BUSINESS PLAN

P.O BOX 130

VIHIGA

PHONE NO: 0792696433

EmaiiAddress:[email protected]

PRESENTED BY: MERCY KAREJI OCHIENG

INDEX NO:

SUBJECT CODE:

INSTITUTION:NATIONAL YOUTH SERVICE INSTITUTE OF BUSINESS STUDIES

PRESENTED TO:THE KENYA NATIONAL EXAMINATION COUNCIL IN PARTIAL

FULLFILMENT FOR THE AWARD OF DIPLOMA IN HUMAN RESOURCE
MANAGEMENT.

SERIES:JULY 2019

ii
 DECLARATION
I declare that this is my personal effort and the compilation of the document is my original work
and it has not been sub mitted elsewhere for the purpose of examination.

STUDENT NAME:MERCY KAREJI OCHIENG

SIGNATURE:

DATE:

SUPERVISOR’S NAME:

SIGNATURE:

DATE:

iii
 ACKNOWLEDGEMENT
I wish to acknowledge The Almighty God for giving me the chance ,wisdom and knowledge. I
gratefully send my gratitude to the National Youth Service (NYS) through the Director General
Miss MATILDA SAKWA for giving me a chance to pursue a Diploma course in Human
Recourse Management.

I also give thanks to the principal National Youth Service Institute of Business Studies for
material support and not forgetting my entrepreneurship teacher Mr. Wanganui for ensuring
that I accomplish the business plan.

Finally I acknowledge my fellow students of HRM 9 for their support . M y family members
are the greatest for their financial and moral support they gave unto me.

GOD BLESS YOU ALL !

iv
 DEDICATION
I dedicate this business to both my parents MR and MRS OCHIENG for their care, love and
inspiration to struggle for my academic goods and get informed and to be knowledgeable to
modern technology.

I also dedicate this plan to my lovely sisters and brothers for their prayers and support .My
special thanks also to my cousin MR and MRS AJEGA for their encouragement and support
for making this become successful .

Table of Contents
DECLARATION.........................................................................................................................ii
v
ACKNOWLEDGEMENT..........................................................................................................iii
DEDICATION............................................................................................................................iv
CHAPTER ONE..........................................................................................................................1
1.0 EXECUTIVE SUMMARY....................................................................................................1
1.1 BUSINESS DECRIPTION....................................................................................................1
1.2 MARKETING PLAN............................................................................................................1
1.3 ORGANISATION AND MANAGEMENT PLAN..............................................................2
1.4 OPERATIONAL/ PRODUCTION PLAN...........................................................................2
1.5 FINANCIAL PLAN...............................................................................................................2
CHAPTER TWO.........................................................................................................................3
2.0 BUSINESS DESCRIPTION..................................................................................................3
2.1 BUSINESS NAME................................................................................................................3
2.2 BUSINESSS LOCATION AND ADDRESS........................................................................3
2.3 FORM OF OWNERSHIP......................................................................................................4
2.4 TYPE OF BUSINESS............................................................................................................4
2.5 THE PRODUCT(S) / SERVICE(S).......................................................................................4
2.6 JUSTIFICATION OF OPPORTUNITY................................................................................4
2.7 INDUSTRY...........................................................................................................................4
2.8 BUSINESS GOALS..............................................................................................................5
2.9 ENTRY AND GROWTH STRATEGY..............................................................................5
CHAPTER THREE......................................................................................................................5
3.0 MARKERTING PLAN..........................................................................................................5
3.1 CUSTOMERS........................................................................................................................5
3.2 MARKET SHARE.................................................................................................................6
3.3 COMPETIOTION..................................................................................................................6
3.3.1 POTENTIAL CUSTOMERS..............................................................................................6
3.3.2 STRENGTH AND WEAKNESS.......................................................................................7
3.4 PROMOTION AND ADVERTISING..................................................................................8
3.5 PRICING STRATEGY..........................................................................................................9
3.6 SALES TACTICS..................................................................................................................9
3.7 DISTRIBUTION STRATEGY..............................................................................................9

vi
CHAPTER FOUR......................................................................................................................10
4.0 ORGANISATION AND MANAGEMENT PLAN............................................................10
4.1 BUSINESS MANAGER(S) AND QUALIFICATION S....................................................11
4.2 PERSONNEL, NUMBER AND DUTIES...........................................................................12
4.3 RECRUITMENT, TRAINING ANG PROMOTION.........................................................13
4.4 RENUMERATION AND INCENTIVES...........................................................................14
4.5 LICENCE, PERMIT AND BY-LAWS...............................................................................14
CHAPTER FIVE........................................................................................................................15
5.0 OPERATIONAL/ PRODUCTION PLAN..........................................................................15
5.1 PRODUCTION FACILITIES AND CAPACITY...............................................................15
5.2 PRODUCTION STRATEGY..............................................................................................17
5.2.1 PRODUCT DESIGN AND DEVELOPMENT................................................................17
5.2.2 MONTHLY MATERIAL REQUIREMENT...................................................................17
5.2.3 MONTHLY LABOUR REQUIREMENT........................................................................18
5.2.4 MONTHLY OPERATION OR PRODUCTION EXPENSES.........................................18
5.3 PRODUCTION PROCESS..................................................................................................19
5.4 GOVERNMENT REGULATIONS/ REGULATIONS AFFECTING OPERATIONS......19
CHAPTER SIX..........................................................................................................................20
6.0 FINANCIAL PLAN.............................................................................................................20
6.1 PRE-OPERATIONAL COST..............................................................................................20
6.2 ESTIMATION OF WORKING CAPITAL.........................................................................21
6.3.0 PREPARATION OF CASH FLOW PROJECTIONS......................................................22
6.3.1 PROFORMA CASH FLOW STATEMENT FOR THE FIRST TWELVE MONTHS...22
6.3.1 PROFORMA CASHFLOW STATEMENT FOR THE FIRST YEARS.........................23
6.4.0 PREPARATION OF PROFORMA INCOME STATEMENT........................................24
6.4.1 PROFORMA INCOME STATEMENT FOR THE 1ST TWELVE MONTHS.................24
6.4.2 PROFORMA INCOME STATEMENT FOR THE FIRST THREE YEARS..................25
6.4.3 CALCULATION OF GROSS PROFIT AND NET PROFIT..........................................26
6.5.0 PREPARATION OF PROFORMA BALANCE SHEET.................................................26
6.5.1 PROFORMA BALANCE SHEET AS AT 1ST JAN 2022................................................26
6.5.2 PROFORMA BALANCE SHEET AS AT 31ST DECEMBER 2022...............................27

vii
6.6 CALCULATION OF BREAK EVEN POINT....................................................................27
6.7 CALCULATION OF PROFITABILITY RATION............................................................29
6.7.1 Gross profit.......................................................................................................................29
6.7.2 Return on equity................................................................................................................29
6.7.3 Return on sales..................................................................................................................30
6.8 DESIRED FINANCING......................................................................................................30
6.9 PROPOSED CAPITALIZATION.......................................................................................31

viii
 CHAPTER ONE

1.0 EXECUTIVE SUMMARY

1.1 BUSINESS DECRIPTION

The name of the proposed business is Havi agrovet . It will be managed by MERCY KAREJI as
a sole proprietor after her completion of a Diploma in Human Resource Management at National
Youth Service, Institute of business studies.Business location: The business will be located at
Vihiga county, Mbale town opposite Barclays bank along Mbale, Kisumu highway building no.
6.Form of ownership: Havi agrovet will be a sole proprietorship where the owner will contribute
ksh 150,000 , bank loan ksh 50,000,friends ksh 150,000 and family and relatives ksh 50,000
making a total of ksh 400,000 which is the Initial capital for entry into business.

Products and services: T he business intends to deal with supplying of Agricultural products such
as fertilizers, planting seeds and vetenary products.Justification of the business: The needs that
motivated the owner to start the business is the demand from customers and also to create
employment opportunities to the people within the locality.Industry: The proposed business falls
under a service industry. Goals of the business is to open a new branch in another strategic point
after three years of operation .Entry and growth strategy: For the business to penetrate in the
owner will carry out sur vey on customers demand. The owner will also advertise its pro ducts
thro ugh sign boards, posters e.t.c

1.2 MARKETING PLAN

Customers: Havi agrovet will aim at marketing its products to institutional customers such
Kaimosi teachers training college and the whole locality. Mar ket share: The owner will gain
much since 3000 customers out of 6000 people will purchase from her business and the rest is
shared amongst the competitors . Havi agrovet has the highest percentage of 45%, Huduma 25%
and Amani has 30%. Competition: The proposed business will face co mpetion mainly from
Huduma and Amani agrovets . Huduma agro vet is located 5km from the main road and Amani
is located 4km from the main road compared to the proposed business which is 2km from the
main road. T his will help the business to take advantage of customers directly from the main
road. Pricing strategy: T o determine the pricing strategy, the proposed business will consider
expenses incurred in the business , demand of pro ducts and competitors pricing. Sales tactics:

1
the proposed business will sell its products directly to customers. Distribution strategy: The
business will have its products reach its customers through direct sales. Our means of transport
will be road transport.

1.3 ORGANISATION AND MANAGEMENT PLAN

The proposed business is composed of the General manager, Accountant, Sales person, security
officer and also the cleaner who is also the chef. Business managers and qualifications: All the
employees must be medically and physically fit. Personal numbers and duties: Each employee
will be assigned duties and responsibilities. The proposed business will recruit its employees
from the surrounding area. Training will be done with an aim of improving their skills. T he
business licence will be obtained from the municipal council of Mbale town. Workers will be
paid on monthly basis and motivated to increase productivity.

1.4 OPERATIONAL/ PRODUCTION PLAN

The products that will be sold will be of high quality so as to attract more customers. Machinery
and equipment will be purchased from Waka company in M bale town. Regular repair and
maintenance will be done so as to reduce the cost of purchasing.

1.5 FINANCIAL PLAN

The financial objective of the proposed business is to maximize the profit from the capital
employed and sustain profit growth. It gives the calculation of the two proforma statements for
both the 12months and for t he first three years (2022-2024). It also gives calculation of balance
sheet for both the years. It gives also the break even-point, the total fixed costs, total variables
costs, total contribution, contribution margin, return on sales, return on equity and profitability
ratios. The desired financing and proposed capitalization of the business is also calculated.

2
 CHAPTER TWO

2.0 BUSINESS DESCRIPTION

2.1 BUSINESS NAME

The name of the proposed business will be the Havi Agrovet.The business intends to start on
March 2021 when the owner will have completed her Diploma course in Human Resource
Management at National Youth Service Institute of business studies. The business will operate as
a sole-proprietorship. T he main activity of the business will be offering Agricultural products
and vetenary services. Agricultural products will include selling of fertilizers and other
agricultural products such as selling different planting seeds of maize, tomatoes ,cabbages e.t.c.
The products of the proposed business will be sold to the customers within and the surrounding
areas of Vihiga, Majengo town.

2.2 BUSINESSS LOCATION AND ADDRESS

Havi agrovet will be located at Vihiga county, Mbale town opposite Barclays bank along
Mbale, kisumu highway building no.6. The business will mar ket its products to the area of
Mbale town and V ihiga county at large. The availability of infrastructure makes the location
suitable , the availability of water and electricity there is also high security since the business
will be faster transaction since the business is located near the KCB bank. Incase of contact with
the customers and suppliers . The address will be as follows:

HAVI AGROVET

P.O.BOX 130,

VIHIGA.

Phone no. 0792696433

Email address: Mercyka @gmail.com.

3
2.3 FORM OF OWNERSHIP
The proposed business will be operating as a sole proprietorship with the owner being the
general manager of the business. The business will be owned by Mercy kareji Ochieng who is
22 years old ,a resident of Vihiga county currently undergoing a Diploma course in HRM at
National youth service IBS. The owner will be operating the business since her mother was a
vetenary officer, this is the stage where the owner gained experience. The owner will also
employ people with qualified skills to operate the business.

2.4 TYPE OF BUSINESS

The business will operate as a sole proprietorship. T he manager intends to start the business on
march 2021 after completion o f her Diploma course in Human resource management. Initial
capital to start and run business wil be sh.400,000. Personal savings being sh 150,000, bank loan
sh . 50,000,friends sh 150,000 and relatives and family sh . 50,000 .

2.5 THE PRODUCT(S) / SERVICE(S)

The proposed business intends to deal with supplying of Agricultural products such as
fertilizers , planting seeds and vetenary products. Fertilizers will be of different types depending
on the uses in the farm. Vetenary products will include deworming medicine and all animal
feeds. T he products will be packed in different sizes to cater for all despite o f the amount of
money a customer has and t he quality will not change.

2.6 JUSTIFICATION OF OPPORTUNITY

This is a production industry which intends to dominate the area of vihiga county. The pro ducts
will be of high quality and certified for the farmers to use. The customers will be given special
teaching on importance of agriculture and furthermore t he animals for greater output in their
farms .

2.7 INDUSTRY
Havi agrovet belong to the production industry. The business intends to have three firms which
include; the production firm, accounting firm and sales firm. The technology used will be
labour intensive and modern technology. The number of firms would be five. T he proposed
business will be faced by seasonal factors. This factors will depend on the seasons of planting by
farmers.

4
2.8 BUSINESS GOALS
There are long-term goals and short-term goals.

Long- term goals

i. Expanding the business boundaries

ii. Maximising sales volume and generating profit margins.
iii. Having enough stock to avoid shortages

Short-term goals

i. Employing qualified staff

ii. Maximising profit obtained
iii. Providing high quality products.

2.9 ENTRY AND GROWTH STRATEGY

T he owner of the business will come up with the following strategies for the success of the
business. The business will carry out survey on customers demands . The farmers views will be
raised through suggestion boxes so as to discover strengths and weaknesses. Word of mouth will
be carried out by the sales representatives . The products will be advertised through online and
local media. The business plans to open other branches nationwide and employing many locals
to be workers.

5
 CHAPTER THREE

3.0 MARKERTING PLAN

3.1 CUSTOMERS
The business will identify those who will be willing and able to acquire our products and
services at a given price. The proposed business will be selling its products and services to the
people of all aged bracket, that is both the young and old. It will be a business of all the religions;
Christians, hindus and muslims. The potential customers will be looking for quality products
which are affordable and comfortable. The potential customers will be purchasing our products
and services from Monday to Saturday as from 7.00am to 10.00pm and on Saturdays from
1.00pm to 9.00pm. The purchasing mode of payment will be through cash payments, pay bill
number 356401 and M-pesa accounts.

3.2 MARKET SHARE

The investigation shows that the potential customers who require our products and services are
6000 and those who intend to buy from our business is 3000 customers while the rest of the
customers shared amongst the other competitors . The proposed business have got its
competitors namely Huduma agrovet and Amani . The expected number of total sales of product
per unit will be 10bags of 90kg of DAP at ksh 350 and 20 bags of 50kg of UREA at ksh 150 per
week.

Sales

Huduma agrovet
Havi agrovet 25%
45%

Amani agrovet
30%

6
3.3 COMPETIOTION

3.3.1 POTENTIAL CUSTOMERS

The potential competitors o f Havi agro vet are Huduma agro vet and Amani agro vet. Hoodlum
agro vet is located 5km away from the main road and Amani is located 4km away from the
main road . The location of the proposed business is located 2km away from the main road which
makes it an advantage. Along that the competitors opens from Monday to Friday from 8.00am
to 6.0pm and do not operate on Saturdays and sundays unlike the proposed business which
operates throughout, that is Monday to Sunday from 7.00am to 10.00pm. This helps the proposed
business to take advantage of customers who plan to buy in late evenings and on weekends. The
size of potential competitors is small as compared to the proposed business.

PRODUCT(S) / SERVICE(S) COMPARISON TABLE

BUSINESS QUALITY CUSTOMER PRICING ACCESSIBILITY

NAME SERVICE
HAVI 5 5 5 5
AGROVET
HUDUMA 4 3 2 2
AGROVET
AMANI 3 4 3 2
AGROVET

KEY

5- Very good

4- Good

3- Fairly good

2- Poor

7
3.3.2 STRENGTH AND WEAKNESS
The Havi agro vet has got fair prices, high skilled personnel and accessible to the main road
since it is 2km away from the main road. On the other side it has its own weaknesses which is; it
is new in the market and has no experience. Huduma agrovet has the experience, medium prices
but its not always open,poor organization and disorganized employees. Amani agro vet is well
known ,experienced but not accessible to the main road since it is located 4km away from the
main road, poor time management, it also has poor methods of advertisement, it is not always
open and has disorganized employees.

SWOT ANALYSIS TABLE

BUSINESS STRENGTHS WEAKNESSES OPPORTUNITY THREATS

NAME
HAVI -Have fair prices -Newly in the -Good customer -Stiff
AGROVET -Accessible to market relations competition
the main road -Fair prices - Friendly
-High skilled employees
labour
HUDUMA -Has experience -Not open always -Good customers Affected by
AGROVET -Medium prices -Disorganised relations modern
-Poor technology.
organisation
AMANI -Long term -Poor time -Ready market -Stiff
AGROVET experience in the management. competition.
market -Disorganised
- It has good employees.
promotion
methods.

8
3.4 PROMOTION AND ADVERTISING
The proposed business will advertise its products through the following methods; they include
by use of word of mouth, the manager and its employees will use this to advertise its products
and services to customers. Use of posters will also be used. T hey will be placed in market
centers and strategic points. Business media will also be used twice a week which will cost kasha
1000 because advertising once is ksh 500. Promotional campaigns will be held when introducing
new products and services to customers. Promotion of giving discount and transport will be
offered to customers who buy our products. Method cost ksh 800 per month.

3.5 PRICING STRATEGY

The pricing of the products and services will depend on the expenses involved in the
business.The pricing will depend on transaction such as transportation of products, security cost,
rent, salaries and taxes. The demand and supply will also be considered. If the demand will be
high the owner will raise the price to cater for the business when there is high supply and low
demand.The business will also set the selling prices regarding the order of size. The customers
who will make orders above ksh 30,000 will be given a discount of 10%. This criteria will
depend on the trustworthy of customers.

3.6 SALES TACTICS

The business will sell its products directly to customers and by the help of sale representatives.
Prices will be fair and this will enhance god public relations to the customers. The sales
representatives will be recruited through advertisement and will apply and the qualified will be
granted opportunity to work in the business. Employees welfare will also be taken into
consideration to enhance good relations. This will involve giving them better protection such like
giving them lunch and protection wear.

9
3.7 DISTRIBUTION STRATEGY
The products will get to customers through direct selling and sales representatives. The means of
transport will be by use of road due to good infrastructure. The problem that will the business
face is bad weather conditions especially when transporting to remote areas where there are no
god roads. This will cost ksh 4000 [per month. The management will ensure that the products
leave tfhe premises early to avoid delays which can lead to poor relationship with customers.

10
 CHAPTER FOUR

4.0 ORGANISATION AND MANAGEMENT PLAN

ORGANISATION CHART FOR THE PROPOSED BUSINESS

General manager

Accountant Sales
representative

Security

Cleaner ( chef)

The proposed business is composed of general manager, sales representative, accountant and
cleaner who is also the chef. The duties of the manager is ensuring that any work to be carried
out in the business is done under her.

11
4.1 BUSINESS MANAGER(S) AND QUALIFICATION S
Havi agro vet will be managed by Mercy Kareji as a sole proprietorship.

Qualifications

i. Must have a sound knowledge of business.

ii. Must have a Diploma in Human resource management.
iii. Have entreprenueral skills.
iv. Have god managerial and communication skills.
v. Must be computer literate.

Duties and responsibilities

i. Set goals and objectives of the business.

ii. Bearing losess and profits of the business.
iii. Making orders from the suppliers.
iv. Recruitment of employees and dismissing them.

The Havi agro vet will ensure that the manager gets ksh 20,000 as salary per month.

4.2 PERSONNEL, NUMBER AND DUTIES

Havi agro vet will require 5 employees and the owner being the manager. This will include sales
representative, the manager, security, accountant and cleaner who is also the chef. They must
have the following qualifications and duties.

SALES REPRESENTATIVE

Qualifications

Must be a holder of diploma in sales and marketing .

i. Should have good organizational skills.
ii. Must be time conscious.
iii. Have good communication skills.S

Duties

i. Conducting market research on behalf of the business.

ii. Handling customers inquiries.
iii. Preparing orders of the customers.

Accounting

12
 i. Must be a holder of CPA I AND II from any recognized institution.
ii. Be computer literate.
iii. Should be able to work under minimum supervision.

Duties

i. Receiving payment from business clients.

ii. Responsible for business calculation.

CLEANER

Qualifications

i. A holder of Kenya Certificate of Secondary Education (K.C.S.E)

ii. Must be an active member.
iii. Should be medically and physically fit.
iv. Must work under minimum supervision.

Duties

i. Wiping dust on the shelves.

ii. Cleaning the floor and the whole business premises.
iii. Cook tea and lunch for the rest of the workers.

SECURITY OFFICER

Qualifications

i. Must be atleast having a Kenya Certificate of Secondary Education .

ii. Must be a responsible man.
iii. Should be able to communicate well in national language.
iv. Aged between 28-30 years.
v. Have experience for atleast one year.

Duties

i. Provide maximum security of the premises.

ii. Inspecting any luggage in and out of the premises.

13
4.3 RECRUITMENT, TRAINING ANG PROMOTION
Recruitment

Employees will be recruited from surrounding area through posters, giving notices to schools and
churches and social gatherings. Those who will be qualified will be appointed to work in the
premises.

Training

The manager will ensure that employees are trained to improve the business.

The manager will carry out performance appraisal to employees who meet business objective in
order to motivate them.

Promotion

Employees will be promoted based on hard work, responsibilities and good performance will be
dismissed from the business and those with good performance rewarded.

4.4 RENUMERATION AND INCENTIVES

The manager will renumerate the employees by offering them lunch and overtime
allowances.The business intends to provide incentives to employees such as protective wear as
gloves, labcoats, gumboots and uniform. Better working conditions will be maintained in the
business. The business will also ensure the stability and high morale among employees by
holding constant meetings in case of any conflict this meetings will help solve issues.

EMPLOYEE TOTAL SALARY TOTAL

SALARY
Manager 1 25,000 25,000
Accountant 1 10,000 10,000
Security officer 1 5,000 5,000
Cleaner 1 4,500 4,500
Sales representative 2 10,000 20,000
Total 6 54,500 64,500

4.5 LICENCE, PERMIT AND BY-LAWS

The proposed business requires some legal documents which include; trade license and
operational license.

Trade license

Trade license will be obtained from Mbale Municipal at a cost of ksh 1000.

Taxes

14
Taxes will be paid according to the prices of Kenya Revenue Authority.

The by-laws

The employees will set laws that would govern the business. They include;

i. All employees should be time conscious.

ii. Employees should be ready to work under minimal supervision.

15
 CHAPTER FIVE

5.0 OPERATIONAL/ PRODUCTION PLAN

5.1 PRODUCTION FACILITIES AND CAPACITY

The proposed business will require equipments to facilitate the smooth running of the business.
They include the following:

MACHINES QUANTITY UNIT TOTAL

/EQUIPMENTS COST(ksh) COST(ksh)
Laptop 1 24000 24,000
Pick-up 1 100,000 100,000
Chairs 5 500 2,500
Wheelbarrow 2 2,000 4,000
Gloves 10 70 700
Tables 2 800 1,600
Shelves 10 250 2,500
Aprons 4 150 600
Total 35 127,770 135,900

The business plans for the repair and maintenance.

Regular maintenance; This will be done regularly through wiping dust on the shelves and
chairs.Also greasing and oiling of moveable parts so as to improve their durability.

Preventive maintenance ; The measures will be undertaken on tools and equipment before they
get worn out hence reduces their cost of repair.

Scheduled maintenance; The repair and maintenance will be done by Mr. Charles javan who
works from mbale town when need arises. This repair will be done on particular dates of the
month. This will be done at a cost of k.sh 1000. The other fixed assets that will be required by
the business will be obtained from Waka company from Mbale town. This will ensure the
smooth and continous running of the bussiness . This will also ensure there is no delay in
transporting of the products. This will ensure ther is good relationship with our potential
customers.

16
 THE HAVI AGRO VET OFFICE LAYOUT

TOILETS
GENTS LADIES STORE ACCOUNT OFFICE

WATER
TANK
MAIN GATE
THE HAVI
AGROVET

STAFF Security
PARKING parking

KITCHEN
MANAGERS VISITORS
OFFICE PARKING

17
5.2 PRODUCTION STRATEGY

5.2.1 PRODUCT DESIGN AND DEVELOPMENT

Since the business does not produce its products for sale, the workers who will be employed will
be of high standard skills so as to bring up good quality services and products. This will
challenge the competitors. The proposed business through advertisement of products will be
done thus leading to good approach of customers. The business will also be opened very early in
the morning and operate throughout the days for quality goods and services. Cleanliness will be
of highest level that being of daily routine to improve the business.

5.2.2 MONTHLY MATERIAL REQUIREMENT

MATERIAL QUANTITY UNIT PRICE TOTAL (k.sh)
Deworming drugs 20 boxes k.sh 500 10,000
Chick marsh 10 sacks k.sh 600 6,000
Growers marsh 50 sacks k.sh 400 20,000
Total 80 k.sh 1500 36,000
Since not all the required materials are not available throughout the business will be ordering
those products from Waka.

5.2.3 MONTHLY LABOUR REQUIREMENT

POSITION TOTAL NUMBER SALARY IN (k.sh) TOTAL (k.sh)
Manager 1 25000 25000
Accountant 1 10000 10000
Security officer 1 5000 5000
Cleaner 1 4500 4500
Sales representative 2 10000 20000
Total 6 54500 64500

5.2.4 MONTHLY OPERATION OR PRODUCTION EXPENSES

EXPENSES AMOUNT IN (k.sh)
Advertisement 1000
Maintanance and repair 1000
License 1000
Telephone 700

18
 Electricity 500
Salaries 64500
Miscellaneous 500
Insurance 500
Totals 69700

5.3 PRODUCTION PROCESS

The products will be properly packed and transported from WSaka company from Mbale town to
the business that is proposed. The products will be transported by means of road transport. The
products will be then be released to the business premises to our customers of the location. The
external factors that are likely to affect the production process may include;

Climate; This may affect the roads during transportation because during the rainy seasons the
roads are not good.

Competitors; The business will face competition because it is new in the market and hence lacks
experience hence that is a challenge. In order to minimize the impact of these external factors the
manager will ensure that the goods reach the premises early to customers so as to curb the
competition faced. Also the business will try to cope with the changes of the climate to minimize
delays.

5.4 GOVERNMENT REGULATIONS/ REGULATIONS AFFECTING OPERATIONS

The proposed business will require a trading license and operational license before it
commences. The government regulations include;

Trade license; This will be obtained from city council of Mbale at a cost of k.sh 1000

Work permit; Work permit will be obtained from ministry of labour, this will ensure the safety
of workers.

19
Health permit; The business will obtain a health permit from Vihiga county, this will ensure
that the hygienic standards are maintained within the proposed business premises. It will also
ensure that waste is properly disposed to keep the environment clean.

Taxation; The business will be required to pay taxes as required by the Kenya Revenue
Authority. The business will ensure that it observes all government regulations and rules.

CHAPTER SIX

6.0 FINANCIAL PLAN

6.1 PRE-OPERATIONAL COST

Machinery/Equipment Quantity Unit cost (k.sh) Total cost (k.sh)
Laptop 1 24000 24000
Pick-up 1 100000 100000
Chairs 5 500 2500
Wheelbarrow 2 2000 4000
Gloves 10 70 700

20
 Tables 2 800 1600
Shelves 10 250 2500
Aprons 4 150 600
Total 35 127770 135900

6.2 ESTIMATION OF WORKING CAPITAL

Working capital= initial capital – pre-operational cost

W.C= 400000- 135900

W.C = 264100

working capital = ksh264100

21
 6.3.0 PREPARATION OF CASH FLOW PROJECTIONS

6.3.1 PROFORMA CASH FLOW STATEMENT FOR THE FIRST TWELVE MONTHS
PARTICULARS JAN FEB MARCH APRI MAY JUNE JULY AUG SEPT OCT NOV DEC TOTAL
L
Opening cash 264100 30640 341200 375000 400200 41430 421000 43240 43380 453600 46180 466100 4779900
0 0 0 0 0
Sales 170000 17050 171000 172000 172500 17300 180000 18050 18100 182000 18250 183000 2118000
0 0 0 0 0
Total cash inflow 434100 47690 512200 547000 572700 58730 601000 61290 62480 635600 64430 649100 6897900
0 0 0 0 0
CASH INFLOW - - SSS- - - - - - - - - - -
Purchases 50000 60000 60500 70000 80000 90000 90500 91000 92000 95000 10000 100500 884500
0
Advertisement 1000 - 1000 1000 1100 - 1200 1200 1000 1000 1200 1200 10900
Maintenance 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 12000
License 1000 - - - 1000 - - - 1000 - - 1000 4000
Telephone 700 700 700 800 800 800 900 900 900 1000 1000 1000 10200
Electricity 500 500 500 500 500 500 500 500 500 500 500 500 6000
Salaries 64500 64500 64500 64500 64500 64500 64500 64500 64500 64500 64500 64500 774000
Miscellaneous 500 500 500 500 1000 1000 1500 1500 1800 1800 2000 2000 14600
Insurance 500 500 500 500 500 500 500 500 500 500 500 500 6000
Rent 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 60000
Loan repayment 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 36000
TOTAL OUTFLOW 127700 13570 137200 146800 158400 16630 168600 16910 17120 173800 17820 180700 1819700
0 0 0 0 0
NETCASH 306400 34120 315000 400200 414300 42100 432400 44380 45360 461800 46610 468400 5078200
0 0 0 0 0

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6.3.1 PROFORMA CASHFLOW STATEMENT FOR THE FIRST YEARS
PARTICULARS 1st YEAR 2022 2nd YEAR 2033 3rd YEAR 2024
Opening cash 4779900 5078200 5384900
Sales 2118000 2128000 2139000
Total cash 6897900 7206200 7523900
CASH OUTFLOW
Advertisement 10900 10900 10900
Maintenance 12000 12000 12000
License 4000 4000 4000
Telephone 10200 10300 10400
Electricity 7500 7600 7700
Salaries 774000 774000 774000
Miscellaneous 14600 15000 154000
Insurance 6000 6000 6000
Rent 60000 60000 60000
Loan repayment 36000 36000 36000
Purchases 884500 885500 886500

TOTAL OUTFLOW 1819700 1821300 1822900

NET CASH 5078200 5384900 570100

23
 6.4.0 PREPARATION OF PROFORMA INCOME STATEMENT

6.4.1 PROFORMA INCOME STATEMENT FOR THE 1ST TWELVE MONTHS

PARTICULARS JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL
Sales 170000 170500 171000 17200 172500 173000 18000 180500 181000 182000 182500 183000 2118000
0 0
Purchases 50000 60000 60500 70000 80000 90000 90500 91000 92000 95000 100000 100500 979500
Gross profit 120000 110500 109500 10200 92500 83000 89500 89555 89000 87000 82500 82500 1137555
0
Expenses - - - - - - - - - - - - -
Advertisement 1000 - 1000 1000 1100 - 1200 1200 1000 1000 1200 1200 10900
Maintenance 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 12000
License 1000 - - - 1000 - - - 1000 - - 1000 4000
Telephone 700 700 700 800 800 800 900 900 900 1000 1000 1000 10200
Electricity 500 500 500 500 500 500 500 500 500 1000 1000 1000 7500
Salaries 64500 64500 64500 64500 64500 64500 64500 64500 64500 64500 64500 64500 774000
Miscellaneous 500 500 500 500 1000 1000 1500 1500 1800 1800 2000 2000 14600
Insurance 500 500 500 500 500 500 500 500 500 500 500 500 6000
Rent 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 60000
Loan 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 36000
Total 77700 75700 76700 76800 78400 76300 78100 78100 798200 78800 79200 80200 935200
Net profit before tax 42300 34800 32800 25200 14100 6700 11400 11455 7800 8200 3300 2300 202355
Provision tax 30% 12690 10440 9840 7560 4230 2010 3420 3436.5 2940 2460 990 690 60706.5
Net profit after tax 29610 24360 22960 17640 9870 4690 7980 8018.5 6850 5740 2310 1610 141638.5

24
6.4.2 PROFORMA INCOME STATEMENT FOR THE FIRST THREE YEARS
PARTICVULARS 1ST YEAR 2022 2ND YEAR 2023 3RD YEAR 2024
Sales 2118000 3118000 3218000
Purchases 979500 989500 1001000
Gross profit 1137555 2128500 221700
Expenses
Advertisement 10900 10900 10900
Maintenance 1200 12500 13000
License 4000 4000 4000
Telephone 10200 10300 10400
Electricity 7500 7500 7500
Salaries 774000 774000 774000
Miscellaneous 14600 14600 14600
Insurance 6000 6500 6500
Rent 60000 60000 60000
Loan repayment 36000 38000 40000
Total expenses 935200 938300 940900
Net profit before tax 202355 1190200 1276100
Tax 30% 60706.5 357060 382830
Net profit after tax 141638.5 833440 893270

25
6.4.3 CALCULATION OF GROSS PROFIT AND NET PROFIT
Gross profit = sales - purchases

2118000 – 979500

GP =sh 1138500

Net profit =Gross profit - expenses

1138500 - 935200

NP = sh 203300

6.5.0 PREPARATION OF PROFORMA BALANCE SHEET

6.5.1 PROFORMA BALANCE SHEET AS AT 1ST JAN 2022

ASSETS LIABILITIES
Fixed assets ksh Long liabilities ksh
Machinery and equipment 135900 Equity 150000
Family 50000
Current assets ksh Friends 150000
Working capital 264100 Bank loans 50000

TOTAL =SH 400000 TOTALS =SH 400000

26
6.5.2 PROFORMA BALANCE SHEET AS AT 31ST DECEMBER 2022
NON CURRENT ASSETS LIABILITIES
Machines 10400 Capital ksh 400000
Materials 31200
Fixtures and fittings 94300

CURRENT ASSETS CURRENT LIABILITIES

Cash in hand 264100 Net profit 142348.5
Net profit 142348.5
Ksh 542348.5 =542348.5

6.6 CALCULATION OF BREAK EVEN POINT

Fixed Varieties Amount (sh)
Loan 3600
Salaries 774000
Rent 60000
Insurance 6000
License 4000
TOTALS 880000
Variables Cost
Advertisement 10900
Maintenance 12000
Telephone 10200
Miscellaneous 14600
Purchases 979500

TOTALS 1027200

Total Contribution =Total Sales – Total Variable Costs

27
Total Contribution =2118000 – 1027200

= Ksh 1090800

% Contribution Margin = Total contribution x 100%

Total sales

=1090800 x 100

211800

=51.50%

Break even level = fixed assets x 100

contribution margin

880000 x 100

51.5

B.E.L = SH 170873.79

6.7 CALCULATION OF PROFITABILITY RATION

6.7.1 Gross profit % =Gross profit x 100%

28
 Total sales

=1137555 x 100

2118000

Gross profit 53.71%

6.7.2 Return on equity = Net profit x 100

Capital compensation

= 142348.5 x 100

142348.5+400000

= 142348.5 x 100

542348.5

R.O.E =26.25%

6.7.3 Return on sales = Net profit x 100

Total sale

29
 = 142348.5 x 100

2118000

= 6.72%

6.8 DESIRED FINANCING

Total desired financing = pre-operational costs + Working capital

=135900 + 264100

Desired financing = sh 400000

6.9 PROPOSED CAPITALIZATION

Contribution Amount Percentage (%)
Personal saving Sh.150000 40%

30
Family and relatives Sh.50000 10%

Friends Sh.150000 40%

Bank loan Sh.50000 10%

TOTAL Sh.400000 100%s

31