BUSINESS PLAN

ELDORET BAKERS

P. O. BOX 2219-300, ELDORET

PHONE:0743290258
Email [email protected]

PRESENTED BY : CELESTINE KEMBOI

INDEX NO. : 26509230070

PAPER NO : 307

CENTER CODE : 2912

CENTER NAME : ELDORET OF TOURISM AMD

PROFESSIONAL COLLEGE

PRESENTED TO : THE KENYA NATIONAL EXAMINATION

COUNCIL
SUPERVISOR : MR. DERICK OCHIENG
DECLARATION
I firmly declare that this business plan is my own work and it has not been produced in

any other Institution.

Name: CELESTINE KEMBOI

Date: …………………………………

Signature: …………………………………

Supervisor’s name: …………………………….

Date: ………………………………..

Signature: ………………………………..

i
DEDICATION
This project is dedicated to my dear parents and my brothers and sisters for their love and

encouragement which enabled me to go through my course successfully.

ii
ACKNOWLEDGEMENT
I would like to recognize the sincere and devoted efforts of my classmates who assisted

me during my project writing.

I would also like to express my sincere gratitude to my supervisor his willingness to

supervise and guide me all throughout the making of my business plan.

Special thanks to my parents for the financial and material support they granted me

during the writing of the business plan.

May God Bless you abundantly.

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TABLE OF CONTENTS
DECLARATION ................................................................................................................. i
DEDICATION .................................................................................................................... ii
ACKNOWLEDGEMENT ................................................................................................. iii
TABLE OF CONTENTS ................................................................................................... iv
CHAPTER ONE ................................................................................................................. 1
1.0 BUSINESS DESCRIPTION ................................................................................ 1
1.2 Marketing plan .......................................................................................................... 1
1.3 Organization and management plan.......................................................................... 2
1.4 Production plan ......................................................................................................... 2
1.5 Financial plan ............................................................................................................ 3
CHAPTER TWO ................................................................................................................ 1
2.0 BUSINES SDESCRIPTION ..................................................................................... 1
2.1 OWNER BACKGROUND ....................................................................................... 1
2.2 BUSINESS INDENTITY ......................................................................................... 1
2.3 BUSINESS STATUS/FORM OF OWNERSHIP ..................................................... 2
2.4 TYPES OF BUSINESS ............................................................................................ 3
2.5 PRODUCT/SERVICES ....................................................................................... 3
2.6 JUSTIFICATION OF OPPORTUNITY................................................................... 4
2.7 INDUSTRY .............................................................................................................. 5
2.8 BUSINESS GOALS ................................................................................................. 6
2.9 ENTRY AND GROWTH STRATEGY .............................................................. 6
CHAPTER THREE ............................................................................................................ 7
3.0 MARKETING PLAN ............................................................................................... 7
3.1 CUSTOMERS........................................................................................................... 7
3.2 MARKET SHARE.................................................................................................... 7
3.3 COMPETITION ....................................................................................................... 9
3.4PRODUCTS/SERVICES ......................................................................................... 10
3.5 PRICING STRATEGY ........................................................................................... 11
3.6 SALES TACTICS ................................................................................................... 12
3.7 ADVERTISEMENT AND SALES PROMOTION ........................................... 12
3.8 DISTRIBUTION STRATEGY ............................................................................... 14
CHAPTER FOUR ............................................................................................................. 15
4.0 ORGANIZATION AND MANAGEMENT........................................................... 15
4.1 MANAGEMENT TEAM ....................................................................................... 15
4.2 STAFFING ............................................................................................................. 17

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 4.3 PEOPLE SYSTEMS ............................................................................................... 19
4.4 LEGAL REQUIRMENTS ...................................................................................... 22
4.5 PROFESSIONAL ADVISORS AND SUPPORT SERVICES .............................. 22
CHAPTER FIVE .............................................................................................................. 24
5.0 PRODUCTION PLAN ........................................................................................... 24
5.1 PRODUCTION FACILITIES AND EQUIPMENT ............................................... 24
5.2 PRODUCTION STRATEGY ................................................................................. 25
5.3 PRODUCTION PROCESS .................................................................................... 29
5.5 REGULATIONS AFFECTING OPERATION ...................................................... 31
CHAPTER SIX ................................................................................................................. 32
6.0 FINANCIAL PLAN................................................................................................ 32
6.1 PRE-OPERATION COST ESTIMATES ............................................................... 32
6.2 WORKING CAPITAL ........................................................................................... 32
6.3.1 PROJECTED CASH FLOW MONTLHY DATA FOR THE YEAR 2019 ........ 33
6.3.2 PROJECTED CASH FLOW MONTLHY DATA FOR THE YEAR 2020 ........ 34
6.3.3 PROJECTED CASH FLOW MONTHLY DATA FOR THE YEAR 2021 ........ 35
6.4 PROFORMA INCOME STATEMENT ............................................................ 36
6.5 PROFORMA BALANCE SHEET OF ELDORET BAKERY AS AT 31ST
DECEMBER 2018 ........................................................................................................ 37
6.6 BREAK EVEN POINT........................................................................................... 38
6.7 PROFITABILITY RATIOS ................................................................................... 39
6.8 DESIRED FINANCING ......................................................................................... 40
6.9 PROPOSED CAPITALIZATION .......................................................................... 41
APPENDIX I ................................................................................................................ 42
BUSINESS LOCATION .............................................................................................. 42

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CHAPTER ONE
1.0 BUSINESS DESCRIPTION
The business to be started will be called ELDORET BAKERS . The suggested name
arise from the place of business. The owner suggested this name as it is unique easy to
pronounce and attractive to customers. Through the acquired entrepreneurial skills in
library will give the best and satisfactory service to the customers.

1.2 Marketing plan

The business major customers are individual’s customers who constitutes about 90%

while the remaining 10% institutional customers. The owner of the business intends to

capture 20% of the total customers within the location and hence capitalize on the

weakness of the competitors to gain competitive advantage e.g. the long chain of

distribution they use. Eldoret Bakery has competitive advantages such as improved

quality, easy access of bread by customers, great customers care and availability of credit

facilities and providing the best sterile conditions possible within the company.

Competitive strategy will be;

After sales service, free samples, after credit facilities, discounts, transport among others.

Qualified and well trained sales promoters will be in place to carry sales promotions

which will include giving, t-shirts, caps, key holders and also free samples etc. The price

determination strategy will depend on production cost. Competitors prices distribution

channel, profit margin and government policy on pricing. The prices will not be

negotiable be we will offer credit facilities to our customers, sales tactics will include,

point reward scheme, after discounts and locate our branches at strategic points.

The business intends to use direct channel of distribution for max. Customer’s

satisfaction.

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1.3 Organization and management plan
The business will have 2 levels of management i.e. lower and higher levels of training on;

first aid , fire management and safety. Promotion will also be based on merit and will

consider the employees performance, experience, commitment and the time he/she was

employed. Remuneration policy will be based on government policy on salary and wages

position and duties of the employee salaries and wages paid by other similar businesses

and the period one has stayed in the firm.

The statutory deductions which affect our employees includes N.S.S.F & N.H.I.F.

The legal requirements include: trading license and health license support services will be

offered by; MAISH Advocates on legal matters, Kenya Commercial Bank on banking

services, K-Rep on audits among others.

1.4 Production plan

The business will produce about 100,000 pieces of bread per month. The business will

use facilities and equipment’s made by current technology, such equipment’s include

oven, computers, trolley cell phones etc. stocks will be supplied by Stico agencies once

they receive our request. The employees will be working 11 hours, 6days a week and

hence there will be a total of 2475 man hours. This implies that labor cost per hour will

be Kshs 331.

Overhead cost per month will be Kshs 322,000 implying hourly overhead costs to be

Kshs 9728.0. the business sales projection per month is Kshs 1,236,000 with a mark up

margin of 20%.

Production process is as follows:-

(i) Availing of ingredients to the company

(ii) Mixing them

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 (iii) Doughing

(iv) Fermentation

(v) Seizing

(vi) Baking

(vii) Packing

(viii) Storage

(ix) Sale

1.5 Financial plan

Pre-operational cost was estimated at Kshs 196,000 while the working capital was

estimated at Kshs 1,400,000. The cash flow for the first year gave a net flow of Kshs

77,600,000, Kshs 198,326,000 and Kshs 360,456,00 respectively.

Performance income statement gave a net profit after 5% tax for the second year to be

Kshs 5,755,106, 5,434,900 and 4,988,450 respectively.

Proforma balance sheet projected indicated the available capital (owners equity) for the 3

years at Kshs 1,490,8550, Kshs 7,245,950 and Kshs 12,680,900 respectively.

The Eldoret Bakery break even point for the year 2019Kshs 8,903072.213, year 2020is

Kshs 7,403552.23 and year 2021 Kshs 7,018,455,556.

The profitability ratios for the first year are estimated at 27.80%, 28.10% and 22.67%

respectively.

The total desired financing is Kshs 7,441,950. Proposed capitalization will include

personal savings of Kshs 1,400,000 and external financing which are mainly bank loans

of Kshs 6,041,950.

3
CHAPTER TWO
2.0 BUSINES SDESCRIPTION
2.1 OWNER BACKGROUND
The sponsor of the enterprise will be Celestine who is undertaking a Diploma In

Accounts Cambridge Institute this makes it favorable for him since it is his field of study.

In college management is part of his studies thus he has both skills of sales and

marketing. Before college he had an experience to work at Paul’s bakery which drove his

desire to open a bakery.

The owner was able to take 50% of the capital needed during his period which he has

been working while 30% is from parents and 20% is contribution from friends and other

relatives.

2.2 BUSINESS INDENTITY

The business will be located in Eldoret town along Uganda road opposite the new stage.

It will be called Eldoret Bakery. The word Eldoret is familiar with the local residents,

since the people know my both names and even they went to an extent of abbreviating it,

hence they enjoy to call me so, as it is sweet to everyone and respected by every person.

After careful feasibility study, the following reasons influenced the owner of the firm to

choose this particular location.

No Bakery is located in this area of any neighboring estate. The population mainly

depends on one bakery that is united millers which is located 15km away. The number of

competitors was also an encouraging factor. There is united millers 15km away and may

fair bakery is also situated about 20km away.

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The Time taken and the cost of transportation incurred is less. This will reduce the cost of

their expenditure and enjoy a number of customers.

The building will be located in a four roomed rented building Eldoret and opposite the

main stage which guarantees 100% security.

The business address will be:-

Eldoret Bakery (AB)

P.O. Box 124

Eldoret.

Kenya

Tel: 0703818137

2.3 BUSINESS STATUS/FORM OF OWNERSHIP

The business will be sole proprietorship business due to the following factors

 The owner enjoys all the profits

 Decision making is easy or faster

 The owner becomes the basis

 The owner is the manager

 The owner is also decision maker

 It’s a source of employment to the owner and the surrounding

As the owner and the manager, and qualifies technically and business wise after taking a

3 year diploma course in Applied biology which also involves doing both

entrepreneurship educational and management as subjects apart from this there is also

some Bakers such as united millers and may fair bakery located within the town.

2
The firm is likely to start on January 2011 since all the requirements such as capital and

salesmen and women are readily available.

2.4 TYPES OF BUSINESS

Eldoret Bakery will be any starting business, with a serious aim of upstanding the well

established firms. The proposed business is a manufacturing type of business since it will

involve the transformation of raw materials into finished goods. This business is good

since it uses appropriate technology which does not require any further modification.

2.5 PRODUCT/SERVICES
Bread will be the main product processed, but as the business stabilizes plan are there to

introduce more products in the list of production such as scones, cakes and cookies. The

introduction of some of these new products will squarely depend on the market trend and

the demand for them. The production will be unique as compared to the min competitors

in that they will have extra weight, however the price will be in the same range with extra

sweetness. They will be 100 gram extra by weight.

Company Mass of bread (g)

Eldoret Bakery 500

United Millers 400

Rafiki Millers 400

There will be a lot of sales hence a lot of profits is being make per day.

The bread can last for 4 days if preserved well since it has good preservative. The

company will ensure that the products are distributed in time when still fresh and readily

available.

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2.6 JUSTIFICATION OF OPPORTUNITY
The manager that is the owner of the business intends to address the following problems

within the business locality. Unemployment: the firm intends to employ people such as

workers, drivers, sales men and women and watchman for the uplift of their standard of

living.

Constant supply of goods: The firm intend to work tirelessly to ensure that there is

enough bread for the customers every time without failure this will make them to be sure

of getting the bread at any time its needed.

The demand for bread: This is a place situated at a slum where population is very high

since there is Nehema institute, Moi high and the surrounding residents and they all

depend on united and may fair which produce low products and not available most of the

time hence the firm will ensure that there is enough supply of bread especially in the

flower farms where the population is extremely high and they have money.

The owner of the business worked with the Paul’s Bakery just before he joined college

and have enough experience on how to win customers and have also known their

weakness hence can work very hard to avoid the mistakes made by Paul’s Bakery. The

following are the degree of success of failure factors

Cost of labour is low since its slum.

High number of customers

The cost of operation in terms of rent, labor is affordable, considering the fact that the

residents mostly occupied by middle and low cost class sin terms of socio-economic

class.

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The high population of people: The projection of return on investment is very positive

considering the low cost of rents, labor and the cost of transport. The project shows that

expenditure, might be less than the income.

2.7 INDUSTRY
Eldoret as a business, fall under Bakery Industry. The significance of this industry to the

local community includes;

 It provides employment opportunity

 Improve the development of infrastructure

 Constant supply of goods and services

Size of the industry, wheat industry especially in Eldoret town is not large for example a

similar enterprise has four permanent of this company is about Kshs 1.5 million. The

industry is growing day by day given the increasing population and the high demand for

bread.

Appropriate technology is currently in use in the industry in which every technology is

meant to suit a particular situation.

The industry is profitable because raw materials used are locally processed and also the

demand for bread is high while supply is low. The industry is an all season since the

demand for wheat product is not seasonal. The main problems facing the industry are:-

 The high cost of wrapping materials (papers)

 Reluctance by the farmers to release their produce/harvest to the millers in time

makes production volume to reduce. But the future is very promising since the

government though the ministry of agriculture has put services policies on wheat

production such as the proper payment of farmers, reduced prices.

5
2.8 BUSINESS GOALS
Short term goals are:-

 To create employment opportunity for the local residents

 To be a major supplier of bread in Eldoret

 To satisfy the needs of the customers by producing quality production

Long term plans are:

 To be an established business (enterprise) in Eldoret and Kenya as a whole.

 To be a major supplier of bread to leading supermarkets and hotels in Eldoret

 To contribute to the nation building through paying taxes

 To become the best in wheat industry

2.9 ENTRY AND GROWTH STRATEGY

The business sis expected to start to its operations. Three months immediately after
acquiring the loan (starting capital). The owner intend to avail all the logistics first
include labour, premise (paying rent) furniture and equipments, raw materials and any
other important requirement for any business to start and operate in location (license).
The date of off take will be advertised through both the print and electronic media that
files, posters, TVs, Radios, Newspapers and so on. As a skilled entrepreneur the owner
will give out free samples, discounts, after sales services in order to gain acceptance in
the market. Given the available business opportunity in this area indicated by the high
population, demand and economic status, the owner will Marshall resources and
implement the business ideas that arises.
The business growth will be enhanced by:

 Increasing the working capital through use of returns raised from the sales

implementing the new business ideas.

 Scanning new environment for more demand.

6
CHAPTER THREE
3.0 MARKETING PLAN
3.1 CUSTOMERS
Eldoret Bakery’s customers. 10% institutional (schools and farms). Most of our

customers are area residents and the schools within this area.

Customers of the business are evenly distributed hence sales returns will almost be equal

to different geographical location of our customers within this place. The market

Technology carried by the owner of the business revealed that most families (customers)

by bread every morning, quantity depending on the family size while retail shops go for

crates between 4-10 daily. Both of them buy in cash every time they buy. Most people

(customers) like the white bread with a small percentage (about 5%) going for yellow or

brown breads

3.2 MARKET SHARE

The owner of the business, intend to capture 20% of total customers within the location.

The market Technology carried revealed that 20% of the total customers are satisfied

because of the following:

 The low quality of bread they get.

 The channels of distribution which at the end make the final customers buy the

product expensively.

 A serious deficiency here is the low supply of bread due to the long chain

distribution by those who would be competitor which the owner of the business

intend to capitalize on and thus gain the competitive advantage over her

competitors.

7
Firm number of customers

United millers 10

Rafiki millers 6

Eldoret Bakery 4

Total 20

% of Eldoret Bakery’s 4/20 x 100

Potential customers = 20%

UNITED MILLERS
ELDORET BAKERY 33%
42%

RAFIKI MILLERS
25%

Quality is my priority number one set affordable prices and last located my branches

at strategic points.

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3.3 COMPETITION
The competitors of the business are:

1. United millers which has been in the market for the last 2 years.

2. Rafiki Bakery which started it’s operations 4 years ago

Competitive analysis chart

Criteria Competing

firms

Quality 5 4 4 4.3

Size 4 4 5 4.3

Packaging 5 3 3 3.6

Customer care 5 5 5 5

Accessibility 4 4 5 4.5

Advertisement 3 2 4 3

Efficiency 5 3 3 3.6

Operating 3 3 3 3

Schedule 4 4 4 4

Reliability 3 3 3 3

Total 41 35 37 38.1

Scale

Poor Medium Good

1 2 3 4 5

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Competitive advantages of the business include:

 Improved quality

 Easily accessible by customers

 Great customers care

Competitive strategy will include:

 Offer after sale services

 Free samples

 Discount on certain quantity bought

 Offer credit facilities

 Introduce smart card point rewards

3.4PRODUCTS/SERVICES
Since most of the customers like yellow sweet bread and they are not available in both

United Millers and Rafiki Bakery. The owner of Eldoret bakers intends to increase the

number of yellow bread to satisfy customer of yellow bread.

The owner of the business also intends to increase the production of scones since most of

primary schools can easily go for scones since they are of affordable price.

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 Yellow bread in % Scones in % Demand

United Millers 20 30 10%

Rafiki Bakery 30 10 10%

Eldoret Bakery 50 60 80%

3.5 PRICING STRATEGY

My determination strategy will depend on the following factors.

 Production cost which include labour, raw materials and other expenses incurred

by the business.

 Competitors price want my price to range close to my competitors prices.

 Distribution channel which to m case is direct

 The profit margin, my profit margin is expected to be about 30% of the total cost

of production.

 Government policies or prices and the cost of taxation will also play part in

determining my prices.

Item Product Competitors price Eldoret bakers prices

range

1 Bread 35-45 35-43

My prices will be fixed and not negotiable but affordable to most of my potential

customers. Most of my customers will be individual customers and thus mode of selling

will probably be cash but at time I will offer credit facilities to my regular customers. To

institutional customers both modes of selling will be possible (credit & sales).

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3.6 SALES TACTICS
In order for a large sales volume in the market despite competitors, the business is to sell

directly through agents and distributors.

The marketing managers shall constantly visit perspective buyers and receiving orders by

phones, letters, thus tracing the area of weakness easily and finally coming up with

necessary ways of doing away with the weakness. The owner trained and experienced

sales team who are well motivated to perform to the required standards. Open branches at

strategic points that are close to the customers. Offer discounts and free gifts on certain

quantity of purchase. Introduce point reward competition based on the amount quality

bought.

3.7 ADVERTISEMENT AND SALES PROMOTION

(i) Advertisement

The owner of the business, intend to use electronic and print media for adverts which

includes:

 Radio

 Poster

 Banners

 Fliers

 Bill boards

The owner of the business, intend to advertise in local radio station and write posters and

fliers in both local and national language. This will ensure the effectiveness for the

adverts.

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(ii) Sales promotion

I will offer free samples (T-shirts, caps, key holders etc) after sales services and organize

football tournaments which are the most popular gave errand and loved by many. I will

employ very qualified and competent sales agents. I will determine the promotional

impact of sales promotion by:

Analyzing the sales volume, which I expect to increase as increased inquiry by new

customers on our products.

Budget protection for sales promotion

Advertisement medium Amount in Kshs

Radio 5,000

Posters 1,500

Bill boards 3,000

Fliers 500

Banners 1,000

Total 11,000

Budget projection for sales promotion

Service/product Amount in Kshs

Free samples 3,000

After sales services 8,000

Football tournaments 5,000

Total 16,000

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3.8 DISTRIBUTION STRATEGY

To compete properly the firm shall ensure that the channels of distribution, for the

products from the firms premise is without any problem.

Manufacturer wholesalers retailer customer

Manufacturer wholesalers customer

Manufacturer customer

The distribution of the products will not be a problem since the firm is planning to buy 10

bicycles and 15 motorcycles to be used. The firm will only be standard during rainy

seasons. Eldoret Bakery intends to serve the entire Eldoret Town which is about 50

square kilometers with a population of about 200,000 people. But there are also some

problems which are likely to be encountered during distribution e.g.

- Inaccessible roads

- Middlemen who buy in bulky and then keep selling later at higher prices.

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CHAPTER FOUR
4.0 ORGANIZATION AND MANAGEMENT
4.1 MANAGEMENT TEAM

Eldoret Bakery will have 2 distinct levels of management hierarchy that is lower and

higher level of management. Higher level consists of managers while lower consists of

supervisors and other senior staff members.

Owner Manager

H.R Manager Quality manager Account Production T. Manager

Supervisor Quality analyst Receptionist Technicians

Senior staff

Subordinate staff

Manager

The manager will be Abby Jebet who is the owner of the enterprise. He must be at least

23 years old and must have a credit in business management must be computerized and

have at least 3 years experience.

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Duties and Responsibility

 Support in handling specific human resources matters.

 Help in interpreting and implementation of police and regulations coordinating

duties to the junior.

 Managers and ensures that all lower manager perform their duties.

Human Resource Manager

 Responsible for producing of human resource and labour.

 Support in handling some specific issues related to management.

 Diligence authority and responsibilities to supervisors

Qualifications

 Diploma in human resource management

 Computer literate

 Ability to work with less supervision

Account clerk

Duties

 Preparing financial statement

 Reviewing financial status of the business

Qualification

 Minimum qualification in Diploma analytical chemistry

 One year working experience

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Production Manager

Duties

 To be in charge of production work.

 Control production capacity

Qualifications

 Diploma in mechanical production engineering

 Computer literate

4.2 STAFFING
The enterprise will ensure that the other staff members made up of able and hardworking

members for it to gain maximum efficiency.

Job Specification

Watchman

 He ensures that the enterprise is out of bound, to any an authorized person and

take care of goods within the factory.

 Ensures on worker goes out with the products of the enterprise without any

information.

 He will be paid Kshs 1500 per month.

 Must be hardworking and twisted

 They will maintain all the cleanliness required in the enterprise right from

highway to the offices, bathrooms and toilets the number to be employed in ten

17
 and payment Kshs 1,500 per month per person must obtain high standard of

hygienic and hardworking.

Store keeper

This sis the person who keeps all the products, materials both raw and processed good

and services must be hardworking and trustworthy will be paid Kshs 3,000 per

month.

Staff regulation

These comprises of the following:

 Every employee must report and leave the working place in specified time.

 Wearing of protective clothing as provided by the enterprise during working

hours is a must.

 Employees must be ready to work whether with supervisor or without.

 Respect among employees and managers must be highly observed at all time.

 Rewarding the outstanding performance.

 The employees will be given certificates of good performance and good

conduct.

 When there is good production and high profit, workers can be given

something small as a token of appreciation.

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4.3 PEOPLE SYSTEMS
Recruitment and selection

The owner will do the following:

 State vacancies to be filled

 Job analysis that is source of the knowledge, skills and attitude needed to do the

job.

 Advertise the job

 Sort at the application

 Shortlist the candidates for interview

 Select the best and give out appointment letters

 Induction process

Training

The new employees will require general training such as:

 Five outbreak management

 Management training

 First aid training

 Safety training

It will be in house where experts from outside will be invited to help in training. The

training will be funded by part of the starting capital since the training cost was already

included in the initial budget.

Supervisors will check the impact of training by ensuring/confirming whether the

employees work according to how they were trained.

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Promotion

Promotion will be based on revisit and be based on the following performance of each

employee

 Leadership skills of the employment

 Competency

 Remuneration and incentives

 Academic duration taken since employment

 Government policy and salary and wages

 Position and duties of the employees

 Salaries and wages paid by similar business competitors

The period an employee has taken since employment

Item Position Salary in Kshs Subtotal

1 Human Resource manger (1) 30,000 30,000

2 Accounts Clerk (1) 20,000 20,000

3 Quality Manger (1) 20000 20,000

4 Production manager 18,000 18,000

5 Technician (2) 1,500 x 2 30,000

6 Quality Analysist (1) 15,000 15,000

7 General Supervisor 15,000 15,000

Total 148,000

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The statutory deductions which the staff incurs, include:-

National Social Security Fund (NSSF)

National Hospital Insurance Fund (NHIF)

Incentives

 The manager intends to use both the group and individual forms of giving

incentives.

 Individual incentives such as cash, leave and so on.

 To motivate on individual to work harder.

 Increase competition among employees

 Group incentives such as end year parties, daily transport and overtime.

 To increase team work

 To promote cohesion and togetherness.

 The cost of incentives will be included in the total expenditure during financial

planning.

COMMUNICATION CHANNELS

The enterprise will employ an upward communication channel where information is

passed from the lower level of employee to the top most personnel that is the owner

manager.

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4.4 LEGAL REQUIRMENTS
Licenses and permits

The license of the business will be obtained from the county council of Eldoret which

will cost 5,000 while permit will be obtained from Kenya licensing board through the

Ministry of Heath which cost 4,000.

By laws

The business must give back to the community be employing the local residents and

improving the area infrastructure such as roods. The business should not be health hazard

but a health promoter and thus will be directing the waste products to the Municipal

sewage since they have a well constructed and managed sewage system to avoid

information communication or water pollution.

4.5 PROFESSIONAL ADVISORS AND SUPPORT SERVICES

Legal matters will be handled by:

Makori and company advocates

Te: 0720-123456

0731-765421

0571- 360011

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Banking services will be handled by:

Kenya Commercial Bank

Eldoret Town Branch Kenyatta avenue

P.O. Box 1112131415

ELDORET

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CHAPTER FIVE
5.0 PRODUCTION PLAN
5.1 PRODUCTION FACILITIES AND EQUIPMENT
Item Description Specification Quantity Unit cost Sub total

1 Oven China 400 4 800,000 3,200,000

2 Trolleys Wifi 126 5 7,000 35,000

3 Hand cart Metallic 5 2,000 10,000

4 Wheel barrow Metallic 5 3,000 15,000

5 Pick up Nisan hard body 2 1,400,000 2,800,000

6 Computer Dell 7 30,000 210,000

7 Furniture/fitting Wooden 2 set 100,000 200,000

8 Files Anri 10 150 1,500

9 Wall clock Quartz 2 250 500

10 Cell phone Nokia 110 2 2,500 5,000

11 Packing material Kenton 56 250 12,500

12 Stationeries General 1 6,000 6,000

Total 6,495,500

Repairs and maintenance on the equipments and machines will be done once a year by

Jabum mechanical engineering works

24
BUSINESS LAYOUT PLAN

Store Production room

office
Preparation
Loading Room
Bay

5.2 PRODUCTION STRATEGY

Project output

Particular Projected output per month

Bread 100,000

Total 100,000

Raw materials

Item Description Quality Unit cost Sub total

1 Wheat flour 300 bags 1440 432,000
2 Vegetable oil 200 kg 130 26,000
3 Sugar 400 kg 100 40,000
4 Slat 50 kg 40 2,000
5 6ms 20 bags 800 16,000
6 Yeast 50kg 200 10,000
7 Acetic acid 1,000 ml 100 100,000
Total 626,000

25
The stocks will be supplied by Kanini Haraka enterprise on requisition by Eldoret

Bakery. The manager will use a pin card at the store to show the flow of stock and

balance.

26
Labour and skills

Item Position Grade No Wages/salary Sub total

1 Production manager Diploma in mechanical 1 18,000 18,000

2 Quality assistant Diploma in analytical chemistry 1 15,000 15,000

3 Technician Certificate in electrical 2 12,000 24,000

4 Cleaners Form four certificate 5 5,000 25,000

Total 82,000

The enterprise will be working 11 hours a day, 6 days a week. The total hours in a month;

(Daily worked hours x No. of days )

(11 x 25) = 275 hours

Man hours = total hours x number of workers = (275 x 9) = 2475 hours

Labour cost = (82,000)

2475

= Kshs 33.1

27
Overhead cost (indirect cost)

Particulars Amount in Kshs

Rent 50,000

Management salaries 148,000

Transport bill 50,000

Water bill 7,000

Electricity 12,000

Telephone bill 10,000

Repair & maintenance 20,000

Stationeries 5,000

Consultancy services 5,000

Depreciation of fixed assets 5,000

Total 322,000

Hourly overhead cost = 322,000

33.1

= Kshs 9728.00

Total production cost

Particulars Amount in Kshs

Raw materials 620,000

Labour cost 82,000

Overhead cost 322,000

Total 1,030,000

28
Sales projection

Sales = 100200,000 + (20 x 1030000)

100

= Kshs 1,236,000

5.3 PRODUCTION PROCESS

Steps in producing bread

1. Availability of ingredients

2. mixing

3. doughing

4. fermentation

5. sizing

6. baking

7. packing

8. storage/display /sales

1. Availing of ingredients

The raw materials are brought together near the point of action that is processing zone.

2. Mixing the ingredients are mixed considering the prescribed ration by the quality

assistant. This ratio must always be observed to ensure quality and safety of the

customers in terms of their health.

3. Doughing – the boiled water is mixed together with flour and all the ingredients,

serious attention given to the prescribed rotation by the quality control analyst. This

process is very necessary to ensure that there is proper mixing and balancing of the

ingredients.

29
4. Fermentation

The properly mixed dough is left to stay overnight in well covered drums. This process is

done to give yeast a better and required time for proper reaction. This time given to yeast

to react is very essential fro a better quality product.

5. Sizing

The fermented dough is then made into required size usually 500g. at this stage serious

cleanliness precautions are taken.

6. Baking

The sized dough is then placed in an oxen for baking in order to obtain the consumable

bread. The oven temperature require to bake a dough into bread is normally about 100-

1500c. Attention must be put to oven temperature in order to obtain uniform and quality

baked bread.

7. Packing

The processed bread is then packed into the correct polythene packing with all the

ingredients clearly indicated on the packs including date of manufacture, date of expiry

and the mass of bread.

9. Sales/display

The processed bread is then therefore ready for display and subsequent sales to the

customers.

Availing of Mixing Doughing Fermentation

ingredients

Sales display Packing Baking Sizing

30
5.5 REGULATIONS AFFECTING OPERATION
1. Fire fighting equipment’s – every room will be fitted with fire fighting

equipments

and proper escape doors must be constructed incase of fire.

2. Trade mark logo

The Eldoret bakery has a registered logo under the company acts.

3. Public health

The business has acquired food handling certificates, provided clean toilets and

treated élan water for drinking and washing hands.

4. Safety

Eldoret Bakery has a provision of safety years to its employees. This includes

gloves, eye goggles, coats and boots among others.

5. Labour laws

The business employment policy is very clear on employment that is 21 years of

age and above. This is so to conform to the employment act and labour laws of

Kenya. Any worker who will be interested to register with the workers union is

fully allowed to do so.

31
CHAPTER SIX
6.0 FINANCIAL PLAN
6.1 PRE-OPERATION COST ESTIMATES
Particular Cost in Kshs

Feasibility studies 5,000

Business registration 9,000

Rent deposit (30months) 150,000

Renovations 18,000

Initial advertisement 11,000

Miscellaneous 3,000

Total 196,000

6.2 WORKING CAPITAL

Current assets (Kshs) Current liabilities

Cash at bank 800,000 Creditors 100,000

Cash at hand 400,000 Bank overdraft 100,000

Stock 300,000 Accrued Salaries 80,000

Debtors 250,000 Accrued taxes 700,000

Total 1,750,000 Total 350,000

Working capital = current assets – current liabilities

= (1,750,000 – 350,000)

= Kshs 1,400,000

32
 6.3.1 PROJECTED CASH FLOW MONTLHY DATA FOR THE YEAR 2019
PARTICULARS JAN FEB MAR APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC TOTAL
Cash Balance 1400000 2051000 2887000 4029000 5021000 5664000 6346000 7028000 7501000 8183000 8852000 9730000 68692000
Cash inflow
Cash sales 1200000 1300000 1300000 1200000 1200000 1300000 1300000 1200000 1300000 1400000 1200000 1200000 15200000
Data collection 400000 450000 450000 700000 350000 300000 300000 200000 300000 200000 600000 300000 4750000
Loans 300000 350000 306000 200000 400000 400000 300000 200000 3000000 2450000
Total cash inflow 1900000 2100000 2056000 19000000 1750000 2000000 2000000 1700000 1800000 1900000 1800000 1500000 22400000
Total cash 3300000 4157000 4943000 5929000 6771000 7664000 8346000 8728000 9301000 100083000 10652000 11230000 91092000
available
Cash outflow
Rent 50000 50000 50000 50000 50000 50000 50000 50000 50000 50000 50000 50000 600000
Salaries 148000 148000 150000 150000 148000 148000 148000 150000 150000 1520000 1520000 1520000 1796000
Raw materials 626000 626000 626000 626000 626000 626000 626000 626000 626000 626000 626000 626000 7512000
Transport bill 50000 50000 60000 60000 50000 50000 50000 60000 60000 60000 70000 70000 690000
telephone bill 10000 10000 12000 11000 11000 12000 12000 12000 11000 10000 11000 11000 132000
Repairs &maint 20000 20000
Stationery 5000 5000 6000 5000 6000 6000 6000 5000 6000 6000 6000 6000 67000
Loan repayment 320000 370000 420000 210000 420000 420000 320000 210000 320000 2890000
Consultancy 15000 15000 150000
Miscellaneous 5000 5000 6000 6000 5000 6000 6000 5000 6000 6000 6000 7000 70000
Total cash 1249000 1264000 1344500 908000 1107000 1381000 1318000 1227000 1118000 1231000 9229000 922000 13492000
outflow
Net cash out flow 2051000 2887000 4029000 5021000 5664000 6346000 7028000 7501000 8183000 8852000 9730000 10308000 77600000

33
 6.3.2 PROJECTED CASH FLOW MONTLHY DATA FOR THE YEAR 2020
PARTICULARS JAN FEB MAR APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC TOTAL
Cash Balance 10308000 11088000 11889000 12867000 13565000 14962000 1595800 1694700 1789800 188690000 10068000 21362000 22453000
Cash inflow
Cash sales 1400000 1500000 1600000 1600000 1600000 1700000 1600000 1600000 1600000 1700000 1700000 1700000 1930000
Data collection 400000 300000 400000 500000 300000 400000 350000 400000 500000 600000 400000 300000 4950000
Loans 200000 300000 400000 300000 400000 200000 300000 400000 2500000
Total cash inflow 2000000 2100000 2400000 21000000 2000000 2300000 2400000 21500000 2300000 2200000 2300000 2500000 26750000
Total cash 12308000 13188000 14289000 14967000 15965000 17262000 1858000 19097000 20198000 21069000 22368000 23862000 21293100
available
Cash outflow
Rent 50000 50000 50000 50000 50000 50000 50000 50000 50000 50000 50000 50000 600000
Salaries 160000 160000 160000 160000 160000 160000 160000 170000 170000 170000 170000 170000 1970000
Raw materials 650000 650000 650000 650000 650000 650000 650000 650000 650000 650000 650000 650000 7800000
Transport bill 100000 100000 120000 120000 120000 120000 120000 100000 110000 100000 100000 100000 1320000
telephone bill 10000 9000 10000 12000 12000 10000 9000 8500 7000 8000 6000 7000 107500
Repairs &maint 30000 30000
Stationery 5000 5000 6000 5000 6000 6000 6000 5000 6000 6000 6000 6000 67500
Loan repayment 320000 370000 420000 210000 420000 420000 320000 210000 320000 2890000
Consultancy 150000
Miscellaneous 5000 5000 6000 6000 5000 6000 6000 5000 6000 6000 6000 7000 70000
Total cash 1220000 1299000 1422000 1002000 1003000 1324000 1411000 1199000 1329000 1001000 1006000 1409000 14650000
outflow
Net cash out flow 11088000 11889000 12867000 139657000 14962000 1595800 1694700 17898000 18869000 20068000 21362000 22453000 19832600

34
 6.3.3 PROJECTED CASH FLOW MONTHLY DATA FOR THE YEAR 2021
PARTICULARS JAN FEB MAR APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC TOTAL
Cash Balance 22453000 23578000 24856000 26033000 27270500 28264000 29411000 30627000 31743000 32858000 84064000 35258000 34396000
Cash inflow
Cash sales 1700000 1700000 1800000 1800000 1800000 1800000 1800000 1800000 1900000 1900000 2000000 2000000 22000000
Data collection 300000 200000 300000 300000 400000 350000 400000 500000 600000 400000 300000 4950000
Loans 200000 300000 400000 300000 300000 400000 300000 2500000
Total cash inflow 2300000 2300000 2450000 26000000 2400000 2650000 2300000 22000000 2200000 2600000 2700000 2650000 29550000
Total cash 24953000 25878000 27286000 28633000 29670500 30914500 31711000 3227000 33943000 35458000 36764000 37908000 375946000
available
Cash outflow
Rent 50000 50000 50000 50000 50000 50000 50000 50000 50000 50000 50000 50000 600000
Salaries 170000 170000 170000 170000 180000 180000 180000 180000 180000 180000 180000 180000 2120000
Raw materials 650000 650000 650000 650000 650000 650000 650000 650000 650000 650000 650000 650000 7800000
Transport bill 150000 150000 150000 150000 160000 160000 160000 160000 160000 150000 160000 150000 1860000
telephone bill 10000 11000 11000 10000 12000 10000 10000 10000 12000 11000 12000 11000 130000
Repairs &maint 15000 15000
Stationery 5000 5000 6000 6500 7000 6000 6000 7000 7000 6500 7000 6500 78000
Loan repayment 320000 210000 320000 320000 420000 320000 420000 2680000
Consultancy 150000
Miscellaneous 5000 5000 6000 6000 5000 6000 6000 5000 6000 6000 6000 7000 77000
Total cash 1375000 1042000 1253000 1362500 1406000 1503500 1084000 1084000 1085000 1394000 1506000 1395000 15490000
outflow
Net cash out flow 23578000 24836000 26003300 27270500 28264000 29411000 30627000 31743000 32858800 34064000 35258000 36573000 360456000

35
6.4 PROFORMA INCOME STATEMENT
PARTICULARS YEAR 2019 YEAR 2020 YEAR 2021

Wet sales 19,950,000 24,250,000 27,050,000

Operating expenses

Rent 600,000 600,000 600,000

Salaries 1,796,000 1,970,000 2,120,000

Transport bill 690,000 1,320,000 1,860,000

Repair and maintenance 20,000 30,000 15,000

Stationeries 67,000 67,500 78,000

Telephone 132,000 107,500 130,000

Water bill 84,000 88,000 90,000

Electricity bill 140,000 136,000 139,000

Loan repayment 2,590,000 2,640,000 2,680,000

Consultancy services 15,000 - -

Miscellaneous 70,000 70,000 77,800

Total 6,204,000 7,029,000 7,759,000

Net profit before tax 6,204,000 5,721,000 5,251,000

Less 5% tax 302,900 286,050 262,550

Net profit 5,755,100 5,434,950 4,988,450

36
6.5 PROFORMA BALANCE SHEET OF ELDORET BAKERY AS AT 31ST
DECEMBER 2018
PARTICULAR YEAR 2019 YEAR 2020 YEAR 2021

Assets
Fixed assets
Machine & equipment 6,295,500 5,665,950 5,099,355
Less depreciation 10% 629,550 566,595 509,955.5
Net value 5,665,950 5,099,355 4,589, 419.5
Furniture & fitting 200,000 180,000 16,200
Net value 18,000 162,000 145,800
Total fixed assets 5,845,950 5,262,355 4,735,219.5
Current assets
Cash at bank 1,120,000 1,750,000 8,169,545
Cash at hand 80,000 100,000 100,000
Stock 300,000 4,500,000 3,800,000
Debtors 250,000 1,819,545 2,144,585.5
Total current assets 1,780,000 8,169,545 14,214,130.5
Total assets 7,595,950 13,430,900 18,949,350
Liabilities
Creditors 100,000 350,000 750,000
Bank overdraft 100,000 200,000 300,000
Accrued taxes 70,000 100,000 110,000
Accrued salaries 80,000 100,000 120,000
Total current liabilities 350,000 750,000 1,280,000
Long term liabilities
Capital owners equity 1,490,850 7,245,950 12,680,900
Add net profit 5,755,100 5,454,950 4,988,450
Loans - - -
Total 7,245,950 12,680,900 17,669,350
Total liabilities 7,595,950 13,430,900 18,945,350

37
6.6 BREAK EVEN POINT
PARTICULAR YEAR 2019 YEAR 2020 YEAR 2021
Fixed cost

Rent 600,000 600,000 600,000

Depreciation 619,550- 584,595 526,135

Management staff 1,796,000 1,970,000 2,120,000

Salaries

Loan interest 140,000 140,000 150,000

Stationeries 67,000 67,500 78,000

Total fixed cost 3,252,550 3,362,095 3,474,135.5

Variables

Raw materials 7,512,000 7,800,000 7,960,000

Labour cost 984,000 984,000 984,000

Transport bill 690,000 1,320,000 1,860,000

Water bill 84,000 88,000 90,000

Electricity bill 140,000 136,000 139,000

Repair/maintenance 20,000 30,000 15,000

Telephone bill 132,000 107,500 130,000

Consultancy 15,000 - -

Miscellaneous 70,0000 70,000 77,000

Total variable cost 9,647,000 10,535,500 11,110,000

Total cost 12,899,550 13,897,595 14,584,135.5

Sales 15,200,000 19,300,000 22,000,000

38
6.7 PROFITABILITY RATIOS
PARTICULAR YEAR 2019 YEAR 2020 YEAR 2021
Net profit x 100% 5,755,100 x 100 5,434,950 x 100 4,988,450 x 100

Sales 15,290,000 1 9,300,000 22,000,000

= 37.86% = 28.16% = 22.67%

Net profit x 100 5,755,100 x 100 5,434,950 x 100 4,988,450 x 100

Working capital 1,400,000 1,400,000 1,4000,000

= 411.0% = 388.2% = 356.3%

Net profit x 100 5,755,100 x 100 5,434,950 x 100 4,988,450 x 100

Total operation 6,204,000 7,029,000 7,759,000

= = 77.32% = 64.28%

Net profit x 100 5,755,100 x 100 5,434,950 x 100 4,988,450 x 100

Capital employed 7,155,100 6,834,950 6,388,430

= 80.43% = 79.352% = 78.08%

Net profit x 100 5,755,100 x 100 5,434,950 x 100 4,988,450 x 100

Owners equity 1,490,850 7,245,950 12,680,900

= 386.03% = 75.00% = 39.34%

39
6.8 DESIRED FINANCING
PARTICULARS AMOUNT IN KSHS

Pre-operational cost

Feasibility studies 5,000

Business registration 9,000

Rent deposit 150,000

Renovation 18,000

Initial advertisement 11,000

Miscellaneous 3,000

Fixed assets

Machine &equipments 6,295,500

Less depreciation 10% 629,550

Net value 5,665,950

Furniture & fitting 200,000

Less depreciation 10% 20,000

Net value 180,000

Total fixed assets 5,845,950

Working capital 1,400,000

Total desired financing 7,441,950

40
6.9 PROPOSED CAPITALIZATION
Financial source (particulars) Amount (kshs)

Personal saving 1,400,000

External financing (loans) 6,041,950

Total 7,441,950

The modalities of loan acquisition, includes:

Application of the loan early enough before business registration, this includes;

Awaiting for loan period to mature

Acquisition of the loan

41
 APPENDIX I

BUSINESS LOCATION

NAKURU - ELDORET HIGHWAY

ELDORET BAKERY

SHOPS

MARKET
MAIN STAGE

ELDORET
UGANDA ROAD

COUNTY
GOVERNMENT
OFICES

SHOPPING CENTER

KITALE ROAD

INSITIUTE

42 PIONEER
ESTATE