SIMBA’S BUILDING MATERIAL ENTERPRISE

P.O BOX 1885-001, Nairobi, Kenya

Tel(sales): +254704206629, Kajiado County
E-mail address: [email protected]

PRESENTER : ALEX MULUNGU

BUSINESS NAME : SIMBA’S BUILDING MATERIAL ENTERPRISE

SUPERVISOR : Ms. JULIANA TALIA

PRESENTED TO : THE KENYA NATIONAL EXAMINATIONS COUNCIL IN

PARTIAL FULFILLMENT FOR THE AWARD OF
CERTIFICATE IN BUILDING TECHNOLOGY

INSTITUTION : KENYA INSTITUTE OF HIGHWAYS AND BUILDING

TECHNOLOGY

DATE OF PRESENTATION: JUNE 2021

 EXECUTIVE SUMMARY

1. BUSINESS DESCRIPTION

The business’s name is Simba’s Building Material Enterprise, name I choose for my business

because of the quality of materials available in my store. The business will be located at Kimuka

along Ngong Suswa road. To reach my business, you can use the email address below:

[email protected]

The business is a sole proprietorship. I preferred it because it is cheap to start. The business main

goal is to serve its customers well and meet their demands and also open more branches. The

business will majorly focus on building industry due to availability of materials in these industry

for building. The business will use mostly advertisements method to popularize its goods.

2. MARKETING PLAN

Simba’s building materials enterprise will majorly serve Kimuka and its environment and also

open other branches in areas like Suswa and parts of Ngong before spreading to other parts of the

country. Competition will be one of the crucial factors in the area, but the business will find its

way to cop with it by serving its customers with quality products and also given after sales

services such as free transport. Customers will be given carrier bags after buying from the store

and given the receipt.

3. ORGANIZATIONAL PLAN

The business’ future will depend on the workers hence it will employ both skilled and unskilled

labor to run it. This includes the manager who will be controlling the business. It will also

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employ an accountant, driver, guard and a cleaner for the beginning, before increasing the

number in the future.

4. OPERATIONAL PLAN

The business will be operating from Monday to Sunday (after church). With the help of the

Manager, who will be the controller of the business, will make sure that workers attend to their

duties accordingly so s to meet the customers’ expectations. The manager also will ensure that

the business runs smoothly, by introducing rules and regulations between the interactions among

workers and customers to enable cohesion between them.

5. FINANCIAL PLAN

The business’ financial plan will depend on the project pre-operation cost which is Ksh.

3,743,700 for machinery and other materials. The business will also get a boost from bank loans

of Kshi. 1,800,000, contribution Ksh. 2,000,000 and owner’s equity of 100,000, which will see

the business running smoothly.

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DECLARATION

I Alex Mulungu would like to state that this is my original work and that it has never been

submitted by anybody else in collage or university for the award of any certificate.

Name: ……………………………………...

Signature……………………………………

Date………………………………………...

I hereby certify that this project is submitted to KNEC with my approval as the supervisor.

Supervisor’s Name…………………………………

Signature…………………………………………...

Date………………………………………………...

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ACKNOWLEDGEMENT

I take this opportunity to thank my heavenly father for the energy and good health, my mother

Damaris Chepkeino, Uncle James Watiti, Aunty Rebecca Bisanju, Aunty Naomi, my

grandparents and both my cousins and friends for their inspiration they always have given me.

As I undertake my third-year training course in collage.

I also wish to extend my gratitude to Ms. Juliana Talai for her tireless efforts and assistance

who’s without her contribution this project would have been impossible to work on.

Thank you all and I love you. God bless you.

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DEDICATION
This piece of work is dedicated to all my family members for being there for me.

I do extend this to all KIBHT Ngong students. (2018-2021) May God be with you in all your

endeavors.

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PREFACE
This is written to fulfil part of my course that certifies my award for building technology. It gears

to acquire knowledge and skills to be yield in building technology engineering.

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Table of Contents

EXECUTIVE SUMMARY........................................................................................................................i
DECLARATION......................................................................................................................................iii
ACKNOWLEDGEMENT........................................................................................................................iv
DEDICATION...........................................................................................................................................v
PREFACE.................................................................................................................................................vi
CHAPTER ONE........................................................................................................................................1
1.0 Business Description..................................................................................................................1
1.1 Business Name............................................................................................................................1
1.2 Business Location and Address................................................................................................2
1.3 Type of ownership......................................................................................................................3
1.4 Product and services..................................................................................................................3
1.5 Justification of Opportunity......................................................................................................3
1.6 Industry......................................................................................................................................4
1.7 Goals of the Business.................................................................................................................4
1.8 Entry and growth Strategy.......................................................................................................4
CHAPTER TWO.......................................................................................................................................5
2.1 Market Plan...............................................................................................................................5
2.2 Customers...................................................................................................................................5
2.3 Market Share.............................................................................................................................5
2.4 Competition................................................................................................................................6
2.5 Methods of Promotion and Advertisements.............................................................................7
2.6 Pricing Strategy.........................................................................................................................7
2.7 Sales Tactics...............................................................................................................................8
2.8 Distribution Strategy.................................................................................................................8
CHAPTER THREE...................................................................................................................................9
CHAPTER FOUR...................................................................................................................................14
4.1.1 Production/operational facility.......................................................................................14
4.1.2 Machines...........................................................................................................................15
4.1.3 Legal premises..................................................................................................................15
4.1.4 Raw materials...................................................................................................................15
4.1.5 Monthly Product Expenses..............................................................................................16

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CHAPTER FIVE.....................................................................................................................................22
5.1. Financial Plan..........................................................................................................................22
5.2 Pre-operational Plan................................................................................................................22
5.3 Working Capital......................................................................................................................23
i. Projected cash flow year 1.........................................................................................................24
ii. Projected cash flow year 2.........................................................................................................26
iii. Projected cash flow year 3.....................................................................................................28
5.4 Proforma Income statement....................................................................................................30
5.5 Proforma Balance Sheet..........................................................................................................32
5.6 Break even Analysis.................................................................................................................33
5.7 Profitability Ratios...................................................................................................................36
5.8 Desired finance.........................................................................................................................38
5.9 Sources of finance....................................................................................................................39

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 CHAPTER ONE

1.0Business Description

This is Donna’s building materials enterprise with a new building material in the market

according to the new technology.

The business Will be shipping its products directly from the industry to avoid being cheated by

buying bad materials of lower quality that may make the business loss its customers and also

leading to the closure of the business.

The business Will be operating under my management to make sure that everything runs

smoothly and that the customers are served according to their expectations.

The business will be the sole proprietorship firm which is simpler to start and maintain because

of its simple requirements to begin such as the business premises and small capital compared to

others such as industry which requires more stable personnel in terms of financial statements.

1.1Business Name

This is Simba’s materials enterprise a name l chose for my business because it is easier to

remember and also because of the high quality of products that my business enterprise will be

supplying

The name Simba is associated with the strength and the quality of the goods sold

Just like the Simba cement, my products will also be of high quality which ensures that the

building or any structure built with my products will last longer enough.

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 1.2Business Location and Address

The business Will be located in Kimuka, it’s located along Ngong - Suswa road.

Kimuka is a small centre which rapidly growing up due to the strategic location along two towns

such as Ngong and Suswa road. The road is well tarmac which accelerate the transportation of

goods to and from the building materials industry which is located at the Nairobi city.

The security of the business premises and also the all area is good due to the presence of the

police station around the area which scared the robbers and other gangsters from engaging into

bad behaviors such as stealing and killing.

The business can be reached through the;

E-mail address: [email protected]

P.O BOX 1885-001, Nairobi, Kenya

Tel(sales): +254704206629, Kajiado County

From Ngong

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 1.3 Type of ownership

The business Will be a sole proprietorship, the type of the business l chose due to its simplicity

to start and maintain because it doesn’t need a lot of capital, you only need a premise and small

amount of capital to buy products for anyone to start sole proprietorship business

The business can also get funds from family and friends or bank to enable one to start sole

proprietorship and also its maintenance is cheaper compared to the others like industry.

The business Will employ both skills and unskilled labor mostly to run the business smoothly

under my management. The business looks forward to opening more branches in places like

Ngong town and Suswa to enable the enterprise to realize its goals which is to avail materials

near to the customers.

1.4 Product and services

After a long search of what business, I could venture into in this area, Kimuka, I finally came up

with building materials due to the recent development of story buildings and I know the business

is going to perform well and meet the needs of its customers. My business is going to deal with

all types of building materials recently brought to the market.

1.5Justification of Opportunity

I came up with this business proposal just after the accomplishment of the tarmac road from

Ngong town to Suswa. This will accelerate the shipping or transport of materials from Nairobi

city to my store and also my customers will have an easy time transporting their materials from

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my store. This area is also very peaceful and free from terrorism, apart from the fact that there

are an Administrative Police (A.P) and police camp located near my store. There is a lot of

development of building erection and ongoing constructions.

1.6 Industry

For the last 10 years, Kimuka has been an area with low population of the Maasai community.

This was due to the poor infrastructure, but as for now, the Ngong – Suswa tarmac road has

brought rapid development of Kimuka hence need for more building materials. I know by 2030,

Kimuka will be a developed town and my business will be one to benefit more from this

development because as for now, I won’t have competitors, although I know they are on their

way in investing in the area. My business focuses mainly in building industry hence more

reliable in the region and I believe it is going to grow faster, due to many investors in this sector.

1.7 Goals of the Business

My main goal of this business is to open many branches as possible and create job opportunities

for the youth and encourage them to start self-operation business instead of waiting for the

government to create jobs for them. This will minimize crimes associated with lack of

employment.

1.8 Entry and growth Strategy

As a sole proprietorship business, I need to put more effort to display my product to potential

customers through the use of: -

 TV advertisements

 Billboards

 Posters

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  Individual advertisements

Apart from this, my business will have to expand more market to minimize competitors and

accumulate more customers.

Through my frequent carrying out of market survey, I can be able to know the recent needs of

my customers in terms of recent development of technology.

CHAPTER TWO

2.1 Market Plan

Popularizing my business products is my major critical factor. But I have managed it through

employing workers who will manage to walk door to door and giving people advise on how to

use the products. I also use billboards and animated videos to make my business more popular,

moving cars from town to town giving advice and free gifts for those who manage to buy some

quantity of products.

2.2 Customers

I have managed my customers by employing more educated customer-care personnel’s, who

managed to make my business increase due to increasing number of customers in my store and

the advice they get is more of important for the entered business.

2.3Market Share

This is a very difficult factor to define in my business as a market share, you can guarantee that

you can maintain the share of your product as competitors are also making what they can to

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improve
Sales
their
Simba's Building
Materials
products

hence . Kimberly enterprise

Sharks enterprise

increasing their market share, but as per now, my business only manages 50% of the market

share in the region. Kimberly enterprise manages 37% and the Sharks products manages 13% of

the market share.

This is the illustration is shown in the pie chart below.

2.4Competition

Customers are increasing in my business due to my own business strategy that I employed and

enough labor for my customers not to spend a lot of time waiting to be served. Customers also

get free carrier bags after buying anything from the store. Workers frequently interreacts with

most of the customers and this actually have increased my chances of survival in the business.

This is as shown in the table of survey below.

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 Strength Opportunities Weakness
Simba Highly recognized Nearer to the Lack of enough

manufacturing transportation for

company delivery
Shark Popular in the region Know by suppliers Limited expand
Kimberly More Known by Good road system Lack of skilled labor

customers

2.5Methods of Promotion and Advertisements

As for my business promotion is a very important factor for it to increase, so I have managed this

by giving my customers’ free gifts after buying certain number of products as well as providing

free carrier bags and transportation. As for employees, I have managed to facilitate transport to

and from their respective homes for work. My business uses workers as a form of

advertisements, which are also done through: -

 Animated videos

 Billboards

 Radios

This has helped in popularizing the business and outcoming my competitors.

2.6Pricing Strategy

Pricing of my products mostly depend on how far I shipped them from. Since my store is not far

away from the manufacturer, my price is relatively lower than that of my competitors who ship

them from a far. This does not consume a lot of money for transport as well as on maintenance

cost.

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 2.7Sales Tactics

As for me I always focus on the quantity of items a customer buy. Customers buying bulk

products get a bigger discount and sometimes free delivery or other gifts.

2.8Distribution Strategy

All of my clients take their goods in my shelves to enable them solve what they want hence

reducing wastage of time in the store. The work of my customer /clients is to identify a product.

In cases where goods are delivered, there is a pay bill where they can buy goods from.

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 CHAPTER THREE

3.1 Organization Plan

Simba’s Building Materials Enterprise will manage its business well by employing both skilled

and unskilled labor to enable them share basic knowledge together that could see the business

realize its objective. Being a sole proprietor business I as the owner has managed to do some

managerial work before and this is going to make sure that the risk of business failure is limited.

3.2 Organizational Structure

I have managed this well by making sure that each employee knows his/her part, I did this to

enable the business grow well without confusion in role taking. The flow chart is as shown

below; -
Manager

ICT Manger

Accountant

Secretary

Sales Person

Store Keeper

Driver

Guard

Cleaner/Plumber

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 3.3 Managers and Qualifications

The following table shows the positions, qualifications and responsibilities of various managers.

Position Qualifications Responsibilities

Manager  Masters in sales and marketing  Organizes the future growth

 2 Years’ experience in the field of the business

of marketing  Controls all the activities and

processes in the business

ICT  Degree in IT from any  Manages all computers and

Manager Institution other electronics in the

 4 years of experience business

Accountant  Masters in accountancy  Manages financial records

 2 years’ experience in the field  Ensures that payments are

of accounting recorded accurately

Secretary  Degree in secretarial  Sign all payments made and

 At least 2 years’ experience in withdrawn within the

the field business

Sales  Diploma in marketing from any  Should be responsible for all

Person recognized institution sales in the business

Store  Should have a KCSE certificate  Manages all materials coming

Keeper with a good pass in math in and those going out.

Driver  Has a driving license  To transport materials out

and in of the store

Guard  Certificate from a recognized  Ensure security of the

institution business both night and

during the day time

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 3.4 Other personnel, number and duties

Name Number Qualification Responsibility

Plumber 01  Certificate in plumbing  Manage all

 Physically fit the drainage

 Enough experience within the

business

Cleaner 05  Physically fit  Make sure

 Hardworking that the

premise id

well cleaned

3.5 Recruitment, training and promotion

Position Recruitment Training Promotion

Manager  Newspaper  Workshops  Academic level

 Radio  Conferences  Work progress

 Television  Services
Accountant  Newspaper  Workshops  Academic level

 Radio  Conferences  Work progress

 Television  Services
ICT Manager  Newspaper  Workshops  Academic level

 Radio  Conferences  Work progress

 Television  Services
3.6 Renumeration and incentives

Position Number Salary Allowances Total

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 Manager 1 60,000 15,000 75,000
Account 1 45,000 10,000 55,000
Secretary 2 40,000 10,000 50,000
Salesperson 5 50,000 5,000 55,000
Store keeper 2 10,000 500 10,500
Driver 3 15,000 5,000 20,000
3.7 License, Permit and by laws

i. License

My business will require a license for its operation and I will get it from the council of Kajiado

County.

ii. Permits

All of my enterprise will require a health permit from the district hospital of Kajiado.

Transportation permit will also be needed for efficient operation.

iii. By-laws

The enterprise will follow all regulations from the government such as – Ensure policy, paying

taxes.

3.8 Support service

The enterprise got a big boost by the help of financial institutions such as: -

 Baking Services

 Insurance Policy

 Transport Services

Which is going to make the business realize its objective more efficiently.

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 CHAPTER FOUR

4.1 Operational Plan

For Simba’s Building Materials Enterprise to succeed in business it will require enough

resources and machinery equipment to enable it operate more efficiently. The following tables

show some equipment and machines that the business will be using:

4.1.1 Production/operational facility

The following table shows some facilities and equipment necessary for the business.

Facilities Quantity Cost (Ksh) Total Cost (Ksh)

Table 1 2,500 2,500
Seats 4 700 2,800
Measuring Tape 2 350 700
Paper Punch 1 1,500 1,500
Pair of scissors 2 500 100
Gloves 3 300 900
Claw hammer 2 800 1,600

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 Stapler 2 4,500 9,000
Wheelbarrow 4 100 400
Total 20, 400

4.1.2 Machines

The table below shows machines that the business will require in order to operate.

Items Quantity Cost (Ksh) Total Cost (Ksh)

Computer 1 70,000 70,000
Printer 1 45,000 45,000
Telephone 1 20,000 20,000
Generator 1 30,000 30,000
Total 165,000

4.1.3 Legal premises

The business will be operating under a rented house which will be paying monthly. The building

is permanent with both electricity and water. The business is on the ground floor of the premises.

It contains an ample space including parking and the road is well tarmacked. The rent cost is

charged Ksh 5000 monthly.

4.1.4 Raw materials

The following table shows some items that my hardware will be selling. The items will be

supplied by a hired lorry to the premises.

Item Quantity Price (Ksh) Total (Ksh)

Timber 500 150 per timber 75, 000
Block 1500 30 per block 45, 000
Sand 4 tones 10, 000 per tone 20, 000

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 Hardcore 4 tones 15,000 per tone 60, 000
Iron sheets 50 750 37, 500
Poles 50 150 750
Cement 200 750 150, 000
Plump bob 15 200 6000
Manson square 45 450 20, 250
Spirit level 40 400 16, 000
Water tanks 6 30, 000 30, 000
Paints 10 800 8, 000
Horse pipes 10 rolls 3000 per roll 30, 000
Total 498,500

4.1.5 Monthly Product Expenses

The following table shows a monthly expense incurred during the production process.

Items Cost (Ksh)

Water bill 900
Electricity bill 1, 500
Rent 5, 000
Telephone 12, 000
Advertisements 15, 000
Transport 10,000
Total 44, 400

4.2 Production process/Operational process

For the business to survive in today’s condition, my business is going to make sure that the

management of the business is well managed by the staff I have employed.

Planning

Enquiring

Ordering materials
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Purchasing
 Receiving

Storing

Issuing

Preparation

Sales

i. Planning

The business will borrow some funds from KCB bank for it to run smoothly.

ii. Enquiring

The business will use mobile phones for enquiring about the products needed before sending a

sales person agent to check the condition of product before ordering.

iii. Ordering

After enquiry, the business will order the items depending on sales agent’s’ report about the

product, cost and transport services.

iv. Purchasing

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The business will purchase the items, transport it using a hired lorry for storage.

v. Storing

After the arrival of the goods, they will be stored by the ready for branding.

vi. Issuing

The goods will only be issued just after branding them.

vii. Preparation

they will be stored in shelves after branding them for easy access of the products.

viii. Sales

The branded products will be sold straight from the shelves after paying the amount required at

the cashier.

4.3 Production/Operation Strategies

The business will manage its operation by making sure that the employees are paid well and that

discipline is kept and other rules like time management will be strictly followed.

Monthly labor Expenses

Personnel Number Amount (Ksh)

Manager 1 30, 000
Accountant 1 26, 000
Secretary 1 24, 000
Sales person 4 32, 000
Store keeper 2 15, 000
Driver 2 12, 000
Total 139, 000

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 i. Quality Control

The business will manage its product quality by making sure that the staff are paid well and the

products are of high quality according recent update product. The weighing machine will be

updated accordingly to the current council requirements. The business will update its trading

license regularly to avoid inconveniences by the local authorities.

ii. Future Plan

The business will brand the product, get the receipt book for that show the product, cost and

balance given to the customer. It will also increase the quantity of items and also the

workmanship for efficient production. The business will also be delivering goods in future to

ease the congestion at the premises, and increase availability of goods to customers.

4.4 Regulations Affecting Operation

The rules that govern the operation of the business making sure that there is healthy working.

a. Health and safety act

The employees shall observe all health protocols according to the government and minimize

risks of injuries during working that may be caused by neglecting rules.

b. Sex discrimination act

The business will not tolerate any type of discrimination within the business. The employment

opportunities shall be open to all genders.

c. Race discrimination

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There will be no discrimination based on color. The employment opportunities will be to all

races.

d. Sales of goods act

The goods sold in the business shall follow the regulations of the government. The business will

not sell expired goods.

e. Food safety regulation

The goods sold in the business shall be of good quality. Expired goods will be kept in the store

for disposal.

f. Public health act

The business will maintain the quality of hygiene required by the count council.

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 CHAPTER FIVE

5.1. Financial Plan

These are statements showing aspects of proposed business. The business financial plan will

ensure that the business run smoothly without many difficulties.

5.2 Pre-operational Plan

These are costs consumed before the start of a business operation.

Item Amount (Ksh)

License management 20, 000
Transportation 366, 000
Water 71, 000
Insurance 7, 000
Salary 2, 690, 000
Telephone 71, 000
Electricity 37,700
Advertisements and promotions 11, 000
Furniture and setting 20, 000

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 Rental deposit 50, 000
Machinery and equipment 40, 000
Total 3, 743, 700

5.3 Working Capital

These are the common difference between the current assets and current liabilities.

Item Y1 Y2 Y3
Current Assets
Cash in Hand 8, 354, 000 2, 000, 000 1, 622, 000
Cash at Bank 3, 437, 000 3, 962, 000 6, 800, 000
Debtors 100, 000 113, 000 85, 000
Stocks 900, 000 1, 000, 000 1, 850, 000
Total 12, 491, 000 5, 275, 000 10, 357, 000

Current Liabilities
Creditors 3,000, 000 66, 500 78, 000
Bank loan 1, 800, 000 200, 000
Contribution 20, 000, 000 120, 000 180, 000
Owner’s equity 10, 000, 000 120, 000 150, 000
Total 6, 8000, 000 306, 500 608, 000

i. Projected cash flow year 1

Item JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL
Cash inflow
Balance b/f 59259 1279780 10608 254830 45038 32909 61122 69228 57730 86738 95842

0 50 00 0 070 40 20 00 80
Cash in bank 2500 21000 200000 26000 270000 28200 28500 30000 32000 33000 35000 38000 3437000

00 0 0 0 0 0 0 0 0 0
Debtors 10000 10000
Cash in hand 1250 13500 146000 15000 188000 20000 25000 28000 13000 11200 17800 20000 8354000

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 00 0 0 0 0 0 00 00 00 00
Cash sales 7500 82000 880000 89000 6050160 98000 10000 11100 15000 17000 18500 26000 34800160

000 0 0 0 00 00 00 00 00 00
Loan 10000 60000 20000 1800000

00 0 0
Total cash 1125 27575 2505780 23708 1612830 59658 54330 78020 10242 96030 12653 14564 74381748

000 90 50 00 90 70 840 20 80 280

flow
EXPENSES 7000 98000 80000

0
Purchases 5000 6000 81000 85000 91000 7000 87000 65000 69000 97000 62600 5800 943600
Telephone bill 4500 6000 4000 3000 2000 6100 10000 8000 9000 7000 3500 6500 71000
Water bill 5000 2000 6500 4300 6300 2500 6000 7000 6100 6000 6200 6000 71000
Electricity bill 1500 16000 3000 1000 1500 25000 6000 5000 4000 2000 5200 5000 37700

00 0 0
Salary 7000 190000 12000 220000 30000 26000 20000 21000 23000 40000 2690000

0 0 0 0 0 0 0
Insurance 7000 30000 7000
Transport 2000 34000 19000 25000 27000 39000 31000 36000 27000 34000 44000 366000

0
Repair and 1000 10000 40000 140000

0
maintenance
Loan 3900 10000

repayment
Interests 4300 3900 4000 4000 2500 4300 4500 4500 36000
Creditors 6800 6700 6700 6800 6000 6200 7000 6000 6100 6000 5900 6000 75600
Advertisement 1080 9000 9000 10900 15000 16000 727000

0
s
License and 2000 20000

0
permit
Total cash 3025 13305 319610 17992 354190 38220 10554 37041 33063 55540 36385 92195 5466590

30 00 0 0 00 0 0 0 0 0
flow
Net cash 8224 14270 2186170 21909 1258640 55836 43776 74316 99122 90476 13289 13642 67915158

70 90 30 00 90 00 10 20 50 330

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 ii. Projected cash flow year 2

Item JAN FEB MAR APR MAY JUN JUL AU SEP OCT NOV DEC TOTAL

G
Cash inflow
Balance b/f 85000 90000 1050000 1160000 1270000 13065 1450000 14900 15000 1600000 1780000 1850000

00 00 0 0 0 00 0 000 000 0 0 0
Cash in bank 15000 17500 160000 180000 190000 12000 121000 11100 12100 220000 220000 230000 2000000

0 0 0 0 0
Debtors 36000 35000 310000 380000 210000 22200 212000 37000 36000 368000 400000 420000 3962000

0 0 0 0 0
Cash in hand 7000 6000 5000 2000 8000 9000 10000 7000 3000 25000 1500 16000 113000
Cash sales 50000 72600 7000000 800000 610000 88000 810000 73600 56000 710000 610000 800000 32400000

00 00 0 00 0
Loan
Total cash 95170 16710 1167500 1296200 1371800 14296 1565300 22748 16044 1732500 1904500 1996600 189740000

00 00 0 0 0 000 0 000 000 0 0

flow
EXPENSES
Purchases 80000 60000 900000 70000 500000 75000 73000 72000 88000 1000000 99000 1223000 5500000

0 0 0
Telephone 5000 2000 2100 3500 3000 2000 4000 4100 6000 5100 6000 5000 478000

bill
Water bill 4000 3000 2100 3000 5000 6000 2000 2000 2100 3500 2500 5000 402000
Electricity 20000 21000 223000 212000 300000 25000 260000 31000 20000 2120000 200000 290000 3075000

0 0 0 0 0
bill
Salary 9000 9000
Insurance 40000 38000 30000 31000 32000 29000 27000 34000 40000 41000 50000 48000 440000
Transport 7000 6000 6500 5000 4000 6200 6300 6500 7000 7800 6800 6700 75000
Repair and 8000 80000

maintenance
Loan 11000 11000

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repayment
Interests 3100 4200 4000 3200 3200 4100 4200 4300 4600 2100 37000
Creditors 6000 5000 5200 6000 6800 6200 5300 600 4800 4200 5000 66500
Advertiseme 11000 10000 20000 15000 6000 56000

nts
License and 12000 12000

permit
Total cash 38510 86400 3180100 344500 854000 37760 397600 43870 35210 1495900 388900 1585800 10664300

0 0 0 0 0
flow
Net cash 91319 15927 8494900 1261750 1386400 13918 1525540 22309 15691 1582910 1865610 1838020 179075700

00 000 0 0 400 0 300 900 0 0 0

iii. Projected cash flow year 3

Item JAN FEB MAR APR MAY JUN JUL AU SEP OCT NOV DE TOT

G C AL
Cash

inflow
Balance b/f 3000000 3200000 3100000 3300000 3500000 3600000 38500 38500 40000 4100050 4300000 44000

0 0 0 0 0 0 000 000 500 0 0 000

Cash in 485000 495000 500000 510000 530000 570000 58000 59000 60000 620000 63000 69000 6800000

0 0 0 0
bank
Debtors 100000 111999 112000 120000 133000 135000 13700 14600 14800 150000 160000 17000 1622000

0 0 0 0
Cash in 10000 15000 10500 11000 16000 7500 8000 9000 87000

24 | P a g e
hand
Cash sales 500000 500600 588000 590000 600000 6900000 65000 68000 70000 710000 6929400 79000 6000000

00 00 00 00 0
Loan 200000 200000
Total cash 3129500 3312160 3749200 3422000 4167350 4365500 45228 46052 47748 4887800 5072740 52769 5133595

0 0 0 0 0 0 000 000 000 0 00 00

flow
EXPENSE

S
Purchases 80000 88000 90000 95000 100000 120000 12100 12300 12500 150000 160000 20000 142000

0 0 0 0
Telephone 2800 3000 3200 5000 5600 4000 4200 4100 5000 6000 6200 600 55100

bill
Water bill 4000 3800 3200 4000 3000 3300 42000 4000 5000 6000 6200 6800 55500

0
Electricity 300000 310000 350000 370000 390000 400000 55000 40000 45000 400000 450000 46000 4700000

0 0
bill
Salary 40000 41000 42000 45000 47000 50000 56000 60000 650000 68000 70000 639000
Insurance 8000 107450 8000
Transport 107450 14000 6800 6200 6300 6900 14500 7400 7500 8000 8000 3000000
Repair and 100000 32000 20000 15000 32000 12000 13000 16000 150000

maintenanc

e
Loan 10000 10000

repayment
Interests 250 255 380 410 430 460 400 455 420 420 430 420 4730
Creditors 7000 6500 6200 6100 6200 6300 4000 6100 6200 7000 7200 6800 78000
Advertisem 20000 1500 16000 10000 10800 718000

ents
License and 90000 90000

permit
Total cash 579500 588555 612430 552310 575430 605360 66610 62965 65902 665720 706030 77402 7615130

0 5 0 0
flow
Net cash 3071550 3253304 3687957 3366769 4107807 4304964 45061 45422 47088 4821228 5002137 51994 5057443

0 5 0 0 0 0 900 345 980 0 0 980 70

25 | P a g e
 5.4 Proforma Income statement

The table below shows the projected income statement or profit and loss statement. The table

below shows how the business will improve.

Item Year 1 Year 2 Year 3

Cash sales 34, 400, 000 32, 400, 000 60, 000, 000
Cash purchase 943, 600 5, 500, 000 1, 452, 000
Gross profit 33, 856, 560 26, 900, 000 58, 548, 000
Expenses
Electricity bill 37, 700 47, 800 55,100
Telephone bill 71, 000 40, 200 55, 500
Salary 2, 690, 000 3, 075, 000 4, 700, 000
Insurance 7, 000 9, 000 8, 000
Transport 366, 000 440, 000 639, 000
Water 71, 000 75, 000 300, 000
Repair and maintenance 140, 000 80, 000 150, 000
License and permit 20, 000 12, 000 90, 000
Loan payment 10, 000 11, 000 10, 000
Interest 36, 000 37, 000 4, 730
Total Expenses 3, 448, 700 3, 827, 000 6, 508, 230
Net Profit before Tax 30, 407, 860 23, 073, 000 52, 039, 770
Net Profit less 14% 4, 256, 800 3, 230, 220 7, 285, 767
Net Profit after taxation 26, 151, 059 19, 842, 780 44, 754, 202

After gaining certain amount of money;

Gross pay = Total sales – purchases

= 34, 800, 160 – 943, 600

= 33, 856, 560

Net profit = gross pay – Total expense

= 33,856,560 – 3,448,700

26 | P a g e
 = 30,407,860

Net profit after tax = net profit – tax not less than 14%
= 30,407,860 ×86
100
= 26,150,750.6

Net profit after tax = Net profit – tax

= 30,407,860 – 26,150,759.6

= 4,257,100.4

5.5 Proforma Balance Sheet

The proforma table below shows financial statement position of a business for 3 years as shown

below.

Items Year 1 Year 2 Year 3

Assets
Current assets
Cash in hand 8,354,000 2,000,000 1,622,000
Cash at bank 3,437,000 3,962,000 6,800,000
Debtors 100,000 113,000 85,000
Stocks 900,000 1,000,000 1,850,000
Total 12,791,000 7,075,000 10,357,000
Fitted assets
Machinery and equipment 105,000 160,000 200,000
Furnished and sittngs 20,000 25,000 30,000

27 | P a g e
 Total 125,000 185,000 230,000
Total assets 12,916,000 7,260,000 1,265,700
Liabilities
Short term liabilities
Creditors 2,000,000 66,500 78,000
Total 2,000,000 66,500 78,000
Long term liabilities
Owner’s equity 100,000 120,000 150,000
Bank loan 1,800,000 200,000
Contribution 200,000 120,000 180,000
Total 2,100,000 240,000 530,000

5.6 Break even Analysis

Break even analysis shows how a business is surviving, if it’s making profit or loss. If the total

revenue is higher than the total cost, the firm makes large profits, but if the total revenue is less

than the total cost, then the business makes much loss.

Item Year 1 Year 2 Year 3

Variable cost
Water bill 71,000 75,000 3,000,000
Electricity bill 37,700 47,800 551,000
Telephone bill 71,000 40,200 55,500
Transport 366,000 440,000 639,000
Repair and maintenance 140,000 80,000 150,000
Total cost 684,700 683,000 4,395,500

Fixed cost
Rental deposit 50,000 50,000 50,000
Salaries 2,690,000 3,075,000 4,700,000
License and permit 20,000 12,000 90,000
Loan repayment 10,000 11,000 10,000
Total cost 2,770,000 3,148,000 4,850,000

First year

Contribution margin = sales – variable cost

28 | P a g e
 = 34,800,160 – 685,700

= 34,114,460.

34,114,460 ×
Contribution percentage = 100%
34,800,160
= 98.0296%

Total fixed cost *

Break even analysis = 100
Contribution
margin percentage
2,770,000 × 100%
98.0296%
= 2,825,677.142

Second year

Contribution margin = sales – variable cost

= 32,400,000 – 683,000

= 31,717,000.

31,717,000 ×
Contribution percentage = 100%
32,400,000
= 97.892%

29 | P a g e
Break even analysis = Total fixed cost *
100
Contribution
margin percentage
3,148,000 × 100%
97.892%
= 3,215,788.82

Third year

Contribution margin = sales – variable cost

= 60,000,000– 4,395,500

= 55,604,500.

55,604,500×
Contribution percentage = 100%
60,000,000
= 92.6742%

Total fixed cost *

Break even analysis = 100
Contribution
margin percentage
4,850,000 × 100%
92.6742% 30 | P a g e
= 5,233,387.502
 5.7 Profitability Ratios

These are ratios that show how a firm made profit. It calculates the percentage of sales that

exceed the cost of goods sold, and how a company uses its materials and products profitability.

First year

Gros profit = Gross profit * 100%

Sales
33,856,560 * 100
384,800,160
= 97.2885%

Second year

Gros profit = Gross profit * 100%

Sales
26,900,00 * 100
32,400,000
= 83.0247% 31 | P a g e
 Third year

Gros profit = Gross profit * 100%

Sales
58,548,000 * 100
60,000,000
= 97.58%

Net profit ratios

These show the relationship between the net profit after tax and the net sales.

First year

Net profit ratio =

Net profit after tax * 100%
Net Sales
26,151,059.6 * 100
34,800,160
= 75.1464%

Second year

Net profit ratio =

Net profit after tax * 100%
Net Sales
19,842,780 * 100
32,400,000
= 61.1431%

32 | P a g e
 Third year

Net profit ratio =

Net profit after tax * 100%
Net Sales
44,754,202.2 * 100
60,000,000
= 74.5903%

5.8 Desired finance

These are money generated to show the ability of business to open its doors.

Item Amount
Pre-operational costs 3,743,700
Working capital 5,091,000
Fixed assets 125,000
Total 8,959,700

5.9 Sources of finance

These are money that the business benefits from, for it is survival which include loans and others

as shown below.

Sources Amount
Owner’s equity 1,000,000
Contribution 2,000,000
Bank loan 1,800,000
Total 4,800,000

33 | P a g e