inspecting the business regulation.
c) Insurance – all business employees’ properties shall be insured against the risk of fire
fraud and accident.
d) Taxes- The business, shall pay taxes according to the rules required by the
government at the predefined rates.

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 CHAPTER FIVE
5.0 FINANCIAL PLAN
5.1 PRE –OPERATIONAL COST
The costs to be incurred by the business before its operations will be as follows: -
Items Cost (Kshs)
Machinery and equipment 39,000
Stationery and furniture 3,000
Advertisement and promotion 1,600
License 2,300
Permit 1,300
Insurance 1,800
Telephone/postage 1,000
Total 50,000
5.2 ESTIMATES OF WORKING CAPITAL
Item 1st year 2nd year 3rd year
Current assets 66,000 78,000 88,000
Stock of raw materials 52,800 64,800 70,000
Cash at hand 30,100 3,600 42,500
Cash at bank
Debtors 9,000 12,000 16,000
Stock of materials in progress
TOTAL 165,900 173,400 236,000

Current liabilities
Creditors 10,800 8,000 6,000
Insurance 1,400 1,400 1,400
License and permits 4,000 4,000 4,000
Advertisement $ Promotion 1,600 1,800 2,200
Bank loan 12,000 11,200 9,500
TOTAL 29,800 26,400 23,100

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Working capital = total current Assets – Total current liabilities
First year = 165,900-29,800
=136,100]
Second year = 173,400-26,400
=147,000
Third year = 23,600-23,100
= 212,900

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5.3 PRESENTATION OF CASH FLOW PRESENTATION
The cash flow projection for the business for 3 years is summarized in 5.3 and 5.3.3
5.3.1 BICHERU HARDWARES 1ST CASH PROJECTION FOR 1ST YEAR
ITEMS JAN FEB MAR APR MAY JUN JULY AUG SEPT OCTO NOV DEC TOTAL
Balance b/f 16580 2300 2900 36500 43630 43630 49300 56510 74200 93300 128900 170000 720500
Cash in flow
Cash at bank 3500 1690 1200 3000 3300 2000 2600 1000 1200 4050 1320 5000 29860
Loans 12650
Debtors receipt 700 800 1000 700 600 750 880 500 600 800 900 850 9080
Total inflow 73250 73920 84170 93120 100470 108720 121170 135320 162070 195520 232870 273920 1656520
Cash outflow
Cash purchases 6600 7000 8000 8500 9000 12000 12200 14000 14,500 16,000 16,800 18,000 142,800
Creditors paid 1600 1000 1500 2000 3000 2700 11800
Salaries 46,20 46200 46200 46200 46200 46200 46200 46200 46200 46200 46200 46200 554400
0
Stationary 500 300 250 1050
Telephone/postage 250 250 250 250 1000
Transport 250 300 450 450 450 500 600 700 800 850 900 1000 7250
Advertisement/ 400 400 400 400 1,600
promotion
Insurance 400 400 400 400 1,600
Loan Repayment
Licensees/permits 3,600 800 500 4,000 5,000 14,900
Repair and 600 200 3000 2000 5,800
maintenance
Taxes
Miscellaneous 200 300 200 400 1,400 150 1600 450 4700
Total Outflow 57,50 54,00 55,45 58,000 56,850 59,500 63,500 61,150 69,200 66,650 68,850 799,350 849,902
0 0 0
Net cash flow 16,00 23,00 28,82 35,400 42,600 48,800 55,750 74,200 93,800 128,870 164,020 190,880 902,140
0 0 0
Accumulated Cash 15950 37920 66740 102,210 145,830 145,830 250,720 324,890 417,760 546,630 710,650 905,220 3,670,350

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5.3.2 2ND BICHERU HARDWARES CASH PROJECTION FOR 2ND YEAR
ITEMS JAN FEB MAR APR MAY JUN JULY AUG SEPT OCT NOV DEC TOTAL
Balance b/f 194,570 215,720 240,270 2,603,170 282,670 307,920 337,070 357,870 411,870 437,520 463,670 388,070 39000
Cash in flow
Cash Sale 59,000 68,000 72,000 78,000 80,000 82,000 85,000 86,000 86,000 88,000 92,000 108,000 984,000
Cash at bank 5000 1200 1300 1800 2900 3000 1900 4000 4700 2800 3750 2100 34450
Loans 1000 1000
Debtors receipt 800 900 1100 1000 8000 850 950 700 800 1000 11000 19900
Total inflow 274570 288720 318920 348070 371570 399220 428820 452820 484470 509320 540270 582870 5559910
Cash outflow
Cash purchases 800 7000 8200 14000 15000 15000 16000 17000 19500 24000 24800 26500 187800
Creditors paid 1000 2000 1000 2000 2000 8000
Salaries 46200 46200 46200 46200 46200 46200 46200 46200 46200 46200 46200 508200
Stationary 400 400 200 1000
Telephone/postage 300 100 200 200 200 1000
Transport 450 500 500 500 500 550 650 750 900 750 950 1000 8000
Advertisement/ 450 450 450 450 1800
promotion
Insurance 300 300 300 300 1200
Loan Repayment 2000 2500 2500 2500 3000 10000
Licensees/permits 4000 4000
Repair and 500 300 2000 2000 4800
maintenance
Taxes 14286 14286
Miscellaneous 200 300 250 400 1400 200 1500 200 500 16350
Total Outflow 58850 48500 55750 65400 63650 62150 70950 64750 72600 71800 76600 91486 802486
Net cash flow 215720 240220 263170 282670 307920 337870 388070 411870 437420 463670 491384 357870 3093306
Accumulated Cash 215720 455940 719110 1001780 1809700 1646770 2004640 2392710 2804580 3242100 3705770 4197154 2419500

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5.3.3 BICHERU HARDWARES 3RD CASH PROJECTION FOR 3RD YEAR
ITEMS JAN FEB MAR APR MAY JUN JULY AUG SEPT OCTO NOV DEC TOTAL
Balance b/f 491384 513984 532884 551284 575834 603934 655834 690934 705634 739434 785034 842184
Cash in flow
Cash Sale 66000 70000 74000 82000 86000 92000 94000 96000 100000 110000 116000 120000
Cash at bank 2000 3800 1800 3900 200 3900 3300 2800 2400 3000 6000 6000 39100
Loans 9000 9000
Debtors receipt 2000 1200 1000 1300 2000 1500 3000 12000
Total inflow 576384 592184 613684 641284 669734 705934 738234 776234 860734 915834 981184 8884858
Cash outflow
Cash purchases 10000 11000 13500 16000 18000 18500 19000 20000 24500 25000 25000 30000 230000
Creditors paid 1000 1500 2000 1500 2000 200 10000
Salaries 46200 46200 46200 46200 46200 46200 46200 46200 46200 46200 46200 46200 554400
Stationary 200 200 200 200 200 1000
Telephone/postage 300 300 300 100 1000
Transport 500 600 700 850 500 1000 400 600 900 800 950 1200 9000
Advertisement/ 500 500 500 500 20000
promotion
Insurance 1200 1200
Loan Repayment 1000 1500 1000 2000 1000 2500 9000
Licensees/permits 3000 3000
Repair and 500 200 800 1000 500 1000 800 4800
maintenance
Taxes 19502 19502
Miscellaneous 500 1000 900 800 600 500 700 5000
Total Outflow 64400 59300 62400 6540 65800 70100 67300 70600 74000 75700 73650 101202 849902
Net cash flow 513984 582884 551284 575834 603934 635834 705634 739434 842184 879982 879982 1759964
Accumulated Cash 513984 1046868 1598152 21738686 2777920 3413754 4084688 479032 6529756 6314794 7156914 8036956 8,036,956

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5.4 PROFORMA INCOME STATEMENTS
Assumptions to be made when preparing proof income statement include: -
i) Share are to remain constant for all the three years
ii) Tax provision to the provided at 6.62% annually
iii) Repair costs will be constant for the three years
5.5 PROFORMS BALANCE SHEET

Item 1ST Year 2nd year 3rd year

Assets
Current assets
Cash at hand 50,750 60,850 69500
Cash at bank 38,370 34,450 40,000
Debtors 8,000 10,000 12,000
Stock 14,2800 188,000 230,000
Total current assets 229,920 293,300 351,500
Fixed assets
Machinery 28,000 25,200 22,400
Accumulated depreciated (2,800) (22,400) (2,800)
Furniture (2,200) 1,200 1,200
Accumulated depreciated (500) (500) (500)
Equipment 9,900 6,900 6,900
Accumulated depreciated (1,500) (1,500) (1,500)
Total fixed asset 35,300 30,500 25,700
Total asset 265,220 323,800 377,200
Liabilities
Current liabilities
Creditors 12,600 10,000 8,000
Provision of tax 14,286 14,286 18,502
Total current liabilities 20,100 24,286 27,502
Long term liabilities
Bank loan
Equity 10,750 10,000 9,000
Net profit after tax 114,520 88,000 65,600
Total long term liabilities 119,850 201,515 275,098
Total liabilities 277,020 33,380 377,200

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5.6 DESIRED FINANCING
The amount of money that shall be required to start off the business for the first year is: -

ITEM AMOUNT
Pre-operational cost 48,150
Working capital 148,450
Total financial requirement 196,600

5.7 PROPOSAL CAPITALIZATION

ITEM AMOUNT
Donors 124,600
Bank loan 10,950
Total investment 203,900

5.8 BREAK EVEN LEVEL ANALYSIS

Variable Amount Fixed cost Amount

Purchases 142,800 Salaries 562,200
Advertisement 1,400 License/permit 3,200
Telephone/Postage 1000 Insurance 1,400
Stationery 800 Tax 8,600
Transport 7500 24,286 27,502
Loan repayment 10,900
Miscellaneous 4,400
TOTAL 168,800 TOTAL 575,400

Contribution margin = total sales – variety costs

=846,000-168,800
=677,200
Contribution margin percentage=contribution margin x 100
Total

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=677,200x100
846,000
=80,047
=80.05%

Total fixed cost = fixed cost x 100

Contribution margin

57,540x100
80.05

=718,800.7495

5.9 CALCULATION OF PROFITABILITY RATIO

It deals with how much profit an enterprise makes it relation to some data elements
representing what amount it took (return of investment)

5.9.1 Gross profit ration (sales on investment)

This ratio expresses gross profit as percentage of sales and is calculated as:-
This ratio express gross profit as a percentage of sales and is calculated as:-

Gross profit ratio = gross profit x 100

Sales
Year 1 = 706,000 x 100
848,000

83.2547
=83.25%

Year 2 =984,000
=80.89

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